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| 8-K - 8-K - Global Brokerage, Inc. | v377641_8k.htm |
FXCM Inc. Announces First Quarter 2014 Results
Releases April 2014 Operating Metrics
First Quarter 2014 Highlights:
| · | US GAAP revenues of $115.0 million, down 6% versus the same period in 2013 |
| · | US GAAP net income attributable to FXCM Inc. of $2.1 million or $0.05 per fully diluted share down 70% and 79% respectively versus the same period in 2013 |
| · | Adjusted Pro Forma EBITDA of $24.6 million, down 44% versus the same period in 2013 |
| · | Adjusted Pro Forma net income of $5.2 million or $0.07 per fully exchanged, diluted share down 70% and 70% respectively versus the same period in 2013 |
April 2014 Operating Metric Highlights:
| · | Retail customer trading volume of $250 billion, 32% lower than April 2013 |
| · | Institutional customer trading volume of $185 billion, 1% higher than April 2013 |
NEW YORK, NY – May 8, 2014 – 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.fxcm.com.
This operating data is preliminary and subject to revision and should not be taken as an indication of the financial performance of FXCM Inc. FXCM undertakes no obligation to publicly update or review previously reported operating data. Any updates to previously reported operating data will be reflected in the historical operating data that can be found on the Investor Relations page of the Company’s corporate website, www.fxcm.com.
(1) Volume that FXCM customers traded in period is translated into US dollars.
(2) A Tradeable Account is an account with sufficient funds to place a trade in accordance with FXCM trading policies.
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.
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 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 | $ | 0.23 | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| A-1 |
FXCM Inc.
Condensed Consolidated Statements of Financial Condition
As of March 31, 2014 and December 31, 2013
(Amounts in thousands except share data)
| (Unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 357,905 | $ | 365,245 | ||||
| Cash and cash equivalents, held for customers | 1,245,341 | 1,190,880 | ||||||
| Due from brokers | 44,301 | 5,450 | ||||||
| Accounts receivables, net | 14,039 | 9,953 | ||||||
| Deferred tax asset | 9,834 | 11,910 | ||||||
| Notes receivable | - | 5,992 | ||||||
| Tax receivable | 7,205 | 3,861 | ||||||
| Total current assets | 1,678,625 | 1,593,291 | ||||||
| Deferred tax asset | 170,445 | 166,576 | ||||||
| Office, communication and computer equipment, net | 50,794 | 49,165 | ||||||
| Goodwill | 328,461 | 307,936 | ||||||
| Other intangible assets, net | 71,935 | 76,713 | ||||||
| Notes receivable | 8,108 | 5,950 | ||||||
| Other assets | 31,930 | 24,316 | ||||||
| Total assets | $ | 2,340,298 | $ | 2,223,947 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Customer account liabilities | $ | 1,245,341 | $ | 1,190,880 | ||||
| Accounts payable and accrued expenses | 70,888 | 69,697 | ||||||
| Credit agreement | 50,000 | - | ||||||
| Notes payable | 9,800 | 9,800 | ||||||
| Due to brokers | 633 | 8,652 | ||||||
| Securities sold, not yet purchased | 3,586 | - | ||||||
| Due to related parties pursuant to tax receivable agreement | 14,880 | 18,588 | ||||||
| Total current liabilities | 1,395,128 | 1,297,617 | ||||||
| Deferred tax liability | 3,930 | 3,687 | ||||||
| Due to related parties pursuant to tax receivable agreement | 136,655 | 131,670 | ||||||
| Senior convertible notes | 147,598 | 146,303 | ||||||
| Other liabilities | 5,721 | 9,289 | ||||||
| Total liabilities | 1,689,032 | 1,588,566 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Equity | ||||||||
| Class A common stock, par value $0.01 per share; | 458 | 447 | ||||||
| 3,000,000,000 shares authorized, 45,835,442 and 44,664,884 shares issued | ||||||||
| and outstanding as of March 31, 2014 and December 31, 2013, respectively | ||||||||
| Class B common stock, par value $0.01 per share; | 1 | 1 | ||||||
| 1,000,000 shares authorized, 41 shares issued and outsanding | ||||||||
| as of March 31, 2014 and December 31, 2013 | ||||||||
| Additional paid-in capital | 254,270 | 245,426 | ||||||
| Retained earnings | 15,679 | 16,352 | ||||||
| Accumulated other comprehensive loss | (4,537 | ) | (5,344 | ) | ||||
| Total stockholders' equity, FXCM Inc. | 265,871 | 256,882 | ||||||
| Non-controlling interests | 385,395 | 378,499 | ||||||
| Total stockholders' equity | 651,266 | 635,381 | ||||||
| Total liabilities and stockholders' equity | $ | 2,340,298 | $ | 2,223,947 | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| A-2 |
Adjusted Pro Forma Results
Throughout the discussion of FXCM Inc.’s results, information is presented on an Adjusted Pro Forma basis, which is a non-generally accepted accounting principles (“non-GAAP”) measure. Adjusted Pro Forma results begin with information prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), adjusted to exclude certain items and reflects the conversion of all units of FXCM Holdings, LLC for shares of Class A common stock of FXCM Inc. FXCM believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare FXCM’s results across several periods and facilitate an understanding of FXCM’s operating results. The Company uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. The differences between Adjusted Pro Forma and U.S. GAAP results are as follows:
| 1. | Assumed Exchange of Units of FXCM Holdings, LLC for FXCM Inc. Class A Shares. As a result of the exchange of FXCM Holdings units, the non-controlling interest related to these units is converted to controlling interest. The Company's management believes that it is useful to provide the per-share effect associated with the assumed exchange of all FXCM Holdings units. |
| 2. | 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. | 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-3 |
FXCM Inc.
Adjusted Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2014 | 2013 | |||||||||||||||||||||||
| As | Adjusted | As | Adjusted | |||||||||||||||||||||
| Reported | Adjustments | Pro Forma | Reported | Adjustments | Pro Forma | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Retail trading revenue | $ | 82,660 | $ | - | $ | 82,660 | $ | 91,254 | $ | - | $ | 91,254 | ||||||||||||
| Institutional trading revenue | 26,150 | - | 26,150 | 27,556 | - | 27,556 | ||||||||||||||||||
| Trading revenue | 108,810 | - | 108,810 | 118,810 | - | 118,810 | ||||||||||||||||||
| Interest income | 563 | - | 563 | 679 | - | 679 | ||||||||||||||||||
| Brokerage interest expense | (96 | ) | - | (96 | ) | (55 | ) | - | (55 | ) | ||||||||||||||
| Net interest income | 467 | - | 467 | 624 | - | 624 | ||||||||||||||||||
| Other operating income | 5,731 | (3,672 | )(1) | 2,059 | 3,430 | - | 3,430 | |||||||||||||||||
| Total net revenues | 115,008 | (3,672 | ) | 111,336 | 122,864 | - | 122,864 | |||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||
| Compensation and benefits | 29,890 | (2,174 | )(2) | 27,716 | 23,533 | (2,062 | )(9) | 21,471 | ||||||||||||||||
| Allocation of net income to Lucid members for services provided | 2,973 | (2,973 | )(3) | - | - | - | - | |||||||||||||||||
| Total compensation and benefits | 32,863 | (5,147 | ) | 27,716 | 23,533 | (2,062 | ) | 21,471 | ||||||||||||||||
| Referring broker fees | 19,122 | - | 19,122 | 21,350 | - | 21,350 | ||||||||||||||||||
| Advertising and marketing | 6,497 | - | 6,497 | 7,351 | - | 7,351 | ||||||||||||||||||
| Communication and technology | 12,219 | (206 | )(4) | 12,013 | 8,355 | - | 8,355 | |||||||||||||||||
| Trading costs, prime brokerage and clearing fees | 8,206 | - | 8,206 | 7,938 | - | 7,938 | ||||||||||||||||||
| General and administrative | 16,068 | (3,200 | )(5) | 12,868 | 12,471 | - | 12,471 | |||||||||||||||||
| Depreciation and amortization | 12,630 | - | 12,630 | 11,974 | - | 11,974 | ||||||||||||||||||
| Total operating expenses | 107,605 | (8,553 | ) | 99,052 | 92,972 | (2,062 | ) | 90,910 | ||||||||||||||||
| Total operating income | 7,403 | 4,881 | 12,284 | 29,892 | 2,062 | 31,954 | ||||||||||||||||||
| Loss on equity method investments, net | 310 | - | 310 | 148 | - | 148 | ||||||||||||||||||
| Interest on borrowings | 2,997 | - | 2,997 | 817 | - | 817 | ||||||||||||||||||
| Income before income taxes | 4,096 | 4,881 | 8,977 | 28,927 | 2,062 | 30,989 | ||||||||||||||||||
| Income tax provision | 1,251 | 928 | (6) | 2,179 | 7,959 | 1,637 | (6) | 9,596 | ||||||||||||||||
| Net income | 2,845 | 3,953 | 6,798 | 20,968 | 425 | 21,393 | ||||||||||||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | 2,427 | (2,427 | )(7) | - | 10,230 | (10,230 | )(7) | - | ||||||||||||||||
| Net income attributable to other non-controlling interests | (1,659 | ) | 3,263 | (8) | 1,604 | 3,878 | - | 3,878 | ||||||||||||||||
| Net income attributable to FXCM Inc. | $ | 2,077 | $ | 3,117 | $ | 5,194 | $ | 6,860 | $ | 10,655 | $ | 17,515 | ||||||||||||
| Diluted weighted average shares outstanding as reported and pro forma fully exchanged, fully diluted weighted average shares outstanding | 43,152 | 79,766 | (10) | 29,678 | 75,785 | (10) | ||||||||||||||||||
| Diluted net income per share as reported and adjusted pro forma net income per fully exchanged, fully diluted weighted average shares outstanding | $ | 0.05 | $ | 0.07 | $ | 0.23 | $ | 0.23 | ||||||||||||||||
| (1) | Represents the elimination of a $3.7 million benefit recorded to reduce the contingent consideration related to the Faros acquisition. |
| (2) | Represents the elimination of $1.9 million of IPO stock-based compensation and $0.3 million of compensation cost related to the V3 Markets, LLC ("V3") acquisition. |
| (3) | Represents the reclassification of the 49.9% of Lucid’s earnings allocated among the non-controlling interests recorded as compensation for U.S. GAAP purposes to Net income attributable to other non-controlling interests. |
| (4) | Represents the elimination of V3 acquisition costs. |
| (5) | Represents the elimination of $0.7 million of V3 acquisition costs and $2.5 million to eliminate an additional reserve established relating to pre-August 2010 trade execution practices in the UK. |
| (6) | Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 24.3% and 31.0% for the three months ended March 31, 2014 and 2013, 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 proforma adjustments. |
| (7) | 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. |
| (8) | Represents the reclassification of the 49.9% of Lucid’s earnings allocated among the non-controlling interests recorded as compensation for U.S. GAAP purposes to Net income attributable to other non-controlling interests and the impact of other proforma adjustments impacting non-controlling interests. |
| (9) | Represents the elimination of stock-based compensation associated with the IPO. |
| (10) | Diluted shares assuming all unitholders had fully exchanged their Holdings units for shares of Class A common stock of the Company. |
| A-4 |
FXCM Inc.
Reconciliation of Non-GAAP Measures to Nearest U.S. GAAP Results
(In thousands)
(Unaudited )
| Three Months Ended March 31, | ||||||||
| 2014 | 2013 | |||||||
| GAAP Net income attributable to FXCM Inc. | $ | 2,077 | $ | 6,860 | ||||
| Contingent Consideration - Faros Follow-On Payment | (3,672 | )(1) | - | (1) | ||||
| IPO Stock Options | 1,902 | (2) | 2,062 | (2) | ||||
| V3 Acquisition related costs | 1,213 | (3) | - | |||||
| Additional Reserve for UK pre August 2010 trade execution practices | 2,465 | (4) | - | |||||
| Non-Controlling interest Adjustments related to the above adjustments | (290 | ) | - | |||||
| FXCM Holdings Conversion | 2,427 | (6) | 10,230 | (6) | ||||
| Tax adjustments related to the above | (928 | )(5) | (1,637 | )(5) | ||||
| Non GAAP Adjusted Proforma Net Income | $ | 5,194 | $ | 17,515 | ||||
| All other stock compensation | 1,310 | 1,166 | ||||||
| Amortization | 6,981 | 7,027 | ||||||
| Non-Controlling interest Adjustments related to the above adjustments | (3,284 | ) | (3,029 | ) | ||||
| Tax adjustments related to the above | (1,154 | )(5) | (1,480 | )(5) | ||||
| Non GAAP Adjusted Proforma Net Income excluding other stock compensation and amortization | $ | 9,047 | $ | 21,199 | ||||
| GAAP Weighted average Class A shares outstanding - Diluted | 43,152 | 29,678 | ||||||
| FXCM Holdings Conversion | 36,614 | (7) | 46,107 | (7) | ||||
| Non GAAP Weighted average Proforma shares outstanding - Diluted | 79,766 | 75,785 | ||||||
| GAAP Net Income per Class A Share -Diluted | $ | 0.05 | $ | 0.23 | ||||
| Non GAAP Adjusted Proforma Net Income per Proforma Share - Diluted | $ | 0.07 | $ | 0.23 | ||||
| Non GAAP Adjusted Proforma Net Income excluding other stock compensation and amortization per Proforma Share - Diluted | $ | 0.11 | $ | 0.28 | ||||
| (1) | Represents the elimination of a $3.7 million benefit recorded to reduce the contingent consideration related to the Faros acquisition. |
| (2) | Represents the elimination of stock-based compensation associated with the IPO. |
| (3) | Represents the elimination of V3 acquisition costs. |
| (4) | Represents the elimination of an additional reserve established relating to pre-August 2010 trade execution practices. |
| (5) | Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 24.3% and 31.0% for the three months ended March 31, 2014 and 2013, 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 proforma adjustments. |
| (6) | 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. |
| (7) | Diluted shares assuming all unitholders had fully exchanged their Holdings units for shares of Class A common stock of the Company. |
| A-5 |
FXCM Inc.
Reconciliation of EBITDA to Net Income
(In thousands)
(Unaudited )
| Three Months Ended March 31, | ||||||||||||||||
| Adjusted Pro Forma | U.S. GAAP | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Revenues | $ | 111,336 | $ | 122,864 | $ | 115,008 | $ | 122,864 | ||||||||
| Net income attributable to FXCM Inc. | $ | 5,194 | $ | 17,515 | $ | 2,077 | $ | 6,860 | ||||||||
| Net income attributable to non-controlling interest in FXCM Holdings, LLC | - | - | 2,427 | 10,230 | ||||||||||||
| Net income (loss) attributable to other non-controlling interests | 1,604 | 3,878 | (1,659 | ) | 3,878 | |||||||||||
| Provision for income taxes | 2,179 | 9,596 | 1,251 | 7,959 | ||||||||||||
| Depreciation and amortization | 12,630 | 11,974 | 12,630 | 11,974 | ||||||||||||
| Interest on borrowings | 2,997 | 817 | 2,997 | 817 | ||||||||||||
| EBITDA | $ | 24,604 | $ | 43,780 | $ | 19,723 | $ | 41,718 | ||||||||
| A-6 |