2006 Annual Net Income Increases 47% and Fourth Quarter Pre-Tax
Margin Increases to 39.5% PLANTATION, Fla., Feb. 15
/PRNewswire-FirstCall/ -- TradeStation Group, Inc. (NASDAQ GS:
TRAD) today reported for the 2006 fourth quarter record net
revenues of $34.5 million, record net income of $8.6 million,
record net income per share (diluted) of 19 cents, record brokerage
accounts of over 31,500, and record daily average revenue trades
(DARTs) of nearly 63,000. For the 2006 year, the company reported
record net revenues of $128.5 million, record net income of $31.0
million, and record net income per share (diluted) of 67 cents.
"2006 was an important year for the company," said Salomon Sredni,
CEO of TradeStation Group. "Not only did we deliver a record year
in both revenues and EPS, we made important strides in setting up
our company for future growth. I am particularly excited about the
potential that an integrated foreign exchange offering and the
ability to design, test and automate fundamental data strategies
brings to our company. Forex execution, which is currently in beta
testing, provides us access to an international market that trades
24 hours a day, is the most liquid market in the world, and is
clearly a growing and exciting market for online traders. Access to
fundamental data, which is already available to TradeStation
customers, expands the appeal of our product's uniqueness to
include traders and investors who focus on strategies based on
company revenues, earnings and other fundamental data, or a
combination of fundamental and technical data. Both of these
initiatives help us expand the universe of clients who can take
advantage of rule-based trading." TradeStation Group's 2006 fourth
quarter net income of $8.6 million, or 19 cents per share
(diluted), was a 17% increase from 2005 fourth quarter net income
of $7.3 million, or 16 cents per share (diluted). Net income for
the 2005 fourth quarter included a $927,000 reversal of a valuation
allowance on deferred income tax assets, which accounted for 2
cents of the company's net income of 16 cents per share (diluted)
in the 2005 fourth quarter. Accordingly, the company's 2006 fourth
quarter income before income taxes of $13.6 million was a 33%
increase from 2005 fourth quarter income before income taxes of
$10.3 million. For the full year, TradeStation Group's 2006 net
income was $31.0 million, or 67 cents per share (diluted), as
compared to 2005 net income of $21.1 million, or 48 cents per share
(diluted). The company's 2006 income before income taxes of $50.0
million was a 54% increase from 2005 income before income taxes of
$32.5 million. The company's 2006 fourth quarter net revenues of
$34.5 million were a 26% increase from 2005 fourth quarter net
revenues of $27.3 million, and the company's 2006 annual net
revenues of $128.5 million were a 33% increase from 2005 annual net
revenues of $97.0 million. The company's pre-tax margin increased
to 39.5% in the 2006 fourth quarter, as compared to a pre-tax
margin of 37.6% in the 2005 fourth quarter. The company's pre-tax
margin for the 2006 year increased by 16% -- to a 38.9% pre-tax
margin in 2006 from a 33.5% pre-tax margin in 2005. Pre-tax margin
is determined by dividing the company's income before income taxes
by its net revenues. TradeStation Reports Record DARTs and Total
Accounts For the 2006 fourth quarter, TradeStation experienced the
following year- over-year daily trading growth results with respect
to equities, futures and forex accounts: Q4 06 Q4 05 % Increase
------------------------------------- Daily Average Revenue Trades
62,821 48,767 29% "We attribute our year-over-year 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, the company's chief financial officer. The
company also published today, in a separate announcement, its DARTs
and Total Client Assets for the month of January 2007. TradeStation
had 31,502 brokerage accounts at December 31, 2006, a 29% increase
from January 1, 2006. TradeStation's Average Client Trades Over 500
Times per Year and Has an Average Account Balance of $80,000 for
Equities and $19,000 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 2006 fourth quarter: Client Trading Activity
----------------------- Annualized average revenue per account
$4,147 Annualized trades per account 512 Client Account Assets
--------------------- Average assets per account (Equities) $80,000
Average assets per account (Futures) $19,000 While the average
TradeStation account traded 512 times per year, or 43 times per
month, the average TD Ameritrade and E-Trade account traded about
10 times per year, or less than one time per month. Also,
TradeStation's average assets per equities account of $80,000 was
substantially higher than the average assets per account of TD
Ameritrade and E-Trade. Company Provides 2007 Business Outlook
TradeStation today also published its 2007 Business Outlook. The
company's first quarter and full-year 2007 Business Outlook
estimated ranges are as follows: 2007 BUSINESS OUTLOOK (In
Millions, Except Per Share Data) First Quarter 2007 Full-year 2007
------------------ -------------- REVENUES $34.0 to $36.0 $145.0 to
$160.0 EARNINGS PER SHARE (Diluted) $0.17 to $0.18 $0.74 to $0.84
The company's first quarter and full-year 2007 Business Outlook
estimated ranges are based on numerous assumptions, including:
basing the midpoints of the ranges, in part, on monthly trading
volume for the year equal to January 2007 trading volume plus 10%,
anticipated growth and trading activity of active trader equities
and futures accounts; federal funds interest rates, the rate of
growth and impact of the company's direct-access options execution
service offering; the launch date of the company's upgraded forex
offering and the rate of growth and impact of new forex accounts
and trading activity; interest rates (and the extent to which they
will or will not increase or decrease); the cost of ongoing
litigation, arbitration and regulatory matters 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
fourth quarter and year-end results and its 2007 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, Boston
Options Exchange, Chicago Board Options Exchange, Chicago Stock
Exchange, International Securities Exchange, NYSE ARCA and
Philadelphia Stock Exchange. 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, and FSA-authorized
brokerage firm, introduces UK and other European accounts to
TradeStation Securities. Forward-Looking Statements - Issues,
Uncertainties and Risk Factors This press release, including the
2007 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 two pending lawsuits, both 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 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 Three Months Ended Year
Ended December 31, December 31, 2006 2005 2006 2005 -----------
----------- ----------- ----------- (Unaudited) REVENUES: Brokerage
commissions and fees $20,972,667 $17,391,097 $78,828,740
$65,953,165 Interest income 12,265,813 8,270,953 44,586,720
24,489,696 Brokerage interest expense 1,214,546 1,040,786 4,634,946
3,512,606 Net interest income 11,051,267 7,230,167 39,951,774
20,977,090 Subscription fees Other 2,120,946 2,025,118 8,583,761
8,120,296 348,809 626,528 1,180,930 1,948,418 Net revenues
34,493,689 27,272,910 128,545,205 96,998,969 EXPENSES: Employee
compensation and benefits 7,637,284 6,010,819 29,379,209 23,027,397
Clearing and execution 6,997,769 5,405,379 26,107,369 20,096,813
Data centers and communications 1,677,137 1,353,014 6,452,997
5,713,811 Advertising 1,134,466 913,407 4,314,691 3,829,972
Professional services 1,131,455 634,692 3,410,888 2,987,593
Occupancy and equipment 645,894 814,014 2,548,575 2,641,146
Depreciation and amortization 785,456 440,540 2,507,916 1,770,930
Other 871,527 1,445,380 3,853,965 4,414,641 Total expenses
20,880,988 17,017,245 78,575,610 64,482,303 Income before income
taxes 13,612,701 10,255,665 49,969,595 32,516,666 INCOME TAX
PROVISION 5,025,414 2,916,002 18,950,719 11,451,096 Net income
$8,587,287 $7,339,663 $31,018,876 $21,065,570 EARNINGS PER SHARE:
Basic $0.19 $0.17 $0.70 $0.49 Diluted $0.19 $0.16 $0.67 $0.48
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 44,759,201 43,725,038
44,591,437 42,728,461 Diluted 46,054,285 45,094,410 45,971,729
44,176,690 TRADESTATION GROUP, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS December 31, December 31, 2006 2005
----------- ----------- ASSETS: Cash and cash equivalents,
including restricted cash of $1,433,569 at December 31, 2006 and
$1,672,497 at December 31, 2005* $74,539,256 $75,101,842 Cash
segregated in compliance with federal regulations 417,501,417
426,061,999 Marketable securities 9,322,297 - Receivables from
brokers, dealers, clearing organizations and clearing agents
34,866,825 36,033,229 Receivables from brokerage customers, net
77,021,893 58,132,743 Property and equipment, net 8,734,890
3,212,019 Deferred income taxes 1,970,047 2,150,218 Deposits with
clearing organizations 20,180,361 11,243,184 Other assets 4,950,427
3,198,711 Total assets $649,087,413 $615,133,945 LIABILITIES AND
SHAREHOLDERS' EQUITY: LIABILITIES: Payables to brokers, dealers and
clearing organizations $4,444,956 $789,824 Payables to brokerage
customers 516,355,890 523,895,972 Accounts payable 2,846,669
2,416,272 Accrued expenses 7,235,023 5,511,153 Total liabilities
530,882,538 532,613,221 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS'
EQUITY 118,204,875 82,520,724 Total liabilities and shareholders'
equity $649,087,413 $615,133,945 * December 31, 2006 Cash and cash
equivalents excludes $7.6 million that was transferred on January
3, 2007 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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