GAIN Capital, a leading global provider of online trading services, reported net income of $3.2 million, or $0.08 per share, and adjusted net income of $3.6 million, or $0.09 per share, for the third quarter ended September 30, 2012.
Highlights:
- Net revenue of $40.0 million
- Adjusted EBITDA* of $6.2 million
- Net income of $3.2 million; $0.08 per diluted share
- Adjusted net income* of $3.6 million; $0.09 per diluted share
“In the third quarter, we launched new products and services in both our retail and institutional businesses, while lowering our operating expenses in our core retail business. As a result, we were able to achieve an adjusted EBITDA of $6.2 million and an adjusted EBITDA margin of 15.5% in this period of muted volatility and difficult market conditions,” said Glenn Stevens, chief executive officer of GAIN Capital. “Our revenue performance benefitted from the contribution of our institutional business, GTX, which continued to grow at a time when many of our competitors are reporting decreasing trading volumes, and one month of contribution from our online futures broker Open E Cry (OEC), which we acquired at the end of August.”
“In the fourth quarter, we will introduce new marketing campaigns to promote our enhanced retail offering, which features an expanded portfolio of products delivered through our newly introduced platform, TRADE, positioning ourselves to benefit from improved market conditions. At the same time, we expect a positive impact from a full quarter’s contribution from the recent additions to GTX’s specialty execution desk and our futures business, OEC.”
“The completion of the OEC acquisition and the expansion of our institutional business demonstrates our strategy of investing in our retail and institutional FX business lines, while growing and diversifying our revenue sources through both organic initiatives and strategic acquisitions,” Mr. Stevens added.
Retail Business
In the third quarter of 2012, GAIN’s retail business generated revenue of $34.3 million, compared to $40.8 million in 2Q 2012 and $52.2 million in 3Q 2011. Total retail trading volume was $278.7 billion compared to $340.8 billion in 2Q 2012 and $447.9 billion in 3Q 2011, as low market volatility reduced client activity.
Despite quiet market conditions in the third quarter, active accounts in the period remained stable, decreasing 3% compared to 2Q 2012 and 4% compared to 3Q 2011. Client assets (excluding OEC) increased by 10.6% to $316.9 million as of September 30, 2012, compared to 3Q 2011, with a stable base of more than 74,000 retail accounts worldwide.
GAIN successfully launched TRADE in September, expanding its retail product offering more than threefold to over 250 tradable markets, including FX, as well as a range of contracts for difference on indices and commodities. TRADE also features innovative tools for market monitoring, technical trading and strategy building.
“The launch of TRADE is an important step in a program to deliver a world-class FX and CFD trading experience for active traders that will include multiple new asset classes, unique ways to trade a wide range of global markets, and innovative ways to engage with the wider trading community through social and community tools,” said Mr. Stevens.
GAIN will continue to roll out TRADE worldwide in the fourth quarter of 2012.
Institutional Business
GAIN’s institutional business, GTX, which serves institutional market participants, including hedge funds, banks and high-frequency trading firms, generated revenue of $4.2 million in 3Q 2012, compared with $1.4 million in 3Q 2011. Institutional volume was $503.7 billion, compared with $260.0 billion in 3Q 2011.
GTX recently expanded its specialty execution desk through the addition of a 14-person agency desk, which became operational in September 2012.
GTX is differentiated by innovative technology and a unique approach to liquidity management. GTX facilitates electronic and automated trade execution through its high performance trading platform, as well as voice execution services through a team of experienced professionals.
“GTX’s competitive advantages have allowed us to continue growing our institutional volume, even under challenging market conditions,” said Mr. Stevens. “The addition of new products and a significantly expanded specialty execution team are expected to continue to drive growth in GTX’s volume and revenue.”
Third Quarter Metrics
(Comparisons below are referenced to 3Q 2011)
- Net revenue of $40.0 million, compared to $53.9 million
- Net income of $3.2 million, compared to $7.6 million
- Adjusted EBITDA* of $6.2 million, compared to $15.6 million
- Adjusted net income* of $3.6 million, compared to $9.3 million
- Diluted EPS of $0.08, compared to $0.20
- Adjusted diluted EPS* of $0.09, compared to $0.24
- Total retail trading volume of $278.7 billion, compared to $447.9 billion
- Total institutional trading volume of $503.7 billion, compared to $260.0 billion
(*See below for reconciliation of non-GAAP financial measures)
Declaration of Quarterly Dividend
The Board of Directors approved a quarterly dividend of $0.05 per share, to be paid on December 21, 2012 to shareholders of record as of December 12, 2012.
Worth noting – while the drop in volatility has led to decreased volumes, Gain’s revenue margins have increased from around $116 per $million traded last year to $123 this year. While the rise in that figure did little to offset the 37% drop in volumes it does back up the profitability results posted last week http://forexmagnates.com/q3-2012-us-forex-traders-profitability-report-number-of-us-accounts-keeps-plummeting-citifx-pro-on-top/ which showed traders losing more money during the low volatile trading.