FXCM Inc. Announces Third Quarter 2015 Results

Third Quarter 2015 Highlights:

  • U.S. GAAP net revenues from continuing operations of $59.6 million
  • U.S. GAAP net income attributable to FXCM Inc. from continuing operations of $64.3 million or $12.10(1) per fully diluted share, including a $137.6 million gain on derivative liability
  • U.S. GAAP net revenues from discontinued operations of $14.8 million
  • U.S. GAAP net income attributable to FXCM Inc. from discontinued operations of $9.3 million or $1.76(1)  per fully diluted share
  • Adjusted EBITDA from continuing and discontinued operations of $5.2 million
  • Strong combined operating cash position of $254.3 million and regulatory surplus of $85.1 million at September 30, 2015

October 2015 Customer Trading Metrics from Continuing Operations(2) Highlights:

  • Retail customer trading volume(3) of $335 billion in October 2015, 3% higher than September 2015 and 25% lower than October 2014.
  • Institutional customer trading volume(3) of $34 billion in October 2015, 28% lower than September 2015 and 63% lower than October 2014.

NEW YORK, Nov. 05, 2015 (GLOBE NEWSWIRE) —  FXCM Inc. (NYSE:FXCM), a leading online provider of foreign exchange, or FX, trading and related services, today announced for the quarter ended September 30, 2015, U.S. GAAP trading revenue from continuing operations of $56.3 million, compared to $88.7 million for the quarter ended September 30, 2014. U.S. GAAP net income attributable to FXCM Inc. from continuing operations was $64.3 million for the third quarter 2015 or $12.10(1) per fully diluted share, compared to U.S. GAAP net income attributable to FXCM Inc. from continuing operations of $2.0 million or $0.45(1) per fully diluted share for the third quarter 2014.

For the nine months ended September 30, 2015, U.S. GAAP trading revenue from continuing operations was $184.7 million, compared to $245.3 million for the nine months ended September 30, 2014.  U.S. GAAP net loss attributable to FXCM Inc. from continuing operations was $427.9 million for the nine months ended September 30, 2015 or $86.13(1) per fully diluted share, compared to U.S. GAAP net loss attributable to FXCM Inc. from continuing operations of $1.4 million or $0.36(1) per fully diluted share for the nine months ended September 30, 2014.

Results from operations for the quarter ended September 30, 2015 included a gain on derivative liability of $137.6 million and results from the nine months ended September 30, 2015 included a loss on derivative liability of $254.7 million.  In each case, the gain/loss is a non-cash item relating to the increase/decrease in value of the Leucadia Letter Agreement.  The Letter Agreement is a component of the financing package provided by Leucadia National Corp. (“Leucadia”). On January 15, 2015, FXCM’s customers suffered negative equity balances due to the unprecedented move in the Swiss Franc after the Swiss National Bank (“SNB”) discontinued its peg of the Swiss Franc to the Euro.  On January 16, 2015, FXCM entered into a financing agreement with Leucadia that permitted FXCM’s regulated subsidiaries to meet their regulatory capital requirements and continue normal operations after significant losses were incurred resulting from the events of January 15, 2015.   

U.S. GAAP trading revenue from discontinued operations for the quarter ended September 30, 2015 was $13.4 million, compared to $23.5 million for the quarter ended September 30, 2014.  U.S. GAAP net income attributable to FXCM Inc. from discontinued operations was $9.3 million for the third quarter 2015 or $1.76(1) per fully diluted share, which includes a $12.4 million gain on the sale of FXCM Hong Kong, or $2.34(1) per fully diluted share, compared to U.S. GAAP net income attributable to FXCM Inc. from discontinued operations of $0.4 million or $0.10(1) per fully diluted share for the third quarter 2014.

 U.S. GAAP trading revenue from discontinued operations for the nine months ended September 30, 2015 was $60.2 million, compared to $71.3 million for the nine months ended September 30, 2014.  U.S. GAAP net loss attributable to FXCM Inc. from discontinued operations was $21.1 million for the nine months ended September 30, 2015 or $4.24(1) per fully diluted share, compared to U.S. GAAP net income attributable to FXCM Inc. from discontinued operations of $2.8 million or $0.70(1) per fully diluted share for the nine months ended September 30, 2014.

Adjusted EBITDA from continuing and discontinued operations for the three months ended September 30, 2015 was $5.2 million, compared to $28.4 million for the three months ended September 30, 2014.

Adjusted EBITDA from continuing and discontinued operations for the nine months ended September 30, 2015 was $25.6 million, compared to $66.5 million for the nine months ended September 30, 2014.

Adjusted EBITDA is a Non-GAAP financial measure. This measure does not represent and should not be considered as a substitute for net income, net income attributable to FXCM Inc. or net income per Class A share or as a substitute for cash flow from operating activities, each as determined in accordance with U.S. GAAP, and our calculations of these measures may not be comparable to similarly entitled measures reported by other companies. See “Non-GAAP Financial Measures” beginning on A-3 of this release for additional information regarding these Non-GAAP financial measures and for reconciliations of such measures to the most directly comparable measures calculated in accordance with U.S. GAAP.

FXCM Inc. today announced certain key customer trading metrics for October 2015. Monthly activities included:

October 2015 Customer Trading Metrics from Continuing Operations (2)

Retail Customer Trading Metrics

  • Retail customer trading volume(3) of $335 billion in October 2015, 3% higher than September 2015 and 25% lower than October 2014.
  • Average retail customer trading volume(3) per day of $15.2 billion in October 2015, 3% higher than September 2015 and 22% lower than October 2014.
  • An average of 513,724 retail client trades per day in October 2015, 9% lower than September 2015 and 3% lower than October 2014.
  • Active accounts(4) of  178,273 as of October 31, 2015, a decrease of  1,848, or 1%, from September 2015, and an increase of 17,222, or 11%, from October 2014. 
  • Tradeable accounts(5) of  161,085 as of October 31, 2015, an increase of  735, or 0.5%, from September 2015, and a decrease of 16,891, or 9%, from October 2014.   

Institutional Customer Trading Metrics

  • Institutional customer trading volume(3) of $34 billion in October 2015, 28% lower than September 2015 and 63% lower than October 2014.
  • Average institutional trading volume(3) per day of $1.6 billion in October 2015, 24% lower than September 2015 and 59% lower than October 2014.
  • An average of 28,590 institutional client trades per day in October 2015, 4% lower than September 2015 and 104% higher than October 2014.

More information, including historical results for each of the above metrics, can be found on the investor relations page of FXCM’s corporate website www.fxcm.com.

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) Earnings per share have been adjusted to reflect the impact of the one-for-ten reverse stock split of the Corporation’s issued and outstanding Class A common stock that became effective on October 1, 2015.

(2) Customer Trading Metrics from Continuing Operations excludes discontinued operations of FXCM Japan and FXCM Hong Kong.

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

(4) An Active Account represents an account that has traded at least once in the previous twelve months.

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

 
Selected Customer Trading Metrics from Continuing Operations
                           
      Three Months Ended September 30,   Nine Months Ended September 30,
        2015       2014     % Change     2015       2014     % Change
                           
Total retail trading volume ($ in billions) $ 972     $ 876       11 %   $ 2,907     $ 2,381       22 %
Total active accounts   180,121       158,237       14 %     180,121       158,237       14 %
Trading days in period   66       66       0 %     194       194       0 %
Daily average trades     563,100       374,026       51 %     539,153       354,009       52 %
Daily average trades per active account   3.1       2.4       32 %     3.0       2.2       34 %
Retail trading revenue per million traded $ 56     $ 93       -40 %   $ 59     $ 95       -38 %
Total customer equity ($ in millions) $ 713.2     $ 878.1       -19 %   $ 713.2     $ 878.1       -19 %
                                               

Conference Call

As previously announced, FXCM will host a conference call to discuss the results at 4:45 p.m. (EDT). This conference call will be available to domestic participants by dialing 877.445.4603 and 443.295.9270 for international participants. The conference ID number is 63690274.

A live audio webcast, a copy of FXCM’s earnings release, and presentation slides for this conference call will be available at http://ir.fxcm.com/.

Disclosure Regarding Forward-Looking Statements

In addition to historical information, this earnings release may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995, which reflect FXCM’s current views with respect to, among other things, its operations and financial performance in the future. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about FXCM’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict including, without limitation, risks associated with the events that took place in the currency markets on January 15, 2015 and their impact on FXCM’s capital structure, risks associated with FXCM’s ability to recover all or a portion of any capital losses, risks relating to the ability of FXCM to satisfy the terms and conditions of or make payments pursuant to the terms of the credit agreement with Leucadia, risks related to FXCM’s dependence on FX market makers, market conditions, risks associated with the outcome of any potential litigation or regulatory inquiries to which FXCM may become subject as a result of the cybersecurity incident that was reported in a press release on October 1, 2015, risks associated with potential reputational damage to FXCM resulting from this cybersecurity incident, the outcome of FXCM’s ongoing investigation (including FXCM’s potential discovery of additional information relating to this cybersecurity incident) and the extent of remediation costs and other additional expenses that may be incurred by FXCM as a result of this security incident, and those other risks described under “Risk Factors” in FXCM Inc.’s Annual Report on Form 10-K, FXCM Inc.’s latest Quarterly Report on Form 10-Q, and other reports or documents FXCM files with, or furnishes to, the SEC from time to time, which are accessible on the SEC website at sec.gov. This information should also be read in conjunction with FXCM’s Consolidated Financial Statements and the Notes thereto contained in FXCM’s Annual Report on Form 10-K, FXCM Inc.’s latest Quarterly Report on Form 10-Q, and in other reports or documents the FXCM files with, or furnishes to, the SEC from time to time, which are accessible on the SEC website at sec.gov.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our SEC filings. FXCM Inc. undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Visit www.fxcm.com and follow us on Twitter @FXCM, Facebook FXCM, Google+ FXCM or YouTube FXCM.

About FXCM Inc.

FXCM Inc. (NYSE:FXCM) is a leading provider of online foreign exchange (FX) trading, CFD trading, spread betting and related services. Our mission is to provide global traders with access to the world’s largest and most liquid market by offering innovative trading tools, hiring excellent trading educators, meeting strict financial standards and striving for the best online trading experience in the market.

Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. In addition, FXCM offers educational courses on FX trading and provides free news and market research through DailyFX.com.

Trading foreign exchange and CFDs on margin carries a high level of risk, which may result in losses that could exceed your deposits, therefore may not be suitable for all investors. Read full disclaimer.

ANNEX I

Schedule     Page Number
       
U.S. GAAP Results      
Unaudited U.S. GAAP Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014      A-1
Unaudited U.S. GAAP Condensed Consolidated Statements of Financial Condition As of September 30, 2015 and December 31, 2014      A-2
       
Non-GAAP Financial Measures      A-3
Reconciliation of U.S. GAAP Reported to Adjusted EBITDA     A-4
Schedule of Cash and Cash Equivalents and Amounts Due to/from Brokers     A-5
       

   
FXCM Inc.  
Condensed Consolidated Statements of Operations  
(In thousands, except per share amounts)  
(Unaudited)  
 
  Three Months Ended September 30,   Nine Months Ended September 30,  
    2015       2014       2015       2014    
Revenues                
Trading revenue $ 56,247     $ 88,696     $ 184,672     $ 245,294    
Interest income   494       519       1,232       1,493    
Brokerage interest expense   (212 )     (174 )     (589 )     (370 )  
Net interest revenue   282       345       643       1,123    
Other income   3,053       2,344       149,969       2,889    
Total net revenues   59,582       91,385       335,284       249,306    
Operating Expenses                
Compensation and benefits   23,948       23,317       72,444       72,680    
Referring broker fees   13,032       20,735       43,702       55,652    
Advertising and marketing   4,116       4,067       10,416       16,226    
Communication and technology   7,312       10,451       26,072       28,446    
Trading costs, prime brokerage and clearing fees   847       2,394       2,947       5,946    
General and administrative   12,861       14,872       39,234       41,678    
Bad debt expense               257,303          
Depreciation and amortization   7,316       7,917       21,136       20,506    
Goodwill impairment loss               9,513          
Total operating expenses   69,432       83,753       482,767       241,134    
Operating (loss) income   (9,850 )     7,632       (147,483 )     8,172    
Other Income (expense)                
Gain (loss) on derivative liability — Letter Agreement   137,566             (254,730 )        
Loss on equity method investments, net   111       137       299       304    
Interest on borrowings   28,974       3,028       103,824       9,121    
Income (loss) from continuing operations before income taxes   98,631       4,467       (506,336 )     (1,253 )  
Income tax provision   295       1,350       181,616       1,366    
Income (loss) from continuing operations   98,336       3,117       (687,952 )     (2,619 )  
Income (loss) from discontinued operations, net of tax   18,018       (357 )     (74,915 )     69    
Net income (loss)   116,354       2,760       (762,867 )     (2,550 )  
Net income (loss) attributable to non-controlling interest in FXCM Holdings, LLC   39,038       1,538       (274,650 )     1,756    
Net income (loss) attributable to other non-controlling interests   3,667       (1,170 )     (39,238 )     (5,697 )  
Net income (loss) attributable to FXCM Inc. $ 73,649     $ 2,392     $ (448,979 )   $ 1,391    
                 
Income (loss) from continuing operations attributable to FXCM Inc. $ 64,302     $ 1,956     $ (427,909 )   $ (1,431 )  
Income (loss) from discontinued operations attributable to FXCM Inc.   9,347       436       (21,070 )     2,822    
Net income (loss) attributable to FXCM Inc. $ 73,649     $ 2,392     $ (448,979 )   $ 1,391    
                 
Weighted average shares of Class A common stock outstanding:(1)                
Basic   5,313       4,296       4,968       4,011    
Diluted   5,313       4,382       4,968       4,011    
                 
Net income (loss) per share attributable to stockholders of Class A common stock of FXCM Inc.:(1)                
Basic:                
Continuing operations $ 12.10     $ 0.46     $ (86.13 )   $ (0.36 )  
Discontinued operations   1.76       0.10       (4.24 )     0.70    
Basic net income (loss) attributable to FXCM Inc. $ 13.86     $ 0.56     $ (90.37 )   $ 0.34    
                 
Net income (loss) per share attributable to stockholders of Class A common stock of FXCM Inc.: (1)                
Diluted:                
Continuing operations $ 12.10     $ 0.45     $ (86.13 )   $ (0.36 )  
Discontinued operations   1.76       0.10       (4.24 )     0.70    
Diluted net income (loss) attributable to FXCM Inc. $ 13.86     $ 0.55     $ (90.37 )   $ 0.34    
                 
Dividends declared per common share(1) $     $ 0.60     $     $ 1.80    
 
(1) Adjusted to reflect the impact of the one-for-ten reverse stock split of the Corporation’s issued and outstanding Class A common stock that became effective on October 1, 2015.  
   

 A-1

 
FXCM Inc.
Condensed Consolidated Statements of Financial Condition
As of September 30, 2015 and December 31, 2014
(Amounts in thousands except share data)
(Unaudited)
    September 30, 2015   December 31, 2014
Assets        
Current assets        
Cash and cash equivalents   $ 186,369     $ 256,887  
Cash and cash equivalents, held for customers     713,204       901,227  
Due from brokers     24,007       9,772  
Accounts receivable, net     13,894       7,209  
Deferred tax asset           9,065  
Tax receivable     2,626       1,381  
Current assets held for sale     357,894       548,506  
Total current assets     1,297,994       1,734,047  
Deferred tax asset           172,619  
Office, communication and computer equipment, net     37,335       39,028  
Goodwill     28,656       39,242  
Other intangible assets, net     15,787       15,338  
Notes receivable     7,881       9,381  
Other assets     17,512       14,829  
Noncurrent assets held for sale           362,943  
Total assets   $ 1,405,165     $ 2,387,427  
Liabilities and Stockholders’ (Deficit) Equity        
Current liabilities        
Customer account liabilities   $ 713,204     $ 901,227  
Accounts payable and accrued expenses     48,635       35,189  
Revolving credit agreement           25,000  
Due to brokers     60       15,983  
Due to related parties pursuant to tax receivable agreement           5,352  
Current liabilities held for sale     84,057       455,915  
Total current liabilities     845,956       1,438,666  
Deferred tax liability     944       1,698  
Senior convertible notes     155,758       151,578  
Credit agreement     145,330        
Due to related parties pursuant to tax receivable agreement           145,224  
Derivative liability — Letter Agreement     348,531        
Other liabilities     16,294       5,957  
Noncurrent liabilities held for sale           1,288  
Total liabilities     1,512,813       1,744,411  
Commitments and Contingencies        
Stockholders’ (Deficit) Equity        
Class A common stock, par value $0.01 per share; 3,000,000,000 shares authorized, 5,372,666(1) and 4,788,996(1) shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively     54       48  
Class B common stock, par value $0.01 per share; 1,000,000 shares authorized, 27 and 34 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively     1       1  
Additional paid-in capital(1)     273,313       274,139  
(Accumulated deficit) retained earnings     (426,600 )     22,379  
Accumulated other comprehensive income (loss)     570       (11,879 )
Total stockholders’ (deficit) equity, FXCM Inc.     (152,662 )     284,688  
Non-controlling interests     45,014       358,328  
Total stockholders’ (deficit) equity     (107,648 )     643,016  
Total liabilities and stockholders’ (deficit) equity   $ 1,405,165     $ 2,387,427  
         
(1) Adjusted to reflect the impact of the one-for-ten reverse stock split of the Corporation’s issued and outstanding Class A common stock that became effective on October 1, 2015.
 

A-2

Non-GAAP Financial Measures       

We use Non-GAAP financial measures to evaluate our operating performance, as well as the performance of individual employees. Management believes that the disclosed Non-GAAP measures when presented in conjunction with comparable U.S. GAAP measures are useful to investors to compare FXCM’s results across several periods and facilitate an understanding of FXCM’s operating results. These measures do not represent and should not be considered as a substitute for, or superior to, net income, net income attributable to FXCM Inc. or net income per Class A share or as a substitute for, or superior to, cash flow from operating activities, each as determined in accordance with U.S. GAAP, and our calculations of these measures may not be comparable to similarly entitled measures reported by other companies. 

  1. Compensation Expense. Adjustments have been made to eliminate expense relating to stock based compensation relating to the Company’s IPO as well as costs associated with the acquisition of V3 Markets, LLC. Given the nature of these expenses, they are not viewed by management as expenses incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these expenses.
  2. Compensation Expense / Lucid Minority Interest.  Our reported U.S. GAAP results reflect the portion of the 49.9% of Lucid earnings allocated among the non-controlling members of Lucid based on services provided as a component of compensation expense under Allocation of income to Lucid members for services provided. Adjustments have been made to eliminate this allocation of Lucid’s earnings attributable to non-controlling members. The Company’s management believes that this adjustment provides a more meaningful view of the Company’s operating expenses and the Company’s economic arrangement with Lucid’s non-controlling members. This adjustment has no impact on net income as reported by the Company.
  3. Acquisition Costs/Income.  Adjustments have been made to eliminate certain acquisition related costs/income. Given the nature of these items, they are not viewed by management as expenses/income incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these items.
  4. Regulatory Costs.  Adjustments have been made to eliminate certain costs (including client reimbursements and professional fees) associated with ongoing discussions and settling certain regulatory matters. Given the nature of these expenses, they are not viewed by management as expenses incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these expenses.
  5. SNB Costs.  Adjustments have been made to eliminate certain costs/income (including the net losses associated with client debit balances, costs related to the implementation of a Stockholder Rights Plan and adjustments to the Company’s tax receivable agreement contingent liability) associated with the January 15, 2015 SNB event. Given the nature of these expenses, they are not viewed by management as expenses incurred in the ordinary course of business and management believes it is useful to provide the effects of eliminating these expenses.
  6. Cyber Security Incident: An adjustment has been made to eliminate certain costs related to investigative and other professional services, costs of communications with customers and remediation activities associated with the incident.  Given the nature of these expenses, management believes it is useful to provide the effects of eliminating these expenses.

A-3

   
  Reconciliation of U.S. GAAP Reported to Non-GAAP Adjusted Measures(1)
  Three Months Ended September 30,
    2015       2014  
  Continuing
Ops
Disc Ops Combined   Continuing
Ops
Disc Ops Combined
Net income (loss) $    98,336   $    18,018   $    116,354     $    3,117   $    (357 ) $    2,760  
EBITDA and Other Adjustments              
Depreciation and amortization   7,316         7,316       7,917     7,124     15,041  
Interest on borrowings   28,974         28,974       3,028         3,028  
MTM (gain) loss on derivatives   (137,566 )       (137,566 )              
Goodwill and held for sale impairment       (979 )   (979 )              
Gain on completed dispositions       (12,449 )   (12,449 )              
Income tax provision (benefit)   295     (306 )   (11 )     1,350     (206 )   1,144  
EBITDA and Other Adjustments     (2,645 )     4,284       1,639         15,412       6,561       21,973  
Adjustments              
Net Revenues(2)                 (360 )       (360 )
Compensation and benefits(3)                 2,232         2,232  
Allocation of net income to Lucid members for services provided(4)       2,249     2,249           1,483     1,483  
General and administrative(5)   1,306         1,306       3,116         3,116  
Adjusted EBITDA $    (1,339 ) $    6,533   $    5,194     $    20,400   $    8,044   $    28,444  
                                       

(1) The presentation includes Non-GAAP financial measures. These Non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles, and do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with U.S. GAAP.

(2) Represents the elimination of a $0.4 million benefit in Q3 2014 attributable to the remeasurement of our tax receivable agreement liability to reflect a revised effective tax rate.

(3) Represents the elimination of stock-based compensation associated with the IPO of $2.2 million in Q3 2014.

(4) Represents the elimination of the 49.9% of Lucid’s earnings allocated among the non-controlling interests recorded as compensation for U.S. GAAP purposes.

(5) Represents regulatory and professional fees of $1.3 million in Q3 2015 including $0.2 million of costs related to the cyber security incident, the net expense relating to pre-August 2010 trade execution practices and other regulatory fees and fines of $0.8 million in Q3 2014 and the $2.3 million charge related to a put option payment for Online Courses in Q3 2014.

   
  Reconciliation of U.S. GAAP Reported to Non-GAAP Adjusted Measures(1)
  Nine Months Ended September 30,
  2015   2014
  Continuing
Ops
Disc Ops Combined   Continuing
Ops
Disc Ops Combined
Net (loss) income $   (687,952 ) $    (74,915 ) $   (762,867 )   $    (2,619 ) $    69   $    (2,550 )
EBITDA and Other Adjustments              
Depreciation and amortization   21,136     12,359     33,495       20,506     20,287     40,793  
Interest on borrowings   103,824         103,824       9,121         9,121  
MTM loss on derivatives   254,730         254,730                
Goodwill and held for sale impairment   9,513     82,685     92,198                
Gain on completed dispositions       (14,427 )   (14,427 )              
Income tax provision   181,616     5,321     186,937       1,366     282     1,648  
EBITDA and Other Adjustments     (117,133 )     11,023       (106,110 )       28,374       20,638       49,012  
Adjustments              
Net Revenues(2)   (145,224 )       (145,224 )     (360 )   (3,672 )   (4,032 )
Compensation and benefits(3)                 6,367     272     6,639  
Allocation of net income to Lucid members for services provided(4)       6,916     6,916           6,771     6,771  
Communication and technology(5)                     206     206  
General and administrative(6)   4,341         4,341       7,697     163     7,860  
Bad debt expense(7)   257,303     8,408     265,711                
Adjusted EBITDA $    (713 ) $    26,347   $    25,634     $    42,078   $    24,378   $    66,456  
               

(1) The presentation includes Non-GAAP financial measures. These Non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles, and do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with U.S. GAAP.

(2) Represents the elimination of a $145.2 million benefit in Q1 2015 attributable to the reduction of our tax receivable agreement contingent liability to zero and the elimination of a $0.4 million benefit in Q3 2014 attributable to the remeasurement of our tax receivable agreement liability to reflect a revised effective tax rate and the elimination of a $3.7 million benefit recorded to reduce the contingent consideration related to the Faros acquisition in Q1 2014.

(3) Represents the elimination of stock-based compensation associated with the IPO of $6.4 million in the Nine Months Ended September 30, 2014 and the elimination of V3 acquisition costs of $0.3 million in Q1 2014.

(4) Represents the elimination of the 49.9% of Lucid’s earnings allocated among the non-controlling interests recorded as compensation for U.S. GAAP purposes.

(5) Represents the elimination of V3 acquisition costs in Q1 2014.

(6) Represents the elimination of the expense related to the Stockholders Rights Plan, legal fees resulting from the January 15, 2015 SNB event and regulatory and other professional fees of $4.3 million, including $0.2 million of costs related to the cyber security incident, in the Nine Months Ended September 30, 2015, the net expense relating to pre-August 2010 trade execution practices and other regulatory fees and fines of $3.5 million in the Nine Months Ended September 30, 2014 and the elimination of V3 acquisition costs of $0.5 million in continuing ops and $0.2 million in discontinued ops in Q1 2014 and the $3.6 million of charges related to put option payments for Online Courses in Q2 & Q3 2014.

(7) Represents the net bad debt expense related to client debit balances associated with the January 15, 2015 SNB event.

A-4

Schedule of Cash and Cash Equivalents and Due to/from Brokers

       
  September 30, 2015   December 31, 2014
  Continuing
Ops
Disc Ops Combined   Continuing
Ops
Disc Ops Combined
Cash & Cash Equivalents $ 186,369   $ 23,422   $ 209,791     $ 256,887   $ 85,263   $ 342,150  
Due From Brokers   24,007     20,595     44,602       9,772     27,552     37,324  
Due to Brokers   (60 )   (21 )   (81 )     (15,983 )   (330 )   (16,313 )
Operating Cash $    210,316   $    43,996   $    254,312     $    250,676   $    112,485   $    363,161  
               

A-5

CONTACT: Contacts
Jaclyn Klein, 646-432-2463
Vice-President, Corporate Communications and Investor Relations
jklein@fxcm.com

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