TradeStation Group Announces Record Brokerage Revenues; 2002 First Quarter Brokerage Revenues Increase 25% Over Prior Quarter and 35% Year Over Year.
MIAMI--(BUSINESS WIRE)--April 15, 2002
Customer Accounts Grow 76% Over Prior Quarter
2002 First Quarter Results 54% Better Than Business Outlook
TradeStation Group, Inc. (Nasdaq:TRAD), the parent company of the award-winning TradeStation Securities direct-access brokerage, today reported its financial results for the first quarter 2002. First quarter 2002 brokerage revenue was a record high, growing 25% over fourth quarter 2001 brokerage revenue and 35% over first quarter 2001 brokerage revenue, and was 22% better than estimated in the company's 2002 Business Outlook. Also, TradeStation Group's net results were 54% better than what was estimated in its 2002 Business Outlook. The company experienced 76% account growth from fourth quarter 2001 with respect to TradeStation 6 brokerage platform accounts.
First Quarter 2002 Financial Results Demonstrate Strong Brokerage Revenue Growth
In the 2002 first quarter, revenue from TradeStation's brokerage business increased 25% to $6.8 million, as compared to 2001 fourth quarter brokerage revenue of $5.5 million, and increased 35% compared to 2001 first quarter brokerage revenue of $5.1 million. Brokerage revenue for the 2002 first quarter was also 22% better than what was estimated in the company's 2002 Business Outlook. Substantial growth in the number of TradeStation 6 platform accounts was the main reason for the increase. Excluding TradeStation Group's legacy software operations, which have been phased-out by the company since May 2000, revenues increased 17% to $8.5 million in the 2002 first quarter, as compared to $7.3 million in the 2001 fourth quarter, and increased 9% as compared to $7.8 million in the 2001 first quarter. Total revenues, including legacy software operations, were $9.7 million in the 2002 first quarter, compared to $9.1 million in the 2001 fourth quarter, and as compared to $12.1 million in the 2001 first quarter (the 2001 first quarter included $4.3 million of legacy software revenue).
TradeStation Group's first quarter 2002 net loss per share of 5 cents was 54% better than the company's 2002 Business Outlook, and one cent, or 14%, better than the company's net loss per share of 6 cents for the 2001 fourth quarter (after excluding non-recurring, non-cash fourth quarter 2001 charges relating to impairment of goodwill and certain intangible assets and providing a full valuation allowance against deferred tax assets). The company's 2001 first quarter net loss per share was 4 cents.
$18.4 Million of Cash and Marketable Securities
TradeStation Group had cash and marketable securities of $18.4 million at March 31, 2002, approximately $3.9 million of which was restricted at that date. At March 31, 2002, the company had no borrowings other than $1.7 million of capital lease obligations.
"We believe our available cash resources are sufficient to enable our growth to produce sustained positive cash and earnings results," said David Fleischman, Chief Financial Officer of TradeStation Group.
Trading Activity Soars As Company Grows Active Trader Customer Base
The company experienced the following daily trading results with respect to TradeStation 6 platform equities and futures accounts in the 2002 first quarter:
Equities Account Statistics Q1 02 Q4 01 % Increase --------------------------- ----- ----- ---------- Average daily revenue trades 3,824 2,177 76% Average daily share volume 4,452,000 2,590,000 72% Futures Account Statistics Q1 02 Q4 01 % Increase -------------------------- ----- ----- ---------- Average daily revenue trades (a "trade" includes both the 953 329 190% initiating and closing trades)
"While virtually every major online brokerage firm has experienced a decline in average daily trades during the 2002 first quarter and trading volume is down from a year ago, we have achieved record brokerage revenue," said Bill Cruz, Co-Chairman of the Board and Co-CEO. "This growth, in these times, continues to demonstrate the immense drawing power and value of TradeStation 6 to the active trader market."
Customer Account Metrics Among the Best in the Industry
Stock brokerage clients using the TradeStation 6 platform generated the following customer account metrics in the 2002 first quarter:
Customer Account Metrics ------------------------ Annualized average revenue per account $8,811 Annualized trades per account 434 Average assets per account $103,274
"The metrics on customer accounts for equities clients using TradeStation 6 are outstanding," said Cruz. "We have maintained for some time that the TradeStation 6 platform attracts very active traders. Our average TradeStation 6 brokerage client traded more than 100 times in the 2002 first quarter. We believe we will be a major player in the online brokerage industry."
At the end of the 2002 first quarter, the company had 3,737 funded TradeStation 6 equities and futures accounts, a 76% increase over the 2,127 accounts the company had at the end of the 2001 fourth quarter. "We believe the trading activity generated by this number of accounts is a powerful statement about the leverage of our active trader business model," said Cruz. "It doesn't take that many accounts to run a sizeable and profitable business. It just takes the right accounts. As we continue to add accounts, they should deliver substantial results without significantly increasing our infrastructure."
Company Announces New All-Inclusive Per Share Commission Plan
On March 27, 2002, TradeStation Securities launched a new brokerage commission plan that charges active traders fees based solely upon the share volume of their trades, the way institutional traders are charged. Currently, nearly all online brokerage firms that offer direct-access execution charge their customers a commission made up of two components: a per trade charge, typically called a "ticket" charge; and ECN and other marked-up pass-through fees for direct-access service. The all-inclusive per share approach now offered by TradeStation greatly simplifies commission pricing and gives active traders the benefit of being able to scale in and out of positions without incurring additional ticket charges.
Company's 2002 Business Outlook May Be Reevaluated Next Quarter
Given the company's recent changes to its brokerage commission pricing structure, and the continued uncertainties surrounding the online brokerage market generally, the company decided to make no revisions to its 2002 Business Outlook that was published January 17, 2002.
"While we have significantly out-performed our Business Outlook for the 2002 first quarter," said Fleischman, "and look forward to the accelerated active trader account growth we believe our new pricing structure will produce, prudence dictates that we make no changes to our Business Outlook until we see at least one fiscal quarter of results from our new pricing structure."
At 11:00 a.m., eastern time, today, the management of TradeStation Group will conduct an analyst conference call to discuss the company's 2002 first quarter results. The telephone conference will be broadcast live via the Internet at http://www.TradeStation.com. A rebroadcast of the call will be accessible for approximately 90 days.
About TradeStation Group, Inc.
TradeStation Group, Inc. (NasdaqNM:TRAD), through its operating subsidiary, TradeStation Securities, Inc., offers TradeStation 6 to institutional, professional and serious, active individual traders -- an electronic trading platform that enables clients to design, test and monitor their own custom trading strategies and then automate them with direct-access order execution. The trading platform currently offers streaming real-time equities, options, futures and futures options market data. Equities and options transactions are cleared through Bear, Stearns Securities Corp. (NYSE:BSC) and futures and futures options transactions are cleared through Refco, LLC. The company's other operating subsidiary, TradeStation Technologies, Inc., develops and offers strategy trading software tools and subscription services.
This press release and the conference call being broadcast today contain and/or will contain statements 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 "believes," "plans," "estimates," "expects," "intends," "designed," "anticipates," "may," "will," "should," "could," "become," "upcoming," "potential," "pending" 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 suggested herein or on the conference call. Factors that may cause or contribute to the various potential differences include, but are not limited to, the effect the company's new commission pricing structure (which was implemented in the 2002 second quarter) will have on brokerage revenue and profitability; market pressure to lower substantially or eliminate pricing on brokerage and subscription services as a result of such services being provided at lower or no additional costs by brokerages, financial institutions and other financial companies to their customers, or for other market reasons; the timing of the pending sale of legacy brokerage accounts; the company's ability to continue to effectuate its Internet brokerage strategy and to successfully market in a timely fashion the company's principal product and service offering (TradeStation 6, f/k/a the TradeStation Platform) and the costs associated therewith; the acceptance of the company's new products and services in the marketplace, including the company's ability (or lack thereof) to achieve significant net increases in brokerage accounts quarter over quarter; the company's customer and active prospect base containing a substantially lower number of interested brokerage clients than the company anticipates; the date(s) on which the company's planned additions and enhancements to its direct-access trading platform are launched being materially later than the expected date(s) due to changes in marketing decisions, results of ongoing quality assurance testing, insufficient product development resources, other decisions to modify certain features, regulatory pronouncements, or other reasons; technical difficulties or errors in the products and/or services; the appeal of the company's products and services to the institutional market (given the company's limited experience selling to that market); the company's brokerage client base trading with an average frequency and/or volume lower than the company anticipates; potential NASD or other broker-dealer regulatory issues arising from the conduct of a brokerage business focused on active traders; variations in patterns of customer revenues due to holidays or major news events; the company's future participation in any merger or strategic alliance; unfavorable critical reviews regarding the company's products and services; the level of market demand for real-time decision support tools, real-time data and/or online brokerage services and/or Web site services generally; the scalability, possible performance failures and reliability of the company's server farm/data network; the entrance of new competitors or competitive products or services into the market; the timing and significance of additional new product and service introductions by the company and its competitors; general economic and market factors, including changes in securities and financial markets; the possibility of "cyberterrorism" and the effect that would have on people's willingness to use Internet-based services, particularly for significant financial transactions; variations from the company's budgeted expectations with respect to hiring and maintenance of personnel, sales and marketing expenditures, expected brokerage revenue growth and subscription fee and client software licensing fee revenue decline; the ability to collect ongoing royalty fee receivables expected from MoneyLine Network, Inc.; the amount of unexpected legal, consultation and professional fees, and other items, events and unpredictable costs or revenue impact that may occur; the adequacy of working capital, cash flows and available financing to fund the growth of the company's online brokerage business and sustain expected operating losses; and other 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 year ended December 31, 2001, as well as other SEC filings and company press releases.
TRADESTATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, ------------------ 2002 2001 ------------ ------------ (Unaudited) REVENUES: Brokerage revenues $ 6,848,266 $ 5,081,966 Subscription fees 1,660,142 2,753,807 Other 1,170,780 4,271,379 ------------ ------------ Total revenues 9,679,188 12,107,152 ------------ ------------ OPERATING EXPENSES: Clearing and execution costs 1,939,896 1,589,811 Data center costs 1,212,165 1,364,613 Technology development 2,347,119 2,441,894 Sales and marketing 3,239,507 3,038,066 General and administrative 2,923,748 4,035,565 Amortization of intangibles 255,772 1,518,212 ------------ ------------ Total operating expenses 11,918,207 13,988,161 ------------ ------------ Loss from operations (2,239,019) (1,881,009) OTHER INCOME (EXPENSE), net (12,783) 221,634 ------------ ------------ Loss before income taxes (2,251,802) (1,659,375) INCOME TAX PROVISION - 11,746 ------------ ------------ Net loss $ (2,251,802) $ (1,671,121) ============ ============ LOSS PER SHARE: Basic and diluted $ (0.05) $ (0.04) ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING: Basic and diluted 44,547,816 44,307,025 ============ ============ TRADESTATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 2002 2001 ------------ ------------ (Unaudited) ASSETS: ------- Cash and cash equivalents $ 18,009,338 $ 19,981,591 Receivables from clearing firms 1,032,275 255,146 Securities owned, at market value 415,928 415,928 Accounts receivable 246,607 330,300 Property and equipment, net 3,509,748 3,224,518 Intangible assets, net 1,592,324 1,748,096 Other assets 824,874 865,424 ------------ ------------ Total assets $ 25,631,094 $ 26,821,003 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: ------------------------------------- LIABILITIES: Accounts payable $ 1,827,020 $ 1,596,244 Accrued expenses 6,654,522 6,013,038 Deferred revenue 222,405 347,336 Capital lease obligations 1,690,385 1,406,872 ------------ ------------ Total liabilities 10,394,332 9,363,490 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY 15,236,762 17,457,513 ------------ ------------ Total liabilities and shareholders' equity $ 25,631,094 $ 26,821,003 ============ ============