May 7, 2013

FXCM Inc. Announces First Quarter 2013 Results

Releases April 2013 Operating Metrics

Revenues up 20% and EBITDA up 76%

Record Quarterly Revenues

First Quarter 2013 Highlights:

  • Revenues of $122.9 million, up 20% versus the same period in 2012 and highest in FXCM history
  • US GAAP net income attributable to FXCM Inc. of $6.9 million or $0.23 per fully diluted share up 138% and 44% respectively versus the same period in 2012
  • Adjusted Pro Forma EBITDA of $43.8 million, up 76% versus the same period in 2012
  • Adjusted Pro Forma net income of $17.5 million or $0.23 per fully exchanged, fully diluted share up 40% and 35% respectively versus the same period in 2012

April 2013 Operating Metric Highlights:

  • Retail customer trading volume of $366 billion, 48% higher than April 2012 and third highest in FXCM history
  • Institutional customer trading volume of $183 billion, 78% higher than April 2012 and highest in FXCM history

NEW YORK--(BUSINESS WIRE)-- 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, 2013, revenues of $122.9 million, compared to $102.6 million for the quarter ended March 31, 2012, an increase of 20%. U.S. GAAP net income attributable to FXCM Inc. was $6.9 million for the First Quarter 2013 or $0.23 per diluted share, compared to $2.9 million or $0.16 per diluted share for the First Quarter 2012, an increase of 138% and 44% respectively.

Adjusted Pro Forma EBITDA for the First Quarter 2013 was $43.8 million, compared to $24.9 million for the First Quarter 2012, an increase of 76%. Adjusted Pro Forma Net Income was $17.5 million or $0.23 per share for the First Quarter 2013, compared to $12.5 million or $0.17 per diluted, fully exchanged share for the First Quarter 2012, an increase of 40% and 35% respectively.

"FXCM turned in one of its best quarters with record revenues and our second highest EBITDA ever," said Drew Niv, Chief Executive Officer. "Having grown our client base so significantly over the past few years, we were well positioned to benefit from the improvement in currency trading conditions that occurred in the first quarter of this year."

"FXCM today is over four times the size in client equity than it was just five years ago," he continued.

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 the equity based compensation expense regarding a grant of stock options at the time of FXCM's initial public offering ("IPO") in December 2010 as well as certain other non-recurring charges.

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

April 2013 Operating Metrics

Retail Trading Metrics

  1. Retail customer trading volume(1) of $366 billion in April 2013, third highest in FXCM history and 15% higher than March 2013 and 48% higher than April 2012.
  2. Average retail customer trading volume(1) per day of $16.6 billion in April 2013, third highest in FXCM history and 9% higher than March 2013 and 41% higher than April 2012.
  3. An average of 498,808 retail client trades per day in April 2013, the highest in FXCM history and 18% higher than March 2013 and 54% higher than April 2012.
  4. Tradeable accounts(2) of 196,174 as of April 30, 2013, an increase of 545, or 0.3%, from March 2013, and a decrease of 6,365,or 3%, from April 2012.

Institutional Trading Metrics

  • Institutional customer trading volume(1) of $183 billion in April 2013, the highest in FXCM history and 46% higher than March 2013 and 78% higher than April 2012.
  • Average institutional trading volume(1) per day of $8.3 billion in April 2013, the highest in FXCM history and 38% higher than March 2013 and 69% higher than April 2012.
  • An average of 22,851 institutional client trades per day in April 2013, 27% higher than March 2013 and 68% higher than April 2012.

"April continued the strong trading environment of the First Quarter," continued Niv. "We are pleased to report record or near-records 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 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 data)
Three Months Ended March 31,

2013

 

2012

% Change

 
Total net revenues $ 122,864 $ 102,589 20%
 
Referring broker fees 21,350 20,189 6%
Compensation and benefits 23,533 23,217 1%
Other expenses 36,115 36,360 -1%
 
Loss on equity method investments, net 148 - 0%
 
Depreciation and amortization 11,974 6,181 94%
Interest on borrowings   817   269
Income before income taxes   28,927   16,373 77%
 
Income tax provision 7,959 2,367 236%
 
Net Income   20,968   14,006 50%
 
Net income attributable to non-controlling interest in FXCM Holdings, LLC 10,230 11,118 -8%
 
Net income attributable to non-controlling interest in Lucid Markets Trading Limited 3,878 - 0%
   
Net Income Attributable to FXCM Inc. $ 6,860 $ 2,888 138%
 
 
Net Income $ 6,860 $ 2,888 138%
 
Net Income per Class A Share
Basic $ 0.24 $ 0.16 50%
Net Income per Class A Share
Diluted $ 0.23 $ 0.16 44%
 
Weighted average Class A shares outstanding - Basic   28,472   17,989 58%
Weighted average Class A shares outstanding - Diluted   29,678   17,989 65%
 
     

Unaudited Adjusted Pro Forma

(thousands, except per share data)

Three Months Ended March 31,

2013

 

2012

 

% Change

 
Total Revenues $ 122,864 $ 102,589 20%
 
Referring broker fees 21,350 20,189 6%
Compensation and benefits 21,471 21,109 2%
Loss on equity method investments, net 148 - 0%
Other expenses   36,115   36,360 -1%
 
EBITDA   43,780   24,931 76%
 
Depreciation and amortization 11,974 6,181 94%
 
Interest on borrowings   817   269 204%
Income before income taxes   30,989   18,481 68%
 
Income tax provision 9,596 5,968 61%
 
Net Income   21,393   12,513 71%
 
Net income attributable to non-controlling interest in FXCM Holdings, LLC - - 0%
 
Net income attributable to non-controlling interest in Lucid Markets Trading Limited 3,878 - 0%
   
Net Income Attributable to FXCM Inc. $ 17,515 $ 12,513 40%
 
Pro forma fully exchanged, diluted weighted average shares outstanding 75,785 72,675 4%
 
Earnings Per Share $ 0.23 $ 0.17 35%
 
         

Selected Operating Metrics

 
(Unaudited)
Three Months Ended March 31,

2013

2012

% Change

 
Total trading volume ($ in billions) $ 1,041 $ 985 6%
 
Total institutional trading volume ($ in billions) $ 373 $ 398 -7%
 
Total active accounts 173,265 171,296 1%
 
Trading days in period 63 65 -3%
 
Daily average trades 437,813 379,289 15%
 
Daily average trades per active account 2.5 2.2 13%
 
Retail trading revenue per million traded $ 88 $ 94 -6%
 
Total customer equity ($ in millions) $ 1,190.4 $ 1,135.9 5%
 

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 July 1st, 2013 to Class A stockholders of record at the close of business on June 6th, 2013.

Conference Call

As previously announced, FXCM Inc. will host a conference call to discuss its results at 8:15 a.m. (EDT) today. 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 60363575.

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.

     

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, 2013 and 2012       A-1
Unaudited U.S. GAAP Condensed Consolidated Statements of Financial Condition As of March 31, 2013 and December 31, 2012       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, 2013 and 2012       A-4
Reconciliation of EBITDA to U.S. GAAP Net Income       A-5
 
       
FXCM Inc.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited )
Three Months Ended March 31,
  2013     2012  
Revenues
 
Retail trading revenue $ 91,254 $ 92,726
Institutional trading revenue   27,556     5,820  
Trading revenue 118,810 98,546
 
Interest income 679 860
Brokerage interest expense   (55 )   (91 )
Net interest income 624 769
 
Other income   3,430     3,274  
 
Total net revenues   122,864     102,589  
 
Operating Expenses
 
Referring broker fees 21,350 20,189
Compensation and benefits 23,533 23,217
Advertising and marketing 7,351 8,270
Communication and technology 8,355 8,380
Trading costs, prime brokerage and clearing fees 7,938 1,313
General and administrative 12,471 18,397
Depreciation and amortization 11,974 6,181
   
 
Total operating expenses   92,972     85,947  
 
Operating income 29,892 16,642
 
Loss on equity method investments, net 148 -
Interest on borrowings   817     269  
 
Income before income taxes 28,927 16,373
Income tax provision   7,959     2,367  
Net income 20,968 14,006
Net income attributable to non-controlling interest in FXCM Holdings, LLC 10,230 11,118
Net income attributable to non-controlling interest in Lucid Markets Trading Limited   3,878     -  
Net income attributable to FXCM Inc. $ 6,860   $ 2,888  
 
   
Net Income $ 6,860   $ 2,888  
 
Net Income per Class A Share
Basic $ 0.24   $ 0.16  
Diluted $ 0.23   $ 0.16  
 
Weighted average Class A shares outstanding - Basic   28,472     17,989  
Weighted average Class A shares outstanding - Diluted   29,678     17,989  
 

A-1

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

2013

    2012  
 
Assets
 
Current assets
Cash and cash equivalents $     273,384 $ 272,332
Cash and cash equivalents, held for customers 1,190,413 1,190,762
Due from brokers 2,725 8,040
Accounts receivables, net 8,216 5,485
Deferred tax asset 10,587 10,598
Tax receivable       4,292     6,003  
Total current assets 1,489,617 1,493,220
 
Deferred tax asset 123,305 117,221
Office, communication and computer equipment, net 50,882 50,316
Goodwill 282,277 285,654
Intangible assets, net 89,184 97,792
Other assets       19,581     20,967  
Total assets $     2,054,846   $ 2,065,170  
 
Liabilities and Equity
 
Current liabilities
Customer account liabilities $ 1,190,413 $ 1,190,762
Accounts payable and accrued expenses 50,833 56,841
Credit agreement 80,000 85,000
Notes payable 22,867 22,867
Due to brokers 3,398 14,494
Deferred tax liability 7,021 7,100
Due to related parties pursuant to tax receivable agreement       11,207     13,569  
Total current liabilities 1,365,739 1,390,633
 
Deferred tax liability 14,435 12,351
Due to related parties pursuant to tax receivable agreement       93,494     87,271  
Total liabilities       1,473,668     1,490,255  
 
Commitments and Contingencies
 
Stockholders' Equity
Class A common stock, par value $0.01 per share; 365 347
3,000,000,000 shares authorized, 36,458,351 and 34,683,599 shares issued
and outstanding as of March 31, 2013 and December 31, 2012, respectively
Class B common stock, par value $0.01 per share; 1 1
1,000,000 shares authorized, 44 and 43 shares issued
and outstanding as of March 31, 2013 and December 31, 2012, respectively
Additional paid-in-capital 182,980 171,390
Retained earnings 15,825 11,122
Accumulated other comprehensive loss       (5,333 )   (1,301 )
Total stockholders' equity, FXCM Inc. 193,838 181,559
Non-controlling interest       387,340     393,356  
Total stockholders' equity       581,178     574,915  
Total liabilities and stockholders' equity $     2,054,846   $ 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. 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. 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. 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.
  4. Regulatory Costs. Adjustments have been made to the Adjusted Pro Forma Earnings to eliminate certain costs associated with a settlement with the Company's regulators in the United States and the estimated expense associated with reimbursement of clients regarding trading issues at the Company's Japanese subsidiary. The Company's management believes it is useful to provide the effects of eliminating these expenses of a one-time nature.
  5. 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. In addition, 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 Statement of Operations
(In thousands, except per share amounts)
(Unaudited )
Three Months Ended March 31,
2013 2012  
 
As Adjusted As Adjusted
Reported Adjustments Pro Forma Reported Adjustments Pro Forma
Revenues
 
Retail trading revenue $ 91,254 - $ 91,254 $ 92,726 - $ 92,726
Institutional trading revenue   27,556     -     27,556     5,820     -     5,820  
Trading revenue 118,810 - 118,810 98,546 - 98,546
 
Interest income 679 - 679 860 - 860
Brokerage interest expense   (55 )   -     (55 )   (91 )   -     (91 )
Net interest income 624 - 624 769 - 769
 
Other income
Other   3,430     -     3,430     3,274     -     3,274  
 
Total net revenues   122,864     -     122,864     102,589     -     102,589  
 
Operating Expenses
 
Referring broker fees 21,350 - 21,350 20,189 - 20,189
Compensation and benefits 23,533 (2,062 )

(1)

 

21,471 23,217 (2,108 )

(1)

 

21,109
Advertising and marketing 7,351 - 7,351 8,270 - 8,270
Communication and technology 8,355 - 8,355 8,380 - 8,380
Trading costs, prime brokerage and clearing fees 7,938 7,938 1,313 - 1,313
General and administrative 12,471 - 12,471 18,397 - 18,397
Depreciation and amortization 11,974 - 11,974 6,181 - 6,181
           
Total operating expenses   92,972     (2,062 )   90,910     85,947     (2,108 )   83,839  
 
Operating income 29,892 2,062 31,954 16,642 2,108 18,750
 
Loss on equity method investments, net 148 - 148 - - -
Interest on borrowings   817     -     817     269     -     269  
 
Income before income taxes 28,927 2,062 30,989 16,373 2,108 18,481
Income tax provision   7,959     1,637  

(2)

 

  9,596     2,367     3,601  

(2)

 

  5,968  
Net income 20,968 425 21,393 14,006 (1,493 ) 12,513
Net income attributable to non-controlling interest in FXCM Holdings, LLC 10,230 (10,230 )

(3)

 

- 11,118 (11,118 )

(3)

 

-
Net income attributable to non-controlling interest in Lucid Markets Trading Limited   3,878     -     3,878     -     -     -  
Net income attributable to FXCM Inc. $ 6,860   $ 10,655   $ 17,515   $ 2,888   $ 9,625   $ 12,513  
 
 
Pro Forma fully exchanged, diluted weighted average shares outstanding   75,785  

(4)

 

  72,675  

(4)

 

 
Adjusted Pro Forma net income per fully exchanged, fully diluted weighted average shares outstanding $ 0.23   $ 0.17  
 

(1)

 

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

 

(2)

Represents an adjustment to reflect the assumed effective corporate tax rate of approximately 31.0% and 32.3% for the three months ended March 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 FXCM Holdings, LLC ("Holdings") units for shares of Class A common stock of the Company and reflects the tax effect of any proforma adjustments.

 

(3)

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.

 

(4)

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 EBITDA to Net Income
(In thousands)
(Unaudited )
               
Three Months Ended March 31,
Adjusted Pro Forma

    U.S. GAAP    

2013

2012

2013

2012

 
Revenues $ 122,864

$

102,589

$

   

122,864

$

   

102,589

 
Net income attributable to FXCM Inc. $ 17,515 $ 12,513 $ 6,860 $ 2,888
Net income attributable to non-controlling interest in FXCM Holdings, LLC - - 10,230 11,118
Net income attributable to non-controlling interest in Lucid Markets Trading Limited 3,878 - 3,878 -
Provision for income taxes 9,596 5,968 7,959 2,367
Depreciation and amortization 11,974 6,181 11,974 6,181
Interest on borrowings   817   269           817         269
EBITDA $ 43,780

 

$ 24,931     $     41,718

 

$     22,823
 

A-5

 

For Media:
FXCM Inc.
Jaclyn Klein, 646-432-2463
Vice-President, Corporate Communications
jklein@fxcm.com

Source: FXCM Inc.

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