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| 8-K - FORM 8-K - Global Brokerage, Inc. | v370739_8k.htm |
FXCM Inc. Announces Fourth Quarter 2013 and Full Year 2013 Results
Record 2013 Revenues and EBITDA
Releases February 2014 Monthly Operating Metrics
Full-Year 2013 Highlights:
| · | Full year U.S. GAAP revenues of $489.6 million, up 17% compared to 2012 and a record for FXCM |
| · | U.S. GAAP net income of $14.8 million or $0.44 per fully diluted share, up 66% and 19%, respectively, versus the same period in 2012 |
| · | Adjusted Pro Forma EBITDA of $158.0 million, up 40% compared to 2012 and a record for FXCM |
| · | Adjusted Pro Forma net income of $57.8 million or $0.76 per fully exchanged, fully diluted share, up 36% and 31%, respectively, versus the same period in 2012 |
| · | Retail trading volume of $4.1 trillion, up 13% from 2012, a record for FXCM |
| · | Institutional trading volume of $2.0 trillion, up 72% from 2012, a record for FXCM |
Fourth Quarter 2013 Highlights:
| · | 2013 fourth quarter U.S. GAAP revenues of $113.3 million, up 5% versus the same period in 2012 |
| · | U.S. GAAP net income of $3.0 million or $0.08 per fully diluted share, down 1% and 27% versus the same period in 2012, respectively |
| · | 2013 fourth quarter Adjusted Pro Forma Revenues of $107.6 million, down 0.5% versus the same period in 2012 |
| · | Adjusted Pro Forma EBITDA of $26.8 million, down 10% versus the same period in 2012 |
| · | Adjusted Pro Forma net income of $7.3 million or $0.10 per fully exchanged, fully diluted share, down 24% and 23%, respectively, versus the same period in 2012 |
| · | Active accounts of 183,679, up 7% from the same period in 2012 |
| · | Declared a quarterly dividend of $0.06 per share of Class A common stock |
February 2014 Monthly Metrics Highlights:
| · | Retail average daily volume of $15.2 billion per day, down 2% from January 2014 |
| · | Retail customer trading volume of $305 billion, down 11% from January 2014 |
| · | Institutional average daily volume of $8.1 billion per day, down 4% from January 2014 |
| · | Institutional customer trading volume of $162 billion, down 12% from January 2014 |
NEW YORK—March 6, 2014 -- FXCM Inc. (NYSE: FXCM), a leading online provider of foreign exchange, or FX, trading and related services, today announced revenues under U.S. GAAP for the quarter ended December 31, 2013 of $113.3 million, compared to $108.1 million for the quarter ended December 31, 2012, an increase of 5%. U.S. GAAP net income was $2.97 million or $0.08 per fully diluted Class A share for the fourth quarter 2013, compared to $3.00 million or $0.11 per fully diluted Class A share for the fourth quarter 2012, a decrease of 1% and 27%, respectively.
Under U.S. GAAP, revenues for the year ended December 31, 2013 increased 17% to $489.6 million, compared to $417.3 million for the corresponding period in 2012. U.S. GAAP net income for the year ended December 31, 2013 was $14.8 million, or $0.44 cents per fully diluted Class A share versus $9.0 million or $0.37 cents per fully diluted Class A share, an increase of 66% and 19%, respectively.
Adjusted Pro Forma revenues for the fourth quarter 2013 were $107.6 million, compared to $108.1 million for the fourth quarter 2012, a decrease of 0.5%. Adjusted Pro Forma EBITDA for the fourth quarter 2013 was $26.8 million, compared to $29.8 million for the fourth quarter 2012, a decrease of 10%. Adjusted Pro Forma Net Income was $7.3 million or $0.10 per fully exchanged, fully diluted share for the fourth quarter 2013, compared to $9.7 million or $0.13 per fully exchanged, fully diluted share for the fourth quarter 2012, a decrease of 24% and 23%, respectively.
Adjusted Pro Forma EBITDA for the year ended December 31, 2013 was $158.0 million, compared to $112.9 million, for the corresponding period in 2012, an increase of 40%. Adjusted Pro Forma Net Income for the year ended December 31, 2013 was $57.8 million, or $0.76 per share on a fully exchanged, fully diluted basis, compared to $42.6 million, or $0.58 per share on a fully exchanged, fully diluted basis, for the corresponding period in 2012, an increase of 36% and 31%, respectively.
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 charges and equity based compensation expense granted at the time of FXCM's initial public offering in December 2010.
"FXCM delivered strong results in 2013 with revenue growth of 16% and EBITDA growth of 40%" said Drew Niv, Chief Executive Officer of FXCM. "We delivered 40% net EBITDA margin, a solid improvement from the 34% we delivered in 2012" Niv continued.
"While the latter half of 2013 was a more muted trading environment, we expect a number of our organic initiatives to bear fruit in 2014 even if trading conditions do not pick up,” Niv added.
Subsequent to year end, FXCM, through affiliates, acquired certain assets and liabilities of Infinium Capital Holdings LLC and certain of its affiliates (collectively, “Infinium”), an electronic market maker in the commodities and foreign exchange trading sectors. The purchase price included approximately $11.9 million owed by Infinium to FXCM pursuant to certain senior secured notes issued by Infinium. The acquisition is intended to broaden FXCM’s subsidiary Lucid Markets Trading Limited (“Lucid”) into a broader array of financial instruments and provide more robust connectivity to various financial exchanges. FXCM shall hold a 50.1% interest and the principals of Lucid will hold a 49.9% interest in the new venture.
FXCM Inc. today also announced certain key operating metrics for February 2014 for its retail and institutional foreign exchange business. Monthly activities included:
February 2014 Operating Metrics
Retail Trading Metrics
| · | Retail customer trading volume(1) of $305 billion in February 2014, 11% lower than January 2014 and 15% lower than February 2013. |
| · | Average retail customer trading volume per day of $15.2 billion in February 2014, 2% lower than January 2014 and 15% lower than February 2013. |
| · | An average of 401,674 retail client trades per day in February 2014, 2% lower than January 2014 and 13% lower than February 2013. |
| · | Tradable accounts(2) of 190,722 as of February 28, 2014, an increase of 1,112 or 1% from January 2014, and a decrease of 169 or less than 1% from February 2013. |
Institutional Trading Metrics
| · | Institutional customer trading volume(1) of $162 billion in February 2014, 12% lower than January 2014 and 23% higher than February 2013. |
| · | Average institutional trading volume per day of $8.1 billion in February 2014, 4% lower than January 2014 and 23% higher than February 2013. |
| · | An average of 35,047 institutional client trades per day in February 2014, 8% lower than January 2014 and 96% higher than February 2013. |
Drew Niv, FXCM's Chief Executive Officer, commenting on February metrics, said, "Both January and February of this year have seen better trading conditions in the currency markets than the last half of 2013. It shall be interesting to see how the year unfolds with the Federal Reserve pulling back from bond purchases and with the recent volatility in the emerging markets.”
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 U.S. dollars.
(2) A tradable account is an account with sufficient funds to place a trade in accordance with FXCM trading policies.
Condensed Consolidated Adjusted Pro Forma and U.S. GAAP Results
| Unaudited | ||||||||||||||||||||||||
| Adjusted Pro Forma (thousands except per share amounts) | Adjusted Pro Forma (thousands except per share amounts) | |||||||||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||||||||||||
| Total Revenues | $ | 107,593 | $ | 108,094 | -0.5 | % | $ | 483,838 | $ | 417,315 | 16 | % | ||||||||||||
| Compensation and benefits | 23,988 | 21,591 | 11 | % | 93,181 | 84,304 | 11 | % | ||||||||||||||||
| Allocation of net income to Lucid members for services provided | - | - | - | - | - | - | ||||||||||||||||||
| Total compensation and benefits | 23,988 | 21,591 | 93,181 | 84,304 | ||||||||||||||||||||
| Referring broker fees | 19,750 | 17,720 | 11 | % | 84,231 | 76,585 | 10 | % | ||||||||||||||||
| Loss on equity method investments, net | 24 | - | 0 | % | 752 | - | 0 | % | ||||||||||||||||
| Other expenses | 37,080 | 39,016 | -5 | % | 147,675 | 143,525 | 3 | % | ||||||||||||||||
| EBITDA | 26,751 | 29,767 | -10 | % | 157,999 | 112,901 | 40 | % | ||||||||||||||||
| Depreciation and amortization | 12,971 | 12,012 | 8 | % | 50,275 | 36,773 | 37 | % | ||||||||||||||||
| Interest on borrowings | 2,697 | 1,065 | 153 | % | 7,673 | 2,763 | 0 | % | ||||||||||||||||
| Income before income taxes | 11,083 | 16,690 | -34 | % | 100,051 | 73,365 | 36 | % | ||||||||||||||||
| Income tax provision | 1,711 | 5,900 | -71 | % | 25,807 | 24,389 | 6 | % | ||||||||||||||||
| Net Income | 9,372 | 10,790 | -13 | % | 74,244 | 48,976 | 52 | % | ||||||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | - | - | - | - | - | - | ||||||||||||||||||
| Net income attributable to other non-controlling interests | 2,057 | 1,136 | 81 | % | 16,444 | 6,389 | 157 | % | ||||||||||||||||
| Net Income Attributable to FXCM Inc. | $ | 7,315 | $ | 9,654 | -24 | % | $ | 57,800 | $ | 42,587 | 36 | % | ||||||||||||
| Pro forma fully exchanged, fully diluted weighted average shares outstanding | 76,887 | 74,935 | 3 | % | 76,361 | 73,896 | 3 | % | ||||||||||||||||
| Earnings Per Share | $ | 0.10 | $ | 0.13 | -23 | % | $ | 0.76 | $ | 0.58 | 31 | % | ||||||||||||
| Unaudited U.S. GAAP (thousands except per share amounts) | ||||||||||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||||||||||||
| Total net revenues | $ | 113,343 | $ | 108,094 | 5 | % | $ | 489,588 | $ | 417,315 | 17 | % | ||||||||||||
| Compensation and benefits | 26,541 | 24,604 | 8 | % | 105,470 | 105,779 | 0 | % | ||||||||||||||||
| Allocation of net income to Lucid members for services provided | 3,290 | - | 0 | % | 21,290 | - | 0 | % | ||||||||||||||||
| Total compensation and benefits | 29,831 | 24,604 | 21 | % | 126,760 | 105,779 | 20 | % | ||||||||||||||||
| Referring broker fees | 19,750 | 17,720 | 11 | % | 84,231 | 76,585 | 10 | % | ||||||||||||||||
| Other expenses | 38,988 | 39,016 | 0 | % | 164,583 | 147,951 | 11 | % | ||||||||||||||||
| Loss on equity method investments, net | 24 | - | 752 | - | 0 | % | ||||||||||||||||||
| EBITDA | 24,750 | 26,754 | -7 | % | 113,262 | 87,000 | 30 | % | ||||||||||||||||
| Depreciation and amortization | 16,425 | 12,012 | 37 | % | 53,729 | 36,773 | 46 | % | ||||||||||||||||
| Interest on borrowings | 2,697 | 1,065 | 153 | % | 7,673 | 2,763 | 178 | % | ||||||||||||||||
| Income before income taxes | 5,628 | 13,677 | -59 | % | 51,860 | 47,464 | 9 | % | ||||||||||||||||
| Income tax provision | 231 | 4,130 | -94 | % | 17,024 | 8,986 | 89 | % | ||||||||||||||||
| Net Income | 5,397 | 9,547 | -43 | % | 34,836 | 38,478 | -9 | % | ||||||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | 3,660 | 5,413 | -32 | % | 24,850 | 23,131 | 7 | % | ||||||||||||||||
| Net income attributable to other non-controlling interests | (1,233 | ) | 1,136 | -209 | % | (4,846 | ) | 6,389 | -176 | % | ||||||||||||||
| Net Income Attributable to FXCM Inc. | $ | 2,970 | $ | 2,998 | -1 | % | $ | 14,832 | $ | 8,958 | 66 | % | ||||||||||||
| Weighted average Class A shares outstanding - Basic | 38,085 | 27,750 | 37 | % | 32,789 | 24,086 | 36 | % | ||||||||||||||||
| Weighted average Class A shares outstanding - Diluted | 39,055 | 27,750 | 41 | % | 33,957 | 24,086 | 41 | % | ||||||||||||||||
| Net income per Class A share - Basic | $ | 0.08 | $ | 0.11 | -27 | % | $ | 0.45 | $ | 0.37 | 22 | % | ||||||||||||
| Net income per Class A share -Diluted | $ | 0.08 | $ | 0.11 | -27 | % | $ | 0.44 | $ | 0.37 | 19 | % | ||||||||||||
Selected Operating Metrics
| (Unaudited) | (Unaudited) | |||||||||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||||||||||||
| Total retail trading volume ($ in billions) | $ | 895 | $ | 886 | 1 | % | $ | 4,068 | $ | 3,601 | 13 | % | ||||||||||||
| Total institutional trading volume ($ in billions) | $ | 515 | $ | 223 | 131 | % | $ | 2,022 | $ | 1,179 | 72 | % | ||||||||||||
| Total active accounts | 183,679 | 170,930 | 7 | % | 183,679 | 170,930 | 7 | % | ||||||||||||||||
| Trading days in period | 64 | 64 | 0 | % | 258 | 259 | -0.4 | % | ||||||||||||||||
| Daily average trades | 378,316 | 366,015 | 3 | % | 437,947 | 364,417 | 20 | % | ||||||||||||||||
| Daily average trades per active account | 2.1 | 2.1 | 0 | % | 2.4 | 2.1 | 14 | % | ||||||||||||||||
| Retail trading revenue per million traded | $ | 93 | $ | 95 | -2 | % | $ | 90 | $ | 94 | -4 | % | ||||||||||||
| Total customer equity ($ in millions) | $ | 1,190.9 | $ | 1,190.8 | 0.01 | % | $ | 1,190.9 | $ | 1,190.8 | 0.01 | % | ||||||||||||
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 April 1, 2014 to Class A stockholders of record at the close of business on March 21, 2014.
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 877.445.4603 and 443.295.9270 for international participants. The conference ID number is 4828386.
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 leading 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.
Visit www.fxcm.com and follow us on Twitter @FXCM, Facebook FXCM, Google+ FXCM or YouTube FXCM.”
ANNEX I
| Schedule | Page Number |
| U.S. GAAP Results | |
| Unaudited U.S. GAAP Consolidated Statements of Operations for the Three Months and Twelve Months Ended December 31, 2013 and 2012 | A-1 |
| Unaudited U.S. GAAP Consolidated Statements of Financial Condition as of December 31, 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 December 31, 2013 and 2012 | A-5 |
| Unaudited Adjusted Pro Forma and U.S. GAAP Consolidated Statements of Operations for the Twelve Months Ended December 31, 2013 and 2012 | A-6 |
| Reconciliation of EBITDA to U.S. GAAP Net Income | A-7 |
FXCM Inc.
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited )
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Revenues | ||||||||||||||||
| Retail trading revenue | $ | 82,989 | $ | 83,852 | $ | 365,285 | $ | 339,685 | ||||||||
| Institutional trading revenue | 21,790 | 19,125 | 103,994 | 62,033 | ||||||||||||
| Trading revenue | 104,779 | 102,977 | 469,279 | 401,718 | ||||||||||||
| Interest income | 728 | 661 | 2,614 | 3,571 | ||||||||||||
| Brokerage interest expense | (71 | ) | (42 | ) | (258 | ) | (277 | ) | ||||||||
| Net interest income | 657 | 619 | 2,356 | 3,294 | ||||||||||||
| Other income | 7,907 | 4,498 | 17,953 | 12,303 | ||||||||||||
| Total net revenues | 113,343 | 108,094 | 489,588 | 417,315 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Compensation and benefits | 26,541 | 24,604 | 105,470 | 105,779 | ||||||||||||
| Allocation of income to Lucid members for services provided | 3,290 | - | 21,290 | - | ||||||||||||
| Total compensation and benefits | 29,831 | 24,604 | 126,760 | 105,779 | ||||||||||||
| Referring broker fees | 19,750 | 17,720 | 84,231 | 76,585 | ||||||||||||
| Advertising and marketing | 7,278 | 7,594 | 27,091 | 30,860 | ||||||||||||
| Communication and technology | 10,210 | 10,522 | 38,441 | 37,113 | ||||||||||||
| Trading costs, prime brokerage and clearing fees | 7,113 | 6,748 | 30,821 | 16,935 | ||||||||||||
| General and administrative | 14,387 | 14,152 | 68,230 | 63,043 | ||||||||||||
| Depreciation and amortization | 16,425 | 12,012 | 53,729 | 36,773 | ||||||||||||
| Total operating expenses | 104,994 | 93,352 | 429,303 | 367,088 | ||||||||||||
| Total operating income | 8,349 | 14,742 | 60,285 | 50,227 | ||||||||||||
| Other Expense | ||||||||||||||||
| Loss on equity method investments, net | 24 | - | 752 | - | ||||||||||||
| Interest on borrowings | 2,697 | 1,065 | 7,673 | 2,763 | ||||||||||||
| Income before income taxes | 5,628 | 13,677 | 51,860 | 47,464 | ||||||||||||
| Income tax provision | 231 | 4,130 | 17,024 | 8,986 | ||||||||||||
| Net income | 5,397 | 9,547 | 34,836 | 38,478 | ||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | 3,660 | 5,413 | 24,850 | 23,131 | ||||||||||||
| Net income (loss) attributable to other non-controlling interests | (1,233 | ) | 1,136 | (4,846 | ) | 6,389 | ||||||||||
| Net income attributable to FXCM, Inc. | $ | 2,970 | $ | 2,998 | $ | 14,832 | $ | 8,958 | ||||||||
| Net Income | $ | 2,970 | $ | 2,998 | $ | 14,832 | $ | 8,958 | ||||||||
| Weighted average Class A shares outstanding - Basic | 38,085 | 27,750 | 32,789 | 24,086 | ||||||||||||
| Weighted average Class A shares outstanding - Diluted | 39,055 | 27,750 | 33,957 | 24,086 | ||||||||||||
| Net Income per Class A Share | ||||||||||||||||
| Basic | $ | 0.08 | $ | 0.11 | $ | 0.45 | $ | 0.37 | ||||||||
| Diluted | $ | 0.08 | $ | 0.11 | $ | 0.44 | $ | 0.37 | ||||||||
| A-1 |
FXCM Inc.
Consolidated Statements of Financial Condition
As of December 31, 2013 and December 31, 2012
(Amounts in thousands except for share data)
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2013 | 2012 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 365,245 | $ | 272,332 | ||||
| Cash and cash equivalents, held for customers | 1,190,880 | 1,190,762 | ||||||
| Due from brokers | 5,450 | 8,040 | ||||||
| Accounts receivables, net | 9,953 | 6,336 | ||||||
| Deferred tax asset | 11,910 | 10,598 | ||||||
| Notes receivable | 5,992 | |||||||
| Tax receivable | 3,861 | 6,003 | ||||||
| Total current assets | 1,593,291 | 1,494,071 | ||||||
| Deferred tax asset | 166,576 | 117,221 | ||||||
| Office, communication and computer equipment, net | 49,165 | 50,316 | ||||||
| Intangible assets and goodwill, net | 384,649 | 383,446 | ||||||
| Notes receivable | 5,950 | - | ||||||
| Other assets | 24,316 | 20,116 | ||||||
| Total assets | $ | 2,223,947 | $ | 2,065,170 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Customer account liabilities | $ | 1,190,880 | $ | 1,190,762 | ||||
| Accounts payable and accrued expenses | 69,697 | 52,635 | ||||||
| Credit agreement | - | 85,000 | ||||||
| Notes payable | 9,800 | 22,867 | ||||||
| Due to brokers | 8,652 | 14,494 | ||||||
| Deferred tax liability | - | 7,100 | ||||||
| Due to related parties pursuant to tax receivable agreement | 18,588 | 13,569 | ||||||
| Total current liabilities | 1,297,617 | 1,386,427 | ||||||
| Deferred tax liability | 3,687 | 12,351 | ||||||
| Due to related parties pursuant to tax receivable agreement | 131,670 | 87,271 | ||||||
| Senior convertible notes | 146,303 | - | ||||||
| Other liabilities | 9,289 | 4,206 | ||||||
| Total liabilities | 1,588,566 | 1,490,255 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' equity | ||||||||
| Class A common stock, par value $0.01 per share; | 447 | 347 | ||||||
| 3,000,000,000 shares authorized, 44,664,884 and 34,683,599 shares issued | ||||||||
| and outstanding as of December 31, 2013 and December 31, 2012, respectively | ||||||||
| Class B common stock, par value $0.01 per share; | 1 | 1 | ||||||
| 1,000,000 shares authorized, 41 and 43 shares issued | ||||||||
| and outstanding as of December 31, 2013 and December 31, 2012, respectively | ||||||||
| Additional paid-in-capital | 245,426 | 171,390 | ||||||
| Retained earnings | 16,352 | 11,122 | ||||||
| Accumulated other comprehensive income | (5,344 | ) | (1,301 | ) | ||||
| Total stockholders' equity, FXCM Inc. | 256,882 | 181,559 | ||||||
| Non-controlling interests | 378,499 | 393,356 | ||||||
| Total stockholders' equity | 635,381 | 574,915 | ||||||
| Total liabilities and stockholders' equity | $ | 2,223,947 | $ | 2,065,170 | ||||
| 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. 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. | 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 as well as costs associated with the renegotiation or termination of certain employment contracts that held profit sharing interests in the performance of the Company’s business units. Given the nature of these expenses, they are not viewed by management as expenses incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these expenses. |
| 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 other non-controlling interests.” 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/Income. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate certain acquisition related costs/income. Given the nature of these items, they are not viewed by management as expenses/income incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these items. |
| 5. | Regulatory Costs. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate certain costs (including client reimbursements) associated with ongoing discussions and settling certain historical trade execution matters with the Company’s regulators. Given the nature of these expenses they are not viewed by management as expenses incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these expenses. |
| 6. | Depreciation. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate certain impairment charges recorded as a component of depreciation. Given the nature of these charges they are not viewed by management as expenses incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these charges. |
| A-3 |
| 7. | 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 (including Tax Receivable Agreement adjustments recorded to Other Income) 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. In addition, the Adjusted Pro Forma income tax provision reflects the tax effect of any adjusted pro forma adjustments. |
| A-4 |
FXCM Inc.
Adjusted Pro Forma Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited )
| Three Months Ended December 31, | ||||||||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||||||
| As | Adjusted | As | Adjusted | |||||||||||||||||||||
| Reported | Adjustments | Pro Forma | Reported | Adjustments | Pro Forma | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Retail trading revenue | $ | 82,989 | - | $ | 82,989 | $ | 83,852 | - | $ | 83,852 | ||||||||||||||
| Institutional trading revenue | 21,790 | - | 21,790 | 19,125 | - | 19,125 | ||||||||||||||||||
| Trading revenue | 104,779 | - | 104,779 | 102,977 | - | 102,977 | ||||||||||||||||||
| Interest income | 728 | - | 728 | 661 | - | 661 | ||||||||||||||||||
| Brokerage interest expense | (71 | ) | - | (71 | ) | (42 | ) | - | (42 | ) | ||||||||||||||
| Net interest income | 657 | - | 657 | 619 | - | 619 | ||||||||||||||||||
| Other operating income | 7,907 | (5,750 | )(5) | 2,157 | 4,498 | - | 4,498 | |||||||||||||||||
| Total net revenues | 113,343 | (5,750 | ) | 107,593 | 108,094 | - | 108,094 | |||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||
| Compensation and benefits | 26,541 | (2,553 | )(1) | 23,988 | 24,604 | (3,013 | )(2) | 21,591 | ||||||||||||||||
| Allocation of net income to Lucid members for services provided | 3,290 | (3,290 | )(6) | - | - | - | - | |||||||||||||||||
| Total compensation and benefits | 29,831 | (5,843 | ) | 23,988 | 24,604 | (3,013 | ) | 21,591 | ||||||||||||||||
| Referring broker fees | 19,750 | - | 19,750 | 17,720 | - | 17,720 | ||||||||||||||||||
| Advertising and marketing | 7,278 | - | 7,278 | 7,594 | - | 7,594 | ||||||||||||||||||
| Communication and technology | 10,210 | - | 10,210 | 10,522 | - | 10,522 | ||||||||||||||||||
| Trading costs, prime brokerage and clearing fees | 7,113 | - | 7,113 | 6,748 | - | 6,748 | ||||||||||||||||||
| General and administrative | 14,387 | (1,908 | )(7) | 12,479 | 14,152 | - | 14,152 | |||||||||||||||||
| Depreciation and amortization | 16,425 | (3,454 | )(8) | 12,971 | 12,012 | - | 12,012 | |||||||||||||||||
| Total operating expenses | 104,994 | (11,205 | ) | 93,789 | 93,352 | (3,013 | ) | 90,339 | ||||||||||||||||
| . | ||||||||||||||||||||||||
| Total operating income | 8,349 | 5,455 | 13,804 | 14,742 | 3,013 | 17,755 | ||||||||||||||||||
| Loss on equity method investments, net | 24 | - | 24 | - | - | - | ||||||||||||||||||
| Interest on borrowings | 2,697 | - | 2,697 | 1,065 | - | 1,065 | ||||||||||||||||||
| Income before income taxes | 5,628 | 5,455 | 11,083 | 13,677 | 3,013 | 16,690 | ||||||||||||||||||
| Income tax provision | 231 | 1,480 | (3) | 1,711 | 4,130 | 1,770 | (3) | 5,900 | ||||||||||||||||
| Net income | 5,397 | 3,975 | 9,372 | 9,547 | 1,243 | 10,790 | ||||||||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | 3,660 | (3,660 | )(4) | - | 5,413 | (5,413 | )(4) | - | ||||||||||||||||
| Net income attributable to other non-controlling interests | (1,233 | ) | 3,290 | (6) | 2,057 | 1,136 | - | 1,136 | ||||||||||||||||
| Net income attributable to FXCM Inc. | $ | 2,970 | $ | 4,345 | $ | 7,315 | $ | 2,998 | $ | 6,656 | $ | 9,654 | ||||||||||||
| Diluted weighted average shares outstanding as reported and pro forma fully exchanged, fully diluted weighted average shares outstanding | 39,055 | 76,887 | (9) | 27,750 | 74,935 | (9) | ||||||||||||||||||
| Diluted net income per share as reported and adjusted pro forma net income per fully exchanged, fully diluted weighted average shares outstanding | $ | 0.08 | $ | 0.10 | $ | 0.11 | $ | 0.13 | ||||||||||||||||
(1) Represents the elimination of stock-based compensation for stock options granted subsequent to the IPO.
(2) 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.
(3) Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 15.4% and 35.4% for the three months ended December 31, 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 of 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 Units (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 a $6.9 million benefit recorded to reduce the initial contingent consideration recorded for the Faros acquisition and the elimination of $1.2 million of expense attributable to the remeasurement of Due to related parties pursuant to tax receivable agreement relating to the change in our U.S. federal tax rate.
(6) 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 other non-controlling interests.
(7) Represents an adjustment to eliminate a reserve established relating to a settlement with United Kingdom Financial Conduct Authority ("UK FCA") regarding pre August 2010 trade execution practices.
(8) Represents the elimination of an amount related to an impairment adjustment to the carrying value of an electronic foreign exchange options trading platform in the Company's institutional business.
(9) Fully diluted weighted average shares assuming all unitholders had fully exchanged their Holdings Units for shares of Class A common stock of the Company.
| A-5 |
FXCM Inc.
Adjusted Pro Forma Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited )
| Year Ended December 31, | ||||||||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||||||
| As | Adjusted | As | Adjusted | |||||||||||||||||||||
| Reported | Adjustments | Pro Forma | Reported | Adjustments | Pro Forma | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Retail trading revenue | $ | 365,285 | - | $ | 365,285 | $ | 339,685 | - | $ | 339,685 | ||||||||||||||
| Institutional trading revenue | 103,994 | - | 103,994 | 62,033 | - | 62,033 | ||||||||||||||||||
| Trading revenue | 469,279 | - | 469,279 | 401,718 | - | 401,718 | ||||||||||||||||||
| Interest income | 2,614 | - | 2,614 | 3,571 | - | 3,571 | ||||||||||||||||||
| Brokerage interest expense | (258 | ) | - | (258 | ) | (277 | ) | - | (277 | ) | ||||||||||||||
| Net interest income | 2,356 | - | 2,356 | 3,294 | - | 3,294 | ||||||||||||||||||
| Other operating Income | 17,953 | (5,750 | )(8) | 12,203 | 12,303 | - | 12,303 | |||||||||||||||||
| Total net revenues | 489,588 | (5,750 | ) | 483,838 | 417,315 | - | 417,315 | |||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||
| Compensation and benefits | 105,470 | (12,289 | )(1) | 93,181 | 105,779 | (21,475 | )(5) | 84,304 | ||||||||||||||||
| Allocation of income to Lucid members for services provided | 21,290 | (21,290 | )(2) | - | - | - | - | |||||||||||||||||
| Total compensation and benefits | 126,760 | (33,579 | ) | 93,181 | 105,779 | (21,475 | ) | 84,304 | ||||||||||||||||
| Referring broker fees | 84,231 | - | 84,231 | 76,585 | - | 76,585 | ||||||||||||||||||
| Advertising and marketing | 27,091 | - | 27,091 | 30,860 | - | 30,860 | ||||||||||||||||||
| Communication and technology | 38,441 | - | 38,441 | 37,113 | - | 37,113 | ||||||||||||||||||
| Trading costs, prime brokerage and clearing fees | 30,821 | - | 30,821 | 16,935 | - | 16,935 | ||||||||||||||||||
| General and administrative | 68,230 | (16,908 | )(6) | 51,322 | 63,043 | (4,426 | )(9) | 58,617 | ||||||||||||||||
| Depreciation and amortization | 53,729 | (3,454 | )(10) | 50,275 | 36,773 | - | 36,773 | |||||||||||||||||
| Total operating expenses | 429,303 | (53,941 | ) | 375,362 | 367,088 | (25,901 | ) | 341,187 | ||||||||||||||||
| Total operating income | 60,285 | 48,191 | 108,476 | 50,227 | 25,901 | 76,128 | ||||||||||||||||||
| Loss on equity method investments, net | 752 | - | 752 | - | - | - | ||||||||||||||||||
| Interest on borrowings | 7,673 | - | 7,673 | 2,763 | - | 2,763 | ||||||||||||||||||
| Income before income taxes | 51,860 | 48,191 | 100,051 | 47,464 | 25,901 | 73,365 | ||||||||||||||||||
| Income tax provision | 17,024 | 8,783 | (3) | 25,807 | 8,986 | 15,403 | (3) | 24,389 | ||||||||||||||||
| Net income | 34,836 | 39,408 | 74,244 | 38,478 | 10,498 | 48,976 | ||||||||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | 24,850 | (24,850 | )(4) | - | 23,131 | (23,131 | )(4) | - | ||||||||||||||||
| Net income (loss) attributable to other non-controlling interests | (4,846 | ) | 21,290 | (2) | 16,444 | 6,389 | - | 6,389 | ||||||||||||||||
| Net income attributable to FXCM Inc. | $ | 14,832 | $ | 42,968 | $ | 57,800 | $ | 8,958 | $ | 33,629 | $ | 42,587 | ||||||||||||
| Diluted weighted average shares outstanding as reported and pro forma fully exchanged, fully diluted weighted average shares outstanding | 33,957 | 76,361 | (7) | 24,086 | 73,896 | (7) | ||||||||||||||||||
| Diluted net income per share as reported and adjusted pro forma net income per fully exchanged, fully diluted weighted average shares outstanding | $ | 0.44 | $ | 0.76 | $ | 0.37 | $ | 0.58 | ||||||||||||||||
(1) Represents the elimination of equity-based compensation associated with the IPO and a charge incurred in connection with the termination of an employment contract in the Company's retail business.
(2) Represents the reclassification of the portion of the 49.9% of Lucid's earnings atributed to non-controlling interest recorded as compensation for U.S. GAAP purposes to Net income attributable to other non-controlling interests.
(3) Represents an adjustment to reflect an effective corporate tax rate of approximately 25.8% and 33.2% for the years ended December 31, 2013 and 2012, respectively assuming a full exchange of existing Unitholders Holdings Units for shares of Class A common stock of the Company and 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 equity-based compensation associated with the IPO, severance and stock-based compensation in connection with the renegotiation and the termination of certain employment contracts in the Company's institutional and retail businesses.
(6) Represents an adjustment to eliminate a reserve established relating to a settlement with UK FCA regarding pre August 2010 trade execution practices.
(7) Fully diluted shares assuming all unitholders had fully exchanged their Holdings Units for shares of Class A common stock of the Company.
(8) Represents the elimination of a $6.9 million benefit recorded to reduce the initial contingent consideration recorded for the Faros acquisition and the elimination of $1.2 million of expense attributable to the remeasurement of Due to related parties pursuant to tax receivable agreement relating to the change in our U.S. federal tax rate.
(9) Represents the elimination of certain acquisition-related costs and the elimination of costs (including client reimbursements) associated with settling historical trade execution issues with the Financial Services Agency of Japan.
(10) Represents the elimination of an amount related to an impairment adjustment to the carrying value of an electronic foreign exchange options trading platform in the Company's institutional business.
| A-6 |
FXCM Inc.
Reconciliation of EBITDA to Net Income
(In thousands)
(Unaudited )
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||
| Adjusted Pro Forma | U.S. GAAP | Adjusted Pro Forma | U.S. GAAP | |||||||||||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||
| Revenues | $ | 107,593 | $ | 108,094 | $ | 113,343 | $ | 108,094 | $ | 483,838 | $ | 417,315 | $ | 489,588 | $ | 417,315 | ||||||||||||||||
| Net income attributable to FXCM Inc. | $ | 7,315 | $ | 9,654 | $ | 2,970 | $ | 2,998 | $ | 57,800 | $ | 42,587 | $ | 14,832 | $ | 8,958 | ||||||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | - | - | 3,660 | 5,413 | - | - | 24,850 | 23,131 | ||||||||||||||||||||||||
| Net income (loss) attributable to other non-controlling interests | 2,057 | 1,136 | (1,233 | ) | 1,136 | 16,444 | 6,389 | (4,846 | ) | 6,389 | ||||||||||||||||||||||
| Provision for income taxes | 1,711 | 5,900 | 231 | 4,130 | 25,807 | 24,389 | 17,024 | 8,986 | ||||||||||||||||||||||||
| Depreciation and amortization | 12,971 | 12,012 | 16,425 | 12,012 | 50,275 | 36,773 | 53,729 | 36,773 | ||||||||||||||||||||||||
| Interest expense | 2,697 | 1,065 | 2,697 | 1,065 | 7,673 | 2,763 | 7,673 | 2,763 | ||||||||||||||||||||||||
| EBITDA | $ | 26,751 | $ | 29,767 | $ | 24,750 | $ | 26,754 | $ | 157,999 | $ | 112,901 | $ | 113,262 | $ | 87,000 | ||||||||||||||||
| A-7 |