Tuesday April 25, 7:28 am Eastern Time
Company Press Release
Web Street, Inc. Reports 182% Increase in First Quarter Revenues
DEERFIELD, Ill.--(BUSINESS WIRE)--April 25, 2000--
Web Street Securities' Self-Clearing Conversion Deferred to June 2000
Avi Fox Appointed Co-Chief Executive Officer of Web Street, Inc.
Joseph Barr Appointed President of Web Street, Inc.
Web Street Securities Prepares to Open Investment Banking Operations
Web Street, Inc. (NASDAQ:WEBS - news), parent company of Web Street Securities, a leading online brokerage firm, today announced record results for its first quarter ended March 31, 2000.
For the quarter, total revenues increased to $13.1 million, representing a 182% increase over revenues of $4.6 million for the first quarter of 1999, and a 57% sequential increase over revenues for the fourth quarter of 1999. Net loss for the quarter was $3.8 million, or $0.15 per share, compared to net income of $14,591 or $0.00 per share, for the first quarter of 1999. The weighted average number of shares outstanding for the current quarter was 25,674,219, compared to 20,092,013 during last year's comparable quarter.
The Company also reported the following key metrics for the first quarter of 2000 vs. the first quarter of 1999:
-- The number of total customer accounts increased 106% to 112,000 at
March 31;
-- The Company executed 469,000 trades for the quarter, a 151%
increase over 1999;
-- Average trades executed per day increased 143% to 7,444; o New
customer acquisition costs for the first quarter of 2000 were $228
an account;
-- Total customer assets at March 31, 2000 increased 214% over 1999
to $1.1 billion.
Joseph J. Fox, Chief Executive Officer of Web Street stated, ``Once again, during the first quarter we reported record revenues and trade volumes, while simultaneously making great strides in the immediate and future development of our company. Throughout the first quarter we continued our international expansion, as we began providing investors in Hong Kong with online access to the U.S. securities markets through our strategic alliance with Sun Hung Kai & Co., Ltd.'s online unit, SHK Online. This strategic alliance with Sun Hung Kai allows Web Street entrance into China's financial markets. Hong Kong investors are now experiencing all the services currently offered to our domestic and other international customers, such as real-time streaming quotes, pop-up order confirmations and access to both our Mutual Fund SuperSite(TM) and Trading Pit.''
Mr. Fox also commented on the increased domestic growth and activity during the first quarter, ``Our strong growth in key operating metrics throughout the quarter is reflective of the initiatives we implemented during both the past few months, as well as the record securities trading volumes in the overall markets. We reached a record 10,000 trades executed in a single day. Achieving this milestone, along with having many trading days just under the 10,000 mark, contributed significantly to the increased number of trades executed during the quarter. We aggressively promoted our brand beginning with the February launch of our national advertising campaign employing the tagline, `Invest with Ambition.' We are now focused on expanding this initiative in existing and new target markets through additional broadcast, print, and direct marketing efforts. Furthermore, during the first quarter, we eliminated all commissions on the purchase, sale and exchange of any of the over 4,000 funds available through our Mutual Fund SuperSite(TM). This announcement made Web Street the first and only online brokerage firm to offer commission free mutual fund transactions on every fund Web Street offers to its customers.''
Commenting on the status of Web Street Securities' conversion to self-clearing, Mr. Fox stated, ``We are pleased to say that we now have in place the required operations and personnel to effectively conduct our self-clearing operations. However, the April monthly meeting of the National Securities Clearing Corporation was delayed until May and we are still awaiting the necessary regulatory approvals for us to begin providing self-clearing services. We expect to receive these approvals during the coming weeks, which we believe will allow us to complete our conversion to self-clearing operations by the end of June, as opposed to our originally anticipated May 1 goal. By the end of June, when we expect to end our association with our current clearing firm, we intend to have all of our accounts fully transferred and do not foresee any lapses in customer service. However, beginning May 1, we expect to begin receiving lower payments for order flow at current market rates as the payments will be based on actual rebates received from the market makers that process our orders. In addition, we will not experience the benefits of the increased interest income that we expect to derive from carrying our customers' accounts until the conversion is completed. We expect that the combination of these factors will result in significantly slower revenue growth during the second quarter compared to our recent quarterly revenue growth rates. The expected decrease in revenue per trade, combined with a temporary increase in clearing costs through the completion of the conversion period, will also lead to lower gross profit margins. However, we expect to carefully manage discretionary spending, including marketing, during the second quarter in order to mitigate the impact on net profit margins. Beyond the second quarter, we anticipate important positive customer benefits, a return to strong revenue growth and increased profitability for the firm following this transition to self- clearing.''
Mr. Fox continued, ``Internally, we have taken steps to further strengthen our senior management team and proposed several key appointments to be made by our Board at their May 9th meeting. Most notably, we are delighted to announce that our current President, Avi Fox, has been designated for appointment to the position of Co-Chief Executive Officer, along with myself. As Co-Chief Executive Officer of Web Street, Inc., Avi will be relinquishing his day-to-day operational responsibilities at the firm to Joseph Barr in order to assume a more strategic role at the Company. As part of these new responsibilities, Avi will be responsible for building the Company's international investment banking operations and overseeing the expansion of the Company's financial services centers in major cities in the U.S. and internationally. Between Web Street and our international partners, we have the opportunity to provide focused investment banking products, such as initial public offering distribution, to over 500,000 customers worldwide.''
Further commenting on management changes, Mr. Fox noted, ``We are also pleased to announce the promotion of Joseph Barr, currently our Chief Financial Officer and Treasurer, to the position of President and Treasurer of Web Street, Inc. Joe will continue his duties in the role of Chief Financial Officer until an appropriate candidate has been selected to replace him in that role. Joe's new duties will include overall responsibility for the operating performance of Web Street, as well as the management of all business development, finance, marketing, human resources and subsidiary executives.''
Looking ahead, Mr. Fox concluded, ``Toward the end of the first quarter we moved to increase our brick-and-mortar presence, with the signing of leases in the financial districts of San Francisco, Boston and Denver. These locations will house our state-of-the-art financial service centers and enable us to provide educational seminars, access to information on various financial markets and demonstrations detailing our product services and offerings. In light of the fact that the Internet tends to be very impersonal, we believe that our online brokerage customers benefit from face-to-face interaction with their service provider. These financial service centers will give our customers the trust, comfort and a `name-to-a- face' association that they are looking for. We intend to introduce more of our financial service centers throughout the remainder of 2000 and in future years in key domestic and international cities.''
Web Street, Inc., based in Deerfield, Illinois, provides online brokerage services to individual investors in the United States, Europe, Asia and Latin America, through its wholly-owned subsidiary, Web Street Securities, Inc., which was founded in 1996. Web Street was rated four stars by Barron's in 1998 and 1999, as well as ranked as one of the top 3 online brokers in March 1998 and March 1999 by SmartMoney. Web Street offers 24 hours a day customer service, low- price commissions, and real time account information via multiple channels - online, touch-tone telephone, person-to-person via telephone, and face-to-face onsite through its existing and future brick-and-mortar branches. For more information on the Company's products and services, visit us at www.webstreet.com or call us at 1-800-WEBTRADE.
Cautionary Note Regarding Forward-Looking Statements
This news release includes forward-looking statements that reflect Web Street's current expectations about its future results, performance, prospects and opportunities. These forward-looking statements include the statements above regarding the expected impact of the deferral of self-clearing operations and regarding the expected benefits to the Company of becoming self-clearing. Web Street has tried to identify these forward-looking statements by using words such as ``may,'' ``will,'' ``expect,'' ``anticipate,'' ``believe,'' ``intend,'' and ``estimate'' and other similar expressions. These forward-looking statements are based on information currently available to Web Street and are subject to a number of risks, uncertainties and other factors that could cause Web Street's actual results, performance, prospects or opportunities in the remainder of 2000 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation, Web Street's ability to establish and maintain international relationships and relationships with content providers, intense price and other competition among companies providing online financial services, Web Street's need to maintain and increase its customer accounts, Web Street's ability to obtain required regulatory approvals for and successfully implement self-clearing operations, volatility in the securities markets, Web Street's ability to develop and enhance its services and products, risk of system failures, and existing and future regulations affecting the online brokerage industry or the Internet generally. For further information about these and other risks, uncertainties and factors, that could affect Web Street's future results, performance, prospects and opportunities, please review the disclosure included under the caption ``Business-Risk Factors'' in Web Street's annual report on Form 10-K for the year ended December 31, 1999, as filed with the Securities and Exchange Commission. Except as required by the federal securities laws, Web Street undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this news release.
WEB STREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND KEY OPERATING STATISTICS
Three Months Ended March 31,
2000 1999
(unaudited)
Revenues
Transaction revenue $ 12,077,940 $ 4,271,268
Interest income 734,549 147,800
Other revenue 242,727 217,527
---------- ---------
Total revenues 13,055,216 4,636,595
Cost of services
Clearance and execution 5,353,579 1,717,696
Employee compensation
and benefits 966,935 550,121
Communication and
data processing 657,712 288,199
---------- ---------
Total cost of
services 6,978,226 2,556,016
Operating expenses
Marketing and
advertising 5,591,869 633,148
Technology development 709,240 314,220
General and
administrative 3,567,845 1,118,620
--------- ---------
Total operating
expenses 9,868,954 2,065,988
------------- ----------
Net income /(loss) $ (3,791,964) $ 14,591
============= ==========
Basic and diluted net
income/(loss) per
common share $ (0.15) $ 0.00
============= ===========
Weighted average common
shares used in
computation of basic
and diluted net
income/(loss) per
common share: 25,674,219 20,092,013 (1)
========== ==========
Key Operating
Statistics:
Total trades 469,000 187,200
Average trades per day 7,444 3,069
Total customer
accounts (2)(3) 112,000 54,500
Total customer
assets (2) $1,094,745,000 $348,308,300
Total employees (2) 166 80
(1) Represents shares used in computing basic net income per share.
20,485,997 shares were used in computing diluted net income of
$0.00 per share.
(2) As of the end of each period presented.
(3) Represents open accounts, regardless of whether there have ever
been any funds or securities in the account.
WEB STREET, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of As of
December 31, March 31,
1999 2000
(unaudited)
ASSETS
Cash and cash equivalents $ 39,189,362 $ 32,008,412
Receivable from clearing broker 2,395,679 4,022,823
Other receivables 359,917 450,188
Property and equipment, net 3,994,411 5,590,288
Prepaids and other assets 1,851,534 2,465,902
------------ ------------
Total assets $ 47,790,903 $ 44,537,613
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 2,705,228 $ 3,398,135
Accrued compensation
and benefits 1,202,561 433,736
Other accrued expenses 774,072 1,154,212
Deferred rent 146,082 145,008
------------- ------------
Total liabilities $ 4,827,943 $ 5,131,091
Stockholders' equity:
Preferred stock - -
Common stock--($.01 par value;
100,000,000 shares authorized;
25,660,402, and 25,702,777
issued and outstanding as of
December 31, 1999, and March
31, 2000, respectively 256,604 257,028
Additional paid-in capital 65,317,651 65,552,753
Accumulated deficit (22,611,295) (26,403,259)
------------ ------------
Total stockholders' equity $ 42,962,960 $ 39,406,522
-------------- -------------
Total liabilities and
stockholders' equity $ 47,790,903 $ 44,537,613
============== =============
--------------------------------------------------------------------------------
Contact:
Web Street, Inc.
Joseph A. Barr
EVP/Chief Financial Officer
847-444-4700
or
Investor Relations
Morgen-Walke Associates
Cheryl Schneider/Hulus Alpay
Press: Evan Goetz/Laura Novak
212-850-5600 |
