Nice day today on the earnings news;
Web Street Reports Second Quarter Results
DEERFIELD, Ill., Jul 14, 2000 /PRNewswire via COMTEX/ -- Web Street Inc. (Nasdaq: WEBS chart, msgs), parent company of Web Street Securities, a leading online brokerage firm, today announced results for its second quarter ended June 30, 2000.
For the quarter, total revenues were $7.3 million, representing a 21% increase over revenues of $6.0 million for the second quarter of 1999. Interest income increased nearly seven-fold to $672 thousand, from $97 thousand in the same quarter of 1999.
The net loss for the quarter was $6.9 million, or $.27 per share, compared to a net loss of $1.2 million or $.06 per share for the second quarter of 1999. The weighted average number of shares outstanding for the current quarter was 25,727,076, compared to 20,404,466 during last year's comparable quarter.
For the six months ended June 30, 2000, total revenues increased 91% to $20.4 million from $10.7 million for the same period of 1999. Interest income increased over four-fold from $315 thousand in the year ago period to $1.4 million for the six months ended June 30, 2000. The net loss for this period increased to $10.7 million or $.42 per share versus a loss of $1.2 million or $.06 per share for the same period last year.
"When it rains, farmers cheer and ball players sigh. This quarter it poured. Results fell short of expectations in the second quarter and we were dissatisfied with our financial performance," said Joseph Fox, Chief Executive Officer. "While at the same time, we are pleased to have completed our conversion to self-clearing at the end of the quarter, which will be the foundation of our business going forward," Fox continued. "Now that we are in control of the entire brokerage process, we are confident that our unique business strategies will allow us to achieve the revenue growth and profits our shareholders desire."
"During the quarter, the markets experienced a drop in overall trading volume compared to the previous quarter. This coupled with the unexpected postponement of a National Securities Clearing Corporation meeting to approve our conversion to self-clearing resulted in second quarter revenue below targeted levels," Fox added.
Joseph Barr, President and Chief Financial Officer commented, "Our record of consistent revenue growth was interrupted in large part due to the time lag between the expiration of our previous outsourced clearing contract on April 30 and the completion of the conversion to self-clearing on July 3. Subsequent to April 30, Web Street began experiencing decreased revenue per trade due to lower order flow payments that reflect current market rates for order flow. This timing did not afford us the opportunity to capitalize on the increased net interest income that we expect to generate from carrying customer accounts on our balance sheet. In future quarters, we expect to generate significantly increased levels of interest income from fully supporting our customers' accounts as a self-clearing firm."
"This decrease in revenue per trade, combined with a temporary increase in clearing costs through the completion of the transition period, led to lower gross margins in the second quarter. Conversion-related activities also resulted in non-recurring, redundant expenses of approximately $1.1 million in the quarter, further lowering our operating margins. However, we carefully managed discretionary spending, including marketing and technology development expenses, to limit the impact on net income," he continued.
Fox commented, "During the quarter, Web Street made several pivotal announcements that we believe position us to achieve accelerated growth in the coming quarters. We believe our successful commencement of self-clearing operations on July 3, 2000, will prove to be a critical step towards accelerating profitability and will bring us more diversified revenue streams and improved profit margins in the near future."
"We have accomplished key benchmarks this quarter that validate our commitment to delivering on the goals outlined in our initial public offering. Along with the commencement of Web Street's self-clearing operations, the launch of our Online Financial District and other improved service offerings are a clear indication of our evolution towards becoming a diversified financial services organization with a strong global presence and industry-leading customer service levels."
During the quarter, the company announced new product offerings and partnerships aimed at increasing customer reliance on Web Street as their one-stop online financial services provider:
-- A new website including the Web Street Global Asset Manager, a tool to
enable cash and investment management all through a single on-line
account;
-- The industry's lowest published margin rates for high margin balances;
-- An alliance with InsWeb, a leading on-line insurance services provider,
to provide Web Street customers with access to low-cost home, auto,
life and health insurance;
-- An alliance with Lending Tree, a nationally-recognized loan marketplace
for consumers and lenders, that offers Web Street customers access to
affordable mortgages and other consumer loans;
-- An agreement with REDIBook, a leading ECN, to provide extended-hours
trading to Web Street customers in the coming weeks;
-- An agreement with eSpeed, Inc., the leading provider of business-to-
business electronic market places, to offer our customers direct access
to electronic trading of bonds in the coming weeks.
Despite weakness in overall market trading volumes during the quarter ended June 30, 2000, the company reported strong year over year operating metrics, including the following:
-- The number of total customer accounts increased 85% to 123,000 at
June 30, 2000 compared to June 30, 1999;
-- The company executed 342,400 trades for the quarter, a 35% increase
over the second quarter of 1999;
-- Average trades executed per day also increased 35% to 5,435 compared to
the quarter ended June 30, 1999;
-- New customer acquisition costs for the second quarter of 2000 were $274
per account;
-- Total customer assets at June 30, 2000 increased 90% over June 30, 1999
to $894.8 million.
"Going forward, we remain confident that our business model is well-designed to drive revenue growth and profitability. Our management team has taken the steps to successfully reposition Web Street to capitalize on a more diversified revenue stream and a greater leveraging of cost synergies as we build scale. Our international relationships, self-clearing operations and creative new service offerings continue to set the stage for true cross-border trading functionality. We believe these competitive advantages, along with the recent pickup in market trading volumes, will drive new customer relationships and assets to Web Street," Fox concluded.
About Web Street
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 recently awarded a five star customer service rating in Money Magazine's "Best Online Brokers of 2000", in addition to four star ratings by Barron's in 1998 and 1999, as well as being 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 (1-800-932-8723).
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. Web Street has tried to identify these forward-looking statements by using words such as "will," "expect," "anticipate," "believe," "intend," 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 successfully manage its self-clearing operations, 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, 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. |
