TradeStation Group Recognizes Three Cents Per Share Unrealized Gain Resulting from CBOE Initial Public Offering
Second Quarter Earnings Revised to Twelve Cents Per Share
Plantation FL, July 29, 2010 –TradeStation Group, Inc. (NASDAQ GS: 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
Earnings per
(in thousands)
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
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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 GS: TRAD), through its principal operating subsidiary, TradeStation Securities, Inc., offers theTradeStationplatform to the active trader and certain institutional trader markets.TradeStationis 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. ItsTradeStation Prime Servicesdivision, 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.
Contact David H. Fleischman Chief Financial Officer TradeStation Group, Inc. 954-652-7000
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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,
December 31,
2010
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.
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