Third Quarter 2016 Highlights:
FXCM Inc. (NASDAQ:FXCM), a leading online provider of foreign
exchange, or FX, trading and related services, today announced for
the quarter ended September 30, 2016, U.S. GAAP trading revenue
from continuing operations of $57.8 million, compared to $56.2
million for the quarter ended September 30, 2015. U.S. GAAP net
loss attributable to FXCM Inc. from continuing operations was $35.8
million (including a $27.0 million net loss on derivative
liabilities) for the quarter ended September 30, 2016, or $6.39 per
diluted share, compared to U.S. GAAP net income attributable to
FXCM Inc. from continuing operations of $64.3 million (including a
$137.6 million net gain on derivative liabilities), or $12.10 per
diluted share, for the quarter ended September 30, 2015.
For the nine months ended September 30, 2016, U.S.
GAAP trading revenue from continuing operations was $196.6 million,
compared to $184.7 million for the nine months ended September 30,
2015. U.S. GAAP net income attributable to FXCM Inc. from
continuing operations was $85.9 million for the nine months ended
September 30, 2016, or $15.34 per diluted share, compared to U.S.
GAAP net loss attributable to FXCM Inc. from continuing operations
of $427.9 million, or $86.13 per diluted share, for the nine months
ended September 30, 2015. These results include a $200.4
million net gain on derivative liabilities for the nine months
ended September 30, 2016 and a $254.7 million net loss on
derivative liabilities for the nine months ended September 30,
2015.
The net loss/gain on derivative liabilities
consists of non-cash changes in the value of embedded derivatives
associated with the Leucadia Letter and Credit Agreements (as
described further below). 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.
On September 1, 2016 we completed the restructuring
of the financing arrangements with Leucadia (the “Leucadia
Restructuring Transaction”). We amended the terms of the Amended
and Restated Credit Agreement (the "Credit Agreement") and replaced
the Amended and Restated Letter Agreement (the "Letter Agreement")
with a new Limited Liability Company Agreement. The
restructuring deepens the partnership with Leucadia and provides
Leucadia with a membership interest in our operating entity, FXCM
Group, LLC.
U.S. GAAP trading revenue from discontinued
operations for the quarter ended September 30, 2016 was $8.8
million, compared to $13.4 million for the quarter ended September
30, 2015. U.S. GAAP net loss attributable to FXCM Inc. from
discontinued operations was $3.3 million for the quarter ended
September 30, 2016, or $0.59 per diluted share, compared to U.S.
GAAP net income attributable to FXCM Inc. from discontinued
operations of $9.3 million, or $1.76 per diluted share, for the
quarter ended September 30, 2015.
U.S. GAAP trading revenue from discontinued
operations for the nine months ended September 30, 2016 was $22.6
million, compared to $60.2 million for the nine months ended
September 30, 2015. U.S. GAAP net loss attributable to FXCM
Inc. from discontinued operations was $14.9 million for the nine
months ended September 30, 2016, or $2.67 per diluted share,
compared to U.S. GAAP net loss attributable to FXCM Inc. from
discontinued operations of $21.1 million, or $4.24 per diluted
share, for the nine months ended September 30, 2015.
For the nine months ended September 30, 2016,
operating expenses include a $2.3 million settlement of a
longstanding legal matter.
Adjusted EBITDA from continuing and discontinued
operations was $6.4 million for the quarter ended September 30,
2016 compared to $5.2 million for the quarter ended September 30,
2015.
Adjusted EBITDA from continuing and discontinued
operations was $27.6 million for the nine months ended September
30, 2016 compared to $25.6 million for the nine months ended
September 30, 2015.
Adjusted EBITDA from continuing operations was $2.1
million for the quarter ended September 30, 2016 compared to a loss
of $1.3 million for the quarter ended September 30, 2015.
Adjusted EBITDA from continuing operations was
$20.5 million for the nine months ended September 30, 2016 compared
to a loss of $0.7 million for the nine months ended September 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 October 2016. Monthly activities included:
October 2016 Customer Trading Metrics from
Continuing Operations (1)
Retail Customer Trading
Metrics
- Retail customer trading volume(2) of $305 billion in October
2016, 6% lower than September 2016 and 9% lower than October
2015.
- Average retail customer trading volume(2) per day of $14.5
billion in October 2016, 1% lower than September 2016 and 5% lower
than October 2015.
- An average of 538,098 retail client trades per day in October
2016, 4% lower than September 2016 and 5% higher than October
2015.
- Active accounts(3) of 177,949 as of October 31, 2016, an
increase of 131, or 0.1%, from September 30, 2016, and a decrease
of 324, or 0.2%, from October 31, 2015.
- Tradeable accounts(4) of 154,986 as of October 31, 2016, a
decrease of 81, or 0.1%, from September 30, 2016, and a decrease of
6,099, or 4%, from October 31, 2015.
Institutional Customer Trading
Metrics
- Institutional customer trading volume(2) of $24 billion in
October 2016, 17% lower than September 2016 and 29% lower than
October 2015.
- Average institutional trading volume(2) per day of $1.1 billion
in October 2016, 15% lower than September 2016 and 31% lower than
October 2015.
- An average of 37,709 institutional client trades per day in
October 2016, 9% lower than September 2016 and 32% higher than
October 2015.
More information, including historical results for
each of the above metrics, can be found on the investor relations
page of FXCM's corporate website www.fxcm.com.
This operating data is preliminary and subject to
revision and should not be taken as an indication of the financial
performance of FXCM Inc. FXCM undertakes no obligation to publicly
update or review previously reported operating data. Any updates to
previously reported operating data will be reflected in the
historical operating data that can be found on the Investor
Relations page of the Company’s corporate website www.fxcm.com.
(1) Customer Trading Metrics from Continuing
Operations excludes discontinued operations of FXCM Japan and FXCM
Hong Kong.
(2) Volume that FXCM customers traded in period is
translated into US dollars.
(3) An Active Account represents an account that
has traded at least once in the previous twelve months.
(4) A Tradeable Account is an account with
sufficient funds to place a trade in accordance with FXCM trading
policies.
Selected Customer Trading Metrics from
Continuing Operations |
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
|
2015 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
retail trading volume ($ in billions) |
$ |
875 |
|
|
$ |
972 |
|
|
|
-10 |
% |
|
$ |
2,648 |
|
|
$ |
2,906 |
|
|
|
-9 |
% |
Total
active accounts |
|
177,818 |
|
|
|
180,121 |
|
|
|
-1 |
% |
|
|
177,818 |
|
|
|
180,121 |
|
|
|
-1 |
% |
Trading
days in period |
|
66 |
|
|
|
66 |
|
|
|
0 |
% |
|
|
195 |
|
|
|
194 |
|
|
|
1 |
% |
Daily
average trades |
|
|
544,096 |
|
|
|
563,100 |
|
|
|
-3 |
% |
|
|
582,861 |
|
|
|
539,043 |
|
|
|
8 |
% |
Daily
average trades per active account |
|
3.1 |
|
|
|
3.1 |
|
|
|
-2 |
% |
|
|
3.3 |
|
|
|
3.0 |
|
|
|
10 |
% |
Retail
trading revenue per million traded |
$ |
65 |
|
|
|
$ |
56 |
|
|
|
16 |
% |
|
$ |
72 |
|
|
|
$ |
59 |
|
|
|
22 |
% |
Total
customer equity ($ in millions) |
$ |
725 |
|
|
$ |
713 |
|
|
|
2 |
% |
|
$ |
725 |
|
|
$ |
713 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 finance agreements 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, risks
associated with potential reputational damage to FXCM resulting
from this cybersecurity incident that was reported in a press
release on October 1, 2015, 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, or furnishes to, 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, or YouTube FXCM.
About Us
FXCM Inc. (NASDAQ:FXCM) is a
publicly traded company which owns 50.1% of FXCM Group, LLC (FXCM
Group).
FXCM Group is a holding company of Forex
Capital Markets LLC, (FXCM US), Forex Capital Markets Limited,
inclusive of all EU branches (FXCM UK), FXCM Australia Pty.
Limited, (FXCM AU), and all affiliates of aforementioned firms, or
other firms under the FXCM group of companies (collectively
"FXCM"). FXCM Group is owned and operated by FXCM
Inc. (NASDAQ:FXCM) and Leucadia National Corporation
(NYSE:LUK). Leucadia National Corporation is a multi-billion dollar
diversified holding company engaged through its consolidated
subsidiaries in a variety of businesses.
FXCM is a leading provider of
online foreign exchange (FX) trading, CFD trading, spread betting
and related services. The company's 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 trading tools, proprietary data and
premium resources. FXCM Pro provides retail brokers,
small hedge funds and emerging market banks access to wholesale
execution and liquidity, while providing high and medium frequency
funds access to prime brokerage services via FXCM Prime. Trading
foreign exchange and CFDs on margin carries a high level of risk,
which may result in losses that could exceed your deposits, and
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 Nine Months Ended
September 30, 2016 and 2015 |
|
|
A-1 |
Unaudited U.S. GAAP Condensed Consolidated
Statements of Financial Condition As of September 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 September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Revenues |
|
|
|
|
|
|
|
Trading revenue |
$ |
57,845 |
|
|
$ |
56,247 |
|
|
$ |
196,550 |
|
|
$ |
184,672 |
|
Interest income |
|
791 |
|
|
|
494 |
|
|
|
1,900 |
|
|
|
1,232 |
|
Brokerage interest expense |
|
(228 |
) |
|
|
(212 |
) |
|
|
(655 |
) |
|
|
(589 |
) |
Net interest revenue |
|
563 |
|
|
|
282 |
|
|
|
1,245 |
|
|
|
643 |
|
Other income |
|
2,984 |
|
|
|
3,053 |
|
|
|
5,668 |
|
|
|
149,969 |
|
Total net
revenues |
|
61,392 |
|
|
|
59,582 |
|
|
|
203,463 |
|
|
|
335,284 |
|
Operating
Expenses |
|
|
|
|
|
|
|
Compensation and benefits |
|
24,222 |
|
|
|
23,948 |
|
|
|
73,399 |
|
|
|
72,444 |
|
Referring broker fees |
|
9,535 |
|
|
|
13,032 |
|
|
|
29,114 |
|
|
|
43,702 |
|
Advertising and marketing |
|
5,069 |
|
|
|
4,116 |
|
|
|
15,353 |
|
|
|
10,416 |
|
Communication and technology |
|
6,878 |
|
|
|
7,312 |
|
|
|
20,999 |
|
|
|
26,072 |
|
Trading costs, prime brokerage and
clearing fees |
|
871 |
|
|
|
847 |
|
|
|
2,608 |
|
|
|
2,947 |
|
General and administrative |
|
14,646 |
|
|
|
12,861 |
|
|
|
53,626 |
|
|
|
39,234 |
|
Bad debt (recovery) expense |
|
- |
|
|
|
- |
|
|
|
(141 |
) |
|
|
257,303 |
|
Depreciation and amortization |
|
6,956 |
|
|
|
7,316 |
|
|
|
21,149 |
|
|
|
21,136 |
|
Goodwill impairment loss |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,513 |
|
Total operating
expenses |
|
68,177 |
|
|
|
69,432 |
|
|
|
216,107 |
|
|
|
482,767 |
|
Operating
loss |
|
(6,785 |
) |
|
|
(9,850 |
) |
|
|
(12,644 |
) |
|
|
(147,483 |
) |
Other Income
(Expense) |
|
|
|
|
|
|
|
(Loss) gain on derivative
liabilities — Letter & Credit Agreement |
|
(26,985 |
) |
|
|
137,566 |
|
|
|
200,375 |
|
|
|
(254,730 |
) |
Loss on equity method investments,
net |
|
140 |
|
|
|
111 |
|
|
|
478 |
|
|
|
299 |
|
Interest on borrowings |
|
19,473 |
|
|
|
28,974 |
|
|
|
61,228 |
|
|
|
103,824 |
|
(Loss) income
from continuing operations before income taxes |
|
(53,383 |
) |
|
|
98,631 |
|
|
|
126,025 |
|
|
|
(506,336 |
) |
Income tax (benefit)
provision |
|
(85 |
) |
|
|
295 |
|
|
|
58 |
|
|
|
181,616 |
|
(Loss) income
from continuing operations |
|
(53,298 |
) |
|
|
98,336 |
|
|
|
125,967 |
|
|
|
(687,952 |
) |
(Loss) income from
discontinued operations, net of tax |
|
(22,049 |
) |
|
|
18,018 |
|
|
|
(53,635 |
) |
|
|
(74,915 |
) |
Net (loss)
income |
|
(75,347 |
) |
|
|
116,354 |
|
|
|
72,332 |
|
|
|
(762,867 |
) |
Net (loss) income attributable to
non-controlling interest in FXCM Holdings, LLC |
|
(18,493 |
) |
|
|
39,038 |
|
|
|
33,411 |
|
|
|
(274,650 |
) |
Net loss attributable to redeemable
non-controlling interest in FXCM Group, LLC |
|
(6,877 |
) |
|
|
- |
|
|
|
(6,877 |
) |
|
|
- |
|
Net (loss) income attributable to
other non-controlling interests |
|
(10,843 |
) |
|
|
3,667 |
|
|
|
(25,204 |
) |
|
|
(39,238 |
) |
Net (loss)
income attributable to FXCM Inc. |
$ |
(39,134 |
) |
|
$ |
73,649 |
|
|
$ |
71,002 |
|
|
$ |
(448,979 |
) |
|
|
|
|
|
|
|
|
(Loss) income from
continuing operations attributable to FXCM Inc. |
$ |
(35,829 |
) |
|
$ |
64,302 |
|
|
$ |
85,936 |
|
|
$ |
(427,909 |
) |
(Loss) income from
discontinued operations attributable to FXCM Inc. |
|
(3,305 |
) |
|
|
9,347 |
|
|
|
(14,934 |
) |
|
|
(21,070 |
) |
Net (loss)
income attributable to FXCM Inc. |
$ |
(39,134 |
) |
|
$ |
73,649 |
|
|
$ |
71,002 |
|
|
$ |
(448,979 |
) |
|
|
|
|
|
|
|
|
Weighted average shares
of Class A common stock outstanding - Basic and Diluted |
|
5,603 |
|
|
|
5,313 |
|
|
|
5,603 |
|
|
|
4,968 |
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to stockholders of Class A common stock of FXCM
Inc. - Basic and Diluted |
|
|
|
|
|
|
|
Continuing operations |
$ |
(6.39 |
) |
|
$ |
12.10 |
|
|
$ |
15.34 |
|
|
$ |
(86.13 |
) |
Discontinued operations |
|
(0.59 |
) |
|
|
1.76 |
|
|
|
(2.67 |
) |
|
|
(4.24 |
) |
Net (loss) income income
attributable to FXCM Inc. |
$ |
(6.98 |
) |
|
$ |
13.86 |
|
|
$ |
12.67 |
|
|
$ |
(90.37 |
) |
|
|
|
|
|
|
|
|
A-1
FXCM
Inc. |
|
|
|
|
Condensed
Consolidated Statements of Financial Condition |
|
|
|
|
As of September
30, 2016 and December 31, 2015 |
|
|
|
|
(Amounts in
thousands except share data) |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
September 30, 2016 |
|
December 31, 2015 |
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
220,211 |
|
|
$ |
203,854 |
|
Cash and cash equivalents, held for
customers |
|
|
725,375 |
|
|
|
685,043 |
|
Due from brokers |
|
|
924 |
|
|
|
3,781 |
|
Accounts receivable, net |
|
|
404 |
|
|
|
1,636 |
|
Tax receivable |
|
|
259 |
|
|
|
1,766 |
|
Current assets held for sale |
|
|
169,608 |
|
|
|
233,937 |
|
Total current assets |
|
|
1,116,781 |
|
|
|
1,130,017 |
|
Deferred tax asset |
|
|
15 |
|
|
|
14 |
|
Office, communication
and computer equipment, net |
|
|
34,984 |
|
|
|
35,891 |
|
Goodwill |
|
|
24,727 |
|
|
|
28,080 |
|
Other intangible
assets, net |
|
|
7,763 |
|
|
|
13,782 |
|
Notes receivable |
|
|
- |
|
|
|
7,881 |
|
Other assets |
|
|
10,583 |
|
|
|
11,421 |
|
Total assets |
|
$ |
1,194,853 |
|
|
$ |
1,227,086 |
|
Liabilities,
Redeemable Non-Controlling Interest and Stockholders'
Deficit |
|
|
|
|
Current
liabilities |
|
|
|
|
Customer account liabilities |
|
$ |
725,375 |
|
|
$ |
685,043 |
|
Accounts payable and accrued
expenses |
|
|
51,977 |
|
|
|
38,298 |
|
Due to brokers |
|
|
20,067 |
|
|
|
1,073 |
|
Due to related parties pursuant to
tax receivable agreement |
|
|
- |
|
|
|
145 |
|
Current liabilities held for
sale |
|
|
10,084 |
|
|
|
14,510 |
|
Total current liabilities |
|
|
807,503 |
|
|
|
739,069 |
|
Deferred tax
liability |
|
|
141 |
|
|
|
719 |
|
Senior convertible
notes |
|
|
159,606 |
|
|
|
154,255 |
|
Credit agreement |
|
|
189,686 |
|
|
|
147,262 |
|
Derivative liability —
Letter Agreement |
|
|
- |
|
|
|
448,458 |
|
Other liabilities |
|
|
11,294 |
|
|
|
16,044 |
|
Total
liabilities |
|
|
1,168,230 |
|
|
|
1,505,807 |
|
Redeemable
non-controlling interest |
|
|
86,473 |
|
|
|
- |
|
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 September 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 September 30, 2016 and December 31, 2015 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
365,193 |
|
|
|
267,369 |
|
Accumulated deficit |
|
|
(460,548 |
) |
|
|
(531,550 |
) |
Accumulated other comprehensive
(loss) income |
|
|
(1,044 |
) |
|
|
1,004 |
|
Total stockholders’ deficit, FXCM
Inc. |
|
|
(96,342 |
) |
|
|
(263,120 |
) |
Non-controlling
interests |
|
|
36,492 |
|
|
|
(15,601 |
) |
Total stockholders’
deficit |
|
|
(59,850 |
) |
|
|
(278,721 |
) |
Total
liabilities, redeemable non-controlling interest and stockholders’
deficit |
|
$ |
1,194,853 |
|
|
$ |
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 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 with Leucadia, costs related to the
implementation of a Stockholder Rights Plan, costs related to the
Leucadia Restructuring Transaction, 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 impairments, gains or losses on
classification as held for sale assets, 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 September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
Continuing Ops |
Disc Ops |
Combined |
|
Continuing Ops |
Disc Ops |
Combined |
Net (loss)
income |
$ |
(53,298 |
) |
$ |
(22,049 |
) |
$ |
(75,347 |
) |
|
$ |
98,336 |
|
$ |
18,018 |
|
$ |
116,354 |
|
Adjustments: |
|
|
|
|
|
|
|
Allocation of net income to Lucid
members for services provided(1) |
|
- |
|
|
1,218 |
|
|
1,218 |
|
|
|
- |
|
|
2,249 |
|
|
2,249 |
|
General and administrative(2) |
|
2,078 |
|
|
- |
|
|
2,078 |
|
|
|
1,306 |
|
|
- |
|
|
1,306 |
|
Depreciation and amortization |
|
6,956 |
|
|
- |
|
|
6,956 |
|
|
|
7,316 |
|
|
- |
|
|
7,316 |
|
Loss (gain) on classification as
held for sale |
|
- |
|
|
25,095 |
|
|
25,095 |
|
|
|
- |
|
|
(979 |
) |
|
(979 |
) |
Loss (gain) on derivative
liabilities - Letter & Credit Agreement |
|
26,985 |
|
|
- |
|
|
26,985 |
|
|
|
(137,566 |
) |
|
- |
|
|
(137,566 |
) |
Interest on borrowings |
|
19,473 |
|
|
- |
|
|
19,473 |
|
|
|
28,974 |
|
|
- |
|
|
28,974 |
|
Income tax (benefit) provision |
|
(85 |
) |
|
- |
|
|
(85 |
) |
|
|
295 |
|
|
(306 |
) |
|
(11 |
) |
Gain on completed dispositions |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(12,449 |
) |
|
(12,449 |
) |
Total
adjustments |
|
55,407 |
|
|
26,313 |
|
|
81,720 |
|
|
|
(99,675 |
) |
|
(11,485 |
) |
|
(111,160 |
) |
Adjusted
EBITDA |
$ |
2,109 |
|
$ |
4,264 |
|
$ |
6,373 |
|
|
$ |
(1,339 |
) |
$ |
6,533 |
|
$ |
5,194 |
|
|
|
|
|
|
|
|
|
(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 $2.1 million of professional fees, including fees
related to the Leucadia Restructuring Transaction and other SNB
related costs included in continuing operations for the three
months ended September 30, 2016. For the three months ended
September 30, 2015, represents $1.1 million of regulatory and legal
costs related to the SNB event, and $0.2 million of costs related
to the cybersecurity incident.
(Unaudited) |
Reconciliation of U.S. GAAP Net Income (Loss)
to Adjusted EBITDA |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
Continuing Ops |
Disc Ops |
Combined |
|
Continuing Ops |
Disc Ops |
Combined |
Net income
(loss) |
$ |
125,967 |
|
$ |
(53,635 |
) |
$ |
72,332 |
|
|
$ |
(687,952 |
) |
$ |
(74,915 |
) |
$ |
(762,867 |
) |
Adjustments: |
|
|
|
|
|
|
|
- |
|
Net Revenues(1) |
|
44 |
|
|
- |
|
|
44 |
|
|
|
(145,224 |
) |
|
- |
|
|
(145,224 |
) |
Allocation of net income to Lucid
members for services provided(2) |
|
- |
|
|
3,779 |
|
|
3,779 |
|
|
|
- |
|
|
6,916 |
|
|
6,916 |
|
General and administrative(3) |
|
12,577 |
|
|
513 |
|
|
13,090 |
|
|
|
4,341 |
|
|
- |
|
|
4,341 |
|
Bad debt (recovery) expense(4) |
|
(141 |
) |
|
- |
|
|
(141 |
) |
|
|
257,303 |
|
|
8,408 |
|
|
265,711 |
|
Depreciation and amortization |
|
21,149 |
|
|
- |
|
|
21,149 |
|
|
|
21,136 |
|
|
12,359 |
|
|
33,495 |
|
Goodwill impairment and loss on
classification as held for sale |
|
- |
|
|
57,092 |
|
|
57,092 |
|
|
|
9,513 |
|
|
82,685 |
|
|
92,198 |
|
(Gain) loss on derivative
liabilities - Letter & Credit Agreement |
|
(200,375 |
) |
|
- |
|
|
(200,375 |
) |
|
|
254,730 |
|
|
- |
|
|
254,730 |
|
Gain on disposition of equity
method investment(5) |
|
- |
|
|
(679 |
) |
|
(679 |
) |
|
|
- |
|
|
- |
|
|
- |
|
Interest on borrowings |
|
61,228 |
|
|
- |
|
|
61,228 |
|
|
|
103,824 |
|
|
- |
|
|
103,824 |
|
Income tax provision |
|
58 |
|
|
- |
|
|
58 |
|
|
|
181,616 |
|
|
5,321 |
|
|
186,937 |
|
Gain on completed dispositions |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(14,427 |
) |
|
(14,427 |
) |
Total
adjustments |
|
(105,460 |
) |
|
60,705 |
|
|
(44,755 |
) |
|
|
687,239 |
|
|
101,262 |
|
|
788,501 |
|
Adjusted
EBITDA |
$ |
20,507 |
|
$ |
7,070 |
|
$ |
27,577 |
|
|
$ |
(713 |
) |
$ |
26,347 |
|
$ |
25,634 |
|
|
|
|
|
|
|
|
|
(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, $5.4 million of professional
fees, including fees related to the Leucadia Restructuring
Transaction and 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 nine months ended September 30, 2016, and expense of $0.5
million included in discontinued operations in the nine months
ended September 30, 2016 related to pre-August 2010 trade execution
practices and other regulatory fees and fines. For the nine months
ended September 30, 2015, represents $4.1 million of professional
fees, including fees resulting from the SNB event and the
Stockholder Rights Plan, and $0.2 million of costs related to the
cybersecurity incident.
(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) |
September 30, 2016 |
|
December 31, 2015 |
|
Continuing Ops |
Disc Ops |
Combined |
|
Continuing Ops |
Disc Ops |
Combined |
Cash & Cash Equivalents |
$ |
220,211 |
|
$ |
13,261 |
|
$ |
233,472 |
|
|
$ |
203,854 |
|
$ |
10,786 |
|
$ |
214,640 |
|
Due From Brokers |
|
924 |
|
|
13,628 |
|
|
14,552 |
|
|
|
3,781 |
|
|
22,234 |
|
|
26,015 |
|
Due to Brokers |
|
(20,067 |
) |
|
(371 |
) |
|
(20,438 |
) |
|
|
(1,073 |
) |
|
- |
|
|
(1,073 |
) |
Operating
Cash |
$ |
201,068 |
|
$ |
26,518 |
|
$ |
227,586 |
|
|
$ |
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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