Monday November 29, 5:08 pm Eastern Time
Company Press Release
VERSUS Technologies Inc. Reports Fiscal Year 1999 Revenue Growth of 51%; E*TRADE Canada Total Accounts Grow 141%
TORONTO, ONTARIO--For VERSUS Technologies Inc., 1999 was a defining year in which the Company solidified its position as a leader in the online financial services movement in Canada by enabling consumers and institutions to exercise their desire for financial control and independence in a safe and reliable environment. During the year, VERSUS aggressively expanded its institutional products/services, solidified its infrastructure capability and significantly enhanced E*TRADE Canada's powerful brand momentum. Highlights of the year include:
* Successfully completed an initial public offering ("IPO") raising
approximately $49 million, and commenced trading on the TSE and
ME in March 1999 under the symbol V
* First successful introduction into the Canadian marketplace of
anonymous electronic block trading through the development of
LYNXX, VERSUS' temporal order matching product
* Formation of key strategic alliances in keeping with E*TRADE
Canada's goal of building one of the strongest brands in Canada,
expanding customer base and growing market share
* Launched E*TRADE Canada's online investing service offering in the
Province of Quebec and constructed a French marketing website
* Pioneered the concept of online investment banking through the
successful launch of E*TRADE Canada's IPO Centre - the first brokerage
to offer customers access to IPOs online in Canada and the creation of
VERSUS Capital.com - VERSUS' new online investment banking offering through
The VERSUS Network
* Launched a number of successful institutional applications such as
ClickTrader, PortfolioTrader and TradeChat.
* Significantly enhanced VERSUS' core server to expand capacity,
scalability and reliability
VERSUS' strong revenue growth continued for the fourth quarter and fiscal year ended September 30, 1999. Fourth quarter revenues grew to $5.9 million, up 38 percent from the same period a year ago. Fiscal year 1999 revenues increased 51 percent to $23.5 million, compared to $15.5 million in 1998.
FINANCIAL HIGHLIGHTS
Sept. 30,
(Thousands of dollars, unaudited) 1999 1998
------------------------------------------------------------------------
Cash and cash equivalents 48,256 7,766
Total assets 187,433 155,804
Shareholders equity 53,039 12,333
------------------------------------------------------------------------
(Thousands of dollars, Three months ended Sept. 30, Year ended Sept. 30,
except per share data, unaudited) 1999 1998 1999 1998
------------------------------------------------------------------------
Revenues
E*TRADE Canada 2,457 802 8,087 2,394
Institutional Services 3,459 3,480 15,403 13,126
------------------------------------------------------------------------
Total revenues 5,916 4,282 23,490 15,520
Net loss (3,236) (1,375) (7,567) (5,905)
Loss per share* $ (0.27) $(0.21) $ (0.81) $ (0.91)
------------------------------------------------------------------------
* Adjusted retroactively for effects of share consolidation for
comparative purposes.
VERSUS' total revenue growth during the quarter is attributable to E*TRADE Canada revenues of $2.5 million, an increase of 213 percent from $0.8 million in the fourth quarter of 1998. E*TRADE Canada's fiscal year 1999 revenues grew to $8.1 million, up 238 percent from $2.4 million in the previous year.
Revenues for VERSUS' institutional services business totaled $3.5 million during the fourth quarter of 1999, comparable to $3.5 million during the same period last year, and $4.3 million for the third quarter of 1999, in line with traditional summer slowdown. Fiscal year 1999 institutional services revenues totaled $15.4 million, up 17 percent from the comparable period a year ago.
''Nineteen ninety-nine has been a year of achievement for VERSUS,'' said Doug Steiner, Chairman and CEO. ''VERSUS' success in developing leading-edge technology for the purpose of empowering both the individual and institutional investor has been a catalyst in reinventing the financial services industry in Canada. With the development of products such as TradeChat, VERSUS continues to focus on enhancing the sell-side technology available to investment dealers. VERSUS will continue building the base for subsequent phases of growth while assessing new opportunities to deliver results to VERSUS shareholders.''
Consistent with VERSUS' original vision and strategy outlined when the Company became a public entity in March of this year, VERSUS has continued to invest the capital raised from the IPO in three main areas: 1) Building the power of the E*TRADE Canada brand to acquire accounts and gain critical mass, 2) Investing in the development of new technology in terms of matching products, and 3) Significantly enhancing VERSUS infrastructure in order to increase capacity and reliability. As VERSUS continued to make the strategic investments vital to our future growth, the Company incurred a fourth quarter net operating loss of $3.2 million (or $0.27 per share). This compares to a net loss of $1.4 million (or $0.21 per share) for the fourth quarter of 1998.
Operating expenses before depreciation for the fourth quarter of 1999 were $8.1 million, an increase of 74 percent from the comparable period in 1998, and up only one percent from the third quarter of 1999. Fiscal 1999 expenses before depreciation totaled $28.3 million, an increase of 51 percent from fiscal 1998. Marketing expenditures during the fourth quarter contributed significantly to the increase in expenses, up 166 percent from the fourth quarter of 1998 in keeping with the Company's strategy of building the E*TRADE Canada brand and customer mind share to drive further growth. VERSUS also continued to make more specific additions to its world-class team during the fourth quarter, expanding both the E*TRADE Canada and institutional sales/trading groups to support increased activity. This resulted in an increase in compensation and benefits of approximately 71 percent from the fourth quarter of 1998. Expenses related to brokerage operations increased commensurate with!
volume during the quarter, up 40 percent from the fourth quarter of 1998. Telecommunications and data was up 70 percent from the fourth quarter of 1998, primarily due to a one-time fee related to moving the data centre, in addition to a substantial rise in U.S. order routing charges.
E*TRADE CANADA
Key Performance Metrics
The fourth quarter of 1999 continued the trend of significant growth for E*TRADE Canada in accounts and assets, despite the seasonal slowdown in the summer months. E*TRADE Canada added 2,808 new accounts in the fourth quarter resulting in total accounts at the end of fiscal 1999 of 16,759, an increase of 141 percent from the previous year. Customer assets under management as of September 30, 1999 totaled $408.10 million, an increase of 219 percent over last year, and up 15 percent from the third quarter of 1999.
Transactions totaled 50,513 for the quarter, a significant increase of 222 percent from the comparable period in 1998, but slightly lower than the third quarter this year due to the normal seasonality of the online investing industry.
''Consistent growth in customer accounts and assets are positive indications of the success of E*TRADE Canada in the Canadian marketplace,'' noted Colleen Moorehead, President of VERSUS and E*TRADE Canada. ''The growth we have experienced in the last quarter reaffirms our commitment to our strategy of customer acquisition and rapid acceptance of the Internet and continues to expand our growth opportunities.''
Key Metrics - Q4 1999 Results
Key Metrics FY99 FY98 FY99 v. Q499 Q498 Q499 v.
. FY98 Q498
New Accounts 9,804 5,071 93% 2,808 1,240 127%
Total Accounts 16,759 6,955 141% 16,759 6,955 141%
Total
Transactions 169,471 55,305 206% 50,513 15,677 222%
Total Assets
in Customer
Accounts $408.10 $128.10 219% $408.10 $128.10 219%
million million million million
Extending the E*TRADE Canada Brand
E*TRADE Canada activities during the fourth quarter continued to support the strategy of providing an exciting customer service experience and unique value proposition. The Company received strong validation of this strategy in the recent Globe & Mail Discount Broker Survey ranking E*TRADE Canada's site first overall in the Canadian marketplace.
Further advancements of the E*TRADE Canada brand in the fourth quarter of 1999 include the formation of key alliances with Netcom, Salter New Media, imoney and Clearnet. E*TRADE Canada's strategic relationships effectively expand overall reach and significantly increase traffic and investment activity on the site. Strategic alliances remain a key element of E*TRADE Canada's marketing plan, aligning ourselves with like-minded partners to provide value to customers.
Compelling New Products/Services
E*TRADE Canada continues to revolutionize the online financial services industry by providing first-rate investment tools for online customers. During the fourth quarter of 1999, E*TRADE Canada:
* Launched the first online IPO Centre in Canada, revolutionizing access
to initial public offerings by allowing customers to participate
online in public offerings which in the past have been available
predominantly to large institutions and brokers' best clients. Since
the overwhelmingly successful launch of the Chapters.ca IPO, E*TRADE
Canada has offered six new issues to customers.
* Reached an agreement to distribute new issues led by Yorkton Securities
Inc. as part of the E*TRADE Canada IPO Centre. As part of this
exclusive agreement, E*TRADE Canada will also offer Yorkton research
to online customers on a subscription basis.
* Introduced a new account application where customers can complete an
account application online, effectively decreasing account conversion
and processing time. E*TRADE Canada is currently processing
approximately 50 percent of all new accounts online.
* Launched the E*TRADE Canada online investing service in Quebec,
initiated a strategic marketing plan and constructed a French
marketing site.
* Launched the new Options Centre, increasing functionality through the
addition of new features designed to enhance the customer experience.
* Continued to build resources and capabilities in anticipation of a
major brand launch and account acquisition strategy as the RRSP season
approaches.
INSTITUTIONAL SERVICES
Key Performance Metrics
Institutional commissions totaled $2.0 million for the fourth quarter of fiscal 1999, down slightly from $2.5 million for the comparable period in 1998, which was an exceptional growth quarter during a typically slower period in the seasonal cycle. Fiscal 1999 institutional commissions were $9.8 million, an increase of four percent from the comparable period in 1998. Dealer fees were $1.1 million for the fourth quarter, up 18 percent from the same period in 1998. Fiscal 1999 dealer fees grew 35 percent from 1998 to over $4.6 million.
The equivalent of 13 percent of the combined volume traded on the TSE and ME was facilitated through The VERSUS Network, up from approximately 12 percent for the third quarter of 1999.
Compelling New Products/Services
Of particular note during the fourth quarter is the official transition of VERSUS from the order routing to the order matching business through the development and launch of LYNXX, VERSUS' proprietary electronic intra-day crossing service for Canadian equity trading offered through The VERSUS Network. With the recent addition of two new matching times, LYNXX now offers seven matching times (10:00 am, 11:00 am, 12:00 pm, 1:00 pm, 2:00 pm, 3:00 pm and 4:15 pm) offering block order liquidity. Only market orders are accepted in LYNXX and no size or side of the transaction at the time of the match is disclosed prior to the match to ensure anonymity and reduce market impact. LYNXX is currently processing an average of approximately 170 orders per day, with an approximate average match rate of between 5 and 8 percent per day. With the launch of LYNXX, VERSUS continues to change the economics of the institutional market to the participants' advantage by offering the first order on ! any single stock symbol to trade for free.
The Company also launched TradeChat during the quarter - VERSUS' electronic messaging product. TradeChat facilitates the electronic exchange of information so market participants improve their pre-trade stock specific analysis. Approximately 17 broker/dealers and 52 institutional clients are maximizing their efficiency by tailoring the TradeChat product to their specific needs. Customers will continue to enjoy the TradeChat product on a complimentary basis until the second quarter of 2000.
Also during the quarter, Portfolio Trader, VERSUS' Microsoft Excel-based next generation trading terminal, was released from beta stage. Portfolio Trader will dramatically increase institutional traders' ability to automate their desktop, allowing users to integrate their own proprietary trading analysis with VERSUS execution software. The release of PortfolioTrader completes an exciting year of trading product application releases at VERSUS. The VERSUS suite of products are focused at empowering institutional investors and dealers while enhancing overall trading performance and returns.
VERSUS Capital.com
The creation of VERSUS e-commerce investment banking service in the fourth quarter, VERSUS Capital.com, represents another step in the journey toward low-cost, electronic distribution channels in the financial services market. Founded by Don Reid, a former Managing Director and Co-Head of the worldwide energy group at Morgan Stanley Dean Witter, VERSUS Capital.com will introduce a new class of online investment banking services to the Canadian marketplace. Leveraging VERSUS' technology, the new online banking service will conduct much of its investment banking activity - from IPO roadshows to share distribution and research dissemination - over its private network and the Internet.
ABOUT VERSUS
VERSUS Technologies Inc. (TSE, ME: V - news), 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.
Financial Statements Follow
VERSUS TECHNOLOGIES INC
CONSOLIDATED BALANCE SHEETS
September 30
(Thousands of dollars, unaudited) 1999 1998
------------------------------------------------------------------------
ASSETS
Current
Cash $ 1,853 $ 7,488
Short-term investments 46,403 278
Securities owned 96 5
RRSP funds in trust 26,321 9,229
Due from clients 102,122 131,595
Accounts receivable and prepaid expenses 2,668 2,588
Advances to employees 1,645 191
Income taxes receivable 72 98
-----------------------------------
181,180 151,472
-----------------------------------
Capital assets 4,146 1,073
Other assets 2,107 3,259
-----------------------------------
$ 187,433 $ 155,804
-----------------------------------
LIABILITIES
Current
Securities sold short $ 9 $ -
Due to clients 108,162 54,209
Due to settlement agent 20,368 86,656
Accounts payable and accrued liabilities 5,473 1,930
Unearned revenue 382 676
-----------------------------------
134,394 143,471
-----------------------------------
SHAREHOLDERS' EQUITY
Share capital (12,016,828 shares, 1998 -
6,455,686 shares)* 77,000 28,727
Deficit (23,961) (16,394)
-----------------------------------
53,039 12,333
-----------------------------------
$ 187,433 $ 155,804
-----------------------------------
* number of shares adjusted retroactively for effect of share
consolidation
VERSUS TECHNOLOGIES INC
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
Three months ended Twelve months ended
September 30 September 30
(Thousands of dollars, 1999 1998 1999 1998
except per share data,
unaudited)
------------------------------------------------------------------------
REVENUE
Commissions $ 3,716 $ 3,045 $ 15,848 $ 11,258
Dealer fees 1,102 929 4,649 3,455
Interest and other
income 1,098 308 2,993 807
--------------------------------------------------
5,916 4,282 23,490 15,520
--------------------------------------------------
EXPENSES
Compensation and
benefits 2,718 1,593 8,954 7,125
Brokerage operations 2,001 1,428 8,056 4,716
Selling and marketing 1,111 418 4,141 2,210
Telecommunications and
data 1,484 871 4,532 2,701
Administration and other 772 828 2,574 2,505
Depreciation and
amortization 1,102 517 2,774 2,154
--------------------------------------------------
9,188 5,655 31,031 21,411
--------------------------------------------------
LOSS BEFORE INCOME
TAXES (3,272) (1,373) (7,541) (5,891)
--------------------------------------------------
Provision for income taxes (36) 2 26 14
--------------------------------------------------
NET LOSS $ (3,236) $ (1,375) $ (7,567) $ (5,905)
--------------------------------------------------
DEFICIT, BEGINNING
OF PERIOD $ (20,725) $(15,019) $ (16,394) $ (10,489)
--------------------------------------------------
DEFICIT, END OF
PERIOD $ (23,961) $(16,394) $ (23,961) $ (16,394)
--------------------------------------------------
Weighted average
shares outstanding* 11,871,063 6,455,686 9,377,202 6,458,888
Loss per share* $ (0.27) $ (0.21) $ (0.81) $ (0.91)
* adjusted retroactively for effects of share consolidation
VERSUS TECHNOLOGIES INC
CONSOLIDATED SUMMARY OF SEGMENTED INFORMATION
Twelve months ended
September 30, 1999 Institutional
(Thousands of ----------------------
dollars, unaudited) E*TRADE Canada Investor Dealer Total
---------------------------------------------------------------------
Revenues from external
customers $ 7,604 $ 9,788 $ 4,649 $22,041
Interest revenue 483 483 483 1,449
-------------------------------------
Total revenue 8,087 10,271 5,132 23,490
Expenses 14,415 9,996 3,846 28,257
-------------------------------------
Operating income (loss)
before depreciation and
amortization $(6,328) $ 275 $ 1,286 $(4,767)
Depreciation and amortization 2,774
-------------------------------------
Operating loss before income taxes $(7,541)
-------------------------------------
VERSUS TECHNOLOGIES INC
CONSOLIDATED CASH FLOW STATEMENTS
Three months ended Twelve months ended
September 30 September 30
1999 1998 1999 1998
----------------------------------------------------------------
September 30
(Thousands of dollars,
except per share data,
unaudited)
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
Cash Flows From
Operating Activities
Net loss $(3,236) $(1,375) $(7,567) $(5,905)
Non-cash items
Depreciation and
amortization 1,102 517 2,774 2,154
Net change in income
taxes receivable - 200 26 192
Net change in
non-cash working
capital items 616 (1,586) 1,680 (860)
-------------------------------------------
(1,518) (2,244) (3,087) (4,419)
-------------------------------------------
Cash Flows From
Investing Activities
Purchases of capital
assets, net (3,334) (223) (4,695) (910)
(Investment in) proceeds
from VERSUS Employees'
Option Trust 1 1,797 (36)
-------------------------------------------
(3,334) (222) (2,898) (946)
-------------------------------------------
Cash Flows From
Financing Activities
Issuance of Special
Warrants - 357 - 5,000
Conversion of E*TRADE
Group debt into Special
Warrants - 2,268 2,268
Issuance of shares
for cash 1,580 - 50,596 -
Exercise of warrants
for cash 204 - 1,750 -
Exercise of employee
options for cash - - 25 -
Exercise of compensation
options for cash - - 294 -
Due to E*TRADE Group - (1,330) (1,330)
Repurchase of shares
from VERSUS Employees'
Option Trust - - (1,797)
Costs of issuance of
shares and Special
Warrants (79) (398) (4,393) (429)
-------------------------------------------
1,705 897 46,475 5,509
-------------------------------------------
INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS DURING THE
YEAR (3,147) (1,569) 40,490 144
CASH AND CASH
EQUIVALENTS,
BEGINNING
OF YEAR 51,403 9,335 7,766 7,622
-------------------------------------------
CASH AND CASH
EQUIVALENTS,
END OF YEAR $48,256 $ 7,766 $48,256 $ 7,766
-------------------------------------------
CASH AND CASH
EQUIVALENTS ARE
COMPRISED OF:
Cash $ 1,853 $ 7,488 $ 1,853 $ 7,488
Short-term
investments 46,403 278 46,403 278
-------------------------------------------
CASH AND CASH
EQUIVALENTS,
END OF YEAR $ 48,256 $ 7,766 $48,256 $ 7,766
-------------------------------------------
--------------------------------------------------------------------------------
Contact:
Amanda Ram
Chief Financial Officer
VERSUS Technologies Inc.
(416) 214-7929
or
Jodi Peake
Manager, Investor Relations
VERSUS Technologies Inc.
(416) 214-7932
--
investors@tradeit.com
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