Bad debt expenses – or, otherwise put, negative client balances, took their toll on the financial metrics of US Forex broker FXCM Inc (NYSE:FXCM) in the first quarter of 2015, with the group recording a hefty loss from both continuing and discontinued operations.
The net loss from continuing operations totaled massive $393.3 million in the first three months of 2015, while the loss from discontinued operations being also heavy at $33.5 million.
The main factor for this negative outcome? “Black Thursday” events that led to negative client balances of $276 million. The company has managed to recover only a small portion of these, as suggested by the bad debt expense of $265.3 million, net of recoveries, relating to negative client equity balances. The inability to recover the bulk of the negative client balances is not surprising, given the legal rights of FXCM’s customers not to pay.
Looking back at the losses, there is, of course, the Leucadia deal. In the first three months of 2015, FXCM reported a loss on derivative liability of $292.4 million, a non-cash item relating to the increase in value of the Leucadia Letter Agreement, a component of the financing package provided by Leucadia.
FXCM said it had already repaid $81.6 million of Leucadia loan to date, with $12.4 million of the sum having been repaid in the quarter and $69.2 million – after the quarter-end.
First Quarter 2015 Financial Results:
- U.S. GAAP trading revenues from continuing operations of $69.2 million, compared to $82.2 million for the quarter ended March 31, 2014, a decrease of 16%.
- U.S. GAAP net loss attributable to FXCM Inc. from continuing operations was $393.3 million for the first quarter 2015 or $8.35 per fully diluted share, compared to U.S. GAAP net loss attributable to FXCM Inc. from continuing operations of $0.8 million or $0.02 per fully diluted share for the first quarter 2014.
- U.S. GAAP revenues from discontinued operations (including FXCM Japan) were $28.8 million, compared to $32.2 million for the quarter ended March 31, 2014, a decrease of 10%.
- U.S. GAAP net loss attributable to FXCM Inc. from discontinued operations was $33.5 million for the first quarter 2015 or $0.71 per fully diluted share, compared to U.S. GAAP net income attributable to FXCM Inc. from discontinued operations of $2.9 million or $0.07 per fully diluted share for the first quarter 2014.
- Adjusted revenue from continuing and discontinued operations for the first quarter 2015 was $98.8 million, compared to $111.3 million for the first quarter 2014, a decrease of 11%.
- Adjusted EBITDA from continuing and discontinued operations for the first quarter 2015 was $14.5 million, compared to $24.6 million for the first quarter 2014, a decrease of 41%.
(Note: Chart shows data for continuing operations).
To view FXCM’s official announcement of its Q1 2015 financial results, click here.