eSpeed reported net income of $9.0 million, or $0.16 per diluted share, for the second quarter 2004 on a Generally Accepted Accounting Principles (GAAP) basis. To reflect earnings generated from the Company's operations, eSpeed also reports operating income. For the same period, the Company reported fully taxed operating income of $9.1 million, or $0.16 per diluted share. The difference between fully taxed operating income and GAAP net income was a less than $0.1 million non-cash charge for business partner securities. For comparative purposes, eSpeed reported operating income of $8.3 million, or $0.15 per diluted share, in the second quarter of 2003.
eSpeed's total revenues for the second quarter 2004 were $42.8 million, compared to total revenues of $39.1 million for the second quarter 2003. Second quarter 2004 fully electronic revenues were $29.2 million compared to $27.5 million in the second quarter 2003. Total revenues from Software Solutions in the second quarter 2004 were $7.6 million versus $6.1 million in the second quarter 2003.
Second quarter 2004 pre-tax operating margins were 35.0 percent versus 35.5 percent in the second quarter 2003.
Fully electronic volume was $8.0 trillion for the second quarter 2004, compared to $7.8 trillion reported by the Company in the second quarter 2003. eSpeed's total electronic volume, including fully electronic and voice-assisted transactions, for the second quarter 2004 was $11.1 trillion, up from $10.4 trillion in the second quarter 2003. Average daily Federal Reserve US Treasury volume was $522 billion for the second quarter 2004. eSpeed had expected average daily Federal Reserve US Treasury volume to be between $515 and $520 billion for this period.
Fully electronic notional volume for new products, which eSpeed defines as mortgage-backed securities, foreign exchange, interest rate swaps, futures and repos, was $199 billion in the second quarter 2004, compared to $133 billion in the first quarter 2004. Volume for the eSpeed Equities direct access product was 102 million shares in the second quarter 2004, up from 85 million shares in the first quarter 2004.
The Company generated free cash flow of $4.8 million for the second quarter 2004. Excluding related party receivables and payables, free cash flow for the second quarter of 2004 was $6.0 million. As of June 30, 2004, eSpeed's cash and cash equivalents was approximately $240 million.
From July 2, 2004, to date, eSpeed repurchased approximately 1.6 million shares of the Company’s stock for a total of $19.5 million in cash, at an average price of $12.18 per share. Today, eSpeed’s Board of Directors announced a new share repurchase authorization of $100 million, to replace the remaining $20.5 million authorization from the prior plan.
For the third quarter 2004, eSpeed expects operating earnings to be in the range of $0.09 to $0.10 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 $445 and $465 billion for the third quarter 2004.
eSpeed expects to generate operating revenues in excess of $163 million and expects its pre-tax operating margins to be in excess of 30 percent for the full year 2004. Operating earnings after tax for 2004 are expected to be in a range of $0.53 to $0.55 per diluted share. This guidance is based on the Company's expectations that average daily Federal Reserve US Treasury volume will be between $480 and $490 billion for the full year 2004.
Howard W. Lutnick, Chairman and CEO of eSpeed, commented, "For the remainder of 2004, eSpeed will focus on growing volume and revenue in our core business, adding clients in new products by aggressively investing in our sales efforts, and rolling out additional proprietary software enhancements. We remain confident and committed to our long term strategy and the growth of our Company in 2005.”
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, 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 second quarter 2004, the difference between GAAP net income and non-GAAP net operating income was less than $0.1 million.
eSpeed, Inc. (NASDAQ: ESPD), 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 equities 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 and major exchanges. 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.
Contacts:
Investors:
Maureen Murphy
212.610.2430
Media:
Tom Ryan
212.610.2425