Aug 08, 2007 11:37 AM
BGC provides preliminary results
eSpeed reaffirms 2008 Outlook for the combined company
NEW YORK--(BUSINESS WIRE)--Aug. 8, 2007--eSpeed, Inc. (NASDAQ: ESPD), a leading developer of electronic marketplaces and related trading technology for the global capital markets, today reported preliminary results for the second quarter ended June 30, 2007.
The results reported today are preliminary, as the Company has been undergoing an evaluation of its accounting policy covering a portion of the development and maintenance of related party software covered under the Joint Services Agreement ("JSA") with Cantor Fitzgerald, L.P. ("Cantor"). The accounting policy under review has been consistently applied since the inception of the Company in 1999. This review may result in revenue reported in prior periods being restated as deferred income and recognized in future periods.
The effect of this potential adjustment may result in a non-cash charge to earnings of no more than $4 million spread over the period from 2002 through June 30, 2007. The Company expects that deferred income recorded through this adjustment would be recognized upon closing of its proposed merger with BGC Partners Inc., and its affiliates ("BGC") and the related termination of the JSA.
Due to this review, eSpeed expects to delay the filing of its Form 10-Q for the second quarter ended June 30, 2007. If it is required to restate its historical financial statements, eSpeed may amend any affected prior fillings.
eSpeed's Preliminary Second Quarter Results Summary(1)
2Q2007 2Q2007 2Q2006
Actual Outlook Actual
---------------------------------------========-=============-========
GAAP Revenues $38.7 MM NA $39.0 MM
----------------------------------------------------------------------
Non-GAAP Operating Revenues $38.4 MM >$36 MM $39.0 MM
----------------------------------------------------------------------
GAAP Net Loss Per Diluted Share $0.12 NA $0.01
----------------------------------------------------------------------
Non-GAAP Net Operating Income Per
Diluted Share $0.01 approx. $0.00 $0.04
----------------------------------------------------------------------
|
BGC's Preliminary Pro Forma Second Quarter Results Summary(2)
BGC announced the following financial highlights related to its preliminary results for the second quarter of 2007:
* BGC's 2Q2007 pre-tax profits were approximately $24.3 million compared to a loss of $10.2 million in 2Q2006;
* BGC's pro forma stand-alone 2Q2007 revenues increased by over 35 percent to approximately $253 million year-over-year;
* BGC's pro forma stand-alone 2Q2007 revenue increased year-over-year by approximately 22 percent in Rates;
* BGC's pro forma stand-alone 2Q2007 Credit revenues were up by approximately 49 percent year-over-year; and
* BGC's pro forma stand-alone Foreign Exchange revenues increased by approximately 24 percent year-over-year in 2Q2007.
eSpeed's Preliminary Second Quarter Earnings
eSpeed reported a preliminary net loss of $6.3 million, or $0.12 per diluted share, for the second 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 $0.3 million, or $0.01 per diluted share. The difference between non-GAAP net operating income and preliminary GAAP net loss for the quarter occurred primarily due to $2.4 million in charge related to the impaired of long-lived assets; $2.3 million in direct expenses associated with the combination; $1.6 million in patent litigation costs; and $0.3 million in losses from eSpeed's Equities Direct Access business, which became a separate company called Aqua in the second quarter and in which eSpeed has an equity stake. All of these differences were net of tax.
In a preliminary comparison, eSpeed reported a GAAP net loss of $0.4 million, or $0.01 per diluted share, and non-GAAP net operating income of $1.8 million, or $0.04 per diluted share, for the second quarter of 2006. The difference between non-GAAP net operating income and the GAAP net loss for the quarter was primarily due to $2.0 million in expenses relating to the relocation of the Company's London office and $0.5 million in patent litigation costs, partially offset by a positive settlement of a tax-related matter of $0.3 million. All of these differences were net of tax.
Preliminary Second Quarter Revenues for eSpeed
eSpeed reported preliminary GAAP revenues of $38.7 million and non-GAAP operating revenues of $38.4 million for the second quarter of 2007. The difference between GAAP and non-GAAP revenues for the second quarter of 2007 reflected eSpeed Equities Direct Access revenues of $0.3 million.
eSpeed's total GAAP and non-GAAP operating revenues for the second quarter of 2006 were both $39.0 million.
Fully electronic revenues were $16.0 million in the second quarter of 2007 compared with $17.3 million for the second quarter of 2006. Preliminary revenues from Software Solutions in the second quarter of 2007 were $11.3 million versus $11.5 million in the year ago period. Hybrid voice- and screen-assisted revenues totaled $8.9 million in the second quarter of 2007 compared with $8.1 million in the second quarter of 2006. Non-GAAP pre-tax operating margin was 1.1 percent in the second quarter of 2007.
The year over year decrease in quarterly GAAP revenues was due primarily to the loss of revenue related to the Wagner patent, which expired in February of 2007, partially offset by year-over-year increases in screen- and voice-assisted revenues and Software Solutions from related parties. In the second quarter of 2006, the Company recorded $3.9 million in GAAP revenue and $1.7 million in GAAP net income related to the patent.
See "Non-GAAP Financial Measures" below for a detailed description of the Company's non-GAAP financial measures.
eSpeed's Preliminary Cash Flow and Cash
On a preliminary basis, the Company generated cash flow from operations of approximately $3.8 million during the second quarter of 2007, compared with approximately $4.3 million during the second 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 approximately ($4.1) million for the second quarter of 2007, compared with approximately $0.8 million in the prior year period.
Excluding related party receivables and payables, free cash flow was approximately $2.8 million for the second quarter of 2007, compared with approximately $6.1 million for the second quarter of 2006.
The above cash flow measures were negatively impacted by $3.7 million in acquisition-related costs.
As of June 30, 2007, eSpeed's cash and cash equivalents were approximately $188.5 million.
Second Quarter Volume and Transactions on the eSpeed System
Fully electronic volume on the eSpeed system, excluding new products, was $10.3 trillion for the second quarter of 2007, up 0.4 percent from $10.2 trillion in the second quarter of 2006. Hybrid volume on the eSpeed network, or the combined total of voice-assisted and screen-assisted volume, was $17.1 trillion for the second quarter of 2007, an increase of 20.7 percent from $14.2 trillion in the second 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 $1.1 trillion for the second quarter of 2007, up 43.3 percent from the $744 billion reported in the second quarter of 2006.
Preliminary BGC Results
For the second quarter of 2007, BGC's preliminary pro forma stand-alone revenues were approximately $253 million compared to the prior year quarter's approximately $186.5 million. BGC recorded pre-tax profits of approximately $24.3 million compared to a loss of $10.2 million in the prior-year period.
Increased global securities and derivatives volume and volatility led to strong organic growth contributions from BGC's three largest asset class categories. BGC's pro forma stand-alone revenues in Rates increased by approximately 22 percent, Credit by approximately 49 percent, and Foreign Exchange by approximately 24 percent, all compared to the second quarter of 2006. Pro forma stand-alone revenues from Other Asset classes increased by approximately 438 percent in the second quarter of 2007 compared to the year-ago quarter due primarily to the November 2006 acquisition of Aurel Leven. Pro forma stand-alone Market Data revenues increased by approximately 18 percent compared to the prior-year period.
For the second quarter of 2007, Rates represented 53 percent of BGC's pro forma stand-alone revenues; Credit represented 22 percent; and Foreign Exchange represented 10 percent.
BGC's margin improvements in the second quarter were driven primarily by improved broker productivity and BGC's strong revenue growth paired with its leverageable expense base, which allowed for growth at declining marginal cost.
Outlook for BGC and eSpeed Combined(3)
Due to the highly accretive nature of its proposed merger with BGC Partners, eSpeed believes that it more is useful to provide guidance for the combined company. Because of the strong second quarter performance from BGC, however, eSpeed reaffirms its previously stated non-GAAP outlook for BGC and the combined company.
BGC's stand-alone profits are expected to be at least $93 million in 2007. For 2008, the combined company's projected revenues are expected to increase by more than 12 percent and to exceed $1.1 billion. The combined company expects to have pre-tax net income attributable to fully diluted shares (of approximately 185 million shares) representing at least 13 percent of revenues or $145 million in 2008.
The combined company expects to have an effective tax rate of no higher than 27 percent in 2008, which reflects the effects of the net operating loss carry forwards, and to have an effective tax rate of approximately 32.5 percent for 2009 and thereafter.
The above outlook includes the elimination of revenues related to inter-company transactions of approximately $61 million in 2008, respectively, because of amounts that have historically been associated with inter-company revenue sharing transactions that will cease subsequent to the consummation of the proposed merger.
eSpeed will host a conference call on Thursday, August 9, 2007 at 8:30 A.M. EDT, to discuss the above preliminary 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 second quarter of 2007, the difference between GAAP net loss and non-GAAP net operating income was approximately $6.5 million, net of tax, while the difference between GAAP revenues and non-GAAP operating revenues was approximately $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.
Important Information
In connection with the proposed Merger, the Company intends to file a proxy statement and related materials with the U.S. Securities and Exchange Commission (the "SEC") for the meeting of stockholders to vote on the proposed Merger. BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION, HOLDERS OF THE COMPANY'S COMMON STOCK ARE URGED TO READ THEM CAREFULLY, IF AND WHEN THEY BECOME AVAILABLE. When filed with the SEC, the proxy statement and related materials will be available for free (along with any other documents and reports filed by the Company with the SEC) at the SEC's website, www.sec.gov, and at the Company's website, www.espeed.com.
Participant Information
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company's stockholders in connection with the proposed Merger. Certain information regarding the participants and their interests in the solicitation are set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2006, which was filed with the SEC on March 15, 2007, and will be set forth in the proxy statement for the Company's meeting of stockholders to vote on the proposed Merger. Stockholders may obtain additional information regarding the proposed Merger by reading the proxy statement and the related materials relating to the proposed Merger, if and when they become available.
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 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.
On May 29, 2007, eSpeed announced that it had entered into an Agreement and Plan of Merger, dated as of May 29, 2007 with BGC Partners, Inc. ("BGC Partners"); Cantor Fitzgerald, L.P. ("Cantor"); BGC Partners, L.P., a Delaware limited partnership; BGC Global Holdings, L.P., a Cayman Islands exempted limited partnership; and BGC Holdings, L.P., a Delaware limited partnership pursuant to which eSpeed will acquire BGC Partners through a merger of BGC Partners with and into eSpeed. For more information, see eSpeed's Report on Form 8-K dated May 29, 2007.
Discussion of Forward-Looking Statements
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. 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.
The actual results of eSpeed, BGC or the combined company in the merger ("we", "our" or the "combined company") 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 for eSpeed, BGC and/or the combined company include, but are not limited to, the combined company's relationship with Cantor and its affiliates and any related conflicts of interests, competition for and retention of brokers and other managers and key employees, pricing and commissions and market position with respect to any of our products, and that of the combined company's respective competitors, the effect of industry concentration and consolidation, and market conditions, including trading volume and volatility, as well as economic or geopolitical conditions or uncertainties. Results may also be impacted by the extensive regulation of our respective businesses and risks relating to compliance matters, as well as factors related to specific transactions or series of transactions, including credit, performance and unmatched principal risk as well as counterparty failure. Factors may also include the costs and expenses of developing, maintaining and protecting intellectual property, including judgments or settlements paid or received in connection with intellectual property or employment or other litigation and their related costs, and certain financial risks, including the possibility of future losses and negative cash flow from operations, risks of obtaining financing and risks of the resulting leverage, as well as interest and currency rate fluctuations.
Discrepancies may also result from such factors as the ability to enter new markets or develop new products, trading desks, marketplaces or services and to induce customers to use these products, trading desks, marketplaces or services, to secure and maintain market share, to enter into marketing and strategic alliances, and other transactions, including acquisitions, dispositions, reorganizations, partnering opportunities, and joint ventures, and the integration of any completed transactions, to hire new personnel, to expand the use of technology for screen-assisted, voice-assisted and fully electronic trading and to effectively manage any growth that may be achieved. Results are also subject to risks relating to the proposed merger and separation of the BGC businesses and the relationship between the various entities, financial reporting, accounting and internal control factors, including identification of any material weaknesses in our internal controls, our ability to prepare historical and pro forma financial statements and reports in a timely manner, and other factors, including those that are discussed under "Risk Factors" in each of eSpeed's Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 15, 2007 and BGC's Registration Statement on Form S-1 filed with the SEC on February 8, 2007 (Registration No. 333-140531) to the extent applicable.
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.
(1) All comparisons for eSpeed in this release are made against historical financial statements with respect to the relevant period without giving effect to any possible adjustments or restatement which may be made as a result of eSpeed's ongoing financial review as described above.
(2) The preliminary results for BGC reflect the effects of the full formation and final separation from Cantor and exclude any costs which may be associated with the formation, separation (including, without limitation, redemption of partnership interests) and merger as well as any (i) cash and non-cash compensation and (ii) other accounting charges associated with transactions to facilitate repayment of loans to executive officers, exchangeability of BGC Holdings units and other structuring features of the formation, separation and merger.
(3) The non-GAAP outlook for BGC reflects the effects of the full formation and final separation from Cantor and excludes any costs which may be associated with the formation, separation (including, without limitation, redemption of partnership interests) and merger as well as any (i) cash and non-cash compensation and (ii) other accounting charges associated with transactions to facilitate repayment of loans to executive officers, exchangeability of BGC Holdings units and other structuring features of the formation, separation and merger.
eSpeed, Inc and Subsidiaries PRELIMINARY
PRELIMINARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
(in thousands, except per share data)
June 30, December 31,
2007 2006
-----------------------
(Unaudited)
Assets
Cash and cash equivalents $3,624 $21,838
Reverse repurchase agreements with
related parties 184,897 166,009
-----------------------
Total cash and cash equivalents 188,521 187,847
Marketable securities 2,357 -
Fixed assets, net 53,092 57,207
Investments 9,012 7,780
Goodwill 12,184 12,184
Other intangible assets, net 5,981 6,949
Receivable from related parties 10,371 7,145
Other assets 11,213 13,725
-----------------------
Total assets $292,731 $292,837
=======================
Liabilities and
Stockholders' Equity
Current liabilities:
Payable to related parties 6,666 7,751
Accounts payable and accrued
liabilities 30,564 25,836
-----------------------
Total current liabilities 37,230 33,587
Deferred income 3,866 4,075
-----------------------
Total liabilities 41,096 37,662
-----------------------
Stockholders' Equity:
Class A common stock, par value
$0.01 per share; 200,000 shares
authorized; 36,455 and 36,407
shares issued at June 30, 2007 and
December 31, 2006, respectively 365 364
Class B common stock, par value
$0.01 per share; 100,000 shares
authorized; 20,498 shares at June
30, 2007 and December 31, 2006,
respectively 205 205
Additional paid-in capital 301,741 299,682
Treasury stock, at cost; 6,502 and
6,488 shares of Class A common
stock at June 30, 2007 and
December 31, 2006 respectively (62,597) (62,597)
Retained earnings 11,897 17,521
Accumulated other comprehensive
income 24 -
-----------------------
Total stockholders' equity 251,635 255,175
-----------------------
Total liabilities and stockholders'
equity $292,731 $292,837
=======================
eSpeed, Inc. and Subsidiaries PRELIMINARY
PRELIMINARY CONSOLIDATED STATEMENTS OF INCOME IN ACCORDANCE
WITH GAAP (unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-------- -------- -------- --------
Revenues:
Transaction revenues
Fully electronic
transactions with
related parties $15,721 $15,704 $32,161 $31,385
Fully electronic
transactions with
unrelated parties 300 1,601 1,806 2,639
-------- -------- -------- --------
Total fully
electronic
transactions 16,021 17,305 33,967 34,024
Voice-assisted
brokerage
transactions with
related parties 6,805 6,648 13,779 13,903
Screen-assisted
open outcry
transactions with
related parties 2,070 1,438 3,802 2,864
-------- -------- -------- --------
Total transaction
revenues 24,896 25,391 51,548 50,791
-------- -------- -------- --------
Software Solutions
fees from related
parties 8,538 7,897 17,263 15,388
Software Solutions
and licensing fees
from unrelated
parties 2,778 3,572 6,342 7,371
Insurance recovery - - - 3,500
Interest income 2,537 2,093 5,010 4,455
-------- -------- -------- --------
Total revenues 38,749 38,953 80,163 81,505
-------- -------- -------- --------
Expenses:
Compensation and
employee benefits 15,046 12,372 29,212 26,230
Amortization of
software
development costs
and other
intangible assets 4,773 5,627 10,107 12,517
Other occupancy and
equipment 9,029 11,646 18,406 20,279
Professional and
consulting fees 4,111 2,225 7,006 4,135
Impairment of long
lived assets 4,010 - 4,010 -
Communications and
client networks 2,185 2,000 4,288 4,027
Marketing 230 265 456 597
Administrative fees
to related parties 3,464 3,670 6,985 7,097
Amortization of
business partner
and non-employee
securities - - - 19
Acquisition related
costs 3,707 - 3,707 -
Other expenses 2,433 1,915 4,872 3,960
-------- -------- -------- --------
Total operating
expenses 48,988 39,720 89,049 78,861
-------- -------- -------- --------
-------- -------- -------- --------
(Loss) income before
income taxes (10,239) (767) (8,886) 2,644
-------- -------- -------- --------
Income (benefit)
provision (3,969) (391) (3,473) 1,000
-------- -------- -------- --------
Net (loss) income $(6,270) $(376) $(5,413) $1,644
======== ======== ======== ========
Per share data:
Basic earnings per
share $(0.12) $(0.01) $(0.11) $0.03
======== ======== ======== ========
Diluted earnings per
share $(0.12) $(0.01) $(0.11) $0.03
======== ======== ======== ========
Basic weighted
average shares of
common stock
outstanding 50,448 50,142 50,435 50,207
======== ======== ======== ========
Diluted weighted
average shares of
common stock
outstanding 50,448 50,142 50,435 51,150
======== ======== ======== ========
eSpeed, Inc. and Subsidiaries PRELIMINARY
PRELIMINARY NON-GAAP CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-------- -------- -------- --------
Revenues:
Transaction revenues
Fully electronic
transactions with
related parties $15,721 $15,704 $32,161 $31,385
Fully electronic
transactions with
unrelated parties 300 1,601 1,806 2,639
-------- -------- -------- --------
Total fully
electronic
transactions 16,021 17,305 33,967 34,024
Voice-assisted
brokerage
transactions with
related parties 6,805 6,648 13,779 13,903
Screen-assisted
open outcry
transactions with
related parties 2,070 1,438 3,802 2,864
-------- -------- -------- --------
Total transaction
revenues 24,896 25,391 51,548 50,791
-------- -------- -------- --------
Software Solutions
fees from related
parties 8,538 7,897 17,263 15,388
Software Solutions
and licensing fees
from unrelated
parties 2,455 3,572 5,738 7,371
Interest income 2,538 2,093 5,011 4,056
-------- -------- -------- --------
Total non-GAAP
revenues 38,427 38,953 79,560 77,606
-------- -------- -------- --------
Expenses:
Compensation and
employee benefits 14,882 12,797 28,846 26,431
Amortization of
software
development costs
and other
intangibles 4,643 5,627 9,870 11,354
Other occupancy and
equipment 8,795 8,383 17,804 16,372
Administrative fees
to related parties 3,395 3,670 6,778 7,097
Professional and
consulting fees 1,650 1,435 3,266 2,598
Communications and
client networks 2,149 2,000 4,230 4,027
Marketing 231 265 456 597
Other expenses 2,267 1,915 4,675 3,961
-------- -------- -------- --------
Total non-GAAP
operating expenses 38,012 36,092 75,925 72,437
-------- -------- -------- --------
-------- -------- -------- --------
Non-GAAP income
before income taxes 415 2,861 3,635 5,169
-------- -------- -------- --------
Non-GAAP provision
for income taxes 152 1,015 1,333 1,956
-------- -------- -------- --------
Non-GAAP net
operating income 263 1,846 2,302 3,213
======== ======== ======== ========
Non-operating (loss)
income:
Amortization of
business partner
and non-employee
securities, net of
tax - - - (11)
Litigation costs,
net of tax (1,555) (513) (2,364) (955)
Loss on investment,
net of tax (301) - (674) -
Acquisition related
costs, net of tax (2,247) - (2,247) -
Accelerated
depreciation, net
of tax - - - (689)
Office relocation
cost, net of tax - (1,978) - (2,360)
Tax settlement, net
of tax - 269 - 373
Insurance recovery,
net of tax - - - 2,073
Impairment of long
lived assets, net
of tax (2,430) - (2,430) -
-------- -------- -------- --------
Total non-operating
loss (income) (6,533) (2,222) (7,715) (1,569)
-------- -------- -------- --------
Net (loss) income $(6,270) $(376) $(5,413) $1,644
======== ======== ======== ========
Per share data:
Basic non-GAAP
income before
income taxes per
share $0.01 $0.06 $0.07 $0.10
Basic non-GAAP
provision for
income taxes per
share $0.00 $0.02 $0.03 $0.04
-------- -------- -------- --------
Basic non-GAAP net
operating income
per share $0.01 $0.04 $0.04 $0.06
Basic non-operating
(loss) income per
share $(0.13) $(0.04) $(0.15) $(0.03)
-------- -------- -------- --------
Basic GAAP earnings
per share $(0.12) $(0.01) $(0.11) $0.03
======== ======== ======== ========
Diluted non-GAAP
income before
income taxes per
share $0.01 $0.06 $0.07 $0.10
Diluted non-GAAP
provision for
income taxes per
share $0.00 $0.02 $0.03 $0.04
-------- -------- -------- --------
Diluted non-GAAP net
operating income
per share $0.01 $0.04 $0.04 $0.06
Diluted non-
operating (loss)
income per share $(0.13) $(0.05) $(0.15) $(0.03)
-------- -------- -------- --------
Diluted GAAP
earnings per share $(0.12) $(0.01) $(0.11) $0.03
======== ======== ======== ========
Basic weighted
average shares of
common stock
outstanding 50,448 50,142 50,435 50,207
======== ======== ======== ========
Diluted weighted
average shares of
common stock
outstanding 50,448 50,142 50,435 51,150
======== ======== ======== ========
Additional data:
Non-GAAP pre-tax
operating margin 1.1% 7.3% 4.6% 6.7%
======== ======== ======== ========
eSpeed, Inc. & Subsidiaries PRELIMINARY
PRELIMINARY CONSOLIDATED STATEMENTS OF FREE CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- -------- -------- --------
Non-GAAP income
before income taxes $416 $2,861 $3,635 $5,169
Depreciation and
amortization 7,846 9,008 16,078 18,853
Other non-cash and
non-operating items (5,755) (3,134) (6,863) (1,527)
--------- -------- -------- --------
Non-GAAP income
before income taxes
adjusted for
depreciation,
amortization and
other 2,506 8,735 12,850 22,495
--------- -------- -------- --------
Provision for income
taxes on non-GAAP
operating income (152) (1,015) (1,333) (1,956)
Income tax benefit
(provision) on non-
operating (loss)
income 4,119 1,406 4,803 956
Deferred income tax
expense (4,070) (1,707) (3,718) (602)
Tax benefit from
stock-based
compensation 22 24 45 93
Income taxes paid - 99 35 99
--------- -------- -------- --------
Increase (decrease)
in current income
tax payable (81) (1,193) (168) (1,410)
Changes in related
party receivable and
payable, net (6,982) (5,293) (4,569) (11,665)
Changes in other
operating assets and
liabilities, net 8,404 2,057 9,460 (59)
--------- -------- -------- --------
Net cash
provided by
operating
activities 3,848 4,306 17,573 9,361
--------- -------- -------- --------
Insurance proceeds
from related parties - 3,500 - 3,500
Purchase of fixed
assets (2,017) (2,563) (3,222) (4,668)
Purchase of
marketable
securities 0 - (2,229) -
Capitalization of
software development
costs (5,403) (4,115) (11,600) (8,300)
Capitalization of
patent defense and
registration costs (331) (334) (766) (575)
Purchase of
Investment (750) - (750) -
Decrease in
restricted cash 505 - 1,827 -
--------- -------- -------- --------
Free cash flows (4,148) 794 833 (682)
--------- -------- -------- --------
Related party
receivable and
payable, net 6,982 5,293 4,569 11,665
--------- -------- -------- --------
Free cash flows,
net of related
party activity $ 2,834 $6,087 $ 5,402 $10,983
========= ======== ======== ========
eSpeed, Inc. & Subsidiaries PRELIMINARY
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- --------- --------- ---------
Cash flows from
operating
activities:
Net (loss) income $(6,270) $(376) $(5,413) $1,644
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation and
amortization 7,846 9,008 16,078 18,853
Impairment of
long lived
assets 4,010 - 4,010 -
Gain on insurance
recovery from
related parties - - - (3,500)
Equity in net
loss of
unconsolidated
investments (27) (23) (49) (45)
Unrealized gain
on available for
sale securities 47 - 47 -
Deferred income
tax expense (4,070) (1,707) (3,718) (602)
Stock-based
compensation 904 509 1,698 1,082
Tax benefit from
stock-based
compensation 22 24 44 93
Excess tax
benefits from
stock-based
compensation (35) 8 (49) (39)
Changes in
operating assets
and liabilities:
Receivable from
related parties (3,284) (4,068) (3,226) (4,676)
Other assets 749 (4,119) 942 (7,230)
Payable to
related parties (3,698) (1,225) (1,343) (3,489)
Accounts payable
and accrued
expenses 7,759 6,380 8,761 7,479
Deferred income (105) (105) (209) (209)
--------- --------- --------- ---------
Net cash provided
by operating
activities 3,848 4,306 17,573 9,361
--------- --------- --------- ---------
Cash flows (used
in) investing
activities:
Insurance
proceeds from
related parties - 3,500 - 3,500
Purchase of fixed
assets (2,017) (2,563) (3,222) (4,668)
Purchase of
marketable
securities - - (2,229) -
Capitalization of
software
development
costs (5,403) (4,115) (11,600) (8,300)
Capitalization of
patent defense
and registration
costs (331) (334) (766) (575)
Decrease in
restricted cash 505 - 1,827 -
Purchase of
Investment (750) - (750) -
--------- --------- --------- ---------
Net cash used in
investing
activities (7,996) (3,512) (16,740) (10,043)
--------- --------- --------- ---------
Cash flows provided
by (used in)
provided by
financing
activities:
Repurchase of
Class A common
stock - - (373) -
Proceeds from
exercises of
stock options
and warrants 70 128 165 369
Excess tax
benefit from
stock based
compensation 35 (8) 49 39
--------- --------- --------- ---------
Net cash provided
by financing
activities 105 120 (159) 408
--------- --------- --------- ---------
Net (decrease)
increase in cash
and cash
equivalents (4,043) 914 674 (274)
--------- --------- --------- ---------
Cash and cash
equivalents at
beginning of
period 5,333 12,195 21,838 37,070
Reverse repurchase
agreements with
related parties at
beginning of
period 187,231 165,052 166,009 141,365
--------- --------- --------- ---------
Total cash and cash
equivalents at
beginning of
period 192,564 177,247 187,847 178,435
--------- --------- --------- ---------
Cash and cash
equivalents at end
of period 3,624 37,495 3,624 37,495
Reverse repurchase
agreements with
related parties at
end of period 184,897 140,666 184,897 140,666
--------- --------- --------- ---------
Total cash and cash
equivalents at end
of period $188,521 $178,161 $188,521 $178,161
========= ========= ========= =========
Supplemental cash
information:
Cash paid for
income taxes $- $99 $35 $99
Deemed dividend to
Cantor - - - 1,500
Contribution of
license from
Cantor - - - 1,500
Conversion of Class
B common stock to
Class A common
stock - - - 10
eSpeed, Inc. and Subsidiaries PRELIMINARY
PRELIMINARY RECONCILIATION of NON-GAAP FINANCIAL MEASURES
TO GAAP (unaudited)
(in thousands)
Three Months Ended Six Months Ended
------------------ ------------------
June 30 June 30 June 30 June 30
2007 2006 2007 2006
--------- -------- -------- --------
Revenues $38,427 38,953 $79,560 77,606
Insurance recovery
(a) - - - 3,500
Tax settlement (b) - - - 399
eSpeed Equities (c) 322 - 603 -
--------- -------- -------- --------
GAAP revenues $38,749 $38,953 $80,163 $81,505
--------- -------- -------- --------
Operating expenses $38,012 $36,092 $75,925 $72,437
Amortization of
business partner
and non-employee
securities (d) - - - 19
Litigation costs (e) 2,462 790 3,740 1,537
Tax settlement (f) - (425) - (201)
Accelerated
amortization (g) - - - 1,162
Office relocation
costs (h) - 3,263 - 3,907
Acquisition related
costs (i) 3,707 - 3,707 -
Impairment of long
lived assets (j) 4,010 - 4,010 -
eSpeed Equities/Aqua
Equities Pickup (k) 797 - 1,667 -
--------- -------- -------- --------
GAAP expenses $48,988 $39,720 $89,049 $78,861
--------- -------- -------- --------
Pre-tax operating
income $415 $2,861 $3,635 $5,169
Sum of reconciling
items = (a) + (b) +
(c) - (d) - (e) -
(f) - (g) - (h) -
(i) - (j) - (k) (10,654) (3,628) (12,520) (2,525)
--------- -------- -------- --------
GAAP (loss) income
before income tax
provision $(10,239) $(767) $(8,885) $2,644
--------- -------- -------- --------
Non-GAAP provision
for income taxes $152 $1,015 $1,333 $1,956
Income tax
benefit/expense on
non-operating
income (l) (4,121) (1,406) (4,806) (956)
--------- -------- -------- --------
GAAP provision for
income taxes $(3,969) $(391) $(3,473) $1,000
--------- -------- -------- --------
Non-GAAP net
operating income $263 $1,846 $2,302 $3,213
Sum of reconciling
items = (a) + (b) +
(c) - (d) - (e) -
(f) - (g) - (h) -
(i) - (j) - (k) -
(l) (6,533) (2,222) (7,715) (1,569)
--------- -------- -------- --------
GAAP net income $(6,270) $(376) $(5,413) $1,644
--------- -------- -------- --------
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.
------------------------------
2Q06 3Q06 4Q06
------------------------------
Volume (in billions)
--------------------------------------
Fully Electronic Volume - Excluding New
Products 10,235 9,381 9,813
Fully Electronic Volume - New Products* 744 1,179 1,335
------------------------------
Total Fully Electronic Volume 10,979 10,560 11,148
Voice-Assisted Volume 8,618 8,217 7,933
Screen-Assisted Volume 5,583 5,898 6,111
------------------------------
Total Voice/Screen-Assisted Volume 14,201 14,115 14,044
------------------------------
Total Volume 25,180 24,675 25,192
==============================
Transaction Count
--------------------------------------
Fully Electronic Transactions -
Excluding New Products 2,035,458 1,687,779 1,764,930
Fully Electronic Transactions - New
Products* 138,421 140,539 142,239
------------------------------
Total Fully Electronic Transactions 2,173,879 1,828,318 1,907,169
Voice-Assisted Transactions 202,600 183,646 177,789
Screen-Assisted Transactions 68,768 66,451 62,977
------------------------------
Total Voice/Screen-Assisted Volume 271,368 250,097 240,766
------------------------------
Total Transactions 2,445,247 2,078,415 2,147,935
==============================
Trading Days 63 63 62
% Change % Change
----------------------------------------
1Q07 2Q07 2Q07 vs 2Q07 vs
1Q07 2Q06
--------------------
Volume (in billions)
----------------------------
Fully Electronic Volume -
Excluding New Products 11,809 10,281 (12.9%) 0.4%
Fully Electronic Volume - New
Products* 1,415 1,066 (24.6%) 43.3%
----------------------------------------
Total Fully Electronic
Volume 13,224 11,347 (14.2%) 3.4%
Voice-Assisted Volume 8,884 9,820 10.5% 14.0%
Screen-Assisted Volume 7,486 7,317 (2.3%) 31.0%
----------------------------------------
Total Voice/Screen-Assisted
Volume 16,370 17,137 4.7% 20.7%
----------------------------------------
Total Volume 29,594 28,484 (3.7%) 13.1%
========================================
Transaction Count
----------------------------
Fully Electronic Transactions
- Excluding New Products 2,062,341 1,749,219 (15.2%) (14.1%)
Fully Electronic Transactions
- New Products* 144,378 153,673 6.4% 11.0%
----------------------------------------
Total Fully Electronic
Transactions 2,206,719 1,902,892 (13.8%) (12.5%)
Voice-Assisted Transactions 201,250 209,504 4.1% 3.4%
Screen-Assisted Transactions 92,496 114,320 23.6% 66.2%
----------------------------------------
Total Voice/Screen-Assisted
Volume 293,746 323,824 10.2% 19.3%
----------------------------------------
Total Transactions 2,500,465 2,226,716 (10.9%) (8.9%)
========================================
Trading Days 62 64
* 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 128,443,758 126,285,125 129,828,448
CME - Euro $ Contracts 127,350,219 127,101,116 130,341,959
EUREX - Bund Contracts 88,078,646 72,591,730 74,001,534
Fed UST Primary Dealer Volume (in
billions) (2)
UST Volume 33,688 32,171 30,742
Average Daily UST Volume 535 511 496
NYSE - Volume (shares traded) - in
millions (3) 121,582 108,825 114,434
Transaction Value - in millions 4,627,787 3,941,583 4,316,756
NASDAQ - Volume (shares traded) -
in millions (4) 134,155 116,510 121,477
Transaction Value - in millions 3,031,230 2,587,538 2,945,401
Global Interest Rate Futures
Volume (1)
CBOT - US Treasury Contracts 161,232,523 171,180,151 6.2% 33.3%
CME - Euro $ Contracts 152,724,717 148,244,973 (2.9%) 16.4%
EUREX - Bund Contracts 88,987,126 88,867,284 (0.1%) 0.9%
Fed UST Primary Dealer Volume
(in billions) (2)
UST Volume 34,437 33,100 (3.9%) (1.7%)
Average Daily UST Volume 555 517 (6.9%) (3.3%)
NYSE - Volume (shares traded) -
in millions (3) 123,765 127,755 3.2% 5.1%
Transaction Value - in millions 4,943,056 5,339,909 8.0% 15.4%
NASDAQ - Volume (shares traded)
- in millions (4) 131,410 134,007 2.0% (0.1%)
Transaction Value - in millions 3,300,788 3,526,949 6.9% 16.4%
----------------
Trading Days
----------------
Sources: (1) Futures Industry Association -
Monthly Volume Report - (www.cbot.com,
www.cme.com, www.eurexchange.com) 2007
----------------
(2)
www.ny.frb.org/pihome/statistics/dealer
- Federal Reserve Bank
(3) NYSE - www.nyse.com Q1 Q2 Q3 Q4
----------------
(4) NASDAQ - www.marketdata.nasdaq.com 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
Adrian Thomas, 44-(0)207-894-8647
AThomas@BGCPartners.com
or
Investors:
Jason McGruder, 212-829-4988
jmcgruder@espeed.com
SOURCE: eSpeed, Inc.
