VERSUS Technologies Inc. Reports Third Quarter
Revenue Growth of 79 Percent, E-TRADE Canada
Accounts Grow 144 Percent
Business Wire - August 10, 1999 11:31
TORONTO--(BUSINESS WIRE)--Aug. 9, 1999--VERSUS Technologies Inc. (TSE:V.)
(ME:V.) today reported continued strong revenue growth during the three months ended June
30, 1999. Revenues were $7.0 million for the third quarter of 1999, an increase of 79 percent
from $3.9 million for the same period a year earlier, and up 25 percent from $5.6 million for the
second quarter of fiscal 1999. Fiscal year-to-date revenues totaled $17.6 million, an increase of
56 percent from the previous year.
FINANCIAL HIGHLIGHTS
June 30,
(Thousands of dollars, unaudited) 1999 1998
--------------------------------- ---- ----
Cash and cash equivalents 51,403 9,335
Total assets 137,919 111,171
Shareholders equity 54,570 11,481
------------------- ------ ------
(Thousands of dollars, Three months Nine months
except per share data, ended June 30, ended June 30,
unaudited) 1999 1998 1999 1998
--------------------- ---- ---- ---- ----
Revenues
E-TRADE Canada 2,722 639 5,630 1,592
Institutional Services 4,286 3,252 11,944 9,646
------------------------ ----- ----- ------ -----
Total revenues 7,008 3,891 17,574 11,238
Net loss (1,581) (2,416) (4,331) (4,530)
Loss per share- $ (0.14) $ (0.37) $ (0.51) $ (0.70)
- Adjusted retroactively for effects of share consolidation for
comparative purposes.
VERSUS' strong revenue growth during the quarter is attributable primarily to E-TRADE
Canada's revenue contribution of $2.7 million, an increase of 350 percent from $0.6 million in
the third quarter of 1998, and up 50 percent from $1.8 million in the second quarter of fiscal
1999.
The Company's institutional services business contributed total revenues of $4.3 million for the
third quarter of 1999, an increase of 32 percent from the same period last year, and up 13
percent from $3.8 million for the second quarter of 1999. Institutional services fiscal
year-to-date revenues were $11.9 million, an increase of 24 percent from the previous year.
As anticipated, the Company incurred a third quarter operating loss as it continued to focus on
building the infrastructure for future growth through significant investments in building the
E-TRADE Canada brand, improving customer service, enhancing user functionality and
maintaining a robust and scalable environment. The net loss for the third quarter was $1.6
million compared to a net loss of $2.4 million for the third quarter of 1998. Due to the higher
than anticipated growth in trading volume this year and in anticipation of regulatory changes in
the electronic financial services industry, the Company continued to make the strategic
investments required to achieve its aggressive aspirations for growth. Going forward, these
expenditures are expected to significantly add to long-term shareholder value.
"We are pleased to report continued strong revenue growth during the third quarter of 1999,"
said Doug Steiner, Chairman and Chief Executive Officer of VERSUS. "We are encouraged by
this continued strength which reaffirms our position as the pre-eminent provider of electronic
securities trading services to the retail and institutional Canadian marketplace. We remain
dedicated to providing our customers with leading-edge technologies, superior customer service
and innovative products."
Operating expenses for the third quarter were $8.6 million, an increase of 36 percent from the
third quarter of 1998.
Expenses related to brokerage operations increased with volume, representing approximately
52 percent of the total increase in expenses during the period. Fiscal year-to-date expenses
were $21.8 million, an increase of 39 percent from the same period in 1998. Expenses relating
to telecommunications and data increased approximately 58 percent from the third quarter of
1998 due to a prior period adjustment as well as a significant rise in variable U.S. routing
charges during the quarter. In keeping with the Company's strategic plan of increased
E-TRADE Canada account acquisition, marketing expenditures during the third quarter
increased 172 percent from the comparable period in 1998.
E-TRADE CANADA
A record number of transactions drove revenue growth for E-TRADE Canada during the
period. Transactions reached 53,991 for the quarter, up 216 percent from 17,094 during the
same period a year earlier and up 33 percent from 40,498 for the second quarter of fiscal
1999. Total assets held in customer accounts exceeded $350 million at June 30, 1999, an
increase of 198 percent from the previous year.
E-TRADE Canada added 2,787 new accounts during the third quarter of this year - an
increase of 149 percent from the same period in 1998. Total E-TRADE Canada accounts at
quarter end were just under 14,000, an increase of 144 percent from the previous year.
"Our focus is to continue to build one of the strongest brands on the Internet, expand our
customer base and grow market share," noted Colleen Moorehead, President of VERSUS and
E-TRADE Canada. "By listening to our customers and continuing to innovate, we are
successfully delivering an enhanced, customer service focused online investing experience. We
are committed to creating a business built for the long term."
E-TRADE Canada continued its rapid pace of service enhancement and innovation during the
third quarter of 1999. Significant developments during the period included:
Continuing the Company's strategy of extending the E-TRADE Canada brand by establishing
strategic alliances with Carlson Online, Internet Direct and Mutual Fund Counsel to allow
members direct linked access to the E-TRADE Canada service.
Enhancing website functionality through the implementation of new features designed to
expedite order processing for customers.
Increasing customer service personnel by over 78 percent from the second quarter of 1999
consistent with E-TRADE Canada's commitment to provide superior service to all customers.
Launching the E-TRADE Canada Charity Online auction site, the first investment
industry-sponsored online charity auction, with all proceeds donated to the Canadian
Foundation for aids research (CANFAR).
E-TRADE Canada remains focused on driving new account growth. The Company will
continue to build the power of the E-TRADE Canada brand through both on-line and off-line
activity. The recent approval to offer E-TRADE Canada's online investing service in Quebec
means the Company can now build that business aggressively. E-TRADE Canada also
continues to develop key strategic relationships with leading Web based brands. This provides
a cost effective means to drive targeted traffic to the E-TRADE site and broadens the
Company's reach and exposure.
INSTITUTIONAL SERVICES
VERSUS institutional services business generated positive operating earnings before
depreciation, amortization and taxes of $939,000 for the third quarter, resulting in total
year-to-date of $2.3 million.
Institutional commissions totaled $2.4 million for the third quarter of the year, an increase of 7
percent from the third quarter of 1998. Year-to-date institutional commissions were $7.8
million, an increase of 13 percent from the same period in 1998. Dealer fees exceeded $1.5
million for the third quarter, up 78 percent from the third quarter of 1998. Year-to-date dealer
fees increased 40 percent from 1998 to over $3.5 million.
During the third quarter of fiscal 1999, The VERSUS Network facilitated the execution of
trades equal to approximately 12 percent of the combined total number of shares traded on The
Toronto Stock Exchange and the Montreal Exchange, up from approximately 11 percent for
the third quarter of 1998.
Other significant achievements in the institutional business during the quarter included the release
of the beta version of a Microsoft Excel-based next generation trading terminal, Portfolio
Trader, that will dramatically increase institutional traders' ability to automate their electronic
desktop.
In addition, a key refocusing of senior management resources during the third quarter has
effectively positioned VERSUS to move quickly and capture opportunities that fit the
Company's growth strategy in this exciting and fast-paced environment.
OUTLOOK
Meeting the needs of customers through leading-edge technology and innovation is the driving
force behind VERSUS' strategy. The Company has made the strategic decision to increase
investments in new technology over the next several quarters, with the intention of having
infrastructure in place to capitalize on opportunities for growth. In particular, the Company is
currently enhancing its core servers to effectively expand the capacity, scalability and reliability
of its transaction systems seamlessly as activity levels rise. In addition, the Company is building
its trading room to support matching services for both investment dealers and institutional
customers, and developing a new order matching service to augment the Company's growing
line of innovative institutional services.
These significant expenditures planned for both the Company's retail and institutional business
are investments for growth that are expected to significantly add to long-term shareholder value
as the Company continues to secure its leadership position in the electronic trading industry.
ABOUT VERSUS
VERSUS Technologies Inc. (TSE, ME: V), together with its wholly-owned subsidiary
VERSUS Brokerage Services Inc., is a leading provider of electronic securities trading services
to the Canadian marketplace. VERSUS' retail business is marketed exclusively in Canada
under the E-TRADE Canada name, as a service of VERSUS Brokerage Services Inc. The
E-TRADE Canada service is currently offered in all provinces. VERSUS Technologies Inc. and
VERSUS Brokerage Services Inc. are headquartered in Toronto, Canada. VERSUS
Brokerage Services Inc. is a member of the Investment Dealers Association of Canada, and the
Canadian Investor Protection Fund.
E-TRADE Canada is a trademark of E-TRADE Securities, Inc. and is used with their
permission.
VERSUS TECHNOLOGIES INC
CONSOLIDATED BALANCE SHEETS
June 30
(Thousands of dollars,
unaudited) 1999 1998
--------------------------------------------------------
ASSETS
Current
Cash $ 4,243 $ 9,060
Short-term investments 47,160 275
Securities owned 98 -
RRSP funds in trust 20,502 7,040
Due from clients 50,356 59,698
Due from settlement agent 9,279 28,472
Accounts receivable and
prepaid expenses 2,147 1,660
Income taxes receivable 72 299
---------------------------------
133,857 106,504
---------------------------------
Capital assets 1,626 1,080
Other assets 2,436 3,587
---------------------------------
$ 137,919 $ 111,171
---------------------------------
---------------------------------
LIABILITIES
Current
Securities sold short $ 291 $ 1
Due to clients 79,846 95,241
Due to settlement agent 98 -
Accounts payable and accrued
liabilities 2,721 1,790
Current portion of Due to
E-TRADE Group - 1,223
Unearned revenue 393 457
---------------------------------
83,349 98,712
---------------------------------
Due to E-TRADE Group - 978
SHAREHOLDERS' EQUITY
Share capital (11,844,615 shares,
1998 - 6,459,967 shares)- 80,038 26,531
Deficit (25,468) (15,050)
---------------------------------
54,570 11,481
---------------------------------
$ 137,919 $ 111,171
---------------------------------
---------------------------------
- adjusted retroactively for effects of share consolidation
VERSUS TECHNOLOGIES INC
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(Thousands of
dollars, Three months ended Nine months ended
except per June 30 June 30
share data, unaudited) 1999 1998 1999 1998
---------------------------------------------------------------
REVENUE
Commissions $ 4,362 $ 2,856 $ 12,132 $ 8,213
Dealer fees 1,509 850 3,547 2,526
Interest and other
income 1,137 185 1,895 499
-----------------------------------------
7,008 3,891 17,574 11,238
-----------------------------------------
EXPENSES
Compensation and
benefits 2,346 2,439 6,236 5,532
Brokerage operations 2,530 1,289 6,055 3,288
Selling and marketing 1,350 497 3,030 1,792
Telecommunications and
data 1,266 799 3,048 1,830
Administration and other 542 639 1,802 1,677
Depreciation and
amortization 552 649 1,672 1,637
-----------------------------------------
8,586 6,312 21,843 15,756
-----------------------------------------
LOSS BEFORE INCOME
TAXES (1,578) (2,421) (4,269) (4,518)
-----------------------------------------
Provision for income
taxes 3 (5) 62 12
-----------------------------------------
NET LOSS $ (1,581) $ (2,416) $ (4,331) $ (4,530)
-----------------------------------------
-----------------------------------------
DEFICIT, BEGINNING
OF PERIOD $ (23,170) $ (12,603) $ (16,823) $ (10,489)
Costs of issuance
of shares (717) (31) (4,314) (31)
-----------------------------------------
DEFICIT, END OF
PERIOD $ (25,468) $ (15,050) $ (25,468) $ (15,050)
-----------------------------------------
-----------------------------------------
Weighted average shares
outstanding- 11,696,164 6,455,686 8,560,428 6,459,967
Loss per share- $ (0.14) $ (0.37) $ (0.51) $ (0.70)
- adjusted retroactively for effects of share consolidation
VERSUS TECHNOLOGIES INC
CONSOLIDATED SUMMARY OF SEGMENTED INFORMATION
Nine months ended June 30, 1999 Institutional
(Thousands of dollars, ----------------------
unaudited) E-TRADE
Canada Investor Dealer Total
---------------------------------------------------------------
Revenues from external
customers $5,335 $7,807 $3,547 $16,689
Interest revenue 295 295 295 885
---------------------------------------
Total revenue 5,630 8,102 3,842 17,574
Expenses 10,518 7,036 2,617 20,171
---------------------------------------
Operating income (loss)
before depreciation and
amortization $(4,888) $1,066 $1,225 $(2,597)
Depreciation and
amortization 1,672
---------------------------------------
Operating loss before income taxes $(4,269)
---------------------------------------
---------------------------------------
VERSUS TECHNOLOGIES INC
CONSOLIDATED CASH FLOW STATEMENTS
(Thousands of dollars, unaudited)
Three months ended Nine months ended
June 30 June 30
1999 1998 1999 1998
---------------------------------------------------------------
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
Operating
Net loss $ (1,581) $ (2,416) $ (4,331) $ (4,530)
Non-cash items
Depreciation and
amortization 552 649 1,672 1,637
Net change in income
taxes receivable (25) (4) 26 (8)
Net change in non-cash
working capital
items (455) 1,138 1,064 726
----------------------------------------------
(1,509) (633) (1,569) (2,175)
----------------------------------------------
----------------------------------------------
Investing
Purchases of capital
assets, net (137) (217) (1,361) (687)
(Investment in) proceeds
from VERSUS Employees'
Option Trust - 2 1,797 (37)
----------------------------------------------
(137) (215) 436 (724)
----------------------------------------------
----------------------------------------------
Financing
Issuance of special
warrants for cash - 4,643 - 4,643
Issuance of shares
for cash 7,041 - 49,016 -
Conversion of warrants
for cash 1,665 1,865
Repurchase of shares
from VERSUS Employees'
Option Trust - - (1,797) -
Costs of issuance
of shares (717) (31) (4,314) (31)
----------------------------------------------
7,989 4,612 44,770 4,612
----------------------------------------------
----------------------------------------------
INCREASE (DECREASE)
IN CASH DURING
THE PERIOD 6,343 3,764 43,637 1,713
CASH, BEGINNING
OF PERIOD 45,060 5,571 7,766 7,622
----------------------------------------------
CASH, END OF
PERIOD $ 51,403 $ 9,335 $ 51,403 $ 9,335
----------------------------------------------
----------------------------------------------
CASH IS COMPRISED OF:
Cash $ 4,243 $ 9,060 $ 4,243 $ 9,060
Short-term
investments 47,160 275 47,160 275
----------------------------------------------
$ 51,403 $ 9,335 $ 51,403 $ 9,335
----------------------------------------------
----------------------------------------------
CONTACT: VERSUS Technologies Inc.
Amanda Ram, 416/ 214-7929
or
VERSUS Technologies Inc.
Jodi Peake, 416/ 214-7932
e-mail investors@tradeit.com
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