NEW YORK - May 9, 2005 - eSpeed, Inc. (NASDAQ: ESPD), a leading developer of electronic marketplaces and related trading technology for the global capital markets, today reported results for the first quarter ended March 31, 2005.
eSpeed reported net income of $1.3 million, or $0.02 per diluted share, for the first quarter 2005 on a Generally Accepted Accounting Principles (GAAP) basis. To reflect earnings generated from the Company's operations, eSpeed also reports non-GAAP net operating income. For the same period, the Company reported non-GAAP net operating income of $2.7 million, or $0.05 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the first quarter 2005 is $1.3 million (net of tax) for patent litigation costs and a non-cash charge related to business partner securities. For comparative purposes, eSpeed reported non-GAAP net operating income of $11.0 million, or $0.19 per diluted share, in the first quarter of 2004. See "Non-GAAP Financial Measures" below for a detailed description of eSpeed's non-GAAP net operating income.
eSpeed's total revenues for the first quarter 2005 were $38.9 million, compared to total revenues of $44.6 million for the first quarter 2004. First quarter 2005 fully electronic revenues were $20.4 million compared to $30.5 million in the first quarter 2004. Total revenues from Software Solutions in the first quarter 2005 were $10.3 million versus $7.1 million in the first quarter 2004.
First quarter 2005 pre-tax operating margins were 10.8 percent.
Fully electronic volume was $6.4 trillion for the first quarter 2005, an increase of 12.6 percent compared to $5.7 trillion reported by the Company in the fourth quarter 2004. This growth compares to an 11.2 percent increase in US Treasury volume as reported by the Federal Reserve over the same period. Average daily Federal Reserve US Treasury volume was $567 billion for the first quarter 2005. eSpeed's voice assisted volume for the first quarter 2005 was $4.7 trillion, an increase of 28.1 percent, compared with $3.7 trillion in the fourth quarter 2004.
Fully electronic notional volume for new products, which eSpeed defines as mortgage-backed securities, foreign exchange, interest rate swaps, futures and repos, was $436 billion in the first quarter 2005, compared to $497 billion in the fourth quarter 2004. Volume for the eSpeed Equities direct access product was 168 million shares in the first quarter 2005, compared with 123 million shares in the fourth quarter 2004.
The Company generated free cash flow, cash from operations less capital expenditures, of ($8.6) million for the first quarter 2005, which includes the reduction of approximately $8.6 million in liabilities. Excluding related party receivables and payables, free cash flow for the first quarter 2005 was ($5.4) million. As of March 31, 2005, eSpeed's cash and cash equivalents was approximately $190 million.
During the first quarter 2005, eSpeed repurchased approximately 1.353 million shares of the Company's stock for a total of $11.6 million in cash, at an average price of $8.58.
Howard W. Lutnick, Chairman and CEO of eSpeed, Inc. commented, "Our focus on client service remains at the forefront of our core market strategy and its successful execution had a direct impact on improving eSpeed's growth as compared to Fed volumes. Throughout 2005, we are confident that we will continue to implement our strategy and aggressively enhance opportunities for new products."
For the second quarter 2005, eSpeed expects to generate revenues in excess of $38 million and expects non-GAAP net operating income to be in the range of $0.04 to $0.05 per diluted share. This is based on the Company's expectations that the average daily Federal Reserve US Treasury volume will be between $555 and $565 billion for the second quarter 2005. For the full year 2005, the Company expects to generate revenues of at least $155 million, operating expenses to be approximately $141 to $142 million and non-GAAP net operating income to be in the range of $0.15 to $0.18 per diluted share. This includes the expectation that average daily Federal Reserve U.S. Treasury volume will be between $545 and $560 billion for the full year 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 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 first quarter of 2005, the difference between GAAP net income and non-GAAP net operating income was $1.3 million (net of tax). eSpeed considers "non-GAAP net operating income" as after tax income generated from the Company's continuing operations excluding certain non-recurring or non-core items such as, but not limited to, asset impairments, litigation judgments, costs or settlements, restructuring charges, charitable contributions, insurance proceeds, business partner securities and similar events. The amortization of patent costs and associated licensing fees (including those made in settlement of litigation) from such patents are generally treated as operating items. Material judgments or settlement amounts paid or received and impairments to all or a portion of such assets are generally treated as non-operating items. Management does not provide guidance of GAAP net income because certain items identified as excluded from non-GAAP net operating income are difficult to forecast.
About eSpeed, Inc.
eSpeed, Inc. (NASDAQ: ESPD) is a 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 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.
The information in this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the effects of the attacks on the World Trade Center on September 11, 2001, the costs and expenses of developing, maintaining and protecting our intellectual property, including judgments or settlements paid or received and their related costs, the possibility of future losses and negative cash flow from operations, the effect of market conditions, including trading volume and volatility, our pricing strategy and that of our competitors, our ability to develop new products and services, to enter new markets, to secure and maintain market share, to enter into marketing and strategic alliances, to hire new personnel, to expand the use of our electronic system, to induce clients to use our marketplaces and services and to effectively manage any growth we achieve, and other factors that are discussed under "Risk Factors" in eSpeed's Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Contacts:
Investors:
Kim Henneforth
212-610-2433
Media:
Michael Geller
212-610-2430