FXCM Sees Red in Q3 2013 Results, Stock Went Down 4%, Despite Strong October Volumes

FXCM, the NYSE listed forex broker, announced today results for the third quarter of 2013, as well as its October trading metrics. During the quarter, the broker reported a US GAAP net loss of $5.1 million on revenues of $113.2 million, which were 19.2% below Q2 2013. However, retail volumes in October rose 11% from September to $315 billion.

After today’s trading at the NYSE started, FXCM’s stock price went down by as much as 4% as of 9:42 AM New York time.

Adjusted Pro Forma EBITDA for the third quarter of 2013, was just $33 million, a decrease of 39.45% compared to $54.5 million for the second quarter of 2013. Adjusted Pro Forma Net Income was $9.7 million or $0.13 per share for Q3 2013, compared to $23.3 million or $0.31 per fully diluted, fully exchanged share Q2 2013, a very considerable decrease of 58.37% and 58.06% respectively.

US GAAP net loss attributable to FXCM Inc. was $5.1 million for the Q3 2013 or ($0.15) per fully diluted share, a net decrease of $15.2 million, compared to net income of $10.1 million or $0.32 per fully diluted share for the Q2 2013. The Q3 FXCM results include a $15 million reserve established for regulatory matters.

Third Quarter 2013 Key Results:

• Revenues of $113.2 million, a decrease of 1% versus third quarter 2012
• Adjusted Pro Forma EBITDA of $33.0 million, a decrease of 11% versus third quarter 2012
• Adjusted Pro Forma net income of $9.7 million or $0.13 per fully diluted share, a decrease of 22% and 24% respectively versus third quarter 2012
• US GAAP net loss attributable to FXCM Inc. of $5.1 million or $0.15 per diluted share – includes a $15.0 million reserve established for certain regulatory matters — versus net income of $4.5 million or $0.17 per diluted share in the third quarter 2012

Commenting on the weak quarter, FXCM’s CEO Drew Niv focused on the bright side saying that despite a muted trading environment, the business is still generating strong cash flow: “Volatility declined throughout the quarter, resulting in lower trading activity, but our business is built to withstand these headwinds.”

October 2013 Retail Trading Operating Metrics

• Retail customer trading volume of $315 billion in October 2013, 11% higher than September 2013, and 3% lower than October 2012.
• Average retail customer trading volume per day of $13.7 billion in October 2013, 1% higher than September 2013, and 3% lower than October 2012.
• An average of 379,280 retail client trades per day in October 2013, 1% lower than September 2013, and 11% higher than October 2012.
• Tradable accounts of 188,814 as of October 31, 2013, a decrease of 174, or flat from September 2013, and a decrease of 14,900 or 7%, from October 2012.

October 2013 Institutional Trading Operating Metrics

• Institutional customer trading volume of $176 billion in October 2013, 3% lower than September 2013, and 232% higher than October 2012.
• Average institutional trading volume per day of $7.7 billion in October 2013, 10% lower than September 2013, and 235% higher than October 2012.
• An average of 29,063 institutional client trades per day in October 2013, 24% lower than September 2013, and 397% higher than October 2012.

Mr. Niv further reminded investors that FXCM has more than enough liquidity to pursue acquisitions and return capital to shareholders if that will be needed: “When such market conditions occur, diversity and scale are critical. With $422 million of cash and all of our $155 million credit facility available.”