FXCM Inc. Announces Second Quarter 2013 Results

Releases July 2013 Operating Metrics

 

Revenues up 53% on Record Quarterly Retail and Institutional Volume of $1.7 trillion

Pro Forma EBITDA up 159% and Pro Forma EPS up 182%

 

Second Quarter 2013 Highlights:

·

Revenues of $140.1 million, up 53% versus the same period in 2012

·

U.S. GAAP net income attributable to FXCM Inc. of $10.1 million or $0.32 per fully diluted share

·

Adjusted Pro Forma EBITDA of $54.5 million, up 159% versus the same period in 2012

·

Adjusted Pro Forma net income of $23.3 million or $0.31 per fully diluted share up 196% and 182%, respectively, versus the same period in 2012

 

July 2013 Operating Metrics Highlights:

·

Retail customer trading volume of $388 billion – third highest in FXCM’s history

·

Institutional customer trading volume of $185 billion – second highest in FXCM’s history

 

NEW YORK, NY – August 7, 2013 – FXCM Inc. (NYSE: FXCM), a leading online provider of foreign exchange, or FX, trading and related services, today announced for the quarter ended June 30, 2013, revenues of $140.1 million, compared to $91.7 million for the quarter ended June 30, 2012, an increase of 53%. U.S. GAAP net income attributable to FXCM Inc. was $10.1 million for the Second Quarter 2013 or $0.32 per fully diluted FXCM Inc. Class A share, compared to a loss of $1.4 million or $0.06 per FXCM Inc. Class A share for the Second Quarter 2012.

 

Adjusted Pro Forma EBITDA for the Second Quarter 2013 was $54.5 million, compared to $21.0 million for the Second Quarter 2012, an increase of 159%. Adjusted Pro Forma Net Income was $23.3 million or $0.31 per share for the Second Quarter 2013, compared to $7.9 million or $0.11 per fully diluted, fully exchanged share for the Second Quarter 2012, an increase of 196% and 182%, respectively.

 

For the six months ended June 30, 2013, revenues were $263.0 million, compared to $194.3 million for the six months ended June 30, 2012, an increase of 35%. U.S. GAAP net income attributable to FXCM Inc. was $17.0 million for the six months ended June 30, 2013 or $0.55 per fully diluted FXCM Inc. Class A share, compared to $1.4 million or $0.07 per FXCM Inc. Class A share for the six months ended June 30, 2012.

 

 

Adjusted Pro Forma EBITDA for the six months ended June 30, 2013 was $98.3 million, compared to $45.9 million for the six months ended June 30, 2012, an increase of 114%. Adjusted Pro Forma Net Income was $40.8 million or $0.54 per share for the six months ended June 30, 2013, compared to $20.4 million or $0.28 per fully diluted, fully exchanged share for the six months ended June 30, 2012, an increase of 100% and 93%, respectively.

 

“FXCM turned in one of its best quarters with record revenues and our second highest EBITDA ever – only slightly below the fourth quarter of 2008, when volatility spiked to levels more than double what we saw in the second quarter,” said Drew Niv, Chief Executive Officer. “We have expanded the scale of our business to the point that we were able to deliver outstanding results in a much more moderate climate.”

 

“We now have $374 million of cash and are undrawn on our $155 million credit facility – leaving us with plenty of liquidity to pursue acquisitions,” he added.

 

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 equity based compensation expense regarding a grant of stock options at the time of FXCM’s initial public offering (“IPO”) in December 2010 and reclassifies the allocation of earnings of Lucid non-controlling members recorded as compensation expense to net income attributable to non-controlling interest.

 

FXCM Inc. today announced certain key operating metrics for July 2013 for its retail and institutional foreign exchange business. Monthly activities included:

 

July 2013 Operating Metrics

 

Retail Trading Metrics

 

·

Retail customer trading volume(1) of $388 billion in July 2013, 2% lower than June 2013 and 32% higher than July 2012.

 

·

Average retail customer trading volume(1) per day of $16.9 billion in July 2013, 17% lower than June 2013 and 30% higher than July 2012.

 

·

An average of 456,044 retail client trades per day in July 2013, 22% lower than June 2013 and 28% higher than July 2012.

 

·

Tradable accounts(2) of 194,519 as of July 30, 2013, an increase of 3,521, or 2% from June 2013, and a decrease of 12,226, or 6%, from July 2012.

 

Institutional Trading Metrics

 

·

Institutional customer trading volume(1) of $185 billion in July 2013, 1% higher than June 2013 and 208% higher than July 2012.

 

 

·

Average institutional trading volume(1) per day of $8 billion in July 2013, 13% lower than June 2013 and 196% higher than July 2012.

  

·

An average of 44,139 institutional client trades per day in July 2013, 8% higher than June 2013 and 604% higher than July 2012.

 

  “July continued the strong trading environment of the Second Quarter,” continued Niv. “We are pleased to report near-record levels in most of our key operating metrics.”

 

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’s customers traded in period is translated into U.S. dollars.

 

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

 

 

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

 

		Unaudited Adjusted Pro Forma (thousands, except per share amounts)												Unaudited Adjusted Pro Forma (thousands except per share amounts)
		Three Months Ended June 30,												Six Months Ended June 30,
		2013				2012				% Change				2013				2012				% Change
Total net revenues		$	140,133			$	91,683				53	%		$	262,997			$	194,273				35	%
Referring broker fees			22,422				19,968				12	%			43,772				40,157				9	%
Compensation and benefits			24,529				19,830				24	%			45,999				40,939				12	%
Loss on equity method investments, net			397				-				0	%			545				-				0	%
Other expenses			38,306				30,879				24	%			74,421				67,239				11	%
EBITDA			54,479				21,006				159	%			98,260				45,938				114	%
Depreciation and amortization			12,481				6,863				82	%			24,455				13,044				87	%
Interest on borrowings			1,290				271				376	%			2,107				540				290	%
Income before income taxes			40,708				13,872				193	%			71,698				32,354				122	%
Income tax provision			9,365				5,124				83	%			18,960				11,091				71	%
Net income			31,343				8,748				258	%			52,738				21,263				148	%
Net income attributable to non-controlling interest in FXCM Holdings, LLC			-				-				0	%			-				-				0	%
Net income attributable to non-controlling interest in Lucid Markets Trading Limited			8,043				873				821	%			11,921				873				1266	%
Net income attributable to FXCM Inc.		$	23,300			$	7,875				196	%		$	40,817			$	20,390				100	%
Pro forma fully exchanged, diluted weighted average shares outstanding			75,715				72,848				4	%			75,750				72,761				4	%
Earnings per share		$	0.31			$	0.11				182	%		$	0.54			$	0.28				93	%

 

 

		Unaudited U.S. GAAP												Unaudited U.S. GAAP
		(thousands, except per share amounts)												(thousands, except per share amounts)
		Three Months Ended June 30,												Six Months Ended June 30,
		2013				2012				% Change				2013				2012				% Change
Total net revenues		$	140,133			$	91,683				53	%		$	262,997			$	194,273				35	%
Compensation and benefits			26,587				33,802				-21	%			50,120				57,019				-12	%
Allocation of net income to Lucid members for services provided			15,004				-				0	%			15,004				-				0	%
Total compensation and benefits			41,591				33,802				23	%			65,124				57,019				14	%
Referring broker fees			22,422				19,968				12	%			43,772				40,157				9	%
Other expenses			38,306				34,804				10	%			74,421				71,164				5	%
Loss on equity method investments, net			397				-				0	%			545				-				0	%
Depreciation and amortization			12,481				6,863				82	%			24,455				13,044				87	%
Interest on borrowings			1,290				271								2,107				540				290	%
Income before income taxes			23,646				(4,025	)			687	%			52,573				12,349				326	%
Income tax provision			6,390				(1,109	)			676	%			14,349				1,258				1041	%
Net income			17,256				(2,916	)			692	%			38,224				11,091				245	%
Net income attributable to non-controlling interest in FXCM Holdings, LLC			14,093				(2,348	)			700	%			24,323				8,771				177	%
Net income attributable to non-controlling interest in Lucid Markets Trading Limited			(6,961	)			873				-897	%			(3,083	)			873				-453	%
Net income attributable to FXCM Inc.		$	10,124			$	(1,441	)			803	%		$	16,984			$	1,447				1074	%
Net income		$	10,124			$	(1,441	)			803	%		$	16,984			$	1,447				1074	%
Weighted average Class A shares outstanding - Basic			30,695				22,296				38	%			29,589				20,142				47	%
Weighted average Class A shares outstanding - Diluted			31,829				22,296				43	%			30,759				20,142				53	%
Net income per Class A share
Basic		$	0.33			$	(0.06	)			650	%		$	0.57			$	0.07				714	%
Net income per Class A share
Diluted		$	0.32			$	(0.06	)			633	%		$	0.55			$	0.07				686	%

 

 

Selected Operating Metrics

 

		Three Months Ended June 30,												Six Months Ended June 30,
		2013				2012				% Change				2013				2012				% Change
Total trading volume ($ in billions)		$	1,152			$	869				33	%		$	2,193			$	1,854				18	%
Total institutional trading volume ($ in billions)		$	558			$	402				39	%		$	931			$	800				16	%
Total active accounts			182,225				174,218				5	%			182,225				174,218				5	%
Trading days in period			65				65				0	%			128				130				-2	%
Daily average trades			516,960				367,051				41	%			478,129				372,944				28	%
Daily average trades per active account			2.8				2.1				33	%			2.6				2.1				24	%
Retail trading revenue per million traded		$	90			$	90				0	%		$	89			$	92				-3	%
Total customer equity ($ in millions)		$	1,172			$	1,255				-7	%		$	1,172			$	1,255				-7	%

 

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 September 30^th, 2013 to Class A stockholders of record at the close of business on September 6^th, 2013.

 

 

Conference Call

 

As previously announced, FXCM Inc. 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 877.303.9132 and 408.337.0136 for international participants. The conference ID number is 26671427.

 

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 Klein, 646-432-2463
Vice-President, Corporate Communications
jklein@fxcm.com

 

 

ANNEX I

 

Schedule	Page Number
U.S. GAAP Results
Unaudited U.S. GAAP Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012	A-1
Unaudited U.S. GAAP Consolidated Statements of Financial Condition As of June 30, 2013 and December 31, 2012	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 June 30, 2013 and 2012	A-5
Unaudited Adjusted Pro Forma, Adjusted Pro Forma Cash and U.S. GAAP Consolidated Statements of Operations for the Six Months Ended June 30, 2013 and 2012	A-6
Reconciliation of EBITDA to U.S. GAAP Net Income	A-7

 

 

FXCM Inc.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited )

 

		Three Months Ended June 30								Six Months Ended June 30,
		2013				2012				2013				2012
Revenues
Retail trading revenue		$	104,068			$	77,870			$	195,322			$	170,596
Institutional trading revenue			31,792				11,220				59,348				17,040
Trading revenue			135,860				89,090				254,670				187,636
Interest income			670				1,059				1,349				1,920
Brokerage interest expense			(69	)			(78	)			(124	)			(169	)
Net interest income			601				981				1,225				1,751
Other operating income			3,672				1,612				7,102				4,886
Total net revenues			140,133				91,683				262,997				194,273
Operating Expenses
Compensation and benefits			26,587				33,802				50,120				57,019
Allocation of net income to Lucid members for services provided			15,004				-				15,004				-
Total compensation and benefits			41,591				33,802				65,124				57,019
Referring broker fees			22,422				19,968				43,772				40,157
Advertising and marketing			6,157				7,487				13,508				15,757
Communication and technology			9,765				8,611				18,120				16,991
Trading costs, prime brokerage and clearing fees			8,961				1,893				16,899				3,206
General and administrative			13,423				16,813				25,894				35,210
Depreciation and amortization			12,481				6,863				24,455				13,044
Total operating expenses			114,800				95,437				207,772				181,384
Operating income			25,333				(3,754	)			55,225				12,889
Loss on equity method investments, net			397				-				545				-
Interest on borrowings			1,290				271				2,107				540
Income before income taxes			23,646				(4,025	)			52,573				12,349
Income tax provision (benefit)			6,390				(1,109	)			14,349				1,258
Net income			17,256				(2,916	)			38,224				11,091
Net income attributable to non-controlling interest in FXCM Holdings, LLC			14,093				(2,348	)			24,323				8,771
Net income attributable to non-controlling interest in Lucid Markets Trading Limited			(6,961	)			873				(3,083	)			873
Net income attributable to FXCM Inc.		$	10,124			$	(1,441	)		$	16,984			$	1,447
Net Income		$	10,124			$	(1,441	)		$	16,984			$	1,447
Weighted average Class A shares outstanding - Basic			30,695				22,296				29,589				20,142
Weighted average Class A shares outstanding - Diluted			31,829				22,296				30,759				20,142
Net Income per Class A Share
Basic		$	0.33			$	(0.06	)		$	0.57			$	0.07
Diluted		$	0.32			$	(0.06	)		$	0.55			$	0.07

 

 

FXCM Inc.
Condensed Consolidated Statements of Financial Condition
As of June 30, 2013 and December 31, 2012
(Amounts in thousands except share data)

 

		(Unaudited)
		June 30,				December 31,
		2013				2012
Assets
Current assets
Cash and cash equivalents		$	373,745			$	272,332
Cash and cash equivalents, held for customers			1,171,487				1,190,762
Due from brokers			5,517				8,040
Accounts receivables, net			27,528				5,485
Deferred tax asset			9,838				10,598
Tax receivable			938				6,003
Total current assets			1,589,053				1,493,220
Deferred tax asset			134,768				117,221
Office, communication and computer equipment, net			51,437				50,316
Goodwill			280,674				285,654
Intangible assets, net			81,930				97,792
Other assets			27,376				20,967
Total assets		$	2,165,238			$	2,065,170
Liabilities and Equity
Current liabilities
Customer account liabilities		$	1,171,487			$	1,190,762
Accounts payable and accrued expenses			62,474				56,841
Credit agreement			-				85,000
Notes payable			15,300				22,867
Due to brokers			43,173				14,494
Deferred tax liability			1,655				7,100
Due to related parties pursuant to tax receivable agreement			12,951				13,569
Total current liabilities			1,307,040				1,390,633
Deferred tax liability			8,348				12,351
Due to related parties pursuant to tax receivable agreement			99,159				87,271
Senior convertible notes			143,789				-
Total liabilities			1,558,336				1,490,255
Commitments and Contingencies			-				-
Stockholders' Equity
Class A common stock, par value $0.01 per share;			380				347
3,000,000,000 shares authorized, 38,012,793 and 34,683,599 shares issued
and outstanding as of June 30, 2013 and December 31, 2012, respectively
Class B common stock, par value $0.01 per share;			1				1
1,000,000 shares authorized, 40 and 43 shares issued
and outstanding as of June 30, 2013 and December 31, 2012, respectively
Additional paid-in-capital			199,104				171,390
Retained earnings			23,671				11,122
Accumulated other comprehensive loss			(6,874	)			(1,301	)
Total stockholders' equity FXCM Inc.			216,282				181,559
Non-controlling interests			390,620				393,356
Total stockholders' equity			606,902				574,915
Total liabilities and stockholders' equity		$	2,165,238			$	2,065,170

 

 

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. The Company’s management 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 and compensation costs associated with the renegotiation of certain employment contracts. The Company’s management believes it is useful to provide the effects of eliminating these expenses relating to these one-time items.

 

3.

Lucid Minority Interest/Compensation Expense. Our reported U.S. GAAP results reflect the portion of the 49.9% of Lucid earnings allocated among the non-controlling members of Lucid based on services provided as a component of compensation expense under “Allocation of Net Income to Lucid Members for Services Provided.” Adjustments have been made to the Adjusted Pro Forma Earnings to reclassify this allocation of Lucid’s earnings attributable to non-controlling members to “Net income attributable to non-controlling interest in Lucid.” The Company’s management believes that this reclassification provides a more meaningful view of the Company’s operating expenses and the Company’s economic arrangement with Lucid’s non-controlling members. This adjustment has no impact on net income as reported by FXCM Inc.

 

4.

Acquisition Costs. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate certain acquisition related costs. The Company’s management believes it is useful to provide the effects of eliminating these expenses.

 

5.

Regulatory Costs. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate certain costs (including client reimbursements) associated with settling certain historical trade execution issues with the Company’s regulators. The Company’s management believes it is useful to provide the effects of eliminating these expenses relating to these one-time items.

 

 

6.

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. 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.

 

 

FXCM Inc.

Adjusted Pro Forma Condensed Consolidated Statement of Operations

(In thousands, except per share data)

(Unaudited )

 

		Three Months Ended June 30,
		2013												2012
		As								Adjusted				As								Adjusted
		Reported				Adjustments				Pro Forma				Reported				Adjustments				Pro Forma
Revenues
Retail trading revenue		$	104,068				-			$	104,068			$	77,870				-			$	77,870
Institutional trading revenue			31,792				-				31,792				11,220				-				11,220
Trading revenue			135,860				-				135,860				89,090				-				89,090
Interest income			670				-				670				1,059				-				1,059
Brokerage interest expense			(69	)			-				(69	)			(78	)			-				(78	)
Net interest income			601				-				601				981				-				981
Other operating income
Other			3,672				-				3,672				1,612				-				1,612
Total net revenues			140,133				-				140,133				91,683				-				91,683
Operating Expenses
Compensation and benefits			26,587				(2,058	)(1)			24,529				33,802				(13,972	)(5)			19,830
Allocation of net income to Lucid members for services provided			15,004				(15,004	)(2)			-				-				-				-
Total compensation and benefits			41,591				(17,062	)			24,529				33,802				(13,972	)			19,830
Referring broker fees			22,422				-				22,422				19,968				-				19,968
Advertising and marketing			6,157				-				6,157				7,487				-				7,487
Communication and technology			9,765				-				9,765				8,611				-				8,611
Trading costs, prime brokerage and clearing fees			8,961								8,961				1,893				-				1,893
General and administrative			13,423				-				13,423				16,813				(3,925	)(6)			12,888
Depreciation and amortization			12,481				-				12,481				6,863				-				6,863
Total operating expenses			114,800				(17,062	)			97,738				95,437				(17,897	)			77,540
Operating income (loss)			25,333				17,062				42,395				(3,754	)			17,897				14,143
Loss on equity method investments, net			397				-				397				-				-				-
Interest on borrowings			1,290				-				1,290				271				-				271
Income before income taxes			23,646				17,062				40,708				(4,025	)			17,897				13,872
Income tax provision (benefit)			6,390				2,975	(3)			9,365				(1,109	)			6,233	(3)			5,124
Net income			17,256				14,087				31,343				(2,916	)			11,664				8,748
Net income attributable to non-controlling interest in FXCM Holdings, LLC			14,093				(14,093	)(4)			-				(2,348	)			2,348	(4)			-
Net income attributable to non-controlling interest in Lucid Markets Trading Limited			(6,961	)			15,004	(2)			8,043				873				-				873
Net income attributable to FXCM Inc.		$	10,124			$	13,176			$	23,300			$	(1,441	)		$	9,316			$	7,875
Pro Forma fully exchanged, fully diluted weighted average shares outstanding											75,715	(7)											72,848	(7)
Adjusted Pro Forma net income per fully exchanged, fully diluted weighted average shares outstanding										$	0.31											$	0.11

  

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

 

⁽²⁾ Represents the reclassification of the 49.9% of Lucid’s earnings allocated among the non-controlling members of Lucid based on services provided for U.S. GAAP purposes to Net income attributable to non-controlling interest in Lucid Markets Trading Limited.

 

⁽³⁾ Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 23.0% and 36.9% for the three months ended June 30, 2013 and 2012, 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 ("Holdings") units for shares of Class A common stock of the Company and reflects the tax effect of any pro forma adjustments.

 

⁽⁴⁾ Represents the elimination of the non-controlling interest associated with the ownership by existing unitholders of Holdings (excluding FXCM, Inc.), as if the unitholders had fully exchanged their Holdings units for shares of Class A common stock of the Company.

 

⁽⁵⁾ Represents the elimination of stock-based compensation associated with the IPO, severance and stock-based compensation in connection with the renegotiation of certain employment contracts in the Company's institutional and retail businesses.

 

⁽⁶⁾ Represents the elimination of certain acquisition-related costs and the elimination of certain costs (including client reimbursements) associated with settling certain historical trade execution issues with the Financial Services Agency of Japan.

 

⁽⁷⁾ Fully diluted shares assuming all unitholders had fully exchanged their Holdings units for shares of Class A common stock of the Company.

 

 

FXCM Inc.

Adjusted Pro Forma Condensed Consolidated Statement of Operations

(In thousands, except per share data)

(Unaudited )

 

		Six months ended June 30,
		2013												2012
		As Reported				Adjustments				Adjusted Pro Forma				As Reported				Adjustments				Adjusted Pro Forma
Revenues
Retail trading revenue		$	195,322				-			$	195,322			$	170,596				-			$	170,596
Institutional trading revenue			59,348				-				59,348				17,040				-				17,040
Trading revenue			254,670				-				254,670				187,636				-				187,636
Interest income			1,349				-				1,349				1,920				-				1,920
Brokerage interest expense			(124	)			-				(124	)			(169	)			-				(169	)
Net interest income			1,225				-				1,225				1,751				-				1,751
Other operating income			7,102				-				7,102				4,886				-				4,886
Total net revenues			262,997				-				262,997				194,273				-				194,273
Operating Expenses
Compensation and benefits			50,120				(4,121	)(1)			45,999				57,019				(16,080	)(5)			40,939
Allocation of net income to Lucid members for services provided			15,004				(15,004	)(2)			-				-				-				-
Total compensation and benefits			65,124				(19,125	)			45,999				57,019				(16,080	)			40,939
Referring broker fees			43,772				-				43,772				40,157				-				40,157
Advertising and marketing			13,508				-				13,508				15,757				-				15,757
Communication and technology			18,120				-				18,120				16,991				-				16,991
Trading costs, prime brokerage and clearing fees			16,899				-				16,899				3,206				-				3,206
General and administrative			25,894				-				25,894				35,210				(3,925	)(7)			31,285
Depreciation and amortization			24,455								24,455				13,044				-				13,044
Total operating expenses			207,772				(19,125	)			188,647				181,384				(20,005	)			161,379
Operating income (loss)			55,225				19,125				74,350				12,889				20,005				32,894
Other expense
Loss on equity method investments, net			545				-				545				-				-				-
Interest on borrowings			2,107				-				2,107				540				-				540
Income before income taxes			52,573				19,125				71,698				12,349				20,005				32,354
Income tax provision (benefit)			14,349				4,611	(3)			18,960				1,258				9,833	(3)			11,091
Net income			38,224				14,514				52,738				11,091				10,172				21,263
Net income attributable to non-controlling interest in FXCM Holdings, LLC			24,323				(24,323	)(4)			-				8,771				(8,771	)(4)			-
Net income attributable to non-controlling interest in Lucid Markets Trading Limited			(3,083	)			15,004	(2)			11,921				873				-				873
Net income attributable to FXCM Inc.		$	16,984			$	23,833			$	40,817			$	1,447			$	18,943			$	20,390
Pro Forma fully exchanged, fully diluted weighted average shares outstanding											75,750	(6)											72,761	(6)
Adjusted Pro Forma net income per fully exchanged, fully diluted weighted average shares outstanding										$	0.54											$	0.28

 

 

 

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

 

⁽²⁾ Represents the reclassification of the 49.9% of Lucid’s earnings allocated among the non-controlling members of Lucid based on services provided for U.S. GAAP purposes to Net income attributable to non-controlling interest in Lucid Markets Trading Limited.

 

⁽³⁾ Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 26.4% and 34.3% for the six months ended June 30, 2013 and 2012, 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 Holdings units for shares of Class A common stock of the Company.

 

⁽⁴⁾ Represents the elimination of the non-controlling interest associated with the ownership by existing unitholders of Holdings (excluding FXCM, Inc.), as if the unitholders had fully exchanged their Holdings units for shares of Class A common stock of the Company.

 

⁽⁵⁾ Represents the elimination of stock-based compensation associated with the IPO, severance and stock-based compensation in connection with the renegotiation of certain employment contracts in the Company's institutional and retail businesses.

 

⁽⁶⁾ Fully diluted shares assuming all unitholders had fully exchanged their Holdings units for shares of Class A common stock of the Company.

 

⁽⁷⁾ Represents the elimination of certain acquisition-related costs and the elimination of certain costs (including client reimbursements) associated with settling certain historical trade execution issues with the Financial Services Agency of Japan.

 

 

FXCM Inc.

Reconciliation of EBITDA to U.S. GAAP Net Income

(In thousands)

(Unaudited)

 

 

 

		Three Months Ended June 30,																Six Months Ended June 30,
		Adjusted Pro Forma								U.S. GAAP								Adjusted Pro Forma								U.S. GAAP
		2013				2012				2013				2012				2013				2012				2013				2012
Revenues		$	140,133			$	91,683			$	140,133			$	91,683			$	262,997			$	194,273			$	262,997			$	194,273
Net income attributable to FXCM Inc.		$	23,300			$	7,875			$	10,124			$	(1,441	)		$	40,817			$	20,390			$	16,984			$	1,447
Net income attributable to non-controlling interest in FXCM Holdings, LLC			-				-				14,093				(2,348	)			-				-				24,323				8,771
Net income attributable to non-controlling interest in Lucid Markets Trading Limited			8,043				873				(6,961	)			873				11,921				873				(3,083	)			873
Provision (benefit) for income taxes			9,365				5,124				6,390				(1,109	)			18,960				11,091				14,349				1,258
Depreciation and amortization			12,481				6,863				12,481				6,863				24,455				13,044				24,455				13,044
Interest on borrowings			1,290				271				1,290				271				2,107				540				2,107				540
EBITDA		$	54,479			$	21,006			$	37,417			$	3,109			$	98,260			$	45,938			$	79,135			$	25,933