TradeStation posts Q3 operating loss despite revenue growth

abdelaziz Fathi

TradeStation Group today announced its results for the fiscal third quarter ending December 31, 2021, which showed a positive performance in terms of revenue growth. However, the multi-asset brokerage company posted worse-than-expected net income triggered by higher marketing expenses and investments to scale the company’s “fast-growing business.”

According to the investor update published by Monex Group’s subsidiary, the company was able to amass a total revenue of $53.9 million. This figure was up 1.8% over the three months ended December 31, 2020, and also grew by 6.9% as compared to the prior quarter.

Taking a year-to-date perspective, TradeStation had net revenues of $157.0 million for the April-December period, a 2.2% increase over the 2020 nine-month period.

TradeStation attributed the revenue growth to higher trading-related revenue and net interest income. However, this growth was partially offset by lower average trading-related revenue per account coupled with lower subscription fees and other revenue.

As per the report, TradeStation had 178,863 customer accounts, an increase of 36.1% from December 2020, and up 9.9% from September 2021. The broker added 27,412 new accounts during the last three months, up an 81.0% from 15,147 a year earlier.

TradeStation said that its crypto-focused unit had run a promotion in December which attracted 4,950 initially-funded crypto accounts, or 86.5% of the 5,725 total new crypto accounts it added in the month.

Tailor-made for crypto traders, TradeStation uses global integrations to create a wide pool of liquidity sources that enable better price discovery and transparency. The company also promotes its crypto desk as helping traders avoid lengthy transactions on traditional exchanges, as well as avoid fees charged by other platforms for instant large volume trades.

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Due to TradeStation’s increased marketing and headcount, total expenses jumped to $69.5 million, and $180.0 million for the nine-month period. That compares to $50.0 million and $147.4 million for the three- and nine-month periods, respectively, ended December 31, 2020.

TradeStation’s total headcount increased, primarily in product development and information technology, from 511 full-time employees in March to 714 in December. Together with wage inflation, employee compensation and benefits increased to $24.7 million in the third quarter relative to $17.7 million for the Q3 2020.

Despite the bullish operational metrics, the company posted a net loss of $11.3 million, a loss before income taxes of $15.7 million, and negative adjusted EBITDA of $13.6 million. That compares to a profit of $2.1 million, income before income taxes of $2.9 million, and adjusted EBITDA of $12.4 million for the prior-year’s three months.

Year-to-date, the company had a net loss of $16.9 million after it earned $4.5 million in the previous year.

TradeStation Securities, the US broker-dealer arm of Japanese financial services giant Monex Group, said in November it will go public through a merger with a blank-check firm in a deal that values the combined entity at $1.43 billion.

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