Listed FX and CFD broker Gain Capital has announced promising results for Q2 2012 compared to a sloppy Q1 & April (2012). Traders have been cautious of the volatility caused by Euro Zone uncertainty and talk of QE3 (another round of quantitative easing) thus impacting volumes.
Highlights
(Comparisons below are referenced to Q2 2011)
- Net revenue of $45.7 million, compared to $55.6 million
- Adjusted EBITDA* of $8.8 million, compared to $19.1 million
- Net income of $4.4 million, compared to $10.0 million
- Adjusted net income* of $5.0 million, compared to $11.2 million
- Diluted EPS of $0.11, compared to $0.26
- Adjusted diluted EPS* of $0.13, compared to $0.29
- Total retail trading volume of $340.8 billion, compared to $357.2 billion
- Total institutional trading volume of $442.5 billion, compared to $97.4 billion
GAIN Capital reported a net income of $4.4 million, or $0.11 per share, and adjusted net income of $5.0 million, or $0.13 per share, for the second quarter ended June 30, 2012, on net revenue of $45.7 million.
Gain Capital’s share price is trading at $4.80.
“Our strong sequential revenues and expense performance was driven by a substantial increase in revenue from our retail FX business, demonstrating GAIN’s ability to capitalize on a modest uptick in market volatility,” said Glenn Stevens, chief executive officer of GAIN Capital. “At the same time, our GAIN GTX institutional platform continued to increase market share, with revenue increasing fourfold from last year’s second quarter.”
“We also executed on our longer term strategy to grow and diversify our revenue sources through the announced acquisition of Open E Cry, which provides entry into the exchange-traded futures market and increases GAIN’s commission-based revenues,” Mr. Stevens added. “We added a 10-person team in July to augment our institutional business, more than doubling the size of our institutional execution desk.”
Retail Business
In the second quarter of 2012, GAIN’s retail business generated revenue of $40.8 million, compared with $29.4 million in Q1 2012 and $54.1 million in 2Q 2011. Total retail trading volume was $340.8 billion in Q2 2012, compared with $385.1 billion in Q1 2012 and $357.2 billion in Q2 2011.
“We continued the organic growth momentum in our retail business, increasing client assets 9% to $320.2 million as of June 30, 2012, launching a new FOREX.com service in Canada and moving ahead with the Beta version of our new CFD offering, which is on schedule for full release in September of this year,” Mr. Stevens said.
In July 2012, GAIN launched its FOREX.com service in Canada, which will allow Canadian residents to trade more than 70 products, including 50 currencies, as well as energy, precious metals, agricultural commodities and equity indices.
Institutional Business
GAIN’s institutional business, GAIN GTX, which serves institutional market participants, including hedge funds, banks and high-frequency trading firms, generated revenue of $4.2 million in 2Q 2012, compared with $0.9 million in 2Q 2011. Institutional volume was $442.5 billion, compared with $97.4 billion in 2Q 2011.
GAIN GTX recently expanded its specialty execution desk through the recruitment of a 10-person agency desk. The New York-based team, which specializes in FX, options and emerging markets, more than doubles the size of GAIN GTX’s execution desk and will expand the team’s client base and product coverage.
“In less than two years since launch, GAIN GTX has established itself among institutional FX traders and continues to gain market share, thanks to its innovative ECN technology and unique central clearing model,” said Mr. Stevens. “With new hires and an increasing portfolio of products, we look forward to continued growth in volumes and revenue.”
Other Recent Developments
As part of GAIN’s strategy to diversify its product portfolio and add new revenue sources, GAIN announced in June an agreement to acquire Open E Cry (OEC), an online futures broker, from optionsXpress, a subsidiary of the Charles Schwab Corporation, for $12 million. As of June 30, 2012, OEC held $95.9 million in customer assets, with 8,101 open accounts. OEC’s revenue was $13.6 million for the fiscal year ended December 31, 2011. The transaction is scheduled to close in Q3 2012 and is expected to be accretive in FY 2012.
“Futures are a natural fit with GAIN’s existing retail forex and CFD offering. OEC is an excellent entry into the futures space because of its proprietary technology and capacity to grow via GAIN’s global client base,” said Mr. Stevens. “We see strong potential for synergies, as GAIN will be able to expand OEC’s geographic footprint beyond the United States, as well as cross-sell between futures and FX.”
With GAIN buying into the US Futures space and FXCM connecting to NinjaTrader recently, it looks like both of these firms see the benefit of getting direct access to US futures clients for growth. Nice move.