Bgc Group Inc (BGC) 2014 Q4 法說會逐字稿

Welcome to the Q4 and full-year 2014 BGC Partners, Inc. earnings conference call. My name is Christine, and I will be your operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded. I will now turn the call over to Jason McGruder, Head of Investor Relations. You may begin.

Good morning. Our fourth-quarter 2014 financial results press release was issued this morning. This can be found in either the News Center or Investor Relations section of our website at BGCpartners.com. During today's call, we will also be referring to our presentation, summarizing results which includes other useful information. This too can be found in the Investor Relations section of our website.

Throughout today's call, we will be referring to our results only on a distributable earnings basis. Please see today's press release for GAAP results. Please also see the section of today's press release entitled distributable earnings, distributable earnings compared with GAAP results, reconciliations of revenues under GAAP distributable earnings, and reconciliation of GAAP net income/loss to distributable earnings, for a definition of these terms and how, when, and why management uses them.

Unless otherwise stated, whenever we refer to income statement items such as revenues, expenses, pre-tax earnings, post-tax earnings, we're doing so on a distributable earnings basis. Unless otherwise stated, all results provided on this call compare the fourth quarter of 2014 with the year earlier period. In addition, certain revenue items and non-financial metrics may have been adjusted for prior periods to conform to current reporting methodology. Any such adjustments would have had no impact on overall revenues or earnings for either GAAP or distributable earnings.

On June 28, 2013, BGC sold it's fully electronic trading platform for benchmark US treasury notes and bonds to NASDAQ OMX. For the purposes of today's call and on the press release, such assets are referred to as eSpeed, and the businesses remaining with BGC that were not part of eSpeed may be referred to as retained. Also, Newmark Grubb Knight Frank is synonymous with NGKF, or our Real Estate Services segment. I'll also remind you that the information on this call regarding our business that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act of 1933 as amended, and Section 21E of the Securities and Exchange Act of 1934 as amended.

Such statements involve risks and uncertainties. Except as required by law, BGC takes no obligation to release any revisions to forward-looking statements. For a discussion of additional risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, please see BGC's Securities and Exchange Commission filings, including but not limited to risk factors set forth in our public filings including our most recent Form 10-K and any updates to such risk factors contained in subsequent Forms 10-Q or Form 8-K filings.

Please also refer to today's press release, or the section in today's press release titled important additional information for disclosure regarding our tender offer for GFI Group. I'm now happy to turn the call over to our host, Howard Lutnick, Chairman and CEO of BGC Partners.

Well said, Jason. Good morning. Thank you for joining us on our fourth quarter 2014 conference call. With me today are BGC's President, Shaun Lynn; our Chief Operating Officer, Sean Windeatt; and our Chief Financial Officer, Graham Sadler. BGC's post-tax earnings increased by over 50% to $61 million, which made it the second consecutive record quarter for the Company. These best ever results also reflect pre-tax earnings growth of 79% for our high margin fully electronic businesses.

Our overall Financial Services business also improved as volatility picked up across many asset classes, and our real estate services business continued to benefit from robust real estate industry trends. We are confident that the combination of these positive industry dynamics, coupled with our ability to profitably hire and accretively acquire, along with our operational outperformance across both segments, will lead to strong growth for the overall Company going forward. It is with this backdrop that we expect BGC to have its third consecutive record performance next quarter.

Our liquidity exceeds $825 million, and in addition to that, we expect to receive approximately $625 million in NASDAQ OMX stock over time, which provides us with significant capital to profitably hire and make accretive acquisitions, all while maintaining our investment grade rating. Our most recently announced a acquisitions include Apartment Realty Advisors, or ARA, and RP Martin in London.

With respect to GFI, we are very excited that including the 17.1 million shares BGC owns and the 37.9 million shares tendered, stockholders representing 43.3% of GFI shares supported our tender as of last week. Since we only need 45%, we implore those stockholders who has not yet tendered to do so in order to receive the cash value to which they are entitled. We remain confident that our proposed transaction will provide substantial benefits to GFI's customers, their counterparties, regulators, brokers and their other employees, all of whom should prefer GFI being part of a larger, faster growing, and more diversified investment grade company.

Following the successful completion of our tender offer, we expect to generate increased productivity for front office employee and to reduce annual expenses by at least $40 million in the first year. We also expect to free up tens of millions of dollars of duplicative capital currently set aside by GFI for regulatory and clearing purposes. We therefore believe we can generate considerable earnings accretion and strong cash flow for BGC.

I'm happy to report that our Board declared a $0.12 qualified dividend for the second quarter, which at yesterday's closing stock price translates into a 5.5% annualized yield. Given our record performance and our strong outlook, we expect to raise our dividend next quarter. So with that, I'll turn the call over to Shaun.

Thanks, Howard, and good morning, everyone. Our Financial Services business increased its pre-tax earnings by 62.7% to $52.8 million. We were able to achieve this over 700-basis-point expansion in pre-tax margins to 20.3% due in large part to significant growth of our higher margin fully electronic businesses. Financial Services revenues were up 5.9% to $260.8 million. These revenues would have been approximately $9 million higher in the quarter but for the strengthening of the US dollar versus various other currencies.

Revenues for our e-businesses rose by 53.6% to $27.9 million, while their pre-tax earnings increased by 78.6% to $15.2 million. This revenue is higher and the growth is much faster than (technical difficulty) -- in the second quarter of 2013 over $1.2 billion. We have a pipeline of over $900 million of annual voice and hybrid Financial Services brokerage revenue. A large portion of which can be converted to fully electronic brokerage and generate valuable market data. Our e-businesses revenues were up by approximately 38% year on year over the first 26 trading days of 2015, and their pre-tax earnings margins averaged 54% in 2014.

Going forward, we expect these businesses to become an ever more valuable part of the Company as they continue to grow faster than and be substantially larger than eSpeed ever was for us. Looking at our overall Financial Services results by asset class, while revenues from our fully electronic rates products were up by approximately 35%, our overall rates revenues were down by 9.7% in the quarter to $89.7 million. Because of the sale of eSpeed, our rates businesses is currently geared towards Europe and was negatively impacted by the low volatility environment in the quarter.

This is largely why European interest rate volumes were down by 33% at ICE, for example. While the global ethics markets benefited from higher volatility in the quarter, BGC's fully electronic foreign exchange products outpaced the industry. Our eFX revenues, including both spot and derivatives, were up by approximately 76% compared with FX volumes increases of between 1% and 57% for Hotspot, Reuters, CME, and EBS.

Our overall FX businesses was up by 28.9% to $57.6 million. While we generated more than 64% increase in revenues from our fully electronic credit desks, our overall credit revenues declined by 10.6% to $47.9 million. These results reflect industry statistics. For example, the daily average primary dealer volumes for coupons were down by approximately 3% year over year according to Federal Reserve while dealer gross notional credit derivatives outstanding were down by approximately 26% according to SIFMA.

BGC's revenues from our energy and commodities desks increased by around 83%, while our overall revenues from equities and other asset classes, which includes these desks, increased by 32% to $46.5 million. This improvement surpassed most relevant industry volumes. For example, equity derivative volumes ranged from being down 5% for ICE to being up by 28% at Eurex. Energy and commodities volumes were basically flat for ICE and up by 14% to 18% at CME.

Moving on to our Real Estate Services business. NGKF continues to benefit from the low interest rate environment, easier availability of credit, and steadily improving US economy. According to CoStar, combined net absorption for US office, industrial, and retail properties was up by 23% year over year in 2014. This signals continued improvement within the overall leasing market. In real estate capital markets, US non-agency CMBS issuance increased by over 9% for the year according to Commercial Mortgage Alert, while fourth quarter US sales volumes were up by 5% according to Real Capital Analytics.

While helped by these positive industry trends, we believe that NGKF continues to gain market share. Our real estate brokerage revenues improved by 52.7% to $202.2 million in the quarter driven in part by more than doubling of revenues from investment sales in capital markets. Management services and other revenues were up by 2.1% to $45.2 million, while overall segment revenues improved by 40% to $247.4 million. NGKF's pre-tax earnings increased by 40.6% to $38.3 million.

The additions of Cornish & Carey and ARA contributed to our outperformance in Real Estate Services. For the fourth quarter, Real Estate Services totaled nearly half of BGC's overall revenues, and our goal is for NGKF to generate at least $1 billion in revenues for the full year of 2015. We hope to achieve this target through organic growth across our businesses while continuing to make accretive purchases and profitable hires.

Looking to headcount, we had 1,244 real estate brokers and salespeople as of quarter end, up 41% compared with 884 a year earlier. While average revenue per real estate broker increased by 17% to $176,000, because capital market brokers, like those at ARA, have relatively high productivity. We expect the addition of ARA to boost these figures for us in 2015. We finished December with 1,619 Financial Services brokers and salespeople, up 8% from 1,501 a year earlier. Our average revenue per Financial Services broker salesperson increased by 2% to $156,000.

As we continue to convert voice and hybrid brokerage to fully electronic, we expect to further increase broker productivity. Company-wide, our front office headcount was up by 20% to 2,863, and their productivity increased by 8% to $164,000 per broker salesperson. With that, I'd now like to turn the call over to Graham.

Thank you, Shaun, and good morning, everyone. BGC generated consolidated revenues of $515.5 million, up 19.1% compared with $432.9 million. Our revenues from the Americas were up approximately 31%. Revenues from Europe, Middle East, and Africa were down by 2% while Asia-Pacific revenues decreased by 1%. As Shaun mentioned, our non-US results were negatively impacted during the quarter by the stronger US dollar with most of the impact felt in our European offices.

Turning to expenses. Compensation and employee benefits were up by 18.4% on an absolute basis but improved slightly to represent 61.8% of revenues. This was despite a larger proportion of revenues coming from real estate. While non-compensation expenses increased in absolute terms by 5.5%, they were down as a percentage of revenues to 24.1%, compared to 27.3%.

The absolute increase in quarterly non-compensation expenses reflected increased interest expense related to the Company's issuance during the quarter of $300 million of 5.375% senior notes due 2019. The impact of acquisitions and increased professional and consulting fees related to the settlement of all legal claims with Tullett, we believe that the settlement will lower legal expenses going forward. Over the course of the past five years, such fees have totaled tens of millions of dollars.

Our pre-tax earnings before noncontrolling interest in subsidiaries and taxes were $72.6 million, up by 57.8% when compared with $46 million. Our pre-tax margin this quarter expanded by around 350 basis points to 14.1% compared with 10.6% a year ago. BGC's effective tax rate for distributable earnings was 15% versus 14.5%. Our post-tax earnings were up by 50.7% to $60.6 million, compared with $40.2 million. Our post-tax earnings margin improved by nearly 250 basis points to 11.8%, compared with 9.3%, while our post-tax earnings per share were up by 38.5% to $0.18.

BGC had a fully diluted weighted average share count of 374.3 million in the fourth quarter of 2014 of distributable earnings and 221 million under GAAP. A year earlier, our fully diluted share count was 358 million for distributable earnings and 18.1 million under GAAP. The GAAP share counts were lower because they excluded certain share equivalents in order to avoid anti-dilution. The share count increased primarily due to issuances related to the acquisitions of Cornish & Carey, ARA, Remate, and HEAT Energy Group, equity based employee compensation, and new front office hires.

This was partially offset by the reduction and/or repurchase of 18.9 million shares in units at a cost to BGC of $139.9 million, or an average cost of $7.39 per share or unit during 2014. As of December 31, 2014, the Company's fully diluted share count was 374.5 million, assuming conversion of the convertible senior notes into 40.3 million shares. All else being equal, in the second quarter of 2015, we expect to reduce our fully diluted share count by over 20 million shares or 6% with the redemption of the 8.75% convertible senior notes.

Moving on to the balance sheet. As of December 31, 2014, the Company's liquidity, which we define as cash and cash equivalents, marketable securities, and securities owned held for liquidity purposes, was $825.5 million. Notes payable and collateralized borrowings and notes payable to related parties were $706.7 million. Book value per common share was $1.83. Total capital, which we define as redeemable partnership interest, noncontrolling interest in subsidiaries, and total stockholders equity, was $642.9 million. In comparison, as of December 31, 2013, the Company's liquidity was $795 million.

Notes payable and collateralized borrowings and notes payable to related parties were $408.4 million. Book value per common share was $2.15, and total capital was $769.7 million. The changes in BGC's liquidity since year-end 2013 were primarily related to cash raised in the Company's issuance of senior notes due 2019. This was partially offset by cash used for the redemption and/or repurchase of 18.9 million shares in units at a cost to BGC of $139.9 million, and cash used for the five acquisitions made in 2014.

The settlement with Tullett is reflected on our balance sheet as part of accounts payable accrued and other liabilities and is expected to be paid by the end of the first quarter. With that, I'm happy to turn the call back over to Howard.

Thank you, Graham. Our guidance for the first quarter 2015 as compared to last year is as follows. We expect to generate revenues of between $490 million and $520 million, or an increase of between 10% and 17% when compared with $445.9 million. Our revenue outlook would have been at least $15 million higher but for the recent strengthening of the US dollar.

We anticipate pre-tax earnings to be between $68 million and $80 million, an increase of between 21% and 42% as compared to $56.2 million, and at the midpoint of our guidance, the Company will produce our third record quarter in a row. We expect our effective tax rate to remain unchanged at approximately 15%. Our outlook reflects the fact that commercial real estate service firms are generally seasonally slowest in the first calendar quarter and strongest in the fourth calendar quarter, while the reverse is true for our Financial Services business. We intend to update our first quarter guidance by the end of March 2015.

Earlier today, we announced that Graham will be retiring. He's done a great job for us over the past six plus years, and we will miss him. Graham will be staying with us until we find a replacement, so this may well not be his last earnings call. We hope you all join us in wishing him the best in his retirement. And now, operator, we'd be happy to open the call for questions.

Thank you. (Operator Instructions)

And our first question is from Niamh Alexander of KBW. Please go ahead.

Hi. Thanks for taking my questions, and good morning. Just to kind of go through the balance sheet for a sec if I could, the $825 million, thanks for the information, is very helpful. $825 million is I think where you were at the end of the quarter and then your debt of over $700 million, so the net cash number is coming down a little bit.

So just to get a sense of your due to repay, is it $150 million of the convert is what you're guiding to? So that comes off that? And then does the $100 million settlement come off the cash amount, too, or is that kind of already elsewhere on the balance sheet?

That would come off. The $100 million settlement would come off the $825 million.

Okay, and then the 150 in the convert as well would come out of the cash. And then you usually do biannual bonuses.

(multiple speakers) Niamh, we can choose, of course, to refinance it with ordinary debt which would take off the share count and dramatically lower our current coupon is in the 8%s, and we'd be able to buy -- our last debt was at 5 3/8%. We'd be able to take 300 basis points off the cost and take the share count out with the convert and dramatically improve the financial results of the Company, just by that. Or of course, we could use our cash to pay off the convert, either way. So those are all possibilities that are in front of the Company.

Okay. Fair enough. Thanks for clarifying. So the level of debt you're currently carrying, around $700 million or so, and you said in the release a couple times you want to maintain the investment grade rating. I think it's pretty emphatic in the release. Why do you need to maintain the investment grade rating? And then what's the level of debt to EBITDA we should kind of keep an eye on and that you're targeting?

Well, I think we go through that with the rating agencies all the time. They expect to have adequate coverage of your EBITDA to your debt coverage. And what you're seeing now is we added to our liquidity in order to have substantial resources to execute the GFI transaction. And so I think we are in very good shape with respect to that, and we have more than adequate liquidity to execute that transaction.

We also have as you see a continuing growing stake in NASDAQ OMX. NASDAQ has been performing very well, and we continue to increase our value of our investment in NASDAQ. So we do have the resources available to us I think relatively straightforward. And with respect to our GFI transaction, I think we are well positioned for it and we wouldn't have had the additional debt but for the fact that we're anticipating doing our tender next week.

Okay. Fair enough. I guess moving over to the tender then if I could, Howard. Just to clarify, your target is 45%. So if for example you get to the 45%, if you get to that level, could you just walk me through what happens next?

Do you then close out those people who had tendered or is GFI still kind of reluctant to negotiate or not willing to party with them going to a deal basically. What is next? Do the shareholders kind of hang out? Do they have an option to pull back? What would happen?

So we have put out a minimum tender condition that says that we need to have at least 45%. We'd be happy to have 55%. But we know that the Jersey partners has agreed and a few others, about 40% of the shareholders have agreed with the CME to be constrained, the CME can constrain them. There's only 60% that you're possibly talking to, and as long as at least 45% of them tender, we have a variety of relatively simple conditions in order for us to pay for that stock.

And the basic one, and most important one, is that the GFI give us control of their Board, give us the seats on the Board, just put our Board members on their Board. And since they were willing to do that at $5.85 for the CME, you would think at $6.10 for their shareholders, that's not really a bold-faced comment. It's sort of they were agreeing to do that at $5.85. So people were saying, well why would they do that, doesn't make a lot of sense.

Of course they were doing it. They were selling the Company to CME. I think if we are able to get over the 45% and at the tender, we were at 43.3%, so very, very close, I think there is a reasonable likelihood that the Board will get together and decide that they prefer to actually do the transaction than to continue to risk the lawsuits which are against them for breach of -- for their share duty.

Okay. Fair enough. And just kind of for your shareholders' perspective, if for some reason GFI still doesn't want to give up control of the Board, you're willing to kind of take it to the proxy level. This means that the GFI shareholders have tendered, they'd be kind of waiting. They still don't get their cash until this sees it all the way through. So right now your priority is, okay, the CME deal didn't happen, it's got control of the Board, so this could take quite a while, right?

My opinion is the time is coming to its end. That there's a litigation in front of the plaintiffs, have put a litigation in front of the vice chancellor in Delaware with respect to breach of fiduciary duty by the Board of Directors. That case is scheduled possibly to have a quick trial next week. Our tender is on the 19th.

These things are coming to a head relatively swiftly, and I think it's only a matter of time that the shareholders get $6.10 per share, which is the appropriate cash value that they're supposed to get, and we will have control of the Board and we will help make our shareholders and their shareholders more money.

Okay. Fair enough. Just lastly on this issue before I move over to the dividend. Have you actually signed a nondisclosure agreement and been able to get in and start to do due diligence yet?

We haven't done any due diligence, no, and I don't really want to talk about anything else with respect to it other than I've given you my opinion, and we look forward to next week. We are so close. 43.3% does not need very many shares to go over the 45%. I think it's time.

Okay. Fair enough. Thank you. And then just on the dividend. Thanks for the guidance on expecting it to go up a little bit. But help us think about your targeted payout ratio. Has the mindset changed? It used to be 80% or more or so of the distributable earnings. Is that a good level to think about?

I think we've had a general guideline of at least 75%, and that's been our general guideline. Obviously, it's a general guideline, but the Company's doing very well. We have strong outlook, three record quarters in a row, seems like a trend. So if we can get there next quarter, which is midpoint of our guidance, so I think, yes, you can look at at least 75%, and it's up to the Board to go from there.

But this will all be informed by whether we can get the GFI transaction done as well. We think the GFI transaction will be because of our scale and our scope and our ability to take costs out of the business. We think it will be highly accretive for us.

Okay. I'll get back in line. Thank you.

Thank you.

(Operator Instructions)

Our next question is from Rich Repetto of Sandler O'Neill. Please go ahead.

Hi, Howard. Good morning.

Good morning.

I guess the first -- first, just to follow up on the -- actually, it's is a new question, but on the Tullett legal expenses. I'm not going to make a joke. On the Tullett expenses, can we quantify the tens of millions of dollars a little bit tighter?

They were running more than -- lately, they were running more than $10 million a year. So it was just a vast expense of legal costs, sometimes I think the word waste comes to mind but cost is cost. And with the expectation that this would continue for us and them well years into the future. The math to our earnings was much less than one might consider, and if you looked to their numbers, you would see. I don't think they were covered substantially more than their legal fees in the whole thing of our settlement here.

So this just needed to go away. We worked it out. It's behind us. And it will improve our earnings going forward because we won't have tens of millions of dollars of legal fees going out. That's just the cost, let alone the massive time and effort that goes into these kind of things and preparation. So I just think it's much more efficient for my Company to be focused going forward. We made that decision and put it behind us.

Great. I got that. And then next on GFI expenses, so you're talking about $40 million in expense base, that's over $2 billion, I believe. (multiple speakers) [The bid] is 730, 740, but I guess that still seems pretty conservative to me, $40 million out of $700 million. When you have the similar businesses, and I understand you have to pay brokers the high comp ratio, but are we just being conservative here or how do you get to that $40 million?

Yes, I'm being conservative. We haven't done due diligence on the Company. We can't imagine how it couldn't be at least that. But absolutely yes, we're being conservative.

Okay. And then last question then, Howard, is I guess maybe on the update on the fully electronic. So you're seeing continued momentum here with the amount of revenue and even look at the incremental margin that you're taking on this. I know it's a 50% or 54%, but even you look at as you add to it, I'm calculating 70% incremental margins.

I know this was asked a lot on the last call, but how are we getting these -- do we expect that -- was that just a function of high revenue overall in the quarter? Would we expect that fully electronic number to go down next quarter or stay flat with the percentage of revenue next quarter? What's happening to convert this business?

Rich, it's Shaun. We're continuing to convert our pipeline of business, basically. As you know, we've been talking about it for some time now, but this is now coming to fruition. We're turning more and more of our traditional markets electronic. There's been the driving force of Dodd-Frank and regulation which has pushed it in North America. The move is happening now in Europe. We are continuing to convert a bit.

So yes, you can continue to expect from us that we're going to convert more and more of our business every minute of the day. The challenge has always been the marketplace wanting it, the brokers accepting it, and we think we've broken the back of that. We think that -- we know that our brokers are completely aligned. They're shareholders in our Company and they benefit from the good work that we're all doing and they completely embrace technology. I'm not saying it's easy, but we are continuing to forge ahead. So yes, you continue to expect us to grow, build, and expand our electronic platform globally.

Okay. That's all I had, guys. Thank you.

Thank you. And our next question is from Patrick O'Shaughnessy of Raymond James. Please go ahead.

Hello, good morning, guys.

Good morning.

Good morning.

So a first question on the commercial real estate business. It was a pretty lofty revenue goal that you guys threw out for 2015. How much of the way do you think you can get there with your existing companies that you already own and how much of that is dependent upon doing more acquisitions?

I don't think we ever depend on more acquisitions because you can't count on them, you can't rely on them, and they may not happen. So I think the answer is we think organic growth and the businesses we have and growing those businesses, I think we feel good about it, good enough to talk about it on the phone. If we find the right acquisitions at the right price at the right time and they're accretive, we'll add them.

They may make making the goal easier, but we're confident and we feel good right where we are, right now. That's why we say things on the phone call when you can't say things on the phone to us. We won't do it unless we're confident we can get it done, and buying other companies is not a way to be confident getting things done.

Got you. And then can you talk about where you stand as far as bringing the different subsidiaries of ARA into the BGC fold?

Well, ARA was a series of 16 companies. They had a nice relationship with each other, but that's about it. They had sort of a marketing relationship, and we are finishing -- we're finishing up with those. There are a few small ones left that we might finish in the second quarter, and even possibly one of the smaller companies might even last until the third quarter.

For all intents and purposes, we would expect by the end of the first quarter to have the virtually all of it complete. That is consequential to our shareholders. There may be a few smaller offices left, but they would not be overall consequential to the overall operation. Consequential to themselves, but to the overall size of BGC and our real estate business, you know, they're just a nice to add.

All right. Got it. Thanks. And then your other acquisition during the fourth quarter, RP Martin, I believe you closed on the UK assets during, I think, mid-December. We didn't see an increase to your Financial Services headcount during the quarter. That was actually down by one. So did you bring some of those people over during the fourth quarter and then there was just a little bit of headcount reduction elsewhere in the Company?

Yes, we've continued to, as we always do, to control our non-performing headcount. We've always been pushing hard, especially as we turn markets electronic, to look at our overall headcount to make sure it's giving everything that we expect of it to push hard and be profitable. And what we've done is in December, the addition of the RP Martin team really just took us back above the level that we were at beforehand. There's a lot of turnover that's gone on inside that number.

In addition, that shows that the headcount and the revenue per head you've seen another increase in revenue per head because of letting go the underperforming brokers, bringing on the brokers from RP Martin. You should expect that to continue to increase in 2015.

All right. Great. Thank you. Now switching gears to GFI Group, and I appreciate that you're probably limited with what you can talk about, but can you provide some color into kind of what the hang-up has been, why you weren't able to agree to a nondisclosure agreement that their Board was comfortable with?

Sure. The nondisclosure agreement in the past was -- had combined with a no poach, a no hire agreement that would have, if we had signed it, kept us out of being able to hire people going forward. And if their Company had remained independent, which obviously was its intention, it would have basically cost us something without any particular benefit. So we know the industry unbelievably well.

We understand the business. We understand the math. We have the scale and scope to have the business be accretive if it's part of us. We didn't need to give of ourselves in order to get that kind of financial information. A private equity buyer would have to agree, and of course they don't really care.

The CME would agree, but they don't really care because they weren't interested. They weren't even buying the brokers. To us, it just was a request that did not make sense and was not intended to assist us in doing the transaction. It was intended to basically shackle us. That's why we chose not to pursue it there, but we did pursue of course a tender offer to buy the company. So we moved forward.

Got you. Thanks for that color. And then can you characterize the tone of your conversations with GFI's special committee? Because it does sound like you've had some interactions and certainly I think the two special committee members have voted in favor of your tender offer in the past. So how have those conversations gone and is there anything you can share there?

Well, we had tender offer agreements. They would raise points. We would address their points, discuss with their counsel how to reasonably resolve the points between us, came to a reasonable resolution of those points between us, and that were raised and sent them tender offer agreements. That's about it. That's sort of how it went. We tried to address their concerns, tried to resolve them in appropriate business fashion. There was nothing other than appropriate business fashion between counsel. It really wasn't about business people.

Got you. Great. That's all from me. Thank you, guys.

Thank you. I will now turn the call back over to the Chairman and CEO, Mr. Howard Lutnick.

Well, thanks very much for joining us. Obviously, the addition of real estate makes the fourth quarter look great. Having a great Financial Service business makes the first quarter great. The Company is doing very, very well, seems to be firing now on more and more cylinders as the business volatility comes back in Financial Services.

We can see ever better numbers. So we are confident of the first quarter, and we're confident going forward, and we look forward to speaking to you next quarter, and we would be happy to set up, if we are successful with our GFI tender offer. I'm sure we will be scheduling something to come back and talk to you then.

But we look forward to speaking to you at least next quarter and hopefully before then. So thank you all for joining us this morning. We look forward to speaking to you soon. Have a great day.

Thank you. And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.