Form 8-K GAIN Capital Holdings, For: Nov 03
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
November 3, 2016
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
(Registrant’s 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):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On November 3, 2016, GAIN Capital Holdings, Inc., a Delaware corporation (the “Company”), issued a press release to report the Company’s financial results for the quarter and nine months ended September 30, 2016. 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 3, 2016, beginning at 4:30 p.m., eastern time, the Company will host a conference call concerning the Company’s financial results for the quarter and nine months ended September 30, 2016. 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 3, 2016, the Company announced that its Board of Directors has declared a dividend of $0.06 per share of the Company’s common stock. The dividend will be paid on December 22, 2016 to shareholders of record at the close of business on December 12, 2016.
On November 3, 2016, the Company also announced that its Board of Directors had increased the amount available for the repurchase of the Company’s common stock under the Company’s share repurchase plan to $30.0 million.
Item 9.01. Financial Statements and Exhibits
Exhibit No. | Description | |
99.1 | Press Release of GAIN Capital Holdings, Inc., dated November 3, 2016, 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 3, 2016
GAIN CAPITAL HOLDINGS, INC. | ||
By: | /s/ Nigel Rose | |
Name: | Nigel Rose | |
Title: | Chief Financial Officer | |
Exhibit Index
Exhibit No. | Description | |
99.1 | Press Release of GAIN Capital Holdings, Inc., dated November 3, 2016, reporting its financial results. | |
99.2 | Corporate Presentation | |
GAIN Capital Reports Third Quarter and Nine Months 2016 Results
Third Quarter | Nine Months |
Net revenue of $72.2 million | Net revenue of $296.1 million |
Net loss of 4.7 million | Net income of $14.5 million |
Adjusted EBITDA1 of $3.3 million | Adjusted EBITDA1 of $62.7 million |
Loss per diluted share of $0.11 | Earnings per diluted share of $0.25 |
Adjusted loss per diluted share1 of $0.12 | Adjusted earnings per diluted share1 of $0.49 |
BEDMINSTER, N.J., November 3, 2016 /PRNewswire/ -- GAIN Capital Holdings, Inc. ("GAIN") (NYSE: GCAP), a leading global provider of online trading services, announced financial results for the third quarter and nine months of 2016.
Net loss for the quarter was $4.7 million, down from a $1.0 million profit in the third quarter of 2015, and adjusted EBITDA was $3.3 million, down from $30.1 million in the third quarter of 2015. GAIN’s financial highlights for the three and nine months ended September 30 are included in the chart below.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015(2) | 2016 | 2015(2) | ||||||||||||
Net Revenue | $ | 72.2 | $ | 128.1 | $ | 296.1 | $ | 332.6 | |||||||
Operating Expenses | (68.9 | ) | (98.0 | ) | (233.4 | ) | (269.2 | ) | |||||||
Galvan Earnout Adjustment | — | — | — | (4.3 | ) | ||||||||||
Adjusted EBITDA(1) | $ | 3.3 | $ | 30.1 | $ | 62.7 | $ | 59.1 | |||||||
Net Income/(Loss) | $ | (4.7 | ) | $ | 1.0 | $ | 14.5 | $ | (0.7 | ) | |||||
Adjusted Net Income/(Loss)(1) | $ | (5.8 | ) | $ | 15.3 | $ | 24.1 | $ | 25.3 | ||||||
Diluted GAAP EPS | $ | (0.11 | ) | $ | 0.05 | $ | 0.25 | $ | (0.01 | ) | |||||
Adjusted EPS(1) | $ | (0.12 | ) | $ | 0.31 | $ | 0.49 | $ | 0.54 | ||||||
_____________________________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1See below for reconciliation of non-GAAP financial measures.
2As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
“The challenging market conditions of the third quarter resulted in lower than expected average daily volumes and revenue capture," commented Glenn Stevens, CEO of GAIN Capital. "However, the volatility outlook is improving as a result of several market drivers including Brexit, global interest rate uncertainty and the U.S. elections,” continued Mr. Stevens. "In addition, we are executing on several key initiatives that we believe will enhance our customer experience which will lead to increased customer engagement and drive long-term value for both clients and shareholders," concluded Mr. Stevens.
Retail Segment
In the third quarter of 2016, GAIN’s retail segment generated net revenue of $52.7 million and segment profit of $6.5 million, reflecting a margin of 12%.
For the trailing twelve months ended September 30, 2016, the retail segment generated net revenue of $321.7 million and segment profit of $99.4 million, reflecting a margin of 31%.
Institutional Segment
In the third quarter of 2016, GAIN’s institutional segment generated net revenue of $6.9 million and segment profit of $1.0 million, reflecting a margin of 16%.
For the trailing twelve months ended September 30, 2016, the institutional segment generated net revenue of $28.9 million and segment profit of $6.0 million, reflecting a margin of 21%.
Futures Segment
In the third quarter of 2016, GAIN’s futures segment generated net revenue of $12.5 million and segment profit of $1.4 million, reflecting a margin of 11%.
For the trailing twelve months ended September 30, 2016, the futures segment generated net revenue of $48.5 million and segment profit of $4.8 million, reflecting a margin of 10%.
Dividend
GAIN’s Board of Directors declared a quarterly cash dividend of $0.06 per share of the company’s common stock, an increase of 20%. The dividend is payable on December 22, 2016 to shareholders of record as of the close of business December 12, 2016.
Share Repurchase
The company also announced that its Board of Directors has approved a share repurchase plan which authorizes the expenditure of up to $30 million for the purchase of the company's common stock. The amount and timing of specific repurchases, if any, will depend on market conditions, the trading price of GAIN Capital's common stock and other factors.
October Operating Metrics
Retail Segment Metrics
• | OTC average daily volume1 of $9.1 billion, a decrease of 3.8% from September 2016 and 31.7% from October 2015. |
• | OTC trading volume1 of $190.9 billion, a decrease of 8.2% from September 2016 and 34.8% from October 2015. |
• | Active OTC accounts2 of 131,277, a decrease of 1.3% from September 2016 and 11.5% from October 2015. |
Institutional Segment Metrics
• | ECN average daily volume1 of $8.7 billion, an increase of 2.7% from September 2016 and 44.2% from October 2015. |
• | ECN volume1 of $182.6 billion, a decrease of 2.0% from September 2016 and an increase of 37.6% from October 2015. |
• | Swap Dealer average daily volume1 of $2.8 billion, a decrease of 9.5% from September 2016 and an increase of 32.5% from October 2015. |
• | Swap Dealer volume1 of $58.4 billion, a decrease of 13.7% from September 2016 and an increase of 26.5% from October 2015. |
Futures Segment Metrics
• | Futures average daily contracts of 28,272 a decrease of 11.3% from September 2016 and 13.4% from October 2015. |
• | Futures contracts of 593,706, a decrease of 11.3% from September 2016 and 13.4% from October 2015. |
• | Active futures accounts2 of 8,514, a decrease of 0.9% from September 2016 and 3.4% from October 2015. |
_________________________________________
1US dollar equivalent of notional amounts traded.
2Accounts that executed a transaction during the last 12 months.
Conference Call
GAIN will host a conference call November 3, 2016 at 4.30 p.m. ET. Participants may access the live call by dialing +1.888.349.0112 (US Domestic), or +1.412.317.6001 (International). Please let the operator know you would like to join the GAIN Capital call.
A live audio webcast of the call, as well as a PDF copy of the earnings presentation, will be available on the Investor Relations section of the GAIN Capital website (http://ir.gaincapital.com).
An audio replay will be made available for one month starting approximately one hour after the call by dialing +1.877.344.7529 from the U.S. or +1.412.317.0088 from abroad, and entering the passcode 10095480#.
For more corporate information or to sign up for alerts, please visit: http://ir.gaincapital.com.
About GAIN
GAIN Capital Holdings, Inc. 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
+1 908.731.0737
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, | |||||||||||
2016 | 2015(1) | 2016 | 2015(1) | |||||||||
REVENUE: | ||||||||||||
Retail revenue | 51.5 | 106.5 | $ | 234.6 | 265.9 | |||||||
Institutional revenue | 6.6 | 8.3 | 20.6 | 26.5 | ||||||||
Futures revenue | 12.4 | 12.5 | 37.2 | 34.8 | ||||||||
Other revenue | 1.5 | 0.8 | 3.0 | 5.2 | ||||||||
Total non-interest revenue | 72.0 | 128.0 | 295.3 | 332.5 | ||||||||
Interest revenue | 0.4 | 0.3 | 1.1 | 0.9 | ||||||||
Interest expense | 0.1 | 0.2 | 0.4 | 0.8 | ||||||||
Total net interest revenue | 0.3 | 0.1 | 0.8 | 0.1 | ||||||||
Net revenue | 72.2 | 128.1 | $ | 296.1 | 332.6 | |||||||
EXPENSES: | ||||||||||||
Employee compensation and benefits | 23.8 | 28.9 | 76.8 | 81.7 | ||||||||
Selling and marketing | 5.3 | 7.4 | 18.5 | 20.4 | ||||||||
Referral fees | 15.2 | 28.6 | 53.4 | 84.7 | ||||||||
Trading expenses | 6.9 | 9.0 | 23.1 | 24.1 | ||||||||
General and administrative | 12.8 | 16.8 | 43.9 | 40.3 | ||||||||
Depreciation and amortization | 3.5 | 2.9 | 10.2 | 7.6 | ||||||||
Purchased intangible amortization | 3.6 | 4.3 | 11.4 | 10.7 | ||||||||
Communications and technology | 4.8 | 5.6 | 15.7 | 14.2 | ||||||||
Bad debt provision | 0.2 | 1.8 | 2.0 | 6.4 | ||||||||
Acquisition expenses | — | 0.2 | — | 2.7 | ||||||||
Restructuring expenses | 0.3 | — | 1.1 | 1.9 | ||||||||
Integration expenses | 0.6 | 10.7 | 2.5 | 23.1 | ||||||||
Legal settlement | (0.2 | ) | — | 9.2 | — | |||||||
Total expenses | 76.8 | 116.1 | 267.8 | 317.7 | ||||||||
Operating profit/(loss) | (4.5 | ) | 12.0 | 28.3 | 14.9 | |||||||
Interest on long term borrowings | 2.6 | 2.6 | 7.8 | 6.6 | ||||||||
Income before income tax expense/(benefit) | (7.2 | ) | 9.4 | 20.5 | 8.2 | |||||||
Income tax (benefit)/expense | (3.2 | ) | 7.9 | 4.2 | 7.6 | |||||||
Equity in net loss of affiliate | — | — | (0.1 | ) | — | |||||||
Net income/(loss) | (4.0 | ) | 1.6 | $ | 16.3 | 0.7 | ||||||
Net income attributable to non-controlling interests | 0.7 | 0.6 | 1.8 | 1.3 | ||||||||
NET INCOME/(LOSS) APPLICABLE TO GAIN CAPITAL HOLDINGS, INC. | (4.7 | ) | 1.0 | $ | 14.5 | (0.7 | ) | |||||
Earnings per common share: | ||||||||||||
Basic | (0.11 | ) | 0.05 | $ | 0.25 | (0.01 | ) | |||||
Diluted | (0.11 | ) | 0.05 | $ | 0.25 | (0.01 | ) | |||||
Weighted averages common shares outstanding used in computing earnings per share: | ||||||||||||
Basic | 48,651,212 | 49,149,102 | 48,606,923 | 47,163,814 | ||||||||
Diluted | 48,651,212 | 49,918,707 | 48,883,258 | 47,163,814 | ||||||||
_________________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
Condensed Consolidated Balance Sheet
In millions
(unaudited)
September 30, | December 31, | ||||||
2016 | 2015(1) | ||||||
ASSETS: | |||||||
Cash and cash equivalents | $ | 235.7 | $ | 171.9 | |||
Cash and securities held for customers | 1,054.6 | 920.6 | |||||
Receivables from brokers | 52.3 | 121.2 | |||||
Prepaid assets | 10.3 | 7.8 | |||||
Property and equipment - net of accumulated depreciation | 34.8 | 30.4 | |||||
Intangible assets, net of accumulated amortization | 73.2 | 91.5 | |||||
Goodwill | 32.6 | 34.0 | |||||
Other assets | 48.8 | 47.2 | |||||
Total assets | $ | 1,542.4 | $ | 1,424.6 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||
Payables to customers | 1,054.6 | 920.6 | |||||
Accrued compensation & benefits | 10.8 | 12.4 | |||||
Accrued expenses and other liabilities | 44.5 | 51.6 | |||||
Income tax payable | 2.3 | 1.1 | |||||
Convertible senior notes | 123.5 | 121.7 | |||||
Total liabilities | $ | 1,235.7 | $ | 1,107.4 | |||
Redeemable non-controlling interests | 14.2 | 11.0 | |||||
Shareholders' equity | $ | 292.5 | $ | 306.1 | |||
Total liabilities and shareholders' equity | $ | 1,542.4 | $ | 1,424.6 | |||
_________________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
(*) Reconciliation of GAAP Net Income/(Loss) to Adjusted Net Income/(Loss) and Adjusted EPS
Adjusted net income is a non-GAAP financial measure and represents our net income excluding restructuring, acquisition and integration related expenses, adjustment to fair value of contingent consideration and other non-recurring items. 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 net income assists investors in evaluating our operating performance. However, because adjusted 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.
Net Income/(Loss) to Adjusted Net Income/(Loss) and Adjusted EPS
In millions, except per share data
(unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Net income/(loss) applicable to Gain Capital Holdings Inc. | $ | (4.7 | ) | $ | 1.0 | $ | 14.5 | $ | (0.7 | ) | |||||
Income tax | (3.2 | ) | 7.9 | 4.2 | 7.6 | ||||||||||
Equity in net loss of affiliate | — | — | 0.1 | — | |||||||||||
Non-controlling interest | 0.7 | 0.6 | 1.8 | 1.3 | |||||||||||
Pre-tax income/(loss) | $ | (7.2 | ) | $ | 9.4 | $ | 20.5 | $ | 8.2 | ||||||
Adjustments | 0.7 | 10.9 | 12.8 | 25.9 | |||||||||||
Adjusted Pre-tax income/(loss) | $ | (6.5 | ) | $ | 20.4 | $ | 33.3 | $ | 34.1 | ||||||
Adjusted income tax | 1.4 | (4.5 | ) | (7.3 | ) | (7.5 | ) | ||||||||
Equity in net loss of affiliate | — | — | (0.1 | ) | — | ||||||||||
Non-controlling interest | (0.7 | ) | (0.6 | ) | (1.8 | ) | (1.3 | ) | |||||||
Adjusted net income/(loss) | $ | (5.8 | ) | $ | 15.3 | $ | 24.1 | $ | 25.3 | ||||||
Adjusted earnings/(loss) per common share | |||||||||||||||
Basic | $ | (0.12 | ) | $ | 0.31 | $ | 0.50 | $ | 0.54 | ||||||
Diluted | $ | (0.12 | ) | $ | 0.31 | $ | 0.49 | $ | 0.54 | ||||||
Weighted average common shares outstanding used in computing earnings per common share | |||||||||||||||
Basic | 48,651,212 | 49,149,102 | 48,606,923 | 47,163,814 | |||||||||||
Diluted | 48,651,212 | 49,918,707 | 48,883,258 | 47,163,814 | |||||||||||
_____________________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
Reconciliation of GAAP Net Income/(Loss) to Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA is a non-GAAP financial measure that represents our earnings before interest, taxes, depreciation and amortization, purchased intangible amortization, restructuring, acquisition and integration-related expenses, legal settlement, non-controlling interest, adjustment to fair value of contingent consideration and bad debt expense related to the SNB event in January of 2015. 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/(Loss) to Adjusted EBITDA and Adjusted EBITDA Margin
In millions
(unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Net revenue | $ | 72.2 | $ | 128.1 | $ | 296.1 | $ | 332.6 | |||||||
Net income/(loss) applicable to Gain Capital Holdings Inc. | (4.7 | ) | 1.0 | 14.5 | (0.7 | ) | |||||||||
Net income margin % | (7 | )% | 1 | % | 5 | % | 0 | % | |||||||
Net income/(loss) | (4.7 | ) | 1.0 | 14.5 | (0.7 | ) | |||||||||
Depreciation and amortization | 3.5 | 2.9 | 10.2 | 7.6 | |||||||||||
Purchased intangible amortization | 3.6 | 4.3 | 11.4 | 10.7 | |||||||||||
Interest expense | 2.6 | 2.6 | 7.8 | 6.6 | |||||||||||
Income tax expense | (3.2 | ) | 7.9 | 4.2 | 7.6 | ||||||||||
Acquisition expenses | — | 0.2 | — | 2.7 | |||||||||||
Restructuring expenses | 0.3 | — | 1.1 | 1.9 | |||||||||||
Integration costs | 0.6 | 10.7 | 2.5 | 23.1 | |||||||||||
Legal settlement | (0.2 | ) | — | 9.2 | — | ||||||||||
Bad debt related to SNB event in January of 2015 | — | — | — | 2.5 | |||||||||||
Acquisition contingent consideration adjustment | — | — | — | (4.3 | ) | ||||||||||
Equity in net loss of affiliate | — | — | 0.1 | — | |||||||||||
Net income attributable to non-controlling interest | 0.7 | 0.6 | 1.8 | 1.3 | |||||||||||
Adjusted EBITDA | $ | 3.3 | $ | 30.1 | $ | 62.7 | $ | 59.1 | |||||||
Adjusted EBITDA Margin(2) | 5 | % | 24 | % | 21 | % | 18 | % | |||||||
_________________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
2 Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenue.
Segment Information:
ASC 280, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision making group, in deciding how to allocate resources and in assessing performance. Reportable segments are defined as an operating segment that either (a) exceeds 10% of revenue, or (b) reported profit or loss in absolute amount exceeds 10% of profit of all operating segments that did not report a loss or (c) exceeds 10% of the combined assets of all operating segments. The Company’s operations relate to global trading services and solutions. Based on the Company’s management strategies, and common production, marketing, development and client coverage teams, the Company has concluded that it operates in three operating segments: Retail Segment, Institutional Segment and Futures Segment.
Retail
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Trading Revenue | $ | 51.5 | $ | 106.6 | $ | 234.3 | $ | 265.8 | |||||||
Other Retail Revenue | 1.2 | 1.1 | 4.5 | 2.8 | |||||||||||
Total Revenue | 52.7 | 107.7 | 238.8 | 268.6 | |||||||||||
Employee Comp & Ben | 14.4 | 18.4 | 48.0 | 51.0 | |||||||||||
Marketing | 5.0 | 7.2 | 17.8 | 19.6 | |||||||||||
Referral Fees | 11.2 | 24.0 | 41.5 | 72.6 | |||||||||||
Other Operating Expense | 15.6 | 24.4 | 57.2 | 56.3 | |||||||||||
Segment Profit | $ | 6.5 | $ | 33.7 | $ | 74.3 | $ | 69.2 | |||||||
Segment Profit Margin % | 12 | % | 31 | % | 31 | % | 26 | % | |||||||
Institutional
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
ECN | $ | 4.7 | $ | 5.6 | $ | 14.8 | $ | 17.8 | |||||||
Swap Dealer | 2.2 | 3.2 | 6.7 | 9.9 | |||||||||||
Total Revenue | 6.9 | 8.7 | 21.5 | 27.7 | |||||||||||
Employee Comp & Ben | 3.5 | 3.9 | 10.1 | 12.2 | |||||||||||
Other Operating Expense | 2.4 | 2.4 | 7.4 | 7.5 | |||||||||||
Segment Profit | $ | 1.0 | $ | 2.4 | $ | 4.0 | $ | 8.0 | |||||||
Segment Profit Margin % | 16 | % | 27 | % | 18 | % | 29 | % | |||||||
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
Futures
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Revenue | $ | 12.5 | $ | 12.5 | $ | 37.6 | $ | 34.9 | |||||||
Employee Comp & Ben | 3.3 | 3.0 | 9.4 | 8.2 | |||||||||||
Marketing | 0.2 | 0.2 | 0.7 | 0.7 | |||||||||||
Referral Fees | 4.0 | 4.6 | 11.9 | 12.1 | |||||||||||
Other Operating Expense | 3.7 | 3.6 | 11.5 | 10.6 | |||||||||||
Segment Profit | $ | 1.4 | $ | 1.0 | $ | 4.1 | $ | 3.3 | |||||||
Segment Profit Margin % | 11 | % | 8 | % | 11 | % | 9 | % | |||||||
Corporate and Other
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Revenue | $ | 0.1 | $ | (0.5 | ) | $ | (1.8 | ) | $ | (3.0 | ) | ||||
Employee Comp & Ben | 2.6 | 3.5 | 9.3 | 10.2 | |||||||||||
Other Operating Expense | 3.0 | 3.0 | 8.6 | 8.1 | |||||||||||
Loss | $ | (5.6 | ) | $ | (7.0 | ) | $ | (19.7 | ) | $ | (21.4 | ) | |||
____________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
Reconciliation of Segment Profit to Income/(Loss) Before Income Tax Expense
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Retail segment | $ | 6.5 | $ | 33.7 | $ | 74.3 | $ | 69.2 | |||||||
Institutional segment | 1.0 | 2.4 | 4.0 | 8.0 | |||||||||||
Futures segment | 1.4 | 1.0 | 4.1 | 3.3 | |||||||||||
Corporate and other | (5.6 | ) | (7.0 | ) | (19.7 | ) | (21.4 | ) | |||||||
Segment Profit | 3.3 | 30.1 | 62.7 | 59.1 | |||||||||||
Depreciation and amortization | 3.5 | 2.9 | 10.2 | 7.6 | |||||||||||
Purchased intangible amortization | 3.6 | 4.3 | 11.4 | 10.7 | |||||||||||
Acquisition expenses | — | 0.2 | — | 2.7 | |||||||||||
Restructuring expenses | 0.3 | — | 1.1 | 1.9 | |||||||||||
Integration expenses | 0.6 | 10.7 | 2.5 | 23.1 | |||||||||||
Legal settlement | (0.2 | ) | — | 9.2 | — | ||||||||||
Bad debt related to SNB event | — | — | — | 2.5 | |||||||||||
Acquisition contingent consideration adj. | — | — | — | (4.3 | ) | ||||||||||
Operating profit/(loss) | $ | (4.5 | ) | $ | 12.0 | $ | 28.3 | $ | 14.9 | ||||||
Interest expense on long term borrowings | 2.6 | 2.6 | 7.8 | 6.6 | |||||||||||
Income/(Loss) before income tax expense | $ | (7.2 | ) | $ | 9.4 | $ | 20.5 | $ | 8.2 | ||||||
____________________
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
1 As restated. See the Company's Form 10-Q/A filed on May 3, 2016 for additional information.
Forward-Looking Statements:
In addition to historical information, this earnings release contains "forward-looking" statements that reflect management's expectations for the future. 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/A for the year ended December 31, 2015, as filed with the Securities and Exchange Commission on May 2, 2016, and include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility (including volatility levels resulting from market drivers such as Brexit, global interest rate uncertainty and the U.S. elections that differ from our expectations), evolving industry regulations, 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, 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.
Financial and Operating Results
Third Quarter and 9 Months 2016
November 2016
GAIN Capital 2
Safe Harbor Statement
Forward Looking Statements
In addition to historical information, this earnings presentation contains "forward-looking" statements that reflect management's expectations for
the future. 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/A for the year ended December 31, 2015, as filed with the Securities and Exchange Commission on
May 2, 2016, and include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading
volumes, financial market volatility (including volatility levels resulting from market drivers such as Brexit, global interest rate uncertainty and the
U.S. elections that differ from our expectations), evolving industry regulations, 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, 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, adjusted net income, adjusted EPS and various
“pro forma” non-GAAP measures. 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 assists 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.
GAIN Capital 3
Third Quarter and Year-to-Date Overview
• Challenging market conditions led to lower than expected average daily
volumes and revenue capture, impacting retail results
• Continuing to deliver on synergy plan with $42 million of run-rate
synergies achieved and expect achievement of $45 million by end of
Q4 2016
• Volatility outlook improved as a result of several drivers
• Execution of several key initiatives to enhance customer experience,
engagement, tenure and long-term value
• Strong cash position to fund several new organic and inorganic
opportunities, as well as return of capital to shareholders via increased
quarterly dividend and share buyback plan
GAIN Capital 4
Key Financial Results & Operating Metrics
Note: Dollars in millions, except per share data. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
(2) Adjusted EBITDA is a non-GAAP financial measure that represents our earnings before interest, taxes, depreciation, amortization and other one-time items. A reconciliation of net income/(loss) to adjusted EBITDA is available in the
appendix to this presentation.
(3) Adjusted net income/(loss) is a non-GAAP financial measure that represents net income/(loss) excluding the impact of one-time items. A reconciliation of GAAP net income/(loss) to adjusted net income/(loss) is available in the
appendix to this presentation.
(4) Adjusted EPS is a non-GAAP financial measure that represents net income/(loss) per share excluding the impact of one-time items. A reconciliation of GAAP EPS to adjusted EPS is available in the appendix to this presentation.
(5) Represents the simple addition of GAIN Capital and City Index.
(6) Definitions for operating metrics are available in the appendix to this presentation.
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30, % Change
2016 2015
(1 )
2016 2015
(1 )
TTM
As Reported
Net Revenue $72.2 $128.1 $296.1 $332.6 $398.9
Operating Expenses (68.9) (98.0) (233.4) (269.2) (312.5)
Galvan Earnout Adjustm ent - - - (4.3) (2.3)
Adjusted EBITDA
(2)
$3.3 $30.1 $62.7 $59.1 $84.2
Net Incom e/(Loss) ($4.7) $1.0 $14.5 ($0.7) $25.4
Adjusted Net Incom e/(Loss)
(3)
(5.8) 15.3 24.1 25.3 31.3
GAAP Diluted EPS ($0.11) $0.05 $0.25 ($0.01) $0.48
Adjusted Diluted EPS
(4)
(0.12) 0.31 0.49 0.54 0.65
Pro Form a
(5 )
Net Revenue $72.2 $128.1 $296.1 $368.2 $398.9
Operating Expenses (68.9) (98.0) (233.4) (302.6) (312.5)
Galvan Earnout Adjustm ent - - - (4.3) (2.3)
Adjusted EBITDA
(2)
$3.3 $30.1 $62.7 $61.3 $84.2
Operating M etrics
(6 )
Retail OTC ADV (bns) $9.3 $16.9 $11.2 $16.4 $11.5
Institutional ADV (bns) $10.6 $9.8 $10.9 $10.7 $10.5
ECN 7.7 6.8 8.0 7.5 7.6
Swap Dealer 2.9 3.0 2.9 3.2 2.9
Avg. Daily Futures Contracts 29,878 34,429 34,233 35,321 33,869
GAIN Capital 5
Summary Operating Segments and Corporate Results
Retail Financial & Operating Results
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
2016 2015
(1 )
2016 2015
(1 )
TTM
Trading Revenue $51.5 $106.6 $234.3 $265.8 $310.3
Other Retail Revenue 1.2 1.1 4.5 2.8 11.4
Total Revenue $52.7 $107.7 $238.8 $268.6 $321.7
Em ployee Com p & Ben 14.4 18.4 48.0 51.0 64.5
Marketing 5.0 7.2 17.8 19.6 24.3
Referral Fees 11.2 24.0 41.5 72.6 56.2
Other Operating Exp. 15.6 24.4 57.2 56.3 77.3
Segm ent Profit $6.5 $33.7 $74.3 $69.2 $99.4
% Margin 12% 31% 31% 26% 31%
Operating M etrics
ADV (bns) $9.3 $16.9 $11.2 $16.4 $11.5
Active Accounts 133,009 149,846 133,009 149,846 133,009
Client Assets $635.3 $750.1 $635.3 $750.1 $635.3
PnL/m m $84 $95 $107 $82 $105
Insitutional Financial & Operating Results
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
2016 2015
( )
2016 2015
( )
TTM
ECN $4.7 $5. $14.8 $17.8 $19.4
Swap Deal r 22 3.2 67 9.9 95
Total Revenue $6.9 $8.7 $21.5 $27.7 $28.9
Em ployee Com p & Ben 3.5 3.9 10.1 12.2 13.2
Other Operating Exp. 2.4 2.4 7.4 7.5 9.5
Segm ent Profit $1.0 $2.4 $4.0 $8.0 $6.0
% Margin 16% 27% 18% 29% 21%
Operating M etrics
ECN ADV (bns) $7.7 $6.8 $8.0 $7.5 $7.6
Swap Dealer ADV (bns) 2.9 3.0 2.9 3.2 2.9
Futures Financial & Operating Results
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
2016 2015
(1 )
2016 2015
(1 )
TTM
Revenue $12.5 $12.5 $37.6 $34.9 $48.5
Em ployee Com p & Ben 3.3 3.0 9.4 8.2 11.7
Marketing 0.2 0.2 0.7 0.7 0.9
Referral Fees 4.0 4.6 11.9 12.1 16.2
Other Operating Exp. 3.7 3.6 11.5 10.6 14.9
Segm ent Profit $1.4 $1.0 $4.1 $3.3 $4.8
% Margin 11% 8% 11% 9% 10%
Operating M etrics
Avg. Daily Contracts 29,878 34,429 34,233 35,321 33,869
Active Accounts 8,594 8,567 8,594 8,567 8,594
Client Assets $419.3 $236.3 $419.3 $236.3 $419.3
Revenue/Contract $6.55 $5.67 $5.82 $5.40 $5.69
Corporate & Other
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
016 2015
(1 )
2016 2015
(1 )
TTM
Revenue $0.1 ($0.5) ($1.8) ($3.0) ($2.5)
Em ployee Com p & Ben 2.6 3.5 9.3 10.2 12.1
Other Operating Exp. 3.0 3.0 8.6 8.1 11.5
Loss ($5.6) ($7.0) ($19.7) ($21.4) ($26.1)
Note: Dollars in millions, except where noted otherwise. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
GAIN Capital 6
Segment Results Commentary
• Retail
• YTD segment profit of approximately $75 million with margins of 31%
• Expense management continues to show benefits
• City Index synergies: $42 million of run-rate savings achieved ($45mm by end of Q4 2016)
• YTD referral fee per million: $44/mm
• Average daily trading volumes below management expectations but believe volatility
and client trading levels will revert to historical norms as a result of Brexit, US
elections and global interest rate uncertainty
• Institutional
• GTX ECN market share continuing to increase in a competitive market
• Robust client pipeline with diverse mix of clients lined up to begin trading
• Expanding global reach of ECN with launch of matching engine in London and
upcoming launch in Tokyo
• Futures
• YTD revenue and segment profit continues to grow year-over-year with YTD margins
of 11% compared to 9% in 2015
• Client assets up 77% year-over-year to $419 million as of September 30, 2016
GAIN Capital
$61.5 $58.8 $58.6
$52.0 $54.9 $54.6 $48.2
$106.6
$98.0 $98.0
$79.1
$83.8
$80.7
$68.9
$0
$20
$40
$60
$80
$100
$120
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
Fixed Op. Expenses Variable Operat ing Expenses
7
Consolidated Operating Expenses
Note: Dollars in millions. Q1 2015 operating expenses shown on a pro forma basis based on the simple addition of GAIN Capital and City Index. Details available in appendix to this
presentation.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
(2) Excludes bad debt & other variable expenses, referral fees and marketing expense.
• Q3 operating expenses continue to demonstrate GAIN’s execution on cost-cutting plan, driven
by:
• City Index synergies
• Partnership optimization
• Overall expense management
• 30% year-over-year drop in total operating expenses
• 18% drop in fixed operating expenses for same period
• On track to achieve $45 million of run-rate synergies by end of Q4 2016
(1) (1)
(2)
(1)
GAIN Capital 8
October 2016 Operating Metrics
$13.3
$11.2
$12.9
$15.9
$13.2
$11.6
$12.2
$10.2 $10.5 $10.1
$8.3
$9.4 $9.1
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
OTC Average Daily Volume ($ bns)
148.3 148.9
147.0
143.8 143.7
136.6
140.3
139.0 139.0 139.0
135.6
133.0
131.3
120.0
125.0
130.0
135.0
140.0
145.0
150.0
155.0
Active OTC Accounts (000s)
8.8 8.8 8.7
8.3
8.8 8.9 8.9 8.9 8.8 8.7 8.6 8.6 8.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Active Future Accounts (000s)
$6.0 $6.4
$6.8
$9.4
$8.3
$7.4
$7.8
$6.9
$9.6
$8.3
$6.5
$8.5 $8.7
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
ECN Average Daily Volume ($ bns)
$2.1
$3.8
$2.6 $2.9
$3.0 $2.8
$3.3
$2.9
$2.4 $2.4
$3.2 $3.1 $2.8
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
Swap Dealer Average Daily Volume ($ bns)
32.6
28.4
36.9
42.7
37.0
35.6 36.5 34.7
33.1
29.6 28.3
31.9
28.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Futures Average Daily Contracts (000s)
GAIN Capital 9
Renewed Focus on Organic Growth and Selective M&A
Following a few years of integrations (GFT, City Index) and related focus on
cost synergies, GAIN’s primary focus has shifted to driving organic growth and
selective M&A
• Acquisitions have provided GAIN with scale, a wider product offering,
increased diversity of revenue streams and a broader geographic footprint
• As a result of these acquisitions, GAIN’s focus in past few years has been
on consolidating trading platforms, eliminating duplicative functions,
reducing operational complexity and moving away from non-core business
areas and unproductive commercial relationships
• These efforts have made GAIN structurally stronger than ever – well-
positioned to invest in new products, services, tools, offerings and other
areas to drive organic growth
• GAIN has also continued to pursue a selective M&A strategy, focused
primarily on transactions that complement its organic growth plans
GAIN Capital 10
Renewed Focus on Organic Growth and Selective M&A
(cont.)
• In 2016 a number of product and service enhancements are being delivered
for GAIN’s retail OTC business, including:
• Refreshed brand & new website for FOREX.com
• Mobile trading enhancements
• New trade alerts/recommendation service for UK and US clients
• New, improved charting tool for City Index clients
• New active trader services
• Relationship management team for HNW clients
• These and other enhancements and new offerings reflect GAIN’s focus on
its customers and on driving growth in trading volume, but there’s much
more to come…
GAIN Capital 11
Renewed Focus on Organic Growth and Selective M&A
(cont.)
Among our 2017 planned enhancements:
• Redesigned trading experience
• New City Index website
• Introduction of a global, cross-brand affiliate marketing program
• Easier account opening and more funding options for clients
• Re-launch of Advisory business
• Featuring a new brand and new range of products & services for clients seeking personalized
advice
• Offering exciting new automated investment service
These organic initiatives will be complemented by selective M&A transactions,
to:
• Add products, trading tools and value-added services
• Further diversify our distribution channels
• Add complementary businesses
GAIN Capital 12
Return of Capital
• During the quarter, GAIN was actively reviewing a number of cash intensive
transactions and other initiatives and determined to restrict its stock
repurchase activity
• Through the nine months ended September 30, GAIN has returned over $14 million to
investors via buybacks and dividends
• Buybacks: $7.1 million
• Equity: $5.4 million
• Convertible: $1.7 million
• Dividends: $7.3 million
• Board believes share price is undervalued and will look to resume share buyback with
authorization of $30 million repurchase plan
• Dividend
• Increasing quarterly dividend 20% to $0.06 per share
• Record date: December 12, 2016
• Payment date: December 22, 2016
GAIN Capital 13
Closing Remarks
• Q3 2016 market conditions impacted GAIN and many other retail
brokers driving down retail capture, volume and profitability
• Volatility outlook improved as a result of several drivers including
Brexit and global interest rate uncertainty
• Shift in focus to organic growth and selective M&A to drive long-term
value
• Strength of GAIN’s liquidity position leading to 20% increase in
quarterly dividend to $0.06 per share
• Authorization of $30 million buyback plan to opportunistically
repurchase undervalued shares
GAIN Capital
Appendix
14
GAIN Capital 15
Consolidated Statement of Operations
Note: Dollars in millions, except per share data. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
(2) Earnings per share includes an adjustment for the redemption value of the NCI put option.
Three Months Ended Nine Months Ended
Septem ber 30, Septem ber 30,
2016 2015(1 ) 2016 2015(1 )
Revenue
Retail revenue 51.5$ 106.5$ 234.6 265.9$
Institutional revenue 6.6 8.3 20.6 26.5
Futures revenue 12.4 12.5 37.2 34.8
Other revenue 1.5 0.8 3.0 5.2
Total non interest revenue 72.0 128.0 295.3 332.5
Interest revenue 0.4 0.3 1.1 0.9
Interest expense 0.1 0.2 0.4 0.8
Total net interest revenue 0.3 0.1 0.8 0.1
Net revenue 72.2$ 128.1$ 296.1$ 332.6$
Expenses
Em ployee com pensation and benefits 23.8 28.9 76.8 81.7
Selling and m arketing 5.3 7.4 18.5 20.4
Referral Fees 15.2 28.6 53.4 84.7
Trading expenses 6.9 9.0 23.1 24.1
General and adm inistrative 12.8 16.8 43.9 40.3
Depreciation and am ortization 3.5 2.9 10.2 7.6
Purchased intangible am ortization 3.6 4.3 11.4 10.7
Com m unications and technology 4.8 5.6 15.7 14.2
Bad debt provision 0.2 1.8 2.0 6.4
Acquisition expenses - 0.2 - 2.7
Restructuring expenses 0.3 - 1.1 1.9
Integration expenses 0.6 10.7 2.5 23.1
Settlem ent expense (0.2) - 9.2 -
Total expenses 76.8 116.1 267.8 317.7
Operating profit/(loss) (4.5) 12.0 28.3 14.9
Interest expense on long term borrowings 2.6 2.6 7.8 6.6
Incom e/(loss) before incom e tax expense/(benefit) (7.2) 9.4 20.5 8.2
Incom e tax expense/(benefit) (3.2) 7.9 4.2 7.6
Equity in net loss of affiliate (0.0) - (0.1) -
Net incom e/(loss) (4.0) 1.6 16.3 0.7
Net incom e attributable to non-controlling interests 0.7 0.6 1.8 1.3
Net incom e/(loss) applicable to Gain Capital Holdings Inc. (4.7)$ 1.0$ 14.5$ (0.7)$
Earnings/(loss) per com m on share
(2)
Basic ($0.11) $0.05 $0.25 ($0.01)
Diluted ($0.11) $0.05 $0.25 ($0.01)
W eighted average com m on shares outstanding used
in com puting earnings per com m on share:
Basic 48,651,212 49,149,102 48,606,923 47,163,814
Diluted 48,651,212 49,918,707 48,883,258 47,163,814
GAIN Capital 16
Consolidated Balance Sheet
Note: Dollars in millions. Columns may not add due to rounding.
As of
9/30/2016 12/31/2015
ASSETS:
Cash and cash equivalents 235.7$ 171.9$
Cash and securities held for custom ers 1,054.6 920.6
Receivables from brokers 52.3 121.2
Prepaid assets 10.3 7.8
Property and equipm ent - net of accum ulated depreciation 34.8 30.4
Intangible assets, net 73.2 91.5
Goodwill 32.6 34.0
Other assets 48.8 47.2
Total assets 1,542.4$ 1,424.6$
LIABILITIES AND SHAREHOLDERS' EQUITY:
Payables to custom ers 1,054.6$ 920.6$
Accrued com pensation & benefits 10.8 12.4
Accrued expenses and other liabilities 44.5 51.6
Incom e tax payable 2.3 1.1
Convertible senior notes 123.5 121.7
Total liabilities 1,235.7$ 1,107.4$
Non-controlling interest 14.2$ 11.0$
Shareholders' Equity 292.5 306.1
Total liabilities and shareholders' equity 1,542.4$ 1,424.6$
GAIN Capital 17
Liquidity
Note: Dollars in millions. Columns may not add due to rounding.
(1) Reflects cash that would be received from brokers following the close-out of all open positions.
(2) Relates to regulatory capital requirements or capital charges, depending upon regulatory jurisdiction.
As of
9/30/2016 6/30/2016 3/31/2016 12/31/2015
Cash and cash equivalents $235.7 $89.4 $189.7 $171.9
Receivable from banks and brokers
(1)
52.3 218.1 120.0 121.2
Less: Payable to brokers - (4.8) - -
Less: Regulatory capital requirem ents/charges
(2)
(117.0) (122.6) (121.4) (114.7)
Liquidity $171.0 $180.2 $188.3 $178.4
Regulatory Capital Requirem ents/Charges
US $29.2 $28.4 $29.1 $26.1
UK 79.9 87.8 85.5 82.3
Other jurisdictions 7.9 6.4 6.8 6.3
Total Regulatory Capital Requirem ents/Charges
(2 )
$117.0 $122.6 $121.4 $114.7
GAIN Capital 18
Adjusted EBITDA & Margin Reconciliation
Note: Dollars in millions. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
(2) Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenue.
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
2016 2015
(1 )
2016 2015
(1 )
Net Revenue 72.2$ 128.1$ 296.1$ 332.6$
Net Incom e/(Loss) (4.7) 1.0 14.5 (0.7)
Net Incom e Margin % (7%) 1% 5% (0%)
Net Incom e/(Loss) (4.7)$ 1.0$ 14.5$ (0.7)$
Depreciation & am ortization 3.5 2.9 10.2 7.6
Purchase intangible am ortization 3.6 4.3 11.4 10.7
Interest expense on long term borrowings 2.6 2.6 7.8 6.6
Incom e tax expense/(benefit) (3.2) 7.9 4.2 7.6
Acquisition costs - 0.2 - 2.7
Restructuri g 0.3 - 1.1 1.9
Integration costs 0.6 10.7 2.5 23.1
Legal settlem ent (0.2) - 9.2 -
Bad debt related to SNB event in January of 2015 - - - 2.5
Acquisition contingent consideration adjustm ent - - - (4.3)
Equity in net loss of affiliate 0.0 - 0.1 -
Net incom e attributable to non-controlling interest 0.7 0.6 1.8 1.3
Adjusted EBITDA 3.3$ 30.1$ 62.7$ 59.1$
Adjusted EBITDA Margin %
(2)
5% 24% 21% 18%
GAIN Capital 19
Adjusted Net Income/(Loss) and EPS Reconciliation
Note: Dollars in millions, except per share and share data. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
(2) Assumes 22% tax rate.
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
2016 2015
(1 )
2016
(1 )
2015
(1 )
Net Incom e/(Loss) ($4.7) $1.0 $14.5 ($0.7)
Incom e Tax Expense/(Benefit) (3.2) 7.9 4.2 7.6
Equity in net loss of affilate 0.0 - 0.1 -
Non-controlling Interest 0.7 0.6 1.8 1.3
Pre-Tax Incom e/(Loss) ($7.2) $9.4 $20.5 $8.2
Plus: Adjustm nts 0.7 10.9 12.8 25.9
Adjusted Pre-Tax Incom e/(Loss) ($6.5) $20.4 $33.3 $34.1
Norm alized Incom e Tax
(2)
1.4 (4.5) (7.3) (7.5)
Equity in net loss of affilate (0.0) - (0.1) -
Non-controlling interest (0.7) (0.6) (1.8) (1.3)
Adjusted Net Incom e/(Loss) ($5.8) $15.3 $24.1 $25.3
Adjusted Earnings/(Loss) per Com m on Share:
Basic ($0.12) $0.31 $0.50 $0.54
Diluted ($0.12) $0.31 $0.49 $0.54
GAIN Capital 20
Reconciliation of Segment Profit to Income/(Loss) Before Income Tax Expense
Note: Dollars in millions. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
3 M onths Ended Sept. 30, 9 M onths Ended Sept. 30,
2016 2015
(1 )
2016 2015
(1 )
Retail segm ent $6.5 $33.7 $74.3 $69.2
Institutional segm ent 1.0 2.4 4.0 8.0
Futures segm ent 1.4 1.0 4.1 3.3
Corporate and other (5.6) (7.0) (19.7) (21.4)
Segm ent Profit $3.3 $30.1 $62.7 $59.1
Depreciation and am ortization $3.5 $2.9 $10.2 $7.6
Purchased intangible am ortization 3.6 4.3 11.4 10.7
Acquisition expenses - 0.2 - 2.7
Restructuring expenses 0.3 - 1.1 1.9
Integration expenses 0.6 10.7 2.5 23.1
Legal settlem ent (0.2) - 9.2 -
Bad debt related to SNB event - - - 2.5
Acquisition contingnent consideration adj. - - - (4.3)
Operating profit/(loss) ($4.5) $12.0 $28.3 $14.9
Interest expense on long term borrowings 2.6 2.6 7.8 6.6
Incom e/(loss) before incom e tax expense ($7.2) $9.4 $20.5 $8.2
GAIN Capital 21
Pro Forma Reconciliation – 9 Months 2015
Note: Dollars in millions. Columns may not add due to rounding.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
9 M onths City Index Pro Form a
2015
(1)
Q1 2015 9 M os. 2015
(1 )
Net Revenue 332.6$ 35.7$ 368.2$
Net Incom e/(Loss) (0.7) (6.9) (7.6)
Net Incom e Margin % (0%) (19%) (2%)
Net Incom e/(Loss) (0.7)$ (6.9)$ (7.6)$
Depreciation & am ortization 7.6 2.3 9.9
Purchase intangible am ortization 10.7 3.1 13.8
Interest expense on long term borrowings 6.6 - 6.6
Incom e tax expense 7.6 - 7.6
Acquisition costs 2.7 - 2.7
Restructuring 1.9 - 1.9
Integration costs 23.1 0.2 23.2
Legal settlem ent - - -
Bad debt related to SNB event in January of 2015 2.5 3.6 6.1
Acquisition contingent consideration adjustm ent (4.3) - (4.3)
Equity in net loss of affiliate - - -
Net incom e attributable to non-controlling interest 1.3 - 1.3
Adjusted EBITDA 59.1$ 2.3$ 61.3$
Adjusted EBITDA Margin %
(2)
18% 6% 17%
GAIN Capital 22
Operating Expenses
Note: Dollars in millions. Columns may not add due to rounding. Q1 2015 operating expenses shown on a pro forma basis based on the simple addition of GAIN Capital and City Index.
(1) As restated. See the Company’s Form 10-Q/A filed on May 3, 2016 for additional information.
2015
(1 )
2016
Q1 Q2 Q3 Q4 Q1 Q2 Q3
Total Op. Expenses 106.6$ 98.0$ 98.0$ 79.1$ 83.8$ 80.7$ 68.9$
Bad Debt and other variable 3.0 1.3 3.4 1.5 1.8 1.7 0.2
Referral Fees 33.0 29.5 28.6 18.8 20.7 17.6 15.2
Marketing 9.0 8.4 7.4 6.8 6.4 6.8 5.3
Fixed Op. Expenses 61.5$ 58.8$ 58.6$ 52.0$ 54.9$ 54.6$ 48.2$
GAIN Capital 23
Retail Revenue per Million
$107
$95
$84
$95
$88
$105
$102 $95
$0
$20
$40
$60
$80
$100
$120
$140
Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
Quarterly Trailing 12 Months Trailing 12 Months - Pro Forma
GAIN Capital 24
Quarterly Operating Metrics
Note: Volumes in billions; assets in millions.
Definitions for all operating metrics are available on page 25.
Three M onths Ended,
Sep-15 Dec-15 M ar-16 Jun-16 Sep-16
Retail
OTC Trading Volum e $1,118.4 $812.6 $861.7 $710.9 $612.4
OTC Average Daily Volum e $16.9 $12.5 $13.5 $10.9 $9.3
Active OTC Accounts 149,846 146,977 136,559 139,022 133,009
Institutional
ECN Volum e $451.2 $415.4 $531.6 $526.9 $509.9
ECN Average Daily Volum e $6.8 $6.4 $8.3 $8.1 $7.7
Swap Dealer Volum e $198.5 $184.3 $186.6 $186.2 $190.0
Swap Dealer Average Daily Volum e $3.0 $2.8 $2.9 $2.9 $2.9
Futures
Futures Contracts 2,203,456 2,065,094 2,334,308 2,223,501 1,912,174
Futures Average Daily Contracts 34,429 32,779 38,267 34,742 29,878
Active Futures Accounts 8,567 8,668 8,890 8,822 8,594
GAIN Capital 25
Definition of Metrics
• Active Accounts: Accounts who executed a transaction within the last 12
months
• 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
Financial and Operating Results
Third Quarter and 9 Months 2016
November 2016