Gain Capital Posts Fourth Quarter 2012 Loss, Finishes 2012 Slightly in Profit
Gain Capital just posted disappointing results for fourth quarter 2012 and for the whole 2012 year. It doesn’t come as

Gain Capital just posted disappointing results for fourth quarter 2012 and for the whole 2012 year. It doesn’t come as a surprise that 2012 was a bad year for Gain, it was a bad year for most of other brokers: Saxo today reported significant drop in activity in 2012 when comparing to 2011. Industry flagship FXCM however reported better than expected results, still missing estimates, but faring much better than others as its 2012 income was almost 6 times more than Saxo’s and Gain’s combined. FXCM’s shares today were finally back to IPO levels.
Gain Capital was down in double digits on most metrics as retail volume fell almost 20% due to low volatility experienced in 2012 by most brokers. Retail revenues were down 27% however at least institutional volumes were up 134% driving revenue by 250%. Institutional business is however still a fragment of Gain’s retail one. Clients assets, mainly due to acquisitions, were up by 50%.
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Luckily for all brokers 2013 brought fresh air of volatility to the markets as January and February volumes peaked for most brokers. If this volatility continues we will probably see companies like Gain and Saxo going back to displaying healthy results while brokers like FXCM and GMO will keep growing and strengthening their leading market positions at the expense of less ambitious players.
GAIN Capital Reports 2012 Fourth Quarter & Full Year Results
Effective execution of diversification strategy puts Company in strong position for growth; Multi-year low in market volatility in the fourth quarter impacted retail results; initial 2013 results indicate renewed retail client engagement
For full year 2012:
- Acquisitions and organic growth drove 44% increase in client assets to $446.3 million
- Net income of $2.6 million; $0.07 per diluted share
- Adjusted net income of $5.5 million; $0.14 per diluted share
- Adjusted EBITDA of $11.1 million
BEDMINSTER, N.J., March 12, 2013 /PRNewswire/ — GAIN Capital Holdings, Inc. (“GAIN”) (NYSE: GCAP), a leading global provider of online trading services, reported its results for the fourth quarter and full year 2012.
“In 2012, we made significant progress in our diversification strategy through both organic initiatives and targeted acquisitions,” said Glenn Stevens, CEO of GAIN Capital. “Notable achievements include the growth of our institutional platform, GTX, which more than tripled its revenue year-on-year, as well as the purchase and successful integration of futures broker Open E Cry (OEC), which helped drive a 44% increase in client assets to $446 million at year end. In our core retail OTC business, we expanded our product offering to include more than 450 CFD and FX markets, from 70 in 2011, and launched new international services. Our full year 2012 performance demonstrated our ability to operate profitably in spite of weak market conditions that limited retail client engagement throughout most of the year.”
“In December 2012, we successfully completed the acquisition of the U.S. business of GFT Forex, and in early 2013 we acquired the U.S. business of FX Solutions, illustrating that GAIN has become a partner of choice for M&A transactions, with a reputation as a fair counterparty with proven integration skills.”
“These initiatives and acquisitions have positioned GAIN to capitalize on improved market conditions in 2013. While remaining low by historical levels, FX volatility rose the first two months of the year, and we are seeing a sequential growth across our business lines. As we move through 2013, our focus is to offer market-leading technology and service in our retail OTC business, scale up our institutional and futures offering and seek out additional acquisition opportunities to further scale our business,” Mr. Stevens concluded.
Retail business
For the full year 2012, GAIN’s retail OTC business generated revenue of $127.5 million, compared with $175.9 million in 2011. Total retail trading volume was $1.3 trillion, compared with $1.6 trillion in 2011. Significant developments for the year included the launch of TRADE, a platform giving access to more than 450 CFD and FX markets, as well as new services for the German and Canadian markets, and the acquisition of the U.S. business of GFT Forex.
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“The full year 2012 saw volatility measures drop to multi-year lows, with short upticks of volatility interrupting an overall downward trend. During the year, we took measures to grow our retail business in terms of products, geographic footprint and client assets, while cutting $20.8 million in costs related to the retail business,” Glenn Stevens commented. “With higher levels of volatility in the first months of 2013, we believe these factors, combined with our global brand recognition, position us well to profitably re-engage retail traders.”
For the fourth quarter, GAIN reported retail trading revenue of $22.9 million, compared with $29.8 million a year earlier, while retail OTC volume fell to $298.8 billion, from $366.4 billion in the fourth quarter of 2011.
Institutional and futures businesses
For the full year 2012, GAIN’s institutional business generated revenue of $15.6 million, compared with $4.4 million in 2011. Total institutional volume for the year was $2.0 trillion, compared with $853.9 billion a year earlier. Notable developments for the year included the expansion of our execution desk and the appointment of Joseph Wald to lead the institutional business.
“This was a landmark year for our GTX institutional business, which rapidly gained traction among key institutional customers, including banks, hedge funds and high frequency traders, even as many of our competitors saw declining volumes,” said Glenn Stevens. “With our new leadership structure in place, we are confident that GTX is poised to enter a new phase of growth, reaching new clients with an expanded product offering.”
In the fourth quarter, the institutional business reported revenue of $3.4 million, compared with $1.3 million in the fourth quarter of 2011. Institutional volume for the quarter was $538.4 billion, compared with $386.4 billion a year earlier. Our institutional business’s results in the fourth quarter of 2011 included high-volume customers acquired from Deutsche Bank earlier in the year.
OEC, GAIN’s exchange-traded futures business which was acquired in August 2011, reported revenue of $4.4 million for the fourth quarter, with daily average revenue trades of 13,000 during the quarter.
“OEC is already making a significant contribution to GAIN’s overall revenue, highlighting the potential of the futures market,” said Glenn Stevens. “We will continue to scale OEC in 2013, boosting margins and exploiting synergies with our retail OTC offerings.”
Full Year Metrics
(Comparisons below are referenced to 2011)
- Net revenue of $151.4 million, compared to $181.5 million
- Net income of $2.6 million, compared to $15.7 million
- Adjusted EBITDA* of $11.1 million, compared to $36.6 million
- Adjusted net income* of $5.5 million, compared to $21.7 million
- Diluted EPS of $0.07, compared to $0.40
- Adjusted diluted EPS* of $0.14, compared to $0.56
- Total retail trading volume of $1.3 trillion, compared to $1.6 trillion
- Total institutional trading volume of $2.0 trillion, compared to $853.9 billion
- Total retail client assets of $446.3 million, compared with $310.4 million.
- (*See below for reconciliation of non-GAAP financial measures)
Fourth Quarter Metrics
- (Comparisons below are referenced to 4Q11)
- Net revenue of $32.4 million, compared to $31.6 million
- Net (loss) of $(3.8) million, compared to $(3.3) million
- Adjusted EBITDA* of $(5.0) million, compared to $(3.1) million
- Adjusted net (loss)* of $(3.3) million, compared to $(1.6) million
- Diluted EPS of $(0.11), compared to $(0.10)
- Adjusted diluted EPS* of $(0.09), compared to $(0.05)
- Total retail trading volume of $298.8 billion, compared to $366.4 billion
- Total institutional trading volume of $538.4 billion, compared to $386.4 billion
- Daily average revenue trades of approximately 13,000 in our futures business
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Three Months Ended | Three Months Ended | Twelve Months Ended | Twelve Months Ended | |
---|---|---|---|---|
31-Dec-12 | 31-Dec-11 | 31-Dec-12 | 31-Dec-11 | |
REVENUE: | ||||
Trading revenue | $22.9 | $29.8 | $127.5 | $175.9 |
Commission revenue | $7.8 | $1.4 | $21.4 | $4.6 |
Other revenue | $1.6 | $0.4 | $2.3 | $1.8 |
Total non-interest revenue | $32.3 | $31.6 | $151.2 | $182.3 |
Interest revenue | $0.2 | $0.3 | $0.6 | $0.6 |
Interest expense | ($0.1) | ($0.3) | ($0.4) | ($1.4) |
Total net interest revenue / (expense) | $0.1 | $0.2 | ($0.8) | |
Net revenue | $32.4 | $31.6 | $151.4 | $181.5 |
EXPENSES: | ||||
Employee compensation and benefits | $12.0 | $11.5 | $47.5 | $46.4 |
Selling and marketing | $6.9 | $8.2 | $27.0 | $36.2 |
Trading expenses and commissions | $11.2 | $7.5 | $38.0 | $33.0 |
General and administrative | $5.1 | $5.5 | $20.1 | $21.8 |
Depreciation and amortization | $1.7 | $1.0 | $4.9 | $3.9 |
Purchased intangible amortization | $0.7 | $2.5 | $4.1 | $8.9 |
Communications and technology | $2.1 | $2.0 | $7.7 | $7.1 |
Bad debt provision | $0.1 | $0.1 | $0.4 | $0.9 |
Restructuring(1) | $0.6 | |||
Total | $39.8 | $38.3 | $150.3 | $158.2 |
Income / (loss) before tax expense | ($7.4) | ($6.7) | $1.1 | $23.3 |
Income tax expense / (benefit) | ($3.6) | ($3.4) | ($1.5) | $7.6 |
Net income / (loss) | ($3.8) | ($3.3) | $2.6 | $15.7 |
Earnings / (loss) per common share: | ||||
Basic | ($0.1) | ($0.1) | $0.08 | $0.46 |
Diluted | ($0.1) | ($0.1) | $0.07 | $0.40 |
Weighted average common shares outstanding | ||||
used in computing earnings per common share: | ||||
Basic | $35,081,311.0 | $34,205,991.0 | $34,940,800.0 | $34,286,840.0 |
Diluted | $35,081,311.0 | $34,205,991.0 | $37,880,208.0 | $38,981,792.0 |
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With all due respect, your cheerleading is almost as bad as CNBC. Gain has been in a downward spiral for years (at least as long as GS has been in charge). The stock price has gone from 9 to below 4.5, and this is not including the move from the expected IPO price at 14. There is no direction or vision. GTX while showing growth from zero is seeing more competition from other multi-bank platforms and bank GUI’s. Barclays Gator will be challenging for Gain as it pulls in liquidity from all related exchanges as well as banks. As for… Read more »
With all due respect, your cheerleading is almost as bad as CNBC. Gain has been in a downward spiral for years (at least as long as GS has been in charge). The stock price has gone from 9 to below 4.5, and this is not including the move from the expected IPO price at 14. There is no direction or vision. GTX while showing growth from zero is seeing more competition from other multi-bank platforms and bank GUI’s. Barclays Gator will be challenging for Gain as it pulls in liquidity from all related exchanges as well as banks. As for… Read more »
not really sure where the cheerleading was, nothing good about their quarter or 2012 except for GTX, and that was represented as being a fraction of their overall business.
are you a disgruntled shareholder?
not really sure where the cheerleading was, nothing good about their quarter or 2012 except for GTX, and that was represented as being a fraction of their overall business.
are you a disgruntled shareholder?
“we will probably see companies like Gain and Saxo going back to displaying healthy results”. Did you see gains proposed salaries to execs? Glenn slated to make $2.1 mio this yr.. for what. they hardly made that. Plus he has golden handcuffs that pay him an oversized package if he or O’sullivan leave. Let them go, they haven’t added squat anyway.Can’t vouch for Saxo, but gain has been on descent for awhile, they had to pay off on a put to an investor for USD 30 MIO , I can’t imagine any of their recent mergers add to the bottom… Read more »
“we will probably see companies like Gain and Saxo going back to displaying healthy results”. Did you see gains proposed salaries to execs? Glenn slated to make $2.1 mio this yr.. for what. they hardly made that. Plus he has golden handcuffs that pay him an oversized package if he or O’sullivan leave. Let them go, they haven’t added squat anyway.Can’t vouch for Saxo, but gain has been on descent for awhile, they had to pay off on a put to an investor for USD 30 MIO , I can’t imagine any of their recent mergers add to the bottom… Read more »
with the share price where it is aren’t all shareholders disgruntled.. even officers like daryl carloff and diego rotzstain selling.
with the share price where it is aren’t all shareholders disgruntled.. even officers like daryl carloff and diego rotzstain selling.
I don’t think that line was much of cheerleading. In fact it implied that 2013 so far is lifting all boats, but the bigger/stronger firms should make out best from this environment “while brokers like FXCM and GMO will keep growing and strengthening their leading market positions at the expense of less ambitious players.”
I don’t think that line was much of cheerleading. In fact it implied that 2013 so far is lifting all boats, but the bigger/stronger firms should make out best from this environment “while brokers like FXCM and GMO will keep growing and strengthening their leading market positions at the expense of less ambitious players.”
I will concede to you. Just seems like no one calls anyone out. I listened to the call y’day and it is crazy. Not once did anyone ask about the falling share price. Management marches in and out pays themselves ridiculous salaries (based on lack of performance). Everyone was upset when the banking guys take big salaries and exit packages but these guys dance thru the raindrops. Big question is,why does vantage point the big shareholder continue to accept dwindling returns. 9 mio shares down 10 dollars from the 14 exp ipo and down 4.5 bucks from the actual ipo.… Read more »
I will concede to you. Just seems like no one calls anyone out. I listened to the call y’day and it is crazy. Not once did anyone ask about the falling share price. Management marches in and out pays themselves ridiculous salaries (based on lack of performance). Everyone was upset when the banking guys take big salaries and exit packages but these guys dance thru the raindrops. Big question is,why does vantage point the big shareholder continue to accept dwindling returns. 9 mio shares down 10 dollars from the 14 exp ipo and down 4.5 bucks from the actual ipo.… Read more »
what choice does vantage have?
what choice does vantage have?
Too ez.. GCAP down 30 cents at 4.02. The cream always rises.. FXCM at 14.10. I understand the gain lot have options at 3.50 and a stock buyback program.. they may align under 4. ta
Too ez.. GCAP down 30 cents at 4.02. The cream always rises.. FXCM at 14.10. I understand the gain lot have options at 3.50 and a stock buyback program.. they may align under 4. ta
Vantage should have sold.. like tudor did… I spose at this point like owning an option.. maybe some firm will pay a 50% premium and Vantage can take less of a loss. hard to see it going back to 9 let alone 14 or 26 the equivalent, pre-ipo, of where it was in ’08. But glenn and his merry band of men will continue to soak shareholders along the way. this shud b a biz school case study.
Vantage should have sold.. like tudor did… I spose at this point like owning an option.. maybe some firm will pay a 50% premium and Vantage can take less of a loss. hard to see it going back to 9 let alone 14 or 26 the equivalent, pre-ipo, of where it was in ’08. But glenn and his merry band of men will continue to soak shareholders along the way. this shud b a biz school case study.
RTisaFool: so you bought into the IPO then?
RTisaFool: so you bought into the IPO then?
for the most part no dumped most ahead of 6.50, long fxcm though.. they get it they do meaningful accretive to bottom line deals and have a sense of where the market is going.. gain getting involved in futures and old school broking.. not in my opinion the way to go.. maybe american buggy whip is interested in doing a deal
for the most part no dumped most ahead of 6.50, long fxcm though.. they get it they do meaningful accretive to bottom line deals and have a sense of where the market is going.. gain getting involved in futures and old school broking.. not in my opinion the way to go.. maybe american buggy whip is interested in doing a deal
I agree with much of what RTisaFool said. I remember seeing footage around Gain’s IPO of Stevens kissing his top people on the cheeks and cheering with his hands in the air on the floor of the NYSE. Its great to IPO for sure but the celebration was like watching an 8th seeded NBA basketball team storming the court spraying champagne because they made the playoffs. Especially given they IPO’d at a price roughly 2/3 of where they were aiming. This did not exactly set me at ease with regard to the future of GCAP’s stock, nor does the management… Read more »
I agree with much of what RTisaFool said. I remember seeing footage around Gain’s IPO of Stevens kissing his top people on the cheeks and cheering with his hands in the air on the floor of the NYSE. Its great to IPO for sure but the celebration was like watching an 8th seeded NBA basketball team storming the court spraying champagne because they made the playoffs. Especially given they IPO’d at a price roughly 2/3 of where they were aiming. This did not exactly set me at ease with regard to the future of GCAP’s stock, nor does the management… Read more »