TradeStation Group, Inc. (Nasdaq:TRAD) today reported 2011 first
quarter net revenues of $32.1 million, net income of $996,000, and
earnings per share (diluted) of 3 cents, compared to 2010 first
quarter net revenues of $32.1 million, net income of $2.7 million,
and earnings per share (diluted) of 7 cents.
The primary reasons for the year-over-year difference in net
income were (1) $1.3 million higher net interest income in the 2011
first quarter, offset by $1.3 million lower unrealized gains on
marketable securities, and (2) $2.7 million higher total expenses
in the 2011 first quarter, including a $968,000 increase in
depreciation and amortization (attributable mainly to two software
technology acquisitions and capital expenditures for hardware made
by the company during 2010), an $860,000 increase in marketing
expenses, a $500,000 increase in employee compensation and benefits
(attributable mainly to increased stock-based compensation expense
and higher non-officer employee cash compensation, partially offset
by lower employee benefits and severance pay), and a $326,000
increase in data centers and communications.
TradeStation Reports DARTs and Record Total
Accounts
For the 2011 first quarter, TradeStation experienced the
following year-over-year daily trading results with respect to
equities, futures and forex accounts:
|
Q1 11 |
Q1 10 |
% Increase |
Daily Average Revenue Trades |
85,611 |
80,192 |
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 March 2011.
TradeStation had a record 47,853 brokerage accounts at March 31,
2011, a 2% increase from March 31, 2010 and a 1% increase from
December 31, 2010. The 2011 first quarter is the 38th
consecutive quarter TradeStation has increased its net brokerage
accounts since the 2001 launch of the TradeStation trading
platform.
TradeStation's Average Client Trades 452 Times per Year
and Has an Average Account Balance of $75,500 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 2011 first
quarter:
Client Trading Activity |
|
Annualized average revenue per account |
$2,551 |
Annualized trades per account |
452 |
|
|
|
|
Client Account Assets |
|
Average assets per account (Equities) |
$75,500 |
Average assets per account (Futures) |
$23,000 |
Company to be Acquired by Monex Group
The company announced, the evening of April 20, 2011, that it
entered into a definitive agreement pursuant to which Monex Group,
Inc., a Japanese online brokerage firm, will acquire all the
outstanding common stock of TradeStation for $9.75 per share, or
approximately $411 million in aggregate, through a cash tender
offer followed by a merger, subject to holders of a majority of
TradeStation's outstanding shares of common stock (on a fully
diluted basis) tendering their shares, obtaining required
regulatory approvals, and satisfying other customary closing
conditions. Pursuant to that definitive agreement, the tender
offer is to commence by May 10, 2011 and, once commenced, is to be
concluded twenty (20) business days from that date, or June 7,
2011, subject to a majority of shares being tendered, the required
regulatory approvals being obtained, and the other customary
closing conditions being satisfied by such date. The closing
of the tender offer is expected to be followed promptly by a
statutory merger, i.e., one that does not require shareholder
approval.
Company Provides 2011 Second Quarter Business
Outlook
TradeStation today also published its 2011 Second Quarter
Business Outlook.
The company's 2011 Second Quarter Business Outlook estimated
ranges are as follows:
2011 SECOND QUARTER
BUSINESS OUTLOOK |
|
(In Millions, Except
Per Share Data) |
|
|
|
|
Second Quarter
2011 |
REVENUES |
$34.0 to $36.0 |
|
|
EARNINGS PER SHARE (Diluted) |
$0.02 to $0.03 |
The company's 2011 second quarter 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 (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); estimated legal,
accounting and similar or other fees of $1 million relating to the
Monex transaction; certain levels of revenue growth from forex
(based on the recent launch of a new forex offering), prime
services (mostly securities lending) and Eurex trading, and from
the success of a recently-launched marketing campaign; U.S.
Treasury Bill and Treasury Note yields the company receives
remaining constant at current levels; no unrealized gain or loss on
TradeStation Securities' investment in CBOE Holdings, Inc. or its
U.S. Treasury portfolio; anticipated growth, attrition and trading
activity of active trader equities, futures and forex accounts (for
forex accounts, from the 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 2011 Second
Quarter 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 CBOE
Holdings or its U.S. treasury securities holdings, the results
estimated in the 2011 Second Quarter 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 2011 first quarter results, its 2011 Second
Quarter Business Outlook and its recent announcement concerning the
acquisition of the company by Monex. 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 placement and execution and
enables clients to scan the markets and 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 self-clearing, licensed securities
broker-dealer and a registered futures commission merchant, and
also a member of numerous major
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) which offers foreign currency
(forex) accounts under what is commonly referred to as the "agency
broker model." The London-based subsidiary, TradeStation
Europe Limited, an FSA-authorized brokerage firm, introduces UK and
other European accounts to TradeStation Securities and TradeStation
Forex. TradeStation's technology subsidiary, TradeStation
Technologies, Inc., develops and offers strategy trading software
tools and subscription services and owns TradeStation's
intellectual property.
Forward-Looking Statements – Issues, Uncertainties and
Risk Factors Concerning the Company's 2011 Second Quarter Business
Outlook
The 2011 Second Quarter Business Outlook contained in this press
release constitutes and includes forward-looking statements, and
today's earnings conference call (with respect to such 2011 Second
Quarter Business Outlook and related matters) will include
forward-looking statements, that are and will be 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 such forward-looking
statements. Given the company's definitive merger agreement
with Monex, the tender offer statement to be filed by Monex, the
solicitation/recommendation statement relating to the tender offer
to be filed by the company, and the anticipated closing of the
tender offer and merger no later than early in the 2011 third
quarter, the company intends to make no forward-looking statements
with respect to any period later than the 2011 second quarter, and
any such forward-looking statements made in the conference call
should be understood to relate to no future period beyond the 2011
second quarter. All such 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) to achieve net account
growth (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 or net income than estimated), or
unexpected positive changes (which could have the opposite
effect);
- the company not meeting its revenue or profit expectations to
the extent such expectations are based on its new forex offering,
growth in prime services (particularly securities lending) and
Eurex trading revenues, and recently-implemented marketing efforts,
as a result of unexpected mistakes, delays and/or costs,
less-than-anticipated customer appeal or market interest, and/or
other factors;
- 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 the 2011
second quarter;
- 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;
- 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 two cents
in the 2010 first quarter and five cents in the 2010 second
quarter, and mark-to-market losses decreased earnings per share by
one cent in the 2010 third quarter);
- 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;
- the frequency and size of, and ability to collect, unsecured
client account debits as a result of volatile market movements or
unstable economic conditions, particularly in concentrated
positions held in client accounts or as a result of other high-risk
positions or circumstances;
- 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;
- 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
relating to the transaction with Monex);
- the general variability and unpredictability of operating
results forecast on a quarterly 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 ("SEC"), including, but
not limited to, the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2010, and other SEC filings,
and company press releases, conference calls and public
presentations or statements.
Forward-Looking Statements Concerning the Transaction
with Monex
This press release contains statements with respect to the
acquisition of the company by Monex, and today's analyst conference
call (with respect to such acquisition by Monex and related
matters) may include statements, that are forward-looking and are
subject to risks and uncertainties that could cause actual results
to differ materially from those described. All statements,
other than statements of historical fact, are statements that could
be deemed forward-looking, including all statements and information
regarding the intent, belief or current expectations of
TradeStation and members of its senior management team concerning
the transaction with Monex and related matters. All such
forward-looking statements are based largely on current
expectations and beliefs concerning future events, approvals and
transactions that are subject to substantial risks and
uncertainties. Factors that may cause or contribute to the
actual results or outcomes being different from those contemplated
by such forward-looking statements include:
- uncertainties as to the timing of the tender offer;
- uncertainties as to how many of TradeStation's shareholders
will tender their shares in the offer;
- the possibility that competing offers will be made;
- the possibility that various closing conditions for the
transactions may not be satisfied or waived, including that a
governmental or regulatory authority may prohibit, delay or refuse
to grant approval for the consummation of the transactions;
- the effects of disruption from the proposed transactions which
make it more difficult to maintain relationships with employees,
customers and/or other business relationships;
- other business effects, including the effects of industry,
regulatory, economic and/or market conditions that are outside of
Monex's or TradeStation's control;
- unexpected transaction costs and actual or contingent
liabilities; and
- other risks and uncertainties discussed in documents filed by
TradeStation with the SEC, including, but not limited to, its
Annual Report on Form 10-K for the fiscal year ended December 31,
2010, such Annual Report, as amended, on Form 10-K/A for the fiscal
year ended December 31, 2010 containing Part III information (which
TradeStation expects soon to file with the SEC), and the tender
offer documents and solicitation/recommendation statement to be
filed with the SEC in connection with the tender offer.
TradeStation undertakes no obligation to update any
forward-looking statements relating either to its 2011 Second
Quarter Business Outlook or the transaction with Monex as a result
of new information, future developments or otherwise, except as
expressly required by law.
Notice to Investors (Regarding the Tender Offer by
Monex)
The tender offer for the outstanding shares of TradeStation's
common stock referred to in this press release has not yet
commenced. This press release and today's conference call are
neither an offer to purchase nor a solicitation of an offer to sell
any securities. The solicitation and the offer to buy shares
of TradeStation's common stock will be made pursuant to an offer to
purchase and related materials that Monex and its wholly-owned
subsidiary ("Merger Sub") expect to file with the SEC. At the
time the offer is commenced, Merger Sub and Monex will file a
tender offer statement on Schedule TO with the SEC, and
TradeStation will file a solicitation/recommendation statement on
Schedule 14D-9 with respect to the tender offer. Investors and
TradeStation shareholders are strongly advised to read both the
tender offer statement (including an offer to purchase, a related
letter of transmittal and other offer documents) and the
solicitation/recommendation statement when they become available,
as they will contain important information that should be
considered before any decision is made with respect to the tender
offer. These materials (and all other materials filed by
TradeStation with the SEC) will be available at no charge from the
SEC through its website at www.sec.gov. Free copies of the
tender offer statement and related materials and the
solicitation/recommendation statement, when available, may be
obtained from the information agent for the tender
offer. Investors and TradeStation shareholders may also obtain
free copies of the documents filed by TradeStation with the SEC by
contacting TradeStation's Chief Financial Officer, David H.
Fleischman, at 8050 SW 10th Street, Suite 4000, Plantation, FL
33324, telephone number 954-652-7000.
TRADESTATION GROUP,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
(in thousands,
except per share data) |
|
|
|
|
Three Months
Ended March 31, |
|
2011 |
2010 |
|
(Unaudited) |
|
|
|
|
|
|
REVENUES: |
|
|
Brokerage commissions and fees |
$27,123 |
$26,948 |
|
|
|
Interest income |
3,576 |
2,293 |
Brokerage interest expense |
-- |
-- |
Net interest income |
3,576 |
2,293 |
|
|
|
Subscription fees and other |
1,498 |
1,628 |
|
|
|
Gains (losses) on marketable securities,
net |
(51) |
1,221 |
|
|
|
Net revenues |
32,146 |
32,090 |
|
|
|
EXPENSES: |
|
|
Employee compensation and benefits |
11,694 |
11,194 |
Clearing and execution |
7,258 |
7,184 |
Data centers and communications |
3,828 |
3,502 |
Marketing |
2,392 |
1,532 |
Professional services |
751 |
697 |
Occupancy and equipment |
802 |
752 |
Depreciation and amortization |
1,918 |
950 |
Other |
1,702 |
1,794 |
|
|
|
Total expenses |
30,345 |
27,605 |
|
|
|
Income before income taxes |
1,801 |
4,485 |
|
|
|
INCOME TAX PROVISION |
805 |
1,811 |
|
|
|
Net income |
$996 |
$2,674 |
|
|
|
EARNINGS PER SHARE: |
|
|
Basic |
$0.03 |
$0.07 |
Diluted |
$0.03 |
$0.07 |
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
Basic |
39,120 |
40,502 |
Diluted |
39,536 |
40,940 |
|
TRADESTATION GROUP,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
|
|
|
|
|
|
|
March 31, 2011 |
December 31,
2010 |
|
(Unaudited) |
|
ASSETS: |
|
|
|
|
|
Cash and cash equivalents, including
restricted cash of $478 at March 31, 2011 and December 31,
2010* |
$56,416 |
$41,888 |
Cash and investments segregated in
compliance with federal regulations |
1,329,491 |
1,279,734 |
Marketable securities* |
60,889 |
63,255 |
Receivables from brokers, dealers,
clearing organizations and clearing agents |
117,378 |
80,827 |
Receivables from brokerage customers,
net |
70,891 |
68,268 |
Property and equipment, net |
17,229 |
17,974 |
Deferred income taxes, net |
-- |
-- |
Deposits with clearing
organizations |
35,524 |
35,504 |
Other assets |
7,064 |
5,716 |
|
|
|
Total assets |
$1,694,882 |
$1,593,166 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
Payables to brokers, dealers and clearing
organizations |
$52,853 |
$27,770 |
Payables to brokerage customers |
1,456,536 |
1,381,105 |
Accounts payable |
1,913 |
3,767 |
Accrued expenses |
7,511 |
6,967 |
Deferred income taxes, net |
230 |
120 |
Total liabilities |
1,519,043 |
1,419,729 |
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
SHAREHOLDERS' EQUITY |
175,839 |
173,437 |
|
|
|
Total liabilities and shareholders'
equity |
$1,694,882 |
$1,593,166 |
|
|
|
* Cash and cash equivalents as of
March 31, 2011 include $11.7 million that was transferred on April
1, 2011 to cash and investments segregated in compliance with
federal regulations. 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. |
CONTACT: David H. Fleischman
Chief Financial Officer
TradeStation Group, Inc.
954-652-7000
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