Form 8-K GAIN Capital Holdings, For: Nov 06
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E-mail UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
November 6, 2014
Date of Report (Date of earliest event reported)
GAIN CAPITAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-35008 | 20-4568600 | ||
(State of Incorporation) | (Commission File No.) | (IRS Employer Identification No.) | ||
Bedminster One
135 Route 202/206
Bedminster, New Jersey 07921
(Address of Principal Executive Offices)
(908) 731-0700
(Registrants Telephone Number, Including Area Code)
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 (see General Instruction A.2. below):
� | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
� | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
� | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
� | 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, GAIN Capital Holdings, Inc., a Delaware corporation (the Company ), issued a press release to report the Companys financial results for the quarter ended September 30, 2014. The full text of the press release is attached to this current report on Form 8-K as Exhibit 99.1.*
Item 7.01 Regulation FD Disclosure.
On November 6, 2014, beginning at 8:00 a.m., eastern time, the Company will host a conference call concerning the Companys financial results for the quarter ended September 30, 2014. In connection with this conference call, the Company has made available for review on its website (ir.gaincapital.com) a copy of its corporate presentation. A copy of the corporate presentation is also attached hereto as Exhibit 99.2.*
Item 8.01 Other Events.
On November 6, 2014, the Company announced that the Board of Directors has declared a dividend of $0.05 per share of the Companys common stock. The dividend will be paid on December 22, 2014 to shareholders of record at the close of business on December 12, 2014.
Item 9.01. Financial Statements and Exhibits
Exhibit No. | Description | |
99.1 | Press Release of GAIN Capital Holdings, Inc., dated November 6, 2014, reporting its financial results. | |
99.2 | Corporate Presentation | |
* | The information furnished in Items 2.02, 7.01 and 9.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, 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. |
SIGNATURES
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.
Dated: November 6, 2014
GAIN CAPITAL HOLDINGS, INC. | ||
By: | /s/ Jason Emerson | |
Name: | Jason Emerson | |
Title: | Chief Financial Officer | |
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Exhibit Index
Exhibit No. | Description | |
99.1 | Press Release of GAIN Capital Holdings, Inc., dated November 6, 2014, reporting its financial results. | |
99.2 | Corporate Presentation | |
GAIN Capital Reports Third Quarter 2014 Results
-GAIN reports record net revenue of $103.7 million amid improved trading conditions
-Commission revenue of $35.0 million; represented 34% of total net revenue
-Net income more than doubled to $15.3 million or $0.33 per diluted share
-Adjusted EBITDA more than doubled to $27.5 million
BEDMINSTER, N.J., November 6, 2014 /PRNewswire/ -- GAIN Capital Holdings, Inc. ("GAIN") (NYSE: GCAP), a leading global provider of online trading services, announced financial results for the third quarter ended September 30, 2014.
Third Quarter Results
(Comparisons below are referenced to the third quarter of 2013)
" | Net revenue of $103.7 million, up 71% from $60.8 million |
" | Net income of $15.3 million, or $0.33 per diluted share, compared to net income of $5.6 million, or $0.14 per diluted share |
" | Adjusted EBITDA* of $27.5 million, compared to adjusted EBITDA of $12.1 million |
" | Retail OTC trading volume of $605.4 billion, up 53% from $394.8 billion |
" | Institutional trading volume of $1.2 trillion, up 31% from $0.9 trillion |
" | Average Daily Futures Contracts of 26,736, up 39% from 19,204 |
" | Total retail client assets of $849.7 million, up 24% from $684.1 million |
(*See below for reconciliation of non-GAAP financial measures)
Results for the third quarter highlight our ability to execute on our strategy to grow the firm through organic efforts and acquisitions. During the quarter, we continued to expand our retail OTC business across products and geographies, while also significantly growing our commission-based businesses, which together allowed us to more than double our net income and adjusted EBITDA when compared with the year-ago quarter. I am particularly pleased that our commission-based businesses delivered revenue of $35.0 million, which almost tripled from a year ago, and represented 34% of the total net revenue for the quarter, compared with 21% in the third quarter of 2013, said Mr. Stevens, CEO of GAIN Capital. "This growth in revenue combined with our focus on reducing fixed expenses through the continued achievement of GFT expense synergies and additional expense-reduction initiatives, allowed us to significantly expand our operating margins for the quarter, continued Mr. Stevens.
Looking ahead, we believe we are in an excellent position to continue to grow our business and compete effectively in our industry. In particular, our growing global client base, the rich diversity of products we offer and our demonstrated expertise in executing and successfully integrating targeted acquisitions provide an attractive platform to consolidate our strong market position, Mr. Stevens concluded.
On October 31, 2014, GAIN announced that it agreed to acquire City Index, a leading provider of online trading in Contracts-for-Difference (CFDs), UK spread betting and foreign exchange, for a purchase price of $118 million1, or a net purchase price of $82 million, including $36 million in cash on City Indexs balance sheet.
The acquisition of City Index is an important step in our expansion strategy, enhancing our scale and further diversifying our product mix, while adding brands and technology that will be important advantages as we pursue further growth.� We look forward to completing the transaction, building on our experience with the acquisition of GFT, where we have succeeded in realizing significant synergies while maintaining continuity for clients, added Mr. Stevens.
Retail OTC Business
In the third quarter of 2014, GAINs retail OTC trading business generated revenue of $64.0 million, up 26% from $50.9 million in the third quarter of 2013, predominately due to the improvement in currency and equity volatility during the quarter. GAIN closed on its acquisition of Galvan Research during the quarter, which will be leveraged to provide additional products and services to retail OTC clients. Galvan generated revenue of $2.3 million in the third quarter of 2014, which is classified under commission revenue.
1The estimated total transaction value is based on the closing price of GAIN Capital common stock on October 30, 2014.�The purchase price for accounting purposes will be determined upon the closing of the acquisition and will depend on GAIN Capital's stock price at that time.
GAIN continued to achieve growth in key retail OTC operating metrics during the quarter. Retail OTC trading volume was $605.4 billion, up 53% from $394.8 billion in the third quarter of 2013. Efforts to expand trading of non-FX products continued, with 27% of retail OTC trading volume in the quarter coming from non-FX, primarily CFDs in equities, indices and commodities, up from 13% in the same quarter a year ago. Retail OTC funded accounts and assets grew 2% and 15% from the year-ago quarter to 120,778 and $641.3 million, respectively.
Institutional Businesses
GAINs institutional businesses delivered significant growth, principally through increases in new accounts and trading volumes. In the third quarter of 2014, GAINs institutional businesses generated total revenue of $22.7 million, up 224% from $7.0 million in the third quarter of 2013.
Total institutional trading volume was $1.2 trillion, up 31% from $901.3 billion a year earlier. Trading volume on the GTX platform was $1.1 trillion, up 22% from $889.7 billion a year earlier.
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Futures
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The exchange-traded futures business generated revenue of $10.0 million in the third quarter of 2014, up 75% from $5.7 million in the same period in 2013. Average daily futures contracts reached 26,736 in the third quarter, up 39% from 19,204 in the third quarter of 2013, principally due to the acquisition of a majority interest in the GAA/Top Third businesses, coupled with growth of the legacy business.
Dividend
GAINs Board of Directors declared a quarterly cash dividend of $0.05 per share of the Companys common stock. The dividend is payable on December 22, 2014 to shareholders of record as of the close of business December 12, 2014.
Conference Call
GAIN will host a conference call Thursday, November 6, 2014 at 8.00 a.m. ET. Participants may access the live call by dialing + 1-866-652-5200 (U.S. domestic), or + 1-412-317-6060 (international).
A live audio webcast of the call and a copy of the accompanying presentation will also be available on the Investor Relations section of the GAIN website (http://ir.gaincapital.com). A PDF copy of the earnings presentation will also be available on the Investor Relations website.
An audio replay will be made available for one month starting approximately two hours after the call by dialing +1-877-344-7529 in the U.S. or +1-412-317-0088 from abroad, and entering passcode 10055036#
About GAIN
GAIN Capital Holdings, Inc.�(NYSE:�GCAP) provides innovative trading technology and execution services to retail and institutional investors worldwide, with multiple access points to OTC markets and global exchanges across a wide range of asset classes, including foreign exchange, commodities, and global equities. �GAIN Capital�is headquartered in�Bedminster, New Jersey, with a global presence across�North America, Europe�and the�Asia Pacific�regions.� For further company information, visit www.gaincapital.com
Investor Relations Contact
Hugh Collins and Lynn Morgen
MBS Value Partners
+1 212.750.5800
Media Contact
Chris Mittendorf, Edelman for GAIN Capital
+1 212.704.8134
Condensed Consolidated Statements of Operations
In millions except share data
(unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
REVENUE: | |||||||||||||||
Trading revenue | $ | 64.0 | $ | 50.9 | $ | 151.6 | $ | 143.7 | |||||||
Commission revenue | 35.0 | 12.7 | 97.2 | 37.7 | |||||||||||
Other revenue | 4.5 | (3.0 | ) | 5.2 | 1.7 | ||||||||||
Total non-interest revenue | 103.5 | 60.6 | 254.0 | 183.1 | |||||||||||
Interest revenue | 0.3 | 0.2 | 1.1 | 0.6 | |||||||||||
Interest expense | 0.1 | 0.3 | 0.1 | ||||||||||||
Total net interest revenue | 0.2 | 0.2 | 0.8 | 0.5 | |||||||||||
Total net revenue | 103.7 | 60.8 | 254.8 | 183.6 | |||||||||||
EXPENSES: | |||||||||||||||
Employee compensation and benefits | 25.5 | 17.8 | 71.4 | 50.3 | |||||||||||
Selling and marketing | 4.8 | 5.7 | 16.1 | 15.8 | |||||||||||
Referral fees | 24.7 | 12.4 | 65.9 | 33.6 | |||||||||||
Trading expense | 6.0 | 4.1 | 20.1 | 12.2 | |||||||||||
General and administrative | 9.1 | 5.7 | 28.1 | 16.7 | |||||||||||
Depreciation and amortization | 1.7 | 1.9 | 5.8 | 5.2 | |||||||||||
Purchased intangible amortization | 2.3 | 0.5 | 4.8 | 1.7 | |||||||||||
Communication and technology | 3.8 | 2.2 | 11.6 | 6.5 | |||||||||||
Bad debt provision | 1.5 | 0.8 | 2.7 | 1.2 | |||||||||||
Acquisition expense | 0.9 | 0.5 | 1.5 | 1.5 | |||||||||||
Restructuring | 0.4 | 0.4 | 1.0 | 0.4 | |||||||||||
Integration | 1.7 | ||||||||||||||
Total operating expense | 80.7 | 52.0 | 230.7 | 145.1 | |||||||||||
Operating income | 23.0 | 8.8 | 24.1 | 38.5 | |||||||||||
Interest on long term borrowings | 1.5 | 0.2 | 4.4 | 0.3 | |||||||||||
Income before tax expense | 21.5 | 8.6 | 19.7 | 38.2 | |||||||||||
Income tax expense | 5.4 | 3.0 | 4.7 | 11.2 | |||||||||||
Net income | $ | 16.1 | $ | 5.6 | $ | 15.0 | $ | 27.0 | |||||||
Net income attributable to non-controlling interest | $ | 0.8 | $ | $ | 1.0 | $ | |||||||||
Net income applicable to Gain Capital Holdings Inc. | $ | 15.3 | $ | 5.6 | $ | 14.0 | $ | 27.0 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.35 | $ | 0.16 | $ | 0.32 | $ | 0.76 | |||||||
Diluted | $ | 0.33 | $ | 0.14 | $ | 0.30 | $ | 0.69 | |||||||
Weighted averages common shares outstanding used | |||||||||||||||
in computing earnings per common share: | |||||||||||||||
Basic | 41,038,782 | 36,062,659 | 40,243,330 | 35,563,701 | |||||||||||
Diluted | 43,523,862 | 39,730,857 | 43,054,959 | 38,722,667 | |||||||||||
Condensed Consolidated Balance Sheet
In millions
(unaudited)
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
ASSETS: | |||||||
Cash�and�cash�equivalents | $ | 82.2 | $ | 39.9 | |||
Cash and securities held for customers | 849.7 | 739.3 | |||||
Short term investments | 0.9 | 0.8 | |||||
Receivables from banks and brokers | 165.3 | 227.6 | |||||
Property and�equipment - net of accumulated depreciation | 19.7 | 17.1 | |||||
Prepaid assets | 4.2 | 8.8 | |||||
Goodwill | 30.4 | 15.7 | |||||
Intangible�assets,�net | 63.8 | 34.8 | |||||
Other�assets | 43.8 | 28.6 | |||||
����������Total�assets | $ | 1,260.0 | $ | 1,112.6 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||
Payables to customer, brokers, dealers, FCM'S and other regulated entities | $ | 849.7 | $ | 739.3 | |||
Accrued compensation & benefits | 10.2 | 13.0 | |||||
Accrued expenses and other liabilities | 63.9 | 56.7 | |||||
Income tax payable | 5.8 | 3.8 | |||||
Senior convertible notes | 67.7 | 65.4 | |||||
����������Total�liabilities | $ | 997.3 | $ | 878.2 | |||
Non-controlling interest | 10.4 | ||||||
Shareholders' Equity | 252.3 | 234.4 | |||||
����������Total�liabilities�and�shareholders'�equity | $ | 1,260.0 | $ | 1,112.6 | |||
Reconciliation of GAAP Net Income to Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that represents our earnings before interest, taxes, depreciation and amortization, restructuring, acquisition and integration-related expenses, impairment on investment and gain on extinguishment of debt. This non-GAAP financial measure has certain limitations, including that it does not have a standardized meaning and, therefore, our definition may be different from similar non-GAAP financial measures used by other companies and/or analysts. Thus, it may be more difficult to compare our financial performance to that of other companies. We believe our reporting of adjusted EBITDA assists investors in evaluating our operating performance. However, because adjusted EBITDA is not a measure of financial performance calculated in accordance with GAAP, such measure should be considered in addition to, but not as a substitute for, other measures of our financial performance reported in accordance with GAAP, such as net income.
Reconciliation of GAAP Net Income to Adjusted EBITDA
In millions
(unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net revenue | $ | 103.7 | $ | 60.8 | $ | 254.8 | $ | 183.6 | |||||||
Net income applicable to Gain Capital Holdings Inc. | 15.3 | 5.6 | 14.0 | 27.0 | |||||||||||
Net income | $ | 15.3 | $ | 5.6 | $ | 14.0 | $ | 27.0 | |||||||
Depreciation and amortization | 1.7 | 1.9 | 5.8 | 5.2 | |||||||||||
Purchased intangible amortization | 2.3 | 0.5 | 4.8 | 1.7 | |||||||||||
Interest expense | 1.5 | 0.2 | 4.4 | 0.3 | |||||||||||
Income tax expense | 5.4 | 3.0 | 4.7 | 11.2 | |||||||||||
Acquisition expense | 0.9 | 0.5 | 1.5 | 1.5 | |||||||||||
Restructuring | 0.4 | 0.4 | 1.0 | 0.4 | |||||||||||
Integration | 1.7 | ||||||||||||||
Adjusted EBITDA | 27.5 | 12.1 | 37.9 | 47.3 | |||||||||||
Forward-Looking Statements:
In addition to historical information, this earnings release contains "forward-looking" statements that reflect management's expectations for the future. The forward-looking statements contained in this earnings release include, without limitation, statements relating to GAIN Capital's expectations regarding the opportunities and strengths of the combined company created by the combination of GAIN and GFT, anticipated cost and revenue synergies as well as expected growth in financial and operating metrics, the strategic rationale for the business combination, including expectations regarding product offerings, growth opportunities, value creation, and financial strength. A variety of important factors could cause results to differ materially from such statements. These factors include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, including changes in regulation of futures companies, errors or malfunctions in our systems or technology, rapid changes in technology, effects of inflation, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate assets and companies we have acquired, including the successful integration of GFT, our ability to effectively compete in the OTC products and futures industries, changes in tax policy or accounting rules, fluctuations in foreign exchange rates and commodity prices, adverse changes or volatility in interest rates, as well as general economic, business, credit and financial market conditions, internationally or nationally, and our ability to continue paying a quarterly dividend in light of future financial performance and financing needs. The forward-looking statements included herein represent GAIN Capital's views as of the date of this earnings release. GAIN Capital undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.
Q3 2014 Financial and Operating Results November 6, 2014
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Special Note Regarding Forward-Looking Information In addition to historical information, this presentation contains "forward-looking" statements that reflect management's expectations for the future. The forward-looking statements contained in this presentation include, without limitation, statements relating to GAIN Capital's expectations regarding the opportunities and strengths of the combined company created by the combination of GAIN and GFT, anticipated cost and revenue synergies as well as expected growth in financial and operating metrics, the strategic rationale for the business combination, including expectations regarding product offerings, growth opportunities, value creation, and financial strength. A variety of important factors could cause results to differ materially from such statements. These factors include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, including changes in regulation of futures companies, errors or malfunctions in our systems or technology, rapid changes in technology, effects of inflation, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate assets and companies we have acquired, including the successful integration of GFT, our ability to effectively compete in the OTC products and futures industries, changes in tax policy or accounting rules, fluctuations in foreign exchange rates and commodity prices, adverse changes or volatility in interest rates, as well as general economic, business, credit and financial market conditions, internationally or nationally, and our ability to continue paying a quarterly dividend in light of future financial performance and financing needs. The forward-looking statements included herein represent GAIN Capital's views as of the date of this presentation. GAIN Capital undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law. 2
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Third Quarter Results Reflect Successful Execution of Strategic Plan " Strong third quarter results reflect successful execution of strategic plan, including diversification of revenue streams, buoyed by improved market conditions during period " Consistent organic and inorganic growth in retail business during periods of weaker market conditions bear fruit when market conditions improve " Strong growth in institutional business, increasing to 34% of total revenue from 21% in 3Q13, a major contributor to financial results providing commission-based revenues " Delivering on expense management with over 20% reduction in core fixed operating expenses year-over-year " Successful navigation of regulatory changes and shifting industry dynamics " Clear and demonstrated M&A strategy to increase scale, diversify product offering and create a more balanced business across different revenue streams and geographies " Closed four acquisitions in 2014 " Signed City Index acquisition earlier this month 3
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3rd Quarter 2014 Financial and Operating Results " Financial Results(1) " Net revenue: $103.7 million (up 71%) " Adjusted EBITDA(2): $27.5 million (up 127%) " Net income: $15.3 million (up 173%) " EPS (Diluted): $0.33 (up 136%) " Adjusted EPS (Diluted)(3): $0.37 " Cash EPS (4): $0.42 " Operating Metrics(5) " Retail volume: $605.4 billion (ADV: $9.2 billion) (up 53%) " Institutional volume: $1,181.0 billion (ADV: $17.9 billion) (up 31%) " GTX volume: $1,089.0 billion (ADV: $16.5 billion) " Futures contracts: 1.8 million (up 39%) " Funded accounts: 132,021 (up 25%) 4 (1) Comparisons are referenced to the third quarter of 2013. (2) Adjusted EBITDA is a non-GAAP financial measure that represents our earnings before interest, taxes, depreciation, amortization, restructuring, acquisition and integration expenses. A reconciliation of net income to adjusted EBITDA is available in the appendix to this presentation. (3) Adjusted EPS is a non-GAAP financial measure that represents net income per share excluding the impact of restructuring, acquisition and integration expenses. A reconciliation of GAAP EPS to adjusted EPS is available in the appendix to this presentation. (4) Cash EPS is a non-GAAP financial measure that represents net income per share excluding the impact of depreciation, amortization, purchased intangible amortization and non-cash interest expense. (5) Definitions for all our operating metrics are available in the appendix to this presentation.
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YTD 2014 Financial and Operating Results " Financial Results " Net revenue: $254.8 million " Adjusted EBITDA(1): $37.9 million " Net income: $14.0 million " EPS (Diluted): $0.30 " Adjusted EPS (Diluted)(2): $0.40 " Cash EPS (3): $0.54 " Operating Metrics(4) " Retail volume: $1,699.9 billion (ADV: $8.8 billion) " Institutional volume: $3,878.1 billion (ADV: $20.0 billion) " GTX volume: $3,538.4 billion (ADV: $18.2 billion) " Futures contracts: 5.0 million " Client assets: $849.7 million 5 (1) Adjusted EBITDA is a non-GAAP financial measure that represents our earnings before interest, taxes, depreciation, amortization, restructuring, acquisition and integration expenses. A reconciliation of net income to adjusted EBITDA is available in the appendix to this presentation. (2) Adjusted EPS is a non-GAAP financial measure that represents net income per share excluding the impact of restructuring, acquisition and integration expenses. A reconciliation of GAAP EPS to adjusted EPS is available in the appendix to this presentation. (3) Cash EPS is a non-GAAP financial measure that represents net income per share excluding the impact of depreciation, amortization, purchased intangible amortization and non-cash interest expense. (4) Definitions for all our operating metrics are available in the appendix to this presentation.
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3rd Quarter and YTD 2014 Financial Results Note: Dollars in millions, except retail trading revenue per million. (1) Reconciliation of net income to adjusted EBITDA is available in the appendix to this presentation. (2) Reconciliation of net income to adjusted net income is available in the appendix to this presentation. (3) Does not include line item Other revenue as shown on the consolidated statement of operations. 6 $60.8 $103.7 $183.6 $254.8 $12.1 $27.5 $47.3 $37.9 $0 $50 $100 $150 $200 $250 $300 Q3 2013 Q3 2014 YTD 2013 YTD 2014 Net Revenue & Adjusted EBITDA(1) Net Revenue Adjusted EBITDA $5.6 $15.3 $27.0 $14.0 $6.2 $16.3 $28.4 $17.2 $0 $5 $10 $15 $20 $25 $30 Q3 2013 Q3 2 4 YTD 2013 YTD 2014 Net Income & Adjusted Net Income(2) Net Income Adjusted Net Income $34.3 $22.9 $35.3 $57.5 $50.9 $61.4 $51.2 $36.4 $64.0 $3.9 $3.6 $6.2 $7.8 $7.0 $17.7 $23.3 $23.5 $22.7 $4.2 $4.6 $6.4 $5.7 $5.3 $6.5 $8.9 $10.0 $39.7 $30.7 $46.1 $71.7 $63.6 $84.4 $81.0 $68.8 $99.0 $2.3 ($4) $16 $36 $56 $76 $96 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Revenue by Business Line(3) Retail OTC Institutional Futures Advisory $123 $129 $106 $98 104 $96 $0 $20 $40 $60 $80 $100 $120 $140 Q3 12 Q4 12 Q1 1 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Retail Trading Revenue per Million Quarterly Trailing 12 Months
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Third Quarter Results Reflect Long-Term Focus on Execution of Strategic Plan " Strategic plan has been focused on: " Scaling the retail business by continuing to build market-leading brands and providing a superior customer experience " Diversifying revenue streams across products, geographies, direct vs. indirect and nature of revenue (e.g., commission- based) " Executing on strategic M&A to add complementary products, diversify revenue streams and add scale " Rationalizing fixed expenses while investing in new business lines and high growth areas 7
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Scaling the Retail Business Note: Definitions for all our operating metrics are available in the appendix to this presentation. 8 $4.3 $4.5 $6.7 $7.1 $6.0 $7.9 $9.1 $8.0 $9.2 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Average Daily Retail Volume (in billions) " Over a two-year period, organic and inorganic initiatives have resulted in 27% CAGR in funded accounts " Client assets have grown at a CAGR of 41% over the two-year period, reflecting the effective execution of organic marketing campaigns along with M&A " Over the same two-year period, average daily trading volume in the retail business has grown at a CAGR of 46%, reflecting a continued ability to engage the customer and deliver a superior experience, while growing funded accounts and assets 74.3 76.3 91.3 88.0 118.0 118.8 119.1 120.2 120.8 8.1 8.8 8.7 9.0 9.3 10.3 10.7 10.6 11.2 82.4 85.1 100.0 97.0 127.3 129.1 129.8 130.8 132.0 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Funded Accounts (in 000s) Retail FX Futures $317 $329 $340 $359 $556 $595 $635 $664 $641 $110 $118 $117 $117 $128 $144 $165 $176 $208 $427 $446 $457 $477 $684 $739 $801 $840 $850 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Client Assets (in millions) Retail FX Futures
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Diversifying Revenue Streams " Over the past several years, GAIN has added new business lines and diversified its product offering " New business lines: " The institutional business (GTX launched in 2010 and Sales Traders acquired in 2013) comprised 22% of total revenue in the third quarter versus 11% and 10% one and two years earlier " The futures business (acquired in 2012) has grown to $208 million in client assets (from $98 million at acquisition) and 10% of total revenue versus 9% and 4% of total revenue one and two years earlier " Product diversification " Trading volume from trading in FX products was 73% of total trading volume versus 78% and 92% one and two years earlier " Acquisition of Galvan provided retail customers with advisory services, a commission- based business that can be rolled out internationally and expanded across products 9
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Diversifying Revenue Streams " Growth in GAINs institutional business has accelerated over the past year 22% of total revenue in 3Q14 versus 11% in 3Q13 " The institutional business consists of: " The GTX business, which provides an innovative ECN for trading by financial institutions and high net worth individuals through the internet and voice brokers " The Sales Trader business, which provides high-touch trading services to high net worth individuals and smaller institutional investors " Growth of the institutional business: " GTX has experienced growth in average daily trading volume of 46% CAGR over the past two years " Since being acquired in September 2013, the Sales Trader business has experienced growth of 59% in revenue 10
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Executing on M&A Strategy 11 " Successful execution of M&A strategy has provided: " Scale: Pro forma for the City Index acquisition, GAIN Capitals asset base has nearly tripled in the past 2 years and increased by >4x since IPO " New business lines: Futures, Sales Traders, retail advisory services " Diversification of products: CFDs, spread-bets, futures 2008 Client Assets: $124mm 2010 Client Assets: $257mm 2012 Client Assets: $446mm 9/30/14(1) Client Assets: $1.2bn 2013 Client Assets: $739mm Fortune Capital (Retail Forex) MG Financial (Retail Forex) CMS (Retail Forex) dbFX (Retail Forex) Open E Cry (Futures) GFT U.S. (Retail Forex) FX Solutions (Retail Forex) GFT (Retail Forex & Institutional) GAA and Top Third (Futures) Galvan Research (Advisory) City Index (Retail Forex) Post-IPO Pre-IPO Mar. 18, 2008 Sept. 13, 2010 Oct. 18, 2010 Feb. 22, 2013 Dec. 6, 2012 Sept. 6, 2012 April 21, 2011 Sept. 24, 2013 March 13, 2014 April 7, 2014 Oct. 30, 2014 (1) Pro forma for acquisition of City Index.
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Fixed Operating Expenses Note: Dollars in millions. (1) Core fixed operating expenses calculated as total expenses less referral fees, bad debt, depreciation & amortization, purchased intangible amortization, acquisition costs, restructuring costs, integration costs, a one-time charge taken by GFT prior to the acquisition, direct expenses from new businesses and variable compensation expense (sales commissions and the variable portion of bonus expense). (2) Total fixed operating expenses calculated as core operating expenses plus the direct expenses from new businesses. (3) Pro-forma for the acquisition of GFT. 12 $36.1 $36.6 $34.1 $33.3 $30.5 $135.2 $118.9 $97.7 $41.3 $34.6 $32.9 $33.1 $40.6 $59.2 $103.7 $106.6 $7.4 $7.0 $7.8 $8.9 $9.6 $9.5 $21.4 $26.3 $84.8 $78.1 $74.8 $75.3 $80.7 $203.9 $244.0 $230.7 $0 $50 $100 $150 $200 $250 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 YTD 2012 YTD 2013 YTD 2014 Core Fixed Operating Expenses Variable Expenses Direct expenses from new businesses " YTD core fixed operating expenses down 18% and 28% versus YTD 2013 and 2012(1) " Total fixed operating expenses down 11% and 14% compared to YTD 2013 and 2012(2), reflecting cost control while making investments in commission-based institutional, futures and retail advisory businesses " On target to achieve $35 - $45 million in lower fixed operating expense synergies from the acquisition of GFT (3) (3) (3)
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Return of Capital " Return of capital to shareholders " $0.05 per share quarterly dividend approved " Record date: December 12, 2014 " Payment date: December 22, 2014 " Share repurchase " Program remains in place and will continue to be opportunistic 13
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Closing Remarks " Strong third quarter results reflect successful execution of strategic plan, buoyed by improved market conditions during period " Continued focus on growing fundamental operating metrics in retail business " Institutional business growing rapidly and a major contributor to financial results " Delivering on expense management with over 20% reduction in core fixed operating expenses year-over-year " Clear and demonstrated M&A strategy to increase scale and diversify product offering and revenue streams 14
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15 Appendix
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Market Conditions Currency volatility improved throughout the quarter driven by increased sentiment of global interest rate divergence Source: Bloomberg 16 2008 2009 2010 2011 2012 2013 2014 - 5 10 15 20 25 30
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Consolidated Statements of Operations Note: Unaudited. Dollars in millions, except per share data. 17 Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 2014 2013 Revenue Trading revenue 64.0$ 50.9$ 151.6$ 143.7$ Commission revenue 35.0 12.7 97.2 37.7 Other revenue 4.5 (3.0) 5.2 1.7 Total non-interest revenue 103.5 60.6 254.0 183.1 Interest revenue 0.3 0.2 1.1 0.6 Interest expense 0.1 - 0.3 0.1 Total net interest revenue 0.2 0.2 0.8 0.5 Net revenue 103.7 60.8 254.8 183.6 Expenses Employee compensation and benefits 25.5 17.8 71.4 50.3 Selling and marketing 4.8 5.7 16.1 15.8 Referral fees 24.7 12.4 65.9 33.6 Trading expense 6.0 4.1 20.1 12.2 General & Administrative 9.1 5.7 28.1 16.7 Depreciation and amortization 1.7 1.9 5.8 5.2 Purchased intangible amortization 2.3 0.5 4.8 1.7 Communication and technology 3.8 2.2 11.6 6.5 Bad debt provision 1.5 0.8 2.7 1.2 Acquisition costs 0.9 0.5 1.5 1.5 Restructuring 0.4 0.4 1.0 0.4 Integration costs - - 1.7 - Total operating expense 80.7 52.0 230.7 145.1 Operating income 23.0 8.8 24.1 38.5 Interest on long term borrowings 1.5 0.2 4.4 0.3 Income before tax expense 21.5 8 .6 19.7 38.2 Income tax expense 5.4 3.0 4.7 11.2 Net income 16.1 5.6 15.0 27.0 Net income attributable to non-controlling interest 0.8 - 1.0 - Net income applicable to Gain Capital Holdings Inc. 15.3$ 5 .6$ 14.0$ 27.0$ Earnings per common share : Basic $0.35 $0.16 $0.32 $0.76 Diluted $0.33 $0.14 $0.30 $0.69 Weighted averages common shares outstanding used in computing earnings per common share: Basic 41,038,782 36,062,659 40,243,330 35,563,701 Diluted 43,523,862 39,730,857 43,054,959 38,722,667
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Consolidated Balance Sheet Note: Unaudited. Dollars in millions. 18 September 30, December 31, 2014 2013 ASSETS: Cash and cash equivalents 82.2$ 39.9$ Cash and securities held for customers 849.7 739.3 Short term investments 0.9 0.8 Receivables from banks and brokers 165.3 227.6 Property and equipment - net of accumulated depreciation 19.7 17.1 Prepaid assets 4.2 8.8 Goodwill 30.4 15.7 Intangible assets, net 63.8 34.8 Other assets 43.8 28.6 Total assets 1,260.0$ 1,112.6$ LIABILITIES AND SHAREHOLDERS' EQUITY: Payables to customer, brokers, dealers, FCM'S and other regulated entities 849.7$ 739.3$ Accrued compensation & benefits 10.2 13.0 Accrued expenses and other liabilities 63.9 56.7 Income tax payable 5.8 3.8 Loan payable 67.7 65.4 Total l iabilities 997.3$ 878.2$ Non-controlling interest 10.4$ -$ Shareholders' Equity 252.3 234.4 Total l iabilities and shareholders' equity 1,260.0$ 1,112.6$
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Current Liquidity Note: Dollars in millions. (1) Reflects cash that would be received upon the liquidation of short term investments. (2) Reflects cash that would be received from brokers following the close-out of all open positions. (3) The convertible senior note incorporates the unamortized discount. 19 As of 9/30/14 12/31/13 Cash and cash equivalents $82.2 $39.9 Cash and securities held for customers 849.7 739.3 Short term investments(1) 0.9 0.8 Receivables from banks and brokers(2) 165.3 227.6 Total Operating Cash $1,098.1 $1,007.6 Less: Cash and securities held for customers (849.7) (739.3) Free Operating Cash $248.4 $268.3 Less: Minimum regulatory capital requirements (89.1) (85.7) Less: Convertible Senior Notes(3) (80.0) (80.0) Free Cash Available $79.3 $102.6
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3rd Quarter and YTD 2014 Financial Summary Note: Dollars in millions, except per share data. (1) See page 21 for a reconciliation of GAAP net income to adjusted EBITDA. (2) See page 22 for a reconciliation of GAAP EPS to adjusted EPS. (3) Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenue. 20 3 Months Ended September 30, 9 Months Ended September 30, '14 v '13 2014 2013 2014 2013 Q3 9 Months Net Revenue $103.7 $60.8 $254.8 $183.6 71% 39% Operating Expenses 76.2 48.7 216.9 136.3 56% 59% Adjusted EBITDA(1) $27.5 $12.1 $37.9 $47.3 127% (20%) Net Income $15.3 $5.6 $14.0 $27.0 173% (48%) Adjusted EPS (Diluted)(2) $0.37 $0.16 $0.40 $0.73 131% (45%) EPS (Diluted) $0.33 $0.14 $0.30 $0.69 136% (57%) Adjusted EBITDA Margin %(1)(3) 27% 20% 15% 26% 7 pts (11 pts) Net Income Margin % 15% 9% 5% 15% 6 pts NM
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Adjusted EBITDA & Margin Reconciliation Note: Dollars in millions. (1) Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenue. 21 3 Months Ended September 30, 9 Months Ended September 30, 2014 2013 2014 2013 Net Revenue 103.7$ 60.8$ 254.8$ 183.6$ Net (Loss)/Income 15.3 5.6 14.0 27.0 Net (Loss)/Income Margin % 15% 9% 5% 15% Net (Loss)/Income 15.3$ 5 .6$ 14.0$ 27.0$ Depreciation & amortization 1.7 1.9 5.8 5.2 Purchase intangible amortization 2.3 0.5 4.8 1.7 Interest expense 1.5 0.2 4.4 0.3 Income tax expense 5.4 3.0 4.7 11.2 Acquisition costs 0.9 0.5 1.5 1.5 Restructuring 0.4 0.4 1.0 0.4 Integration costs - - 1.7 - Adjusted EBITDA 27.5$ 12.1$ 37.9$ 47.3$ Adjusted EBITDA Margin % (1) 27% 20% 15% 26%
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Adjusted Net Income and EPS Reconciliation Note: Dollars in millions. 22 3 Months Ended September 30, 9 Months Ended September 30, 2014 2013 2014 2013 Net I come 15.3$ 5 .6$ 14.0$ 27.0$ Acquisition costs, net of tax 0.7 0.3 1.1 1.1 Restructuring, net of tax 0.3 0.3 0.8 0.3 Integration costs, net of tax - - 1.3 - Adjusted Net Income 16.3$ 6 .2$ 17.2$ 28.4$ Adjusted Earnings per Common Share: Basic 0.40$ 0.17$ 0.43$ 0.80$ Diluted 0.37$ 0.16$ 0.40$ 0.73$ 3 Months Ended September 30, 9 Months Ended September 30, 2014 2013 2014 2013 GAAP Earnings per Share (Diluted) 0.33$ 0.14$ 0.30$ 0.69$ Restructuring & Ot er items .04 .02 .1 .04 Adjusted Earnings per Share (Diluted) 0.37$ 0.16$ 0.40$ 0.73$
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Cash Net Income and EPS Reconciliation Note: Dollars in millions. 23 3 Months Ended September 30, 9 Months Ended September 30, 2014 2013 2014 2013 Net Income 15.3$ 5 .6$ 14.0$ 27.0$ Depreciation & amortization, net of tax 1.3 1.2 4.4 3.7 Purchase intangible amortization, net of tax 1.7 0.3 3.7 1.2 Non-cash interest expense, net of tax 0.4 - 1.2 - Cash Net Income 18.7$ 7 .1$ 23.3$ 31.9$ Cash Earnings per Common Share: Basic 0.45$ 0.20$ 0.58$ 0.90$ Diluted 0.42$ 0.18$ 0.54$ 0.82$ 3 Months Ended September 30, 9 Months Ended September 30, 2014 2013 2014 2013 GAAP Earnings per Share (Diluted) 0.33$ 0.14$ 0.30$ 0.69$ Non-cash items .09 .0 .24 .13 Adjusted Earnings per Share (Diluted) 0.42$ 0.18$ 0.54$ 0.82$
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Fixed Operating Expenses Note: Dollars in millions. (1) Pro forma for acquisition of GFT. (2) Includes acquisition costs, restructuring costs, integration costs and a one-time charge taken by GFT prior to the acquisition. (3) Includes sales commissions paid to employees and the variable portion of bonus expense. 24 Q3 2013 ( 1 ) Q4 2013 Q1 2014 Q2 2014 Q3 2014 2012 ( 1 ) 2013 ( 1 ) 2014 Total Expenses $84.8 $78.1 $74.7 $75.3 $80.7 $203.9 $244.0 $230.7 Less: Referral Fees & Bad Debt (19.8) (19.2) (21.3) (21.1) (26.2) (38.9) (58.6) (68.6) Less: Depreciation & Amortization (2.2) (2.5) (2.2) (1.8) (1.7) (4.8) (6.6) (5.7) Less: Purchased Intangible Amortization (1.2) (1.2) (1.0) (1.6) (2.3) (5.8) (4.0) (4.9) Less: One-time Expenses(2) (9.7) (3.9) (2.2) (0.7) (1.3) (0.6) (9.7) (4.2) Less: Direct expenses from new businesses (7.4) (7.0) (7.8) (8.9) (9.6) (9.5) (21.4) (26.3) Less: Variable Compensation(3) (8.4) (7.7) (6.2) (7.9) (9.1) (9.1) (24.8) (23.2) F ixed Operating Expenses $36.1 $36.6 $34.0 $33.3 $30.5 $135.2 $118.9 $97.7 9 Months
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Quarterly Operating Metrics Note: Definitions for all our operating metrics are available on page 24. 25 (Volume in billions; assets in millions) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Retail OTC Trading Volume $394.8 $513.0 $572.3 $522.2 $605.4 Average Daily Volume $6.0 $7.9 $9.1 $8.0 $9.2 Active OTC Accounts 103,924 97,194 97,253 94,261 93,779 Futures Contracts 1,267,472 1,402,367 1,572,465 1,710,944 1,764,586 Funded Accounts 127,305 129,130 129,833 130,840 132,021 Customer Assets $684.1 $739.3 $800.7 $840.0 $849.7 Institutional Total Institutional Volume $901.3 $1,104.0 $1,348.4 $1,348.7 $1,181.0 Average Daily Volume $13.7 $17.0 $21.4 $20.7 $17.9 GTX Volume $889.7 $978.9 $1,212.4 $1,237.0 $1,089.0 Average Daily GTX Volume $13.5 $15.1 $19.2 $19.0 $16.5 3 Months Ended,
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Definition of Metrics " Funded Accounts " Retail accounts who maintain a cash balance " Trading Volume " Represents the U.S. dollar equivalent of notional amounts traded " Futures Contracts " Represents the total contracts transacted by customers of GAINs futures division " Client Assets " Represents amounts due to clients, including customer deposits and unrealized gains or losses arising from open positions 26
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Q3 2014 Financial and Operating Results November 6, 2014
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