FXCM Revenues down 1% in Q2, still owes Leucadia $192.5 million


The quarterly financial reports of retail forex broker FXCM Inc (NYSE:FXCM) have been increasingly difficult to decipher.

On paper, FXCM just reported a $60.5 million net profit for Q2 on revenues of $70.6 million. Which looks great. However a number of accounting charges mask what is really going on.

The highlights from our standpoint are:

Revenues – FXCM took in $70.6 million in Revenues during Q2, down 1% from Q1. Nothing drastic, but if FXCM is going to dig its way out of the debt hole it is in, it is going to have to do better at some point on the Revenue line.

Earnings – FXCM’s EBITDA in Q2 came in at $10.9 million, up slightly from Q1’s $10.3 million. However most of that cash flow went toward paying the ever-growing interest on the loan from Leucadia National Corp (NYSE:LUK). FXCM paid out $21.2 million in interest during Q2, nearly two times its EBITDA.

Leucadia loan – Given FXCM’s Earnings as we describe above, it isn’t surprising that the loan balance owing to Leucadia at the end of Q2 was virtually unchanged from Q1. FXCM still owes Leucadia $192.5 million.

FXCM also reported July volume figures. Retail volumes were strong, up 2% MoM to $281 billion. Institutional volumes were down 28% MoM to $41 billion.

Our conclusion? 

As we’ve written before in FXCM is doing great… and is in big trouble, the ‘business’ part at FXCM is certainly doing OK. The company’s operations are stable if not growing, and the company’s operations are making money. But they are not making near enough money to deal with the huge Leucadia loan that FXCM has to deal with.

And from a shareholder point of view, even if FXCM does dig itself out of debt at some point in the future, most of the upside will accrue to Leucadia, not to FXCM shareholders.

FXCM’s full Q2 results press release can be seen here.

FXCM Q2 retail metrics

 

Related News

  • Jane

    More Bankrupt than ever! And guess what! FXPRO to follow suit!!!

    • LeapRate Staff

      Hi Jane, or whatever your name really is. We’re leaving your comment up, mainly to show our readers that there is someone out there posting to our (and other) sites trying to disparage both FXCM and FxPro at every opportunity. I think that our readers are smart enough to know what is real criticism, and what is bullsh-t. Which of those brokers fired you? Both?

      But to be substantive, FXCM (as we write above) is not bankrupt, although that’s certainly a possibility down the road if they can’t make enough money to repay Leucadia.

      And as far as we know, FxPro is doing just fine.

  • Andy

    What about the Fastmatch sale? They are saying ist “in final stages” since like forever..

    • Luke

      For shareholders this is good; better give them more time to get a higher price than sell now at a lower price. The Fastmatch volume rises steadily and is currently above 12 Billion, which means that FXCM’s stake in Fastmatch is becoming more and more valuable. The current value of Fastmatch alone might currenly be at about 100 Million, let alone the two other assets they have for sale.

  • ngson

    Sorry but I don’t get it, yes, the outstanding amount is huge 192.5M, FXCM has three assets to sell, fastmatch is around 100m (as one poster pointed out earlier), how much will sales of lucid and v3 yield? will the total sales of these assets cover the loan?
    ngson

    • ngson

      correction: estimated value of fastmatch is 100m, fxcm owns 35% , so it can only get 35m hopefully.

      • Luke

        FXCM’s 35% stake is worth around 100M, the total Fastmatch value is around 300Million. The 50% Lucid stake was around 160 to 170Million two years ago. However, same thing as with Fastmatch applies here as well: The popularity and volume increase steadily, so that stake could be higher as well, my guess is 230M by now. The increasing trading volumes are the reason why they don’t sell now, that’s why they write in their report, Quote “While remaining non-core assets being actively marketed, we believe greater value can be realized through additional time to complete asset sales”. I don’t have Information about the V3 stake.

        • ngson

          Thanks Luke, it sounds like there is nothing to worry about. steady revenue, pay off debt with non-assets. I wish I am bold enough to buy its shares 🙂

          • Luke

            Yes the 192M debt they have is absolutely not a problem. The important question is, how the future collaboration between FXCM and Lucedia will look like. They are currently working out a MOU which will be presented in Q3 2016. There has also been some news recently that FXCM will plan a 125Million capital raise in the next couple of weeks. Maybe this is to get more independant from Lucedia. Anyway, it is definately good to be a FXCM shareholder 🙂

          • David

            Since when is $200mln in debt not a problem???? Don’t forget they owe lots of other money too, $172mln in convertible bonds which will never convert so they’llhave to pay that back ttoo. Fastmatch isn’t worth no $300mln, that’s dreaming, its a new company which is like 5th or 6th in its field and gets most of its volume from its owners. Even Drew Niv has admitted that the debt is a problem which won’t go away any time soon.

  • Marek Pokorný

    Well I think that it is just matter of time before some other well established company will come up and offer FXCM possibility to refinance the outstanding debt for much much better conditions since FXCM’s financial reports are pretty solid. However the main thing is the text of the agreement since there is no doubt that early repayment would be heavily penalized.

    • Howard L.

      Marek: I don’t think you read the debt agreement properly. There’s no problem with FXCM paying back the loan now. But no bank in their right mind would lend them the money, since Leucadia effectively controls the company. They would happily replace the loan with one paying a much lower rate of interest if they could. But a company doing $10M of EBITDA a quarter getting a $150M loan???? No way.

arrow

FXCM Revenues down 1% in Q2, still owes Leucadia $192.5 million

4

Send this to a friend

Subscribe to LeapRate
PGlmcmFtZSBzcmM9Ii93cC1jb250ZW50L2E0bHIvaGFuMTZyZXNfNjI1eDQwMC5odG1sIiB3aWR0aD0iNjI1IiBoZWlnaHQ9IjQwMCIgZnJhbWVib3JkZXI9IjAiIHN0eWxlPSJib3JkZXI6bm9uZTsiIHNlYW1sZXNzPjwvaWZyYW1lPg==
Fill out the form below for more information
for lising in LeapRate's Forex Yellow Pages

Please enter the company name, email address to reach you and phone # (optional):

Please fill out the message field to the right for any questions or special inquiry:
PGlmcmFtZSBzcmM9Imh0dHBzOi8vd3d3LmxlYXByYXRlLmNvbS9hNGxyMTcvbG1heC82MDB4NDI1Lmh0bWwiIGZyYW1lYm9yZGVyPSIwIiB3aWR0aD0iNjAwIiBoZWlnaHQ9NDI1Ij48L2lmcmFtZT4=
PGlmcmFtZSBzcmM9Imh0dHBzOi8vd3d3LmxlYXByYXRlLmNvbS8vYTRscjE3L3VmeDE4LzYwMHg0MjVfMXN0LVRpbWVMZWFwUmF0ZS1lbi1HQl9IVE1MNS5odG1sIiBmcmFtZWJvcmRlcj0iMCIgd2lkdGg9IjYwMCIgaGVpZ2h0PTQyNSI+PC9pZnJhbWU+
PGlmcmFtZSBzcmM9Ii8vY2RuLmJhbm5lcnNuYWNrLmNvbS9iYW5uZXJzL2JjaWVod29iOC9lbWJlZC9pbmRleC5odG1sP3VzZXJJZD0zMTU5MzQwNiZ0PTE1MTAxMzg3MTAiIHdpZHRoPSIxMDAlIiBoZWlnaHQ9IjEwMCUiIHNjcm9sbGluZz0ibm8iIGZyYW1lYm9yZGVyPSIwIiBhbGxvd3RyYW5zcGFyZW5jeT0idHJ1ZSIgYWxsb3dmdWxsc2NyZWVuPSJ0cnVlIj48L2lmcmFtZT4=