GAIN Capital — FY2019 Earnings Presentation
35 slides from GAIN Capital's earnings presentation, Feb 27, 2020
Slide 1: Q4 and Full Year 2019 Results
Q4and Full Year2019 Results February 2020 1
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Forward Looking Statements In addition to historical information, this earnings presentation contains "forward-looking" statements that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements
Slide 3: 2019 - A Year in Review
2019 - A YEAR IN REVIEW Positive Organic Growth Despite Challenging Markets • 3 year IRRs continue to exceed expectations Volatility indices at or near record lows: • Year on year growth in key client metrics • CVIX down 12% on prior year, 34% below previous 10 year average ◦ New direct opened accou
Slide 4: Organic Efforts Continue to Show Results
ORGANIC EFFORTS CONTINUE TO SHOW RESULTS New Direct Accounts1 Direct Volume per Active Increased FY’19 67% y/y and decreased 12% q/q Decreased FY ‘19 26% y/y and 37% q/q • Marketing spend (up 6% on FY18) and increased market demand in key markets led to a 67% YoY growth in New Direct Accounts during
Slide 5: Organic Growth Initiatives
ORGANIC GROWTH INITIATIVES Trailing 3-Month Direct Active Accounts1 New Direct Accounts and Marketing Spend Direct actives up 13% vs Q4’18 New Direct accounts up 67% YoY, Marketing spend up 6% YoY • Trailing 3-month direct active accounts have continued to • Steady growth in New Direct Accounts driv
Slide 6: Client Retention Rates Remain Stable
CLIENT RETENTION RATES REMAIN STABLE • 55% of total revenues from loyal clients with tenure of more than 3 years, providing GAIN with sustainable, long term revenue stream • Clients acquired in the last 2 years contribute 45% of annual revenue with our targeted and enhanced relationship management h
Slide 7: 2019 Market Conditions
2019 MARKET CONDITIONS EUR/USD CVIX $1.60 $0.35 30 $1.50 $0.30 25 $1.40 $0.25 20 $1.30 $0.20 $1.20 15 $0.15 $1.10 10 $1.00 $0.10 5 $0.90 $0.05 $0.80 $0.00 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1999 1999 2000 2001 2002 2003 2004 2005 2006 200
Slide 8: Financial Review
= GAIN | CAPITAL Financial Review
Slide 9: Key Financial Results & Operating Metrics
KEY FINANCIAL RESULTS & OPERATING METRICS Three Months Ended Dec. 31, Year Ended Dec. 31, $ Change 2019 2018 2019 2018 Q4 Full Year As Reported Net revenue from continuing operations $ 53.3 $ 79.9 $ 233.9 $ 358.0 $ (26.6) $ (124.1) Class action settlement 0.0 (5.4) 0.0 (5.4) 5.4 5.4 Operating expens
Slide 10: Operating Segment Results: Retail
OPERATING SEGMENT RESULTS: RETAIL Retail Financial & Operating Results • Market conditions saw quarterly ADV decrease 32% year-over-year Three Months Ended Dec. 31, Year Ended Dec. 31, to $6.6 billion 2019 2018 2019 2018 Trading revenue $ 40.2 $ 61.1 $ 177.7 $ 300.2 Other retail revenue 4.1 3.8 16.5
Slide 11: Operating Segment Results: Futures
OPERATING SEGMENT RESULTS: FUTURES Futures Financial & Operating Results • Futures average daily contracts were down 27% to 24,208 Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 during Q4'19 Trading revenue $ 7.2 $ 9.3 $ 34.8 $ 39.7 Other futures revenue 0.9 1.4 5.0 4.3 Total re
Slide 12: Strong Liquidity Position
STRONG LIQUIDITY POSITION Cash and cash equivalents of $190.1 million(1) at the end of Q4 2019. Liquidity Quarterly dividend of $0.06 per share approved • Record date: March 24, 2020 Quarterly Dividends • Payment date: March 27, 2020 Liquidity: $190.1 million(1) GAIN did not repurchase shares during
Slide 13: Appendix
= GAIN | CAPITAL Appendix |
Slide 14: Consolidated Statement of Operations
CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended December 31, Year Ended December 31, 2019 2018 2019 2018 REVENUE: Retail revenue $ 40.2 $ 61.1 $ 177.7 $ 300.2 Futures revenue 7.2 9.3 34.8 39.7 Other revenue 2.9 5.8 7.1 7.4 Total non-interest revenue 50.3 76.2 219.7 347.3 Interest revenue 3.5
Slide 15: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET As of 12/31/2019 12/31/2018 ASSETS: Cash and cash equivalents $ 190.1 $ 278.9 Cash and securities held for customers 929.3 842.5 Receivables from brokers 112.3 84.3 Property and equipment, net 30.6 30.6 Intangible assets, net 24.2 32.2 Goodwill 0.0 27.8 Other assets 64.0 3
Slide 16: Liquidity
LIQUIDITY $m Q4 19 Q3 19 Q2 19 Q1 19 TTM Cash & Equivalents Prior Period $ 200.7 $ 208.5 $ 218.0 $ 278.9 $ 278.9 Adjusted EBITDA $ (0.2) $ 6.0 $ 13.0 $ (23.5) $ (4.6) Capital expenditures (4.4) (4.8) (4.0) (3.1) (16.3) Tax and convertible interest (1.8) (4.3) (2.5) (7.8) (16.4) Dividends, buybacks,
Slide 17: Group Adjusted EBITDA & Adjusted Net Income
GROUP ADJUSTED EBITDA & ADJUSTED NET INCOME Financial & Operating Results Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 Net revenue $ 53.3 $ 79.9 $ 233.9 $ 358.0 Class action settlement 0.0 (5.4) 0.0 (5.4) Operating expenses: Employee compensation and benefits 16.0 19.4 78.1 89
Slide 18: Adjusted EBITDA & Margin Reconciliation
ADJUSTED EBITDA & MARGIN RECONCILIATION Continuing Operations Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 Net Revenue $ 53.3 $ 79.9 $ 233.9 $ 358.0 Net (loss)/income (31.2) (0.7) (60.8) 28.0 Net (loss)/income Margin % (59)% (1)% (26)% 8% Net (loss)/income $ (31.2) $ (0.7) $ (
Slide 19: Adjusted Net Income and EPS Reconciliation
ADJUSTED NET INCOME AND EPS RECONCILIATION Continuing Operations Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 Net (loss)/income from continuing operations $ (31.2) $ (0.7) $ (60.8) $ 28.0 Income tax (benefit)/expense (7.9) (2.9) (12.9) 8.5 Pre-tax (loss)/income $ (39.1)$ (3.6)
Slide 20: Adjusted Income Tax Reconciliation
ADJUSTED INCOME TAX RECONCILIATION Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 GAAP pre-tax (loss)/income $ (39.1) $ (3.6) $ (73.6) $ 36.5 YTD GAAP Tax Rate 17.5% 23.3% 17.5% 23.3% Initial adjusted tax benefit/(expense) 6.8 0.8 12.9 (8.5) Uncertain tax position 0.0 0.0 0.2 (0
Slide 21: EPS Computation
EPS COMPUTATION Three Months Ended Dec. 31, Year Ended Dec.31, 2019 2018 2019 2018 Net (loss)/income from continuing operations $ (31.2) $ (0.7) $ (60.8) $ 28.0 Less income attributable to non-controlling interest 0.0 0.1 0.0 0.7 Net (loss)/income from continuing operations $ (31.2)$ (0.8)$ (60.8)$
Slide 22: Reconciliation of Segment Profit to Income Before Income Tax
RECONCILIATION OF SEGMENT PROFIT TO INCOME BEFORE INCOME TAX (BENEFIT)/EXPENSE Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 Retail segment $ 4.3 $ 13.3 $ 20.2 $ 120.5 Futures segment 0.9 1.6 5.7 6.2 Corporate and other (5.4) (9.7) (30.7) (40.2) Segment (loss)/profit $ (0.2)$ 5
Slide 23: Pro Forma Reconciliation
PRO FORMA RECONCILIATION Q1 2018 Q2 2018 Q3 2018 Q4 2018 GAIN Inst Cont Ops GAIN Inst ContOps GAIN Inst ContOps GAIN Inst ContOps REVENUE: Retail revenue $ 84.1 $ 0.0 $ 84.1 $ 72.0 $ 0.0 $ 72.0 $ 82.9 $ 0.0 $ 82.9 $ 61.1 $ 0.0 $ 61.1 Institutional revenue 8.5 8.5 0.0 7.9 7.9 0.0 0.0 0.0 0.0 0.0 0.0
Slide 24: Discontinued Operations
DISCONTINUED OPERATIONS Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 REVENUE: Institutional revenue $ 0.0 $ 0.0 $ 0.0 $ 16.4 Total non-interest revenue 0.0 0.0 0.0 16.4 Interest revenue 0.0 0.0 0.0 0.1 Total net interest revenue 0.0 0.0 0.0 0.1 Net revenue $ 0.0$ 0.0$ 0.0$ 16.
Slide 25: 2021 Reconciliation of GAAP Net Income Margin to Adjusted EBITDA Margin
2021 RECONCILATION OF GAAP NET INCOME MARGIN TO ADJUSTED EBITDA MARGIN FY 2021 Outlook Net Income Margin 16% to 20% Tax 6% to 8% Interest 2% to 2% Depreciation and Amortization 5% to 5% EBITDA Margin 30% to 35% 25
Slide 26: Retail Revenue per Million
RETAIL REVENUE PER MILLION 26
Slide 27: Operating Segment Results: Corporate & Other
OPERATING SEGMENT RESULTS: CORPORATE & OTHER Corporate & Other Financial & Operating Results Three Months Ended Dec. 31, Year Ended Dec. 31, 2019 2018 2019 2018 Revenue/(loss) $ 0.8 $ (1.1) $ (0.1) $ (2.4) Employee compensation and benefits 3.3 5.3 19.0 23.8 Selling and marketing 0.0 0.1 0.0 0.3 Oth
Slide 28: Quarterly Operating Metrics
QUARTERLY OPERATING METRICS Three Months Ended, Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Retail Segment OTC Trading Volume (1)(2) $ 631.0 $ 487.3 $ 464.3 $ 463.1 $ 428.3 OTC Average Daily Volume $ 9.7 $ 7.7 $ 7.1 $ 7.0 $ 6.6 12 Month Trailing Active OTC Accounts (3) 123,171 120,641 118,320 118,751 122,532
Slide 29: January 2020 Operating Metrics
January 2020 OPERATING METRICS 29
Slide 30: Definition of Metrics
DEFINITION OF METRICS • Active Accounts: Accounts that executed a transaction during the period • Trading Volume: Represents the U.S. dollar equivalent of notional amounts traded • Customer Assets: Represents amounts due to clients, including customer deposits and unrealized gains or losses arising
Slide 31: Additional Disclosures
= GAIN | CAPITAL Additional Disclosures |
Slide 32: 2019 Revenue Composition
2019 REVENUE COMPOSITION 2019 Net Revenue Mix 2019 Retail Trading Revenue Mix 2019 Futures Trading Revenue Mix (2) Top Third Other 2% 9% Top Third Indirect FX 14% Direct 9% 44% Non-FX 23% 42% Direct 3% $234mm $178mm $35mm FX 58% Non-FX Indirect 32% 63% (1) Includes trading revenue only. Net interest
Slide 33: Additional Overhead Disclosure
ADDITIONAL OVERHEAD DISCLOSURE $m 2018 2019 Adj. 1 2019 Adj Fixed Overheads $133.1 $125.0 -$6.7 $118.3 Variable Overheads $56.6 $45.9 -$6.1 $39.8 Selling & Marketing $36.5 $38.4 $38.4 Referral Fees $40.0 $29.3 $29.3 Total Operating Expenses $266.2 $238.6 -$12.8 $225.8 1 Full year impact of savings a
Slide 34: Alternate Historic Revenue Presentation
ALTERNATE HISTORIC REVENUE PRESENTATION Fiscal Year Ended December 31, 2019 2018 2017 2016 2015 Net revenue $233.9 $358.0 $278.2 $382.8 $401.6 Class action settlement 0.0 (5.4) 0.0 0.0 0.0 Adjusted net revenue $233.9 $352.6 $278.2 $382.8 $401.6 Referral fees (29.3) (40.0) (53.7) (70.8) (108.9) Bank
Slide 35: EBITDA Reconciliation
EBITDA Reconciliation Fiscal Year Ended December 31, 2019 2018 2017 2016 2015 Net (loss) / income from continuing operations ($60.8) $28.0 ($14.9) $35.3 $10.3 Depreciation and amortization 17.1 19.7 17.0 13.9 11.1 Purchased intangible amortization 8.8 14.2 14.0 15.0 16.6 Interest on long-term borrow