FXCM Q2 Results: Sees Record Client Equity, Drop in

US based Forex Broker FXCM reported the results for the second quarter of 2012. Client equity rose by 20% from the end of 2011 to over $1.2 billion in Q2. On the other hand, revenue fell by 11% in comparison to Q2 2011.

The company also reported operating metrics for July 2012, which saw a small slide.

When the summer in the northern hemisphere ends, all types of forex activity will likely be on the rise. FXCM recently reported nice growth in institutional trading during June.

For more on Q2 results and July’s metrics, here are more details from the official press release:

Record growth in client equity to over $1.2 billion – up 20% from year-end 2011

Releases July 2012 Operating Metrics

Second Quarter 2012 Highlights:

• Revenues of $91.7 million, down 11% versus the same period in 2011
• Adjusted Pro Forma EBITDA of $21.0 million, down 26% versus the same period in 2011
• Adjusted Pro Forma net income of $7.9 million, down 50% versus the same period in 2011
• Adjusted Pro Forma fully diluted earnings per share of $0.11, down 48% versus the same period in 2011
• US GAAP net income (loss) of $(1.4) million or $(0.06) per fully diluted share versus $3.3 million or $0.19 in the same period in 2011 – includes $15.8 million of one-time items in the quarter, including $11.1 million of non-cash, stock based compensation
• Customer equity of $1,255 million, up 50% from same period in 2011 and up 20% from December 2011
• Active accounts of 174,218, up 13% from the same period in 2011 and up 7% from December 2011
• Completed acquisition of 50.1% of Lucid Markets Trading Ltd., a leading FX market maker in the institutional foreign exchange marketplace

NEW YORK–(BUSINESS WIRE)–FXCM Inc. (NYSE: FXCM), a leading online provider of foreign exchange, or FX, trading and related services, today announced for the quarter ended June 30, 2012, revenues under US GAAP of $91.7 million, compared to $103.3 million for the quarter ended June 30, 2011, a decrease of 11%. Adjusted Pro Forma EBITDA for the second quarter 2012 was $21.0 million, compared to $28.5 million for the second quarter 2011, a decrease of 26%. Adjusted Pro Forma Net Income was $7.9 million for the second quarter 2012, compared to $15.6 million for the second quarter 2011, a decrease of 50%. Adjusted Pro Forma fully diluted earnings per share for the second quarter 2012 of $0.11 on a fully exchanged, fully diluted basis, compared to $0.21 per share for the second quarter 2011, a decrease of 48%. U.S. GAAP net income (loss) was $(1.4) million for the second quarter 2012, compared to $3.3 million for the second quarter 2011. U.S. GAAP earnings (loss) per share for the second quarter 2012 was $(0.06) per fully diluted Class A share, compared to $0.19 per fully diluted Class A share for the second quarter 2011.

Second quarter 2012 results under U.S. GAAP included $15.8 million of one-time expenses, including $11.9 million relating to employee severance and the renegotiation of certain employment contracts in its institutional foreign exchange (“FX”) and retail businesses ($11.1 million of which was non-cash, stock based compensation), $2.3 million in regulatory costs in its Japanese business and $1.6 million in due diligence and other acquisition costs. The employee reductions and renegotiation of certain employment contracts in its institutional and retail businesses are expected to lower annual expenses by approximately $5.0 million going forward.

Adjusted Pro Forma results assume the conversion and exchange of all FXCM Holdings, LLC Units into FXCM Inc. Class A common stock, resulting in the elimination of the non-controlling interest and the corresponding adjustment to the entity’s tax provision. In addition, Adjusted Pro Forma results eliminate certain non-recurring charges, including in the second quarter 2012 the $15.8 million of one-time expenses discussed above, and certain equity based compensation expense granted at the time of FXCM’s initial public offering in December 2010.

“FXCM has always been strong with larger retail clients as they are attracted to our brand, agency execution model and platform,” said Drew Niv, Chief Executive Officer. “You are seeing that in our very strong growth in client equity, which has increased 20% from just year-end 2011 to $1.3 billion and increased 50% from June 30, 2011. This positions us well for future volume increases.”

“However, the macro environment for currency trading has been challenging with historically low FX volatility in the second quarter of this year,” continued Niv. “We have taken a number of steps which did not yet have a material impact in the quarter but should become more significant in the coming quarters.”

“At the end of the June 2012, we completed the acquisition of a 50.1% stake in Lucid Markets Trading Ltd., one of the leading non-bank FX market makers globally, which greatly enhances our capabilities in the institutional marketplace,” said Niv. “In addition, we initiated FastMatch, a joint venture with Credit Suisse, to deploy their technology underpinning the world’s largest equities crossing system. We have re-tooled and tailored the technology to the needs of the global FX market and created a new Electronic Communication Network (ECN) for FX trading. We expect the final release of the FastMatch platform to be available in September 2012.”

“Lastly, we are launching an offering with narrow spreads targeted to small retail customers, a segment that represents the majority of retail FX customers and where we have not been traditionally strong as our agency model has less of an impact. We believe this new offering, which will be offered on a principal execution model, can boost organic growth and capture market share among clients who value narrow spreads.”

FXCM Inc. today announced certain key operating metrics for July 2012 for its retail and institutional foreign exchange businesses. Monthly activities included:

July 2012 Operating Metrics

Retail Trading Metrics

• Retail customer trading volume⁽¹⁾  of $287 billion in July 2012, 9% lower than June 2012 and 8% lower than July 2011.
• Average retail customer trading volume per day of $13.0 billion in July 2012, 13% lower than June 2012 and 12% lower than July 2011.
• An average of 356,255 retail client trades per day in July 2012, 14% lower than June 2012 and 3% lower than July 2011.
• Tradeable accounts⁽²⁾  of 206,745 as of July 31, 2012, an increase of 1,634 or 1% from June 2012, and an increase of 34,439 or 19% from June 2011.

Institutional Trading Metrics

• Institutional customer trading volume⁽¹⁾  of $60 billion in July 2012, 63% lower than June 2012 and flat with July 2011.
• Average institutional trading volume per day of $2.7 billion in July 2012, 64% lower than June 2012 and 4% lower than July 2011.
• An average of 6,272 institutional client trades per day in July 2012, 65% lower than June 2012 and flat with July 2011.

“While retail volumes in July 2012 were lower than previous month, they were consistent with the second quarter 2012 average,” Niv added. “However, I am pleased to say that our retail revenue per million came in at the higher end of our recent $90-$100/million range due to a favorable mix of clients trading in the month.”

This operating data is preliminary and subject to revision and should not be taken as an indication of the financial performance of FXCM Inc. FXCM undertakes no obligation to publicly update or review previously reported operating data. Any updates to previously reported operating data will be reflected in the historical operating data that can be found on the Investor Relations page of the Company’s corporate website,  www.fxcm.com.

⁽¹⁾  Volume that FXCM customers traded in period is translated into US dollars.

⁽²⁾  A Tradeable Account is an account with sufficient funds to place a trade in accordance with FXCM trading policies.