Feb 13, 2007 11:27 AM
Company Provides Outlook for First Quarter and Full Year 2007
NEW YORK--(BUSINESS WIRE)--Feb. 13, 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 fourth quarter and full year ended December 31, 2006.
Fourth Quarter Earnings
eSpeed reported net income of $3.3 million, or $0.06 per diluted share, for the fourth quarter of 2006 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 $3.1 million, or $0.06 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the quarter occurred primarily due to a September 11th-related government grant of $1.9 million partially offset by a $1.2 million charge for the impairment of fixed assets and capitalized software costs, $0.5 million in patent litigation costs, and a $0.1 million charge related to an office relocation. All of these differences were net of tax.
For comparative purposes, eSpeed reported GAAP net income of $0.3 million, or $0.01 per diluted share, for the fourth quarter of 2005. For the same period, eSpeed reported non-GAAP net operating income of $0.9 million, or $0.02 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the fourth quarter of 2005 was due to a gain from insurance proceeds of $1.1 million and a gain of $0.5 million due to the reversal of previously accrued acquisition costs, offset by a $1.6 million charge for the impairment of fixed assets and capitalized software costs, and $0.6 million in costs related to patent litigation, all net of tax.
Full Year Earnings
eSpeed reported GAAP net income of $4.4 million, or $0.09 per diluted share, for the full year 2006. For the same timeframe, eSpeed reported non-GAAP net operating income of $7.5 million, or $0.15 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the full year 2006 was primarily due to insurance proceeds of $2.1 million, a September 11th-related government grant of $1.9 million, a payment to eSpeed of $0.5 million relating to a litigation settlement, and a $0.2 million net gain related to tax settlements, partially offset by $2.5 million in expenses relating to the relocation of the Company's London offices, $2.0 million in patent litigation costs, $1.3 million in acquisition-related costs, a $1.2 million charge for the impairment of fixed assets and capitalized software costs, $0.7 million in accelerated amortization of capitalized software, and a $0.2 million charitable contribution to the Cantor Fitzgerald Relief Fund, all net of tax.
For comparative purposes, eSpeed reported GAAP net income of $2.0 million, or $0.04 per diluted share for the full year 2005. For the same period, the Company reported non-GAAP net operating income of $7.4 million, or $0.14 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the full year 2005 included a gain from insurance proceeds of $1.1 million and a gain on investment of $0.6 million, partially offset by litigation costs of $3.0 million, $2.1 million in costs associated with the Company's attempt to acquire MTS, $1.6 million in charges related to fixed asset and capitalized software, a charitable contribution of $0.3 million, and $0.2 million in amortization of business partner securities, all net of tax.
The increases in quarterly and annual GAAP net income were due primarily to higher GAAP revenues more than offsetting higher GAAP expenses.
Fourth Quarter Revenues
eSpeed reported GAAP revenues of $44.7 million and non-GAAP operating revenues of $41.6 million for the fourth quarter of 2006. The difference between GAAP and non-GAAP revenues for the fourth quarter of 2006 was a September 11th-related government grant of $3.1 million.
In comparison, the Company's GAAP revenues for the fourth quarter of 2005 were $37.8 million and its non-GAAP revenues were $36.1 million. The difference between GAAP and non-GAAP revenues for the fourth quarter of 2005 was a $1.7 million gain from insurance proceeds.
Fully electronic revenues were $18.2 million in the fourth quarter of 2006 compared to $16.5 million for the fourth quarter of 2005. Revenues from software solutions in the fourth quarter of 2006 were $13.3 million versus $10.8 million in the year ago period. Voice- assisted and screen-assisted revenues totaled $7.4 million in the fourth quarter of 2006 compared with $7.0 million in the fourth quarter of 2005. Non-GAAP pre-tax operating margin was 11.7 percent in the fourth quarter of 2006.
The year over year increase in quarterly GAAP revenues was due primarily to higher revenues from Software Solutions and fully electronic transactions as well as the previously mentioned government grant.
Full Year Revenues
eSpeed reported GAAP revenues of $164.3 million and non-GAAP operating revenues of $157.3 million for the full year 2006. The difference between GAAP and non-GAAP revenues for the full year 2006 was a gain from insurance proceeds of $3.5 million, a September 11th-related government grant of $3.1 million, and $0.4 million in interest income related to the settlement of a tax-related matter.
In comparison, the Company reported GAAP revenues of $152.9 million and non-GAAP operating revenues of $150.2 million for the full year 2005. The difference between GAAP and non-GAAP revenues for 2005 was a $1.7 million gain from insurance proceeds and a gain on investment of $1.0 million.
Fully electronic revenues were $69.0 million in the full year 2006 compared to $74.7 million for the full year 2005. Revenues from software solutions in the full year 2006 were $47.4 million versus $41.4 million in the year ago period. Voice- assisted and screen-assisted revenues totaled $31.7 million in the full year 2006 compared with $28.1 million in the full year 2005. Non-GAAP pre-tax operating margin was 7.6 percent for the full year 2006.
The increase in annual GAAP revenues was due primarily to higher revenues from Software Solutions, interest income, and screen-assisted transactions, as well as the previously mentioned government grant and higher insurance proceeds more than offsetting lower revenues from fully electronic transactions and the gain on investment.
See "Non-GAAP Financial Measures" below for a detailed description of the Company's non-GAAP financial measures.
Cash Flow & Cash
eSpeed generated cash flow from operations of $6.7 million during the fourth quarter of 2006, and $36.8 million for the full year 2006. This compares with $2.0 million during the fourth quarter of 2005 and $27.7 million for the full year 2005.
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 ($3.6) million for the fourth quarter of 2006 and $8.6 million for the full year 2006. In comparison, the Company reported free cash flow of ($5.6) million in the fourth quarter of 2005 and ($2.5) million for the full year 2005.
Excluding related party receivables and payables, free cash flow was ($3.9) million for the fourth quarter of 2006 and $14.7 million for the full year 2006, compared with ($10.7) million for the fourth quarter of 2005 and ($0.3) million for the full year 2005.
eSpeed reported year over year improvements in the above cash flow metrics primarily due to higher revenues. The Company traditionally has lower cash flow during the fourth quarter due to the payment of annual employee bonuses.
During the fourth quarter of 2006, eSpeed repurchased approximately 52.2 thousand shares of the Company's stock for approximately $0.5 million, at an average price per share of $8.92.
As of December 31, 2006, eSpeed's cash and cash equivalents were approximately $187.8 million.
Fourth Quarter Volume and Transactions on the eSpeed System
Fully electronic volume on the eSpeed system, excluding new products, was $9.8 trillion for the fourth quarter of 2006, up 30.8 percent from $7.5 trillion in the fourth quarter of 2005. eSpeed's combined voice-assisted and screen-assisted volume for the fourth quarter of 2006 was $14.0 trillion, an increase of 19.4 percent from $11.8 trillion in the fourth quarter of 2005.
Fully electronic volume on the eSpeed system for new products, which the Company defines as foreign exchange, interest rate swaps, futures and repos, was $1.3 trillion for the fourth quarter of 2006, up 147.7 percent against the $540 billion reported in the fourth quarter of 2005.
Full Year Volume and Transactions on the eSpeed System
Fully electronic volume on the eSpeed system, excluding new products, was $38.4 trillion for the full year 2006, up 32.3 percent from $29.0 trillion in 2005. eSpeed's combined voice-assisted and screen-assisted volume for the full year 2006 was $55.7 trillion, an increase of 44.1 percent from $38.7 trillion in 2005.
Fully electronic volume on the eSpeed system for new products was $3.8 trillion for the full year 2006, up 103.6 percent against the $1.9 trillion reported in the prior year.
"I am pleased by the performance of our U.S. Treasury business in the fourth quarter in terms of its strong volume growth and improved competitive market position, both sequentially and year-on-year," said Paul Saltzman, Chief Operating Officer of eSpeed. "This demonstrated that our fixed pricing model along with our commitment to innovative technology and excellence in customer service continues to pay off."
Outlook
For the first quarter of 2007, eSpeed expects to generate non-GAAP operating revenues in excess of $40 million and expects non-GAAP net operating income to be in the range of $0.03 to $0.04 per diluted share.
For the full year 2007, eSpeed expects to generate non-GAAP operating revenues of approximately $152 million. The Company expects non-GAAP operating expenses to be in the 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 $0.07 per diluted share.
eSpeed expects lower revenue and net income for 2007 primarily due to the expiration of the Wagner patent on February 20, 2007. After this date, the Company will no longer receive revenue from this source. eSpeed recognized $17.9 million in revenue and $8.2 million in non-GAAP net operating income related to the patent in 2006.
"We continue to make discretionary investments in technology and staff to support the expected strong growth in revenues from our affiliated voice brokers like BGC as well as growth from our foreign exchange and futures products," added Howard W. Lutnick, Chairman, CEO, and President of eSpeed. "In the long run, we expect these investments will allow us to make up for the expired Patent-related revenue."
The Company will host a conference call on Wednesday, February 14, 2007 at 8:30 a.m. EST, 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 fourth quarter of 2006, the difference between GAAP net income and non-GAAP net operating income was $0.2 million, net of tax. For the full year 2006, the difference between GAAP net income and non-GAAP net operating income was ($3.1) 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 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 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, our relationship with Cantor Fitzgerald 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 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 position, 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.
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.
eSpeed, Inc and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
December 31, December 31,
2006 2005
--------------------------
(Unaudited)
Assets
Cash and cash equivalents $ 21,838 $ 37,070
Reverse repurchase agreements with related
parties 166,009 141,365
--------------------------
Total cash and cash equivalents 187,847 178,435
Fixed assets, net 57,207 58,291
Investments 7,780 7,742
Goodwill 12,184 12,184
Intangible assets, net 6,949 11,356
Receivable from related parties 7,145 4,345
Other assets 13,725 8,581
--------------------------
Total assets $ 292,837 $ 280,934
==========================
Liabilities and Stockholders' Equity
Current liabilities:
Payable to related parties 7,751 7,588
Accounts payable and accrued liabilities 25,836 19,649
--------------------------
Total current liabilities 33,587 27,237
Deferred income 4,075 7,593
--------------------------
Total liabilities 37,662 34,830
--------------------------
Stockholders' Equity:
Preferred stock, par value $0.01 per share;
50,000,000 shares authorized, none
outstanding at December 31, 2006 and
December 31, 2005 - -
Class A common stock, par value $.01 per
share; 200,000,000 shares authorized;
36,407,138 and 34,387,380 shares issued at
December 31, 2006 and December 31, 2005,
respectively 364 343
Class B common stock, par value $.01 per
share; 100,000,000 shares authorized;
20,497,800 and 22,139,270 shares
outstanding at December 31, 2006 and
December 31, 2005, respectively 205 221
Additional paid-in capital 306,869 294,987
Unearned stock based compensation (7,186) (1,592)
Treasury stock, at cost; 6,502,230 and
6,488,047 shares of Class A common stock at
December 31, 2006 and December 31, 2005,
respectively (62,597) (62,486)
Retained earnings 17,520 14,631
--------------------------
Total stockholders' equity 255,175 246,104
--------------------------
Total Liabilities and Stockholders' Equity $ 292,837 $ 280,934
==========================
eSpeed, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME IN ACCORDANCE WITH GAAP (unaudited)
(In thousands, except per share data)
Three Months Twelve Months
Ended Ended
----------------- -------------------
December December December December
31, 31, 31, 31,
2006 2005 2006 2005
-------- -------- --------- ---------
Revenues:
Transaction revenues
Fully electronic
transactions with related
parties $16,101 $16,495 $ 62,084 $ 74,669
Fully electronic
transactions with
unrelated parties 2,144 - 6,937 -
-------- -------- --------- ---------
Total fully electronic
transactions 18,245 16,495 69,021 74,669
Voice-assisted brokerage
transactions with related
parties 6,015 6,063 26,043 25,192
Screen-assisted open outcry
transactions with related
parties 1,413 933 5,675 2,863
-------- -------- --------- ---------
Total transaction revenues 25,673 23,491 100,739 102,724
-------- -------- --------- ---------
Software Solutions fees from
related parties 7,640 6,957 30,445 25,818
Software Solutions and licensing
fees from unrelated parties 5,696 3,822 16,981 15,534
Insurance recovery - 1,692 3,500 1,692
Grant income 3,100 - 3,100 -
Gain on sale of investments - - - 1,015
Interest income 2,616 1,849 9,541 6,160
-------- -------- --------- ---------
Total revenues 44,725 37,811 164,306 152,943
-------- -------- --------- ---------
Expenses:
Compensation and employee
benefits 12,919 11,644 52,765 50,633
Amortization of software
development costs and other
intangibles 5,792 5,758 24,047 20,134
Other occupancy and equipment 8,871 8,022 37,280 30,678
Professional and consulting fees 2,690 1,700 9,464 8,788
Impairment of long lived assets 1,861 2,386 1,861 2,386
Communications and client
networks 1,986 2,588 8,101 8,157
Marketing 110 345 852 1,596
Administrative fees to related
parties 2,885 3,422 12,598 13,938
Amortization of business partner
and non-employee securities - 8 19 318
Acquisition related costs - (797) 2,026 3,327
Other 2,441 2,051 8,289 9,896
-------- -------- --------- ---------
Total operating expenses 39,555 37,127 157,302 149,851
-------- -------- --------- ---------
-------- -------- --------- ---------
Income before income taxes 5,170 684 7,004 3,092
-------- -------- --------- ---------
Income tax provision 1,920 394 2,614 1,048
-------- -------- --------- ---------
Net income $ 3,250 $ 290 $ 4,390 $ 2,044
======== ======== ========= =========
Per share data:
Basic earnings per share $ 0.06 $ 0.01 $ 0.09 $ 0.04
======== ======== ========= =========
Diluted earnings per share $ 0.06 $ 0.01 $ 0.09 $ 0.04
======== ======== ========= =========
Basic weighted average shares of
common stock outstanding 50,327 50,041 50,214 51,349
======== ======== ========= =========
Diluted weighted average shares
of common stock outstanding 51,453 50,653 51,258 52,066
======== ======== ========= =========
eSpeed, Inc. and Subsidiaries
NON-GAAP CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Twelve Months
Ended Ended
----------------- -------------------
December December December December
31, 31, 31, 31,
2006 2005 2006 2005
-------- -------- --------- ---------
Revenues:
Transaction revenues
Fully electronic transactions
with related parties $16,101 $16,495 $ 62,084 $ 74,669
Fully electronic transactions
with unrelated parties 2,144 - 6,937 -
-------- -------- --------- ---------
Total fully electronic
transactions 18,245 16,495 69,021 74,669
Voice-assisted brokerage
transactions with related
parties 6,015 6,063 26,043 25,192
Screen-assisted open outcry
transactions with related
parties 1,413 933 5,675 2,863
-------- -------- --------- ---------
Total transaction revenues 25,673 23,491 100,739 102,724
-------- -------- --------- ---------
Software Solutions fees from
related parties 7,640 6,957 30,445 25,818
Software Solutions and licensing
fees from unrelated parties 5,696 3,822 16,981 15,534
Interest income 2,616 1,849 9,106 6,160
-------- -------- --------- ---------
Total non-GAAP revenues 41,625 36,119 157,271 150,236
-------- -------- --------- ---------
Expenses:
Compensation and employee
benefits 12,919 11,644 52,729 50,633
Amortization of software
development costs and other
intangibles 5,792 5,758 22,884 20,134
Other occupancy and equipment 8,663 8,022 33,166 30,678
Professional and consulting fees 1,965 1,045 6,352 4,412
Communications and client
networks 1,986 2,588 8,101 8,157
Marketing 110 345 852 1,596
Administrative fees to related
parties 2,885 3,422 12,598 13,938
Other 2,441 2,051 8,600 9,518
-------- -------- --------- ---------
Total non-GAAP operating
expenses 36,761 34,875 145,282 139,066
-------- -------- --------- ---------
-------- -------- --------- ---------
Non-GAAP income before income
taxes 4,864 1,244 11,989 11,170
-------- -------- --------- ---------
Non-GAAP income tax provision 1,780 347 4,475 3,726
-------- -------- --------- ---------
Non-GAAP net operating income 3,084 897 7,514 7,444
======== ======== ========= =========
Non-operating income (loss):
Charitable contribution Re:
9/11, net of tax - - (242) (262)
Amortization of business partner
and non-employee securities,
net of tax - (8) (11) (208)
Litigation costs, net of tax (467) (603) (1,952) (2,955)
Acquisition related costs, net
of tax - 518 (1,260) (2,080)
Legal settlement, net of tax - - 458 -
Gain on sale of investment, net
of tax - - - 619
Accelerated depreciation, net of
tax - - (689) -
Office relocation cost, net of
tax (126) - (2,486) -
Tax settlement, net of tax - - 226 -
Grant income, net of tax 1,927 - 1,927
Insurance recovery, net of tax - 1,134 2,073 1,134
Impairment of long lived assets,
net of tax (1,168) (1,648) (1,168) (1,648)
-------- -------- --------- ---------
Total non-operating income
(loss) 166 (607) (3,124) (5,400)
-------- -------- --------- ---------
Net income $ 3,250 $ 290 $ 4,390 $ 2,044
======== ======== ========= =========
Per share data:
Basic non-GAAP income before
income taxes per share $ 0.10 $ 0.03 $ 0.24 $ 0.22
Basic non-GAAP tax provision per
share $ 0.04 $ 0.01 $ 0.09 $ 0.08
-------- -------- --------- ---------
Basic non-GAAP net operating
income per share $ 0.06 $ 0.02 $ 0.15 $ 0.14
Basic non-operating income
(loss) per share $ 0.00 $ (0.01) $ (0.06) $ (0.10)
-------- -------- --------- ---------
Basic GAAP earnings per share $ 0.06 $ 0.01 $ 0.09 $ 0.04
======== ======== ========= =========
Diluted non-GAAP income before
income taxes per share $ 0.09 $ 0.03 $ 0.23 $ 0.21
Diluted non-GAAP tax provision
per share $ 0.03 $ 0.01 $ 0.08 $ 0.07
-------- -------- --------- ---------
Diluted non-GAAP net operating
income per share $ 0.06 $ 0.02 $ 0.15 $ 0.14
Diluted non-operating income
(loss) per share $ 0.00 $ (0.01) $ (0.06) $ (0.10)
-------- -------- --------- ---------
Diluted GAAP earnings per share $ 0.06 $ 0.01 $ 0.09 $ 0.04
======== ======== ========= =========
Basic weighted average shares of
common stock outstanding 50,327 50,041 50,214 51,349
======== ======== ========= =========
Diluted weighted average shares
of common stock outstanding 51,453 50,653 51,258 52,066
======== ======== ========= =========
Additional data:
Non-GAAP pre-tax operating
margin 11.7% 3.4% 7.6% 7.4%
======== ======== ========= =========
eSpeed, Inc. & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 31, 31, 31,
------------------ --------- ---------
2006 2005 2006 2005
------------------ --------- ---------
Cash flows from operating
activities:
Net income $ 3,250 $ 290 $ 4,390 $ 2,044
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 8,960 9,035 36,701 31,085
Gain on insurance recovery
from related parties - - (3,500) -
Impairment of long lived
assets 1,861 2,386 1,861 2,386
Loss on disposal of property 127 - 127 -
Equity in net (income) loss of
unconsolidated investments (5) 137 (39) 142
Gain on sale of investments - - - (1,015)
Deferred income tax expense 442 294 (383) 592
Stock based compensation 701 301 2,418 2,219
Tax benefit from employee
stock option exercises 196 7 302 116
Excess tax benefits from
stock based comp 36 - (11) -
Issuance of securities under
employee benefit plan - 64 - 250
Changes in operating assets and
liabilities:
Receivable from related
parties (2,029) 3,481 (2,773) (2,706)
Other assets (567) (1,616) (5,140) (1,126)
Payable to related parties 2,278 1,531 163 475
Accounts payable and accrued
expenses (5,392) (13,830) 6,197 (6,361)
Deferred income (3,205) (105) (3,518) (418)
------------------ --------- ---------
Net cash provided by
operating activities 6,653 1,975 36,795 27,683
------------------ --------- ---------
Cash flows from investing
activities:
Insurance proceeds from
related parties - - 3,500 -
Purchase of fixed assets (4,486) (4,030) (13,241) (15,360)
Capitalization of software
development costs (5,555) (3,441) (17,213) (18,840)
Capitalization of patents and
related defense costs (259) (149) (1,270) (1,837)
Proceeds from sale of
investments - - - 5,840
------------------ --------- ---------
Net cash used in investing
activities (10,300) (7,620) (28,224) (30,197)
------------------ --------- ---------
Cash flows from financing
activities:
Purchase of Class A common
stock (93) (256) (93) (29,197)
Proceeds from exercises of
stock options and warrants 925 25 1,346 458
Cash settlement of share
based compensation (423) - (423) -
Excess tax benefits from
stock based comp (36) - 11 -
------------------ --------- ---------
Net cash provided by (used
in) financing activities 373 (231) 841 (28,739)
------------------ --------- ---------
Net (decrease) increase in cash
and cash equivalents (3,274) (5,876) 9,412 (31,253)
------------------ --------- ---------
Cash and cash equivalents at
beginning of period 94,149 12,291 37,070 19,884
Reverse repurchase agreements
with related parties at
beginning of period 96,972 172,020 141,365 189,804
------------------ --------- ---------
Total cash and cash equivalents
at beginning of period 191,121 184,311 178,435 209,688
------------------ --------- ---------
Cash and cash equivalents at
end of period 21,838 37,070 21,838 37,070
Reverse repurchase agreements
with related parties at end of
period 166,009 141,365 166,009 141,365
------------------ --------- ---------
Total cash and cash equivalents
at end of period $187,847 $178,435 $187,847 $178,435
================== ========= =========
Supplemental cash information:
Cash paid for income taxes $ 1,986 $ - $ 2,131 $ 206
Dividend distribution 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 Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Non-GAAP income before income
taxes $ 4,864 $ 1,244 $ 11,989 $ 11,170
Depreciation and amortization 8,960 9,035 36,701 31,085
Other non-cash and non-
operating items 3,025 2,581 (240) (3,464)
--------- --------- --------- ---------
Non-GAAP income before income
taxes adjusted for
depreciation, amortization
and other 16,849 12,860 48,450 38,791
--------- --------- --------- ---------
Income tax (provision) on
non-GAAP operating income (1,780) (347) (4,475) (3,726)
Income tax (provision)
benefit on non-operating
(loss) income (140) (47) 1,861 2,678
Deferred income tax expense 442 294 (383) 592
Tax benefit from stock option
exercises 196 7 302 116
Income taxes paid 1,986 - 2,131 206
--------- --------- --------- ---------
Decrease (increase) in
current income tax payable 704 (93) (564) (134)
Changes in related party
receivable and payable, net 249 5,012 (6,110) (2,231)
Changes in other operating
assets and liabilities, net (11,149) (15,804) (4,592) (8,365)
Charitable contribution Re:
9/11 - - (389) (378)
--------- --------- --------- ---------
Net cash provided by
operating activities 6,653 1,975 36,795 27,683
--------- --------- --------- ---------
Insurance proceeds from
related parties - - 3,500 -
Purchases of fixed assets (4,486) (4,030) (13,241) (15,360)
Capitalization of software
development costs (5,555) (3,441) (17,213) (18,840)
Capitalization of patents and
related defense costs (259) (149) (1,270) (1,837)
Proceeds from sale of
investments - - - 5,840
--------- --------- --------- ---------
Free cash flows (3,647) (5,645) 8,571 (2,514)
--------- --------- --------- ---------
Related party receivable and
payable, net (249) (5,012) 6,110 2,231
--------- --------- --------- ---------
Free cash flows, net of
related party activity $ (3,896) $(10,657) $ 14,681 $ (283)
========= ========= ========= =========
eSpeed, Inc. and Subsidiaries
RECONCILIATION of NON-GAAP FINANCIAL MEASURES TO GAAP (unaudited)
(in thousands)
Three Months
Ended Twelve Months Ended
December 31, December 31,
----------------- -------------------
2006 2005 2006 2005
-------- -------- --------- ---------
Total non-GAAP revenues $41,625 36,119 $157,271 $150,236
Insurance recovery (a) - 1,692 3,500 1,692
Grant income (b) 3,100 - 3,100 -
Tax settlement (c) - - 399 -
Legal settlement (d) - - 36 -
Gain on sale of investments (e) - - - 1,015
-------- -------- --------- ---------
Total GAAP revenues $44,725 $37,811 $164,306 $152,943
-------- -------- --------- ---------
Total non-GAAP operating
expenses $36,761 $34,875 $145,282 $139,066
Amortization of business
partner and non-employee
securities (f) - 8 19 318
Litigation costs (g) 725 655 3,112 4,376
Tax settlement (h) - - 36 -
Legal settlement (i) - - (700) -
Accelerated amortization (j) - - 1,162 -
Office relocation costs (k) 208 - 4,115 -
Acquisition related costs (l) - (797) 2,026 3,327
Charitable contribution Re:
9/11(m) - - 389 378
Impairment of long lived assets
(n) 1,861 2,386 1,861 2,386
-------- -------- --------- ---------
Total GAAP operating expenses $39,555 $37,127 $157,302 $149,851
-------- -------- --------- ---------
Non-GAAP income before income
taxes $ 4,864 $ 1,244 $ 11,989 $ 11,170
Sum of reconciling items = (a)
+ (b) + (c) + (d) + (e) - (f)
- (g) - (h) - (i) - (j) - (k)
- (l) - (m) - (n) 306 (560) (4,985) (8,078)
-------- -------- --------- ---------
GAAP income before income taxes $ 5,170 $ 684 $ 7,004 $ 3,092
-------- -------- --------- ---------
Non-GAAP income tax provision $ 1,780 $ 347 $ 4,475 $ 3,726
Income tax expense on non-
operating income (o) 140 47 (1,861) (2,678)
-------- -------- --------- ---------
GAAP income tax provision $ 1,920 $ 394 $ 2,614 $ 1,048
-------- -------- --------- ---------
Non-GAAP net operating income $ 3,084 $ 897 $ 7,514 $ 7,444
Sum of reconciling items = (a)
+ (b) + (c) + (d) + (e) - (f)
- (g) - (h) - (i) - (j) - (k)
- (l) - (m) - (n) - (o) 166 (607) (3,124) (5,400)
-------- -------- --------- ---------
GAAP net income $ 3,250 $ 290 $ 4,390 $ 2,044
======== ======== ========= =========
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.
------------------------------
4Q05 1Q06 2Q06
------------------------------
Volume (in billions)
---------------------------------------
Fully Electronic Volume - Excluding New
Products 7,500 8,957 10,235
Fully Electronic Volume - New Products* 539 524 744
------------------------------
Total Fully Electronic Volume 8,039 9,481 10,979
Voice-Assisted Volume 7,608 8,093 8,618
Screen-Assisted Volume 4,154 5,295 5,583
------------------------------
Total Voice/Screen-Assisted Volume 11,763 13,388 14,201
------------------------------
Total Volume 19,802 22,869 25,180
==============================
Transaction Count
---------------------------------------
Fully Electronic Transactions -
Excluding New Products 1,640,167 1,971,347 2,035,458
Fully Electronic Transactions - New
Products* 111,801 131,700 138,421
------------------------------
Total Fully Electronic Transactions 1,751,968 2,103,047 2,173,879
Voice-Assisted Transactions 193,742 228,124 202,600
Screen-Assisted Transactions 46,242 70,698 68,768
------------------------------
Total Voice/Screen-Assisted Volume 239,984 298,822 271,368
------------------------------
Total Transactions 1,991,952 2,401,869 2,445,247
==============================
------------------------------
eSpeed Equities Direct Access (Number
of Shares Traded In Millions) 147 203 171
==============================
Trading Days 61 62 63
% Change % Change
--------------------------------------
4Q06 vs 4Q06 vs
3Q06 4Q06 3Q06 4Q05
--------------------
Volume (in billions)
--------------------------------
Fully Electronic Volume -
Excluding New Products 9,381 9,813 4.6% 30.8%
Fully Electronic Volume - New
Products* 1,179 1,335 13.2% 147.7%
--------------------------------------
Total Fully Electronic Volume 10,560 11,148 5.6% 38.7%
Voice-Assisted Volume 8,217 7,933 (3.5%) 4.3%
Screen-Assisted Volume 5,898 6,111 3.6% 47.1%
--------------------------------------
Total Voice/Screen-Assisted
Volume 14,115 14,044 (0.5%) 19.4%
--------------------------------------
Total Volume 24,675 25,192 2.1% 27.2%
======================================
Transaction Count
--------------------------------
Fully Electronic Transactions -
Excluding New Products 1,687,779 1,764,930 4.6% 7.6%
Fully Electronic Transactions -
New Products* 140,539 142,239 1.2% 27.2%
--------------------------------------
Total Fully Electronic
Transactions 1,828,318 1,907,169 4.3% 8.9%
Voice-Assisted Transactions 183,646 177,789 (3.2%) (8.2%)
Screen-Assisted Transactions 66,451 62,977 (5.2%) 36.2%
--------------------------------------
Total Voice/Screen-Assisted
Volume 250,097 240,766 (3.7%) 0.3%
--------------------------------------
Total Transactions 2,078,415 2,147,935 3.3% 7.8%
======================================
--------------------------------------
eSpeed Equities Direct Access
(Number of Shares Traded In
Millions) 212 184 (13.3%) 25.4%
======================================
Trading Days 63 62
% Change
-----------------------------
2006 vs
2005 2006 2005
--------------------
Volume (in billions)
----------------------------------------
Fully Electronic Volume - Excluding New
Products 29,009 38,385 32.3%
Fully Electronic Volume - New Products* 1,858 3,783 103.6%
-----------------------------
Total Fully Electronic Volume 30,867 42,168 36.6%
Voice-Assisted Volume 28,311 32,860 16.1%
Screen-Assisted Volume 10,366 22,887 120.8%
-----------------------------
Total Voice/Screen-Assisted Volume 38,677 55,748 44.1%
-----------------------------
Total Volume 69,544 97,916 40.8%
=============================
Transaction Count
----------------------------------------
Fully Electronic Transactions -
Excluding New Products 5,642,628 7,459,514 32.2%
Fully Electronic Transactions - New
Products* 390,001 552,899 41.8%
-----------------------------
Total Fully Electronic Transactions 6,032,629 8,012,413 32.8%
Voice-Assisted Transactions 822,391 792,159 (3.7%)
Screen-Assisted Transactions 112,123 268,894 139.8%
-----------------------------
Total Voice/Screen-Assisted Volume 934,514 1,061,053 13.5%
-----------------------------
Total Transactions 6,967,143 9,073,466 30.2%
=============================
-----------------------------
eSpeed Equities Direct Access (Number of
Shares Traded In Millions) 648 770 18.9%
=============================
Trading Days 250 250
* New Products defined as Foreign Exchange, Interest Rate Swaps, Repos
and Futures. CBOT Futures volume calculated based on per contract
notional value of $200,000 for the two year contract and $100,000 for
all others.
-------------------------------------------
4Q05 1Q06 2Q06
-------------------------------------------
Global Interest Rate
Futures Volume (1)
CBOT - US Treasury
Contracts 101,854,952 127,606,543 128,443,758
CME - Euro $ Contracts 97,306,869 117,284,097 127,350,219
EUREX - Bund Contracts 68,817,862 85,217,459 88,078,646
Fed UST Primary Dealer
Volume (in billions) (2)
UST Volume 32,820 34,810 33,688
Average Daily UST
Volume 538 561 535
NYSE - Volume (shares
traded) - in millions (3) 105,879 108,447 121,582
Transaction Value - in
millions 3,738,882 4,072,426 4,627,787
NASDAQ - Volume (shares
traded) - in millions (4) 110,647 128,566 134,155
Transaction Value - in
millions 2,584,578 3,070,980 3,031,230
% Change % Change
------------------------------------------
4Q06 vs 4Q06 vs
3Q06 4Q06 3Q06 4Q05
------------------------
Global Interest Rate Futures
Volume (1)
CBOT - US Treasury
Contracts 126,285,125 129,828,448 2.8% 27.5%
CME - Euro $ Contracts 127,101,116 130,341,959 2.5% 33.9%
EUREX - Bund Contracts 72,591,730 74,001,534 1.9% 7.5%
Fed UST Primary Dealer
Volume (in billions) (2)
UST Volume 32,171 30,742 (4.4%) (6.3%)
Average Daily UST Volume 511 496 (2.9%) (7.8%)
NYSE - Volume (shares
traded) - in millions (3) 108,825 114,434 5.2% 8.1%
Transaction Value - in
millions 3,941,583 4,316,756 9.5% 15.5%
NASDAQ - Volume (shares
traded) - in millions (4) 116,510 121,477 4.3% 9.8%
Transaction Value - in
millions 2,587,538 2,945,401 13.8% 14.0%
% Change
---------------------------------------
2005 2006 2006 vs 2005
--------------------------
Global Interest Rate
Futures Volume (1)
CBOT - US Treasury
Contracts 445,169,057 512,163,874 15.0%
CME - Euro $ Contracts 410,355,384 502,077,391 22.4%
EUREX - Bund Contracts 299,287,916 319,889,369 6.9%
Fed UST Primary Dealer
Volume (in billions) (2)
UST Volume 138,694 131,410 (5.3%)
Average Daily UST
Volume 555 526 (5.3%)
NYSE - Volume (shares
traded) - in millions (3) 403,764 453,289 12.3%
Transaction Value - in
millions 14,125,294 16,958,552 20.1%
NASDAQ - Volume (shares
traded) - in millions (4) 449,226 500,708 11.5%
Transaction Value - in
millions 9,990,270 11,635,149 16.5%
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 63 63 62
2006
--------------------------------------------------------------------
Q1 Q2 Q3 Q4
--------------------------------------------------------------------
62 63 63 62
2005
--------------------------------------------------------------------
Q1 Q2 Q3 Q4
--------------------------------------------------------------------
61 64 64 61
MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5333766
|
CONTACT: Media:
eSpeed
Robert Hubbell, 212-294-7820
RHubbell@espeed.com
or
Gavin Anderson & Company
Tristan B. Peniston-Bird, 212-515-1933
TPeniston-Bird@GavinAnderson.com
or
Investors:
eSpeed
Jason McGruder, 212-829-4988
jmcgruder@espeed.com
SOURCE: eSpeed, Inc.
