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eSpeed Reports First Quarter 2007 Results

May 02, 2007 11:31 AM

Company Updates Outlook for 2007

NEW YORK--(BUSINESS WIRE)--May 2, 2007--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, 2007.

First Quarter Results Summary

GAAP revenues were 3% lower than in the year-ago period. GAAP net income was $0.02 per diluted share in the first quarter of 2007 vs. $0.04 per diluted share in the first quarter of 2006. eSpeed's non-GAAP operating revenue increased 6% and the Company's non-GAAP net operating income per diluted share increased to $0.04 in the first quarter of 2007 from $0.03 in the prior year's first quarter.

                                       1Q2007      1Q2007     1Q2006
                                       Actual     Outlook     Actual
                                      --------- ------------ ---------
GAAP Revenues                         $41.4 MM       NA      $42.6 MM
Non-GAAP Operating Revenues           $41.1 MM    > $40 MM   $38.7 MM
GAAP Net Income Per Diluted Share      $0.02         NA       $0.04
Non-GAAP Net Operating Income Per
 Diluted Share                         $0.04    $0.03-$0.04   $0.03

"eSpeed's fundamental strength was underscored by the year-over-year gains in our U.S. treasury business and by increased screen-assisted revenue as additional BGC desks entered our hybrid pipeline," said Howard W. Lutnick, eSpeed's Chairman, Chief Executive Officer, and President. "In addition, eSpeed's futures products made solid gains. We remain optimistic about our growth prospects for 2008 and beyond based on strong expected returns on the investments the Company has made in our portfolio of new products."

First Quarter Earnings

eSpeed reported net income of $0.9 million, or $0.02 per diluted share, for the first quarter of 2007 based on Generally Accepted Accounting Principles ("GAAP"). To reflect earnings generated from the Company's operations, eSpeed also 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 quarter occurred primarily due to $0.8 million in patent litigation costs and $0.4 million in losses from eSpeed's Equities Direct Access business, which is set to become a separate company called Aqua in the second quarter and in which eSpeed will have an equity stake. Both of these differences were net of tax.

For the first quarter of 2006, eSpeed reported GAAP net income of $2.0 million, or $0.04 per diluted share and non-GAAP net operating income of $1.4 million, or $0.03 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the quarter was primarily due to a gain from insurance proceeds of $2.1 million and a settlement of a tax-related matter of $0.1 million, partially offset by $0.7 million in accelerated amortization of capitalized software, $0.4 million in patent litigation costs, and $0.4 million in expenses relating to the relocation of the Company's London office, all net of tax.

First Quarter Revenues

eSpeed reported GAAP revenues of $41.4 million and non-GAAP operating revenues of $41.1 million for the first quarter of 2007. The difference between GAAP and non-GAAP revenues for the first quarter of 2007 reflected eSpeed Equities Direct Access revenues of $0.3 million.

In comparison, eSpeed reported GAAP revenues of $42.6 million and non-GAAP operating revenues of $38.7 million for the first quarter of 2006. The difference between GAAP and non-GAAP revenues for the first quarter of 2006 was due to a $3.5 million gain from insurance proceeds and $0.4 million in interest income related to the settlement of a tax-related matter.

Fully electronic revenues were $17.9 million in the first quarter of 2007 compared with $16.7 million for the first quarter of 2006. Revenues from Software Solutions in the first quarter of 2007 were $12.3 million versus $11.3 million in the year ago period. Voice- assisted and screen-assisted revenues totaled $8.7 million in the first quarter of 2007 compared with $8.7 million in the first quarter of 2006. Non-GAAP pre-tax operating margin was 7.8 percent in the first quarter of 2007.

The year over year decrease in quarterly GAAP revenues and net income were due primarily to the aforementioned gain from insurance proceeds in the year-ago quarter partially offset by a year-over-year increase in total transaction revenues and from Software Solutions.

See "Non-GAAP Financial Measures" below for a detailed description of the Company's non-GAAP financial measures.

Cash Flow & Cash

The Company generated cash flow from operations of $13.7 million during the first quarter of 2007, compared with $5.1 million during the first quarter of 2006.

The Company also reports free cash flow, which it defines as cash from operations less net cash used in investing activities, including capital expenditures. eSpeed's free cash flow was $5.0 million for the first quarter of 2007, compared with ($1.5) million in the prior year period.

Excluding related party receivables and payables, free cash flow was $2.6 million for the first quarter of 2007, compared with $4.9 million for the first quarter of 2006.

Year-over-year improvements in cash flow from operations were due primarily to higher receivables from related parties and other assets, partially offset by an increase in payables to related parties and decreased depreciation and amortization.

As of March 31, 2007, eSpeed's cash and cash equivalents were approximately $192.6 million.

First Quarter Volume and Transactions on the eSpeed System

Fully electronic volume on the eSpeed system, excluding new products, was $11.8 trillion for the first quarter of 2007, up 31.8 percent from $9.0 trillion in the first quarter of 2006. eSpeed's combined voice-assisted and screen-assisted volume for the first quarter of 2007 was $16.4 trillion, an increase of 22.3 percent from $13.4 trillion in the first quarter of 2006. Fully electronic volume on the eSpeed system for new products, which the Company defines as foreign exchange, interest rate swaps, futures, credit default swaps, and repurchase agreements, was $1.4 trillion for the first quarter of 2007, up 169.9 percent from the $524 billion reported in the first quarter of 2006.

Outlook

For the second quarter of 2007, eSpeed expects to generate non-GAAP operating revenues in excess of $36 million and expects non-GAAP net operating income to be approximately $0.00 per diluted share.

For the full year 2007, eSpeed now expects to generate non-GAAP operating revenues of approximately $153 million, compared with the Company's previous outlook of $152 million. eSpeed expects non-GAAP operating expenses to be in the range of $148 million to $149 million, versus the previously expected range of $146 million to $148 million. eSpeed expects full year 2007 non-GAAP net operating income to be in the range of $0.05 to $0.06 compared to the prior outlook of $0.05 to $0.07 per diluted share.

eSpeed expects lower revenue and non-GAAP net operating income for the remainder of 2007 primarily due to the expiration of the Wagner patent on February 20, 2007. eSpeed recognized $3.1 million in revenue and $1.5 million in non-GAAP net operating income related to the patent in the first quarter of 2007.

The Company will host a conference call on Thursday, May 3, 2007 at 8:30 a.m. EDT, to discuss the above results. To listen to the call via audio webcast, please visit www.espeed.com. Please note: listeners must have a Real Media or Windows Media plug in and headphones or speakers to listen to the webcast.

Non-GAAP Financial Measures

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 first quarter of 2007, the difference between GAAP net income and non-GAAP net operating income was approximately $1.2 million, net of tax, while the difference between GAAP revenues and non-GAAP operating revenues was $0.3 million. 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. eSpeed considers "non-GAAP operating revenues" to be net revenue excluding these same items.

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 foreign exchange 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 a trusted source for electronic trading at the world's largest fixed income and foreign exchange trading firms and major exchanges. For more information, please visit www.espeed.com.

Discussion of Forward-Looking Statements by eSpeed, Inc.

The information in this 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 (the "Exchange Act"). 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. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements.

Our actual results and the outcome and timing of certain events may differ significantly from the expectations discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, our relationship with Cantor and its affiliates, 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 overall 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, and other transactions, including acquisitions, reorganizations, partnering opportunities, and joint ventures, to hire new personnel, to expand the use of our technology, for both integrated hybrid voice-assisted and fully electronic trading, 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.

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.

                     eSpeed, Inc and Subsidiaries
            CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                (in thousands, except per share data)

                                               March 31,  December 31,
                                                   2007       2006
                                               -----------------------
                                               (Unaudited)

Assets
Cash and cash equivalents                      $    5,333  $   21,838
Reverse repurchase agreements with related
 parties                                          187,231     166,009
                                               -----------------------
  Total cash and cash equivalents                 192,564     187,847
Marketable securities                               2,209           -
Fixed assets, net                                  57,483      57,207
Investments                                         7,802       7,780
Goodwill                                           12,184      12,184
Other intangible assets, net                        6,203       6,949
Receivable from related parties                     7,087       7,145
Other assets                                       12,286      13,725
                                               -----------------------
    Total assets                               $  297,818  $  292,837
                                               =======================

      Liabilities and Stockholders' Equity
Current liabilities:
Payable to related parties                         10,105       7,751
Accounts payable and accrued liabilities           26,890      25,836
                                               -----------------------
  Total current liabilities                        36,995      33,587

Deferred income                                     3,971       4,075
                                               -----------------------
    Total liabilities                              40,966      37,662
                                               -----------------------

Stockholders' equity:

Preferred stock, par value $0.01 per share;
 50,000 shares authorized, none outstanding at
 March 31, 2007 and December 31, 2006                   -           -
Class A common stock, par value $.01 per
 share; 200,000 shares authorized; 36,441 and
 36,407 shares issued and outstanding at March
 31, 2007 and December 31, 2006, respectively         364         364
Class B common stock, par value $.01 per
 share; 100,000 shares authorized; 20,498
 shares outstanding at March 31, 2007 and
 December 31, 2006, convertible to Class A
 common stock                                         205         205
Additional paid-in capital                        300,732     299,683
Treasury stock, at cost; 6,502 shares of Class
 A common stock at March 31, 2007 and December
 31, 2006                                         (62,597)    (62,597)
Retained earnings                                  18,168      17,520
Accumulated other comprehensive loss                  (20)          -

                                               -----------------------
    Total stockholders' equity                    256,852     255,175
                                               -----------------------

Total liabilities and stockholders' equity     $  297,818  $  292,837
                                               =======================
                    eSpeed, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME IN ACCORDANCE WITH GAAP (unaudited)
                (in thousands, except per share data)


                                                   Three Months Ended
                                                  --------------------
                                                  March 31,  March 31,
                                                    2007       2006
                                                  ---------- ---------
Revenues:
  Transaction revenues
     Fully electronic transactions with related
      parties                                     $  16,440  $ 15,681
     Fully electronic transactions with unrelated
      parties                                         1,506     1,038
                                                  ---------- ---------
       Total fully electronic transactions           17,946    16,719
     Voice-assisted brokerage transactions with
      related parties                                 6,974     7,255
     Screen-assisted open outcry transactions
      with related parties                            1,732     1,426
                                                  ---------- ---------
   Total transaction revenues                        26,652    25,400
                                                  ---------- ---------
  Software Solutions fees from related parties        8,725     7,491
  Software Solutions and licensing fees from
   unrelated parties                                  3,564     3,799
  Insurance recovery from related parties                 -     3,500
  Interest income                                     2,473     2,362
                                                  ---------- ---------
     Total revenues                                  41,414    42,552
                                                  ---------- ---------

Expenses:
  Compensation and employee benefits                 14,166    13,858
  Amortization of software development costs and
   other intangible assets                            5,334     6,890
  Other occupancy and equipment                       9,377     8,633
  Administrative fees to related parties              3,521     3,427
  Professional and consulting fees                    2,895     1,910
  Communications and client networks                  2,103     2,027
  Marketing                                             226       332
  Amortization of non-employee securities                 -        19
  Other expenses                                      2,439     2,045
                                                  ---------- ---------
     Total operating expenses                        40,061    39,141
                                                  ---------- ---------

                                                  ---------- ---------
Income before income taxes                            1,353     3,411
                                                  ---------- ---------

Provision for income taxes                              496     1,391

                                                  ---------- ---------
Net income                                        $     857  $  2,020
                                                  ========== =========

Per share data:

  Basic earnings per share                        $    0.02  $   0.04
                                                  ========== =========

  Diluted earnings per share                      $    0.02  $   0.04
                                                  ========== =========

  Basic weighted average shares of common stock
   outstanding                                       50,423    50,077
                                                  ========== =========

  Diluted weighted average shares of common stock
   outstanding                                       51,441    51,137
                                                  ========== =========
                    eSpeed, Inc. and Subsidiaries
        NON-GAAP CONSOLIDATED STATEMENTS OF INCOME (unaudited)
                (in thousands, except per share data)


                                                   Three Months Ended
                                                   -------------------
                                                   March 31, March 31,
                                                     2007      2006
                                                   --------- ---------
Revenues:
  Transaction revenues
      Fully electronic transactions with related
       parties                                     $ 16,440  $ 15,681
      Fully electronic transactions with unrelated
       parties                                        1,506     1,038
                                                   --------- ---------
        Total fully electronic transactions          17,946    16,719
      Voice-assisted brokerage transactions with
       related parties                                6,974     7,255
      Screen-assisted open outcry transactions
       with related parties                           1,732     1,426
                                                   --------- ---------
    Total transaction revenues                       26,652    25,400
                                                   --------- ---------
  Software Solutions fees from related parties        8,725     7,491
  Software Solutions and licensing fees from
   unrelated parties                                  3,283     3,799
  Interest income                                     2,473     1,963
                                                   --------- ---------
      Total non-GAAP revenues                        41,133    38,653
                                                   --------- ---------

Expenses:
  Compensation and employee benefits                 13,964    13,634
  Amortization of software development costs and
   other intangible assets                            5,227     5,727
  Other occupancy and equipment                       9,009     7,989
  Administrative fees to related parties              3,383     3,427
  Professional and consulting fees                    1,617     1,163
  Communications and client networks                  2,081     2,027
  Marketing                                             226       332
  Other expenses                                      2,408     2,046
                                                   --------- ---------
      Total non-GAAP operating expenses              37,915    36,345
                                                   --------- ---------

                                                   --------- ---------
Non-GAAP income before income taxes                   3,218     2,308
                                                   --------- ---------

Non-GAAP provision for income taxes                   1,181       941

                                                   --------- ---------
Non-GAAP net operating income                         2,037     1,367
                                                   ========= =========

Non-operating (loss) income:
  Amortization of non-employee securities, net of
   tax                                                    -       (11)
  Litigation costs, net of tax                         (808)     (442)
  Loss from eSpeed Equities, net of tax                (372)        -
  Accelerated depreciation, net of tax                    -      (689)
  Office relocation cost, net of tax                      -      (382)
  Tax settlement, net of tax                              -       104
  Insurance recovery from related parties, net of
   tax                                                    -     2,073
                                                   --------- ---------
      Total non-operating (loss) income              (1,180)      653
                                                   --------- ---------

Net income                                         $    857  $  2,020
                                                   ========= =========


Per share data:

  Basic non-GAAP income before income taxes per
   share                                           $   0.06  $   0.05

  Basic non-GAAP provision for income taxes per
   share                                           $   0.02  $   0.02
                                                   --------- ---------

  Basic non-GAAP net operating income per share    $   0.04  $   0.03

  Basic non-operating (loss) income per share      $  (0.02) $   0.01
                                                   --------- ---------

  Basic GAAP earnings per share                    $   0.02  $   0.04
                                                   ========= =========


  Diluted non-GAAP income before income taxes per
   share                                           $   0.06  $   0.05

  Diluted non-GAAP provision for income taxes per
   share                                           $   0.02  $   0.02
                                                   --------- ---------

  Diluted non-GAAP net operating income per share  $   0.04  $   0.03

  Diluted non-operating (loss) income per share    $  (0.02) $   0.01
                                                   --------- ---------

  Diluted GAAP earnings per share                  $   0.02  $   0.04
                                                   ========= =========


  Basic weighted average shares of common stock
   outstanding                                       50,423    50,077
                                                   ========= =========

  Diluted weighted average shares of common stock
   outstanding                                       51,441    51,137
                                                   ========= =========

Additional data:

  Non-GAAP pre-tax operating margin                     7.8%      6.0%
                                                   ========= =========
                     eSpeed, Inc. & Subsidiaries
          CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
                            (in thousands)


                                            Three Months  Three Months
                                                Ended         Ended
                                             March 31,     March 31,
                                            ------------  ------------
                                               2007          2006
                                            ------------  ------------
Cash flows from operating activities:
    Net income                               $      857    $    2,020
Adjustments to reconcile net income to net
 cash provided by operating activities:
    Depreciation and amortization                 8,232         9,845
    Gain on insurance recovery from related
     parties                                          -        (3,500)
    Equity in net income of unconsolidated
     investments                                    (22)          (22)
    Deferred income tax expense                     352         1,105
    Stock-based compensation                        794           573
    Tax benefit from stock-based
     compensation                                    22            69
    Excess tax benefit from stock-based
     compensation                                   (14)          (47)

Changes in operating assets and
 liabilities:
    Receivable from related parties                  58          (608)
    Other assets                                    193        (3,111)
    Payable to related parties                    2,355        (2,264)
    Accounts payable and accrued expenses         1,002         1,099
    Deferred income                                (104)         (104)
                                            ------------  ------------
    Net cash provided by operating
     activities                                  13,725         5,055
                                            ------------  ------------

Cash flows used in investing activities:
    Purchase of fixed assets                     (1,205)       (2,105)
    Purchase of marketable securities            (2,229)            -
    Capitalization of software development
     costs                                       (6,197)       (4,185)
    Capitalization of patent defense and
     registration costs                            (435)         (241)
    Decrease in restricted cash                   1,322             -
                                            ------------  ------------
    Net cash used in investing activities        (8,744)       (6,531)
                                            ------------  ------------

Cash flows (used in) provided by financing
 activities:
    Repurchase of Class A common stock             (373)            -
    Proceeds from exercises of stock
     options                                         95           241
    Excess tax benefit from stock-based
     compensation                                    14            47
                                            ------------  ------------
    Net cash (used in) provided by
     financing activities                          (264)          288
                                            ------------  ------------

Net increase (decrease) in cash and cash
 equivalents                                      4,717        (1,188)
                                            ------------  ------------

Cash and cash equivalents at beginning of
 period                                          21,838        37,070
Reverse repurchase agreements with related
 parties at beginning of period                 166,009       141,365
                                            ------------  ------------
Total cash and cash equivalents at
 beginning of period                            187,847       178,435
                                            ------------  ------------

Cash and cash equivalents at end of period        5,333        12,195
Reverse repurchase agreements with related
 parties at end of period                       187,231       165,052
                                            ------------  ------------
Total cash and cash equivalents at end of
 period                                      $  192,564    $  177,247
                                            ============  ============

Supplemental cash information:
Cash paid for income taxes                   $       35    $        -
Deemed dividend to Cantor                             -         1,500
Contribution of license from Cantor                   -         1,500
                     eSpeed, Inc. & Subsidiaries
        CONSOLIDATED STATEMENTS OF FREE CASH FLOWS (unaudited)
                            (in thousands)



                                                   Three Months Ended
                                                        March 31,
                                                   -------------------
                                                       2007      2006
                                                   --------- ---------

Non-GAAP income before income taxes                $  3,218  $  2,308

Depreciation and amortization                         8,232     9,845
Other non-cash and non-operating items               (1,107)    1,607
                                                   --------- ---------
Non-GAAP income before income taxes adjusted for
 depreciation, amortization and other                10,343    13,760
                                                   --------- ---------


Provision for income taxes on non-GAAP operating
 income                                              (1,181)     (941)
Income tax benefit (provision) on non-operating
 (loss) income                                          685      (450)
Deferred income tax expense                             352     1,105
Tax benefit from stock-based compensation                22        69
Income taxes paid                                        35         -
                                                   --------- ---------
Increase in current income tax payable                  (87)     (217)

Changes in related party receivable and payable,
 net                                                  2,413    (6,372)
Changes in other operating assets and liabilities,
 net                                                  1,056    (2,116)
                                                   --------- ---------
     Net cash provided by operating activities       13,725     5,055
                                                   --------- ---------

Purchase of fixed assets                             (1,205)   (2,105)
Purchase of investments                              (2,229)        -
Capitalization of software development costs         (6,197)   (4,185)
Capitalization of patent defense and registration
 costs                                                 (435)     (241)
Decrease in restricted cash                           1,322         -
                                                   --------- ---------
     Free cash flows                                  4,981    (1,476)
                                                   --------- ---------

Related party receivable and payable, net            (2,413)    6,372
                                                   --------- ---------
     Free cash flows, net of related party
      activity                                     $  2,568  $  4,896
                                                   ========= =========
                    eSpeed, Inc. and Subsidiaries
  RECONCILIATION of NON-GAAP FINANCIAL MEASURES TO GAAP (unaudited)
                            (in thousands)


                                                       Three Months
                                                           Ended
                                                         March 31,
                                                     -----------------
                                                      2007     2006
                                                     -------- --------

Total non-GAAP revenues                              $41,133   38,653
Insurance recovery (a)                                     -    3,500
Tax settlement (b)                                         -      399
eSpeed Equities revenues (c)                             281        -
                                                     -------- --------
Total GAAP revenues                                  $41,414  $42,552
                                                     -------- --------

Total non-GAAP operating expenses                    $37,915  $36,345
Amortization of business partner and non-employee
 securities (d)                                            -       19
Litigation costs (e)                                   1,278      747
Legal settlement (f)                                       -      224
Accelerated amortization (g)                               -    1,162
Office relocation costs (h)                                -      644
eSpeed Equities expenses (i)                             868        -
                                                     -------- --------
Total GAAP operating expenses                        $40,061  $39,141
                                                     -------- --------

Non-GAAP income before income taxes                  $ 3,218  $ 2,308
Sum of reconciling items = (a) + (b) + (c) - (d) -
 (e) - (f) - (g) - (h) - (i)                          (1,865)   1,103
                                                     -------- --------
GAAP income before income taxes                      $ 1,353  $ 3,411
                                                     -------- --------

Non-GAAP provision for income taxes                  $ 1,181  $   941
Income tax expense on non-operating income (j)          (685)     450
                                                     -------- --------
GAAP provision for income taxes                      $   496  $ 1,391
                                                     -------- --------

Non-GAAP net operating income                        $ 2,037  $ 1,367
Sum of reconciling items = (a) + (b) + (c) - (d) -
 (e) - (f) - (g) - (h) - (i) - (j)                    (1,180)     653
                                                     -------- --------
GAAP net income                                      $   857  $ 2,020
                                                     ======== ========
eSpeed, Inc. and Subsidiaries
Quarterly Market Activity Report

The following table provides certain volume and transaction count
 information on the eSpeed system for the periods indicated.


                      ------------------------------------------------
                          1Q06        2Q06        3Q06        4Q06
                      ------------------------------------------------
Volume (in billions)
--------------------
Fully Electronic
 Volume - Excluding
 New Products               8,957      10,235       9,381       9,813
Fully Electronic
 Volume - New
 Products*                    524         744       1,179       1,335
                      ------------------------------------------------
   Total Fully
    Electronic
    Volume                  9,481      10,979      10,560      11,148

Voice-Assisted
 Volume                     8,093       8,618       8,217       7,933
Screen-Assisted
 Volume                     5,295       5,583       5,898       6,111
                      ------------------------------------------------
   Total
    Voice/Screen-
    Assisted Volume        13,388      14,201      14,115      14,044

                      ------------------------------------------------
Total Volume               22,869      25,180      24,675      25,192
                      ================================================

Transaction Count
--------------------
Fully Electronic
 Transactions -
 Excluding New
 Products               1,971,347   2,035,458   1,687,779   1,764,930
Fully Electronic
 Transactions - New
 Products*                131,700     138,421     140,539     142,239
                      ------------------------------------------------
   Total Fully
    Electronic
    Transactions        2,103,047   2,173,879   1,828,318   1,907,169

Voice-Assisted
 Transactions             228,124     202,600     183,646     177,789
Screen-Assisted
 Transactions              70,698      68,768      66,451      62,977
                      ------------------------------------------------
   Total
    Voice/Screen-
    Assisted Volume       298,822     271,368     250,097     240,766

                      ------------------------------------------------
   Total
    Transactions        2,401,869   2,445,247   2,078,415   2,147,935
                      ================================================

Trading Days                   62          63          63          62

                                      % Change     % Change
                     ---------------------------------------
                         1Q07     1Q07 vs 4Q06 1Q07 vs 1Q06
                     -------------
Volume (in billions)
--------------------
Fully Electronic
 Volume - Excluding
 New Products              11,809         20.3%        31.8%
Fully Electronic
 Volume - New
 Products*                  1,415          6.0%       169.9%
                     ---------------------------------------
   Total Fully
    Electronic
    Volume                 13,224         18.6%        39.5%

Voice-Assisted
 Volume                     8,884         12.0%         9.8%
Screen-Assisted
 Volume                     7,486         22.5%        41.4%
                     ---------------------------------------
   Total
    Voice/Screen-
    Assisted Volume        16,370         16.6%        22.3%

                     ---------------------------------------
Total Volume               29,594         17.5%        29.4%
                     =======================================

Transaction Count
--------------------
Fully Electronic
 Transactions -
 Excluding New
 Products               2,062,341         16.9%         4.6%
Fully Electronic
 Transactions - New
 Products*                144,378          1.5%         9.6%
                     ---------------------------------------
   Total Fully
    Electronic
    Transactions        2,206,719         15.7%         4.9%

Voice-Assisted
 Transactions             201,250         13.2%      (11.8%)
Screen-Assisted
 Transactions              92,496         46.9%        30.8%
                     ---------------------------------------
   Total
    Voice/Screen-
    Assisted Volume       293,746         22.0%       (1.7%)

                     ---------------------------------------
   Total
    Transactions        2,500,465         16.4%         4.1%
                     =======================================

Trading Days                   62

* New Products defined as Foreign Exchange, Interest Rate Swaps, Repos, Futures, and Credit Default Swaps. CBOT Futures volume calculated based on per contract notional value of $200,000 for the two year contract and $100,000 for all others.

Global Interest Rate
 Futures Volume (1)
  CBOT - US Treasury
   Contracts          127,606,543 128,443,758 126,285,125 129,828,448
  CME - Euro $
   Contracts          117,284,097 127,350,219 127,101,116 130,341,959
  EUREX - Bund
   Contracts           85,217,459  88,078,646  72,591,730  74,001,534

Fed UST Primary
 Dealer Volume (in
 billions) (2)
  UST Volume               34,810      33,688      32,171      30,742
  Average Daily UST
   Volume                     561         535         511         496

NYSE - Volume (shares
 traded) - in
 millions (3)             108,447     121,582     108,825     114,434
  Transaction Value
   - in millions        4,072,426   4,627,787   3,941,583   4,316,756

NASDAQ - Volume
 (shares traded) - in
 millions (4)             128,566     134,155     116,510     121,477
  Transaction Value
   - in millions        3,070,980   3,031,230   2,587,538   2,945,401


Global Interest Rate
 Futures Volume (1)
  CBOT - US Treasury
   Contracts          161,232,523        24.2%       26.4%
  CME - Euro $
   Contracts          152,724,717        17.2%       30.2%
  EUREX - Bund
   Contracts           88,987,126        20.3%        4.4%

Fed UST Primary
 Dealer Volume (in
 billions) (2)
  UST Volume               34,437        12.0%      (1.1%)
  Average Daily UST
   Volume                     555        12.0%      (1.1%)

NYSE - Volume (shares
 traded) - in
 millions (3)             123,765         8.2%       14.1%
  Transaction Value
   - in millions        4,943,056        14.5%       21.4%

NASDAQ - Volume
 (shares traded) - in
 millions (4)             131,410         8.2%        2.2%
  Transaction Value
   - in millions        3,300,788        12.1%        7.5%


Sources:(1) Futures Industry Association - Monthly Volume Report -
         (www.cbot.com, www.cme.com, www.eurexchange.com)
        (2) www.ny.frb.org/pihome/statistics/dealer - Federal Reserve
         Bank
        (3) NYSE - www.nyse.com
        (4) NASDAQ - www.marketdata.nasdaq.com
      Trading Days
------------------------
         2007
------------------------

   Q1    Q2    Q3    Q4
------------------------
   62    64    63    62

         2006
------------------------
   Q1    Q2    Q3    Q4
------------------------
   62    63    63    62

CONTACT: eSpeed, Inc.
Media:
Robert Hubbell, 212-294-7820
rhubbell@espeed.com
or
Investors:
Jason McGruder, 212-829-4988
jmcgruder@espeed.com
or
Gavin Anderson & Company
Tristan B. Peniston-Bird, 212-515-1933
tpeniston-bird@gavinanderson.com

SOURCE: eSpeed, Inc.