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• | GAAP net income of $10.0 million, or $0.22 per share, yielding a 10% margin |
• | GAAP net revenue of $95.5 million, up 30% year-over-year |
• | Adjusted net income of $13.5 million, or $0.30 per share |
• | Adjusted EBITDA of $30.5 million, yielding a 32% adjusted EBITDA margin |
• | New direct accounts increased 28% year-over-year and 23% quarter-over-quarter |
• | Futures segment margin doubled to 14% for the first nine months of 2018 as compared to 7% for the nine months ended September 30, 2017 |
• | Subsequent to quarter end, GAIN commenced a "modified Dutch auction" tender offer to purchase up to $50 million of its shares |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net Income/(Loss) | $ | 10.0 | $ | (3.1 | ) | $ | 28.7 | $ | (8.0 | ) | |||||
Adjusted Net Income/(Loss)(1) | $ | 13.5 | $ | 1.4 | $ | 31.7 | $ | (6.6 | ) | ||||||
Net Revenue | $ | 95.5 | $ | 73.8 | $ | 278.1 | $ | 215.5 | |||||||
Operating Expenses | (65.0 | ) | (60.9 | ) | (196.8 | ) | (191.7 | ) | |||||||
Adjusted EBITDA(1) | $ | 30.5 | $ | 12.9 | $ | 81.3 | $ | 23.8 | |||||||
Diluted GAAP EPS | $ | 0.22 | $ | (0.06 | ) | $ | 0.60 | $ | (0.14 | ) | |||||
Adjusted EPS(1) | $ | 0.30 | $ | 0.03 | $ | 0.70 | $ | (0.14 | ) |
Q3 18 | Q3 17 | Year-over-year Change | ||||||||
Retail Segment | ||||||||||
OTC Trading Volume (1) (2) | $ | 506.5 | $ | 644.8 | (21.4 | )% | ||||
OTC Average Daily Volume | $ | 7.8 | $ | 9.9 | (21.2 | )% | ||||
12 Month Trailing Active OTC Accounts (3) | 129,182 | 133,813 | (3.5 | )% | ||||||
3 Month Trailing Active OTC Accounts (3) | 71,597 | 82,275 | (13.0 | )% | ||||||
Futures Segment | ||||||||||
Number of Futures Contracts | 1,622,114 | 1,518,417 | 6.8 | % | ||||||
Futures Average Daily Contracts | 25,748 | 24,102 | 6.8 | % | ||||||
12 Month Trailing Active Futures Accounts (3) | 7,550 | 8,056 | (6.3 | )% |
• | returned a total of $5.9 million to shareholders in the form of share repurchases and dividends which brings the year-to-date total return to $19.6 million. |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
REVENUE: | |||||||||||||||
Retail revenue | $ | 82.9 | $ | 62.1 | $ | 239.1 | $ | 180.2 | |||||||
Futures revenue | 8.7 | 9.0 | 30.4 | 29.2 | |||||||||||
Other (loss)/revenue | 1.2 | 1.2 | 1.7 | 3.1 | |||||||||||
Total non-interest revenue | 92.8 | 72.4 | 271.2 | 212.4 | |||||||||||
Interest revenue | 3.3 | 1.6 | 8.2 | 3.7 | |||||||||||
Interest expense | 0.5 | 0.3 | 1.3 | 0.6 | |||||||||||
Total net interest revenue | 2.8 | 1.4 | 6.9 | 3.1 | |||||||||||
Net revenue | $ | 95.5 | $ | 73.8 | $ | 278.1 | $ | 215.5 | |||||||
EXPENSES: | |||||||||||||||
Employee compensation and benefits | $ | 22.9 | $ | 20.8 | $ | 69.7 | $ | 64.3 | |||||||
Selling and marketing | 10.2 | 6.4 | 23.0 | 23.2 | |||||||||||
Referral fees | 8.1 | 12.9 | 30.0 | 42.7 | |||||||||||
Trading expenses | 5.8 | 4.7 | 17.1 | 15.1 | |||||||||||
General and administrative | 12.2 | 11.2 | 38.9 | 32.3 | |||||||||||
Depreciation and amortization | 4.7 | 4.4 | 15.4 | 12.3 | |||||||||||
Purchased intangible amortization | 3.5 | 3.5 | 10.8 | 10.4 | |||||||||||
Communications and technology | 5.5 | 4.6 | 16.4 | 14.2 | |||||||||||
Bad debt provision | 0.3 | 0.1 | 1.7 | 0.0 | |||||||||||
Contingent provision | 5.0 | 0.0 | 5.0 | 0.0 | |||||||||||
Impairment of investment | 0.0 | 0.0 | (0.1 | ) | 0.0 | ||||||||||
Total operating expense | 78.2 | 68.8 | 227.9 | 214.5 | |||||||||||
OPERATING PROFIT/(LOSS) | 17.3 | 5.0 | 50.2 | 1.1 | |||||||||||
Interest expense on long term borrowings | 3.4 | 3.0 | 10.1 | 8.3 | |||||||||||
Loss on extinguishment of debt | 0.0 | 4.9 | $ | 0 | 4.9 | ||||||||||
INCOME/(LOSS) BEFORE INCOME TAX EXPENSE/(BENEFIT) | 13.9 | (2.9 | ) | 40.1 | (12.2 | ) | |||||||||
Income tax (benefit)/expense | 4.0 | 0.1 | 11.4 | (4.3 | ) | ||||||||||
Equity in net loss of affiliate | 0.0 | 0.0 | 0.0 | (0.1 | ) | ||||||||||
Net income/(loss) from continuing operations | 10.0 | (3.1 | ) | 28.7 | (8.0 | ) | |||||||||
Income from discontinued operations, including gain on sale of $69,439, net of income tax of $3,222 | 2.3 | 0.7 | 67.3 | 1.0 | |||||||||||
NET INCOME/(LOSS) | 12.3 | (2.4 | ) | 96.0 | (7.0 | ) | |||||||||
Less income attributable to non-controlling interest | 0.1 | 0.2 | 0.6 | 0.5 | |||||||||||
NET INCOME/(LOSS) APPLICABLE TO GAIN CAPITAL HOLDINGS, INC. | $ | 12.2 | $ | (2.6 | ) | $ | 95.4 | $ | (7.5 | ) | |||||
Earnings/(loss) per common share: | |||||||||||||||
Basic earnings/(loss) from continuing operations | $ | 0.22 | $ | (0.06 | ) | $ | 0.61 | $ | (0.14 | ) | |||||
Basic earnings from discontinued operations | $ | 0.05 | $ | 0.02 | $ | 1.50 | $ | 0.02 | |||||||
Basic | $ | 0.27 | $ | (0.04 | ) | $ | 2.11 | $ | (0.12 | ) | |||||
Diluted earnings/(loss) from continuing operations | $ | 0.22 | $ | (0.06 | ) | $ | 0.60 | $ | (0.14 | ) | |||||
Diluted earnings from discontinued operations | $ | 0.05 | $ | 0.02 | $ | 1.49 | $ | 0.02 | |||||||
Diluted | $ | 0.27 | $ | (0.04 | ) | $ | 2.09 | $ | (0.12 | ) | |||||
Weighted average common shares outstanding used in computing earnings/(loss) per common share: | |||||||||||||||
Basic | 44,553,903 | 46,323,038 | 44,787,875 | 47,295,843 | |||||||||||
Diluted | 44,984,721 | 46,323,038 | 45,270,797 | 47,295,843 |
September 30, | December 31, | ||||||
2018 | 2017 | ||||||
ASSETS: | |||||||
Cash and cash equivalents | $ | 362.3 | $ | 209.7 | |||
Cash and securities held for customers | 887.3 | 978.8 | |||||
Receivables from brokers | 57.5 | 78.5 | |||||
Property and equipment, net of accumulated depreciation | 33.5 | 40.7 | |||||
Intangible assets, net of accumulated amortization | 36.2 | 62.0 | |||||
Goodwill | 28.0 | 33.0 | |||||
Other assets | 37.5 | 45.9 | |||||
Total assets | $ | 1,442.3 | $ | 1,448.6 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||
Payables to customers | $ | 887.3 | $ | 978.8 | |||
Payables to brokers | 1.8 | 2.8 | |||||
Accrued compensation & benefits | 11.1 | 10.1 | |||||
Accrued expenses and other liabilities | 38.0 | 33.9 | |||||
Income tax payable | 7.5 | 0.6 | |||||
Convertible senior notes | 136.9 | 132.2 | |||||
Total liabilities | $ | 1,082.5 | $ | 1,158.5 | |||
Redeemable non-controlling interests | $ | 2.5 | $ | 4.4 | |||
Shareholders' equity | 357.2 | 285.7 | |||||
Total liabilities and shareholders' equity | $ | 1,442.3 | $ | 1,448.6 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
REVENUE: | |||||||||||||||
Institutional revenue | $ | 0.0 | $ | 7.5 | $ | 16.4 | $ | 23.3 | |||||||
Total non-interest revenue | 0.0 | 7.5 | 16.4 | 23.3 | |||||||||||
Interest revenue | 0.0 | 0.0 | 0.1 | 0.1 | |||||||||||
Total net interest revenue | 0.0 | 0.0 | 0.1 | 0.1 | |||||||||||
Net revenue | $ | 0.0 | $ | 7.6 | $ | 16.5 | $ | 23.4 | |||||||
EXPENSES: | |||||||||||||||
Employee compensation and benefits | $ | 0.1 | $ | 3.0 | $ | 6.0 | $ | 10.0 | |||||||
Trading expenses | 0.0 | 2.4 | 5.4 | 7.3 | |||||||||||
Other expenses | 0.0 | 1.1 | 4.0 | 4.3 | |||||||||||
Total operating expense | 0.1 | 6.5 | 15.4 | 21.6 | |||||||||||
OPERATING PROFIT | (0.1 | ) | 1.0 | 1.1 | 1.8 | ||||||||||
Gain on sale of discontinued operations | (0.1 | ) | 0.0 | 69.4 | 0.0 | ||||||||||
INCOME BEFORE INCOME TAX EXPENSE/(BENEFIT) | (0.3 | ) | 1.0 | 70.6 | 1.8 | ||||||||||
Income tax expense/(benefit) | (2.6 | ) | 0.3 | 3.2 | 0.8 | ||||||||||
NET INCOME FROM DISCONTINUED OPERATIONS | $ | 2.3 | $ | 0.7 | $ | 67.3 | $ | 1.0 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income/(loss) from continuing operations | $ | 10.0 | $ | (3.1 | ) | $ | 28.7 | $ | (8.0 | ) | |||||
Income tax expense/(benefit) | 4.0 | 0.1 | 11.4 | (4.3 | ) | ||||||||||
Equity in net loss of affiliate | 0.0 | 0.0 | 0.0 | 0.1 | |||||||||||
Pre-tax income/(loss) | $ | 13.9 | $ | (2.9 | ) | $ | 40.1 | $ | (12.2 | ) | |||||
Adjustments | 5.0 | 4.9 | 4.9 | 4.9 | |||||||||||
Adjusted pre-tax income/(loss) | $ | 18.9 | $ | 2.0 | $ | 45.0 | $ | (7.3 | ) | ||||||
Adjusted income tax | (5.3 | ) | (0.3 | ) | (12.6 | ) | 1.2 | ||||||||
Equity in net loss of affiliate | 0.0 | 0.0 | 0.0 | (0.1 | ) | ||||||||||
Non-controlling interest | (0.1 | ) | (0.2 | ) | (0.6 | ) | (0.5 | ) | |||||||
Adjusted net income/(loss) | $ | 13.5 | $ | 1.4 | $ | 31.7 | $ | (6.6 | ) | ||||||
Adjusted earnings/(loss) per common share | |||||||||||||||
Basic | $ | 0.30 | $ | 0.03 | $ | 0.71 | $ | (0.14 | ) | ||||||
Diluted | $ | 0.30 | $ | 0.03 | $ | 0.70 | $ | (0.14 | ) | ||||||
Weighted average common shares outstanding used in computing earnings/(loss) per common share | |||||||||||||||
Basic | 44,553,903 | 46,323,038 | 44,787,875 | 47,295,843 | |||||||||||
Diluted | 44,984,721 | 46,530,002 | 45,270,797 | 47,295,843 |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
GAAP Tax (expense)/benefit | $ | (4.0 | ) | $ | (0.1 | ) | $ | (11.4 | ) | $ | 4.3 | ||||
GAAP Tax Rate | 28.8 | % | (3.4 | )% | 28.4 | % | 35.2 | % | |||||||
Uncertain tax position | 0.0 | 0.0 | (0.2 | ) | (2.1 | ) | |||||||||
Tax true up | 0.1 | 0.6 | 0.4 | (0.1 | ) | ||||||||||
One off adjustments | (1.4 | ) | (0.8 | ) | (1.4 | ) | (0.8 | ) | |||||||
Adjusted tax (expense)/benefit | $ | (5.3 | ) | $ | (0.3 | ) | $ | (12.6 | ) | $ | 1.2 | ||||
Adjusted tax rate | 28.0 | % | 16.9 | % | 28.0 | % | 16.9 | % |
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Net revenue | $ | 95.5 | $ | 73.8 | $ | 278.1 | $ | 215.5 | ||||||
Net income/(loss) from continuing operations | 10.0 | (3.1 | ) | 28.7 | (8.0 | ) | ||||||||
Net income/(loss) margin % (1) | 10 | % | (4 | )% | 10 | % | (4 | )% | ||||||
Net income/(loss) | $ | 10.0 | $ | (3.1 | ) | $ | 28.7 | $ | (8.0 | ) | ||||
Depreciation and amortization | 4.7 | 4.4 | 15.4 | 12.3 | ||||||||||
Purchased intangible amortization | 3.5 | 3.5 | 10.8 | 10.4 | ||||||||||
Interest expense on long term borrowings | 3.4 | 3.0 | 10.1 | 8.3 | ||||||||||
Income tax (benefit)/expense | 4.0 | 0.1 | 11.4 | (4.3 | ) | |||||||||
Contingent provision | 5.0 | 0.0 | 5.0 | 0.0 | ||||||||||
Impairment of investment | 0.0 | 0.0 | (0.1 | ) | 0.0 | |||||||||
Equity in net loss of affiliate | 0.0 | 0.0 | 0.0 | 0.1 | ||||||||||
Loss on extinguishment of debt | 0.0 | 4.9 | 0.0 | 4.9 | ||||||||||
Adjusted EBITDA | 30.5 | 12.9 | $ | 81.3 | $ | 23.8 | ||||||||
Adjusted EBITDA Margin(2) | 32 | % | 17 | % | 29 | % | 11 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Trading Revenue | $ | 82.9 | $ | 62.1 | $ | 239.1 | $ | 180.2 | |||||||
Other Retail Revenue | 2.9 | 1.8 | 7.0 | 4.5 | |||||||||||
Total Revenue | 85.9 | 63.9 | 246.1 | 184.6 | |||||||||||
Employee Compensation & Benefits | 14.4 | 12.7 | 43.4 | 40.5 | |||||||||||
Marketing | 10.0 | 6.3 | 22.1 | 22.4 | |||||||||||
Referral Fees | 5.3 | 9.8 | 20.0 | 31.9 | |||||||||||
Other Operating Expenses | 17.2 | 15.6 | 53.2 | 44.3 | |||||||||||
Segment Profit | $ | 39.0 | $ | 19.5 | $ | 107.3 | $ | 45.5 | |||||||
Segment Profit Margin % | 45 | % | 30 | % | 44 | % | 25 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Trading Revenue | $ | 8.7 | $ | 9.0 | $ | 30.4 | $ | 29.2 | |||||||
Other Futures Revenue | 1.1 | 0.7 | 2.9 | 1.6 | |||||||||||
Revenue | 9.7 | 9.8 | 33.3 | 30.8 | |||||||||||
Employee Compensation & Benefits | 2.4 | 2.3 | 7.8 | 7.4 | |||||||||||
Marketing | 0.2 | 0.1 | 0.6 | 0.6 | |||||||||||
Referral Fees | 2.8 | 3.1 | 10.0 | 10.7 | |||||||||||
Other Operating Expenses | 3.0 | 2.9 | 10.4 | 9.9 | |||||||||||
Segment Profit | $ | 1.3 | $ | 1.3 | $ | 4.5 | $ | 2.2 | |||||||
Segment Profit Margin % | 13 | % | 13 | % | 14 | % | 7 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue/(loss) | $ | (0.1 | ) | $ | 0.1 | $ | (1.3 | ) | $ | 0.2 | |||||
Employee Compensation & Benefits | 6.1 | 5.8 | 18.4 | 16.5 | |||||||||||
Marketing | 0.1 | 0.0 | 0.2 | 0.1 | |||||||||||
Other Operating Expenses | 3.6 | 2.2 | 10.6 | 7.4 | |||||||||||
Loss | $ | (9.8 | ) | $ | (7.9 | ) | $ | (30.5 | ) | $ | (23.9 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Retail segment | $ | 39.0 | $ | 19.5 | $ | 107.3 | $ | 45.5 | |||||||
Futures segment | 1.3 | 1.3 | 4.5 | 2.2 | |||||||||||
Corporate and other | (9.8 | ) | (7.9 | ) | (30.5 | ) | (23.9 | ) | |||||||
Segment Profit | 30.5 | 12.9 | 81.3 | 23.8 | |||||||||||
Depreciation and amortization | 4.7 | 4.4 | 15.4 | 12.3 | |||||||||||
Purchased intangible amortization | 3.5 | 3.5 | 10.8 | 10.4 | |||||||||||
Contingent provision | 5.0 | 0.0 | 5.0 | 0.0 | |||||||||||
Impairment of investment | 0.0 | 0.0 | $ | (0.1 | ) | $ | 0.0 | ||||||||
Operating profit/(loss) | $ | 17.3 | $ | 5.0 | $ | 50.2 | $ | 1.1 | |||||||
Interest expense on long term borrowings | 3.4 | 3.0 | 10.1 | 8.3 | |||||||||||
Loss on extinguishment of debt | 0.0 | 4.9 | $ | 0.0 | $ | 4.9 | |||||||||
Income/(loss) before income tax expense/(benefit) | $ | 13.9 | $ | (2.9 | ) | $ | 40.1 | $ | (12.2 | ) |
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