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FXCM Inc. Announces First Quarter 2014 Results


    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, 2014, US GAAP revenues of $115.0 million, compared to $122.9 million for the quarter ended March 31, 2013, a decrease of 6%. U.S. GAAP net income attributable to FXCM Inc. was $2.1 million for the First Quarter 2014 or $0.05 per diluted share, compared to $6.9 million or $0.23 per diluted share for the First Quarter 2013, a decrease of 70% and 79% respectively.

    Adjusted Pro Forma EBITDA for the First Quarter 2014 was $24.6 million, compared to $43.8 million for the First Quarter 2013, a decrease of 44%. Adjusted Pro Forma Net Income was $5.2 million or $0.07 per share for the First Quarter 2014, compared to $17.5 million or $0.23 per diluted, fully exchanged share for the First Quarter 2013, a decrease of 70% and 70% respectively.

    “Volatility in the currency markets is currently at lows only seen twice in the past 20 years,” said Drew Niv, Chief Executive Officer. “However, having grown our business so significantly in the past few years, we believe we have the scale to continue to weather the difficult trading conditions relative to our competition and use them to expand our market share for when conditions improve.”

    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 granted at the time of FXCM´s initial public offering in December 2010.

    FXCM Inc. today announced certain key operating metrics for April 2014 for its retail and institutional foreign exchange businesses. Monthly activities included:

    April 2014 Operating Metrics

    Retail Trading Metrics

    1.     Retail customer trading volume(1) of $250 billion in April 2014, 14% lower than March 2014 and 32% lower than April 2013.         2.     Average retail customer trading volume(1) per day of $11.4 billion in April 2014, 17% lower than March 2014 and 32% lower than April 2013.         3.     An average of 351,138 retail client trades per day in April 2014, 18% lower than March 2014 and 30% lower than April 2013.         4.     Tradeable accounts(2) of 192,605 as of April 30, 2014, an increase of 3,342, or 2%, from March 2014, and a decrease of 3,569,or 2%, from April 2013.  

    Institutional Trading Metrics

    • Institutional customer trading volume(1) of $185 billion in April 2014, 8% lower than March 2014 and 1% higher than April 2013.
    • Average institutional trading volume(1) per day of $8.4 billion in April 2014, 12% lower than March 2014 and 1% higher than April 2013.
    • An average of 42,876 institutional client trades per day in April 2014, 14% higher than March 2014 and 88% higher than April 2013.

    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.fxcmespanol.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.fxcmespanol.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.

    Condensed Consolidated U.S. GAAP and Adjusted Pro Forma Results

        Unaudited    

    U.S. GAAP (thousands, except per share amounts)

        Three Months Ended March 31,     2014   2013   % Change               Total net revenues   $ 115,008     $

    122,864

     

      -6 %               Compensation and benefits     29,890       23,533     27 % Allocation of net income to Lucid members for services provided     2,973       -     100 % Total compensation and benefits     32,863       23,533     40 % Referring broker fees     19,122       21,350     -10 % Other expenses     42,990       36,115     19 % Loss on equity method investments, net     310       148     109 % Depreciation and amortization     12,630       11,974     5 % Interest on borrowings     2,997       817     267 % Income before income taxes     4,096       28,927     -86 % Income tax provision     1,251       7,959     -84 % Net Income     2,845       20,968     -86 % Net income attributable to non-controlling interest in FXCM Holdings, LLC     2,427       10,230     -76 %

    Net income (loss) attributable to other non-controlling interests

        (1,659 )     3,878     -143 %               Net Income Attributable to FXCM Inc.   $ 2,077     $ 6,860     -70 %               Weighted average Class A shares outstanding - Basic     39,077       28,472     37 %                         Weighted average Class A shares outstanding - Diluted     43,152       29,678     45 %               Net Income per Class A Share             Basic   $ 0.05     $ 0.24     -78 % Net Income per Class A Share             Diluted   $ 0.05     $ 0.23     -79 %       Unaudited     Adjusted Pro Forma (thousands, except per share amounts)     Three Months Ended March 31,     2014   2013   % Change               Total Revenues  

    $

    111,336

     

     

    $

    122,864

     

      -9 %               Compensation and benefits     27,716       21,471     29 % Allocation of net income to Lucid members for services provided     -       -     -   Total compensation and benefits     27,716       21,471     29 % Referring broker fees     19,122       21,350     -10 % Loss on equity method investments, net     310       148     109 % Other expenses     39,584       36,115     10 %               EBITDA     24,604       43,780     -44 %               Depreciation and amortization     12,630       11,974     5 % Interest on borrowings     2,997       817     267 % Income before income taxes     8,977       30,989     -71 % Income tax provision     2,179       9,596     -77 % Net Income     6,798       21,393     -68 % Net income attributable to non-controlling interest in FXCM Holdings, LLC     -       -     -   Net income attributable to other non-controlling interests     1,604       3,878    

    -59

    %

                  Net Income Attributable to FXCM Inc.   $ 5,194     $ 17,515     -70 %               Pro forma fully exchanged, fully diluted weighted average shares outstanding     79,766       75,785     5 %               Earnings Per Share   $ 0.07     $ 0.23     -70 %  

    Selected Operating Metrics

          (Unaudited)     Three Months Ended March 31,     2014   2013   % Change               Total retail trading volume ($ in billions)  

    $

    936

     

     

    $

    1,041

     

      -10 %               Total institutional trading volume ($ in billions)   $ 546     $ 373     46 %               Total active accounts     181,156       173,265     5 %               Trading days in period     63       63     0 %               Daily average trades     413,912       437,813     -5 %               Daily average trades per active account     2.3       2.5     -8 %               Retail trading revenue per million traded   $ 88     $ 88     0 %               Total customer equity ($ in millions)   $ 1,245.3     $ 1,190.4     5 %  

    Non-GAAP Financial Measures

    Adjusted Pro Forma EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per 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 July 1, 2014 to Class A stockholders of record at the close of business on June 6, 2014.

    Conference Call

    As previously announced, the Company will host a conference call to discuss the results at 8:15 a.m. (EDT). This conference call will be available to domestic participants by dialing 877.445.4603 and 443.295.9270 for international participants. The conference ID number is 37161819.

    A live audio webcast, a copy of FXCM´s earnings release, and presentation slides for this conference call will 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.

    Visit www.fxcmespanol.com and follow us on Twitter @FXCM, Facebook FXCM, Google+ FXCM or YouTube FXCM.

    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.

    ANNEX I

    Schedule     Page Number         U.S. GAAP Results       Unaudited U.S. GAAP Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013     A-1 Unaudited U.S. GAAP Condensed Consolidated Statements of Financial Condition As of March 31, 2014 and December 31, 2013     A-2         Adjusted Pro Forma Results     A-3 Unaudited Adjusted Pro Forma and U.S. GAAP Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013     A-4 Reconciliation of non-GAAP Measures to nearest U.S. GAAP Results     A-5 Reconciliation of EBITDA to U.S. GAAP Net Income     A-6   FXCM Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)     Three Months Ended March 31,     2014   2013 Revenues         Retail trading revenue   $ 82,660     $ 91,254   Institutional trading revenue     26,150       27,556   Trading revenue     108,810       118,810             Interest income     563       679   Brokerage interest expense     (96 )     (55 ) Net interest income     467       624             Other income     5,731       3,430   Total net revenues     115,008       122,864             Operating Expenses                   Compensation and benefits     29,890       23,533   Allocation of net income to Lucid members for services provided     2,973       -   Total compensation and benefits     32,863       23,533   Referring broker fees     19,122       21,350   Advertising and marketing     6,497       7,351   Communication and technology     12,219       8,355   Trading costs, prime brokerage and clearing fees     8,206       7,938   General and administrative     16,068       12,471   Depreciation and amortization     12,630       11,974   Total operating expenses     107,605       92,972   Total operating income     7,403       29,892   Other Expense         Loss on equity method investments, net     310       148   Interest on borrowings     2,997       817   Income before income taxes     4,096       28,927   Income tax provision     1,251       7,959   Net income     2,845       20,968  

    Net income attributable to non-controlling interest in FXCM Holdings, LLC

        2,427       10,230  

    Net (loss) income attributable to other non-controlling interests

        (1,659 )     3,878   Net income attributable to FXCM Inc.   $ 2,077     $ 6,860             Weighted average Class A shares outstanding - Basic     39,077       28,472   Weighted average Class A shares outstanding - Diluted     43,152       29,678             Net Income per Class A Share         Basic   $ 0.05     $ 0.24   Diluted   $ 0.05