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GAIN Capital (NYSE:GCAP) has today released its results for the first quarter of 2014. During this period, GAIN’s retail OTC trading business generated revenue of $47.0 million, compared to $35.3 million in the first quarter of 2013.
Total retail OTC trading volume during the quarter was $566.3 billion, compared to $431.8 billion for the same period in 2013.
GAIN Capital’s fortunes maintained a degree of strength recently, as retail OTC trading volume during March actually made an increase of 9% compared with February this year,and institutional volumes remained profitable, a dynamic which has been notable by its absence among many industry participants.
Of particular interest is the firm’s 52% increase in net revenue, which weighed in at $75.8 million for Q1 of 2014, compared with $49.8 million last year, but representing an 8.6% decline from the final quarter of last year which immediately preceded this accounting period.
These results bear little resemblance to compatriot FXCM (NYSE:FXCM), whose net revenue of $115.0 million, compared to $122.9 million for the quarter ended March 31, 2013, depicted a decrease of 6%, with the company still turning a profit despite a period in which FXCM CEO Drew Niv considered in a corporate statement to be the lowest period of volatility for 20 years. This runs contrary to GAIN Capital’s vast increase in revenues YoY, however when comparing the results to the Q4 of 2013, decline has prevailed across the board.
In the first quarter of 2014, GAIN Capital’s commission-based business, which includes institutional forex and exchange traded futures, generated total revenue of $29.8 million, compared to $10.9 million in the first quarter of 2013. The institutional business generated total revenue of $23.3 million in the quarter, compared to $6.2 million for the same period in 2013.
Institutional trading volume was $1.3 trillion in the first quarter of 2014, compared to $889.9 billion a year earlier. The exchange-traded futures business generated revenue of $6.5 million in the first quarter of 2014, compared to $4.7 million in the same period in 2013. Total contracts in the first quarter of 2014 were 1,609,796, compared to 1,282,066 in the same period in 2013.
As far as metrics for the first quarter are concerned, in addition to a net revenue of $75.8 million, GAIN Capital generated a net income of $1.6 million, or $0.04 per diluted share, compared with net income of $4.3 million, or $0.11 per diluted share, lagging behind FXCM’s $2.1 million for the same period.
Adjusted net income was $3.3 million, or $0.08 per diluted share, and adjusted EBITDA was $9.5 million, up 27% from $7.5 million. Retail OTC trading volume for the first quarter of 2014 was $566.3 billion, up 31% from $431.8 billion for the same accounting period last year, and institutional trading volume amounted to $1.3 trillion, up 46% from $889.9 billion.
Futures contracts were up 26% from 1,282,066 to 1,609,796, and total retail client assets for the quarter were $805.9 million, up 76% from $456.9 million.
GAIN Capital’s Board of Directors declared a quarterly dividend of $0.05 per share, to be paid to be paid on June 20, 2014 to shareholders of record as of June 12, 2014.
“Trading conditions in the first quarter, particularly the major currencies’ narrow trading ranges, resulted in a challenging quarter for our retail OTC business, which muted our overall first quarter financial results,” said Glenn Stevens, Chief Executive Officer.
“However, our operating metrics remain strong, with trading volume, active and funded accounts, client assets and futures contracts all experiencing double-digit growth over the first quarter of 2013 and strong sequential growth. We are very pleased with our ability to continue to attract customers and provide them with world-class service, which we expect will translate into growth in our financial results when trading conditions improve,” added Mr. Stevens.
“Our commission-based business, which includes our institutional and exchange-traded futures businesses, showed strong growth in the quarter and continue to drive our revenue diversification efforts. These complementary businesses represented 39% of our overall revenue for the quarter,” Mr. Stevens continued.
“The completed acquisitions of Global Asset Advisors and Top Third Ag Marketing and pending acquisition of Galvan Research will contribute to the further expansion of our commission-based revenue, and we expect these transactions to be accretive in 2014,” he added.
“In addition, we continue to make progress achieving our target cost synergies arising from our acquisition of GFT late last year and expect the realization of those cost savings to ramp significantly in the remaining quarters of 2014. Moreover, we have initiated additional cost-cutting actions that we expect will further reduce our expense base in the coming quarters. With strong client engagement, successful M&A activities which deliver revenue growth and diversification and a continued focus on expense management, we are confident in our ability to deliver long-term shareholder value,” concluded Mr. Stevens.