Income Before Income Taxes Increases 188% and Operating Margin of 31% Is More
Than Double 2004 Second Quarter Operating Margin
PLANTATION, Fla., July 20 /PRNewswire-FirstCall/ -- TradeStation Group,
Inc. (Nasdaq: TRAD) today reported record quarterly revenues of $23.0 million,
record quarterly income before income taxes of $7.5 million, record daily
average revenue trades (DARTs) of over 41,000, and record total brokerage
accounts of nearly 21,000.
TradeStation Group had 2005 second quarter net income of $4.7 million, or
11 cents per share (diluted), as compared to 2004 second quarter net income of
$5.8 million, or 13 cents per share (diluted). However, net income for the
2004 second quarter included an income tax net benefit of $3.2 million related
primarily to the reversal of a valuation allowance. If that income tax net
benefit is excluded, and if the company had recorded income tax expense at the
approximate 38% rate it now uses, 2004 second quarter net income would have
been much lower -- approximately $1.6 million. Given the significant positive
impact of these income tax factors to the 2004 second quarter's net income
results, the company believes that income before income taxes is a more
appropriate comparison of its performance year over year.
The company's 2005 second quarter income before income taxes was
$7.5 million, a 188% increase from income before income taxes of $2.6 million
for the 2004 second quarter. The company's operating margin more than doubled
to 31% in the 2005 second quarter, as compared to 15% in the 2004 second
quarter.
The company's 2005 second quarter revenues of $23.0 million were a 34%
increase over 2004 second quarter revenues of $17.2 million.
"We are very pleased with our record 2005 second quarter results," said
David Fleischman, the company's Chief Financial Officer, "and intend to work
hard to continue to increase our operating margin as we grow."
TradeStation Reports Record DARTs and Total Accounts Approach 21,000
For the 2005 second quarter, TradeStation experienced the following year-
over-year daily trading growth results with respect to equities, futures and
forex accounts:
Q2 05 Q2 04 % Increase
Daily Average Revenue
Trades 41,086 33,477 23 %
TradeStation's year-over-year and sequential increases in DARTs compare
very favorably to the performance of its larger online brokerage firm
competitors. TradeStation's 23% year-over-year increase in DARTs was
significantly better than both Ameritrade, which experienced a 15% year-over-
year decrease in DARTs, and E*Trade, which was flat year over year.
Sequentially, TradeStation's 3% increase in DARTs from the 2005 first quarter
was significantly better than Ameritrade's sequential decrease of 17% and
E*Trade's sequential decrease of approximately 10%(1).
"We attribute our growth in DARTs to consistent account growth, the
robustness of our high-end client base and the diversity of our service
offering," said Fleischman.
TradeStation had 20,942 brokerage accounts at the end of the 2005 second
quarter, a 39% increase year over year.
TradeStation's Average Client Trades Over 500 Times Per Year and Has an
Average Account Balance of Nearly $90,000 for Equities and Nearly $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 2005 second quarter:
Client Trading Activity
Annualized average revenue
per account $3,984
Annualized trades per
account 509
Client Account Assets
Average assets per account
(Equities) $87,100
Average assets per account
(Futures) $19,300
As was the case with DARTs, TradeStation's other account metrics were far
superior to those of its larger online brokerage firm competitors.
TradeStation's annualized trades per account and annualized revenue per
account were both many times higher than those produced by Ameritrade and
E*Trade. While the average TradeStation account traded over 500 times per
year, or over 42 times per month, the average Ameritrade account traded about
9.5 times per year, or .79 times per month, and the average E*Trade account
traded about 6.7 times per year, or .56 times per month. TradeStation's
average assets per equities account of $87,100 was three to four times higher
than the average assets per account of Ameritrade (approximately $21,000) and
E*Trade (approximately $28,000)(1).
TradeStation To Eliminate Monthly Platform Fees For Very Active Traders
To further increase its appeal to very active traders, starting
September 1st TradeStation will be significantly lowering the trade activity
thresholds it uses to waive its $99.95 monthly platform fee. Currently,
TradeStation charges the platform fee each month to brokerage customers unless
the customer trades that month at least 250,000 shares, 2,500 equity option
contracts, 500 futures round-turns, or 500 forex round-turn lots. Beginning
September 1st, the platform fee will be waived for any month the customer
trades at least 25,000 shares, 100 equity option contracts, 50 futures round-
turns, or 25 forex round-turn lots. The effect of this initiative is
estimated to be a $185,000 per month reduction to the company's net income
(assuming no offsetting benefits), and its anticipated effects have been
incorporated in the company's Business Outlook estimates announced today.
"This strategic initiative is based on our belief that there is a
sizeable, highly-valuable group of very active traders who would be trading
with us except only for their hesitancy to commit to $100 a month in platform
fees," said Bill Cruz, Co-Chairman and Co-CEO of TradeStation Group. "We
think that substantially lowering the thresholds at which these fees are
waived will open the door to increased account growth within this highly-
valuable group."
Company Provides Business Outlook For 2005 Third Quarter
The company's third quarter Business Outlook estimated ranges are as
follows:
THIRD QUARTER 2005 BUSINESS OUTLOOK
(In Millions, Except Per Share Data)
Third
Quarter 2005
REVENUES $22.5 to $25.0
INCOME BEFORE INCOME TAXES $7.5 to $9.0
EARNINGS PER SHARE (Diluted) $0.11 to $0.12
The company also announced that its Earnings Per Share (Diluted) Business
Outlook for the 2005 year is now an estimated range of 41 to 45 cents.
The company's third quarter 2005 Business Outlook is based on assumptions
about anticipated growth of active trader equities and futures accounts, the
effects of the lowering of thresholds for waiving the monthly platform fee,
the rate of growth and impact of the company's direct-access options execution
service offering, the rate of growth and impact of new forex accounts,
interest rates (and the extent to which they will increase), the ability to
collect unsecured accounts receivable that may arise from time to time, the
timing and impact of the company's anticipated growth of its institutional and
non-U.S. trader clients, the cost of ongoing litigation and the amount of any
judgments, awards or settlements, the timing of expenses relating to company
growth initiatives as compared to the timing of anticipated benefits from
those initiatives, and numerous other assumptions, expectations and beliefs
concerning its business, its industry, market conditions, and decisions, acts
or failures to act of third parties 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 below and in the
company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2005.
Conference Call/Webcast
At 10:00, a.m., Eastern Time, today, the senior management of TradeStation
Group will conduct an analyst conference call to discuss the company's 2005
second quarter results. All company shareholders and the public are invited
to listen. The telephone conference will be broadcast live via the Internet at
http://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 operating subsidiary,
TradeStation Securities, Inc., offers the TradeStation platform to
institutional, professional and serious, active individual traders.
TradeStation is an electronic trading platform that offers state-of-the-art
direct-access order execution and enables clients to design, test, monitor and
automate their own custom trading strategies. In February 2005, TradeStation
was named Best Stock Brokerage and Best Futures Brokerage and, for the third
year in a row, Best Direct-Access Stock Broker, Best Direct-Access Futures
Broker, Best Professional Platform and Best Institutional Platform, in
"Technical Analysis of Stocks and Commodities" magazine. The trading platform
currently offers streaming real-time Equities, Options, Futures and Forex
market data.
TradeStation Securities, Inc. (Member NASD, NYSE, 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,
Archipelago Exchange, Boston Options Exchange, Chicago Board Options Exchange,
Eurex US, International Securities Exchange, Pacific Exchange and Philadelphia
Stock Exchange. The company's other operating subsidiary, TradeStation
Technologies, Inc., develops and offers strategy trading software tools and
subscription services, and hosts the company's annual users conference.
(1) Estimates of E*Trade's customer account metrics for the 2005 second
quarter are based upon published reports for April and May 2005 and quarterly
estimates by Sandler O'Neil & Partners. E*Trade's DARTs exclude professional
trading.
Forward-Looking Statements -- Issues, Uncertainties and Risk Factors
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," "hope(s),"
"intend(s)," "intended," "look forward," "may," "opportunity,"
"opportunities," "outlook(s)," "pending," "plan(s)," "planned," "potential,"
"scheduled," "shall," "should," "think(s)," "to be," "upcoming," "well-
positioned," "will," "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 effect that the company's low commission pricing structure for
equities and futures trades, and any ongoing modifications to its equities or
futures pricing structure, will have on brokerage revenue and profitability;
market pressure to continue to lower substantially pricing on brokerage and
subscription services as a result of such services being provided at lower or
minimal costs by brokerages, financial institutions and other financial
companies to their customers, or for other market reasons; the results of a
planned reduction to the trading activity level at which brokerage customers'
monthly platform fees are waived, and the timing, cost and success of
marketing campaigns generally; the date by which TradeStation Securities is
able to offer a seamlessly-integrated forex trading platform to customers and
prospects; the effect of unanticipated increased infrastructure costs that may
be incurred as the company grows its brokerage firm operations, adds accounts
and introduces and expands existing and new product and service offerings;
change or lack of change in the federal funds rate of interest that is
different than what the company anticipates; the frequency and collectibility
of unsecured client account debits as a result of volatile market movements in
concentrated positions held in client accounts and other high-risk positions
or circumstances; the ability to provide sufficient short-sale inventory to
brokerage clients as a result of new industry rules, and generally;
TradeStation's technology not attracting as many new customers, or resulting
in as much increased trading activity, or producing as many subscriptions for
optional premium services, as the company expects; the quality and/or pricing
of the company's forex and options execution services failing to appeal to
forex and/or options traders to the degree the company anticipates; the
company's ability (or lack thereof) to achieve significant net increases in
DARTs, brokerage accounts and brokerage revenues sequentially or quarter over
quarter (for example, TradeStation DARTs decreased sequentially from second to
third quarter 2004 and may decrease sequentially in subsequent periods as a
result of negative market conditions or other factors); unanticipated risks or
negative effects of or associated with self-clearing; the cost savings and
efficiencies of self-clearing being less favorable than expected as a result
of unanticipated mistakes, including risk management errors or deficiencies
(the company has minimal self-clearing experience), or other factors;
technical difficulties or errors in the products and/or services, particularly
TradeStation (and its updates, including TradeStation 8.1); changes in the
condition of the securities and financial markets, including decreases in the
combined average share volume of the major exchanges and in market volatility;
issues and difficulties, and unanticipated expenses or claims, the company may
face as it seeks to grow an institutional trader market business (as the
company has no significant prior experience with institutional trader
marketing, sales or product development operations), including potential
acquisition costs incurred in connection with such attempted growth; the
entrance of new competitors or competitive products or services into the
market; adverse results in pending or possible future litigation against the
company (including three lawsuits filed by the co-founders of
onlinetrading.com, a brokerage acquired by the company in 2000, and several
pending NASD arbitration proceedings concerning claims of brokerage clients,
which, in the aggregate, seek tens of millions of dollars in damages) that are
significantly different than is currently estimated or expected (and it should
be noted that the company does not maintain errors or omissions insurance that
might cover, in whole or in part, some of the claims and costs related to
certain litigation); the amount of unexpected legal, consultation and
professional fees (including those expenses as they relate to the
onlinetrading.com co-founder lawsuits against the company described above, all
of which the company considers baseless, but which may result in higher-than-
anticipated attorneys' fees and litigation expenses); the company's annual
users event in Las Vegas attracting fewer-than-expected paying attendees; the
company's estimated earnings per share (diluted) are based on the assumption
of an average stock price for particular time periods (if 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); the general
variability and unpredictability of operating results forecast on a quarterly
basis; other items, events and unpredictable costs or revenue impact 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 Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2005, Annual Report on Form 10-K for the
fiscal year ended December 31, 2004, and other SEC filings and company press
releases.
Contact --
David H. Fleischman
Chief Financial Officer
TradeStation Group, Inc.
954-652-7000
TRADESTATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
REVENUES:
Brokerage
commissions
and fees $16,443,463 $13,880,536 $32,209,763 $28,150,156
Brokerage interest
income 4,981,205 855,738 8,965,654 1,692,852
Brokerage interest
expense 859,944 -- 1,499,501 --
Net brokerage
interest
income 4,121,261 855,738 7,466,153 1,692,852
Net brokerage
revenues 20,564,724 14,736,274 39,675,916 29,843,008
Subscription fees
and other 2,446,318 2,482,874 4,908,273 4,836,868
Net revenues 23,011,042 17,219,148 44,584,189 34,679,876
OPERATING EXPENSES:
Clearing and
execution costs 5,774,919 5,543,222 11,349,620 11,234,837
Data center costs 1,457,262 1,614,034 2,954,352 3,172,147
Technology
development 1,952,347 1,860,199 3,913,722 3,758,375
Sales and marketing 3,388,645 2,648,642 6,644,440 5,319,056
General and
administrative 3,232,833 3,016,075 6,866,079 5,141,255
Total operating
expenses 15,806,006 14,682,172 31,728,213 28,625,670
Income from
operations 7,205,036 2,536,976 12,855,976 6,054,206
OTHER INCOME, net 294,097 69,256 528,736 124,888
Income before
income taxes 7,499,133 2,606,232 13,384,712 6,179,094
INCOME TAX PROVISION
(BENEFIT) 2,822,008 (3,200,038) 4,929,008 (3,128,580)
Net income $ 4,677,125 $ 5,806,270 $ 8,455,704 $ 9,307,674
EARNINGS PER SHARE:
Basic $ 0.11 $ 0.14 $ 0.20 $ 0.22
Diluted $ 0.11 $ 0.13 $ 0.19 $ 0.21
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic 42,173,423 41,625,992 42,020,721 41,556,551
Diluted 43,789,156 44,233,907 43,565,197 44,421,196
TRADESTATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2005 2004
(Unaudited)
ASSETS:
Cash and cash equivalents, including
restricted cash of $1,911,426 at
June 30, 2005 and December 31, 2004 $ 37,173,177 $ 32,111,235
Cash segregated in compliance with federal
regulations 390,659,359 347,094,597
Receivables from brokers, dealers, clearing
organizations and clearing agents 25,707,413 19,404,102
Receivables from brokerage customers, net 58,590,707 56,984,622
Property and equipment, net 3,505,079 3,075,186
Prepaid income taxes 3,057,755 --
Deferred income taxes, net 1,451,643 3,811,716
Deposits with clearing organizations and
clearing agents 9,269,254 14,498,375
Other assets 3,011,494 2,695,996
Total assets $532,425,881 $479,675,829
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Payables to brokers, dealers and clearing
organizations $ 432,285 $ 3,089,950
Payables to brokerage customers 463,476,183 420,709,173
Accounts payable 2,000,877 2,204,845
Accrued expenses 4,612,561 4,346,621
Total liabilities 470,521,906 430,350,589
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 61,903,975 49,325,240
Total liabilities and shareholders'
equity $532,425,881 $479,675,829
SOURCE TradeStation Group, Inc.
 back to top
Related links:
http://www.TradeStation.com
CONTACT:
David H. Fleischman, Chief Financial Officer
of TradeStation Group, Inc., +1-954-652-7000
|
