optionsXpress Holdings, Inc. (Nasdaq:OXPS) today reported results
for the three months ended June 30, 2011.
Highlights from the second quarter 2011 included:
- Revenues of $59.2 million, a 10% decrease year-over-year
- Net income of $8.8 million, or $0.15 per diluted share
- Retail daily average revenue trades (DARTs) of 32,200, a 2%
decrease year-over-year
- Net new account growth of 8,100 during the quarter, resulting
in 397,400 customer accounts, a 9% increase year-over-year
- Ending customer assets of $8.4 billion, a 20% increase
year-over-year
"While we did see trading activity slow somewhat in the
short-term, primarily in the back half of the second quarter,
customer accounts grew at an annualized rate of 8% and customer
assets were flat while the S&P 500, NASDAQ and Russell 2000
indices all declined," commented David Fisher, Chief Executive
Officer of optionsXpress. "We are encouraged that our customer
growth continues to demonstrate the long-term value of our product
for derivatives traders."
For the second quarter, Retail DARTs were 32,200, 2% lower than
the second quarter of 2010, and down 12% from the first quarter of
2011. Total net revenues decreased 10% from the second quarter of
2010 and were down 10% when compared to the first quarter of 2011.
Resulting net income was $8.8 million, or $0.15 per diluted share,
a 43% decrease from the $15.6 million reported in the second
quarter of 2010.
Second quarter results included approximately $2.6 million in
one-time legal costs related to an agreement to settle a customer
matter. Second quarter results also included approximately $1.6
million in expenses related to the merger with The Charles Schwab
Corporation that was previously announced on March 21, 2011.
Finally, the Company recognized non-cash gains related to prior
acquisitions of approximately $1.9 million in the quarter. All of
these items together in the second quarter reduced income before
taxes by approximately $2.3 million and reduced net income by
approximately $2.0 million.
Proposed Merger by Schwab
On March 21, 2011, optionsXpress Holdings, Inc. and The Charles
Schwab Corporation announced that they had entered into a
definitive agreement under which Schwab will acquire optionsXpress.
Under the terms of the agreement, optionsXpress stockholders will
receive 1.02 shares of Schwab stock for each share of optionsXpress
stock. Based on Schwab's closing stock price as of March 18, 2011,
the transaction values each optionsXpress share at $17.91,
resulting in a total transaction value of approximately $1.0
billion.
On April 22, 2011, the Federal Trade Commission granted early
termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, relating to The
Charles Schwab Corporation's pending acquisition of optionsXpress
Holdings, Inc.
This transaction is expected to close as soon as we receive the
necessary regulatory and shareholder approvals, which we anticipate
will be in the third quarter of 2011. Until the transaction is
completed, optionsXpress and Schwab will continue to act as
separate businesses.
About optionsXpress Holdings, Inc.
optionsXpress Holdings, Inc., a pioneer in equity options and
futures trading, offers an innovative suite of online brokerage
services for investor education, strategy evaluation and trade
execution. optionsXpress Holdings subsidiaries include
optionsXpress, Inc., a retail online brokerage specializing in
options and futures, brokersXpress, LLC, an online trading and
reporting platform for independent investment professionals, Open E
Cry, LLC, an innovative futures broker offering direct access
futures trading for high volume commodities and futures traders
through its proprietary software platform, and Optionetics, Inc, a
leading provider of investment education services, including live
seminars, proprietary software analytics, online and offline
educational products and individual coaching.
More information can be found in the Investor Relations section
of optionsXpress' website at
http://www.optionsxpress.com/investor.
The optionsXpress Holdings, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=6907
Safe Harbor
This communication contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements include statements that refer to expectations,
projections or other characterizations of future events or
circumstances and are identified by words such as "believe,"
"anticipate," "expect," "estimate," "intend," "plan," "will,"
"may," "aim," "target," "could," "should," "continue," "build,"
"improve," "growth," "increase," and other similar expressions.
These forward-looking statements relate to the business combination
transaction involving The Charles Schwab Corporation ("Schwab") and
optionsXpress Holdings, Inc. ("optionsXpress"), including expected
synergies; timing of closing; client and stockholder benefits;
management; accretion; growth; client retention; and merger-related
charges which reflect management's beliefs, objectives and
expectations as of the date hereof. Achievement of the expressed
beliefs, objectives and expectations is subject to risks and
uncertainties that could cause actual results to differ materially
from those beliefs, objectives or expectations. Important
transaction-related factors that may cause such differences
include, but are not limited to, the risk that expected revenue,
expense and other synergies from the transaction may not be fully
realized or may take longer to realize than expected; the parties
are unable to successfully implement their integration strategies;
failure of the parties to satisfy the closing conditions in the
merger agreement in a timely manner or at all, including regulatory
approvals; failure of the optionsXpress stockholders to approve the
merger; and disruptions to the parties' businesses as a result of
the announcement and pendency of the merger. Other important
factors include general market conditions, including the level of
interest rates, equity valuations and trading activity; the
parties' ability to attract and retain clients and grow client
assets/relationships; competitive pressures on rates and fees; the
level of client assets, including cash balances; the impact of
changes in market conditions on money market fund fee waivers,
revenues, expenses and pre-tax margins; capital needs; the parties'
ability to develop and launch new products, services and
capabilities in a timely and successful manner; the effect of
adverse developments in litigation or regulatory matters; any
adverse impact of financial reform legislation and related
regulations; and other factors set forth in Schwab's and
optionsXpress' Annual Reports on Form 10-K for the fiscal year
ended December 31, 2010. Schwab and optionsXpress disclaim any
obligation and do not intend to update or revise any
forward-looking statements.
In connection with the proposed transaction, Schwab filed with
the Securities and Exchange Commission ("SEC") a registration
statement on Form S-4 on April 21, 2011, as amended on July 22,
2011, that included a proxy statement/prospectus for the
stockholders of optionsXpress. optionsXpress will mail the
final proxy statement/prospectus to its stockholders after the
foregoing registration statement is declared effective by the
SEC. Investors and security holders are urged to read the
proxy statement/prospectus regarding the proposed transaction and
other relevant documents filed with the SEC when they become
available because they will contain important
information. Copies of all documents filed with the SEC
regarding the proposed transaction may be obtained, free of charge,
at the SEC's website (http://www.sec.gov). These
documents, when available, may also be obtained, free of charge,
from Schwab's website, www.aboutschwab.com/investor, under the tab
"Financials and SEC Filings" or from optionsXpress' website,
www.optionsXpress.com/investor, under the item "SEC Filings."
Participants in this transaction
Schwab, optionsXpress and their respective directors, executive
officers and certain other members of management and employees may
be deemed to be participants in the solicitation of proxies from
the optionsXpress stockholders in respect of the proposed
transaction. Information regarding the persons who may, under
the rules of the SEC, be deemed to be participants in the
solicitation of the stockholders of optionsXpress in connection
with the proposed transaction will be set forth in the proxy
statement/prospectus when it is filed with the
SEC. Information about Schwab's executive officers and
directors is available in Schwab's Annual Report on Form 10-K filed
with the SEC on February 25, 2011 and Schwab's definitive proxy
statement filed with the SEC on March 30, 2011. Information
about optionsXpress' executive officers and directors is available
in optionsXpress' 10-K/A filed with the SEC on April 27,
2011. You can obtain free copies of these documents from
Schwab and optionsXpress using the contact information above.
optionsXpress Holdings,
Inc. |
Consolidated Statements
of Operations |
In thousands, except
per share data |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
|
|
June |
June |
Change |
|
30, 2011 |
30, 2010 |
$ |
% |
Revenues: |
|
|
|
|
Commissions |
$41,764 |
$44,713 |
($2,949) |
(7%) |
Other brokerage-related revenue |
4,730 |
5,243 |
(513) |
(10%) |
Interest revenue and fees |
3,857 |
4,826 |
(969) |
(20%) |
Interest expense |
(58) |
(56) |
(2) |
4% |
Net interest revenue and fees |
3,799 |
4,770 |
(971) |
(20%) |
Education revenues |
5,524 |
7,707 |
(2,183) |
(28%) |
Other income |
3,374 |
3,067 |
307 |
10% |
Net revenues |
$59,191 |
$65,500 |
($6,309) |
(10%) |
|
|
|
|
|
Expenses: |
|
|
|
|
Compensation and benefits |
$12,046 |
$11,854 |
$192 |
2% |
Brokerage, clearing and other related
expenses |
10,407 |
10,250 |
157 |
2% |
Brokerage advertising |
4,600 |
5,747 |
(1,147) |
(20%) |
Education marketing and fulfillment |
3,849 |
4,986 |
(1,137) |
(23%) |
Depreciation and amortization |
2,180 |
2,277 |
(97) |
(4%) |
Loan interest and fees |
1,001 |
-- |
1,001 |
n/a |
Other general and administrative |
10,133 |
5,794 |
4,339 |
75% |
Total expenses |
$44,216 |
$40,908 |
$3,308 |
8% |
|
|
|
|
|
Income before income taxes |
14,975 |
24,592 |
(9,617) |
(39%) |
Income taxes |
6,133 |
9,005 |
(2,872) |
(32%) |
Net income |
$8,842 |
$15,587 |
($6,745) |
(43%) |
|
|
|
|
|
Basic earnings per share |
$0.15 |
$0.27 |
($0.12) |
(44%) |
Diluted earnings per share |
$0.15 |
$0.27 |
($0.12) |
(44%) |
|
|
|
|
|
Weighted average shares |
|
|
|
|
outstanding - basic |
57,497 |
57,403 |
94 |
0% |
Weighted average shares |
|
|
|
|
outstanding - diluted |
57,861 |
57,611 |
250 |
0% |
|
|
|
|
|
Six Months
Ended |
|
|
June |
June |
Change |
|
30, 2011 |
30, 2010 |
$ |
% |
Revenues: |
|
|
|
|
Commissions |
$87,160 |
$84,311 |
$2,849 |
3% |
Other brokerage-related revenue |
10,581 |
9,741 |
840 |
9% |
Interest revenue and fees |
8,140 |
9,593 |
(1,453) |
(15%) |
Interest expense |
(128) |
(107) |
(21) |
20% |
Net interest revenue and fees |
8,012 |
9,486 |
(1,474) |
(16%) |
Education revenues |
10,907 |
15,237 |
(4,330) |
(28%) |
Other income |
8,428 |
3,756 |
4,672 |
124% |
Net revenues |
$125,088 |
$122,531 |
$2,557 |
2% |
|
|
|
|
|
Expenses: |
|
|
|
|
Compensation and benefits |
$24,367 |
$23,502 |
$865 |
4% |
Brokerage, clearing and other related
expenses |
20,151 |
19,268 |
883 |
5% |
Brokerage advertising |
9,983 |
10,116 |
(133) |
(1%) |
Education marketing and fulfillment |
6,892 |
10,281 |
(3,389) |
(33%) |
Depreciation and amortization |
4,346 |
4,568 |
(222) |
(5%) |
Loan interest and fees |
2,014 |
-- |
2,014 |
n/a |
Other general and administrative |
20,139 |
11,370 |
8,769 |
77% |
Total expenses |
$87,892 |
$79,105 |
$8,787 |
11% |
|
|
|
|
|
Income before income taxes |
37,196 |
43,426 |
(6,230) |
(14%) |
Income taxes |
14,126 |
15,951 |
(1,825) |
(11%) |
Net income |
$23,070 |
$27,475 |
($4,405) |
(16%) |
|
|
|
|
|
Basic earnings per share |
$0.40 |
$0.48 |
($0.08) |
(17%) |
Diluted earnings per share |
$0.40 |
$0.48 |
($0.08) |
(17%) |
|
|
|
|
|
Weighted average shares |
|
|
|
|
outstanding - basic |
57,477 |
57,434 |
43 |
0% |
Weighted average shares |
|
|
|
|
outstanding - diluted |
57,845 |
57,643 |
202 |
0% |
optionsXpress Holdings,
Inc. |
Consolidated Balance
Sheets |
In
thousands |
(Unaudited) |
|
|
|
|
|
|
Period
Ended |
|
|
|
June 30, |
December 31, |
Change |
|
|
2011 |
2010 |
$ |
% |
|
Assets: |
|
|
|
|
|
Cash and cash equivalents |
$50,153 |
$100,875 |
($50,722) |
(50%) |
|
Cash and investments segregated |
|
|
|
|
|
in compliance with federal
regulations |
1,127,398 |
945,870 |
181,528 |
19% |
|
Receivables from brokerage customers,
net |
252,241 |
235,589 |
16,652 |
7% |
|
Receivables from brokers, dealers
and |
|
|
|
|
|
clearing organizations |
13,441 |
25,686 |
(12,245) |
(48%) |
|
Investments in securities |
10,562 |
11,442 |
(880) |
(8%) |
|
Deposits with clearing organizations |
20,712 |
20,480 |
232 |
1% |
|
Fixed assets, net |
11,062 |
11,345 |
(283) |
(2%) |
|
Goodwill |
87,489 |
85,360 |
2,129 |
2% |
|
Other intangible assets, net |
3,691 |
4,837 |
(1,146) |
(24%) |
|
Other assets |
39,968 |
31,434 |
8,534 |
27% |
|
Total assets |
$1,616,717 |
$1,472,918 |
$143,799 |
10% |
|
|
|
|
|
|
|
Liabilities and stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Payables to brokerage customers |
$1,322,206 |
$1,193,479 |
$128,727 |
11% |
|
Payables to brokers, dealers and
clearing |
|
|
|
|
|
organizations |
4,551 |
1,711 |
2,840 |
166% |
|
Accrued liabilities and accounts
payable |
23,907 |
19,471 |
4,436 |
23% |
|
Current and deferred income taxes |
562 |
651 |
(89) |
(14%) |
|
Other liabilities |
25,812 |
32,521 |
(6,709) |
(21%) |
|
Long-term debt |
110,400 |
120,000 |
(9,600) |
(8%) |
|
|
|
|
|
|
|
Total liabilities |
1,487,438 |
1,367,833 |
119,605 |
9% |
|
|
|
|
|
|
|
Stockholders' equity |
129,279 |
105,085 |
24,194 |
23% |
|
|
|
|
|
|
|
Total liabilities and stockholders' |
|
|
|
|
|
equity |
$1,616,717 |
$1,472,918 |
$143,799 |
10% |
|
optionsXpress Holdings,
Inc. |
Statistical Operating
Data |
|
|
|
|
|
|
Three Months
Ended |
|
|
June 30, |
June 30, |
Change |
|
2011 |
2010 |
$ or # |
% |
Number of customer accounts |
|
|
|
|
(at period end)(1) |
397,400 |
365,500 |
31,900 |
9% |
Daily average revenue trades (''DARTs'')
(2) |
|
|
|
|
Retail DARTs |
32,200 |
32,700 |
(500) |
(2%) |
Institutional DARTs |
15,300 |
17,100 |
(1,800) |
(11%) |
Total DARTs |
47,500 |
49,800 |
(2,300) |
(5%) |
Customer trades per account (3) |
30 |
35 |
(5) |
(14%) |
Average commission per trade |
$13.94 |
$14.26 |
($0.32) |
(2%) |
Option trades as a % of total trades |
43% |
40% |
3% |
|
Brokerage advertising expense per net
new |
|
|
|
|
customer account (4) |
$568 |
$737 |
($169) |
(23%) |
Total client assets (000s) |
$8,403,112 |
$7,030,199 |
$1,372,913 |
20% |
Client margin balances (000s) |
$227,595 |
$204,194 |
$23,401 |
11% |
|
|
|
|
|
|
Six Months
Ended |
|
|
June 30, |
June 30, |
Change |
|
2011 |
2010 |
$ or # |
% |
Number of customer accounts |
|
|
|
|
(at period end)(1) |
397,400 |
365,500 |
31,900 |
9% |
Daily average revenue trades (''DARTs'')
(2) |
|
|
|
|
Retail DARTs |
34,400 |
31,500 |
2,900 |
9% |
Institutional DARTs |
14,700 |
15,700 |
(1,000) |
(6%) |
Total DARTs |
49,100 |
47,200 |
1,900 |
4% |
Customer trades per account (3) |
32 |
33 |
(1) |
(3%) |
Average commission per trade |
$14.23 |
$14.40 |
($0.17) |
(1%) |
Option trades as a % of total trades |
44% |
41% |
3% |
|
Brokerage advertising expense per net
new |
|
|
|
|
customer account (4) |
$556 |
$707 |
($151) |
(21%) |
Total client assets (000s) |
$8,403,112 |
$7,030,199 |
$1,372,913 |
20% |
Client margin balances (000s) |
$227,595 |
$204,194 |
$23,401 |
11% |
|
|
|
|
|
(1) Customer accounts are open,
numbered accounts. |
(2) DARTs are total
revenue-generating trades for a period divided by the number of
trading days in that period |
(3) Customer trades per account
are total trades divided by the average number of total customer
accounts during the period. Customer trades are annualized. |
(4) Calculated based on total net
new customer accounts opened during the period. |
|
optionsXpress Holdings,
Inc. |
Segment
Information |
In
thousands |
|
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
|
June 30, |
June 30, |
June 30, |
June 30, |
|
2011 |
2010 |
2011 |
2010 |
Revenue |
|
|
|
|
Brokerage services |
$53,859 |
$57,797 |
$114,550 |
$107,288 |
Education services |
6,003 |
8,186 |
11,867 |
16,200 |
Eliminations |
(671) |
(483) |
(1,329) |
(957) |
Revenue |
$59,191 |
$65,500 |
$125,088 |
$122,531 |
|
|
|
|
|
Income/(loss) before income taxes |
|
|
|
|
Brokerage services |
$16,776 |
$25,637 |
$40,352 |
$45,973 |
Education services |
(1,801) |
(1,045) |
(3,156) |
(2,547) |
Income before income taxes |
$14,975 |
$24,592 |
$37,196 |
$43,426 |
CONTACT: Investor Inquiries:
Adam DeWitt
(877) 280-9010
Optionsxpress Holdings, Inc. (MM) (NASDAQ:OXPS)
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