TradeStation Group, Inc. (Nasdaq:TRAD) today reported 2010 fourth
quarter net revenues of $28.9 million, net income of $770,000, and
earnings per share (diluted) of 2 cents, compared to 2009 fourth
quarter net revenues of $31.2 million, net income of $2.7 million,
and earnings per share (diluted) of 7 cents.
The primary reason for the year-over-year difference in net
revenues was lower brokerage commissions and fees caused mainly by
lower daily average revenue trades (DARTs). For the 2010
fourth quarter, brokerage commissions and fees (the largest
component of the company's net revenues) were $24.9 million, as
compared to 2009 fourth quarter brokerage commissions and fees of
$27.8 million. Lower DARTs were caused, the company believes,
primarily by reduced market volatility in the 2010 fourth quarter
as compared to the 2009 fourth quarter. The primary
reasons for the year-over-year difference in net income were the
lower brokerage commissions and fees and higher total expenses,
including an increase in depreciation and amortization of $925,000
attributable mainly to two software technology acquisitions and
capital expenditures for hardware made by the company in
2010.
"We are focused on several exciting growth initiatives in 2011,"
said Salomon Sredni, the company's Chairman and CEO. "We plan
to launch a superior forex brokerage service, as well as a new
marketing campaign that emphasizes the value of TradeStation to the
entire active trader market – not just rules-based traders – and to
grow our recently-launched securities lending and prime services
business and Eurex trading offering. We expect to launch both
the new forex offering and the new marketing campaign by the end of
the 2011 first quarter."
"At the 2010 year end, our client assets were at an all-time
high, average client margin balances had increased 40% since the
2009 fourth quarter, we had cash and cash equivalents and
marketable securities of $105.1 million, no debt, total
shareholders' equity of $173.4 million, and had produced positive
net income for the 35th consecutive quarter," said David
Fleischman, the company's Chief Financial Officer. "With
interest rates having only one direction to move, and the
implementation of our new growth initiatives, we remain excited
about our prospects for long-term earnings growth."
TradeStation Reports DARTs and Record Total
Accounts
For the 2010 fourth quarter, TradeStation experienced the
following year-over-year daily trading results with respect to
equities, futures and forex accounts:
|
Q4 10 |
Q4 09 |
Decrease |
Daily Average Revenue
Trades |
73,572 |
79,179 |
7% |
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 January 2011.
TradeStation had a record 47,581 brokerage accounts at December
31, 2010, a 3% increase from December 31, 2009. The 2010
fourth quarter is the 37th consecutive quarter TradeStation has
increased its net brokerage accounts since the 2001 launch of the
TradeStation trading platform.
TradeStation's Average Client Trades 391 Times per Year
and Has an Average Account Balance of $73,100 for Equities and
$23,000 for Futures
TradeStation's brokerage client account metrics are among the
best in the industry. TradeStation brokerage clients
generated the following client account metrics in the 2010 fourth
quarter:
Client Trading Activity |
|
Annualized average revenue per
account |
$2,245 |
Annualized trades per account |
391 |
|
|
Client Account Assets |
|
Average assets per account (Equities) |
$73,100 |
Average assets per account (Futures) |
$23,000 |
Company Completes 4-Year Stock Buy-Back
Plan
In the 2010 fourth quarter, the company completed its 4-year
stock buy-back plan with the purchase of 284,986 shares of its
common stock for a total purchase price of $1.7 million. Since
buying under the plan began November 13, 2006, through its
completion November 10, 2010, the company purchased 7,036,472
shares for a total purchase price of $59.8 million.
Company Provides 2011 Business Outlook
TradeStation today also published its 2011 Business Outlook.
The company's 2011 First Quarter and Full-year Business Outlook
estimated ranges are as follows:
2011 BUSINESS
OUTLOOK |
(In Millions, Except
Per Share Data) |
|
|
|
|
First Quarter
2011 |
Full-year 2011 |
REVENUES |
$32.0 to $34.0 |
$138.0 to $142.0 |
|
|
|
EARNINGS PER SHARE
(Diluted) |
$0.01 to $0.03 |
$0.15 to $0.20 |
When comparing earnings per share (diluted) in the Full-year
2011 Business Outlook to earnings per share (diluted) for 2010
full-year results, it is important to note that 2010 results were
significantly affected by items the company believes are not
important to its core business and operations, in particular
mark-to-market gains and losses on investments and certain tax
refunds and benefits. TradeStation's 2010 full-year earnings
per share (diluted) of 28 cents would have been 15 cents if
adjusted to exclude all mark-to-market gains or losses and to apply
an annual effective income tax rate of 40% (as compared to the
actual full-year effective income tax rate of 17%)1. The company
believes this is a more meaningful "apples-to-apples" comparison,
as the Full-year 2011 Business Outlook assumes no mark-to-market
gains or losses and a 40% annual effective income tax rate.
1A reconciliation of the company's reported results and its
proforma results assuming no mark-to-market gains or losses during
the period and a 40% annual effective tax rate is as follows (in
thousands, except per share data):
|
Year Ended
December 31, 2010 |
|
Amount (in
thousands) |
Earnings per Share
(diluted) |
Net income, as reported |
$11,440 |
$0.28 |
|
|
|
Gains on marketable securities, net * |
(2,310) |
(0.05) |
|
|
|
40% effective income tax rate |
(3,164) |
(0.08) |
|
|
|
Net income, excluding the effect of items
noted above |
$5,966 |
$0.15 |
|
|
|
Weighted average shares outstanding: |
|
|
Basic |
N/A |
39,815 |
Diluted |
N/A |
40,237 |
* After taxes
The company's 2011 first quarter and full-year estimated ranges
are based on numerous assumptions, including: basing the ranges on
average daily revenue per account for each asset class (equities,
futures, forex) at approximately the same level as average daily
revenue per account over the 12-month period ended December 31,
2010, plus a 2011 stub period ended February 1, 2011 (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); certain levels of revenue
growth from forex (based mainly on the expected first quarter 2011
launch of a new forex offering), prime services (mostly securities
lending) and Eurex trading, and the success of a new marketing
campaign (expected to be launched March 2011); U.S. Treasury Bill
and Treasury Note yields the company receives remaining constant at
current levels throughout the 2011 year; no unrealized gain or loss
on TradeStation Securities' investment in the CBOE or its U.S.
Treasury portfolio in 2011; anticipated growth, attrition and
trading activity of active trader equities, futures and forex
accounts (for forex accounts, chiefly from the planned new
offering), and the proportions in trading activity among those
asset classes (each of which have different profit margin
structures); the timing of expenses relating to the company's
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 our above-described growth initiatives do
not produce the expected results, market volatility and/or market
volumes move to significantly higher or lower levels, net account
growth increases, slows or decreases, the U.S. Treasury Bill and/or
Treasury Note rates of interest are different than what has been
assumed, and/or economic or financial market conditions persist or
worsen, or improve sooner or to a higher degree than expected, or
the company is subject to material mark-to-market adjustments (up
or down) on its investment in the CBOE or its U.S. treasury
securities holdings, 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 2010 fourth quarter results and its 2011
First Quarter and Full-year 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 brokerage
subsidiaries, 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, DTCC,
OCC & NFA) is a licensed securities broker-dealer and a
registered futures commission merchant, and also a member of
various exchanges. Its TradeStation Prime
Services division, based in New York, seeks to provide prime
brokerage services, including securities lending, to small and
mid-sized hedge funds and other firms. TradeStation Forex,
Inc. (Member NFA) is a Retail Foreign Exchange Dealer (RFED) that
is expected to launch and offer exclusively the company's new forex
brokerage offering beginning later this quarter. 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 and, once operational,
TradeStation Forex.
Forward-Looking Statements – Issues, Uncertainties and
Risk Factors
This press release, including the 2011 First Quarter and
Full-year 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:
- the company's ability (or lack thereof), based upon market
conditions, the level of success of its marketing (including its
planned new 2011 marketing campaign) 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 commissions and fees sequentially or year over year (for
example, beginning with the 2009 third quarter, DARTs and brokerage
commissions and fees have generally decreased both sequentially and
year-over-year);
- with respect to net new customer accounts in particular, which
fell to the lowest rate of increase in the company's history during
the 2010 third and fourth quarters, 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 (net account growth began substantially to slow in the
2009 third quarter);
- negative or other significant changes in the condition of the
securities and futures markets, and the financial markets and
economy generally (which could cause the company to experience
significantly lower revenues, net income and earnings per share, as
well as reduced market value of its publicly-traded shares of
common stock), or unexpected positive changes (which could have the
opposite effect);
- the company not meeting its revenue growth or profit
expectations from its planned new forex offering, prime services
(particularly securities lending), Eurex trading, and its planned
new marketing campaign, which are the main sources of the company's
planned revenue and profit growth in 2011, as a result of
unexpected mistakes, delays and/or costs, less-than-anticipated
customer appeal or market interest, and/or other factors;
- with respect to the company's planned new forex offering, the
potential negative effects on the company's forex commissions and
fees, and forex business and prospects generally, as a result of a
recently-enacted CFTC rule imposing a limit on buying power
leverage of 50-to-1 on major foreign currency pairs and 20-to-1 for
other currency pairs, as compared to the buying power leverage of
up to 100-to-1 or 200-to-1 typically offered throughout the world,
outside of the United States, today;
- 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
(generally, lower market volatility and volume results in
lower overall TradeStation brokerage account trading volume);
- changes in U.S. Treasury Note and/or Treasury Bill rates of
interest that are inconsistent with, or different from, the
company's assumption that there will be no changes in 2011;
- technical difficulties, outages, errors or failures in the
company's electronic and software products, services and systems,
or human or manual errors, relating to market data, order execution
and trade processing and reporting, and other software or system,
or human or manual, errors and failures, and 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, or the volume of the company's client
base's trading volume, requires increased, improved or different
hardware and/or software capacity, technology or company domain
know-how or risk and error control systems);
- although the company maintains a redundant back-up system to
its order execution systems, that redundancy is not seamless, which
could materially intensify the negative consequences of software or
system difficulties, outages, errors or failures;
- the potential negative effects on the company's brokerage
commissions and fees of any future rules that may be imposed which
ban short selling or restrict or limit short selling (the SEC has
in recent years focused, and will likely continue to focus, on new
or modified short selling rules), as a significant percentage of
the firm's daily client trades on many trading days are short sale
transactions, and its new securities lending operations depend on
short selling, that is, the need of clients to locate and borrow
stock to effect their transactions;
- mark-to-market gains or losses on marketable securities that
impact the company's financial results even though they do not
affect the company's operations (for example, mark-to-market gains
on marketable securities increased earnings per share by five cents
in the 2010 second quarter and mark-to-market losses decreased
earnings per share by one cent in the 2010 third quarter);
- a substantial decrease in the company's available cash should a
large portion of its current available cash be used for
acquisitions or other expansion activities;
- infrastructure, capital or other large expenses, or unforeseen
or unexpected liabilities and claims, the company may face as it
seeks to grow its U.S. active trader market business, and its
institutional (including prime services) and non-U.S. trader market
businesses, including potential acquisition, joint venture,
investment, business combination or "new division" risks, costs and
expenses (such as start-up costs and expenses, absorption of
ongoing losses from an acquired entity, professional fees and, in
the case of an acquisition, amortization expense -- such potential
opportunities are continuously under consideration);
- business interruptions, slowdowns or failures affecting vendors
or vendor services used by the company for clearance, settlement
and back-office systems, whether caused by adverse economic
conditions or other events, which could significantly interrupt,
impair or injure the company's core business operations;
- in general, new or modified regulatory rules or requirements,
or increased or more stringent enforcement and higher fines or
greater sanctions, concerning required liquidity, net capital or
deposits, or the manner in which the company operates its business
and monitors and ensures compliance of its business operations with
applicable laws, rules and regulations, that may be enacted or
imposed in response to the ongoing economic uncertainty and recent
scandals, and which could materially increase the firm's cash
requirements to conduct its business, require substantial increases
in compliance, legal and/or brokerage operations costs, result in
fines, penalties or sanctions, limit or reduce the firm's access
to, or use of, a significant percentage of its now-available cash,
or otherwise limit the firm's ability to engage fully, and with as
much success, in the services it currently provides and/or those
expanded services that the company is seeking to provide;
- the frequency and size of, and ability to collect, unsecured
client account debits as a result of volatile market movements and
unstable economic conditions, particularly in concentrated
positions held in client accounts or as a result of other high-risk
positions or circumstances;
- 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), whether because of company
share buy-back plans (which the company considers from time to
time) or other events or factors that can affect the price of the
company's shares or the number of outstanding shares;
- 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 effect of changes in product mix (how much of customer
trading volume is stocks versus equity options versus futures
versus forex), which can affect the company's revenues, net income
and margins, even if overall volume remains the same;
- pending or new regulatory matters 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, investments, 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, 2009, Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 2010, June 30, 2010, and
September 30, 2010, and other SEC filings, and company press
releases, conference calls and public presentations or
statements.
TRADESTATION GROUP,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
(in thousands,
except per share data) |
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2010 |
2009 |
2010 |
2009 |
|
(Unaudited) |
|
|
|
|
|
|
|
REVENUES: |
|
|
|
|
Brokerage commissions and fees |
$ 24,883 |
$ 27,836 |
$ 108,318 |
$ 121,258 |
|
|
|
|
|
Interest income |
2,756 |
2,008 |
10,429 |
5,957 |
Brokerage interest expense |
-- |
-- |
-- |
-- |
Net interest income |
2,756 |
2,008 |
10,429 |
5,957 |
|
|
|
|
|
Subscription fees and other |
1,623 |
1,829 |
6,376 |
7,638 |
|
|
|
|
|
Gains and (losses) on marketable
securities, net |
(326) |
(486) |
3,849 |
(142) |
|
|
|
|
|
Net revenues |
28,936 |
31,187 |
128,972 |
134,711 |
|
|
|
|
|
EXPENSES: |
|
|
|
|
Employee compensation and benefits |
10,528 |
10,053 |
44,583 |
41,715 |
Clearing and execution |
6,264 |
7,360 |
28,716 |
31,182 |
Data centers and communications |
3,366 |
2,929 |
14,211 |
11,480 |
Marketing |
1,768 |
1,564 |
6,838 |
6,610 |
Professional services |
1,094 |
859 |
3,640 |
3,372 |
Occupancy and equipment |
824 |
789 |
3,188 |
3,072 |
Depreciation and amortization |
1,981 |
1,056 |
5,311 |
4,362 |
Other |
2,472 |
1,987 |
8,692 |
6,849 |
|
|
|
|
|
Total expenses |
28,297 |
26,597 |
115,179 |
108,642 |
|
|
|
|
|
Income before income taxes |
639 |
4,590 |
13,793 |
26,069 |
|
|
|
|
|
INCOME TAX (BENEFIT) PROVISION |
(131) |
1,858 |
2,353 |
10,279 |
|
|
|
|
|
Net income |
$ 770 |
$ 2,732 |
$ 11,440 |
$ 15,790 |
|
|
|
|
|
EARNINGS PER SHARE: |
|
|
|
|
Basic |
$ 0.02 |
$ 0.07 |
$ 0.29 |
$ 0.38 |
Diluted |
$ 0.02 |
$ 0.07 |
$ 0.28 |
$ 0.38 |
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
|
Basic |
39,105 |
40,882 |
39,815 |
41,507 |
Diluted |
39,523 |
41,361 |
40,237 |
41,981 |
|
TRADESTATION GROUP,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
|
|
|
|
December 31, |
December 31, |
|
2010 |
2009 |
|
|
|
ASSETS: |
|
|
|
|
|
Cash and cash equivalents, including
restricted cash of $478 at December 31, 2010 and $717 at December
31, 2009* |
$ 41,888 |
$ 57,405 |
Cash and investments segregated in
compliance with federal regulations |
1,279,734 |
785,208 |
Marketable securities* |
63,255 |
76,342 |
Receivables from brokers, dealers,
clearing organizations and clearing agents |
80,827 |
32,226 |
Receivables from brokerage customers,
net |
68,268 |
45,034 |
Property and equipment, net |
17,974 |
7,578 |
Deferred income taxes, net |
-- |
1,276 |
Deposits with clearing organizations |
35,504 |
38,521 |
Other assets |
5,716 |
5,606 |
|
|
|
Total assets |
$ 1,593,166 |
$ 1,049,196 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
Payables to brokers, dealers and clearing
organizations |
$ 27,770 |
$ 114 |
Payables to brokerage customers |
1,381,105 |
868,741 |
Accounts payable |
3,767 |
2,627 |
Accrued expenses |
6,967 |
7,206 |
Deferred income taxes, net |
120 |
-- |
Total liabilities |
1,419,729 |
878,688 |
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
SHAREHOLDERS' EQUITY |
173,437 |
170,508 |
|
|
|
Total liabilities and shareholders'
equity |
$ 1,593,166 |
$ 1,049,196 |
|
|
|
* Marketable securities as of
December 31, 2010 exclude $3.9 million that was transferred on
January 3, 2011 from cash and investments segregated in compliance
with federal regulations. Cash and cash equivalents as of
December 31, 2009 include $7.7 million that was transferred on
January 4, 2010 to cash and investments segregated in compliance
with federal regulations. |
CONTACT: David H. Fleischman
Chief Financial Officer
TradeStation Group, Inc.
954-652-7000
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