NEW YORK - (BUSINESS WIRE) - Nov. 3, 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 third quarter ended September 30, 2005.
eSpeed reported net income of $1.9 million, or $0.04 per diluted share, for the third 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 $2.0 million, or $0.04 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the third quarter 2005 is a $0.3 million charitable contribution to the Cantor Fitzgerald Relief Fund, $0.5 million for patent litigation costs, a non-cash charge of $0.03 million related to business partner securities, and $0.6 million gain on investment, all net of tax. For comparative purposes, eSpeed reported non-GAAP net operating income of $6.0 million, or $0.11 per diluted share, in the third quarter 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 third quarter 2005 were $38.8 million on a GAAP basis. For the same period, eSpeed also reported non-GAAP revenues of $37.8 million. The difference between GAAP and non-GAAP revenues for the third quarter of 2005 is a $1.0 million gain on the sale of an investment. For comparative purposes, eSpeed reported GAAP and non-GAAP total revenues of $39.8 million for the third quarter 2004.
Third quarter 2005 fully electronic revenues were $18.9 million compared to $25.5 million for the third quarter 2004. Revenues from Software Solutions in the third quarter 2005 were $9.9 million versus $8.0 million in the third quarter 2004.
Third quarter 2005 pre-tax operating margin was 7.5 percent.
Fully electronic volume was $8.0 trillion for the third quarter 2005, an increase of 12.7 percent compared to $7.1 trillion reported by the Company for the second quarter 2005. This growth compares favorably to a 6 percent decrease in overall US Treasury volume as reported by the Federal Reserve over the same period. Market-wide average daily Federal Reserve US Treasury volume was $540 billion for the third quarter 2005. eSpeed's voice-assisted volume for the third quarter 2005 was $8.6 trillion, an increase of 15.9 percent, compared to $7.4 trillion for the second quarter 2005.
Fully electronic notional volume for new products, which eSpeed defines as mortgage-backed securities, foreign exchange, interest rate swaps, futures and repos, was $376 billion for the third quarter 2005, compared to $506 billion in the second quarter 2005, a decrease of 25.7 percent. Volume for the eSpeed Equities direct access product was 154 million shares for the third quarter 2005, compared with 178 million shares for the second quarter 2005.
The Company generated free cash flow, defined as cash from operations less net cash used in investing activities, of $11.5 million for the third quarter 2005. Excluding related party receivables and payables, free cash flow for the third quarter 2005 was $11.7 million. As of September 30, 2005, eSpeed's cash and cash equivalents were approximately $184 million.
During the third quarter 2005, eSpeed repurchased approximately 1.2 million shares of the Company's stock for approximately $9.5 million in cash, at an average price per share of $7.93.
For the fourth quarter 2005, eSpeed expects to generate revenues of approximately $36 million and expects non-GAAP net operating income to be in the range of $0.00 to $0.01 per diluted share. This is based on the Company's expectations that the average daily Federal Reserve US Treasury volume will be between $520 and $530 billion for the fourth quarter 2005. For the full year 2005, the Company expects to generate revenues of approximately $150 million, operating expenses to be approximately $139 million and non-GAAP net operating income to be in the range of $0.13 to $0.14 per diluted share.
Howard W. Lutnick, Chairman and CEO of eSpeed, Inc. commented, "Despite seasonal weakness in trading volumes for the quarter, the results reflect our improved market position. The continued improvement of our market position in our core U.S. Treasury business reflects the growing recognition of eSpeed's commitment to client service and product innovation. Moreover, we remain focused on enhancing our service offering to clients, through both customized pricing and technology solutions."
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 flow. 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. For the third quarter 2005, the difference between GAAP net income and non-GAAP net operating income was ($0.1) million, net of tax. eSpeed considers "non-GAAP net operating income" to be 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, costs related to potential acquisitions, charitable contributions, insurance proceeds, business partner securities, gains or losses on investments 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 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, the effects of the attacks on the World Trade Center on September 11, 2001, 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. We believe that all forward-looking statements are based upon reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made, and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in forward-looking statements.
Contacts:
Investors:
Steve Wargo
212-610-3584
Media:
Michael Geller
212-610-2430