First Quarter 2006 Earnings

eSpeed reported net income of $2.0 million, or $0.04 per diluted share, for the first quarter of 2006 based on Generally Accepted Accounting Principles (GAAP). To reflect earnings generated from the Company's operations, eSpeed also reports non-GAAP net operating income. For the first quarter of 2006, the Company reported non-GAAP net operating income of $1.4 million, or $0.03 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the quarter occurred primarily due to a gain from insurance proceeds of $2.1 million and a settlement of a tax-related matter of $0.1 million, partially offset by $0.7 million in accelerated amortization of capitalized software, $0.4 million in patent litigation costs, and $0.4 million in expenses relating to the relocation of the Company's London office. All of these differences were net of tax.

For comparative purposes, eSpeed reported GAAP net income of $1.3 million, or $0.02 per diluted share, for the first quarter of 2005. For the same period, the Company reported non-GAAP net operating income of $2.7 million, or $0.05 per diluted share. The difference between non-GAAP net operating income and GAAP net income for the first quarter of 2005 was due to $1.3 million for patent litigation costs and a non-cash charge of $0.1 million related to business partner securities. All of these differences were net of tax.

First Quarter 2006 Revenues

eSpeed's total GAAP revenues for the first quarter of 2006 were $42.6 million. For the same period, eSpeed also reported non-GAAP operating revenues of $38.7 million. The difference between GAAP and non-GAAP revenues for the first quarter of 2006 was due to a $3.5 million gain from insurance proceeds and $0.4 million in interest income related to the settlement of a tax-related matter. The Company reported GAAP and non-GAAP total revenues of $38.9 million for the first quarter of 2005.

Fully electronic revenues were $16.7 million in the first quarter of 2006 compared to $20.4 million for the first quarter of 2005. Revenues from Software Solutions in the first quarter of 2006 were $11.3 million versus $10.3 million in the year ago period. Voice assisted and screen assisted revenues totaled $8.7 million in the first quarter of 2006 versus $6.9 million in the first quarter of 2005. Non-GAAP pre-tax operating margin was 6.0 percent in the first quarter of 2006.

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

First Quarter 2006 Volume and Transactions on the eSpeed System

Fully electronic volume on the eSpeed system, excluding new products, was $9.0 trillion for the first quarter of 2006, up 19.4 percent from $7.5 trillion in the fourth quarter of 2005 and up 40.3 percent from $6.4 trillion in the first quarter of 2005. This compares to a sequential increase of 6.1 percent and a year-over-year increase of 0.7 percent in overall quarterly US Treasury volume as reported by the Federal Reserve. Average daily Federal Reserve US Treasury volume was $561 billion for the first quarter of 2006. eSpeed's voice-assisted volume for the first quarter of 2006 was $8.1 trillion, an increase of 6.4 percent versus the $7.6 trillion reported in the fourth quarter of 2005 and an increase of 71.2 percent over the $4.7 trillion reported in the first 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 $524 billion for the first quarter of 2006, compared to $540 billion in the fourth quarter of 2005 and $436 billion in the first quarter of 2005. This represented a sequential decrease of 2.8 percent and a year over year increase of 20.2 percent. Volume for the eSpeed Equities direct access product was 203 million shares for the first quarter of 2006, up against the 147 million shares traded in the fourth quarter of 2005 and the 168 million shares traded in the first quarter of 2005.

Cash Flow & Cash

eSpeed generated cash flow from operations of $5.1 million during the first quarter of 2006, compared with $1.1 million during the comparable period in 2005. The Company also reports free cash flow, which it defines as cash from operations less net cash used in investing activities. eSpeed's free cash flow was ($1.5) million for the first quarter of 2006 and ($8.6) million in the year-earlier period. Excluding related party receivables and payables, free cash flow for the first quarter of 2006 was $4.9 million compared with ($5.4) million in the first quarter of 2005. As of March 31, 2006, eSpeed's cash and cash equivalents were approximately $177.2 million.

Outlook

For the second quarter of 2006, eSpeed expects to generate non-GAAP operating revenues in excess of $38 million and expects non-GAAP net operating income to be in the range of $0.02 to $0.03 per diluted share. The Company expects the average daily Federal Reserve US Treasury volume to be between $550 billion and $565 billion for the second quarter of 2006. For full year 2006, eSpeed still expects to generate non-GAAP operating revenues in excess of $152 million, although the Company now expects operating expenses to be in the range of $144 million to $147 million and for non-GAAP net operating income to be in the range of $0.07 to $0.10 per diluted share. eSpeed's previous full year 2006 outlook had been for operating expenses to be in the range of $147 million to $150 million and non-GAAP net operating income to be in the range of $0.02 to $0.06 per diluted share.Download the document now 54 kb (Adobe Acrobat Document)