NEW YORK - February 9, 2004 - eSpeed, Inc. (NASDAQ:ESPD), the leading developer of electronic trading technology, today reported results for the fourth quarter and full year ended December 31, 2003.
On a Generally Accepted Accounting Principles (GAAP) basis, eSpeed reported net income of $8.6 million, or $0.15 per diluted share, for the fourth quarter 2003. eSpeed also reports operating income, in order to reflect earnings generated from the Company's operations. For the same period, the Company reported fully taxed operating income of $8.8 million which was also $0.15 per diluted share. The difference between fully taxed operating income and GAAP net income was a $0.3 million non-cash charge for business partner securities. For comparative purposes, eSpeed reported pre-tax operating income of $14.5 million, or $0.25 per diluted share, in the fourth quarter 2003, a 56 percent increase over the $0.16 per diluted share reported in the fourth quarter 2002.
On a GAAP basis, the Company reported net income of $36.1 million, or $0.63 per diluted share for the full year 2003, compared to $42.0 million, or $0.74 per diluted share for the full year 2002. The primary differences between GAAP results reported in 2003 and 2002 were a $12.8 million gain on insurance proceeds related to September 11th included in 2002 and the fact that the Company started paying taxes in the second quarter of 2003. For the full year ended December 31, 2003, the Company reported net income from operations of $38.1 million, or $0.66 per diluted share, compared to $31.4 million and $0.55 per diluted share for the same period last year. For comparative purposes, the Company's full year 2003 pre-tax operating income of $56.1 million, or $0.98 per diluted share represents a 75 percent increase over the $0.56 per diluted share reported in 2002.
eSpeed's total revenues for the fourth quarter 2003 were $39.2 million, 20 percent higher than total revenues of $32.8 million for fourth quarter 2002. Fourth quarter 2003 fully electronic revenues were $27.7 million, up 24 percent compared to $22.4 million in the fourth quarter 2002. Total revenues from Software Solutions in the fourth quarter 2003 were $6.2 million versus $5.5 million in the fourth quarter 2002, an increase of 13 percent.
eSpeed's total revenues for the year ended December 31, 2003 increased 24 percent to $156.6 million, versus $126.4 million in the full year 2002. Fully electronic revenues grew 25 percent to $110.0 million for the year 2003 compared to $88.0 million in 2002. Total revenues from Software Solutions increased 37 percent to $24.2 million for the full year 2003 compared to $17.7 million for the same period in 2002.
Fourth quarter 2003 pre-tax operating margins grew to 36.9 percent versus 28.5 percent in the fourth quarter 2002. Full year 2003 pre-tax operating margins grew to 35.8 percent compared to 25.3 percent in the full year 2002.
Fully electronic volume for the fourth quarter 2003 was $7.5 trillion, an 11 percent increase over $6.8 trillion for the fourth quarter 2002. eSpeed's total electronic volume, including fully electronic and voice-assisted transactions, for the fourth quarter 2003 was $10.3 trillion, up 11 percent from $9.3 trillion in the fourth quarter 2002. This growth compares to an 11 percent increase in US Treasury volume as reported by the Federal Reserve over the same period.
The Company had anticipated average daily Federal Reserve US Treasury volume for the fourth quarter 2003 in a range of $425 - $435 billion. Actual average daily Federal Reserve US Treasury volume was $422 billion for the fourth quarter.
Lee Amaitis, Global Chief Operating Officer of eSpeed, commented, "We are pleased to have reported fourth quarter results at the high end of our expectations despite lower market volumes in the fourth quarter."
For the full year 2003, fully electronic volume was $31.7 trillion, a 21 percent increase over $26.2 trillion for the full year 2002. eSpeed's total electronic volume for 2003 was $42.5 trillion, up 21 percent from $35.1 trillion in 2002. This growth compares to a 17 percent increase in US Treasury volume as reported by the Federal Reserve over the same period.
The Company generated free cash flow of $28.8 million for the full year 2003. Excluding related party receivables and payables, free cash flow for the year was $37.6 million.
As of December 31, 2003, eSpeed's cash and cash equivalents was approximately $228.5 million.
Howard W. Lutnick, Chairman, CEO & President of eSpeed, Inc., commented, "We are proud of our strong results in 2003, marked by 75 percent growth in our profits. Our incremental margins of 80 percent for the year, along with the generation of free cash flow virtually on par with our income, illustrate the strengths and leverage inherent in our business model."
The Company is maintaining its previously stated guidance for the full year 2004. eSpeed continues to expect to generate revenues in excess of $185 million and expects its pre-tax operating margins to exceed 41 percent for the full year 2004. eSpeed anticipates that its incremental margins will exceed 75 percent for the full year 2004. Operating earnings after tax for 2004 are expected to be in a range of $0.80 to $0.84 per diluted share. This guidance is based on the Company's expectations that average daily Federal Reserve US Treasury volume will be between $490 and $510 billion for the full year 2004.
For the first quarter 2004, eSpeed expects operating earnings to be in the range of $0.18 and $0.20 per share diluted and after-tax. This guidance is based on the Company's expectations that the average daily Federal Reserve US Treasury volume will be between $480 and $500 billion for the first quarter 2004.
In conclusion, Mr. Lutnick added, "For eSpeed, 2004 will be characterized by the increasing growth in the US Treasury market overall and eSpeed's leadership position in this market, the continued introduction and adoption of enhancements to our software and the initial roll out of new products to be traded and leveraged across the eSpeed platform. We are encouraged by the strong foundation we have built, as we position ourselves for further growth in the future."
To supplement eSpeed's consolidated financial statements presented in accordance with GAAP and to better reflect the Company's quarter-over-quarter and comparative year-over-year 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. In addition, the Company provides a computation of free cash flows. 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 fourth quarter 2003, the difference between GAAP net income and non-GAAP net operating income was $0.3 million. For the full year 2003, the difference between GAAP net income and non-GAAP net operating income was $2.0 million.
eSpeed, Inc., 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 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
Consolidated Statements of Income in Accordance with GAAP
Reconciliation Of Non-GAAP Financial Measures To GAAP
Consolidated Statements Of Financial Condition
Consolidated Statements Of Cash Flows
Computation Of Consolidated Free Cash Flows
Quarterly Market Activity Report
Contacts:
Investors:
Amy Nauiokas
212.610.2421
Media:
Tom Ryan
212.610.2425