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Forex.com Reports an Extremely Successful First Quarter of the Year

A few hours after its rival FXCM announced its operational metrics for April and Q1 2013, Forex.com is releasing its data. A week ago the broker published its preliminary results for the first quarter of the year, and the reported details were quite promising – revenues up 50% compared to the same period in 2012, client assets increasing, and net income going up as well. 

 
Earlier in April Forex.com declined FXCM's offer to acquire it, pronouncing the offer “hostile” and buying out GFT instead. This did create a certain suspense in the forex world, however it didn't last long and it would appear that things are continuing as before. Moreover, given that the GFT acquisition only cost GAIN Capital $27.8 million and the first year operating synergies are estimated at $35-$45 million, we can easily conclude that this was a sweet deal.
 
Forex.com's retail trading volume for Q1 of the year reached $431.8 billion – a significant increase from the $385.1 billion from Q1 of 2012. Institutional forex also increased a ton, from $468.0 billion in the first quarter of the previous year to $889.9 billion
 
 
GAIN Capital Reports 50% Growth in Revenue; Record Client Assets

- Net revenue increases 50% to $49.8 million from $33.2 million
- Net income of $4.3 million, compared with net loss of $1.3 million
- EBITDA* rises to $7.5 million from $1.3 million
- April metrics show continued positive momentum
- Signs transformational acquisition of Global Futures & Forex (GFT)

BEDMINSTER, N.J., May 7, 2013 /PRNewswire/ -- GAIN Capital Holdings, Inc. ("GAIN") (NYSE: GCAP), a leading global provider of online trading services, reported net income of $4.3 million, or $0.11 per diluted share, for the first quarter of 2013, on net revenue of $49.8 million.

"I am pleased to report strong results for the first quarter, with a 50% increase in net revenue and EBITDA rising to $7.5 million from $1.3 million,  as all of our core business areas posted significant growth amid improved market conditions," said Glenn Stevens, CEO of GAIN Capital. "At the same time, we accelerated the diversification of our net revenue, with commission-based businesses representing 22% of net revenue in the first quarter, compared with 11% in the first quarter of 2012."

"We also reported positive trends in key operating metrics, with client assets rising 40% to a record $456.9 million and funded accounts growing 36% to 100,020, thanks to a mix of acquisitions and organic growth. This was accomplished while managing costs in order to achieve significant operating leverage."

"Our positive momentum continued in April, which saw retail and institutional volumes increase 26% and 103% on a year-over-year basis, while futures DARTs rose 10% from March 2013.  With superior product offerings in our retail, institutional and futures businesses, GAIN has been able to capitalize on improved market conditions across its expanding global operations," Mr. Stevens said.

On April 25, 2013, GAIN Capital announced that it had signed a definitive agreement to acquire Global Futures & Forex, LTD (GFT), a global provider of retail forex and derivatives trading.

"GAIN's pending acquisition of GFT is a transformational transaction, significantly increasing our scale and capacity to generate both revenue and EBITDA, while adding a range of complementary businesses. Following our acquisition of GFT's U.S. assets in December, we are well prepared to swiftly integrate the two businesses following the close of the transaction, capitalizing on synergies while ensuring continuity for clients," Mr. Stevens said.

"Looking ahead to the rest of the year, we see meaningful opportunities to continue our growth. With the scale, diversity of products and revenue sources and significant operating cost synergies provided by the GFT acquisition, as well as the continued strong execution of our organic growth plan, we are well-positioned to take advantage of any continued improvement in market conditions in 2013 and beyond," Mr. Stevens concluded. 

Consolidated Results
Net revenue for the first quarter of 2013 was $49.8 million, a 50% increase from the prior year quarter. Revenue from the trading business was $35.3 million, compared with $29.5 million a year earlier, while revenue from the commission-based business was $10.9 million, compared with $3.7 million in the first quarter of 2012.

Growth in expenses was significantly lower than growth in revenue, with expenses in the first quarter of 2013 increasing 27.1% from the prior year quarter. This increase was largely driven by increases in variable costs, including trading expense, as well as the inclusion of expenses related to OEC, which was acquired in August 2012.  In addition, GAIN was able to achieve revenue growth even as marketing expenses were reduced 23.9%, to $5.4 million.

EBITDA for the first quarter rose to $7.5 million, from $1.3 million a year earlier. EBITDA margin was 15% in the first quarter of 2013, compared with 4% a year earlier.

Net income for the quarter was $4.3 million, or $0.11 per diluted share, compared with a net loss of $1.3 million, or $0.04 per diluted share, a year earlier.

First Quarter Metrics
(Comparisons below are references to 1Q12)

- Net revenue of $49.8 million, compared with $33.2 million
- Net income of $4.3 million, compared with a net loss of $1.3 million
- Diluted EPS of $0.11, compared with ($0.04)
- EBITDA of $7.5 million, compared with $1.3 million
- Total retail trading volume of $431.8 billion, compared with $385.1 billion
- Total institutional trading volume of $889.9 billion, compared with $468.0 billion
- Daily average revenue trades (DARTs) of 13,238 in GAIN's futures business, OEC

GFT Acquisition
On April 25, 2013, GAIN Capital announced that it had signed a definitive agreement to acquire Global Futures & Forex, LTD (GFT), a global provider of retail forex and derivatives trading. The purchase price is approximately $107.8 million which, including approximately $80 million of GFT cash at closing, results in a net purchase price of $27.8 million.

The purchase price will be paid with $40 million in cash, a five-year $40 million seller note and the issuance of approximately 4.9 million shares of GAIN common stock. The transaction is expected to close in the third quarter and to be accretive in the first full quarter after closing; first year operating synergies are estimated at $35-$45 million.
 
 

About GAIN Capital

 
GAIN Capital Holdings, Inc. (NYSE: GCAP) is a global provider of online trading services. GAIN's innovative trading technology provides market access and highly automated trade execution services across multiple asset classes, including foreign exchange (forex or FX), contracts for difference (CFDs) and exchange-based products, to a diverse client base of retail and institutional investors.
 
Through our retail brand, FOREX.com, we provide retail traders around the world with access to a variety of global OTC financial markets, including forex, precious metals and CFDs on commodities and indices.  GAIN Capital also operates GTX, a fully independent FX ECN for hedge funds and institutions; Open eCry (OEC), an innovative online futures broker; and GAIN Securities, Inc. (member FINRA/SIPC) a licensed U.S. Broker-dealer.
 
GAIN Capital and its affiliates have offices in New York City; Bedminster, New Jersey; London; Sydney; Hong Kong; Tokyo; Singapore; Beijing; and Seoul.
TAGS: Forex.com  forex trading  forex metrics  Q1 2013  retail forex  institutional forex  forex trading   GFT  FXCM 

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