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Terra Nova Financial Group, Inc. Announces Third Quarter Earnings
(Market Wire Via Acquire Media NewsEdge) CHICAGO, IL -- (MARKET WIRE) -- 11/13/09 --
Terra Nova Financial Group, Inc. (OTCBB: TNFG),
a specialized financial services firm that through its subsidiaries
provides brokerage services and trading technologies for professional
traders, hedge funds and money managers, today announced preliminary
unaudited financial performance metrics for the three and nine months ended
September 30, 2009.
Selected Results and Discussion
-- Consolidated revenue was $7 million for the three months ended
September 30, 2009 versus $9.7 million for the same period in 2008.
The $2.7 million decrease in revenue was largely influenced by the
following factors:
-- Commissions and fees revenues were $6.3 million for the three
months ended September 30, 2009 -- $1.9 million lower than in
the same period in 2008. The Company's focus on improving margins
at the client level contributed to some of the decline in trading
volume, as did the impact of market drivers. Trade volumes
improved gradually throughout the quarter ended September 30,
2009, but at lower levels than last year, impacting revenues by
$2.6 million. Due to an increased focus on account level gross
margins, commissions per trade for the three months ended
September 30, 2009 improved 14% over the same period in 2008, to
$6.46. This improvement in commissions per trade offset some of
the reduction in trading volume by about $750,000 for three
months ending September 30, 2009 compared to same period last
year.
-- Net interest income declined by $860,000 to $329,000 for the
three months ended September 30, 2009, compared to same period
in 2008. The decline was primarily attributable to a drop in
the federal funds rate -- the base rate from which the Company
earns interest on its bank deposits and margin loans.
Additionally, client margin balances declined approximately 68%
as of September 30, 2009 compared to the same period in 2008.
-- Software fees from Tradient platform subscriptions increased by
9% to $230,000 for the three months ended September 30, 2009
compared to the same period in 2008 -- an improvement that can
be attributed to a decline in the number of clients qualifying
for rebates.
-- Overall trade activity was lower during the three months ended
September 30, 2009 compared to the same period in 2008. DARTs (daily
average revenue trades) were 15,209 for the three months ended
September 30, 2009 compared to 22,602 for the same period in 2008.
These results are primarily attributable to a drop in the number of
users related to a single relationship that was terminated in January
2009. Shares and contracts traded during the second quarter ended
September 30, 2009 totaled 1.4 billion compared to 2.2 billion in the
same period last year.
-- Commission gross profit margin (commissions and fees less cost of
sales) declined 0.9% to 48.4% for the three months ended September
30, 2009, compared to the same period in 2008. The decline in
commission margin is attributable to a shift in trading activity
from direct clients to more commission payout clients. For the
three months ended September 30, 2009, 52.8% of trading activity was
attributable to direct clients and 47.2% was commission payout clients
versus 73.8% direct clients and 26.2% payout-oriented clients in the
same period in 2008. Overall trading activity based on tickets was
down 32% during the three months ended September 30, 2009 compared to
the same period in 2008, which reflects a 22% decrease in the number
of tickets executed on third-party software trading platforms and a
56% decrease in the number of tickets executed on the Tradient
proprietary platforms.
-- Adjusted EBITDA was ($384,000) for the three months ended September
30, 2009 compared to ($1.5 million) for the same period in 2008.
-- Net loss per share was ($0.02) for the three months ended September
30, 2009 compared to net loss per share of ($0.05) for the same
period in 2008.
-- Excluding an accrual of $285,000 for an arbitration award loss before
income taxes would have been ($717,000) for the three months ended
September 30, 2009 instead of the reported operating loss of ($1
million.)
"We are operating under a very challenging business climate as we have
experienced a reduction in our trading volumes due in part to a decline in
the number of clients along with historically low federal funds rates which
have impacted our net interest income," said Michael Nolan, President and
CEO. "Our continued strategy has been to remain focused on the operating
initiatives that we can control, like strategic relationships and
controlling our variable and fixed costs. Our focus on costs has resulted
in Adjusted EBITDA for nine months being only slightly negative at $85,000.
In addition, our commission gross profit margin declined only slightly for
the three months ended September 2009 and has increased 3.34% to 49.6% for
the nine months ended September 2009 compared to the nine months ended
September 2008."
Brokerage Services Segment
Third quarter 2009 summary
-- Brokerage revenue of $6.8 million for the three months ended September
30, 2009 -- a decline of 28% compared to the same period in 2008 --
attributable to a decline of commissions and fees revenue of $1.9 million
due to lower trading volume offset by an increase in average commission per
trade. In addition, net interest income declined $860,000 versus same
period last year due to lower federal funds rates and a decline in both
credit and debit client cash balances.
-- Pre-tax net income of $161,000 for the three months ended September
30, 2009 compared to a pre-tax loss of ($1.7 million) in the same period in
2008.
-- Adjusted EBITDA of $562,000 for the three months ended September 30,
2009 compared to an Adjusted EBITDA of ($1.3 million) in the same period in
2008.
Software Services Segment
Third quarter 2009 summary
-- Revenue of $447,000 for the three months ended September 30, 2009 -- a
decrease of 45% compared to the same period in 2008.
-- Pre-tax net loss of ($196,000) for the three months ended September
30, 2009, compared to net income of $269,000 in the same period in 2008.
The decline in net income is due to a $374,000 decline in revenue and a
$126,000 reversal of a legal accrual and capitalization of wages of $60,000
in the third quarter of 2008. Advertising and depreciation expense also was
lower by $72,000 in the third quarter of 2009 compared to same period last
year.
-- Adjusted EBITDA of ($113,000) for the three months ended September 30,
2009 compared to $380,000 for the same period in 2008.
-- The number of Tradient platform users declined to 2,070 as of
September 30, 2009 from 2,804 as of September 30, 2008. The loss of 734
users is primarily due to a single relationship that was terminated in
January 2009.
Unallocated Expenses
-- Unallocated expenses increased from $743,000 in the quarter ending
September 30, 2008 to $967,000 in the quarter ending September 30, 2009.
The increase included $100,000 in wages expense and a $50,000 investment
write off.
SEGMENT REPORTING and CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
Preliminary Unaudited
TERRA NOVA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
REVENUES:
Commissions and
fees $ 6,288,807 $ 8,147,071 $ 19,761,940 $ 23,438,687
Interest income 329,017 1,376,672 1,189,231 4,848,101
Interest expense on
brokerage accounts - 187,260 - 1,009,689
------------ ------------ ------------ ------------
Net interest
income 329,017 1,189,412 1,189,231 3,838,412
Software fees, net 229,778 210,821 716,978 563,157
Other revenues 154,833 163,243 262,192 359,731
------------ ------------ ------------ ------------
Net revenues 7,002,435 9,710,547 21,930,341 28,199,987
EXPENSES:
Commissions and
clearing 2,575,546 2,488,600 7,663,804 8,267,603
Compensation and
benefits 2,216,306 2,315,995 6,616,982 7,125,321
Software and market
data 741,207 1,330,087 2,494,848 4,580,196
Advertising and
promotional 161,798 214,906 456,139 470,091
Professional fees 653,566 736,876 2,032,802 2,048,807
Communications and
information
technology 246,875 189,618 713,341 637,712
Depreciation and
amortization 583,662 595,923 1,715,916 1,721,854
Bad debt expense - 3,553,296 - 3,470,890
Other general and
administrative
expenses 825,863 464,310 2,129,092 977,102
------------ ------------ ------------ ------------
Total
expenses 8,004,823 11,889,611 23,822,924 29,299,576
------------ ------------ ------------ ------------
Loss before income
taxes (1,002,388) (2,179,064) (1,892,583) (1,099,589)
Income tax benefit 392,021 785,814 737,021 277,696
------------ ------------ ------------ ------------
Net loss (610,367) (1,393,250) (1,155,562) (821,893)
------------ ------------ ------------ ------------
Dividends on
preferred stock - - - (20,113)
------------ ------------ ------------ ------------
Loss attributable
to common
shareholders $ (610,367) $ (1,393,250) $ (1,155,562) $ (842,006)
============ ============ ============ ============
Loss per common
share:
Basic $ (0.02) $ (0.05) $ (0.05) $ (0.03)
============ ============ ============ ============
Diluted $ (0.02) $ (0.05) $ (0.05) $ (0.03)
============ ============ ============ ============
Weighted average
common shares
outstanding:
Basic 25,054,508 25,520,694 25,328,622 25,987,771
============ ============ ============ ============
Diluted 25,054,508 25,520,694 25,328,622 25,987,771
============ ============ ============ ============
TERRA NOVA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2009 2008
------------- -------------
ASSETS
Cash and cash equivalents $ 6,481,304 $ 7,889,553
Cash segregated in compliance with federal
regulations 149,390,045 141,159,364
Receivables from brokers, dealers and
clearing organizations 32,907,231 13,568,459
Receivables from customers and non-customers,
net of allowance for doubtful accounts 10,295,347 4,858,360
Property and equipment, net of accumulated
depreciation and amortization 1,307,758 1,221,066
Capitalized software development costs, net
of accumulated amortization 1,798,575 2,060,015
Intangible assets, net of accumulated
amortization 3,083,901 4,111,514
Income tax receivables 738,285 1,446,264
Goodwill 7,501,408 7,501,408
Deferred income taxes 2,499,761 1,784,761
Other assets 1,193,435 1,346,764
------------- -------------
Total assets $ 217,197,050 $ 186,947,528
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Payables to brokers, dealers and clearing
organizations $ 1,191,819 $ 913,621
Payables to customers and non-customers 183,377,532 151,970,566
Accounts payable and accrued expenses 2,426,404 2,525,692
------------- -------------
Total liabilities 186,995,755 155,409,879
Commitments and contingencies
Shareholders' equity
Preferred stock - $10 par value; 5,000,000
shares authorized; none issued - -
Common stock; $0.01 par value; 150,000,000
shares authorized; 25,482,942 shares
issued and 25,054,508 shares outstanding at
September 30, 2009 and 25,482,942 shares
issued and outstanding at December 31, 2008 254,829 254,829
Treasury stock, common, at cost; 428,434
shares at September 30, 2009 and no shares
at December 31, 2008 (272,056) -
Additional paid-in capital 52,096,682 52,005,418
Accumulated deficit (21,878,160) (20,722,598)
------------- -------------
Total shareholders' equity 30,201,295 31,537,649
------------- -------------
Total liabilities and shareholders'
equity $ 217,197,050 $ 186,947,528
============= =============
In addition to reporting financial results in accordance with generally
accepted accounting principles in the United States, or GAAP, the Company
uses the measure of non-GAAP Adjusted EBITDA (earnings before interest,
taxes, depreciation and amortization and other non-cash items) and non-GAAP
loss before income taxes. These measures are not in accordance with or an
alternative for GAAP, and should not be considered more meaningful than
amounts determined in accordance with GAAP, and may be different from
measures used by other companies. Adjusted EBITDA eliminates certain items
of expenses and losses. The Company's management believes that this
statistic can help in the assessment and evaluation of the relative
strength of the Company's operating performance and is intended to assist
investors in evaluating the current operating and financial performance of
the Company's core business. The non-GAAP loss before income taxes
excludes an arbitration award that we believe to be unusual. Management
believes that its exclusion provides individuals with additional
information to compare the Company's results over multiple periods. The
exclusion of this item from this non-GAAP financial measure should not be
construed as an inference that arbitration hearings or awards are unusual
or infrequent. The Company's management uses these measures internally for
reviewing its financial results and for business planning. The Company
discloses this information externally along with a reconciliation of their
most directly comparable GAAP amounts, to provide access to the detail and
general nature of adjustments made to GAAP financial results.
Below are Terra Nova's preliminary unaudited Segment & Total Adjusted
EBITDA reconciliations for the three and nine months ended September 30,
2009 and 2008.
TERRA NOVA FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss Reconciliation of Non-GAAP
Adjustments - Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2009 2008 2009 2008
----------- ------------ ------------ ------------
REVENUES:
Commissions and fees $ 6,288,807 $ 8,147,071 $ 19,761,940 $ 23,438,687
Net interest income 329,017 1,189,412 1,189,231 3,838,412
Software fees, net 229,778 210,821 716,978 563,157
Other revenue 154,833 163,243 262,192 359,731
----------- ------------ ------------ ------------
Net revenues 7,002,435 9,710,547 21,930,341 28,199,987
Cost of sales 3,246,184 4,132,416 9,961,382 12,598,078
Gross profit 3,756,251 5,578,131 11,968,959 15,601,909
----------- ------------ ------------ ------------
Operating expenses 4,758,639 7,757,195 13,861,542 16,701,498
----------- ------------ ------------ ------------
Loss before income
taxes (1,002,388) (2,179,064) (1,892,583) (1,099,589)
Income tax benefit 392,021 785,814 737,021 277,696
----------- ------------ ------------ ------------
Net loss (610,367) (1,393,250) (1,155,562) (821,893)
Adjustments:
Depreciation and
amortization 583,662 595,923 1,715,916 1,721,854
Stock-based
compensation 34,749 36,288 91,264 107,094
Income tax benefit (392,021) (785,814) (737,021) (277,696)
----------- ------------ ------------ ------------
Total Adjusted
EBITDA $ (383,977) $ (1,546,853) $ (85,403) $ 729,359
=========== ============ ============ ============
Commissions gross
profit $ 3,042,623 $ 4,014,655 $ 9,800,558 $ 10,840,609
Commissions gross
profit margin 48.4% 49.3% 49.6% 46.3%
TERRA NOVA FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss Reconciliation of Non-GAAP
Adjustments - Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
TOTAL REVENUES $ 7,002,435 $ 9,710,547 $ 21,930,341 $ 28,199,987
Total expenses 8,004,823 11,889,611 23,822,924 29,299,576
------------ ------------ ------------ ------------
Loss before income
taxes (1,002,388) (2,179,064) (1,892,583) (1,099,589)
ADJUSTMENTS:
Unusual arbitration
and litigation
accrual 285,000 - 485,000 -
Unusual customer
trading losses - 3,553,296 - 3,470,890
------------ ------------ ------------ ------------
Total Adjusted
income (loss)
before taxes $ (717,388) $ 1,374,232 $ (1,407,583) $ 2,371,301
============ ============ ============ ============
TERRA NOVA FINANCIAL GROUP, INC. AND SUBSIDIARIES
Segment reconciliation of Non-GAAP Adjustments - Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Brokerage Services
Segment
Total revenues $ 6,772,657 $ 9,499,726 $21,213,363 $27,636,830
Total expenses (6,611,953) (11,203,822) (19,974,020) (27,472,327)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 160,704 (1,704,096) 1,239,343 164,503
Net income 160,704 (1,704,096) 1,239,343 164,503
ADJUSTMENTS:
Depreciation and
amortization 401,418 385,552 1,185,523 1,156,261
----------- ----------- ----------- -----------
Total Adjusted EBITDA $ 562,122 $(1,318,544) $ 2,424,866 $ 1,320,764
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
Software Services
Segment 2009 2008 2009 2008
----------- ----------- ----------- -----------
Total revenues $ 447,458 $ 821,213 $ 1,507,365 $ 2,124,879
Total expenses (643,800) (552,642) (1,884,415) (1,758,954)
----------- ----------- ----------- -----------
Income (loss) before
income taxes (196,342) 268,571 (377,050) 365,925
Net income (loss) (196,342) 268,571 (377,050) 365,925
ADJUSTMENTS:
Depreciation and
amortization 83,299 111,816 235,254 269,670
----------- ----------- ----------- -----------
Total Adjusted EBITDA $ (113,043) $ 380,387 $ (141,796) $ 635,595
=========== =========== =========== ===========
Total Adjusted EBITDA
for Segments: $ 449,079 $ (938,157) $ 2,283,070 $ 1,956,359
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
Unallocated expenses 2009 2008 2009 2008
----------- ----------- ----------- -----------
Total revenues $ - $ - $ - $ -
Total expenses (966,750) (743,539) (2,754,876) (1,630,017)
----------- ----------- ----------- -----------
Loss before income
taxes (966,750) (743,539) (2,754,876) (1,630,017)
Income tax benefit 392,021 785,814 737,021 277,696
----------- ----------- ----------- -----------
Net loss (574,729) 42,275 (2,017,855) (1,352,321)
ADJUSTMENTS:
Depreciation and
amortization 98,945 98,555 295,139 295,923
Stock-based
compensation 34,749 36,288 91,264 107,094
Income tax benefit (392,021) (785,814) (737,021) (277,696)
----------- ----------- ----------- -----------
Total Adjusted EBITDA
for Unallocated
expenses: $ (833,056) $ (608,696) $(2,368,473) $(1,227,000)
=========== =========== =========== ===========
Total Adjusted EBITDA $ (383,977) $(1,546,853) $ (85,403) $ 729,359
=========== =========== =========== ===========
About Terra Nova Financial Group, Inc.
Terra Nova Financial Group, Inc. is a holding company of businesses
providing a range of products and services to the professional trading
community. The Company has three primary subsidiaries: Terra Nova
Financial, LLC, a broker-dealer registered with the Securities and Exchange
Commission and a member of Financial Industry Regulatory Authority provides
execution, clearing and prime brokerage services to professional traders,
hedge funds and money managers. Tradient Technologies, Inc., a financial
technology development business provides proprietary applications for
electronic trade execution, order routing and clearing. SC QuantNova
Research SRL, based in Bucharest, Romania, provides software development,
architecture and engineering for Tradient and back office clearing systems.
Terra Nova Financial Group, Inc. trades under the stock symbol "TNFG" and
is listed on the OTC Bulletin Board.
Terra Nova Financial, LLC ("Terra Nova") is a specialized financial
services firm focused on supporting trading professionals. Professional
traders, hedge funds and money managers come to Terra Nova for value in
execution, clearing and prime brokerage services. This recognition
originated with the firm's role (from 1996 to 1998) as the sponsoring
broker-dealer for the innovative Archipelago ECN (now part of the NYSE
Euronext). Terra Nova empowers self-directed clients to trade, analyze,
strategize and report through a portfolio of advanced trading platforms.
Terra Nova was founded in 1994 and is headquartered in Chicago, Illinois
with a sales presence in New York, New York. Primary sources of revenue
for Terra Nova include commissions, account fees and interest.
Terra Nova is a member of Financial Industry Regulatory Authority
("FINRA"), Securities Investor Protection Corporation ("SIPC"), National
Futures Association ("NFA"), The Depository Trust Company ("DTCC"),
National Securities Clearing Corporation ("NSCC") and The Options Clearing
Corporation ("OCC") along with the following exchanges: International
Securities Exchange, Boston Options Exchange, Chicago Stock Exchange,
National Stock Exchange, NYSE Arca Options, NYSE Arca Equities, NYSE Amex
Equities, NYSE Euronext, NASDAQ OMX BX, NASDAQ OMX PHLX, ISE Stock
Exchange, NASDAQ Stock Market, and NYSE Amex Options.
Tradient Technologies, Inc. ("Tradient") operates the Company's proprietary
technology development activities, building applications for electronic
trade execution, order routing and clearing. Tradient platforms are shaped
by what we believe are the foremost needs of professional traders, hedge
funds and registered investment advisors -- efficiency, consistency and
value -- using a swift, targeted innovation and development process.
Tradient is located in Chicago, Illinois. Primary sources of revenue for
Tradient include software licensing and routing fees.
Tradient offers three trading platforms. Tradient's flagship product,
Tradient Pro, is a fully customizable Level II trading platform that
efficiently executes sophisticated equity and options trading strategies.
Tradient Plus is a customizable trading platform designed for ease of use
that economically offers essential equity and options trading features.
Tradient Web is a browser-based trading system providing anytime, anywhere
access to quotes, research, charting tools and other resources to help
traders trade the market online.
Forward-looking statements
Certain statements in this release may constitute "forward-looking"
statements as defined in Section 27A of the Securities Act of 1933, Section
21E of the Securities Exchange Act of 1934, and other laws and regulations.
Such forward-looking statements involve known and unknown risks and other
important factors that could cause the actual results or performance of the
company to differ materially from any future results expressed or implied
by such forward-looking statements. Forward-looking statements can be
identified by, among other things, the use of forward-looking language,
such as the words "plan," "believe," "expect," "anticipate," "intend,"
"project," or other similar words, or the negative of these terms or
comparable language, or by discussion of strategy or intentions. This
cautionary statement is being made pursuant to applicable securities laws
with the intention of obtaining the benefits of the "safe harbor"
provisions of such laws. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees or
indicative of future performance. Important assumptions and other important
factors that could cause actual results to differ materially from those
forward-looking statements with respect to the Company, include, but are
not limited to, risks and uncertainties that are described in the Annual
Report on Form
10-K for the year ended December 31, 2008 and in other securities filings
by the Company with the SEC. Except as required by law, the Company assumes
no obligation to update or revise any forward-looking statements in this
press release, whether as a result of new information, future events, or
otherwise.
For more information about Terra Nova's brokerage and clearing services,
please visit www.TNFG.com.
For more information about Terra Nova's technology offering, please visit
www.TradientTech.com.
Contact Information
Investor Relations:
Gregg J. Fuesel
1-312-827-3654
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