Second Quarter 2016
Highlights:
FXCM Inc. (NYSE:FXCM), a leading online provider of foreign
exchange, or FX, trading and related services, today announced for
the quarter ended June 30, 2016, U.S. GAAP trading revenue from
continuing operations of $69.0 million, compared to $59.2 million
for the quarter ended June 30, 2015. U.S. GAAP net income
attributable to FXCM Inc. from continuing operations was $60.5
million (including a $116.5 million net gain on derivative
liabilities) for the quarter ended June 30, 2016, or $10.80 per
diluted share, compared to U.S. GAAP net loss attributable to FXCM
Inc. from continuing operations of $98.9 million, or $20.30(3) per
diluted share, for the quarter ended June 30, 2015.
For the six months ended June 30, 2016, U.S. GAAP trading
revenue from continuing operations was $138.7 million, compared to
$128.4 million for the six months ended June 30, 2015. U.S. GAAP
net income attributable to FXCM Inc. from continuing operations was
$121.8 million for the six months ended June 30, 2016, or $21.73
per diluted share, compared to U.S. GAAP net loss attributable to
FXCM Inc. from continuing operations of $492.2 million, or
$102.76(3) per diluted share, for the six months ended June 30,
2015.
“We are very pleased with the operating results from continuing
and discontinued operations,” said Drew Niv CEO of FXCM. “The
growth initiatives we implemented last year continue to gain
traction with revenue per million increasing, as well as CFD
trading volume increasing.”
Results from operations for the quarter and the six months ended
June 30, 2016 included a net gain on derivative liabilities of
$116.5 million and $227.4 million, respectively. The net gain
is comprised of non-cash changes in the value of embedded
derivatives associated with the Leucadia Letter & Credit
Agreements. The Letter Agreement is a component of the
financing package provided by Leucadia National Corp. (“Leucadia”).
On January 15, 2015, FXCM’s customers suffered negative equity
balances due to the unprecedented move in the Swiss Franc after the
Swiss National Bank (“SNB”) discontinued its peg of the Swiss Franc
to the Euro. On January 16, 2015, FXCM entered into a
financing agreement with Leucadia that permitted FXCM’s regulated
subsidiaries to meet their regulatory capital requirements and
continue normal operations after significant losses were incurred
resulting from the events of January 15, 2015.
U.S. GAAP trading revenue from discontinued operations for the
quarter ended June 30, 2016 was $7.5 million, compared to $20.5
million for the quarter ended June 30, 2015. U.S. GAAP net
loss attributable to FXCM Inc. from discontinued operations was
$0.1 million for the quarter ended June 30, 2016, or $0.02 per
diluted share, compared to U.S. GAAP net income attributable to
FXCM Inc. from discontinued operations of $3.1 million, or $0.63(3)
per diluted share, for the quarter ended June 30, 2015.
U.S. GAAP trading revenue from discontinued operations for the
six months ended June 30, 2016 was $13.8 million, compared to $46.8
million for the six months ended June 30, 2015. U.S. GAAP net
loss attributable to FXCM Inc. from discontinued operations was
$11.6 million for the six months ended June 30, 2016, or $2.08 per
diluted share, compared to U.S. GAAP net loss attributable to FXCM
Inc. from discontinued operations of $30.4 million, or $6.35(3) per
diluted share, for the six months ended June 30, 2015.
For the quarter and six months ended June 30, 2016, operating
expenses include a $2.3M settlement of a longstanding legal
matter.
Adjusted EBITDA from continuing and discontinued operations was
$10.9 million for the quarter ended June 30, 2016 compared to $5.9
million for the quarter ended June 30, 2015.
Adjusted EBITDA from continuing and discontinued operations was
$21.2 million for the six months ended June 30, 2016 compared to
$20.4 million for the six months ended June 30, 2015.
Adjusted EBITDA from continuing operations was $9.1 million for
the quarter ended June 30, 2016 compared to a loss of $2.8 million
for the quarter ended June 30, 2015.
Adjusted EBITDA from continuing operations was $18.4 million for
the six months ended June 30, 2016 compared to $0.6 million for the
six months ended June 30, 2015.
Adjusted EBITDA is a Non-GAAP financial measure. This measure
does not represent and should not be considered as a substitute for
net income or net income attributable to FXCM Inc., each as
determined in accordance with U.S. GAAP, and our calculations of
this measure may not be comparable to similarly titled measures
reported by other companies. See “Non-GAAP Financial Measures”
beginning on A-3 of this release for additional information
regarding this Non-GAAP financial measure and for a reconciliation
of such measure to the most directly comparable measure calculated
in accordance with U.S. GAAP.
FXCM Inc. today announced certain key customer trading metrics
for July 2016. Monthly activities included:
July 2016 Customer Trading Metrics from Continuing
Operations (1)
Retail Customer Trading Metrics
- Retail customer trading volume(2) of $281 billion in July 2016,
2% higher than June 2016 and 11% lower than July 2015.
- Average retail customer trading volume(2) per day of $13.4
billion in July 2016, 7% higher than June 2016 and 3% lower than
July 2015.
- An average of 578,471 retail client trades per day in July
2016, 1% lower than June 2016 and 9% higher than July 2015.
- Active accounts(4) of 176,620 as of July 31, 2016, a decrease
of 1,824, or 1%, from June 30, 2016, and a decrease of 2,957, or
2%, from July 31, 2015.
- Tradeable accounts(5) of 171,669 as of July 31, 2016, an
increase of 162, or 0.1%, from June 30, 2016, and an increase of
12,782, or 8%, from July 31, 2015.
Institutional Customer Trading Metrics
- Institutional customer trading volume(2) of $41 billion in July
2016, 28% lower than June 2016 and 11% higher than July 2015.
- Average institutional trading volume(2) per day of $2.0 billion
in July 2016, 23% lower than June 2016 and 25% higher than July
2015.
- An average of 40,143 institutional client trades per day in
July 2016, 13% higher than June 2016 and 35% higher than July
2015.
More information, including historical results for each of the
above metrics, can be found on the investor relations page of
FXCM's corporate website www.fxcm.com.
This operating data is preliminary and subject to revision and
should not be taken as an indication of the financial performance
of FXCM Inc. FXCM undertakes no obligation to publicly update or
review previously reported operating data. Any updates to
previously reported operating data will be reflected in the
historical operating data that can be found on the Investor
Relations page of the Company’s corporate website www.fxcm.com.
(1) Customer Trading Metrics from Continuing Operations excludes
discontinued operations of FXCM Japan and FXCM Hong Kong.
(2) Volume that FXCM customers traded in period is translated
into US dollars.
(3) Earnings per share have been adjusted to reflect the impact
of the one-for-ten reverse stock split of the Corporation’s issued
and outstanding Class A common stock that became effective on
October 1, 2015.
(4) An Active Account represents an account that has traded at
least once in the previous twelve months.
(5) A Tradeable Account is an account with sufficient funds to
place a trade in accordance with FXCM trading policies.
|
Selected Customer Trading Metrics from
Continuing Operations |
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
|
2015 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
retail trading volume ($ in billions) |
$ |
842 |
|
|
$ |
1,000 |
|
|
|
-16 |
% |
|
$ |
1,773 |
|
|
$ |
1,934 |
|
|
|
-8 |
% |
Total
active accounts |
|
|
178,444 |
|
|
|
177,305 |
|
|
|
1 |
% |
|
|
178,444 |
|
|
|
177,305 |
|
|
|
1 |
% |
Trading
days in period |
|
|
65 |
|
|
|
65 |
|
|
|
0 |
% |
|
|
129 |
|
|
|
128 |
|
|
|
1 |
% |
Daily
average trades |
|
|
573,279 |
|
|
|
531,558 |
|
|
|
8 |
% |
|
|
602,695 |
|
|
|
526,639 |
|
|
|
14 |
% |
Daily
average trades per active account |
|
3.2 |
|
|
|
3.0 |
|
|
|
7 |
% |
|
|
3.4 |
|
|
|
3.0 |
|
|
|
14 |
% |
Retail
trading revenue per million traded |
$ |
80 |
|
|
$ |
54 |
|
|
|
47 |
% |
|
$ |
76 |
|
|
$ |
61 |
|
|
|
25 |
% |
Total
customer equity ($ in millions) |
$ |
662.4 |
|
|
$ |
734.7 |
|
|
|
-10 |
% |
|
$ |
662.4 |
|
|
$ |
734.7 |
|
|
|
-10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure Regarding Forward-Looking
Statements
In addition to historical information, this earnings release may
contain "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934 and/or the Private Securities Litigation
Reform Act of 1995, which reflect FXCM's current views with respect
to, among other things, its operations and financial performance in
the future. These forward-looking statements are not historical
facts and are based on current expectations, estimates and
projections about FXCM's industry, management's beliefs and certain
assumptions made by management, many of which, by their nature, are
inherently uncertain and beyond our control. Accordingly, readers
are cautioned that any such forward-looking statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict
including, without limitation, risks associated with the events
that took place in the currency markets on January 15, 2015 and
their impact on FXCM's capital structure, risks associated with
FXCM's ability to recover all or a portion of any capital losses,
risks relating to the ability of FXCM to satisfy the terms and
conditions of or make payments pursuant to the terms of the credit
agreement and the letter agreement with Leucadia, risks related to
FXCM's dependence on FX market makers, market conditions, risks
associated with the outcome of any potential litigation or
regulatory inquiries to which FXCM may become subject as a result
of the cybersecurity incident that was reported in a press release
on October 1, 2015, risks associated with potential reputational
damage to FXCM resulting from this cybersecurity incident, and the
extent of remediation costs and other additional expenses that may
be incurred by FXCM as a result of this security incident, and
those other risks described under "Risk Factors" in FXCM Inc.'s
Annual Report on Form 10-K, FXCM Inc.’s latest Quarterly Report on
Form 10-Q, and other reports or documents FXCM files with, the SEC
from time to time, which are accessible on the SEC website
at sec.gov. This information should also be read in
conjunction with FXCM's Consolidated Financial Statements and the
Notes thereto contained in FXCM's Annual Report on Form 10-K, FXCM
Inc.’s latest Quarterly Report on Form 10-Q, and in other reports
or documents FXCM files with, or furnishes to, the SEC from time to
time, 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 release 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.
Visit www.fxcm.com and follow us on Twitter @FXCM, Facebook
FXCM, Google+ FXCM or YouTube FXCM.
About FXCM Inc.
FXCM Inc. (NYSE:FXCM) is a leading provider of online foreign
exchange (FX) trading, CFD trading, spread betting and related
services. Our mission is to provide global traders with access to
the world’s largest and most liquid market by offering innovative
trading tools, hiring excellent trading educators, meeting strict
financial standards and striving for the best online trading
experience in the market.
Clients have the advantage of mobile trading,
one-click order execution and trading from real-time charts. 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, which may result in losses that could
exceed your deposits, therefore may not be suitable for all
investors. Read full disclaimer.
ANNEX I
Schedule |
|
|
Page Number |
|
|
|
|
U.S. GAAP Results |
|
|
|
Unaudited U.S. GAAP Condensed Consolidated
Statements of Operations for the Three and Six Months Ended June
30, 2016 and 2015 |
|
|
A-1 |
Unaudited U.S. GAAP Condensed Consolidated
Statements of Financial Condition As of June 30, 2016 and December
31, 2015 |
|
|
A-2 |
|
|
|
|
Non-GAAP Financial Measures |
|
|
A-3 |
Reconciliation of U.S. GAAP Reported Net Income
(Loss) to Adjusted EBITDA |
|
|
A-4 |
Schedule of Cash and Cash Equivalents and Amounts
Due to/from Brokers |
|
|
A-5 |
FXCM
Inc. |
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations |
|
|
|
|
|
|
|
(In thousands,
except per share amounts) |
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Revenues |
|
|
|
|
|
|
|
Trading revenue |
$ |
68,958 |
|
|
$ |
59,211 |
|
|
$ |
138,705 |
|
|
$ |
128,425 |
|
Interest income |
|
581 |
|
|
|
416 |
|
|
|
1,109 |
|
|
|
738 |
|
Brokerage interest expense |
|
(229 |
) |
|
|
(173 |
) |
|
|
(427 |
) |
|
|
(377 |
) |
Net interest revenue |
|
352 |
|
|
|
243 |
|
|
|
682 |
|
|
|
361 |
|
Other income |
|
1,246 |
|
|
|
1,058 |
|
|
|
2,684 |
|
|
|
146,916 |
|
Total net
revenues |
|
70,556 |
|
|
|
60,512 |
|
|
|
142,071 |
|
|
|
275,702 |
|
Operating Expenses |
|
|
|
|
|
|
|
Compensation and benefits |
|
24,351 |
|
|
|
23,457 |
|
|
|
49,177 |
|
|
|
48,496 |
|
Referring broker fees |
|
8,933 |
|
|
|
14,601 |
|
|
|
19,579 |
|
|
|
30,670 |
|
Advertising and marketing |
|
4,816 |
|
|
|
3,483 |
|
|
|
10,284 |
|
|
|
6,300 |
|
Communication and technology |
|
6,516 |
|
|
|
9,243 |
|
|
|
14,121 |
|
|
|
18,760 |
|
Trading costs, prime brokerage and
clearing fees |
|
849 |
|
|
|
960 |
|
|
|
1,737 |
|
|
|
2,100 |
|
General and administrative |
|
24,879 |
|
|
|
12,718 |
|
|
|
38,980 |
|
|
|
26,373 |
|
Bad debt (recovery) expense |
|
(141 |
) |
|
|
388 |
|
|
|
(141 |
) |
|
|
257,303 |
|
Depreciation and amortization |
|
6,949 |
|
|
|
6,800 |
|
|
|
14,193 |
|
|
|
13,820 |
|
Goodwill impairment loss |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,513 |
|
Total operating
expenses |
|
77,152 |
|
|
|
71,650 |
|
|
|
147,930 |
|
|
|
413,335 |
|
Operating loss |
|
(6,596 |
) |
|
|
(11,138 |
) |
|
|
(5,859 |
) |
|
|
(137,633 |
) |
Other expense |
|
|
|
|
|
|
|
Gain (loss) on derivative
liabilities — Letter & Credit Agreement |
|
116,529 |
|
|
|
(99,867 |
) |
|
|
227,360 |
|
|
|
(392,296 |
) |
Loss on equity method investments,
net |
|
149 |
|
|
|
37 |
|
|
|
338 |
|
|
|
188 |
|
Interest on borrowings |
|
21,202 |
|
|
|
44,291 |
|
|
|
41,755 |
|
|
|
74,850 |
|
Income (loss) from continuing operations
before income taxes |
|
88,582 |
|
|
|
(155,333 |
) |
|
|
179,408 |
|
|
|
(604,967 |
) |
Income tax (benefit) provision |
|
(439 |
) |
|
|
1,559 |
|
|
|
143 |
|
|
|
181,321 |
|
Income (loss) from continuing
operations |
|
89,021 |
|
|
|
(156,892 |
) |
|
|
179,265 |
|
|
|
(786,288 |
) |
(Loss) income from discontinued operations, net
of tax |
|
(518 |
) |
|
|
5,665 |
|
|
|
(31,586 |
) |
|
|
(92,933 |
) |
Net income (loss) |
|
88,503 |
|
|
|
(151,227 |
) |
|
|
147,679 |
|
|
|
(879,221 |
) |
Net income (loss) attributable to
non-controlling interest in FXCM Holdings, LLC |
|
28,452 |
|
|
|
(56,313 |
) |
|
|
51,904 |
|
|
|
(313,688 |
) |
Net (loss) income attributable to
other non-controlling interests |
|
(350 |
) |
|
|
897 |
|
|
|
(14,361 |
) |
|
|
(42,905 |
) |
Net income (loss) attributable to FXCM
Inc. |
$ |
60,401 |
|
|
$ |
(95,811 |
) |
|
$ |
110,136 |
|
|
$ |
(522,628 |
) |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
attributable to FXCM Inc. |
$ |
60,495 |
|
|
$ |
(98,886 |
) |
|
$ |
121,765 |
|
|
$ |
(492,211 |
) |
(Loss) income from discontinued operations
attributable to FXCM Inc. |
|
(94 |
) |
|
|
3,075 |
|
|
|
(11,629 |
) |
|
|
(30,417 |
) |
Net income (loss) attributable to FXCM
Inc. |
$ |
60,401 |
|
|
$ |
(95,811 |
) |
|
$ |
110,136 |
|
|
$ |
(522,628 |
) |
|
|
|
|
|
|
|
|
Weighted average shares of Class A common stock
outstanding - Basic and Diluted(1) |
|
5,603 |
|
|
|
4,871 |
|
|
|
5,603 |
|
|
|
4,790 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to
stockholders of Class A common stock of FXCM Inc. - Basic and
Diluted(1) |
|
|
|
|
|
|
|
Continuing operations |
$ |
10.80 |
|
|
$ |
(20.30 |
) |
|
$ |
21.73 |
|
|
$ |
(102.76 |
) |
Discontinued operations |
|
(0.02 |
) |
|
|
0.63 |
|
|
|
(2.08 |
) |
|
|
(6.35 |
) |
Net income (loss) income
attributable to FXCM Inc. |
$ |
10.78 |
|
|
$ |
(19.67 |
) |
|
$ |
19.65 |
|
|
$ |
(109.11 |
) |
|
|
|
|
|
|
|
|
(1) Prior
period is adjusted to reflect the impact of the one-for-ten reverse
stock split that became effective on October 1, 2015. |
|
|
|
|
|
|
|
|
|
A-1
FXCM
Inc. |
|
|
|
|
Condensed
Consolidated Statements of Financial Condition |
|
|
|
|
As of June 30,
2016 and December 31, 2015 |
|
|
|
|
(Amounts in
thousands except share data) |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
June 30, 2016 |
|
December 31, 2015 |
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
208,707 |
|
|
$ |
203,854 |
|
Cash and cash equivalents, held for
customers |
|
|
662,392 |
|
|
|
685,043 |
|
Due from brokers |
|
|
2,071 |
|
|
|
3,781 |
|
Accounts receivable, net |
|
|
1,468 |
|
|
|
1,636 |
|
Tax receivable |
|
|
21 |
|
|
|
1,766 |
|
Current assets held for sale |
|
|
199,730 |
|
|
|
233,937 |
|
Total current assets |
|
|
1,074,389 |
|
|
|
1,130,017 |
|
Deferred tax asset |
|
|
15 |
|
|
|
14 |
|
Office, communication and computer equipment,
net |
|
|
35,505 |
|
|
|
35,891 |
|
Goodwill |
|
|
25,363 |
|
|
|
28,080 |
|
Other intangible assets, net |
|
|
9,670 |
|
|
|
13,782 |
|
Notes receivable |
|
|
- |
|
|
|
7,881 |
|
Other assets |
|
|
12,393 |
|
|
|
11,421 |
|
Total assets |
|
$ |
1,157,335 |
|
|
$ |
1,227,086 |
|
Liabilities and Stockholders'
Deficit |
|
|
|
|
Current liabilities |
|
|
|
|
Customer account liabilities |
|
$ |
662,392 |
|
|
$ |
685,043 |
|
Accounts payable and accrued
expenses |
|
|
41,597 |
|
|
|
38,298 |
|
Due to brokers |
|
|
12,176 |
|
|
|
1,073 |
|
Due to related parties pursuant to
tax receivable agreement |
|
|
- |
|
|
|
145 |
|
Current liabilities held for
sale |
|
|
13,690 |
|
|
|
14,510 |
|
Total current liabilities |
|
|
729,855 |
|
|
|
739,069 |
|
Deferred tax liability |
|
|
280 |
|
|
|
719 |
|
Senior convertible notes |
|
|
157,795 |
|
|
|
154,255 |
|
Credit agreement |
|
|
180,153 |
|
|
|
147,262 |
|
Derivative liability — Letter Agreement |
|
|
209,458 |
|
|
|
448,458 |
|
Other liabilities |
|
|
13,543 |
|
|
|
16,044 |
|
Total
liabilities |
|
|
1,291,084 |
|
|
|
1,505,807 |
|
Commitments and
Contingencies |
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
Class A common stock, par value
$0.01 per share; 3,000,000,000 shares authorized, 5,602,534 shares
issued and outstanding as of June 30, 2016 and December 31,
2015 |
|
|
56 |
|
|
|
56 |
|
Class B common stock, par value
$0.01 per share; 1,000,000 shares authorized, 25 shares issued and
outstanding as of June 30, 2016 and December 31, 2015 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
268,112 |
|
|
|
267,369 |
|
Accumulated deficit |
|
|
(421,414 |
) |
|
|
(531,550 |
) |
Accumulated other comprehensive
(loss) income |
|
|
(766 |
) |
|
|
1,004 |
|
Total stockholders’ deficit, FXCM
Inc. |
|
|
(154,011 |
) |
|
|
(263,120 |
) |
Non-controlling interests |
|
|
20,262 |
|
|
|
(15,601 |
) |
Total stockholders’
deficit |
|
|
(133,749 |
) |
|
|
(278,721 |
) |
Total liabilities and stockholders’
deficit |
|
$ |
1,157,335 |
|
|
$ |
1,227,086 |
|
|
|
|
|
|
|
|
|
|
A-2
NON-GAAP FINANCIAL MEASURES
In addition to financial results reported in accordance with
U.S. GAAP, we have provided Adjusted EBITDA, a Non- GAAP financial
measure. We believe this Non-GAAP measure, when presented in
conjunction with the comparable U.S. GAAP measure, is useful to
investors in better understanding our current financial performance
as seen through the eyes of management and facilitates comparisons
of our historical operating trends across several periods. We
believe that investors use Adjusted EBITDA as a supplemental
measure to evaluate the overall operating performance of companies
in our industry that present similar measures, although the methods
used by other companies in calculating Adjusted EBITDA may differ
from our method, even if similar terms are used to identify such
measure.
Adjusted EBITDA provides us with an understanding of the results
from the primary operations of our business by excluding the
effects of certain gains, losses or other charges that do not
reflect the normal earnings of our core operations or that may not
be indicative of our future outlook and prospects. Internally,
Adjusted EBITDA is used by management for various purposes,
including to evaluate our operating performance and operational
strategies, as a basis for strategic planning and forecasting, and
for compensation purposes.
Adjusted EBITDA does not represent and should not be considered
as a substitute for net income or net income attributable to FXCM
Inc., each as determined in accordance with U.S. GAAP.
Adjusted EBITDA reflects the following adjustments to net
income:
1. Compensation Expense/Lucid Minority Interest. 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 income to Lucid members for services provided within
discontinued operations. Adjustments have been made to eliminate
this allocation of Lucid's earnings attributable to non-controlling
members. We believe that this adjustment 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 from
continuing operations as reported by the Company.
2. Regulatory and Legal Costs. Adjustments have been made to
eliminate certain costs or recoveries (including client
reimbursements, regulatory fines and settlements from lawsuits)
associated with ongoing discussions and settling certain regulatory
and legal matters. Given the nature of these expenses, they are not
viewed by management as expenses incurred in the ordinary course of
business and we believe it is useful to show the effects of
eliminating these expenses.
3. SNB Costs. Adjustments have been made to eliminate certain
costs/income (including the net losses associated with client debit
balances, gains/losses on the derivative liabilities related to the
Letter and Credit Agreements, costs related to the implementation
of a Stockholder Rights Plan, professional costs, adjustments to
the Company's tax receivable agreement contingent liability and
insurance recoveries) associated with the January 15, 2015 SNB
event. Given the nature of these expenses, they are not viewed by
management as expenses incurred in the ordinary course of business
and we believe it is useful to show the effects of eliminating
these expenses.
4. Cybersecurity Incident. Adjustments have been made to
eliminate certain costs/income related to investigative and other
professional services, costs of communications with customers,
remediation activities associated with the incident and insurance
recoveries. Given the nature of these expenses, we believe it is
useful to show the effects of eliminating these expenses.
5. Discontinued Operations. Adjustments have been made to
eliminate the impact of goodwill and held for sale asset
impairments, gains or losses from completed asset sales and a gain
related to the disposition of an equity method investment. Given
the nature of these items, they are not viewed by management as
activity in the ordinary course of business and we believe it is
useful to show the effect of eliminating these items.
6. Provision for debt forgiveness. An adjustment has been made
to eliminate the provision recorded against a notes receivable from
the non-controlling members of Lucid that will not be required to
be repaid and has been forgiven. Given the atypical nature of this
expense for us, we believe it is useful to show the effect of
eliminating this expense.
A-3
(Unaudited) |
Reconciliation of U.S. GAAP Net Income (Loss)
to Adjusted EBITDA |
|
Three Months Ended June 30, |
|
|
2016 |
|
|
|
2015 |
|
|
Continuing Ops |
Disc Ops |
Combined |
|
Continuing Ops |
Disc Ops |
Combined |
Net income
(loss) |
$ |
89,021 |
|
$ |
(518 |
) |
$ |
88,503 |
|
|
$ |
(156,892 |
) |
$ |
5,665 |
|
$ |
(151,227 |
) |
Adjustments: |
|
|
|
|
|
|
|
Allocation of net income to Lucid
members for services provided(1) |
|
- |
|
|
1,360 |
|
|
1,360 |
|
|
|
- |
|
|
1,981 |
|
|
1,981 |
|
General and administrative(2) |
|
9,013 |
|
|
513 |
|
|
9,526 |
|
|
|
1,198 |
|
|
- |
|
|
1,198 |
|
Bad debt (recovery) expense(3) |
|
(141 |
) |
|
- |
|
|
(141 |
) |
|
|
388 |
|
|
- |
|
|
388 |
|
Depreciation and amortization |
|
6,949 |
|
|
- |
|
|
6,949 |
|
|
|
6,800 |
|
|
- |
|
|
6,800 |
|
Goodwill and held for sale
impairments |
|
- |
|
|
486 |
|
|
486 |
|
|
|
- |
|
|
2,300 |
|
|
2,300 |
|
(Gain) loss on derivative
liabilities - Letter & Credit Agreement |
|
(116,529 |
) |
|
- |
|
|
(116,529 |
) |
|
|
99,867 |
|
|
- |
|
|
99,867 |
|
Interest on borrowings |
|
21,202 |
|
|
- |
|
|
21,202 |
|
|
|
44,291 |
|
|
- |
|
|
44,291 |
|
Income tax (benefit) provision |
|
(439 |
) |
|
- |
|
|
(439 |
) |
|
|
1,559 |
|
|
727 |
|
|
2,286 |
|
Gain on completed dispositions |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(1,978 |
) |
|
(1,978 |
) |
Total
adjustments |
|
(79,945 |
) |
|
2,359 |
|
|
(77,586 |
) |
|
|
154,103 |
|
|
3,030 |
|
|
157,133 |
|
Adjusted
EBITDA |
$ |
9,076 |
|
$ |
1,841 |
|
$ |
10,917 |
|
|
$ |
(2,789 |
) |
$ |
8,695 |
|
$ |
5,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the elimination of the 49.9% of Lucid's earnings
allocated among the non-controlling interests recorded as
compensation for U.S. GAAP purposes included in discontinued
operations.
(2) Represents the provision for debt forgiveness of $8.2
million against the notes receivable from the non-controlling
members of Lucid, $1.8 million of legal and other professional
fees, including fees related to the Leucadia debt restructuring,
partially offset by $1.0 million of insurance recoveries to
reimburse for costs incurred related to the January 15, 2015 SNB
event and the cybersecurity incident, which is included in
continuing operations in the three months ended June 30, 2016, and
expense of $0.5 million included in discontinued operations in the
three months ended June 30, 2016 related to pre-August 2010 trade
execution practices and other regulatory fees and fines. For the
three months ended June 30, 2015, represents $1.2 million of legal
fees resulting from the SNB event.
(3) Represents the net bad debt (recovery) expense related to
client debit balances associated with the January 15, 2015 SNB
event.
(Unaudited) |
Reconciliation of U.S. GAAP Net Income (Loss)
to Adjusted EBITDA |
|
Six Months Ended June 30, |
|
|
2016 |
|
|
|
2015 |
|
|
Continuing Ops |
Disc Ops |
Combined |
|
Continuing Ops |
Disc Ops |
Combined |
Net income
(loss) |
$ |
179,265 |
|
$ |
(31,586 |
) |
$ |
147,679 |
|
|
$ |
(786,288 |
) |
$ |
(92,933 |
) |
$ |
(879,221 |
) |
Adjustments: |
|
|
|
|
|
|
|
- |
|
Net Revenues(1) |
|
44 |
|
|
- |
|
|
44 |
|
|
|
(145,224 |
) |
|
- |
|
|
(145,224 |
) |
Allocation of net income to Lucid
members for services provided(2) |
|
- |
|
|
2,561 |
|
|
2,561 |
|
|
|
- |
|
|
4,667 |
|
|
4,667 |
|
General and administrative(3) |
|
10,499 |
|
|
513 |
|
|
11,012 |
|
|
|
3,035 |
|
|
- |
|
|
3,035 |
|
Bad debt (recovery) expense(4) |
|
(141 |
) |
|
- |
|
|
(141 |
) |
|
|
257,303 |
|
|
8,408 |
|
|
265,711 |
|
Depreciation and amortization |
|
14,193 |
|
|
- |
|
|
14,193 |
|
|
|
13,820 |
|
|
12,359 |
|
|
26,179 |
|
Goodwill and held for sale
impairments |
|
- |
|
|
31,997 |
|
|
31,997 |
|
|
|
9,513 |
|
|
83,664 |
|
|
93,177 |
|
(Gain) loss on derivative
liabilities - Letter & Credit Agreement |
|
(227,360 |
) |
|
- |
|
|
(227,360 |
) |
|
|
392,296 |
|
|
- |
|
|
392,296 |
|
Gain on disposition of equity
method investment(5) |
|
- |
|
|
(679 |
) |
|
(679 |
) |
|
|
- |
|
|
- |
|
|
- |
|
Interest on borrowings |
|
41,755 |
|
|
- |
|
|
41,755 |
|
|
|
74,850 |
|
|
- |
|
|
74,850 |
|
Income tax provision |
|
143 |
|
|
- |
|
|
143 |
|
|
|
181,321 |
|
|
5,627 |
|
|
186,948 |
|
Gain on completed dispositions |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(1,978 |
) |
|
(1,978 |
) |
Total
adjustments |
|
(160,867 |
) |
|
34,392 |
|
|
(126,475 |
) |
|
|
786,914 |
|
|
112,747 |
|
|
899,661 |
|
Adjusted
EBITDA |
$ |
18,398 |
|
$ |
2,806 |
|
$ |
21,204 |
|
|
$ |
626 |
|
$ |
19,814 |
|
$ |
20,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents a $0.1 million charge in the three months ended
March 31, 2016 for tax receivable agreement payments and the
elimination of a $145.2 million noncash benefit in the three months
ended March 31, 2015 attributable to the reduction of our tax
receivable agreement contingent liability to zero.
(2) Represents the elimination of the 49.9% of Lucid’s earnings
allocated among the non-controlling interests recorded as
compensation for U.S. GAAP purposes included in discontinued
operations.
(3) Represents the provision for debt forgiveness of $8.2
million against the notes receivable from the non-controlling
members of Lucid, $3.2 million of legal and other professional
fees, including fees related to the Leucadia debt restructuring and
other professional fees related to the Stockholder Rights Plan,
partially offset by $1.0 million of insurance recoveries to
reimburse for costs incurred related to the January 15, 2015 SNB
event and the cybersecurity incident, which is included in
continuing operations in the six months ended June 30, 2016, and
expense of $0.5 million included in discontinued operations in the
six months ended June 30, 2016 related to pre-August 2010 trade
execution practices and other regulatory fees and fines. For the
six months ended June 30, 2015, represents $3.0 million of legal
and other professional fees, including legal fees resulting from
the SNB event and professional fees related to the Stockholder
Rights Plan. (4) Represents the net bad debt (recovery) expense
related to client debit balances associated with the January 15,
2015 SNB event.
(5) Represents the gain on the disposition of an equity method
investment related to V3 in the three months ended March 31,
2016.
A-4
Schedule of Cash and Cash Equivalents and Due to/from
Brokers
(Unaudited) |
June 30, 2016 |
|
December 31, 2015 |
|
Continuing Ops |
Disc Ops |
Combined |
|
Continuing Ops |
Disc Ops |
Combined |
Cash & Cash Equivalents |
$ |
208,707 |
|
$ |
13,471 |
|
$ |
222,178 |
|
|
$ |
203,854 |
|
$ |
10,786 |
|
$ |
214,640 |
|
Due From Brokers |
|
2,071 |
|
|
18,550 |
|
|
20,621 |
|
|
|
3,781 |
|
|
22,234 |
|
|
26,015 |
|
Due to Brokers |
|
(12,176 |
) |
|
(256 |
) |
|
(12,432 |
) |
|
|
(1,073 |
) |
|
- |
|
|
(1,073 |
) |
Operating
Cash |
$ |
198,602 |
|
$ |
31,765 |
|
$ |
230,367 |
|
|
$ |
206,562 |
|
$ |
33,020 |
|
$ |
239,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-5
Contacts
Jaclyn Sales, 646-432-2463
Vice-President, Corporate Communications and Investor Relations
jsales@fxcm.com
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