DARTs Increase 42% Year over Year While Net Income Increases 49% and Revenues Increase 31% PLANTATION, Fla., Oct. 19 /PRNewswire-FirstCall/ -- TradeStation Group, Inc. (NASDAQ GS: TRAD) today reported record quarterly net income of $7.8 million and record total brokerage accounts of over 30,000. TradeStation Group's 2006 third quarter net income of $7.8 million, or 17 cents per share (diluted), was a 49% increase from 2005 third quarter net income of $5.3 million, or 12 cents per share (diluted). Income before income taxes was $12.3 million in the 2006 third quarter, a 39% increase from 2005 third quarter income before income taxes of $8.9 million. The company's 2006 third quarter net revenues of $32.2 million were a 31% increase over 2005 third quarter net revenues of $24.5 million. TradeStation Reports Record Total Brokerage Accounts, and DARTs Increase 42% Year over Year For the 2006 third quarter, TradeStation experienced the following year- over-year daily trading growth results with respect to equities, futures and forex accounts: Q3 06 Q3 05 %Increase --------------------------------- Daily Average Revenue Trades 58,457 41,206 42% "We attribute our growth in DARTs to the diversity of our service offering, consistent account growth, and the robustness of our high-end client base," said David Fleischman, TradeStation Group's Chief Financial Officer. The company also published today, in a separate announcement, its DARTs and Total Client Assets for the month of September 2006. TradeStation added, net, nearly 1,600 brokerage accounts during the 2006 third quarter, reaching a record 30,265 brokerage accounts as of September 30, 2006. TradeStation's Average Client Trades 500 Times per Year and Has an Average Account Balance of $81,000 for Equities and $17,500 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 2006 third quarter: Client Trading Activity ----------------------- Annualized average revenue per account $4,000 Annualized trades per account 500 Client Account Assets --------------------- Average assets per account (Equities) $81,000 Average assets per account (Futures) $17,500 While, on an annualized basis during the 2006 third quarter, the average TradeStation account traded 500 times, or nearly 42 times per month, the average TD Ameritrade and E-Trade account traded about 8 to 10 times, or less than once per month. Also, TradeStation's average assets per equities account of $81,000 was nearly double the amount of the average assets per account of TD Ameritrade and E-Trade. Company Provides Business Outlook for 2006 Fourth Quarter The company's fourth quarter 2006 Business Outlook estimated ranges are as follows: FOURTH QUARTER 2006 BUSINESS OUTLOOK (In Millions, Except Per Share Data) Fourth Quarter 2006 ---------------- REVENUES $33.0 to $35.0 INCOME BEFORE INCOME TAXES $12.5 to $13.5 EARNINGS PER SHARE (Diluted) $0.17 to $0.18 The company's fourth quarter 2006 Business Outlook estimated ranges are based on numerous assumptions, including: basing the midpoints of the ranges, in part, on recent trading activity levels and market conditions, as well as trading activity levels and market conditions during the first nine months of 2006; anticipated growth and trading activity of active trader equities and futures accounts; interest rates (and the extent to which they will or will not increase or decrease for the remainder of 2006); the cost of ongoing litigation and disputes and the amount of any judgments, awards, settlements or regulatory fines or sanctions; 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 referenced above and below. Conference Call/Webcast At 11:00, a.m., Eastern Time, today, the senior management of TradeStation Group will conduct an analyst conference call to discuss the company's 2006 third quarter results and its fourth quarter 2006 Business Outlook. 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 GS: 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 "direct market access" (DMA) or "direct-access" order execution and enables clients to design, test, optimize, monitor and automate their own custom Equities, Options, Futures and Forex trading strategies. In 2006, TradeStation was named, for the second year in a row, Best Futures Brokerage and, for the fourth 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. 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, 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. Forward-Looking Statements -- Issues, Uncertainties and Risk Factors This press release, including the fourth quarter 2006 Business Outlook estimated ranges contained in 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," "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 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 following: * changes in the condition of the securities and financial markets, including, but not limited to, changes in the combined average share volume of the major exchanges and in market volatility; * 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's DARTs decreased sequentially from second to third quarter in 2004 and in 2006, and net revenues decreased sequentially from second to third quarter 2006, and these items may decrease sequentially in subsequent periods as a result of negative market conditions or other factors); * the timing, cost and success of marketing decisions and campaigns generally, and the entrance of new competitors or competitive products, services or product/service upgrades into the market; * 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; * pending NASD inquiries concerning OATS reporting violations, violations of NASD Conduct Rule 3370 ("Prompt Receipt and Delivery of Securities") concerning certain customer short sale orders in 2004, and failure to transmit short sale position reports since the conversion to self-clearing operations, each of which could result in fines, sanctions and/or other negative consequences; * adverse results in pending or possible future litigation against the company (including three pending lawsuits, all of which the company considers baseless, filed by the co-founders of onlinetrading.com, a brokerage acquired by the company in 2000, which together seek in the aggregate tens of millions of dollars in damages or rescissions of transactions that would create similar negative financial consequences for the company) that are significantly different than is currently estimated or expected (currently zero dollars are reserved for these pending claims); * technical difficulties, errors and/or failures in the company's electronic and software products, services and systems relating to market data, order execution and trade processing and reporting, and other software or system errors and failures; * the company not maintaining a seamless, redundant back-up system to its order execution systems, which could materially intensify the negative consequences described in the previous risk factor; * the timing, implementation and costs associated with planned hardware and software upgrades for back-office and internal systems, and other capital expenditures, planned for later in the year and 2007; * 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, or acquires other businesses; * unanticipated infrastructure, capital or other large expenses, and unforeseen or unexpected liabilities and claims, the company may face as it seeks to grow its U.S. active trader market share in equities and futures, its forex business (including the date by which TradeStation Securities is able to offer a seamlessly-integrated forex trading platform to customers and prospects and the success of that upgraded forex offering), and its institutional and non-US trader market businesses (as the company has no significant prior experience with forex, institutional and non-US trader marketing, sales or product development operations), including potential acquisition or business combination risks, costs and expenses (such as professional fees and, in the case of an acquisition, amortization expense) incurred in the event the company acquires or combines with other businesses; * 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, other lawsuits or proceedings against the company or potential business combinations); * change or lack of change in the federal funds rate of interest that is different than what the company anticipates; * the frequency and size of, and ability to collect, unsecured client account debits as a result of volatile market movements in concentrated positions held in client accounts or as a result of other high-risk positions or circumstances; * the company's estimated earnings per share (diluted) being based on assumptions of a certain number of outstanding shares and an average stock price for particular time periods that turn out to be inaccurate (if the number of outstanding shares and/or 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; 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, including, but not limited to, the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and other company 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 Nine Months Ended September 30, September 30, --------------------- --------------------- 2006 2005 2006 2005 ------ ------ ------ ------ REVENUES: Brokerage commissions and fees $19,215,783 $16,220,671 $57,856,073 $48,562,068 Interest income 11,655,041 6,834,596 32,320,907 16,218,743 Brokerage interest expense 1,202,442 1,024,330 3,420,400 2,471,820 Net interest income 10,452,599 5,810,266 28,900,507 13,746,923 Subscription fees and other 2,547,636 2,508,794 7,294,936 7,417,068 Net revenues 32,216,018 24,539,731 94,051,516 69,726,059 EXPENSES: Employee compensation and benefits 7,544,662 5,744,139 21,741,925 17,016,578 Clearing and execution 6,425,480 4,806,222 19,109,600 14,691,434 Data centers and communications 1,626,680 1,311,782 4,775,860 4,360,797 Advertising 1,121,833 946,939 3,180,225 2,916,565 Professional services 842,725 645,325 2,279,433 2,352,901 Occupancy and equipment 646,987 622,605 1,902,681 1,827,132 Depreciation and amortization 674,867 435,752 1,722,460 1,330,390 Other 1,036,448 1,150,678 2,982,438 2,969,261 Total expenses 19,919,682 15,663,442 57,694,622 47,465,058 Income before income taxes 12,296,336 8,876,289 36,356,894 22,261,001 INCOME TAX PROVISION 4,460,194 3,606,086 13,925,305 8,535,094 Net income $7,836,142 $5,270,203 $22,431,589 $13,725,907 EARNINGS PER SHARE: Basic $0.18 $0.12 $0.50 $0.32 Diluted $0.17 $0.12 $0.49 $0.31 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 44,716,983 43,147,365 44,535,515 42,396,269 Diluted 45,993,658 44,481,956 45,944,210 43,870,783 TRADESTATION GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2006 2005 ------------ ------------ (Unaudited) ASSETS: Cash and cash equivalents, including restricted cash of $1,433,569 at September 30, 2006 and $1,672,497 at December 31, 2005* $69,728,099 $75,101,842 Cash segregated in compliance with federal regulations 437,403,906 426,061,999 Securities, at market value 9,341,497 - Receivables from brokers, dealers, clearing organizations and clearing agents 39,386,940 36,033,229 Receivables from brokerage customers, net 63,686,079 58,132,743 Property and equipment, net 8,007,892 3,212,019 Deferred income taxes 2,040,469 2,150,218 Deposits with clearing organizations and clearing agents 13,218,304 11,243,184 Other assets 5,250,761 3,198,711 Total assets $648,063,947 $615,133,945 LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Payables to brokers, dealers and clearing organizations $181,508 $789,824 Payables to brokerage customers 527,624,205 523,895,972 Accounts payable 2,142,054 2,416,272 Accrued expenses 7,309,610 5,511,153 Total liabilities 537,257,377 532,613,221 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY 110,806,570 82,520,724 Total liabilities and shareholders' equity $648,063,947 $615,133,945 * September 30, 2006 Cash and cash equivalents excludes $11.6 million that was transferred on October 3, 2006 from Cash segregated in compliance with federal regulations. December 31, 2005 Cash and cash equivalents includes $9.5 million that was transferred on January 4, 2006 to Cash segregated in compliance with federal regulations. DATASOURCE: TradeStation Group, Inc. CONTACT: David H. Fleischman, Chief Financial Officer of TradeStation Group, Inc., +1-954-652-7000 Web site: http://www.tradestation.com/

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