GAIN Capital Reports First Quarter 2019 Results

Three Months Ended March 31,

2019

2018

Net (Loss)/Income

$

(28.4)

$

11.9

Adjusted Net (Loss)/Income ⁽¹⁾

$

(28.4)

$

11.6

Net Revenue

$

38.4

$

98.4

Operating Expenses⁽²⁾

(61.9)

(66.6)

Adjusted EBITDA⁽¹⁾

$

(23.5)

$

31.8

Diluted GAAP EPS

$

(0.76)

$

0.25

Adjusted EPS⁽¹⁾

$

(0.76)

$

0.26

___________________________________

Note:  Dollars in millions, except per share amounts and where noted otherwise.  Columns may not add due to rounding.

¹See below for reconciliation of non-GAAP financial measures.

²Operating Expenses excludes Depreciation and Amortization, Purchased Intangible Amortization, and certain one-off costs

Quarterly Operating Metrics

Q1 19

Q1 18

Year-over-year Change

Retail Segment

OTC Trading Volume ^{(1) (2)}

$

487.3

$

795.4

(38.7)

%

OTC Average Daily Volume

$

7.7

$

12.4

(37.9)

%

12 Month Trailing Active OTC Accounts ⁽³⁾

120,641

131,764

(8.4)

%

3 Month Trailing Active OTC Accounts ⁽³⁾

70,051

78,681

(11.0)

%

Futures Segment

Number of Futures Contracts

1,755,873

2,160,231

(18.7)

%

Futures Average Daily Contracts

28,785

35,414

(18.7)

%

12 Month Trailing Active Futures Accounts ⁽³⁾

7,387

7,959

(7.2)

%

_______________________________________

All volume figures reported in billions.

¹ US dollar equivalent of notional amounts traded.

² For the quarter, indirect volume represented 22% of total retail OTC trading volume.

³ Accounts that executed a transaction during the relevant period.

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended

March 31,

2019

2018

REVENUE:

Retail revenue

$

24.3

$

84.1

Futures revenue

8.0

10.6

Other revenue

2.5

1.9

Total non-interest revenue

34.8

96.7

Interest revenue

4.3

2.1

Interest expense

0.6

0.4

Total net interest revenue

3.7

1.7

Net revenue

$

38.4

$

98.4

EXPENSES:

Employee compensation and benefits

$

20.3

$

24.3

Selling and marketing

10.2

6.0

Referral fees

7.1

11.4

Trading expenses

5.5

5.8

General and administrative

12.8

12.5

Depreciation and amortization

4.3

5.4

Purchased intangible amortization

3.3

3.7

Communications and technology

5.7

5.4

Bad debt provision

0.4

1.1

Impairment of investment

0.0

(0.1)

Total operating expense

$

69.5

$

75.4

OPERATING (LOSS)/PROFIT

(31.1)

22.9

Interest expense on long term borrowings

3.3

3.3

(LOSS)/INCOME BEFORE INCOME TAX

(34.4)

19.6

Income tax (benefit)/expense

(6.1)

7.7

Net (loss)/income from continuing operations

(28.4)

11.9

Income from discontinued operations

0.0

4.3

NET (LOSS)/INCOME

(28.4)

16.3

Less (loss)/income attributable to non-controlling interest

0.0

0.2

NET (LOSS)/INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.

$

(28.4)

$

16.1

 _________________________

Note:  Dollars in millions, except where noted otherwise. Columns may not add due to rounding.

Condensed Consolidated Balance Sheet

(unaudited)

March 31,

December 31,

2019

2018

ASSETS:

Cash and cash equivalents

$

218.0

$

278.9

Cash and securities held for customers

869.7

842.5

Receivables from brokers

98.7

84.3

Property and equipment, net

29.9

30.6

Intangible assets, net

29.4

32.2

Goodwill

28.0

27.8

Other assets

50.5

36.4

          Total assets

$

1,324.3

$

1,332.5

LIABILITIES AND SHAREHOLDERS' EQUITY:

Payables to customers

$

869.7

$

842.5

Payables to brokers

0.0

1.6

Accrued compensation & benefits

3.3

11.2

Accrued expenses and other liabilities

46.9

41.6

Income tax payable

1.2

5.8

Convertible senior notes

133.7

132.1

          Total liabilities

$

1,054.8

$

1,034.8

Shareholders' equity

269.5

297.8

          Total liabilities and shareholders' equity

$

1,324.3

$

1,332.5

_________________________

Note:  Dollars in millions, except where noted otherwise. Columns may not add due to rounding.

Income Statement of Discontinued Operations

Three Months Ended March 31,

2019

2018

REVENUE:

Institutional revenue

$

0.0

$

8.5

Total non-interest revenue

0.0

8.5

Net revenue

$

0.0

$

8.5

EXPENSES:

Employee compensation and benefits

$

0.0

$

3.4

Trading expenses

0.0

2.7

Other expenses

0.0

2.1

Total operating expense

0.0

8.1

OPERATING PROFIT

0.0

0.4

INCOME BEFORE INCOME TAX BENEFIT

0.0

0.4

Income tax benefit

0.0

(4.0)

NET INCOME FROM DISCONTINUED OPERATIONS

$

0.0

$

4.3

_________________________

Note:  Dollars in millions, except where noted otherwise.  Columns may not add due to rounding.

Net (Loss)/Income to Adjusted Net (Loss)/Income and Adjusted EPS

(unaudited)

Three Months Ended

March 31,

2019

2018

Net (loss)/income from continuing operations

$

(28.4)

$

11.9

Income tax (benefit)/expense

(6.1)

7.7

Pre-tax (loss)/income

$

(34.4)

$

19.6

Adjustments:

Impairment of investment

0.0

(0.1)

Adjusted pre-tax (loss)/income

$

(34.4)

$

19.5

 Adjusted income tax benefit/(expense)¹

6.1

(7.7)

 Income attributable to non-controlling interest

0.0

(0.2)

Adjusted net (loss)/income

$

(28.4)

$

11.6

Adjusted (loss)/earnings per common share

Basic

$

(0.76)

$

0.26

Diluted

$

(0.76)

$

0.26

Weighted average common shares outstanding used in computing (loss)/earnings per common share

Basic

37,525,073

45,017,716

Diluted

37,525,073

45,523,766

_____________________________

¹Adjusted income tax (expense)/benefit reflects the Company's GAAP income tax (expense)/benefit adjusted for (a) taxable or deductible items affecting income tax (expense)/benefit that are unrelated to pre-tax income in the period and (b) the tax effect of other taxable adjustments made to the Company's pre-tax income. The tax effect of the adjustments to pre-tax income are calculated using the tax rate applicable for the jurisdiction within which each of the adjustments arose. The Company believes that this non-GAAP financial measure provides investors with a more consistent and stable basis for determining the impact of taxes on the Company's core continuing operations

Note:  Dollars in millions, except per share data and where noted otherwise.  Columns may not add due to rounding.

Adjusted Income Tax Reconciliation

(unaudited)

Three Months Ended March 31,

2019

2018

GAAP pre-tax (loss)/income

$

(34.4)

$

19.6

GAAP Tax Rate

17.6

%

39.2

%

Initial adjusted tax benefit/(expense)⁽¹⁾

6.1

(7.7)

Adjusted tax benefit/(expense)

$

6.1

$

(7.7)

Adjusted pre-tax (loss)/income

$

(34.4)

$

19.5

Adjusted tax rate⁽²⁾

17.6

%

39.5

%

¹Initial adjusted tax benefit/(expense) calculated as GAAP pre-tax income multiplied by the YTD GAAP Tax Rate

²Adjusted tax rate calculated as Adjusted tax benefit/(expense) divided by Adjusted pre tax (loss)/income

Reconciliation of GAAP Net (Loss)/Income to Adjusted EBITDA and Adjusted EBITDA Margin

(unaudited)

Three Months Ended

March 31,

2019

2018

Net revenue

$

38.4

$

98.4

Net (loss)/income from continuing operations

(28.4)

11.9

Net (loss)/income margin %

(74)

%

12

%

$

(28.4)

$

11.9

Depreciation and amortization

4.3

5.4

Purchased intangible amortization

3.3

3.7

Interest expense on long term borrowings

3.3

3.3

Income tax (benefit)/expense

(6.1)

7.7

Impairment of investment

0.0

(0.1)

Adjusted EBITDA

$

(23.5)

$

31.8

Adjusted EBITDA Margin⁽¹⁾

(61)

%

32

%

_________________________

Note:  Dollars in millions, except where noted otherwise.  Columns may not add due to rounding.

¹ Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenue.

Retail

Three Months Ended
March 31,

2019

2018

Trading Revenue

$

24.3

$

84.1

Other Retail Revenue

3.9

1.6

Total Revenue

28.2

85.7

 Employee Compensation & Benefits

13.0

15.4

Selling and Marketing

10.0

5.7

Referral Fees

4.4

7.7

Other Operating Expenses

18.2

17.7

Segment (Loss)/Profit

$

(17.4)

$

39.2

 Segment (Loss)/Profit Margin %

(62)

%

46

%

_________________________

Note:  Dollars in millions, except where noted otherwise.  Columns may not add due to rounding.

Futures

Three Months Ended
March 31,

2019

2018

Trading Revenue

$

8.0

$

10.6

Other Futures Revenue

1.4

0.8

Total Revenue

9.4

11.5

Employee Compensation & Benefits

2.2

2.5

Selling and Marketing

0.3

0.2

Referral Fees

2.7

3.7

Other Operating Expenses

3.2

3.8

Segment Profit

$

1.1

$

1.2

Segment Profit Margin %

11

%

10

%

____________________________

Note:  Dollars in millions, except where noted otherwise.  Columns may not add due to rounding.

Corporate and Other

Three Months Ended
March 31,

2019

2018

Revenue

$

0.9

$

1.2

Employee Compensation & Benefits

5.1

6.4

Selling and Marketing

0.0

0.1

Other Operating Expenses

2.9

3.3

Loss

$

(7.2)

$

(8.5)

____________________

Note:  Dollars in millions, except where noted otherwise.  Columns may not add due to rounding.

Reconciliation of Segment (Loss)/Profit to (Loss)/Income Before Income Tax (Benefit)/Expense

Three Months Ended
March 31,

2019

2018

Retail segment

$

(17.4)

$

39.2

Futures segment

1.1

1.2

Corporate and other

(7.2)

(8.5)

Segment (Loss)/Profit

(23.5)

31.8

Depreciation and amortization

4.3

5.4

Purchased intangible amortization

3.3

3.7

Impairment of investment

0.0

(0.1)

Operating (loss)/profit

$

(31.1)

$

22.9

Interest expense on long term borrowings

3.3

3.3

(Loss)/income before income tax (benefit)/expense

$

(34.4)

$

19.6

____________________

Note:  Dollars in millions, except where noted otherwise.  Columns may not add due to rounding.