U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 12, 2003
Delaware 0-28191 13-4063515
-----------------------------------------------------------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of on File Identification
Incorporation) Number) No.)
|
(c) Exhibits.
See Exhibit Index attached to this Current Report on Form 8-K.
On August 12, 2003, eSpeed, Inc. (the "Registrant") issued a press release announcing its preliminary operating statistics for the quarter ended June 30, 2003. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
In accordance with the procedural guidance in SEC Release No. 33-8216, the information in this Current Report on Form 8-K and the Exhibit attached to this Current Report on Form 8-K are being furnished under Item 12 of Form 8-K. The information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
In the press release, the Registrant uses non-GAAP financial measures of revenues, income before income tax provision, net income and earnings per share to supplement its consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, and to better reflect its quarter-over-quarter and comparative first half operating performance. These non-GAAP financial measures do not replace the presentation of GAAP financial results but are provided to enhance overall understanding of the Registrant's current financial performance and prospects for the future. Specifically, the Registrant's management believes that the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to its financial condition and results from operations. In addition, management uses these measures for reviewing the Registrant's financial results and evaluating its financial performance.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
eSpeed, Inc.
Date: August 12, 2003 By: /s/ Howard W. Lutnick
-------------------------
Howard W. Lutnick
Chairman, Chief Executive Officer and President
|
99.1 Press release of eSpeed, Inc. dated August 12, 2003 containing
preliminary operating statistics for the quarter ended June 30,
2003.
|
EXHIBIT 99.1
ESPEED REPORTS SECOND QUARTER 2003 FULLY TAXED OPERATING EPS OF $0.15 AND GAAP
EPS OF $0.14
PRE-TAX OPERATING EARNINGS PER SHARE OF $0.25 INCREASES 92 PERCENT AND REVENUES
GROW 28 PERCENT YEAR OVER YEAR
NET OPERATING MARGINS EXPAND TO OVER 35 PERCENT
COMPANY SIGNIFICANTLY IMPROVES OUTLOOK FOR FULL YEAR 2003
NEW YORK - August 12, 2003 - eSpeed, Inc. (NASDAQ:ESPD), a subsidiary of Cantor Fitzgerald and the leading developer of electronic trading technology, today reported record results for the second quarter ended June 30, 2003.
EARNINGS
For the second quarter 2003, the Company reported fully taxed operating income
of $8.3 million, or $0.15 per diluted share. eSpeed reports net operating income
in order to reflect earnings generated from the Company's operations. In
accordance with Generally Accepted Accounting Principles (GAAP), eSpeed reported
net income of $8.1 million, or $0.14 per diluted share, for the second quarter
2003. The difference between fully taxed operating income and GAAP net income
was a $0.2 million non-cash charge for business partner securities.
This quarter marked the first time eSpeed's results were reported on a fully taxed basis. For comparative purposes, eSpeed reported pre-tax operating income of $13.9 million, or $0.25 per diluted share, in the second quarter 2003, a 92 percent increase over the $0.13 per diluted share reported in the second quarter 2002. On a sequential basis, pre-tax operating income increased 39 percent from the $0.18 per diluted share reported in the first quarter 2003.
REVENUE
eSpeed's total revenues for the second quarter 2003 were $39.1 million, 28
percent higher than revenues of $30.6 million for second quarter 2002 (excluding
a $12.8 million gain, from business interruption insurance proceeds related to
September 11th, in the second quarter 2002, which resulted in GAAP revenues of
$43.4 million). On a sequential basis, total revenues increased 15 percent from
$34.0 million reported in the first quarter 2003.
Second quarter 2003 fully electronic revenues were $27.5 million, up 30 percent compared to $21.2 million in the second quarter 2002. Total revenues from Software Solutions in the second quarter 2003 were $6.1 million versus $4.3 million in the second quarter 2002, an increase of 42 percent.
Howard W. Lutnick, Chairman, CEO & President of eSpeed, Inc. commented, "Our year-over-year pre-tax operating earnings per share growth of 92 percent demonstrates the success of our business model. Just over a year ago we established our growth strategy, and we are delivering on that commitment to shareholders. We are consistently improving our profitability, this quarter delivering 35.5 percent operating margins, compared to the 29.6 percent reported last quarter, and the 24.1 percent reported a year ago."
VOLUME & TRANSACTIONS
Fully electronic volume for the second quarter 2003 was $7.8 trillion, a 25
percent increase over $6.2 trillion for the second quarter 2002. eSpeed's total
electronic volume, including fully electronic and voice-assisted transactions,
for the second quarter 2003 was $10.4 trillion, up 29 percent from $8.1 trillion
in the second quarter 2002. This growth compares to a 27 percent increase in US
Treasury volume as reported by the Federal Reserve. Total transaction count for
the second quarter 2003 was 1.3 million transactions, an increase of 25 percent
from 1.1 million transactions in the second quarter 2002.
Lee Amaitis, Global Chief Operating Officer of eSpeed, Inc. commented, "The record US budget deficit and corresponding debt issuance have improved the market in which eSpeed operates. We believe that the increased US Treasury issuance, which began in the middle of the second quarter, is indicative of the expanded US Treasury market that is at the heart of eSpeed's core business. As the leader in US Treasuries, eSpeed is uniquely positioned to benefit from the tremendous opportunities created by this volume and issuance growth."
CASH AND CASH EQUIVALENTS
As of June 30, 2003, eSpeed's cash and cash equivalents increased to $199
million compared to $175 million as of March 31, 2003.
OUTLOOK
The Company is raising its guidance for full year 2003 net operating earnings to
a range of $0.64 - $0.67 per share diluted and after-tax from $0.54 per share
diluted and after-tax. eSpeed's improved guidance is predicated on the Company's
expectation that average daily Federal Reserve US Treasury volume for the full
year 2003 will be between $430 - $440 billion per day, up from the previous
expectation of between $400 - $408 billion per day. The Company's guidance is
based on its expectation that average daily Federal Reserve US Treasury volume
will be between $440 - $460 billion per day in the third and fourth quarters of
2003. eSpeed expects to generate pre-tax operating margins in excess of 36
percent and incremental margins to continue to exceed 60 percent for the second
half of 2003. For the third quarter 2003, the Company expects to earn in the
range of $0.16 - $0.17 per share diluted and after-tax.
In conclusion, Mr. Lutnick added, "The tremendous growth in the US Treasury market and the success of our price improvement (PI) software in the second quarter resulted in a 15 percent sequential increase in both eSpeed's revenues and fully-electronic volume. Our increased guidance for the third quarter is based on our expectation that we will improve our market position by outperforming the Federal Reserve US Treasury volumes and by realizing continued traction in our price improvement business, and we have already seen these improvements during the month of July. We believe our unique leadership position, at an unprecedented time of record issuance in the US Treasury markets, coupled with our ability to leverage our technology enhancements, leave us extremely well-positioned for growth throughout the remainder of 2003 and beyond."
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 first half operating performance, eSpeed uses non-GAAP financial
measures of revenues, income before income tax provision, net income and
earnings per share, which are adjusted to exclude certain non-operating expenses
and gains. These non-GAAP financial measurements do not replace the presentation
of eSpeed's GAAP financial results but are provided to improve overall
understanding of the Company's current financial performance and its prospects
for the future. Specifically, eSpeed believes the non-GAAP financial results
provide useful information to both management and investors regarding certain
additional
financial and business trends relating to the Company's financial condition and results from operations. In addition, eSpeed's management uses these measures for reviewing the Company's financial results and evaluating eSpeed's financial performance. In the second quarter 2003, the difference between GAAP net income and non-GAAP net operating income was $0.2 million.
ABOUT ESPEED, INC.
eSpeed, a subsidiary of Cantor Fitzgerald, is the 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 non-equity capital markets, including the world's largest government bond markets and other fixed income and financial marketplaces. eSpeed's suite of marketplace tools provides end-to-end transaction solutions for the purchase and sale of financial and non-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, major exchanges and leading natural gas and electricity trading firms. To learn more, please visit www.espeed.com.
Statements contained in this Press Release, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to: the effects of the attacks on the World Trade Center, market volatility, the limited operating history of eSpeed, Inc., and its ability to enter into marketing and strategic alliances, to effectively manage its growth, to expand the use of its electronic systems and to induce clients to use its marketplaces and services, and other factors that are discussed in eSpeed's Annual Report on Form 10-K, filed with the Securities and Exchange Commission.
INVESTORS:
Maureen Murphy
212.610.2430
MEDIA:
Tom Ryan
212.610.2425
ESPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME IN ACCORDANCE WITH GAAP (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ---------------------------
2003 2002 2003 2002
----------- ------------ ----------- -----------
Revenues:
Transaction revenues with related parties
Fully electronic transactions $ 27,538 $ 21,238 $ 50,048 $ 42,826
Voice-assisted brokerage transactions 4,645 4,347 9,806 8,830
Screen-assisted open outcry transactions 243 16 292 123
----------- ------------ ----------- -----------
Total transaction revenues with related parties 32,426 25,601 60,146 51,779
Software Solutions fees from related parties 3,881 3,469 7,530 6,324
Software Solutions and licensing fees from unrelated parties 2,209 806 4,341 1,104
Business interruption insurance proceeds from parent - 12,833 - 12,833
Interest income from related parties 563 740 1,105 1,442
----------- ------------ ----------- -----------
Total revenues 39,079 43,449 73,122 73,482
----------- ------------ ----------- -----------
Expenses:
Compensation and employee benefits 9,239 9,316 18,083 18,635
Occupancy and equipment 7,571 5,792 14,748 11,710
Professional and consulting fees 863 1,193 1,974 3,115
Communications and client networks 1,714 1,694 3,309 3,051
Marketing 408 1,585 742 3,234
Administrative fees to related parties 2,590 2,146 5,168 4,287
Amortization of business partner securities 362 406 1,067 813
Other 2,830 1,512 5,149 2,861
----------- ------------ ----------- -----------
Total expenses 25,577 23,644 50,240 47,706
----------- ------------ ----------- -----------
Income before income tax provision 13,502 19,805 22,882 25,776
Income tax provision 5,400 114 5,305 228
----------- ------------ ----------- -----------
Net income $ 8,102 $ 19,691 $ 17,577 $ 25,548
=========== ============ =========== ===========
Per share data:
Basic earnings per share $ 0.15 $ 0.36 $ 0.32 $ 0.46
=========== ============ =========== ===========
Diluted earnings per share $ 0.14 $ 0.35 $ 0.31 $ 0.45
=========== ============ =========== ===========
Basic weighted average shares of common stock outstanding 55,056 54,980 55,076 54,983
=========== ============ =========== ===========
Diluted weighted average shares of common stock outstanding 56,447 56,924 56,819 56,928
=========== ============ =========== ===========
|
ESPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues:
Transaction revenues with related parties
Fully electronic transactions $ 27,538 $ 21,238 $ 50,048 $ 42,826
Voice-assisted brokerage transactions 4,645 4,347 9,806 8,830
Screen-assisted open outcry transactions 243 16 292 123
---------- ---------- ---------- ----------
Total transaction revenues with related parties 32,426 25,601 60,146 51,779
Software Solutions fees from related parties 3,881 3,469 7,530 6,324
Software Solutions and licensing fees from unrelated parties 2,209 806 4,341 1,104
Interest income from related parties 563 740 1,105 1,442
---------- ---------- ---------- ----------
Total revenues 39,079 30,616 73,122 60,649
---------- ---------- ---------- ----------
Expenses:
Compensation and employee benefits 9,239 9,316 18,083 18,635
Occupancy and equipment 7,571 5,792 14,748 11,710
Professional and consulting fees 863 1,193 1,974 3,115
Communications and client networks 1,714 1,694 3,309 3,051
Marketing 408 1,585 742 3,234
Administrative fees to related parties 2,590 2,146 5,168 4,287
Other 2,830 1,512 5,149 2,861
---------- ---------- ---------- ----------
Total operating expenses 25,215 23,238 49,173 46,893
---------- ---------- ---------- ----------
Pre-tax operating income 13,864 7,378 23,949 13,756
Income tax provision 5,545 114 5,450 228
---------- ---------- ---------- ----------
Net operating income 8,319 7,264 18,499 13,528
---------- ---------- ---------- ----------
Non-operating (loss) income:
Amortization of business partner securities, net of tax (217) (406) (922) (813)
Business interruption insurance proceeds from parent - 12,833 - 12,833
---------- ---------- ---------- ----------
Total non-operating (loss) income (217) 12,427 (922) 12,020
---------- ---------- ---------- ----------
GAAP net income $ 8,102 $ 19,691 $ 17,577 $ 25,548
========== ========== ========== ==========
Per share data:
Basic pre-tax operating income per share 0.25 0.13 0.43 0.25
Basic tax provision per share (0.10) (0.00) (0.10) (0.00)
---------- ---------- ---------- ----------
Basic net operating income per share $ 0.15 $ 0.13 $ 0.34 $ 0.25
Basic non-operating (loss) income per share $ (0.00) $ 0.23 $ (0.02) $ 0.22
---------- ---------- ---------- ----------
Basic GAAP earnings per share $ 0.15 $ 0.36 $ 0.32 $ 0.46
========== ========== ========== ==========
Diluted pre-tax operating income per share 0.25 0.13 0.42 0.24
Diluted tax provision per share (0.10) (0.00) (0.10) (0.00)
---------- ---------- ---------- ----------
Diluted net operating income per share $ 0.15 $ 0.13 $ 0.33 $ 0.24
Diluted non-operating (loss) earnings per share $ (0.00) $ 0.22 $ (0.02) $ 0.21
---------- ---------- ---------- ----------
Diluted GAAP earnings per share $ 0.14 $ 0.35 $ 0.31 $ 0.45
========== ========== ========== ==========
Basic weighted average shares of common stock outstanding 55,056 54,980 55,076 54,983
========== ========== ========== ==========
Diluted weighted average shares of common stock outstanding 56,447 56,924 56,819 56,928
========== ========== ========== ==========
Additional data:
Pre-tax operating margin 35.5% 24.1% 32.8% 22.7%
========== ========== ========== ==========
|
ESPEED, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ------------------------------
2003 2002 2003 2002
------------- ----------- ------------- -------------
Revenues $ 39,079 $ 30,616 $ 73,122 $ 60,649
Business interruption insurance proceeds from parent [a] - 12,833 - 12,833
------------- ----------- ------------- -------------
GAAP revenues $ 39,079 $ 43,449 $ 73,122 $ 73,482
------------- ----------- ------------- -------------
Operating expenses $ 25,215 $ 23,238 $ 49,173 $ 46,893
Amortization of business partner securities [b] 362 406 1,067 813
------------- ----------- ------------- -------------
GAAP expenses $ 25,577 $ 23,644 $ 50,240 $ 47,706
------------- ----------- ------------- -------------
Pre-tax operating income $ 13,864 $ 7,378 $ 23,949 $ 13,756
Sum of reconciling items = [a] + [b] (362) 12,427 (1,067) 12,020
------------- ----------- ------------- -------------
GAAP income before income tax provision $ 13,502 $ 19,805 $ 22,882 $ 25,776
------------- ----------- ------------- -------------
Income tax provision $ 5,545 $ 114 $ 5,450 $ 228
Tax effect of amortization of business partner securities [c] (145) - (145) -
------------- ----------- ------------- -------------
GAAP income tax provision $ 5,400 $ 114 $ 5,305 $ 228
------------- ----------- ------------- -------------
Net operating income $ 8,319 $ 7,264 $ 18,499 $ 13,528
Sum of reconciling items = [a] + [b] + [c] (217) 12,427 (922) 12,020
------------- ----------- ------------- -------------
GAAP net income $ 8,102 $ 19,691 $ 17,577 $ 25,548
============= =========== ============= =============
|
ESPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
JUNE 30, 2003 DECEMBER 31, 2002
---------------------- ---------------------
(UNAUDITED)
Assets
Cash $ 3,574 $ 1,313
Reverse repurchase agreements with related parties 195,074 186,686
---------------------- ---------------------
Total cash and cash equivalents 198,648 187,999
Fixed assets, net 26,038 26,383
Investments 11,402 11,175
Intangible assets, net 19,647 19,528
Receivable from related parties 817 5,266
Other assets 3,817 2,360
---------------------- ---------------------
Total Assets $ 260,369 $ 252,711
====================== =====================
Liabilities and Stockholders' Equity
Liabilities:
Payable to related parties $ 3,153 $ 18,857
Accounts payable and accrued liabilities 19,671 15,399
---------------------- ---------------------
Total liabilities 22,824 34,256
---------------------- ---------------------
Total stockholders' equity 237,545 218,455
---------------------- ---------------------
Total Liabilities and Stockholders' Equity $ 260,369 $ 252,711
====================== =====================
|
ESPEED, INC. AND SUBSIDIARIES
QUARTERLY MARKET ACTIVITY REPORT
TREND
-----------------------------------------------------
2Q02 3Q02 4Q02
-----------------------------------------------------
VOLUME (IN BILLIONS)
--------------------
Fully Electronic Volume 6,240 7,241 6,796
Voice-Assisted Volume 1,831 2,442 2,495
-----------------------------------------------------
Total Electronic Volume 8,072 9,683 9,291
=====================================================
ELECTRONIC TRANSACTION COUNT
----------------------------
Fully Electronic Transactions 915,522 1,092,106 1,060,814
Voice-Assisted Transactions 157,749 159,074 128,648
-----------------------------------------------------
Total Transactions 1,073,271 1,251,180 1,189,462
=====================================================
Trading Days 64 64 62
Global Interest Rate Futures Volume (1)
CBOT - US Treasury Contracts 47,774,190 58,920,377 55,710,144
CME - Euro $ Contracts 54,596,191 53,434,652 42,085,021
EUREX - Bund Contracts 42,501,702 55,962,133 45,319,604
Fed Quarterly UST Volume for Quarter End (in billions) (2)
UST Volume 22,382 25,164 23,637
Average Daily UST Volume 350 393 381
NYSE - Volume (shares traded) - in millions (3) 87,652 99,189 93,353
- Transaction Value - in millions 2,682,303 2,627,565 2,410,169
NASDAQ - Volume (shares traded) - in millions (4) 117,032 110,226 105,200
- Transaction Value - in millions 1,948,451 1,495,032 1,583,382
% Change % Change
------------------------------------------------------------------
1Q03 2Q03 2Q03 vs 1Q03 2Q03 vs 2Q02
------------------------------
VOLUME (IN BILLIONS)
--------------------
Fully Electronic Volume 6,778 7,781 14.8% 24.7%
Voice-Assisted Volume 2,592 2,662 2.7% 45.4%
-----------------------------------------------------------------
Total Electronic Volume 9,369 10,443 11.5% 29.4%
=================================================================
ELECTRONIC TRANSACTION COUNT
----------------------------
Fully Electronic Transactions 1,079,595 1,194,625 10.7% 30.5%
Voice-Assisted Transactions 151,770 148,223 (2.3%) (6.0%)
-----------------------------------------------------------------
Total Transactions 1,231,365 1,342,848 9.1% 25.1%
=================================================================
Trading Days 61 63
Global Interest Rate Futures Volume (1)
CBOT - US Treasury Contracts 60,743,312 71,290,686 17.4% 49.2%
CME - Euro $ Contracts 44,124,452 55,958,592 26.8% 2.5%
EUREX - Bund Contracts 65,864,492 63,455,364 (3.7%) 49.3%
Fed Quarterly UST Volume for Quarter End (in billions) (2)
UST Volume 23,740 28,319 19.3% 26.5%
Average Daily UST Volume 389 450 15.5% 28.5%
NYSE - Volume (shares traded) - in millions (3) 86,585 92,981 7.4% 6.1%
- Transaction Value - in millions 2,173,033 2,497,359 14.9% (6.9%)
NASDAQ - Volume (shares traded) - in millions (4) 88,636 112,524 26.9% (3.9%)
- Transaction Value - in millions 1,390,364 1,739,506 25.1% (10.7%)
|
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
|
---------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2002 Jan'02 Feb'02 Mar'02 Apr'02 May'02 Jun'02
Volume Data (in billions)
Fully Electronic 1,992 1,811 2,158 1,953 2,169 2,119
Voice 731 677 642 622 608 601
Total 2,723 2,488 2,800 2,575 2,777 2,720
Transaction Count
Fully Electronic 311,319 269,697 305,905 289,150 305,115 321,257
Voice 53,828 50,038 47,803 54,733 59,580 43,436
Total 365,147 319,735 353,708 343,883 364,695 364,693
Trading Days 21 19 20 22 22 20
---------------------------------------------------------------------------------------------------------------------------
|
---------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2003 Jan'03 Feb'03 Mar'03 Apr'03 May'03 Jun'03
Volume Data (in billions)
Fully Electronic 2,309 1,906 2,564 2,070 2,871 2,840
Voice 864 810 917 761 956 944
Total 3,173 2,716 3,481 2,831 3,827 3,784
Transaction Count
Fully Electronic 370,992 305,296 403,307 338,281 425,213 431,131
Voice 49,801 48,449 53,520 44,767 49,946 53,510
Total 420,793 353,745 456,827 383,048 475,159 484,641
Trading Days 21 19 21 21 21 21
---------------------------------------------------------------------------------------------------------------------------
|
-----------------------------------------------------------------------
Trading Days
-----------------------------------------------------------------------
2003
----
Q1 Q2 Q3 Q4
-- -- -- --
61 63 64 62
2002
----
Q1 Q2 Q3 Q4
-- -- -- --
60 64 64 62
-----------------------------------------------------------------------
|