UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event
Reported): November 6, 2014
FXCM Inc.
(Exact Name of Registrant as Specified in
its Charter)
| Delaware |
|
001-34986 |
|
27-3268672 |
| (State or Other Jurisdiction of |
|
(Commission File Number) |
|
(IRS Employer |
| Incorporation) |
|
|
|
Identification No.) |
55 Water Street, FL 50 New York, NY,
10041
(Address of Principal Executive Offices)
(Zip Code)
(646) 432-2986
(Registrant’s
Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed
Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| o |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| o |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| o |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and
Financial Condition
On November 6, 2014, FXCM Inc. (“the Company”) issued
a press release announcing financial results for its third quarter ended September 30, 2014. The Company also released its monthly
business metrics for October 2014. A copy of this press release is furnished as Exhibit 99.1 to this Form 8-K and is
hereby incorporated by reference in this Item 2.02.
The information in this Current Report on Form 8-K and the Exhibit
attached hereto is furnished pursuant to the rules and regulations of the Securities and Exchange Commission and shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 7.01 Regulation FD Disclosure
The information set forth under Item 2.02, “Results of
Operations and Financial Condition”, is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
| (a) |
Financial statements of businesses acquired: None |
| (b) |
Pro forma financial information: None |
| (c) |
Shell company transactions: None |
| (d) |
Exhibits: Press release, dated November 6, 2014 issued by FXCM Inc. |
| Exhibit No. |
Exhibit Description |
| |
|
| 99.1** |
Press Release dated November 6, 2014 |
| |
|
** Furnished herewith.
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
| |
FXCM INC. |
| |
|
| |
By: |
/s/Robert Lande |
| |
|
Name: |
Robert Lande |
| |
|
Title: |
Chief Financial Officer |
Date: November 6, 2014
Exhibit Index
| Exhibit No. |
Description |
| |
|
| 99.1 |
Press Release dated as of November 6, 2014 |
Exhibit 99.1
FXCM Inc. Announces Third Quarter 2014
Results
Releases October 2014 Operating Metrics
Record Month of Retail and Institutional
Volume
Third Quarter 2014 Highlights:
| · | U.S. GAAP revenues of $116.1 million, up 3% versus the same period
in 2013 and 19% from the second quarter 2014 |
| · | U.S. GAAP net income attributable to FXCM Inc. of $2.4 million or
$0.05 per fully diluted share versus a loss of $0.15 per fully diluted share for the same period in 2013 and a loss of $0.08 per
fully diluted share in the second quarter 2014 |
| · | Adjusted EBITDA of $28.4 million, down 14% versus the same period
in 2013 and up 112% from the second quarter 2014 |
| · | Net income on an adjusted basis of $8.4 million or $0.11 per fully
exchanged, fully diluted share down 13% and 15% respectively versus the same period in 2013 and versus a loss of $1.5 million or
$0.02 per share in the second quarter 2014 |
| · | Adding back tax-effected amortization and stock based compensation,
net income on an adjusted basis would have been $0.17 per share for the quarter |
| · | Strong growth in client equity to $1.33 billion - up 12% year-to-date
and up 2% from June 30, 2014 |
October 2014 Operating Metrics Highlights:
| · | Retail customer trading volume of $509 billion, 62% higher than October
2013 and a record for FXCM |
| · | Institutional customer trading volume of $393 billion, 123% higher
than October 2013 and a record for FXCM |
NEW YORK – November 6, 2014 – FXCM
Inc. (NYSE:FXCM), a leading online provider of foreign exchange, or FX, trading and related services, today announced for
the quarter ended September 30, 2014, U.S. GAAP revenues of $116.1 million, compared to $113.2 million for the quarter ended September
30, 2013, an increase of 3%. U.S. GAAP net income attributable to FXCM Inc. was $2.4 million for the Third Quarter 2014 or $0.05
per diluted share, compared to U.S. GAAP net loss of $5.1 million or $0.15 per diluted share for the Third Quarter 2013.
For the nine months ended September 30, 2014, U.S. GAAP revenues
were $329.1 million, compared to $376.2 million for the nine months ended September 30, 2013, a decrease of 13%. U.S. GAAP net
income attributable to FXCM Inc. was $1.4 million for the nine months ended September 30, 2014 or $0.03 per diluted share, compared
to U.S. GAAP net income of $11.9 million or $0.37 per diluted share for the nine months ended September 30, 2013, a decrease of
88% and 92% respectively.
“At the beginning of this quarter, volatility in the currency
markets hit all-time lows but conditions notably improved in September,” said Drew Niv, Chief Executive Officer. “The
improvement continued into October and we are pleased to announce that October is our second consecutive month of record retail
and institutional volumes.”
“With our client equity increasing by 12% year-to-date
to over $1.3 billion and with overwhelming positive feedback from clients on our new retail forex pricing model which we recently
announced,” continued Niv, “we believe we are well positioned for the future even if trading conditions were to moderate.”
Adjusted EBITDA for the Third Quarter 2014 was $28.4 million,
compared to $33.0 million for the Third Quarter 2013, a decrease of 14%. Net income on an adjusted basis was $8.4 million or $0.11
per diluted, fully exchanged share for the Third Quarter 2014, compared to Net income on an adjusted basis of $9.7 million or $0.13
per diluted, fully exchanged share for the Third Quarter 2013, a decrease of 13% and 15% respectively.
Adjusted EBITDA for the nine months ended September 30, 2014
was $66.5 million, compared to $131.2 million for the nine months ended September 30, 2013, a decrease of 49%. Net income on an
adjusted basis was $12.1 million or $0.15 per diluted, fully exchanged share for the nine months ended September 30, 2014, compared
to $50.5 million or $0.66 per diluted, fully exchanged share for the nine months ended September 30, 2013, a decrease of 76% and
77% respectively.
Adjusted EBITDA, Net income on an adjusted basis and Net income
on an adjusted basis per diluted, fully exchanged 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 U.S. GAAP, and our calculations of these
measures may not be comparable to similarly entitled measures reported by other companies. See “Non-GAAP Financial Measures”
beginning on A-3 of this release for additional information regarding these Non-GAAP financial measures and for reconciliations
of such measures to the most directly comparable measures calculated in accordance with U.S. GAAP.
FXCM Inc. today announced certain key operating metrics for
October 2014 for its retail and institutional foreign exchange businesses. Monthly activities included:
October 2014 Operating Metrics
Retail Trading Metrics
| · | Retail customer trading volume(1) of $509 billion in October
2014, 23% higher than September 2014 and 62% higher than October 2013. |
| · | Average retail customer trading volume(1) per day of $22.1
billion in October 2014, 18% higher than September 2014 and 61% higher than October 2013. |
| · | An average of 584,080 retail client trades per day in October 2014,
21% higher than September 2014 and 54% higher than October 2013. |
| · | Tradeable accounts(2) of 220,180 as of October 31, 2014,
an increase of 8,161, or 4%, from September 2014, and an increase of 31,366,or 17%, from October 2013. |
Institutional Trading Metrics
| · | Institutional customer trading volume(1) of $393 billion
in October 2014, 9% higher than September 2014 and 123% higher than October 2013. |
| · | Average institutional trading volume(1) per day of $17.1
billion in October 2014, 4% higher than September 2014 and 122% higher than October 2013. |
| · | An average of 41,098 institutional client trades per day in October
2014, 4% higher than September 2014 and 41% higher than October 2013. |
More information, including historical results for each of the
above metrics, can be found on the investor relations page of the Company's corporate website www.fxcm.com.
This operating data is preliminary and subject to revision and
should not be taken as an indication of the financial performance of FXCM Inc. FXCM undertakes no obligation to publicly update
or review previously reported operating data. Any updates to previously reported operating data will be reflected in the historical
operating data that can be found on the Investor Relations page of the Company’s corporate website www.fxcm.com.
(1) Volume that FXCM customers traded in period
is translated into US dollars.
(2) A Tradeable Account is an account with sufficient
funds to place a trade in accordance with FXCM trading policies.
Selected Operating Metrics
| | |
(Unaudited) | |
| | |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| | |
2014 | | |
2013 | | |
% Change | | |
2014 | | |
2013 | | |
% Change | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Total retail trading volume ($ in billions) | |
$ | 977 | | |
$ | 980 | | |
| 0 | % | |
$ | 2,683 | | |
$ | 3,173 | | |
| -15 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total institutional trading volume ($ in billions) | |
$ | 881 | | |
$ | 576 | | |
| 53 | % | |
$ | 2,023 | | |
$ | 1,507 | | |
| 34 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total active accounts | |
| 184,003 | | |
| 182,146 | | |
| 1 | % | |
| 184,003 | | |
| 182,146 | | |
| 1 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Trading days in period | |
| 66 | | |
| 66 | | |
| 0 | % | |
| 194 | | |
| 194 | | |
| 0 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Daily average retail trades | |
| 406,190 | | |
| 417,845 | | |
| -3 | % | |
| 389,478 | | |
| 457,620 | | |
| -15 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Daily average trades per active account | |
| 2.2 | | |
| 2.3 | | |
| -4 | % | |
| 2.1 | | |
| 2.5 | | |
| -16 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Retail trading revenue per million traded | |
$ | 90 | | |
$ | 89 | | |
| 1 | % | |
$ | 91 | | |
$ | 89 | | |
| 2 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total customer equity ($ in millions) | |
$ | 1,332 | | |
$ | 1,264 | | |
| 5 | % | |
$ | 1,332 | | |
$ | 1,264 | | |
| 5 | % |
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 December
31, 2014 to Class A stockholders of record at the close of business on December 19, 2014.
Share Repurchase Program
FXCM Inc. today announced that its board of directors increased
its share repurchase program from $80 million to $130 million of its Class A common stock and/or FXCM Holdings, LLC units. Under
this program, shares may be repurchased from time to time in open market transactions, in privately negotiated transactions or
otherwise. This leaves approximately $67.4 million under the plan for future purchases, given the shares the company has already
acquired to date.
Conference Call
As previously announced, the Company will host a conference
call to discuss the results at 4:45 p.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 19312585.
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.
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
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.
Contacts
For Media:
FXCM Inc.
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 and Nine Months Ended September 30, 2014 and 2013 |
|
A-1 |
| Unaudited U.S. GAAP Condensed Consolidated Statements of Financial Condition As of September 30, 2014 and December 31, 2013 |
|
A-2 |
| |
|
|
| Non-GAAP Financial Measures |
|
A-3 |
| Reconciliation of U.S. GAAP Reported to Non-GAAP Adjusted Financial Measures |
|
A-5 |
| Reconciliation of Non-GAAP Adjusted Net Income to EBITDA |
|
A-8 |
| Reconciliation of Non-GAAP Measures to Non-GAAP Adjusted Net Income Excluding Other Stock Compensation and Amortization |
|
A-9 |
| FXCM Inc. | |
| | |
| | |
| |
| Condensed Consolidated Statements of Operations | |
| | |
| | |
| |
| (In thousands, except per share amounts) | |
| | |
| | |
| |
| (Unaudited) | |
| | |
| | |
| |
| | |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| Revenues | |
| | | |
| | | |
| | | |
| | |
| Retail trading revenue | |
$ | 87,826 | | |
$ | 86,974 | | |
$ | 244,222 | | |
$ | 282,296 | |
| Institutional trading revenue | |
| 24,417 | | |
| 22,856 | | |
| 72,354 | | |
| 82,204 | |
| Trading revenue | |
| 112,243 | | |
| 109,830 | | |
| 316,576 | | |
| 364,500 | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest income | |
| 637 | | |
| 537 | | |
| 1,893 | | |
| 1,886 | |
| Brokerage interest expense | |
| (199 | ) | |
| (63 | ) | |
| (459 | ) | |
| (187 | ) |
| Net interest income | |
| 438 | | |
| 474 | | |
| 1,434 | | |
| 1,699 | |
| | |
| | | |
| | | |
| | | |
| | |
| Other income | |
| 3,466 | | |
| 2,944 | | |
| 11,072 | | |
| 10,046 | |
| Total net revenues | |
| 116,147 | | |
| 113,248 | | |
| 329,082 | | |
| 376,245 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating Expenses | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Compensation and benefits | |
| 27,572 | | |
| 28,809 | | |
| 86,283 | | |
| 78,929 | |
| Allocation of net income to Lucid members for services provided | |
| 1,483 | | |
| 2,996 | | |
| 6,771 | | |
| 18,000 | |
| Total compensation and benefits | |
| 29,055 | | |
| 31,805 | | |
| 93,054 | | |
| 96,929 | |
| Referring broker fees | |
| 20,998 | | |
| 20,709 | | |
| 56,615 | | |
| 64,481 | |
| Advertising and marketing | |
| 5,071 | | |
| 6,305 | | |
| 18,652 | | |
| 19,813 | |
| Communication and technology | |
| 13,434 | | |
| 10,111 | | |
| 37,684 | | |
| 28,231 | |
| Trading costs, prime brokerage and clearing fees | |
| 8,021 | | |
| 6,809 | | |
| 24,257 | | |
| 23,708 | |
| General and administrative | |
| 17,219 | | |
| 27,949 | | |
| 48,898 | | |
| 53,843 | |
| Depreciation and amortization | |
| 15,041 | | |
| 12,849 | | |
| 40,793 | | |
| 37,304 | |
| Total operating expenses | |
| 108,839 | | |
| 116,537 | | |
| 319,953 | | |
| 324,309 | |
| Total operating income (loss) | |
| 7,308 | | |
| (3,289 | ) | |
| 9,129 | | |
| 51,936 | |
| Other Expense | |
| | | |
| | | |
| | | |
| | |
| Loss on equity method investments, net | |
| 376 | | |
| 183 | | |
| 910 | | |
| 728 | |
| Interest on borrowings | |
| 3,028 | | |
| 2,869 | | |
| 9,121 | | |
| 4,976 | |
| Income (loss) before income taxes | |
| 3,904 | | |
| (6,341 | ) | |
| (902 | ) | |
| 46,232 | |
| Income tax provision | |
| 1,144 | | |
| 2,444 | | |
| 1,648 | | |
| 16,793 | |
| Net income (loss) | |
| 2,760 | | |
| (8,785 | ) | |
| (2,550 | ) | |
| 29,439 | |
Net income (loss) attributable to non-controlling interest in
FXCM Holdings, LLC | |
| 1,538 | | |
| (3,133 | ) | |
| 1,756 | | |
| 21,190 | |
Net loss attributable to other non-controlling
interests | |
| (1,170 | ) | |
| (530 | ) | |
| (5,697 | ) | |
| (3,613 | ) |
| Net income (loss) attributable to FXCM Inc. | |
$ | 2,392 | | |
$ | (5,122 | ) | |
$ | 1,391 | | |
$ | 11,862 | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average Class A shares outstanding - Basic | |
| 42,963 | | |
| 33,718 | | |
| 40,108 | | |
| 30,983 | |
| Weighted average Class A shares outstanding - Diluted | |
| 43,819 | | |
| 34,469 | | |
| 42,367 | | |
| 32,009 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net lncome (loss) per Class A Share | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | 0.06 | | |
$ | (0.15 | ) | |
$ | 0.03 | | |
$ | 0.38 | |
| Diluted | |
$ | 0.05 | | |
$ | (0.15 | ) | |
$ | 0.03 | | |
$ | 0.37 | |
| FXCM Inc. | |
| | |
| |
| Condensed Consolidated Statements of Financial Condition | |
| | |
| |
| As of September 30, 2014 and December 31, 2013 | |
| | |
| |
| (Amounts in thousands except share data) | |
| | |
| |
| | |
(Unaudited) | | |
| |
| | |
September 30, | | |
December 31, | |
| |
| |
2014 | | |
2013 | |
| | |
| | | |
| | |
| Assets | |
| | | |
| | |
| | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 326,730 | | |
$ | 365,245 | |
| Cash and cash equivalents, held for customers | |
| 1,332,399 | | |
| 1,190,880 | |
| Restricted time deposits | |
| 3,648 | | |
| - | |
| Trading securities | |
| 633 | | |
| - | |
| Due from brokers | |
| 32,960 | | |
| 5,450 | |
| Accounts receivable and other receivables, net | |
| 20,344 | | |
| 19,806 | |
| Deferred tax asset | |
| 5,215 | | |
| 11,910 | |
| Total current assets | |
| 1,721,929 | | |
| 1,593,291 | |
| | |
| | | |
| | |
| Restricted time deposits | |
| 5,472 | | |
| - | |
| Deferred tax asset | |
| 174,309 | | |
| 166,576 | |
| Office, communication and computer equipment, net | |
| 48,438 | | |
| 49,165 | |
| Goodwill | |
| 326,100 | | |
| 307,936 | |
| Other intangible assets, net | |
| 66,224 | | |
| 76,713 | |
| Notes receivable | |
| 9,608 | | |
| 5,950 | |
| Other assets | |
| 32,329 | | |
| 24,316 | |
| Total assets | |
$ | 2,384,409 | | |
$ | 2,223,947 | |
| | |
| | | |
| | |
| Liabilities and Equity | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Customer account liabilities | |
$ | 1,332,399 | | |
$ | 1,190,880 | |
| Accounts payable and accrued expenses | |
| 56,773 | | |
| 69,697 | |
| Credit agreement | |
| 30,000 | | |
| - | |
| Notes payable | |
| 7,460 | | |
| 9,800 | |
| Due to brokers | |
| 916 | | |
| 8,652 | |
| Securities sold, not yet purchased | |
| 3,815 | | |
| - | |
| Deferred tax liability | |
| 218 | | |
| - | |
| Due to related parties pursuant to tax receivable agreement | |
| 20,276 | | |
| 18,588 | |
| Total current liabilities | |
| 1,451,857 | | |
| 1,297,617 | |
| Deferred tax liability | |
| 3,078 | | |
| 3,687 | |
| Due to related parties pursuant to tax receivable agreement | |
| 131,562 | | |
| 131,670 | |
| Senior convertible notes | |
| 150,236 | | |
| 146,303 | |
| Other liabilities | |
| 6,052 | | |
| 9,289 | |
| Total liabilities | |
| 1,742,785 | | |
| 1,588,566 | |
| | |
| | | |
| | |
| Commitments and Contingencies | |
| | | |
| | |
| | |
| | | |
| | |
| Stockholders' Equity | |
| | | |
| | |
| Class A common stock, par value $0.01 per share; | |
| 462 | | |
| 447 | |
| 3,000,000,000 shares authorized, 46,204,590 and 44,664,884 shares issued | |
| | | |
| | |
| and outstanding as of September 30, 2014 and December 31, 2013, respectively | |
| | | |
| | |
| Class B common stock, par value $0.01 per share; | |
| 1 | | |
| 1 | |
| 1,000,000 shares authorized, 34 and 41 shares issued and outstanding | |
| | | |
| | |
| as of September 30, 2014 and December 31, 2013, respectively | |
| | | |
| | |
| Additional paid-in capital | |
| 260,231 | | |
| 245,426 | |
| Retained earnings | |
| 9,485 | | |
| 16,352 | |
| Accumulated other comprehensive loss | |
| (7,487 | ) | |
| (5,344 | ) |
| Total stockholders' equity, FXCM Inc. | |
| 262,692 | | |
| 256,882 | |
| Non-controlling interests | |
| 378,932 | | |
| 378,499 | |
| Total stockholders' equity | |
| 641,624 | | |
| 635,381 | |
| Total liabilities and stockholders' equity | |
$ | 2,384,409 | | |
$ | 2,223,947 | |
Non-GAAP Financial Measures
We use Non-GAAP financial measures to evaluate
our operating performance, as well as the performance of individual employees. Management believes that the disclosed Non-GAAP
measures 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. 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 U.S. GAAP, and our calculations of these measures
may not be comparable to similarly entitled measures reported by other companies.
Adjusted Non-GAAP results begin with information
prepared in accordance with U.S. GAAP, adjusted to exclude certain items and reflects the conversion of all units of Holdings for
shares of Class A common stock of FXCM Inc. 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 Non-GAAP and U.S. GAAP results
are as follows:
| 1. | Assumed Exchange of Units of Holdings for FXCM Inc. Class A Shares. As a result of the exchange of 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 Holdings units. |
| 2. | Compensation Expense. Adjustments have been made to eliminate expense relating to stock based compensation relating
to the Company’s IPO as well as costs associated with the acquisition of V3 Markets, LLC. 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 reclassify this allocation
of Lucid's earnings attributable to non-controlling members to “Net (loss) 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 the Company. |
| 4. | Acquisition Costs/Income. Adjustments have been made 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 eliminate certain costs (including client reimbursements)
associated with ongoing discussions and settling certain regulatory matters. 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 IPO, FXCM was organized as a series of limited liability companies and foreign
corporations, and even following the IPO, not all of the Company's income is subject to corporate-level taxes. As a result, adjustments
have been made 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 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 income tax provision reflects the tax effect of any Non-GAAP adjustments. |
| | |
Reconciliation of U.S. GAAP Reported to Non-GAAP Adjusted Financial Measures(1) | |
| | |
Three Months Ended September 30, | |
| | |
2014 | | |
2013 | |
| | |
GAAP Basis As Reported | | |
Non-GAAP Adjustments | | |
Non-GAAP Measures | | |
GAAP Basis As Reported | | |
Non-GAAP Adjustments | | |
Non-GAAP Measures | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Net revenues(2) | |
$ | 116,147 | | |
$ | (360 | ) | |
$ | 115,787 | | |
$ | 113,248 | | |
$ | - | | |
$ | 113,248 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Compensation and benefits(3) | |
$ | 29,055 | | |
$ | (3,715 | ) | |
$ | 25,340 | | |
$ | 31,805 | | |
$ | (8,611 | ) | |
$ | 23,194 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and administrative(4) | |
$ | 17,219 | | |
$ | (3,116 | ) | |
$ | 14,103 | | |
$ | 27,949 | | |
$ | (15,000 | ) | |
$ | 12,949 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation and amortization(5) | |
$ | 15,041 | | |
$ | (1,097 | ) | |
$ | 13,944 | | |
$ | 12,849 | | |
$ | - | | |
$ | 12,849 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total operating income (loss) | |
$ | 7,308 | | |
$ | 7,568 | | |
$ | 14,876 | | |
$ | (3,289 | ) | |
$ | 23,611 | | |
$ | 20,322 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) before income taxes | |
$ | 3,904 | | |
$ | 7,568 | | |
$ | 11,472 | | |
$ | (6,341 | ) | |
$ | 23,611 | | |
$ | 17,270 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income tax provision(6) | |
$ | 1,144 | | |
$ | 1,567 | | |
$ | 2,711 | | |
$ | 2,444 | | |
$ | 2,692 | | |
$ | 5,136 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) | |
$ | 2,760 | | |
$ | 6,001 | | |
$ | 8,761 | | |
$ | (8,785 | ) | |
$ | 20,919 | | |
$ | 12,134 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) attributable to non-controlling interest in FXCM Holdings, LLC(7) | |
$ | 1,538 | | |
$ | (1,538 | ) | |
$ | - | | |
$ | (3,133 | ) | |
$ | 3,133 | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net (loss) income attributable to other non-controlling interests(8) | |
$ | (1,170 | ) | |
$ | 1,483 | | |
$ | 313 | | |
$ | (530 | ) | |
$ | 2,996 | | |
$ | 2,466 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) attributable to FXCM Inc. | |
$ | 2,392 | | |
$ | 6,056 | | |
$ | 8,448 | | |
$ | (5,122 | ) | |
$ | 14,790 | | |
$ | 9,668 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Diluted weighted average shares outstanding as reported and Non-GAAP fully exchanged, fully diluted weighted average shares outstanding(9) | |
| 43,819 | | |
| | | |
| 79,611 | | |
| 34,469 | | |
| | | |
| 76,374 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Diluted net income (loss) per share as reported and adjusted Non-GAAP net income per fully exchanged, fully diluted weighted average shares outstanding | |
$ | 0.05 | | |
$ | 0.06 | | |
$ | 0.11 | | |
$ | (0.15 | ) | |
$ | 0.28 | | |
$ | 0.13 | |
| | |
Reconciliation of U.S. GAAP Reported to Non-GAAP Adjusted Financial Measures(1) | |
| | |
Nine Months Ended September 30, | |
| | |
2014 | | |
2013 | |
| | |
GAAP Basis As Reported | | |
Non-GAAP Adjustments | | |
Non-GAAP Measures | | |
GAAP Basis As Reported | | |
Non-GAAP Adjustments | | |
Non-GAAP Measures | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Net revenues(2) | |
$ | 329,082 | | |
$ | (4,032 | ) | |
$ | 325,050 | | |
$ | 376,245 | | |
$ | - | | |
$ | 376,245 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Compensation and benefits(3) | |
$ | 93,054 | | |
$ | (13,410 | ) | |
$ | 79,644 | | |
$ | 96,929 | | |
$ | (27,736 | ) | |
$ | 69,193 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Communication and technology(10) | |
$ | 37,684 | | |
$ | (206 | ) | |
$ | 37,478 | | |
$ | 28,231 | | |
$ | - | | |
$ | 28,231 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and administrative(4) | |
$ | 48,898 | | |
$ | (7,860 | ) | |
$ | 41,038 | | |
$ | 53,843 | | |
$ | (15,000 | ) | |
$ | 38,843 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation and amortization(5) | |
$ | 40,793 | | |
$ | (1,097 | ) | |
$ | 39,696 | | |
$ | 37,304 | | |
$ | - | | |
$ | 37,304 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total operating income | |
$ | 9,129 | | |
$ | 18,541 | | |
$ | 27,670 | | |
$ | 51,936 | | |
$ | 42,736 | | |
$ | 94,672 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| (Loss) income before income taxes | |
$ | (902 | ) | |
$ | 18,541 | | |
$ | 17,639 | | |
$ | 46,232 | | |
$ | 42,736 | | |
$ | 88,968 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income tax provision(6) | |
$ | 1,648 | | |
$ | 2,516 | | |
$ | 4,164 | | |
$ | 16,793 | | |
$ | 7,303 | | |
$ | 24,096 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net (loss) income | |
$ | (2,550 | ) | |
$ | 16,025 | | |
$ | 13,475 | | |
$ | 29,439 | | |
$ | 35,433 | | |
$ | 64,872 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income attributable to non-controlling interest in FXCM Holdings, LLC(7) | |
$ | 1,756 | | |
$ | (1,756 | ) | |
$ | - | | |
$ | 21,190 | | |
$ | (21,190 | ) | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net (loss) income attributable to other non-controlling interests(8) | |
$ | (5,697 | ) | |
$ | 7,061 | | |
$ | 1,364 | | |
$ | (3,613 | ) | |
$ | 18,000 | | |
$ | 14,387 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income attributable to FXCM Inc. | |
$ | 1,391 | | |
$ | 10,720 | | |
$ | 12,111 | | |
$ | 11,862 | | |
$ | 38,623 | | |
$ | 50,485 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Diluted weighted average shares outstanding as reported and Non-GAAP fully exchanged, fully diluted weighted average shares outstanding(9) | |
| 42,367 | | |
| | | |
| 78,899 | | |
| 32,009 | | |
| | | |
| 75,952 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Diluted net income per share as reported and adjusted Non-GAAP net income per fully exchanged, fully diluted weighted average shares outstanding | |
$ | 0.03 | | |
$ | 0.12 | | |
$ | 0.15 | | |
$ | 0.37 | | |
$ | 0.29 | | |
$ | 0.66 | |
(1) The presentation includes Non-GAAP financial measures. These
Non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles, and do not reflect
all of the amounts associated with the Company's results of operations as determined in accordance with U.S. GAAP.
(2) Represents the elimination of a $0.4 million benefit in Q3 2014 attributable to the remeasurement of our tax receivable agreement
liability to reflect a revised effective tax rate and the elimination of a $3.7 million benefit recorded to reduce the contingent
consideration related to the Faros acquisition.
(3) Represents the elimination of stock-based compensation associated
with the IPO, expense of $3.5 million connected to the termination of an employment contract in Q3 2013, the elimination of V3
acquisition costs in Q1 2014 and 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 (loss) income attributable to other non-controlling interests.
(4) Represents the net expense relating to pre-August 2010 trade
execution practices and other regulatory fees and fines in 2014 & 2013, the charge related to put option payments for Online
Courses in 2014 (Q2 2014 $1.3 million and Q3 2014 $2.3 million) and the elimination of V3 acquisition costs in Q1 2014.
(5) Represents a $1.1 million impairment charge to write down
the value of an electronic foreign exchange trading platform in Q3 2014.
(6) Represents an adjustment to reflect the assumed effective
corporate tax rate of approximately 23.6% and 29.7% for the three months ended September 30, 2014 and 2013, respectively, and 23.6%
and 27.1% for the nine months ended September 30, 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 Non-GAAP 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 (loss) income attributable
to other non-controlling interests and the impact of other Non-GAAP adjustments impacting non-controlling interests.
(9) Assumed exchange of units of Holdings for FXCM Inc. Class
A shares. As a result of the exchange of Holdings units, the non-controlling interest related to these units is converted to controlling
interest.
(10) Represents the elimination of V3 acquisition costs in Q1
2014. A-4
| FXCM Inc. | |
| | |
| | |
| | |
| |
| Reconciliation of Non GAAP Adjusted Net Income to EBITDA | |
| | |
| | |
| | |
| |
| (In thousands) | |
| | |
| | |
| | |
| |
| (Unaudited ) | |
| | |
| | |
| | |
| |
| | |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| Non-GAAP adjusted net income | |
$ | 8,448 | | |
$ | 9,668 | | |
$ | 12,111 | | |
$ | 50,485 | |
| Depreciation and amortization | |
| 13,944 | | |
| 12,849 | | |
| 39,696 | | |
| 37,304 | |
| Interest on borrowings | |
| 3,028 | | |
| 2,869 | | |
| 9,121 | | |
| 4,976 | |
| Income tax provision | |
| 2,711 | | |
| 5,136 | | |
| 4,164 | | |
| 24,096 | |
| Net income attributable to other non-controlling interests | |
| 313 | | |
| 2,466 | | |
| 1,364 | | |
| 14,387 | |
| EBITDA | |
$ | 28,444 | | |
$ | 32,988 | | |
$ | 66,456 | | |
$ | 131,248 | |
| FXCM Inc. | |
| | |
| | |
| | |
| |
| Reconciliation of Non-GAAP Measures to Non GAAP Adjusted Net Income Excluding Other Stock Compensation and Amortization | |
| | |
| | |
| | |
| |
| (In thousands) | |
| | |
| | |
| | |
| |
| (Unaudited ) | |
| | |
| | |
| | |
| |
| | |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| | |
| | |
| | |
| | |
| |
| Non-GAAP adjusted net income | |
$ | 8,448 | | |
$ | 9,668 | | |
$ | 12,111 | | |
$ | 50,485 | |
| All other stock compensation | |
| 1,303 | | |
| 1,263 | | |
| 3,869 | | |
| 3,661 | |
| Amortization of intangibles | |
| 7,559 | | |
| 7,000 | | |
| 21,927 | | |
| 20,996 | |
| Amortization of debt discount | |
| 1,335 | | |
| 1,254 | | |
| 3,933 | | |
| 1,644 | |
| Non-Controlling interest adjustment related to the above adjustments | |
| (3,358 | ) | |
| (3,053 | ) | |
| (9,999 | ) | |
| (9,111 | ) |
| Tax adjustments related to the above | |
| (1,522 | )(1) | |
| (1,811 | )(1) | |
| (4,550 | )(1) | |
| (4,463 | )(1) |
| Non-GAAP adjusted net income excluding other stock compensation and amortization | |
$ | 13,765 | | |
$ | 14,321 | | |
$ | 27,291 | | |
$ | 63,212 | |
| | |
| | | |
| | | |
| | | |
| | |
| GAAP Weighted average Class A shares outstanding - Diluted | |
| 43,819 | | |
| 34,469 | | |
| 42,367 | | |
| 32,009 | |
| FXCM Holdings Conversion | |
| 35,792 | (2) | |
| 41,905 | (2) | |
| 36,532 | (2) | |
| 43,943 | (2) |
| Non-GAAP Weighted average shares outstanding - Diluted | |
| 79,611 | | |
| 76,374 | | |
| 78,899 | | |
| 75,952 | |
| | |
| | | |
| | | |
| | | |
| | |
| Non-GAAP adjusted net income per Adjusted Non GAAP share - diluted | |
$ | 0.11 | | |
$ | 0.13 | | |
$ | 0.15 | | |
$ | 0.66 | |
| Non-GAAP Adjusted Net Income excluding other stock compensation and amortization per Adjusted Non GAAP Share - Diluted | |
$ | 0.17 | | |
$ | 0.19 | | |
$ | 0.35 | | |
$ | 0.83 | |
(1) Represents an adjustment to reflect the assumed effective
corporate tax rate of approximately 23.6% and 29.7% for the three months ended September 30, 2014 and 2013, respectively, and 23.6%
and 27.1% for the nine months ended September 30, 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 Non GAAP adjustments.
(2) Diluted shares assuming all unitholders had fully exchanged
their Holdings units for shares of Class A common stock of the Company.
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