Form 8-K GAIN Capital Holdings, For: Oct 31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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�FORM 8-K
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�CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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October 31, 2014
Date of Report (Date of earliest event reported)
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GAIN CAPITAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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001-35008
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20-4568600
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(State of Incorporation)
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(Commission
�File No.)
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(IRS Employer
�Identification No.)
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Bedminster One
135 Route 202/206
Bedminster, New Jersey 07921
(Address of Principal Executive Offices)
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(908) 731-0700
(Registrants Telephone Number, Including Area Code)
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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):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item�1.01
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Entry into a Material Definitive Agreement.
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Stock Purchase Agreement
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On October 31, 2014, GAIN Capital Holdings, Inc., a Delaware corporation (the Company ), entered into a Share Purchase Agreement (the Share Purchase Agreement ) with City Index Group Limited, a company incorporated and registered in England and Wales (the Seller ), INCAP Gaming B.V., a company incorporated and registered in The Netherlands ( INCAP ), and IPGL Limited, a company incorporated and registered in England and Wales ( IPGL ).
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Upon the terms and subject to the conditions set forth in the Share Purchase Agreement, the Company has agreed to purchase the entire issued and outstanding share capital (the Shares ) of City Index (Holdings) Limited, a company incorporated and registered in England and Wales ( City ) from the Seller. The Shares will be sold for an aggregate purchase price consisting of (i)�US$20,000,000 in cash, including US$1,000,000 in cash to be held in escrow (the Escrow Cash ); (ii) 5,319,149 shares of the Companys common stock (the Consideration Shares ), including 4,787,234 Consideration Shares to be held in escrow (the Escrow Shares ); and (iii) 4.125% unsecured convertible loan notes of the Company (the Convertible Notes ) with an aggregate principal amount of US$60,000,000, including Convertible Notes with an aggregate principal amount of US$54,000,000 to be held in escrow (the Escrow Notes ). The Escrow Cash, Escrow Shares and the Escrow Notes will be held in escrow for a period of four years following the closing of the transaction to secure the purchase price adjustment, any indemnity obligations of the Seller and any liabilities which the Seller may have for breach of warranty under the Share Purchase Agreement, unless earlier released as a result of IPGLs election to guarantee the obligations of the Seller under the Share Purchase Agreement. The Share Purchase Agreement also provides for staged scheduled releases of the Escrow Cash, Escrow Shares and Escrow Notes over such four year period. The purchase price is subject to upwards or downwards adjustments based on Citys working capital, regulatory capital and cash and debt as of the date of the closing of the transaction (the Closing Date ).
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The Company and the Seller have each made customary warranties. Subject to certain limitations, the Seller has agreed to indemnify the Company for losses suffered by the Company in respect of certain known pre-existing liabilities. The Company may not make a claim against the Seller unless the Company provides notice of such claim to the Seller before (i) the fourth anniversary of the Closing Date in the case of claims for breach of tax warranties or tax covenants, (ii) the seventh anniversary of the Closing Date in the case of claims for breach of certain fundamental warranties and (iii) 18 months after the Closing Date in the case of claims for breach of any other warranties of the Seller. Subject to certain exceptions, the Sellers liability under the Share Purchase Agreement is subject to an aggregate cap of US$115,000,000 and, in the case of its liability in respect of breaches of the Sellers warranties (other than certain fundamental warranties) and tax covenants, a subcap of US$48,000,000. The Sellers liability in respect of claims arising from the breach of the Sellers warranties (other than certain fundamental warranties) is also subject to a threshold of US$1,000,000.
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The Seller and City are subject to customary covenants between the date of the Share Purchase Agreement and the Closing Date, including an agreement by the Seller to procure that the business of City is conducted in the normal course consistent with past practices, and not to take certain actions specified in the Share Purchase Agreement. The Seller and INCAP have each also agreed, subject to certain exceptions, for a period of two years from the Closing Date, (a) not to carry on any business that competes with the Company in any geographic area where the Company was engaged in business during the twelve months immediately preceding the Closing Date and (b) not to employ or solicit any current employee of the Company or any of its subsidiaries engaged in an executive or managerial position.
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Closing of the transaction is subject to the approval by the stockholders of the Company of the issuance of the Consideration Shares and the Convertible Notes (the Company Stockholder Approval ) at the closing and the satisfaction of other closing conditions, including certain regulatory approvals. The Company is obligated to pay to Seller a fee of US$1,000,000 if the Company Stockholder Approval is not obtained at a meeting of the Companys stockholders. The Share Purchase Agreement will be terminated immediately 180 days after the date of the Share Purchase Agreement (the Long Stop Date ) if the transaction is not closed by such time, unless otherwise agreed by the parties. The Share Purchase Agreement may also be terminated by the Company upon a material breach by the Seller of its warranties or its pre-closing covenants.
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INCAP has guaranteed the payment obligations of the Seller under the Share Purchase Agreement for a period of seven years following the closing of the transaction, unless IPGL elects to guarantee the payment obligations of the Seller under the Share Purchase Agreement prior to such time but on or after 18 months following the Closing Date.
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Stockholders Agreement
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In connection with the Share Purchase Agreement, the Company entered into a Stockholders Agreement (the Stockholders Agreement ) with the Seller, INCAP, Francisco Partners II, L.P., Sun Luxco I, Sarl and Sun Luxco II, Sarl dated as of October 31, 2014.
Under the terms and subject to the conditions of the Stockholders Agreement, including the satisfaction of the eligibility standards established by the Companys Nominating and Corporate Governance Committee, INCAP will have the right to nominate one director to the Companys Board of Directors (the Board ) and the Company will increase the size of the Board by one member upon INCAPs request to nominate its director designee to the Board. INCAPs director designee shall be entitled to remain a director, subject to certain conditions, until the earlier of such time as (i) INCAP ceases to beneficially own at least 5% of the aggregate number of outstanding shares of common stock of the Company (the Common Stock ) and other securities of the Company convertible into or exchangeable for Common Stock (calculated on an as-converted-to-Common Stock basis) (the Ownership Threshold ) and (ii) INCAPs right to nominate a director is terminated by the Company following such time as INCAP ceases to be controlled by the direct or indirect equity holders of INCAP as of the date of the Stockholders Agreement. At any time INCAPs director designee is not serving on the Board and INCAP has the right to nominate a director under the Stockholders Agreement, INCAP has the right to designate one individual as a non-voting observer to the Board.
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The Seller is subject to customary standstill provisions that prevent the Seller from, among other things, engaging in any solicitation of proxies with respect to the voting of the voting securities of the Company, entering into or proposing certain fundamental transactions involving the Company or calling a meeting of shareholders or taking any action or making any public statement to seek to control or influence the management, the Board or policies of the Company. The standstill provisions will cease to apply upon the earliest to occur of (i)�the time at which the Seller and its affiliates beneficially own less than the Ownership Threshold, (ii)�five years from the Closing Date and (iii) the public announcement by the Company that it has entered into a definitive agreement with respect to a fundamental transaction with a third party.
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The Seller has agreed to vote all voting securities it holds or over which it has voting power for all of the nominees on the slate of directors recommended for election by the Board at the 2015 annual meeting of the stockholders of the Company.
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The Seller is also subject to certain restrictions on transfer of its securities of the Company. Among other restrictions, the Seller may not transfer its securities of the Company until six months after the Closing Date, after which time the Seller may transfer up to 16.67% of its securities of the Company (calculated on an as-converted-to-Common Stock basis) every three months, subject to compliance with Rule 144 in a manner that avoids directed block sales.
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Convertible Notes Indenture
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The Convertible Notes will be issued pursuant to an indenture to be dated on or about the Closing Date, in substantially the form attached to the Share Purchase Agreement (the Indenture ). The Convertible Notes will bear interest at a fixed rate of 4.125% per year, payable semiannually, and will mature on a date that will be approximately five years following the Closing Date.
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Prior to the date that is six months immediately preceding the maturity date of the Convertible Notes, the Convertible Notes will be convertible only upon the occurrence of specified events set forth in the Indenture. Thereafter, until the close of business on the business day immediately preceding the maturity date, holders may convert their Convertible Notes at any time. The Company will settle conversions of the Convertible Notes by paying or delivering, as the case may be, cash, shares of Common Stock or a combination thereof, at its election. The conversion rate for the Convertible Notes will be equal to $1,000, divided by the initial conversion price, rounded down to the nearest 1/10,000th share of Common Stock. The initial conversion price will be equal to 125% of the arithmetic average of the daily volume-weighted average price for the Common Stock over the 20 consecutive trading day period ending on, and including, the trading day immediately preceding the Closing Date; provided that the initial conversion price (x) shall not exceed the greater of (i) $9.25 and (ii) the last reported sale price of the Common Stock on the Closing Date and (y) shall not be less than $7.20. The conversion rate and the corresponding conversion price will be subject to adjustment in certain circumstances described in the Indenture.
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If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or part of their Convertible Notes at a purchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, in certain circumstances, the Company may be required to increase the conversion rate for any Convertible Notes converted in connection with a make-whole fundamental change (as defined in the Indenture).
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Prior to the date that is two years immediately preceding the maturity date of the Convertible Notes, the Company will not have the right to redeem the Convertible Notes. During the two year period immediately preceding the maturity date of the Convertible Notes, the Company may redeem for cash all, but not less than all, of the Convertible Notes if the last reported sale price of the Common Stock exceeds 130% of the applicable conversion price for at least 20 trading days, whether or not consecutive, during the 30 consecutive trading day period ending on the trading day immediately preceding the date the Company delivers notice of the redemption.
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Registration Rights Agreement
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On the Closing Date, the Company will enter into a Registration Rights Agreement (the RRA ) with VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P., VantagePoint Venture Partners Principals Fund, L.P., VP New York Venture Partners, L.P. (collectively, the VantagePoint Entities ), Edison Venture Fund IV SBIC, L.P., Edison Partners IV SBIC, LLC (together with Edison Venture Fund IV SBIC, L.P., the Edison Entities and, together with the VantagePoint Entities, the Other Investors ), the Seller and INCAP. Pursuant to the terms of the RRA, upon the request of the Seller, any Other Investor or other parties to the RRA holding at least 30% of the Common Stock and the Convertible Notes (calculated on an as-converted-to-Common-Stock basis) subject to the RRA (the Registrable Securities ), the Company must use its reasonable best efforts to prepare and file a registration statement registering the offer and sale of the number of shares of Registrable Securities requested to be registered in such request. Each of the Seller, and the Other Investors, taken together, may not request a registration of Registrable Securities more than twice each and Seller may not request a registration of Registrable Securities prior to the second anniversary of the Closing Date. The Sellers and the Other Investors registration rights are also subject to additional limitations, including a limitation that no registration is required by the Company unless the anticipated aggregate price to the public (after deduction for underwriters discounts and expenses related to the issuance) of the Registrable Securities requested to be registered is equal to or greater than US$20,000,000. The Company must also use reasonable best efforts to file and cause to become effective a shelf registration statement registering all Registrable Securities within six months of the Closing Date. The Seller and the Other Investors also have customary piggy-back registration rights under the RRA.
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Concurrently with the entry into the RRA by the Company, the Other Investors, the Seller and INCAP, the Amended and Restated Investor Rights Agreement dated January 11, 2008 among the Company, the Other Investors, Mark Galant, The Mark E. Galant 2007 GRAT, Cross Atlantic Technology Fund, L.P., Blue Rock Capital, L.P., Tudor Ventures II, L.P., The Raptor Global Portfolio, Ltd., ALTAR Rock Fund L.P., 3i U.S. Growth Partners L.P. and 3i Technology Partners III L.P, as amended by the Amendment to the Investor Rights Agreement dated November 18, 2013 among the Company, the Other Investors and Mark E. Galant (the IRA ), pursuant to which the Other Investors had certain registration and other rights, will be automatically terminated.
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Item�1.02
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Termination of a Material Definitive Agreement.
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The description of the termination of the IRA set forth in Item 1.01 above is incorporated by reference to this Item 1.02. The VantagePoint Entities and the Edison Entities are stockholders of the Company and certain of their affiliates are members of the Board.
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Item�2.02
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Results of Operations and Financial Condition.
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On October 31, 2014, 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.
The information furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934
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(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 (the Securities Act ) or the Exchange Act, except as expressly set forth by specific reference in such a filing. In addition, Exhibit 99.1 contains statements intended as forward-looking statements that are subject to the cautionary statements about forward-looking statements set forth in such exhibit.
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Item�2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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The description of the Indenture set forth in Item�1.01 above is incorporated by reference to this Item�2.03.
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Item�3.02
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Unregistered Sales of Equity Securities.
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The description of the Share Purchase Agreement and the Indenture set forth in Item 1.01 above is incorporated by reference to this Item�3.02. Pursuant to the terms and conditions of the Share Purchase Agreement, the Company will issue $60,000,000 aggregate principal amount of Convertible Notes and an aggregate of 5,319,149 shares of Common Stock as part of the consideration for the purchase price. The Company will offer and sell the Convertible Notes and such Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.
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Item�7.01
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Regulation FD Disclosure.
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On October 31, 2014, the Company will hold a teleconference to discuss the City acquisition and the Companys financial results for the quarter ended September 30, 2014, and the presentation slides furnished herewith as Exhibit 99.2 will accompany managements comments.
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The information furnished pursuant to Item�7.01, including Exhibit 99.2, shall not be deemed filed for purposes of Section 18 of 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 or the Exchange Act, except as expressly set forth by specific reference in such a filing. In addition, Exhibit 99.2 contains statements intended as forward-looking statements that are subject to the cautionary statements about forward-looking statements set forth in such exhibit.
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Item�9.01
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Financial Statements and Exhibits.
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(d) Exhibits
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99.1 Press release of GAIN Capital Holdings, Inc., dated as of October 31, 2014, reporting its financial results.
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99.2 GAIN Capital Holdings, Inc. financial teleconference presentation dated as of October 31, 2014.
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SIGNATURES
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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.
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Dated: October 31, 2014
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GAIN CAPITAL HOLDINGS, INC.
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By:
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/s/ Diego A. Rotsztain
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Name:
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Diego A. Rotsztain
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Title:
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General Counsel and Secretary
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Exhibit Index
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99.1
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Press release of GAIN Capital Holdings, Inc., dated as of October 31, 2014, reporting its financial results.
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99.2
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GAIN Capital Holdings, Inc. financial teleconference presentation dated as of October 31, 2014.
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Exhibit 99.1
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GAIN Capital to Acquire City Index and Announces Record Preliminary Third Quarter Results
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- Transaction creates global leader in FX/CFD trading, with over 235,000 funded accounts, $1.2 billion in customer assets and $3.1 trillion in annual trading volume -
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- Transaction adds significant scale to GAINs retail business -
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- Results in estimated operating synergies of $45 million-$55 million within two years -
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- Preliminary third quarter 2014 results include record revenues of $103 million, up 69% -
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- Adjusted EBITDA* of $26.6 million, up 120%; 26% adjusted EBITDA Margin* -
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- Net income of $14.7 million, or $0.32 per share, up from $5.6 million or $0.14 per share
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(*See below for reconciliation of non-GAAP financial measures)
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Bedminster, N.J. October 31, 2014 -- GAIN Capital Holdings, Inc. (NYSE: GCAP, GAIN ), today announced that it has entered into a definitive agreement to acquire City Index (Holdings) Limited ( City Index ), a leading online trading firm specializing in contracts-for-difference (CFDs), forex and UK spread betting, for approximately $118 million1�, or a net purchase price of $82 million, including $36 million in cash on the companys balance sheet.
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The combination of GAIN Capital and City Index creates a global leader in online trading, operating two market-leading brands in GAINs FOREX.com, a top retail forex brand globally, and City Index, a premier CFD and spread bet brand.��The combined company will service 235,000 retail customers in over 180 countries with annual trading volumes of more than $3 trillion.
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The acquisition of City Index advances our growth strategy, creating scale for our retail business and accelerates the development of our innovative trading technology, said Glenn Stevens, GAINs chief executive officer.�� The combination will result in a balanced mix of customer volume, with approximately 61% of retail volume coming from FX and 39% from CFD trading/UK spread betting in other asset classes such as equities, indices and commodities.��We look forward to leveraging the City Index brand in key markets and working with the team at City Index, who share our commitment to creating a superior customer experience.
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This transaction is a landmark moment in City Indexs 30-year history as a leader in retail trading, said Mark Preston, City Indexs Chairman and Chief Executive. The combination of GAINs unrivalled leadership in global foreign exchange with City Indexs internationally-recognized CFD business creates a world-class industry leader, providing the scale and capability to deliver the ultimate trading experience to our clients around the world. The combined business will also offer greater opportunities for City Indexs management and staff to flourish in a global business.
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Founded in London in 1983 as one of UKs first spread betting companies, City Index is today one of the worlds leading providers of CFDs, forex and UK spread betting, offering more than 10,000 products
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1��The 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 Capitals stock price at that time.
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across equity, index, FX, commodity and bond CFDs and spread bets.��City Index is majority owned by IPGL, the private holding company for the interests of Michael Spencer, Founder and Chief Executive of ICAP plc, the global markets operator.�
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I am very pleased we have been able to agree to this transaction, which brings benefits for everyone, said Michael Spencer. I believe GAIN is an outstanding company and will be able to move City Index to the next level, by leveraging its broad array of trading products and services onto a global platform. We believe this combination will enhance GAINs leadership position in the FX/CFD industry by putting together two highly complementary companies to create significant value for customers and stakeholders. This is the latest example of the way that IPGL is able to invest actively in businesses over the long term to support their growth and development.
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For the 12 month period ended September 30, 2014, City Index generated $124.8 million in revenue and $10.7 million in adjusted EBITDA.��It had approximately 104,000 funded retail accounts and $344 million in customer assets as of September 30, 2014.
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The combined company will have pro forma client assets of approximately $1.2 billion, and trailing twelve month revenues and adjusted EBITDA, for the period ended September 30, 2014, of $462 million and $61 million, respectively.��GAIN has identified $45 million - $55 million of fixed operating expense synergies, relative to the combined companys trailing twelve-month expenses, and expects to begin realizing theses synergies promptly after closing with full integration achieved over the ensuing 18-24 months.��GAIN expects for this acquisition to become highly accretive over this time period and anticipates achieving accretive results by the fourth quarter following closing.
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The transaction follows the successful acquisition and integration of GFT, which closed in September 2013, where GAIN Capital achieved approximately $40 million of run rate expense synergies.
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City Index clients will not see any immediate impact to the customer service they receive, their account administration or how they trade. All clients will receive more detailed information about the benefits the combined company can offer them, once the acquisition is completed.
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Terms of the Transaction
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The purchase price will consist of $20 million in cash, $60 million of convertible notes and the issuance of approximately 5.3 million GAIN shares.��The total purchase price of $118 million represents a $28 million premium above City Indexs book value as of September 30, 2014.
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In addition to the $36 million of cash on its books as of September 30, 2014, City Index also has $65 million of net operating losses which can be carried forward following the closing of the transaction.
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The transaction is subject to approval by GAIN Capital stockholders, regulatory approvals and customary closing conditions. The deal is expected to close in the first quarter of 2015.
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Jefferies LLC is serving as exclusive financial advisor to GAIN Capital.��KBW is serving as financial advisor to IPGL.��Davis Polk & Wardwell advised GAIN Capital on U.S. and UK legal matters.��Macfarlanes advised IPGL and City Index on UK legal matters and Kirkland & Ellis advised IPGL and City Index on U.S. legal matters.
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City Index Acquisition Conference Call
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GAIN will host a conference call today, Friday, October 31, 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).
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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.
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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 10055502#
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Preliminary Third Quarter Results
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GAIN Capital also announced today preliminary results for the third quarter ended September 30, 2014. Net revenues for the third quarter ended September 30, 2014 were a record $102.8 million, an increase of 69% from $60.8 million from a year earlier. Adjusted EBITDA for the period was $26.6 million, an increase of 120% from $12.1 million from a year earlier.��Net income was $14.7 million, or $0.32 per diluted share, up 163% from $5.6 million, or $0.14 per diluted share a year earlier.��Cash earnings per share, which reflect earnings per share less the impact of depreciation and amortization, purchased intangible amortization and non-cash interest was $0.40 per diluted share, an increase of 124% from a year earlier.��The Company will review its full third quarter results on Thursday November 6, 2014 during a conference call scheduled for 8:00 a.m.���Details for the conference call with be forthcoming.
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About GAIN Capital
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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
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About City Index
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City Index (Holdings) Ltd. is a global provider of retail trading services including spread betting (UK only), CFDs and margin forex. Established in 1983, the firm trades primarily under the City Index, Finspreads, FX Solutions and IFX Markets brands with core markets in the UK, Middle East and the Asia Pacific.
For further company information, visit www.cityindex.co.uk
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Investor Relations Contact
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Hugh Collins and Lynn Morgen
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MBS Value Partners
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+1 212.750.5800
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Media Contact
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For U.S. media inquiries:
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Samantha Nelson, Edelman New York for GAIN Capital
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+1 212.704.4589
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For U.K. media inquiries:
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Rosie Morris, Edelman London for GAIN Capital
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+44 (0)203 047 2424
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Neil Bennett or Andy Donald, Maitland for IPGL and City Index
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+44 (0) 20 7379 5151
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(*) Reconciliation of Net Income to Cash Net Income and Cash EPS
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Cash net income is a non-GAAP financial measure and represents our net income excluding depreciation and amortization, purchased intangible amortization and non-cash interest expense. 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 cash net income assists investors in evaluating our operating performance. However, because cash net income 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.
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Reconciliation of GAAP Net Income to Cash Net Income and Cash EPS
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In thousands, except per share data
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(unaudited)
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Three Months Ended
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September 30,
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2014
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2013
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Net income
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� | $ | 14.7 | � | � | $ | 5.6 | � |
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Add Back; net of tax:
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Depreciation & Amortization
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� | � | 1.5 | � | � | � | 1.2 | � |
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Purchased Intangible Amortization
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� | � | 1.5 | � | � | � | 0.3 | � |
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Non-cash Interest Expense
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� | � | 0.4 | � | � | � | � | |
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Cash net income
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� | � | 18.1 | � | � | � | 7.1 | � |
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Basic
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� | $ | 0.42 | � | � | $ | 0.20 | � |
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Diluted
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� | $ | 0.40 | � | � | $ | 0.18 | � |
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Weighted averages common shares outstanding used
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in computing earnings per common share:
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Basic
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� | � | 41,038,782 | � | � | � | 36,062,659 | � |
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Diluted
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� | � | 43,523,862 | � | � | � | 39,730,857 | � |
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Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted EBITDA Margin
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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.
�
Adjusted EBITDA Margin is adjusted EBITDA over net revenue.
�
�
Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted EBITDA Margin (GAIN)
�
In millions
�
(unaudited)
�
| � | � |
Three Months Ended
|
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Trailing 12 Months
|
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| � | � |
September 30,
|
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September 30
|
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2014
|
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2013
|
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2014
|
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|
Net revenue
|
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|
Net income
|
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|
Net income margin %
|
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| � | � | � | � | � | � | � | � | � | � | � | � | � |
|
Net income
|
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|
Depreciation and amortization
|
� | � | 2.0 | � | � | � | 1.9 | � | � | � | 8.6 | � |
|
Purchased intangible amortization
|
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|
Interest expense
|
� | � | 1.5 | � | � | � | 0.2 | � | � | � | 5.5 | � |
|
Income tax expense
|
� | � | 5.1 | � | � | � | 3.0 | � | � | � | 7.0 | � |
|
Acquisition & integration costs
|
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|
Restructuring
|
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|
Adjusted EBITDA
|
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|
Adjusted EBITDA Margin
|
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6
�
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Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted EBITDA Margin (City Index)
�
In millions
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(unaudited)
�
| � | � |
Trailing 12 Months
|
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| � | � |
September 30
|
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| � | � |
2014
|
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|
Net revenue
|
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|
Net income
|
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|
Depreciation & amortization
|
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|
One-time expenses
|
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|
Adjusted EBITDA
|
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7
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Pro Forma Amounts
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All pro forma amounts represent the combination of GAIN and City Index via simple addition.
�
�
Forward Looking Statements
�
The forward-looking statements contained herein include, without limitation, statements relating to GAIN Capitals and/or City Index (Holdings) Limited ( City Index ) expectations regarding the opportunities and strengths of the combined company created by the proposed business combination, anticipated cost and revenue synergies, the strategic rationale for the proposed business combination, including expectations regarding product offerings, growth opportunities, value creation, and financial strength, and the timing of the closing.��All forward looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that GAIN Capital or City Index will realize these expectations or that these beliefs will prove correct.��In addition, a variety of important factors could cause results to differ materially from such statements. These factors are noted throughout GAIN Capitals annual report on Form 10-K, as filed with the Securities and Exchange Commission on March 17, 2014, and 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 the futures companies, errors or malfunctions in GAIN Capitals 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, our ability to effectively compete in the futures industry, 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 Capitals views as of the date of this release. GAIN Capital undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.
�
�
8
�
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Exhibit 99.2
�
GAIN Capital to Acquire City Index
Creating a Global Leader in Online Trading
October 31, 2014
1
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�
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Safe Harbor Statement
Forward Looking Statements
The forward -looking statements contained herein include, without limitation,
statements relating to GAIN Capital's and/or City Index (Holdings) Limited
("City Index") expectations regarding the opportunities and strengths of the
combined company created by the proposed business combination, anticipated cost
and revenue synergies, the strategic rationale for the proposed business
combination, including expectations regarding product offerings, growth
opportunities, value creation, and financial strength, and the timing of the
closing. All forward looking statements are based upon current expectations and
beliefs and various assumptions. There can be no assurance that GAIN Capital or
City Index will realize these expectations or that these beliefs will prove
correct. In addition, a variety of important factors could cause results to
differ materially from such statements. These factors are noted throughout GAIN
Capital's annual report on Form 10-K, as filed with the Securities and Exchange
Commission on March 17, 2014, and 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 the futures companies, errors or malfunctions in GAIN
Capital's 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, our ability to effectively compete in
the futures industry, 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 release. GAIN Capital undertakes no
obligation to revise or update publicly any forward -looking statement for any
reason unless required by law.
Non-GAAP Financial Measures
This presentation contains various non-GAAP financial measures, including
Adjusted EBITDA and Cash EPS. These non-GAAP financial measures have certain
limitations, including that they do not have a standardized meaning and,
therefore, our definitions 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 these non-GAAP financial measures assist investors in
evaluating our historical and expected operating performance. However, because
these are not measures of financial performance calculated in accordance with
GAAP, such measures 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.
2
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and
Glenn Stevens
CEO, GAIN Capital
3
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GAIN Capital + City Index:
Creating A Global Leader in Online Trading
[] GAIN Capital to acquire City Index, a UK-based global provider of CFDs and
foreign exchange for retail investors
[] Combination creates one of the world's largest and most diversified
providers of leveraged trading
[] #2 provider of retail OTC trading with trailing twelve months revenue of
$462mm; adjusted EBITDA of $61mm; and retail trading volume of $3.1
trillion
[] Key strategic benefits of transaction:
[] Increases scale -- Combined company will have over 235,000 funded accounts,
~$1.2 billion in customer assets and retail trading volume in excess of $3
trillion(1)
[] Diversifies global footprint -- Positions combined company as a top provider
in the major global markets
[] Diversifies retail business -- GAIN Capital's leadership in FX and City
Index's strength in CFDs/spread bets provides greater diversification of volume
and revenue sources in retail business
[] Key financial benefits of transaction:
[] Synergies -- Fixed operating expense synergies of $45mm--$55mm relative
to the combined company's trailing twelve months expenses. Expect to begin
realizing synergies promptly after closing, with full synergies achieved over
18-24 months
[] Positive earnings impact -- Expect transaction to be accretive on both an
adjusted (2) and cash(3) EPS basis by the fourth quarter after transaction
closing
[] Positive tax attributes -- Estimated $65mm of available NOLs at City Index
[] Maintains strong financial footing -- Combined company will increase current
liquidity to over $170mm (pro forma)(4)
Note: All pro forma financials represent the combination of GAIN Capital and
City Index via simple addition.
(1) Funded accounts and client assets as of September 30, 2014. Retail trading
volume for the trailing twelve months ended September 30, 2014. (2) Reflects
GAAP EPS with an adjustment for expected restructuring charges.
(3) Reflects GAAP EPS with an adjustment for non-cash expenses including:
acquired intangible amortization, depreciation and amortization and non-cash
interest expense.
(4) See pro forma liquidity chart in appendix to this presentation.
4
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Summary of Transaction
[] Purchase price of $118mm (1) , consisting of:
[] Cash: $20mm
[] Convertible note: $60mm
[] 4.125% annual interest, payable semi-annually
[] 5-year term
[] Placed principally with City Index's largest shareholder, IPGL Limited
[] Fully flexible settlement (cash, stock or any combination thereof)
[] Conversion price set at closing pursuant to collar mechanism
[] GAIN Capital common stock: ~5.3mm shares
[] Purchase price represents $28mm premium over tangible book
[] Net Purchase Price: $82mm
[] Including City Index's cash on hand of $36mm
[] Synergies
[] Combination of operations is expected to generate $45mm -- $55mm of
operating expense synergies over the first 2 years post-close
[] Expect ~20% of these savings in year 1 and balance in year 2
[] Transaction expected to close in Q1 2015
Note: Assumes GBP/USD exchange rate of 1.60.
(1) Based on the closing price of GCAP common stock as of October 30, 2014.
5
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City Index Overview
[] Founded in 1983 with headquarters in London
[] 375 employees across 7 offices
[] London, Sydney, Shanghai, Dubai, Warsaw, Singapore and Kuala Lumpur
[] TTM September 30, 2014 financial and operating metrics (1)
[] Financials
[] Revenue: $124.8mm
[] EBITDA: $10.7mm (9% margin)
[] Operating Metrics
[] Funded accounts: 103,761
[] Client assets: $344mm
[] Customer trading volume: $880.1bn (ADV: $3.4bn)
[] Majority owned by IPGL, the private holding company for the interests of
Michael Spencer, founder and Chief Executive of ICAP plc, the global markets
operator
(1) Based on GBP/USD exchange rate of 1.60.
6
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City Index Overview (cont. )
[] City Index operates several brands offering clients CFDs, foreign exchange
and UK spread betting
[] City Index: CFDs, foreign exchange and UK spread betting
[] IFX Markets: CFDs and foreign exchange
[] Advanced proprietary trading technology - full suite of customer facing
platforms (Advantage Trader, GTS, etc. ) and execution / risk management
systems
[] Majority (63%) of customer trading volume from CFDs
Volume by Geography (1)
Asia Pacific, 8% Rest of World, 0%
China, 26%
UK, 51%
EMEA, 16%
Volume by Asset Class (1)
Other CFDs, 6%
Equities, 2%
FX, 38%
Equity Indices, 55%
(1) Based on trailing twelve month retail trading volume as of September 30,
2014.
7
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City Index Historical Financials and Operating Metrics
3 Months Ended
31- Dec - 13 31- Mar - 14 30- Jun - 14
Revenue $36.5 $28.8 $23.3
Less: Referral Fees (7.2) (7.0) (5.7)
=============== =============== =============
Net Revenue $29.3 $21.7 $17.6
Less: Other Operating Expenses (21.8) (20.6) (22.2)
=============== =============== =============
Adj usted EBITDA()1 ) $7.5 $1. 1 ($4. 6)
Revenue Growth % 7% (5%) (5%)
EBITDA Margin % 21% 4% NA
Key Operati ng Metri cs and Bal ance Sheet Data
Customer Trading Volume (billions) $213.0 $238.1 $205.5
Average Daily Volume (billions) $3.3 $3.8 $3.2
Funded Accounts 119,349 120,172 118,799
Client Assets $400.5 $370.7 $366.5
PnL/mm $171 $121 $114
12 Months Ended
30- Sep - 14 31- Dec - 12 31- Dec - 13 30- Sep - 14
$36.2 $168.8 $151.3 $124.8
(6.2) (43.9) (38.6) (26.3)
================== ============== =================== ==============
$30.0 $124.9 $112.6 $98.6
(23.3) (119.9) (105.5) (87.9)
================== ============== =================== ==============
$6.7 $4.9 $7.1 $10.7
20% (5%) (5%) (5%)
18% 3% 5% 9%
$223.5 $1,191.1 $1,002.7 $880.1
$3.4 $4.7 $3.9 $3.4
103,761 (2) 143,580 119,349 103,761
$344.2 $377.7 $400.5 $344.2
$162 $142 $151 $142
Note: Dollars in millions, except where noted otherwise. Based on GBP/USD
exchange rate of 1.60.
(1) Adjusted EBITDA is a non-GAAP financial measure that represents earnings
before interest, taxes, depreciation, amortization, and other one- time
expenses. A reconciliation of net income to adjusted EBITDA is available in the
appendix to this presentation.
(2) Inactivity fee initiated in July 2014 resulted in the closure of a
significant number of dormant accounts.
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Pro Forma GAIN Capital
Historical Pro Forma Revenue
$500 $462 $450 $418 $400 $125 $350 $320 $151 $300
$250 $169 $200 $337 $150 $267 $100 $151 $50
$0
CY2012 CY2013 TTM
GAIN City Index
Historical Pro Forma Adjusted EBITDA
$80
$68 $70 $7 $61 $60 $11 $50
$40
$30 $61 $51 $20 $16 $5 $10 $11 $0 CY2012 CY2013 TTM
GAIN City Index
Pro Forma TTM Retail Volume by Asset Class
Other CFDs Equities 10% 1%
Indices 28%
FX 61%
TTM Pro Forma Volume: $3.1 trillion
The combination of GAIN Capital and City Index creates a company with(1):
[] Revenue: >$462mm
[] Adjusted EBITDA (pre-synergies): ~$61mm (13% margin)
[] Adjusted EBITDA (post-synergies) (2) : ~$111mm (24% margin)
[] Pro forma retail volume: $3.1 trillion (ADV: $11.9 billion)
Note: Dollars in millions. All pro forma financials represent the combination
of GAIN Capital and City Index via simple addition. Based on GBP/USD exchange
rate of 1.60.
(1) For the trailing twelve months ended September 30, 2014.
(2) Assumes $50mm of fixed operating expense synergies based on midpoint of
$45mm-$55mm estimated synergies over the first 2 years post- closing.
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Pro Forma GAIN Capital Operating Metrics
Client Assets
$1,400
$1,177 $1,207 $1,194 $1,200
$1,140 $1,058 $1,000 $367 $344 $371 $400 $374 $800
$600
$400 $806 $840 $850 $739 $684
$200
$0
Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
GAIN City Index
Funded Accounts
300,000
245,221 248,479 250,005 249,639
250,000 235,782
200,000
117,916 119,349 120,172 118,799 (1) 103,761
150,000
100,000
127,305 129,130 129,833 130,840 132,021 50,000
-
Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
GAIN City Index
Retail Trading Volume (by Geography) (2)
GAIN Capital
Rest of
World, US, 16% 8%
Asia-Pac, 17% UK, 7%
China, 24% EMEA, 28%
City Index
Asia-Pac, 8%
China, 26%
UK, 51%
EMEA, 16%
Pro Forma
Rest of World, 5%
US, 11%
Asia-Pac, 15%
UK, 19% China, 25% EMEA, 25%
Retail Trading Volume (by Asset Class)(2)
GAIN Capital
Other CFDs, 12%
Equity Indices, 18%
FX, 70%
City Index
Equities, 2% Other CFDs, 6%
FX, 38%
Equity Indices, 55%
Pro Forma
Equities, 1%
Other CFDs, 10%
Equity Indices, 28%
FX, 61%
Note: Client assets in millions. Trading volume in billions. Based on GBP/USD
exchange rate of 1.60.
(1) Inactivity fee initiated in July 2014 resulted in the closure of a
significant number of dormant accounts.
(2) Based on trailing twelve months as of September 30, 2014. GAIN Capital:
$2.2 billion; City Index: $0.9 billion; and Pro Forma: $3.1 trillion.
10
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Synergies -- Fixed Operating Expenses
[] The companies expect to eliminate between $45mm -- $55mm in operating costs
over the first 2 years after closing
[] The companies are continuing to develop detailed integration plans, focusing
achievement of cost savings through:
[] Consolidation of office locations and functions
[] Consolidation of trading platforms and systems
[] Reduced product and software development costs
[] Reduced trading expenses
Quarterly Historical Fixed Operating Expenses
$80 $73.7 $70.9 $70 $64.7 $63.5 $60.7 $61.1 $24.0 $58.7 $60 $23.8 $21.2 $19.9
$50 $18.8 $20.2 $20.9
$40
$30 $49.7 $47.1 $43.5 $43.6 $41.9 $20 $40.8 $37.8
$10
$0
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 GAIN City Index
Impact of Synergies
$300 $272.8 $243.9 $250 $88.9 $193.9 $200 $79.8
$150
$100 $183.9 $164.1 $50
$0
CY 2013 TTM PF TTM[] GAIN City Index Synergies
Breakdown of Synergies
Premises, 4%
Technology, 16%
Operational, 14%
Overlapping Functions, 65%
Note: Dollars in millions. Based on GBP/USD exchange rate of 1.60. Calculation
of fixed operating expenses for both companies available in the appendix to
this presentation.
(1) Assumes $50mm of fixed operating expense synergies based on midpoint of
$45mm-$55mm estimated synergies over the first 2 years post-closing.
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Successful Industry Consolidator
[] City Index transaction is a key part of the successful execution of GAIN's
acquisition strategy
[] MandA is focused on expanding into new products, customer segments and
geographies
[] Pro forma for the acquisition, GAIN Capital's asset base has nearly tripled
in the past 2 years and increased by >4x since IPO
Pre-IPO
dbFX
MG (Retail Forex) CMS
Financial
(Retail Fortune Capital (Retail Forex)
(Retail Forex) Forex)
Mar. 18, April 21, 2008 Sept. 13, Oct. 18, 2011 2010 2010
2008 2010
Client Assets: Client Assets: $124mm $257mm
Post -IPO City Index (Retail Forex) Galvan Research (Advisory) GAA and GFT
Top Third (Retail Forex (Futures) and Institutional) FX Solutions (Retail Forex)
GFT U.S. Oct. 30, 2014 (Retail Forex) Open E Cry (Futures) April
7, March 2014 13, 2014 9/30/14 (1)
Sept. 24, Client Assets: 2013 $1.2bn
Feb. 22, 2013
Dec. 6, 2013
Sept. 6, 2012 Client Assets: 2012 $739mm 2012 Client Assets: $446mm
(1) Pro forma for acquisition of City Index.
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Pro Forma Industry Landscape
As a result of the transaction, GAIN Capital becomes the second largest
provider of leveraged OTC retail trading[]
$14 Average Daily Volume (1)
$ 12.6
$12 $11.3
$10.1
$10
$8 .2
$8 $7.6
$6
$5.1
$4 .6
$4 $3.7
$3 .3
$2
$0
FXCM PF GAIN Saxo Alpari IG Markets Oanda LMAX FXOpen Interactive
Brokers
[]while continuing to develop its commission -based businesses (institutional,
futures and advisory)
Note: Dollars in billions. Dotted line represents impact of City Index trading
volume.
(1) Based on Forex Magnates 3Q 2014 Quarterly Industry Report for the 3 months
ended August 31, 2014. GAIN and City Index volume based on actual data per GAIN
and City Index management. Excludes Japanese brokers.
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Q3 2014 GAIN Capital Flash Results
[] Revenue: $102.8mm
[] Adjusted EBITDA (1): $26.6mm
[] Net Income: $14.7mm
[] GAAP EPS (diluted): $0.32
[] Adjusted EPS (diluted) (2): $0.36
[] Cash EPS(3): $0.40
[] Key Operating Metrics
[] Funded Accounts: 132,021
[] Trading Volume: $605.4bn
[] Client Assets: $850mm
[] Earnings call scheduled for November 6, 2014
(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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Closing Remarks
[] Combination of GAIN Capital and City Index to create a global leader in
online trading
[] Transaction boosts CFD revenue and provides more balanced mix of retail
revenue sources
[] GAIN will leverage established integration experience to achieve an
estimated $45mm -- $55mm of fixed operating expense synergies
[] City Index brands and technology provide platform for further growth in
global markets
[] Transaction to be accretive to adjusted earnings within four quarters of
closing
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Appendix
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Pro Forma Liquidity
September 30, 2014
($ in millions) GAIN Capital City Index
Cash and cash equivalents $82.2 $35.6
Cash and securities held for customers 849.7 344.2
Short term investments 0.9 0.0
Receivables from banks and brokers 165.3 46.5
================ ==============
Total Operating Cash $1,098.1 $426.2
Less: Cash and securities held for customers (849.7) (344.2)
================ ==============
Free Operating Cash $248.4 $82.1
Less: Minimum regulatory capital requirements (88.4) (50.8)
================ ==============
Cur rent Liquidity $160. 0 $31.3
Pro F or ma
Adj ustments 9/30/2014
($20.0) (1) $97.8
0.0 1,193.9
0.0 0.9
0.0 211.8
===================== ==============
($20.0) $1,504.4
(0.0) (1193.9)
===================== ==============
($20.0) $310.5
0.0 (139.2)
===================== ==============
( $20.0) $171. 3
Note: Based on GBP/USD exchange rate of 1.60.
(1) Reflects $20mm cash used for acquisition.
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Fixed Operating Expenses Reconciliation (City Index and GAIN Capital)
City Index Fixed Operating Expenses
($ in millions) Q1 13 Q2 13
Total Expenses $51. 6 $48.4
Less: Referral Fees and Bad Debt (10.1) (12.2)
Less: Other Costs of Sales (2.3) (3.8)
Less: Depreciation and Amortization (7.3) (7.4)
Less: One-time Expenses (3.9) (0.1)
Less: Variable Compensation (4.0) (0.9)
========== =========
Total Fixed Operating Expenses $24.0 $23.8
Q3 13 Q4 13 Q1 14 Q2 14
$40.6 $37.1 $37.3 $33.0
(9.7) (7.0) (6.7) (5.4)
(1.9) (1.2) (0.7) (1.7)
(7.3) (7.1) (7.1) (4.9)
0.4 (1.1) (2.6) (0.2)
(1.0) (0.9) (1.5) (0.6)
========= ========= ========= =========
$21.2 $19.9 $18.8 $20.2
Q3 14 CY 2013 TTM
$34.3 $177.8 $141.7
(6.1) (39.1) (25.1)
(1.8) (9.3) (5.4)
(5.2) (29.2) (24.4)
0.5 (4.7) (3.3)
(0.7) (6.7) (3.6)
========= =========== =========
$20.9 $88.9 $79.8
GAIN Capital Fixed Operating Expenses
($ in millions) Q1 13 Q2 13
Total Expenses $78.7 $80.5
Less: Referral Fees and Bad Debt (19.6) (19.2)
Less: Depreciation and Amortization (2.1) (2.3)
Less: Purchased Intangible Amortization (1.4) (1.4)
Less: One-time expenses - -
Less: GAA/TT/Galvan Acquisition - -
Less: Variable Compensation (5.9) (10.5)
========== =========
Fixed Operating Expenses $49.7 $47.1
Q3 13 Q4 13 Q1 14 Q2 14
$84.8 $78.1 $74.8 $75.3
(19.8) (19.2) (21.3) (21.1)
(2.2) (2.5) (2.2) (1.8)
(1.2) (1.2) (1.0) (1.6)
(9.7) (3.9) (2.2) (0.7)
- - - (1.4)
(8.4) (7.7) (6.2) (7.9)
========= ========= ========= =========
$43.5 $43.6 $41.9 $40.8
Q3 14 CY 2013 TTM
$80.7 $322.1 $308.9
(26.2) (77.8) (87.8)
(2.0) (9.1) (8.5)
(2.0) (5.2) (5.7)
(1.3) (13.6) (8.1)
(2.3) - (3.7)
(9.1) (32.5) (30.9)
========= =========== =========
$37.8 $183.9 $164.1
Note: Based on GBP/USD exchange rate of 1.60.
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Net Income to Adjusted EBITDA Reconciliation
(GAIN Capital)
12 Months Ended December 31,
($ in millions) 2012 2013
Net Revenue $151.4 $266.4
Net Income $2.6 $31.3
Depreciation and Amortization 4.9 7.8
Purchase Intangible Amortization 4.1 2.9
Interest Expense 0.4 1.4
Income Tax Expense/(Benefit) (1.5) 13.8
Acquisition and Integration Costs - 2.2
Restructuring 0.6 1.6
=================== ===========
Adjusted EBITDA $11.1 $61.0
Adjusted EBITDA Margin % 7% 23%
3 Mos . Ended TTM
9/30/14 9/30/14
$102.8 $337.3
$14.7 $17.7
2.0 8.6
2.0 5.8
1.5 5.5
5.1 7.0
0.9 3.9
0.4 2.2
================ =============
$26.6 $50.7
26% 15%
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Net Income to Adjusted EBITDA Reconciliation
(City Index)
3 Months Ended
($ in millions) 31-Dec-13 31-Mar -14 30-Jun-14
Revenue $36.5 $28.8 $23.3
Net Income ($0.7) ($8.5) ($9.7)
Depreciation and Amortization 7.1 7.1 4.9
One-Time Expenses 1.1 2.6 0.2
============= ============= =============
Adjusted EBITDA $7.5 $1.1 ($4.6)
Adjusted EBITDA Margin % 21% 4% NA
12 Months Ended
------------- ------------------ -------------
30-Sep-14 31-Dec-12 31-Dec-13 30-Sep-14
$36.2 $168.8 $151.3 $124.8
$1.9 ($24.7) ($26.7) ($17.0)
5.2 27.3 29.2 24.4
(0.5) 2.3 4.7 3.3
=============== ------------- ================== =============
$6.7 $4.9 $7.1 $10.7
18% 3% 5% 9%
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GAAP EPS to Adjusted EPS Reconciliation
(GAIN Capital)
3 Mos . Ended
9/30/14
GAAP Earnings per Share (Diluted) $0.32
Restructuring and Acquisition Costs 0.04
=================
Adjusted Earnings per Share (Diluted) $0.36
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GAAP EPS to Cash EPS Reconciliation
(GAIN Capital)
3 Mos. Ended
9/30/14
GAAP Ear ni ngs per Share (Diluted) $0. 32
Depreciation and Amortization 0.03
Purchase Intangible Amortization 0.03
Non-cash Interest Expense 0.01
================
Cash Earnings per Share (Diluted) $0.40
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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
[] Customer Assets
[] Represents amounts due to clients, including customer deposits and
unrealized gains or losses arising from open positions
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GAIN Capital to Acquire City Index
Creating a Global Leader in Online Trading
October 31, 2014
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