PLANTATION, Fla., July 24, 2008 (PRIME NEWSWIRE) -- TradeStation Group, Inc. (Nasdaq:TRAD) today reported, for the 2008 second quarter, net revenues of $36.6 million, which includes brokerage commissions and fees, the major component of net revenues, of $28.2 million. The company's brokerage commissions and fees increased 24% year over year as result of net account growth and higher trading volume by the brokerage firm's client accounts. The company also reported quarterly daily average revenue trades (DARTs) of 91,121 for the 2008 second quarter, a 28% increase over the 2007 second quarter.
For the 2008 second quarter, TradeStation Group's net income of $6.1 million and earnings per share (diluted) of 14 cents compared to net income of $8.1 million and earnings per share (diluted) of 18 cents for the 2007 second quarter. Lower net interest income in the 2008 second quarter ($4.7 million lower than net interest income generated in the 2007 second quarter) as a result of the significant year-over-year decrease in the federal funds target rate of interest was the major driver of the variance. Net income and earnings per share (diluted) for the 2008 second quarter include a one-time pre-tax expense of $1.2 million (an after-tax expense of $0.8 million, or 2 cents per share) relating to accelerated vesting of certain officer and director stock options that occurred as a result of the collective beneficial ownership of the company by the company's co-founders falling below 25%. Had that event and expense adjustment not occurred, 2008 second quarter net income would have been $6.9 million and earnings per share (diluted) would have been 16 cents. The company also recorded in the 2008 second quarter a $625,000 recovery of legal expenses from an insurance carrier as part of a final settlement of coverage relating to certain lawsuits in which the company had prevailed or had settled.
"We are very pleased to have generated a robust year-over-year increase in brokerage commissions and fees," said David Fleischman, TradeStation Group's Chief Financial Officer. "We have been able to grow the size and quality of our client account base to increase our brokerage commissions and fees revenue by an impressive 24% compared to the same period last year."
TradeStation Reports Record DARTs and Total Accounts ----------------------------------------------------
For the 2008 second quarter, TradeStation experienced the following year-over-year daily trading growth results with respect to equities, futures and forex accounts:
Q2 08 Q2 07 % Increase
------- ------- ----------
Daily Average Revenue Trades 91,121 71,117 28%
The company also published today, in a separate announcement, its DARTs, Total Client Assets, Average Equities Client Credit Balances and Average Equities Client Margin Balances for the month of June 2008.
TradeStation had 40,769 brokerage accounts at June 30, 2008, a 20% increase from the company's 34,088 brokerage accounts as of June 30, 2007.
TradeStation's Average Client Trades 577 Times per Year and Has an Average Account Balance of $71,000 for Equities and $20,000 for Futures -----------------------------------------------------------------------
TradeStation's brokerage client account metrics are among the very best in the industry. TradeStation brokerage clients generated the following client account metrics in the 2008 second quarter:
Client Trading Activity -------------------------------------- Annualized average revenue per account $3,435 Annualized trades per account 577 Client Account Assets -------------------------------------- Average assets per account (Equities) $71,000 Average assets per account (Futures) $20,000 Company Purchases 383,660 Shares under Stock Buy Back Plan ----------------------------------------------------------
In the 2008 second quarter, the company purchased 383,660 shares of its common stock pursuant to its stock buy back plan for a total purchase price of $3.7 million. Since buying under the plan began November 13, 2006, through June 30, 2008 the company has purchased 2,112,750 shares for a total purchase price of $24.5 million.
Under the stock buy back plan, the company is authorized, over a 4-year period, to purchase up to $60 million of its common stock using available and unrestricted cash in the open market or through privately-negotiated transactions pursuant to one or more Rule 10b5-1 plans or programs. Pursuant to the plan, $1,250,000 of company cash per month during each month of the 4-year period (i.e., $15 million per 12-month period and $60 million for the 4-year period) has been authorized to be used to purchase company shares at prevailing prices, subject to compliance with applicable securities laws, rules and regulations, including Rules 10b5-1 and 10b-18. The buy back plan does not obligate the company to acquire any specific number of shares in any period, and may be modified, suspended, extended or discontinued at any time without prior notice.
Company Provides Third Quarter 2008 Business Outlook ----------------------------------------------------
TradeStation today also published its Third Quarter 2008 Business Outlook.
"We continue to expect nice year-over-year growth in our brokerage commissions and fees in 2008," said Fleischman. "This is not expected, however, to offset the decrease in our interest income, which flows directly to our income before income taxes."
The company's third quarter 2008 Business Outlook estimated ranges are as follows:
THIRD QUARTER 2008 BUSINESS OUTLOOK
(In Millions, Except Per Share Data)
Third Quarter 2008
--------------------
REVENUES $37.0 to $42.0
EARNINGS PER SHARE (Diluted) $0.15 to $0.19
The company's 2008 third quarter estimated ranges are based on numerous assumptions, including: basing the midpoints of the ranges, in part, on average daily revenue per account for each asset class (equities, futures, forex) over the 6-month period ended June 30, 2008 (the period used and the formula and criteria applied often vary with each Business Outlook based upon management's judgment each period concerning the best assumptions to use); no further changes (up or down) in the federal funds target rate of interest for the remainder of 2008; anticipated growth, attrition and trading activity of active trader equities, futures and forex accounts, and the proportions in trading activity among those asset classes (each of which have different profit margin structures); the timing of expenses relating to company growth initiatives as compared to the timing of anticipated benefits from those initiatives; and numerous other assumptions concerning the company's business and industry, market conditions, and various decisions, acts or failures to act both within and outside of the company's control. All assumptions, expectations and beliefs relating to the Business Outlook are forward-looking in nature and actual results may differ materially from those estimated, including, but not limited to, as a result of, or as indicated by, the issues, uncertainties and risk factors set forth and referenced above and below. In particular, to the extent market volatility moves to significantly higher or lower levels, net account growth increases, slows or decreases, the federal funds target rate of interest is higher or lower than what has been assumed, and/or severe market conditions, such as a significant market recession, occur, the results estimated in the Business Outlook will likely be materially different than actual results.
Conference Call/Webcast -----------------------
At 11:00, a.m., Eastern Time, today, members of TradeStation Group senior management will conduct an analyst conference call to discuss the company's 2008 second quarter results and its third quarter 2008 Business Outlook. All company shareholders and the public are invited to listen. The telephone conference will be broadcast live via the Internet at www.TradeStation.com. The live webcast will be accompanied by slides of graphs and charts. A rebroadcast of the call will be accessible for approximately 90 days.
About TradeStation Group, Inc. ------------------------------
TradeStation Group, Inc. (Nasdaq:TRAD), through its principal operating subsidiary, TradeStation Securities, Inc., offers the TradeStation platform to the active trader and certain institutional trader markets. TradeStation is an electronic trading platform that offers state-of-the-art electronic order execution and enables clients to design, test, optimize, monitor and automate their own custom Equities, Options, Futures and Forex trading strategies.
TradeStation Securities, Inc. (Member NYSE, FINRA, SIPC, NSCC, DTC, OCC & NFA) is a licensed securities broker-dealer and a registered futures commission merchant, and also a member of the American Stock Exchange, Boston Options Exchange, Chicago Board Options Exchange, Chicago Stock Exchange, International Securities Exchange, NASDAQ OMX, NYSE-Euronext, and Philadelphia Stock Exchange. The company's technology subsidiary, TradeStation Technologies, Inc., develops and offers strategy trading software tools and subscription services. Its London-based subsidiary, TradeStation Europe Limited, an FSA-authorized brokerage firm, introduces UK and other European accounts to TradeStation Securities.
Forward-Looking Statements -- Issues, Uncertainties and Risk Factors --------------------------------------------------------------------
This press release, including the third quarter 2008 Business Outlook estimated ranges contained in this press release, and today's earnings conference call, contain statements and estimates that are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this press release, or the conference call, the words "anticipate(s)," "anticipated," "anticipation," "assume(s)," "assumption(s)," "become(s)," "belief(s)," "believe(s)," "believed," "could," "designed," "estimate," "estimates," "estimated," "expect(s)," "expected," "expectation(s)," "going forward," "future," "hopeful," "hopefully," "hope(s)," "intend(s)," "intended," "look forward," "may," "might," "opportunity," "opportunities," "outlook(s)," "pending," "plan(s)," "planned," "potential," "scheduled," "shall," "should," "think(s)," "to be," "upcoming," "well-positioned," "will," "wish," "would," and similar expressions, if and to the extent used, are intended to identify forward-looking statements. All forward-looking statements are based largely on current expectations and beliefs concerning future events that are subject to substantial risks and uncertainties. Actual results may differ materially from the results herein suggested or suggested in the conference call. Factors that may cause or contribute to the various potential differences include, but are not limited to, the following:
* changes in the condition of the securities and futures markets,
including, but not limited to, changes in the combined average
volume of the major U.S. equities and futures exchanges and in
market volatility, which tend to significantly affect customer
trading volume at TradeStation (for example, sharply increased
market volatility in the 2008 first quarter helped generate a
significant increase in client trading volume in that quarter, but
then client trading volume decreased in the 2008 second quarter
when market volatility decreased);
* changes in the federal funds target rate of interest that are
inconsistent with, or different from, the company's assumption
that there will be no further increases or decreases in 2008 (the
federal funds target rate of interest determines the amount of
interest income received on customer account balances and affects
the rates charged for account borrowings);
* the company's ability (or lack thereof), based upon market
conditions, the level of success of its marketing and product
development and enhancement efforts, product and service quality
and reliability, competition (including both price and
quality-of-offering competition, which are intense) and other
factors, to achieve significant, or any, net increases in DARTs,
brokerage accounts and brokerage revenues sequentially or year
over year (for example, TradeStation's DARTs decreased
sequentially from first to second quarter in 2008, and this and
other items may decrease sequentially or year over year in
subsequent periods);
* with respect to net new customer accounts, the company's ability
(or lack thereof) to maintain or increase the rate of quarterly
gross account additions and to control the rate of quarterly
account attrition (attrition rose significantly in the 2007 third
quarter, and then declined in the 2007 fourth quarter and 2008
first quarter, but attrition is expected to increase
significantly, and net new customer account growth may not be as
high, in the 2008 third quarter and, possibly, the 2008 fourth
quarter);
* technical difficulties, outages, errors or failures in the
company's electronic and software products, services and systems
relating to market data, order execution and trade processing and
reporting, and other software or system errors and failures, some
of which have occurred as recently as July 2008, January 2008 and
December 2007 (also, the company does not maintain a seamless,
redundant back-up system to its order execution systems, which
could materially intensify the negative consequences of any such
difficulties, outages, errors or failures);
* with respect to the July 2008 technical difficulties, outages,
errors and failures (referred to in the previous item), which the
company experienced with respect to its market data services (and
which affected customer orders relating to them), the failure or
inability of the company to address the underlying issues or
causes relating to such problems, to adequately correct them and
ensure they do not repeat (particularly as the volume of market
data received from the exchanges requires increased, improved or
different hardware and/or software capacity, technology or company
domain know-how), or otherwise to ensure the market data
stability, speed and accuracy of the trading platform's market
data services, as such failure or inability on the part of the
company could materially negatively affect the company's
reputation in the online trader market, causing increased
attrition and a decrease in new accounts, and decreased net
revenues and net income;
* unanticipated infrastructure, capital or other large expenses, and
unforeseen or unexpected liabilities and claims, the company may
face as it seeks to grow its U.S. active trader market share in
equities, futures and forex business, and its institutional and
non-U.S. trader market businesses, including potential
acquisition, joint venture or business combination risks, costs
and expenses (such as professional fees and, in the case of an
acquisition, amortization expense) incurred in the event the
company acquires, joint ventures or combines with other
businesses;
* the company's estimated earnings per share (diluted) being based
on assumptions of a certain number of outstanding shares and an
average stock price for particular time periods that turn out to
be inaccurate (if the number of outstanding shares and/or the
average stock price is actually higher than what has been assumed,
there will be more dilution and the actual earnings per share
would be lower, and, if both of those are lower, there will be
less dilution and higher earnings per share), based on new or
modified company share buyback plans (which the company considers
from time to time and which could be implemented later in 2008) or
based on other events or factors;
* unauthorized intrusion and/or other criminal or fraudulent
activity in customer accounts by persons who unlawfully or
improperly access or use customer accounts (through deceit or
otherwise) and then place orders or other transactions in, or
deposit misappropriated funds in, or improperly withdraw funds
from, those accounts;
* the level of success of the company's forex trading offering, and
whether customer forex trading will become a material part of the
company's business and revenues;
* the effect of changes in product mix (how much of customer trading
volume is stocks versus equity options versus futures versus
forex, etc.), which can affect our revenues, net income and
margins, even if overall volume remains the same;
* with respect to the company's recent offer to customers of a
flat-ticket commission plan, whether the segment of the active
trader market that engages in higher volume individual trades sees
value in this commission offering, will open more accounts, or
trade more frequently;
* the frequency and size of, and ability to collect, unsecured
client account debits as a result of volatile market movements in
concentrated positions held in client accounts or as a result of
other high-risk positions or circumstances;
* rule-based trading not growing in appeal to the extent the company
believes it will;
* the effect of unanticipated increased infrastructure costs that
may be incurred as the company seeks to increase its product
development headcount and resources (which the company continues
to try to do as quickly as possible in 2008) and grows its
brokerage firm operations, adds accounts and introduces and
expands existing and new product and service offerings, or
acquires other businesses;
* pending FINRA matters concerning odd-lot and partial-round-lot
trading, each of which could result in fines, sanctions and/or
other negative consequences;
* the amount of unexpected legal, consultation and professional fees
(including fees related to pending and future regulatory matters,
lawsuits or other proceedings against the company, or potential
acquisitions, business combinations or strategic relationships);
* the general variability and unpredictability of operating results
forecast on a quarterly or annual basis; and
* other items, events and unpredictable costs or revenue impact
items or events that may occur, and other issues, risks and
uncertainties indicated from time to time in the company's filings
with the Securities and Exchange Commission, including, but not
limited to, the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2007, Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2008, and other company
press releases, conference calls and other public presentations or
statements.
TRADESTATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
REVENUES:
Brokerage
commissions and
fees $28,227,501 $22,718,953 $58,752,339 $45,006,658
Interest income 7,061,046 12,151,328 16,337,903 24,117,055
Brokerage interest
expense 846,639 1,223,225 2,071,060 2,417,011
----------- ----------- ----------- -----------
Net interest
income 6,214,407 10,928,103 14,266,843 21,700,044
Subscription fees
and other 2,117,909 2,146,640 4,259,287 4,417,617
----------- ----------- ----------- -----------
Net revenues 36,559,817 35,793,696 77,278,469 71,124,319
----------- ----------- ----------- -----------
EXPENSES:
Employee
compensation and
benefits 10,826,681 8,771,032 20,045,621 17,222,049
Clearing and
execution 8,509,871 7,534,991 18,035,676 14,657,905
Data centers and
communications 2,368,979 1,479,811 4,760,299 3,153,810
Advertising 1,482,949 1,569,333 2,788,267 2,654,902
Professional
services 158,584 204,170 1,787,906 1,362,997
Occupancy and
equipment 754,917 689,070 1,507,590 1,385,697
Depreciation and
amortization 1,082,005 1,007,647 2,031,620 2,006,576
Other 1,351,645 1,570,254 2,801,328 2,514,767
----------- ----------- ----------- -----------
Total expenses 26,535,631 22,826,308 53,758,307 44,958,703
----------- ----------- ----------- -----------
Income before
income taxes 10,024,186 12,967,388 23,520,162 26,165,616
INCOME TAX
PROVISION 3,937,208 4,834,533 9,177,535 9,837,404
----------- ----------- ----------- -----------
Net income $ 6,086,978 $ 8,132,855 $14,342,627 $16,328,212
=========== =========== =========== ===========
EARNINGS PER SHARE:
Basic $ 0.14 $ 0.18 $ 0.33 $ 0.37
=========== =========== =========== ===========
Diluted $ 0.14 $ 0.18 $ 0.32 $ 0.36
=========== =========== =========== ===========
WEIGHTED AVERAGE
SHARES
OUTSTANDING:
Basic 43,389,483 44,382,844 43,548,591 44,486,460
=========== =========== =========== ===========
Diluted 44,143,095 45,424,242 44,302,714 45,566,403
=========== =========== =========== ===========
TRADESTATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2008 2007
------------ ------------
(Unaudited)
ASSETS:
-------
Cash and cash equivalents, including
restricted cash of $1,194,641 at
June 30, 2008 and December 31, 2007* $126,655,706 $103,698,700
Cash segregated in compliance with
federal regulations 517,293,517 475,968,659
Marketable securities 8,860,000 8,860,000
Receivables from brokers, dealers,
clearing organizations and clearing
agents 22,444,379 23,426,192
Receivables from brokerage customers 97,829,271 93,932,498
Property and equipment, net 6,648,291 7,009,526
Deferred income taxes, net 2,127,032 2,539,807
Deposits with clearing organizations 24,979,936 23,964,136
Other assets 5,831,872 5,287,654
------------ ------------
Total assets $812,670,004 $744,687,172
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
-------------------------------------
LIABILITIES:
Payables to brokers, dealers and clearing
organizations $ 71,504 $ 811,084
Payables to brokerage customers 648,282,847 589,654,425
Accounts payable 3,308,540 2,412,353
Accrued expenses 6,732,379 7,851,329
------------ ------------
Total liabilities 658,395,270 600,729,191
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 154,274,734 143,957,981
------------ ------------
Total liabilities and shareholders'
equity $812,670,004 $744,687,172
============ ============
* June 30, 2008 Cash and cash equivalents includes $14.5 million that
was transferred on July 2, 2008 to Cash segregated in compliance with
federal regulations. December 31, 2007 Cash and cash equivalents
includes $7.0 million that was transferred on January 2, 2008 to Cash
segregated in compliance with federal regulations.