NEW YORK - August 12, 2003 - eSpeed, Inc. (NASDAQ:ESPD), a subsidiary of Cantor Fitzgerald and the leading developer of electronic trading technology, today reported record results for the second quarter ended June 30, 2003.
For the second quarter 2003, the Company reported fully taxed operating income of $8.3 million, or $0.15 per diluted share. eSpeed reports net operating income in order to reflect earnings generated from the Company's operations. In accordance with Generally Accepted Accounting Principles (GAAP), eSpeed reported net income of $8.1 million, or $0.14 per diluted share, for the second quarter 2003. The difference between fully taxed operating income and GAAP net income was a $0.2 million non-cash charge for business partner securities. This quarter marked the first time eSpeed's results were reported on a fully taxed basis. For comparative purposes, eSpeed reported pre-tax operating income of $13.9 million, or $0.25 per diluted share, in the second quarter 2003, a 92 percent increase over the $0.13 per diluted share reported in the second quarter 2002. On a sequential basis, pre-tax operating income increased 39 percent from the $0.18 per diluted share reported in the first quarter 2003.
eSpeed's total revenues for the second quarter 2003 were $39.1 million, 28 percent higher than revenues of $30.6 million for second quarter 2002 (excluding a $12.8 million gain, from business interruption insurance proceeds related to September 11th, in the second quarter 2002, which resulted in GAAP revenues of $43.4 million). On a sequential basis, total revenues increased 15 percent from $34.0 million reported in the first quarter 2003.
Second quarter 2003 fully electronic revenues were $27.5 million, up 30 percent compared to $21.2 million in the second quarter 2002. Total revenues from Software Solutions in the second quarter 2003 were $6.1 million versus $4.3 million in the second quarter 2002, an increase of 42 percent.
Howard W. Lutnick, Chairman, CEO & President of eSpeed, Inc. commented, "Our year-over-year pre-tax operating earnings per share growth of 92 percent demonstrates the success of our business model. Just over a year ago we established our growth strategy, and we are delivering on that commitment to shareholders. We are consistently improving our profitability, this quarter delivering 35.5 percent operating margins, compared to the 29.6 percent reported last quarter, and the 24.1 percent reported a year ago."
Fully electronic volume for the second quarter 2003 was $7.8 trillion, a 25 percent increase over $6.2 trillion for the second quarter 2002. eSpeed's total electronic volume, including fully electronic and voice-assisted transactions, for the second quarter 2003 was $10.4 trillion, up 29 percent from $8.1 trillion in the second quarter 2002. This growth compares to a 27 percent increase in US Treasury volume as reported by the Federal Reserve. Total transaction count for the second quarter 2003 was 1.3 million transactions, an increase of 25 percent from 1.1 million transactions in the second quarter 2002.
Lee Amaitis, Global Chief Operating Officer of eSpeed, Inc. commented, "The record US budget deficit and corresponding debt issuance have improved the market in which eSpeed operates. We believe that the increased US Treasury issuance, which began in the middle of the second quarter, is indicative of the expanded US Treasury market that is at the heart of eSpeed's core business. As the leader in US Treasuries, eSpeed is uniquely positioned to benefit from the tremendous opportunities created by this volume and issuance growth."
As of June 30, 2003, eSpeed's cash and cash equivalents increased to $199 million compared to $175 million as of March 31, 2003.
The Company is raising its guidance for full year 2003 net operating earnings to a range of $0.64 - $0.67 per share diluted and after-tax from $0.54 per share diluted and after-tax. eSpeed's improved guidance is predicated on the Company's expectation that average daily Federal Reserve US Treasury volume for the full year 2003 will be between $430 - $440 billion per day, up from the previous expectation of between $400 - $408 billion per day. The Company's guidance is based on its expectation that average daily Federal Reserve US Treasury volume will be between $440 - $460 billion per day in the third and fourth quarters of 2003. eSpeed expects to generate pre-tax operating margins in excess of 36 percent and incremental margins to continue to exceed 60 percent for the second half of 2003. For the third quarter 2003, the Company expects to earn in the range of $0.16 - $0.17 per share diluted and after-tax.
In conclusion, Mr. Lutnick added, "The tremendous growth in the US Treasury market and the success of our price improvement (PI) software in the second quarter resulted in a 15 percent sequential increase in both eSpeed's revenues and fully-electronic volume. Our increased guidance for the third quarter is based on our expectation that we will improve our market position by outperforming the Federal Reserve US Treasury volumes and by realizing continued traction in our price improvement business, and we have already seen these improvements during the month of July. We believe our unique leadership position, at an unprecedented time of record issuance in the US Treasury markets, coupled with our ability to leverage our technology enhancements, leave us extremely well-positioned for growth throughout the remainder of 2003 and beyond."
To supplement eSpeed's consolidated financial statements presented in accordance with GAAP and to better reflect the Company's quarter-over-quarter and comparative first half operating performance, eSpeed uses non-GAAP financial measures of revenues, income before income tax provision, net income and earnings per share, which are adjusted to exclude certain non-operating expenses and gains. These non-GAAP financial measurements do not replace the presentation of eSpeed's GAAP financial results but are provided to improve overall understanding of the Company's current financial performance and its prospects for the future. Specifically, eSpeed believes the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to the Company's financial condition and results from operations. In addition, eSpeed's management uses these measures for reviewing the Company's financial results and evaluating eSpeed's financial performance. In the second quarter 2003, the difference between GAAP net income and non-GAAP net operating income was $0.2 million.
eSpeed, a subsidiary of Cantor Fitzgerald, is the leader in developing and deploying electronic marketplaces and related trading technology that offers traders access to the most liquid, efficient and neutral financial markets in the world. eSpeed operates multiple buyer, multiple seller real-time electronic marketplaces for the global non-equity capital markets, including the world's largest government bond markets and other fixed income and financial marketplaces. eSpeed's suite of marketplace tools provides end-to-end transaction solutions for the purchase and sale of financial and non-financial products over eSpeed's global private network or via the Internet. eSpeed's neutral platform, reliable network, straight-through processing and superior products make it the trusted source for electronic trading at the world's largest fixed income and foreign exchange trading firms, major exchanges and leading natural gas and electricity trading firms. To learn more, please visit www.espeed.com. Statements contained in this Press Release, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to: the effects of the attacks on the World Trade Center, market volatility, the limited operating history of eSpeed, Inc., and its ability to enter into marketing and strategic alliances, to effectively manage its growth, to expand the use of its electronic systems and to induce clients to use its marketplaces and services, and other factors that are discussed in eSpeed's Annual Report on Form 10-K, filed with the Securities and Exchange Commission.
Consolidated Statements of Income in Accordance with GAAP
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