ESpeed reports second quarter prelims

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.

BGC's Preliminary Pro Forma Second Quarter Results Summary (1)

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 prelimiinary 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 (2)

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.

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.

(1) 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.

(2) 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.