Retail volumes down, Revenues down, EBITDA and Net Loss.....
U.S.-based Forex firm Gain Capital (Forex.com) announced Q4 results yesterday, and they were not pretty. Financially, Gain reported its lowest quarterly revenue ($31.6 million) since Q2 of 2007. And not surprisingly, with Q4 revenue down 41% (!!) from Q3 and down 23% from Q4 last year, Gain reported a loss at both the EBITDA line (-$3.1 million) and net income (-$1.6 million). Not exactly a great quarter.
What hit Gain the hardest was a decline in retail volumes to $122 billion per month in Q4, from $149 billion in Q3, or by 18%. Interesting to note though is that despite having virtually identical volumes to Q4 last year, and a lot more institutional volume (more than three times as much, actually, the one bright spot we saw in Q4) than Q4 last year, revenues were down 23% from last year. Clearly, revenues-per-volume are declining rapidly at Gain, as (in our view) price competition continues to increase in the Forex business.
Geography-wise, for some reason the Gain people did not disclose as in previous quarters the geographic distribution of Q4 (or total year) volumes. (We were hoping for increased transparency from Gain, not less!). From digging through Gain's Q3 numbers we revealed back in October that Gain had undergone a rapid and amazing transformation, doing now most of its volume in Asia. We're curious how things went in Q4.
From a strategic perspective, Gain seems to have lost more from the loss of its largest White Label client TradeStation (which went out on its own), than it gained (no pun intended) when it purchased dbFX. We understand that many of the dbFX clients have migrated back to FXCM (a LeapRate Approved List firm) as we predicted might happen when the deal was announced. dbFX was an FXCM White Label, and dbFX clients were accustomed to trading on an FXCM platform.
For more information of the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.