TradeStation Group Recognizes Three Cents Per Share Unrealized Gain Resulting From CBOE Initial Public Offering
July 29 2010 - 7:40AM
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.
CONTACT: David H. Fleischman
Chief Financial Officer
TradeStation Group, Inc.
954-652-7000
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