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8-K - FORM 8-K - Global Brokerage, Inc.v312342_8k.htm

 

 

FXCM Inc. Announces First Quarter 2012 Results

Releases April 2012 Operating Metrics

 

First Quarter 2012 Highlights:

·US GAAP revenues of $102.6 million, up 8% versus the same period in 2011
·Adjusted Pro Forma EBITDA of $24.9 million, down 2% versus the same period in 2011
·Adjusted Pro Forma net income of $12.5 million, down 9% versus the same period in 2011
·Adjusted Pro Forma fully diluted earnings per share of $0.17, down 6% versus the same period in 2011
·US GAAP net income of $2.9 million, up 4% versus the same period in 2011
·US GAAP fully diluted earnings per share of $0.16, unchanged versus the same period in 2011
·Customer equity of $1,136 million, up 47% from same period in 2011 and up 8% from December 2011
·Active accounts of 171,296, up 22% from the same period in 2011 and up 5% from December 2011

 

NEW YORK, NY – May 9, 2012 – FXCM Inc. (NYSE: FXCM), a leading online provider of foreign exchange, or FX, trading and related services, today announced for the quarter ended March 31, 2012, revenues under US GAAP of $102.6 million, compared to $94.6 million for the quarter ended March 31, 2011, an increase of 8%. Adjusted Pro Forma EBITDA for the first quarter 2012 was $24.9 million, compared to $25.5 million for the first quarter 2011, a decrease of 2%. Adjusted Pro Forma Net Income was $12.5 million for the first quarter 2012, compared to $13.7 million for the first quarter 2011, a decrease of 9%. Adjusted Pro Forma fully diluted earnings per share for the first quarter 2012 of $0.17 on a fully exchanged, fully diluted basis, compared to $0.18 per share for the first quarter 2011, a decrease of 6%. U.S. GAAP net income was $2.9 million for the first quarter 2012, compared to $2.8 million for the first quarter 2011, an increase of 4%. U.S. GAAP earnings per share for the first quarter 2012 was unchanged at $0.16 per fully diluted Class A share, compared the first quarter 2011.

 

Adjusted Pro Forma results assume the conversion and exchange of all FXCM Holdings, LLC Units into FXCM Inc. Class A common stock, resulting in the elimination of the non-controlling interest and the corresponding adjustment to the entity’s tax provision. In addition, Adjusted Pro Forma results eliminate certain non-recurring charges and certain equity based compensation expense.

 

 
 

 

“FXCM delivered strong growth in the quarter despite a weak trading environment in foreign exchange. Customer equity grew by 8% to $1.1 billion from year-end 2011 and is up 47% from March 2011. We achieved near record volumes in our retail business with over $985 billion in customer volume – some $15.2 billion a day – in part because of the strength in our Japanese business,” said Drew Niv, Chief Executive Officer.

 

“Our institutional business had a near record with $398 billion in customer volume. We are most pleased with these results as we have begun to roll out our own internally developed institutional trading platform which we believe will make us more competitive in the very large institutional foreign exchange market.”

 

In addition, FXCM Inc. today announced certain key operating metrics for April 2012 for its retail and institutional foreign exchange business. Monthly activities included:

 

April 2012 Operating Metrics

 

Retail Trading Metrics

 

·Retail customer trading volume(1) of $248 billion in April 2012, 27% lower than March 2012 and 15% lower than April 2011.

 

·Average retail customer trading volume per day of $11.8 billion in April 2012, 24% lower than March 2012 and 15% lower than April 2011.

 

·An average of 324,813 retail client trades per day in April 2012, 18% lower than March 2012 and 1% higher than April 2011.

 

·Tradeable accounts(2) of 202,539 as of April 30, 2012, an increase of 2,407 or 1% from March 2012, and an increase of 36,391 or 22% from March 2011.

 

Institutional Trading Metrics

 

·Institutional customer trading volume(1) of $103 billion in April 2012, 36% lower than March 2012 and 65% higher than April 2011.

 

·Average institutional trading volume per day of $4.9 billion in April 2012, 33% lower than March 2012 and 65% higher than April 2011.

 

·An average of 13,608 institutional client trades per day in April 2012, 48% lower than March 2012 and 101% higher than April 2011.

 

“April was one of the lowest months of volatility in foreign currencies seen in the past five years and our operating metrics reflected that,” continued Niv. “However, with the strong start to the year that we have seen in customer equity and account growth, we believe we are well positioned should the trading environment improve.”

 

More information, including historical results for each of the above metrics, can be found on the investor relations page of the Company's corporate website, www.fxcm.com.

 

 
 

 

This operating data is preliminary and subject to revision and should not be taken as an indication of the financial performance of FXCM Inc. FXCM undertakes no obligation to publicly update or review previously reported operating data. Any updates to previously reported operating data will be reflected in the historical operating data that can be found on the Investor Relations page of the Company’s corporate website, www.fxcm.com.

 

(1) Volume that FXCM customers traded in period is translated into US dollars.

 

(2) A Tradeable Account is an account with sufficient funds to place a trade in accordance with FXCM trading policies.

 
 

 

Consolidated Adjusted Pro Forma and U.S. GAAP Results

 

   Adjusted Pro Forma (millions except per
share amounts, unaudited)
 
   Three Months Ended March 31, 
   2012   2011   % Change 
             
Total Net Revenues  $102.6   $94.6    8%
                
Referring broker fees   20.2    21.6    (6)%
Compensation and benefits   21.1    20.2    4%
Other expenses   36.4    27.3    33%
                
EBITDA   24.9    25.5    (2)%
                
Depreciation, amortization and interest expense   6.4    4.1    56%
                
Income before income taxes   18.5    21.4    (14)%
                
Income tax provision   6.0    7.7    (22%)
                
Net Income   12.5    13.7    (9)%
                
Net income attributable to non-controlling interest   -    -    - 
                
Net Income Attributable to FXCM Inc.  $12.5   $13.7    (9)%
                
Pro forma fully exchanged, fully diluted shares outstanding   72.7    75.3    (3)%
                
Earnings Per Share  $0.17   $0.18    (6)%
                

 

 

   Unaudited U.S. GAAP (millions except per
share amounts, unaudited)
 
   Three Months Ended March 31, 
   2012   2011   % Change 
             
Total Net Revenues  $102.6   $94.6    8%
                
Referring broker fees   20.2    21.6    (6)%
Compensation and benefits   23.2    22.6    3%
Other expenses   36.4    27.3    33%
                
EBITDA   22.8    23.1    (1)%
                
Depreciation, amortization and interest expense   6.4    4.1    56%
                
Income before income taxes   16.4    19.0    (14)%
                
Income tax provision   2.4    0.5    380%
                
Net Income   14.0    18.5    (24)%
                
Net income attributable to non-controlling interest   11.1    15.7    (29)%
                
Net Income Attributable to FXCM Inc.   2.9    2.8    4%
                
Average Class A shares outstanding   18.0    17.3    4%
                
Net Income per Class A Share Basic and Diluted  $0.16   $0.16    - 

 

 
 

 

Selected Operating Metrics

 

   (Unaudited) 
   Three Months Ended March 31, 
   2012   2011   % Change 
             
Total trading volume ($ in billions)  $985   $822    20%
                
Total institutional trading volume ($ in billions)  $398   $219    82%
                
Total active accounts   171,296    139,900    22%
                
Trading days in period   65    64    2%
                
Daily average trades   378,837    309,777    22%
                
Daily average trades per active account   2.3    2.2    5%
                
Retail trading revenue per million traded  $94   $95    (1)%
                
Total customer equity ($ in millions)  $1,135.9   $775.1    47%

 

Non-GAAP Financial Measures

 

Adjusted Pro Forma EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per fully diluted share are non-GAAP financial measures. These measures do not represent and should not be considered as a substitute for net income, net income attributable to FXCM Inc. or net income per Class A share or as a substitute for cash flow from operating activities, each as determined in accordance with GAAP, and our calculations of these measures may not be comparable to similarly entitled measures reported by other companies. See “Adjusted Pro Forma Results” beginning on A-3 of this release for additional information regarding these non-GAAP financial measures and for reconciliations of such measure to the most directly comparable measures calculated in accordance with GAAP.

 

Declaration of Quarterly Dividend

 

The company also announced today that its board of directors has declared a quarterly dividend of $0.06 per share on its outstanding Class A common stock. The dividend is payable on June 29th, 2012 to Class A stockholders of record at the close of business on June 19th, 2012.

 

 
 

 

Conference Call

 

As previously announced, FXCM Inc. will host a conference call to discuss its results at 8:15 a.m. (EST) today. This conference call will be available to domestic participants by dialing 888.713.4214 and 617.213.4866 for international participants. The conference ID number is 80886868.

 

A live, audio webcast, a copy of FXCM's earnings release, and a presentation and replay of this conference call will also be available at http://ir.fxcm.com/.

 

Disclosure Regarding Forward-Looking Statements

 

In addition to historical information, this earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect FXCM Inc.’s current views with respect to, among other things, its operations and financial performance for the future. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,”“expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. FXCM Inc. believes these factors include but are not limited to evolving legal and regulatory requirements of the FX industry, the limited operating history of the FX industry, risks related to the protection of its proprietary technology, risks related to its dependence on FX market makers, market conditions and those other risks described under “Risk Factors” in FXCM Inc.’s Annual Report on Form 10-K and other SEC filings, which are accessible on the SEC website at sec.gov.

 

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this presentation and in our SEC filings. FXCM Inc. undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

 

About FXCM Inc.

 

FXCM Inc. (NYSE: FXCM) is a global online provider of foreign exchange, or FX, trading and related services to retail and institutional customers world-wide.

 

At the heart of FXCM's client offering is No Dealing Desk FX trading. Clients benefit from FXCM's large network of forex liquidity providers enabling FXCM to offer competitive spreads on major currency pairs. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. FXCM's U.K. subsidiary, Forex Capital Markets Limited, offers Contract for Difference (“CFD”) products with no re-quote trading and allows clients to trade oil, gold, silver and stock indices along with FX on one platform. In addition, FXCM offers educational courses on FX trading and provides free news and market research through DailyFX.com.

 

 
 

 

Trading foreign exchange and CFDs on margin carries a high level of risk, and may not be suitable for all. Read full disclaimer.

 

For Media:
Jaclyn Sales, 646-432-2463
Vice-President, Corporate Communications
jsales@fxcm.com


or

 
For Investors:
Thomas Porac, 646-432-2986
Vice-President, Investor Relations
investorrelations@fxcm.com

 

 
 

 

ANNEX I

 

Schedule   Page
Number
     
U.S. GAAP Results    
Unaudited U.S. GAAP Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011   A-1
Unaudited U.S. GAAP Consolidated Statements of Financial Condition As of March 31, 2012 and December 31, 2011   A-2
     
Adjusted Pro Forma Results   A-3
Unaudited Adjusted Pro Forma and U.S. GAAP Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011   A-4
Reconciliation of EBITDA to U.S. GAAP Net Income   A-5

 

 
 

 

FXCM Inc.

Consolidated Statement of Operations

(In thousands, except per share amounts)

(Unaudited )

 

   Three Months Ended March 31, 
   2012   2011 
Revenues          
           
Retail trading revenues  $92,726   $77,735 
Institutional trading revenues   5,820    7,379 
Trading revenue   98,546    85,114 
           
Interest income   860    941 
Brokerage interest expense   91    73 
Net interest income   769    868 
           
Other income   3,274    8,597 
           
Total net revenues   102,589    94,579 
           
Operating Expenses          
           
Referring broker fees   20,189    21,601 
Compensation and benefits   23,217    22,586 
Advertising and marketing   8,270    7,018 
Communication and technology   8,380    7,359 
General and administrative   19,710    12,915 
Depreciation and amortization   6,181    4,094 
           
           
Total operating expenses   85,947    75,573 
           
Operating income   16,642    19,006 
           
Other Expense          
Interest on borrowings   269    - 
           
Income before income taxes   16,373    19,006 
Income tax provision   2,367    549 
Net income   14,006    18,457 
Net income attributable to non-controlling interest   11,118    15,661 
Net income attributable to FXCM, Inc.  $2,888   $2,796 
           
Average Class A shares outstanding   17,989    17,319 
           
Net Income per Class A Share Basic and Diluted  $0.16   $0.16 

 

A-1
 

 

FXCM Inc.

Consolidated Statements of Financial Condition

As of March 31, 2012 and December 31, 2011

(Amounts in thousands except for share data)

(Unaudited)

 

   March 31,   December 31, 
   2012   2011 
         
Assets          
           
Current assets          
Cash and cash equivalents  $221,312   $184,721 
Cash and cash equivalents, held for customers   1,135,857    1,046,983 
Due from brokers   3,715    1,311 
Accounts receivables, net   10,916    17,004 
Deferred tax asset   6,241    6,982 
Tax receivable   2,079    2,016 
Total current assets   1,380,120    1,259,017 
           
Deferred tax asset   109,674    88,556 
Office, communication and computer equipment, net   44,562    39,686 
Intangible assets and goodwill, net   78,930    80,656 
Other assets   15,924    19,218 
Total assets  $1,629,210   $1,487,133 
           
Liabilities and Equity          
           
Current liabilities          
Customer account liabilities  $1,135,857   $1,046,983 
Accounts payable and accrued expenses   53,571    56,723 
Credit agreement   45,000    - 
Due to brokers   4,155    13,495 
Deferred tax liability   2,304    2,241 
Due to related parties pursuant to tax receivable agreement   4,468    3,575 
Total current liabilities   1,245,355    1,123,017 
           
Deferred tax liability   6,669    7,044 
Due to related parties pursuant to tax receivable agreement   80,392    63,639 
Total liabilities   1,332,416    1,193,700 
           
Commitments and Contingencies          
           
Stockholders' equity          
Class A common stock, par value $0.01 per share;   200    149 
3,000,000,000 shares authorized, 19,967,859 and 14,899,391 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively          
Class B common stock, par value $0.01 per share;   1    1 
1,000,000 shares authorized, 100 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively          
Additional paid-in-capital   115,707    86,152 
Retained earnings   10,667    8,977 
Accumulated other comprehensive income   (599)   142 
Total stockholders' equity, FXCM Inc.   125,976    95,421 
Non-controlling interest   170,818    198,012 
Total stockholders' equity   296,794    293,433 
Total liabilities and stockholders' equity  $1,629,210   $1,487,133 

 

See accompanying notes to the consolidated financial statements.

 

A-2
 

 

Adjusted Pro Forma Results

 

Throughout the discussion of FXCM Inc.’s results, information is presented on an Adjusted Pro Forma basis, which is a non-generally accepted accounting principles (“non-GAAP”) measure. Adjusted Pro Forma results begin with information prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), adjusted to exclude certain items and reflects the conversion of all units of FXCM Holdings, LLC for shares of Class A common stock of FXCM Inc. FXCM believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare FXCM’s results across several periods and facilitate an understanding of FXCM’s operating results. The Company uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. The differences between Adjusted Pro Forma and U.S. GAAP results are as follows:

 

1.Assumed Exchange of Units of FXCM Holdings, LLC for FXCM Inc. Class A Shares. As a result of the exchange of FXCM Holdings units, the non-controlling interest related to these units is converted to controlling interest. The Company’s management believes that it is useful to provide the per-share effect associated with the assumed exchange of all FXCM Holdings units.

 

2.Stock Based Compensation Expense. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate expense relating to stock based compensation relating to the Company’s initial public offering. The Company’s management believes it is useful to provide the effects of eliminating these expenses.

 

3.Income Taxes. Prior to the initial public offering FXCM was organized as a series of limited liability companies and foreign corporations, and even following the initial public offering not all of the Company’s income is subject to corporate-level taxes. As a result, adjustments have been made to the Adjusted Pro Forma earnings to assume that the Company has adopted a conventional corporate tax structure and is taxed as a C corporation in the U.S. at the prevailing corporate rates and the deferred tax assets related to tax benefits for equity-based compensation awards are realized when the stock options are exercised. This assumption is consistent with the assumption that all of FXCM Holdings’ units are exchanged for shares of FXCM Inc. Class A common stock, as discussed in Item 1 above, as the assumed exchange would change the tax structure of the Company.

 

A-3
 

 

FXCM Inc.

Adjusted Pro Forma Consolidated Statement of Operations

(In thousands, except per share amounts)

(Unaudited )

 

 

   Three Months Ended March 31, 
($ thousands)    2012   2011 
   As       Adjusted   As       Adjusted 
   Reported   Adjustments   Pro Forma   Reported   Adjustments   Pro Forma 
Revenues                                
                               
Retail trading revenues  $92,726    -   $92,726   $77,735    -   $77,735 
Institutional trading revenues   5,820    -    5,820    7,379    -    7,379 
 Trading revenues   98,546    -    98,546    85,114    -    85,114 
                               
Interest Income   860    -    860    941    -    941 
Brokerage interest expense   91    -    91    73    -    73 
 Net interest income   769    -    769    868    -    868 
                               
Other Income   3,274    -    3,274    8,597    -    8,597 
                               
 Total net revenues     102,589    -    102,589    94,579    -    94,579 
                               
Operating Expenses                                
                               
 Referring broker fees     20,189    -    20,189    21,601    -    21,601 
 Compensation and benefits   23,217    (2,108)(1)   21,109    22,586    (2,433)(1)   20,153 
 Advertising and marketing   8,270    -    8,270    7,018    -    7,018 
 Communication and technology   8,380    -    8,380    7,359    -    7,359 
 General and administrative   19,710    -    19,710    12,915    -    12,915 
 Depreciation and amortization   6,181    -    6,181    4,094    -    4,094 
                               
Total operating expenses   85,947    (2,108)   83,839    75,573    (2,433)   73,140 
                               
 Operating income   16,642    (2,108)   18,750    19,006    (2,433)   21,439 
                               
Other expense                                
 Interest on borrowings   269    -    269    -    -    - 
                               
 Income before income taxes     16,373    2,108    18,481    19,006    2,433    21,439 
Income tax provision   2,367    3,601(2)   5,968    549    7,199(2)   7,748 
 Net income   14,006    (1,493)   12,513    18,457    (4,766)   13,691 
Net income attributable to non-controlling interest     11,118    (11,118)(3)   -    15,661    (15,661)(3)   - 
Net income attributable to FXCM Inc.    $2,888   $9,625   $12,513   $2,796   $10,895   $13,691 
                               
 Pro Forma fully exchanged, fully diluted shares outstanding             72,675 (4)             75,300 (4)
                               
 Adjusted Pro Forma net income per fully exchanged, fully diluted shares outstanding            $0.17              $0.18  

 

 

(1) Represents the elimination of equity-based compensation associated with the IPO.

 

(2) Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 32.3% and 36.1% for the three months ended March 31, 2012 and 2011, respectively, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. The adjustment assumes full exchange of existing unitholders FXCM Holdings, LLC units for shares of Class A common stock of the Company.

 

(3) Represents the elimination of the non-controlling interest associated with the ownership by existing unitholders of FXCM Holdings, LLC (excluding FXCM, Inc.), as if the unitholders had fully exchanged their FXCM Holdings, LLC units for shares of Class A common stock of the Company.

 

(4) Fully diluted shares assuming all unitholders had fully exchanged their FXCM Holdings, LLC units for shares of

Class A common stock of the Company.

 

A-4
 

 

FXCM Inc.

Reconciliation of EBITDA to Net Income

(In thousands)

(Unaudited )

  

   Three Months Ended March 31, 
   Adjusted Pro Forma   U.S. GAAP 
   2012   2011   2012   2011 
                 
Revenues   102,589    94,579    102,589    94,579 
                     
Net income attributable to FXCM Inc.   12,513    13,691    2,888    2,796 
Net income attributable to noncontrolling interest   -    -    11,118    15,661 
Provision for income taxes   5,968    7,748    2,367    549 
Depreciation, amortization and interest expense   6,450    4,094    6,450    4,094 
EBITDA   24,931   25,533    22,823   23,100 

 

A-5