GAIN Capital — Q1 2020 Earnings Presentation
25 slides from GAIN Capital's earnings presentation, Apr 23, 2020
Slide 1: Q1 2020 Results
= GAIN | CAPITAL Q12020 Results
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: First Quarter 2020 Review
FIRST QUARTER 2020 REVIEW • Q1 2020 net revenue of $185.7 million, compared to $38.4 million in Q1 2019 • Q1 2020 net income of $77.3 million, compared to net loss of $(28.4) million in Q1 2019 • Q1 2020 adjusted EBITDA of $114.4 million, compared to a loss of $(23.5) million in Q1 2019 • A quarter
Slide 4: Organic Efforts Are Showing Results
ORGANIC EFFORTS ARE SHOWING RESULTS 1 60,000 New Direct Accounts Direct Volume per Active Increased 68% y/y and 38% q/q Increased 24 % y/y and 50% q/q 50,000 10 2.50% • Retail marketing spend 40,000 8 2.00% down 9% QoQ. 6 1.50% 30,000 • Three month trailing active 4 1.00% 20,000 $ (Millions) account
Slide 5: Organic Growth Initiatives
ORGANIC GROWTH INITIATIVES Direct Active Accounts1 New Direct Accounts and Marketing Spend 80,000 Direct actives up 21% vs Q4’19 2.5% New Direct accounts up 68% YoY, Marketing spend down 29% YoY 60,000 $14.m 2.0% 50,000 $12.m 60,000 $10.m 40,000 1.5% $8.m 40,000 30,000 1.0% $6.m 20,000 20,000 $4.m 0
Slide 6: 2020 Q1 Exceptional Market Conditions
2020 Q1 EXCEPTIONAL MARKET CONDITIONS VIX1 CVIX2 90 82.7 18 16.4 80 16 70 14 60 12 50 10 40 8 30 6 20 10 4 0 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 After multi-year lows in 2019, Q1 2020 experienced extraordinary spikes in volatility, driven by the COVID-19 outbreak and its econo
Slide 7: Financial Review
= GAIN | CAPITAL Financial Review
Slide 8: Key Financial Results & Operating Metrics
KEY FINANCIAL RESULTS & OPERATING METRICS Three Months Ended March 31, $ Change 2020 2019 • Market conditions had a significant impact upon financial performance in the quarter, a total contrast Net revenue $ 185.7 $ 38.4 $ 147.3 to those of a year ago Operating expenses(3) (71.3) (61.9) (9.4) (1) A
Slide 9: Operating Segment Results: Retail
OPERATING SEGMENT RESULTS: RETAIL Retail Financial & Operating Results Three Months Ended March 31, 2020 2019 TTM 3/31/20 Trading revenue $ 173.1 $ 24.3 $ 326.5 • Market conditions saw quarterly ADV increase 52% Other retail revenue 3.2 3.9 15.9 year-over-year to $11.7 billion Total revenue $ 176.3
Slide 10: Operating Segment Results: Futures
OPERATING SEGMENT RESULTS: FUTURES Futures Financial & Operating Results Three Months Ended March 31, • Futures average daily contracts were up 14% to 2020 2019 TTM 3/31/20 32,949 during Q1'20 Trading revenue $ 9.4 $ 8.0 $ 36.2 Other futures revenue 0.8 1.4 4.3 Total revenue $ 10.2 $ 9.4 $ 40.5 • Re
Slide 11: Appendix
= GAIN | CAPITAL Appendix |
Slide 12: Condensed Consolidated Statement of Operations
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 2020 2019 REVENUE Retail revenue $ 173.1 $ 24.3 Futures revenue 9.4 8.0 Other revenue 1.0 2.5 Total non-interest revenue 183.4 34.8 Interest revenue 2.7 4.3 Interest expense 0.5 0.6 Total net interest revenue 2.3 3.7 Net rev
Slide 13: Condensed Consolidated Balance Sheet
CONDENSED CONSOLIDATED BALANCE SHEET As of 3/31/2020 12/31/2019 ASSETS: Cash and cash equivalents $ 293.3 $ 190.1 Cash and securities held for customers 785.2 929.3 Receivables from brokers 53.1 112.3 Property and equipment, net 29.1 30.6 Intangible assets, net 21.2 24.2 Other assets 50.0 64.0 Total
Slide 14: Liquidity
LIQUIDITY Q1 2020 Q4 2019 Q3 2019 Q2 2019 TTM Cash and Cash Equivalents Prior Period $ 190.1 $ 200.7 $ 208.5 $ 218.0 $ 218.0 Adjusted EBITDA $ 114.4 $ (0.2) $ 6.0 $ 13.0 $ 133.2 Capital expenditures (4.2) (4.4) (4.8) (4.0) (17.4) Tax and convertible interest (4.1) (1.8) (4.3) (2.5) (12.7) Dividends,
Slide 15: Group Adjusted EBITDA & Adjusted Net Income
GROUP ADJUSTED EBITDA & ADJUSTED NET INCOME Three Months Ended March 31, 2020 2019 Net revenue $ 185.7 $ 38.4 Operating expenses: Employee compensation and benefits $ 24.2 $ 20.3 Selling and marketing 7.1 10.2 Referral fees 12.5 7.1 Trading expenses 4.9 5.5 General and administrative 13.8 12.8 Commu
Slide 16: Adjusted EBITDA & Margin Reconciliation
ADJUSTED EBITDA & MARGIN RECONCILIATION Three Months Ended March 31, 2020 2019 Net revenue $ 185.7 $ 38.4 Net income/(loss) 77.3 (28.4) Net income/(loss) Margin % 42% (74)% Net income/(loss) $ 77.3 $ (28.4) Depreciation and amortization 4.3 4.3 Purchase intangible amortization 1.8 3.3 Interest expen
Slide 17: Adjusted Net Income and EPS Reconciliation
ADJUSTED NET INCOME AND EPS RECONCILIATION Three Months Ended March 31, 2020 2019 Net income/(loss) $ 77.3 $ (28.4) Income tax expense/(benefit) 25.1 (6.1) Pre-tax income/(loss) $ 102.4$ (34.4) Adjustments: Restructuring expenses 1.4 0.0 Transaction costs 1.0 0.0 Adjusted pre-tax income/(loss) 104.9
Slide 18: Adjusted Income Tax (Expense)/Benefit Reconciliation
ADJUSTED INCOME TAX (EXPENSE)/BENEFIT RECONCILIATION Three Months Ended March 31, 2020 2019 GAAP pre-tax income/(loss) $ 102.4$ (34.4) GAAP tax rate 24.5% 17.6% Initial adjusted tax expense/(benefit) 25.1 (6.1) Tax law changes 0.7 0.0 One off adjustments 0.5 0.0 Adjusted tax expense/(benefit) $ 26.3
Slide 19: EPS Computation
EPS COMPUTATION Three Months Ended March 31, 2020 2019 Net income/(loss) $ 77.3 $ (28.4) Earnings/(loss) per common share Basic earnings/(loss) $ 2.06 $ (0.76) Diluted earnings/(loss) $ 2.06 $ (0.76) Weighted average common shares outstanding used in computing earnings/(loss) per common share:(1) Ba
Slide 20: Reconciliation of Segment Profit to Income Before Income Tax Expense
RECONCILIATION OF SEGMENT PROFIT TO INCOME BEFORE INCOME TAX EXPENSE Three Months Ended March 31, 2020 2019 Retail segment $ 123.4 $ (17.4) Futures segment 0.9 1.1 Corporate and other (9.9) (7.2) Segment profit/(loss) $ 114.4$ (23.5) Depreciation and amortization 4.3 4.3 Purchased intangible amortiz
Slide 21: Retail Revenue Per Million
RETAIL REVENUE PER MILLION 21
Slide 22: Operating Segment Results: Corporate & Other
OPERATING SEGMENT RESULTS: CORPORATE & OTHER Corporate & Other Financial & Operating Results Three Months Ended March 31, 2020 2019 TTM 3/31/20 (Loss)/revenue $ (0.7) $ 0.9 $ (1.7) Employee compensation and benefits 6.9 5.1 20.8 Other operating expenses 2.2 2.9 10.9 Loss $ (9.9)$ (7.2)$ (33.5) Note:
Slide 23: Quarterly Operating Metrics
QUARTERLY OPERATING METRICS Three Months Ended, Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Retail Segment OTC Trading Volume (1)(2) $ 487.3 $ 464.3 $ 463.1 $ 428.3 $ 748.7 OTC Average Daily Volume $ 7.7 $ 7.1 $ 7.0 $ 6.6 $ 11.7 12 Month Trailing Active OTC Accounts (3) 120,641 118,320 118,751 122,532 132,84
Slide 24: Operating Metrics
= GAIN | CAPITAL OPERATING METRICS OTC Average Daily Volume ($ bns) TTM Active OTC Accounts (000s) $17.7 132.8 40.0 sig0 MAO as ann yaa ys wpa tba N08 TS as 4 1 $14.0 512.0 599 2 $10.0 $7.8 a 0 Oo 67956 cag 8257S 5 c5 19 Ee 56.0 3) 400 52.0 20.0 50.0 00 8 8 oP Pf Sr a ee Se ee eee Futures Average Da
Slide 25: 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
GAIN Capital Holdings — Q1 2020 Earnings Presentation on 6ix