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| 8-K - 8-K - GAIN Capital Holdings, Inc. | form8kplymouthclosing.htm |
EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Background
On June 29, 2018, GAIN Capital Holdings, Inc., a Delaware corporation (the “Company”), completed the sale of the assets (the "Transaction") of the Company's GTX ECN business, an institutional platform for trading foreign exchange (the "GTX Business"), to 360TGTX Inc. pursuant to an Asset Purchase Agreement dated as of May 29, 2018 (the "Purchase Agreement"). The Purchase Agreement provides for a cash purchase price for the GTX Business of $100 million, subject to a customary adjustment based on the GTX Business's working capital on the closing date.
Pro Forma Information
The accompanying unaudited pro forma condensed consolidated statement of operations of the Company for the year ended December 31, 2017 is presented as if the Transaction had occurred on January 1, 2017. The accompanying unaudited pro forma condensed consolidated statement of operations of the Company for the three months ended March 31, 2018 and the condensed consolidated balance sheet of the Company as of March 31, 2018 are presented as if the Transaction had occurred on January 1, 2018 and, respectively. The pro forma adjustments related to the Transaction do not reflect the final purchase price or final asset and liability balances of the GTX Business. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed consolidated financial information. The unaudited pro forma financial information is not necessarily indicative of the results of operations or financial position that might have been achieved for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position that may occur in the future.
The historical consolidated financial information has been adjusted in the unaudited pro forma financial information to give effect to pro forma events that are (1) directly attributable to the disposal, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results. The pro forma information does not reflect several changes the Company expects to realize after the Transaction because the changes are not certain.
The following is a brief description of the amounts recorded under each of the column headings in the unaudited pro forma consolidated statements of operations and balance sheet:
GAIN Capital Holdings, Inc.
This column reflects the Company’s historical audited operating results for the year ended December 31, 2017 and the historical and unaudited operating results and financial condition as of and for the three months ended March 31, 2018 prior to any adjustment for the Transaction.
Disposal
This column reflects the elimination of the historical operating results of the GTX Business for the year ended December 31, 2017 and the three months ended March 31, 2018 at the amounts that have been reflected in the Company’s condensed consolidated statements of operations for those periods. The disposal column on the unaudited pro forma condensed consolidated balance sheet as of March 31, 2018 reflects the value of assets and liabilities included in GTX Business as of that date.
Pro Forma Adjustments
This column on the unaudited pro forma condensed consolidated balance sheet reflects the pro forma effect of the receipt and use of the cash consideration from the Transaction.
GAIN CAPITAL HOLDINGS, INC.
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
(in thousands, except share data)
March 31, 2018 | |||||||||||||||||
GAIN Capital Holdings, Inc. | Disposal | Pro Forma Adjustments | Notes | Pro Forma | |||||||||||||
ASSETS: | |||||||||||||||||
Cash and cash equivalents | $ | 239,704 | $ | — | $ | 96,690 | (a) | $ | 336,394 | ||||||||
Cash and cash equivalents held for customers | 963,221 | — | — | 963,221 | |||||||||||||
Receivables from brokers | 72,017 | — | — | 72,017 | |||||||||||||
Property and equipment, net | 40,173 | (1,400 | ) | — | (b) | 38,773 | |||||||||||
Intangible assets, net | 59,152 | (13,403 | ) | — | (b) | 45,749 | |||||||||||
Goodwill | 33,443 | (4,707 | ) | — | (b) | 28,736 | |||||||||||
Other assets | 46,898 | (9,260 | ) | — | (b) | 37,638 | |||||||||||
Total assets | $ | 1,454,608 | $ | (28,770 | ) | $ | 96,690 | $ | 1,522,528 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||
Liabilities | |||||||||||||||||
Payables to customers | $ | 963,221 | $ | — | $ | — | $ | 963,221 | |||||||||
Accrued compensation and benefits | 8,782 | (1,032 | ) | — | (b) | 7,750 | |||||||||||
Accrued expenses and other liabilities | 37,294 | (2,666 | ) | — | (b) | 34,628 | |||||||||||
Income tax payable | 3,630 | — | — | 3,630 | |||||||||||||
Convertible senior notes | 133,734 | — | — | 133,734 | |||||||||||||
Total liabilities | $ | 1,146,661 | $ | (3,698 | ) | $ | — | $ | 1,142,963 | ||||||||
Commitments and contingent liabilities | |||||||||||||||||
Redeemable non-controlling interests | $ | 1,953 | $ | — | $ | — | $ | 1,953 | |||||||||
Shareholders’ equity | |||||||||||||||||
Common stock ($0.00001 par value) | $ | — | $ | — | $ | — | $ | — | |||||||||
Additional paid-in capital | 237,560 | — | — | 237,560 | |||||||||||||
Retained earnings | 135,762 | — | 71,618 | (b) | 207,380 | ||||||||||||
Accumulated other comprehensive loss | (6,196 | ) | — | — | (6,196 | ) | |||||||||||
Treasury stock, at cost | (61,132 | ) | — | — | (61,132 | ) | |||||||||||
Total shareholders’ equity | 305,994 | — | 71,618 | 377,612 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 1,454,608 | $ | (3,698 | ) | $ | 71,618 | $ | 1,522,528 | ||||||||
GAIN CAPITAL HOLDINGS, INC.
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited)
(in thousands, except share and per share data)
Year Ended December 31, 2017 | |||||||||||||||||
GAIN Capital Holdings, Inc. | Disposal | Pro Forma Adjustments | Notes | Pro Forma | |||||||||||||
REVENUE: | |||||||||||||||||
Retail revenue | $ | 231,100 | $ | — | $ | — | $ | 231,100 | |||||||||
Institutional revenue | 30,136 | (30,136 | ) | — | — | ||||||||||||
Futures revenue | 37,964 | — | — | 37,964 | |||||||||||||
Other revenue | 4,478 | — | — | 4,478 | |||||||||||||
Total non-interest revenue | 303,678 | (30,136 | ) | — | 273,542 | ||||||||||||
Interest revenue | 5,829 | (250 | ) | — | 5,579 | ||||||||||||
Interest expense | 883 | — | — | 883 | |||||||||||||
Total net interest revenue | 4,946 | (250 | ) | — | 4,696 | ||||||||||||
Net revenue | $ | 308,624 | $ | (30,386 | ) | $ | — | $ | 278,238 | ||||||||
EXPENSES: | |||||||||||||||||
Employee compensation and benefits | $ | 95,218 | $ | (12,719 | ) | $ | — | $ | 82,499 | ||||||||
Selling and marketing | 31,200 | (85 | ) | — | 31,115 | ||||||||||||
Referral fees | 53,671 | — | — | 53,671 | |||||||||||||
Trading expenses | 29,041 | (9,635 | ) | — | 19,406 | ||||||||||||
General and administrative | 45,727 | (2,474 | ) | — | 43,253 | ||||||||||||
Depreciation and amortization | 17,907 | (1,040 | ) | — | 16,867 | ||||||||||||
Purchased intangible amortization | 16,110 | (2,144 | ) | — | 13,966 | ||||||||||||
Communications and technology | 19,699 | (473 | ) | — | 19,226 | ||||||||||||
Bad debt provision | (247 | ) | — | — | (247 | ) | |||||||||||
Impairment of investment | 620 | — | — | 620 | |||||||||||||
Total operating expense | 308,946 | (28,570 | ) | — | 280,376 | ||||||||||||
OPERATING PROFIT/(LOSS) | (322 | ) | (1,816 | ) | — | (2,138 | ) | ||||||||||
Interest expense on long term borrowings | 11,821 | — | — | 11,821 | |||||||||||||
Loss on extinguishment of debt | 4,944 | — | — | 4,944 | |||||||||||||
INCOME/(LOSS) BEFORE INCOME TAX EXPENSE/(BENEFIT) | (17,087 | ) | (1,816 | ) | — | (18,903 | ) | ||||||||||
Income tax expense/(benefit) | (6,855 | ) | (2,234 | ) | — | (4,621 | ) | ||||||||||
Equity in net loss of affiliate | (343 | ) | — | — | (343 | ) | |||||||||||
NET INCOME/(LOSS) | (10,575 | ) | 418 | — | (13,939 | ) | |||||||||||
Net income attributable to non-controlling interests | 620 | — | — | 620 | |||||||||||||
NET INCOME/(LOSS) APPLICABLE TO GAIN CAPITAL HOLDINGS, INC. | $ | (11,195 | ) | $ | 418 | $ | — | $ | (14,559 | ) | |||||||
Earnings/(loss) per common share: | |||||||||||||||||
Basic | $ | (0.20 | ) | $ | (0.28 | ) | |||||||||||
Diluted | $ | (0.20 | ) | $ | (0.28 | ) | |||||||||||
Weighted average common shares outstanding used in computing earnings/(loss) per common share: | |||||||||||||||||
Basic | 46,740,097 | 46,740,097 | |||||||||||||||
Diluted | 46,740,097 | 46,740,097 | |||||||||||||||
GAIN CAPITAL HOLDINGS, INC.
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31, 2018 | |||||||||||||||||
GAIN Capital Holdings, Inc. | Disposal | Pro Forma Adjustments | Notes | Pro Forma | |||||||||||||
REVENUE: | |||||||||||||||||
Retail revenue | $ | 84,120 | $ | — | $ | — | $ | 84,120 | |||||||||
Institutional revenue | 8,455 | (8,455 | ) | — | $ | — | |||||||||||
Futures revenue | 10,645 | — | — | $ | 10,645 | ||||||||||||
Other revenue | 1,895 | — | — | $ | 1,895 | ||||||||||||
Total non-interest revenue | 105,115 | (8,455 | ) | — | 96,660 | ||||||||||||
Interest revenue | 2,122 | (48 | ) | — | $ | 2,074 | |||||||||||
Interest expense | 374 | — | — | $ | 374 | ||||||||||||
Total net interest revenue | 1,748 | (48 | ) | — | 1,700 | ||||||||||||
Net revenue | $ | 106,863 | $ | (8,503 | ) | $ | — | $ | 98,360 | ||||||||
EXPENSES: | |||||||||||||||||
Employee compensation and benefits | $ | 27,751 | $ | (3,709 | ) | $ | — | $ | 24,042 | ||||||||
Selling and marketing | 6,027 | (56 | ) | — | $ | 5,971 | |||||||||||
Referral fees | 11,948 | (517 | ) | — | $ | 11,431 | |||||||||||
Trading expenses | 8,468 | (2,657 | ) | — | $ | 5,811 | |||||||||||
General and administrative | 12,985 | (521 | ) | — | $ | 12,464 | |||||||||||
Depreciation and amortization | 5,669 | (301 | ) | — | $ | 5,368 | |||||||||||
Purchased intangible amortization | 4,204 | (536 | ) | — | $ | 3,668 | |||||||||||
Communications and technology | 5,524 | (133 | ) | — | $ | 5,391 | |||||||||||
Bad debt provision | 1,118 | — | — | $ | 1,118 | ||||||||||||
Impairment of investment | (130 | ) | — | — | $ | (130 | ) | ||||||||||
Total operating expense | 83,564 | (8,430 | ) | — | 75,134 | ||||||||||||
OPERATING PROFIT/(LOSS) | 23,299 | (73 | ) | — | 23,226 | ||||||||||||
Interest expense on long term borrowings | 3,340 | — | — | $ | 3,340 | ||||||||||||
INCOME/(LOSS) BEFORE INCOME TAX EXPENSE/(BENEFIT) | 19,959 | (73 | ) | — | 19,886 | ||||||||||||
Income tax expense/(benefit) | 3,698 | (494 | ) | — | $ | 3,204 | |||||||||||
NET INCOME/(LOSS) | 16,261 | 421 | — | 16,682 | |||||||||||||
Net income attributable to non-controlling interests | 175 | — | — | $ | 175 | ||||||||||||
NET INCOME/(LOSS) APPLICABLE TO GAIN CAPITAL HOLDINGS, INC. | $ | 16,086 | $ | 421 | $ | — | $ | 16,507 | |||||||||
Earnings/(loss) per common share: | |||||||||||||||||
Basic | $ | 0.35 | $ | 0.36 | |||||||||||||
Diluted | $ | 0.35 | $ | 0.36 | |||||||||||||
Weighted average common shares outstanding used in computing earnings/(loss) per common share: | |||||||||||||||||
Basic | 45,017,716 | 45,017,716 | |||||||||||||||
Diluted | 45,523,766 | 45,523,766 | |||||||||||||||
GAIN CAPITAL HOLDINGS, INC.
Notes to Unaudited Pro Forma Consolidated Financial Information
(Unaudited)
(in thousands)
(a) | Total consideration for the Transaction is as follows: | ||||
Cash payment of $100,000 upon closing | $ | 100,000 | |||
Transaction fees | 3,310 | ||||
Total consideration | $ | 96,690 | |||
(b) | The gain on the Transaction is as follows: | ||||
Total consideration | $ | 96,690 | |||
Total assets sold | 28,770 | ||||
Total liabilities assumed | 3,698 | ||||
Net gain on Transaction | $ | 71,618 | |||