PLANTATION, Fla., July 29, 2010 (GLOBE NEWSWIRE) -- TradeStation Group, Inc. (Nasdaq:TRAD) today reported that its second quarter earnings, which were released last week, did not reflect a 3 cent per share unrealized gain that should have been recorded as a result of the Chicago Board Options Exchange (CBOE) initial public offering in June 2010. TradeStation Securities, Inc. held one seat at the CBOE, for which it received shares of equity in CBOE Holdings, Inc. at the time of the offering, which resulted in approximately $2.3 million of unrealized "mark-to-market" gain ($1.4 million, or 3 cents per share, after tax) in the 2010 second quarter.
TradeStation Group's results for the second quarter of 2010, taking into account this gain, were as follows: net revenues were $38.4 million (as opposed to the $36.1 million previously reported), net income was $4.9 million (as opposed to the $3.5 million previously reported), and earnings per share (diluted) were 12 cents (as opposed to the 9 cents previously reported). Included in 2010 second quarter net revenues, in addition to the $2.3 million in unrealized gain from the CBOE initial public offering, and as previously reported, were $1.4 million in "mark-to-market" unrealized gains on TradeStation Securities' U.S. Treasury portfolio. Excluding the combined $3.7 million of unrealized gains, the company would, as previously reported, have had 2010 second quarter net revenues of $34.7 million, net income of $2.7 million, and earnings per share (diluted) of 7 cents.1 Management reiterated that excluding the unrealized gains provides investors with a more accurate view of the results of the company's operations since management does not believe those unrealized gains are important to the company's core business.
1 The following table reconciles net income, as reported, to net income excluding the effect of unrealized gains on marketable securities for the three months ended June 30, 2010.
|
Amount (in thousands) |
Earnings per Share (diluted) |
|
| Net income, as reported | $4,940 | $0.12 |
| Unrealized gains on marketable securities: | ||
| Shares of CBOE | (2,284) | (0.06) |
| U.S. Treasury Bills and Notes | (1,398) | (0.03) |
| Income tax effect of unrealized gains | 1,437 | 0.04 |
|
Net income, excluding the effect of unrealized gains on marketable securities |
$2,695 | $0.07 |
Company Provides 2010 Revised Full-year Business Outlook
TradeStation's 2010 Full-year Business Outlook ranges, incorporating the effect of the additional $2.3 million of unrealized gain from the CBOE initial public offering, are as follows:
| 2010 REVISED FULL-YEAR BUSINESS OUTLOOK | |
| (In Millions, Except Per Share Data) | |
| Full-year 2010 | |
| NET REVENUES | $134.0 to $139.0 |
| EARNINGS PER SHARE (Diluted) | $0.25 to $0.31 |
The company's 2010 revised full-year estimated ranges continue to be subject to the "Forward-Looking Statements - Issues, Uncertainties and Risk Factors" set forth in its July 22, 2010 press release, which are incorporated herein by this reference, and are based on numerous assumptions, including: basing the midpoints of 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 6-month period ended June 30, 2010 adjusted for seasonality, plus a stub period in July 2010 (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); that approximately 1.5 cents of the total estimated earnings per share (diluted) will be generated in the 2010 third quarter by recording during that quarter expected state tax refunds; U.S. Treasury Bill and Treasury Note yields the company receives remaining constant at current levels throughout the remainder of the 2010 year; no unrealized gain or loss on TradeStation Securities' shares in the CBOE and its U.S. Treasury portfolio in the 2010 third or fourth quarter; 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/or referenced above and below. In particular, to the extent 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 shares in the CBOE or its treasury securities holdings, the results estimated in the Business Outlook will likely be materially different than actual results.
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, DTCC, OCC & NFA) is a licensed securities broker-dealer and a registered futures commission merchant, and also a member of the Boston Options Exchange, Chicago Board Options Exchange, Chicago Stock Exchange, International Securities Exchange and NASDAQ OMX. Its TradeStation Prime Services division, based in New York, seeks to provide prime brokerage services to small and mid-sized hedge funds and other firms. 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.
| TRADESTATION GROUP, INC. AND SUBSIDIARIES | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
| (Unaudited) | ||||
| (in thousands, except per share data) | ||||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2010 | 2009 | 2010 | 2009 | |
| REVENUES: | ||||
| Brokerage commissions and fees | $30,456 | $31,864 | $57,404 | $64,799 |
| Interest income | 2,623 | 1,341 | 4,916 | 2,336 |
| Brokerage interest expense | -- | -- | -- | -- |
| Net interest income | 2,623 | 1,341 | 4,916 | 2,336 |
| Subscription fees and other | 1,608 | 1,993 | 3,236 | 4,033 |
| Unrealized gains on marketable securities | 3,682 | -- | 4,903 | -- |
| Net revenues | 38,369 | 35,198 | 70,459 | 71,168 |
| EXPENSES: | ||||
| Employee compensation and benefits | 11,461 | 10,653 | 22,655 | 21,152 |
| Clearing and execution | 8,317 | 7,814 | 15,500 | 16,662 |
| Data centers and communications | 3,940 | 2,887 | 7,443 | 5,649 |
| Marketing | 1,747 | 1,791 | 3,278 | 3,593 |
| Professional services | 739 | 912 | 1,436 | 1,760 |
| Occupancy and equipment | 807 | 746 | 1,559 | 1,483 |
| Depreciation and amortization | 1,063 | 1,115 | 2,013 | 2,244 |
| Other | 1,951 | 1,685 | 3,746 | 3,210 |
| Total expenses | 30,025 | 27,603 | 57,630 | 55,753 |
| Income before income taxes | 8,344 | 7,595 | 12,829 | 15,415 |
| INCOME TAX PROVISION | 3,404 | 2,914 | 5,214 | 6,054 |
| Net income | $4,940 | $4,681 | $7,615 | $9,361 |
| EARNINGS PER SHARE: | ||||
| Basic | $0.12 | $0.11 | $0.19 | $0.22 |
| Diluted | $0.12 | $0.11 | $0.19 | $0.22 |
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||
| Basic | 40,044 | 41,658 | 40,273 | 41,930 |
| Diluted | 40,508 | 42,210 | 40,724 | 42,385 |
| TRADESTATION GROUP, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (in thousands) | ||
|
June 30, 2010 |
December 31, 2009 |
|
| (Unaudited) | ||
| ASSETS: | ||
|
Cash and cash equivalents, including restricted cash of $717 at June 30, 2010 and December 31, 2009* |
$48,927 | $57,405 |
| Cash and investments segregated in compliance with federal regulations | 1,211,881 | 785,208 |
| Marketable securities* | 59,474 | 76,342 |
| Receivables from brokers, dealers, clearing organizations and clearing agents | 22,485 | 32,226 |
| Receivables from brokerage customers, net | 74,709 | 45,034 |
| Property and equipment, net | 9,882 | 7,578 |
| Deferred income taxes, net | 1,085 | 1,276 |
| Deposits with clearing organizations | 38,017 | 38,521 |
| Other assets | 4,110 | 5,606 |
| Total assets | $1,470,570 | $1,049,196 |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||
| LIABILITIES: | ||
| Payables to brokers, dealers and clearing organizations | $111 | $114 |
| Payables to brokerage customers | 1,286,274 | 868,741 |
| Accounts payable | 4,305 | 2,627 |
| Accrued expenses | 7,141 | 7,206 |
| Total liabilities | 1,297,831 | 878,688 |
| COMMITMENTS AND CONTINGENCIES | ||
| SHAREHOLDERS' EQUITY | 172,739 | 170,508 |
| Total liabilities and shareholders' equity | $1,470,570 | $1,049,196 |
*Marketable securities as of June 30, 2010 include $2.2 million that was transferred on July 1, 2010 to 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.