Q2 results - Revenues Rise 38%; Accounts Grow 143%
TORONTO, May 10 /CNW/ - VERSUS Technologies Inc. (TSE, ME: V) today
reported continued strong revenue growth in the second quarter ended March 31,
1999, the Company's inaugural quarter as a public company. Revenues were $5.6
million for the second quarter, an increase of 38% over the second quarter of
1998. Fiscal year-to-date revenues were $10.6 million, an increase of 44% over
the prior year.
The significant growth in revenue was driven by VERSUS' retail trading
business, E*TRADE Canada, which contributed $1.8 million in revenue for the
second quarter, an increase of 230% over the second quarter of 1998, and up
64% from the first quarter of fiscal 1999. Fiscal year-to-date retail revenues
were $2.9 million, an increase of 206% over the same period in 1998.
The Company's institutional services business also had a successful
quarter, reporting revenues of $3.8 million for the second fiscal quarter, an
increase of 8% over the same period last year. Fiscal year-to-date
institutional revenues were $7.7 million, an increase of 20% over the same
period in 1998.
As anticipated, the Company incurred a loss in the second quarter as it
continued to invest in building the E*TRADE Canada business, focusing on an
account acquisition strategy that included major marketing expenditures during
the busy RRSP season and investments in technology and customer service. The
net loss for the second fiscal quarter was $1.7 million, or $0.23 per share
compared with a net loss of $1.2 million or $0.18 per share (adjusted for
share consolidation) for the second quarter of 1998. For the upcoming
quarters, the Company plans to continue to build its retail and institutional
businesses by investing in the development of a more robust and scalable
technology, network and customer service infrastructure. This investment will
better enable the Company to meet the requirements for anticipated growth in
both the E*TRADE Canada and institutional services businesses in the future.
''VERSUS Technologies is pleased with the continued strength of our
revenue growth,'' said Doug Steiner, VERSUS Chairman and Chief Executive
Officer. ''This growth reflects an important shift in the securities industry
paradigm. In the rapidly growing market for electronic securities trading,
VERSUS has built competitive systems, products and services for all market
participants. VERSUS is poised to lead the way in electronic trading as the
capital markets evolve.''
Operating expenses for the second quarter were $7.3 million, up from $5.2
million in the second quarter of 1998. Trading related variable expenses
increased in line with volume, accounting for 23% of the total increase in
expenses. Fiscal year-to-date expenses were $13.3 million, up from $9.4
million in the same period in 1998. Additional expenditures in compensation
and benefits and telecommunications and data of approximately 38% were
required to support new product enhancements and increased volumes for both
businesses. Consistent with the Company's plans for a continued focus on
E*TRADE Canada account acquisition, year-to-date selling and marketing
expenditures increased 30% over 1998.
VERSUS Technologies completed its Initial Public Offering of 3,650,000
common shares on March 12, 1999. The common shares were sold at a price of
$11.50 per common share. Gross proceeds were $41,975,000. These funds, net of
expenses, have been invested for the short term, substantially enhancing the
Company's financial position.
E*TRADE CANADA
In the second quarter, E*TRADE Canada added a record 3,030 new accounts
-- an increase of 157% over the number added in the second quarter of 1998.
The total number of accounts at quarter end was 11,164, an increase of 143%
from a year earlier.
The significant increase in revenues for the period was driven by a
record number of transactions processed. Over 40,000 transactions were
processed in the second quarter, 189% more than in the second quarter of 1998,
and 66% more than in the first quarter of 1999. Total assets held in customer
accounts reached almost $280 million at March 31, 1999, an increase of 190%
over assets at March 31, 1998.
''Canadians continue to place their confidence in E*TRADE Canada as a
pioneer in the movement towards Internet investing for individuals,'' noted
Colleen Moorehead, President of E*TRADE Canada. ''In a short period of time,
E*TRADE Canada has successfully established itself as a leading brand in
Canada's online investment industry.''
During the quarter, E*TRADE Canada continued its fast pace of innovation,
service enhancements and strategic business development, resulting in a sharp
increase in web site activity. Significant achievements included:
- Re-designing the web site for increased functionality and opening the
site to the public, enabling all investors to experience and compare
the extensive line-up of investment tools and resources;
- Launching E*STATION, the Canadian investment industry's first
self-guided online assistance centre;
- Signing a strategic letter of intent with Sympatico and renewing a
strategic alliance with AOL Canada to give their members direct linked
access to the E*TRADE Canada service;
- Receiving first place overall ranking for investors in the Directions,
Canadian Discount Broker Survey (www.ndir.com).
INSTITUTIONAL SERVICES
VERSUS' institutional services business continued to generate positive
operating earnings before depreciation and amortization and taxes of $454,000
in the second quarter, bringing year-to-date earnings to $1.4 million.
The VERSUS Network was used to implement trades equivalent to
approximately 13% of the combined total number of shares traded on The Toronto
Stock Exchange and the Montreal Exchange during the second quarter, up from
approximately 11% in the second quarter of 1998.
Institutional commissions were $2.7 million in the second quarter, an
increase of 5% over the second quarter of 1998. Year-to-date institutional
commissions were $5.4 million, an increase of 16% over 1998. Commission levels
reflect revenues from a broader client base, as the number of active
participants trading through VERSUS Brokerage Services Inc. increased by 5% in
the second quarter compared with the first quarter of 1999. Dealer fees
increased 6% from the second quarter of 1998 to $1.0 million in the second
quarter of 1999. Year-to-date dealer fees increased 22% over 1998 to $2.0
million, driven by increased terminal usage.
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, except Quebec. VERSUS Technologies Inc.
and VERSUS Brokerage Services Inc. are headquartered in Toronto, Canada.
VERSUS Brokerage Services Inc. is a member of the Toronto, Montreal, Vancouver
and Alberta stock exchanges, the Investment Dealers Association of Canada, and
the Canadian Investor Protection Fund.
E*TRADE Canada is a trademark of EçTRADE Securities, Inc. and is used
with their permission.
Financial Statements Follow
VERSUS TECHNOLOGIES INC.
Consolidated Balance Sheets
(thousands of dollars, unaudited)
March 31,
1999 1998
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ASSETS
CURRENT
Cash $ 3,953 $ 1,715
Short-term investments 41,107 3,856
Securities owned 42 165
RRSP funds in trust 15,288 -
Due from clients 76,920 26,539
Due from settlement agent 7,618 69,264
Accounts receivable and prepaid expenses 2,061 1,902
Income taxes receivable 47 294
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147,036 103,735
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CAPITAL ASSETS 1,752 1,223
OTHER ASSETS 2,683 3,835
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$ 151,471 $ 108,793
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LIABILITIES
CURRENT
Securities sold short $ 77 $ -
Due to clients 99,496 95,888
Due to settlement agent 21 165
Accounts payable and accrued liabilities 3,250 817
Current portion of Due to E*TRADE Group - 946
Unearned revenue 466 571
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103,310 98,387
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DUE TO E*TRADE Group - 1,123
SHAREHOLDERS' EQUITY
Share capital (11,034,603 shares,
1998 - 6,462,109 shares) * 71,331 21,886
Deficit (23,170) (12,603)
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48,161 9,283
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$ 151,471 $ 108,793
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* number of shares adjusted retroactively for effects of
share consolidation
VERSUS TECHNOLOGIES INC.
Consolidated Statements of Loss and Deficit
(thousands of dollars, except per share data, unaudited)
Three months ended Six months ended
March 31, March 31,
1999 1998 1999 1998
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REVENUE
Commissions $ 4,185 $ 2,986 $ 7,770 $ 5,357
Dealer fees 954 899 2,038 1,676
Interest and other income 478 176 758 314
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5,617 4,061 10,566 7,347
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EXPENSES
Compensation and benefits 2,230 1,684 3,890 3,093
Brokerage operations 1,942 1,121 3,525 1,999
Selling and marketing 890 820 1,680 1,295
Telecommunications and data 911 468 1,782 1,031
Administration and other 714 595 1,260 1,038
Depreciation and amortization 585 516 1,120 988
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7,272 5,204 13,257 9,444
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LOSS BEFORE INCOME TAXES (1,655) (1,143) (2,691) (2,097)
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PROVISION FOR INCOME TAXES 48 8 59 17
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NET LOSS (1,703) (1,151) (2,750) (2,114)
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DEFICIT, BEGINNING OF PERIOD (17,897) (11,452) (16,823) (10,489)
COSTS OF ISSUANCE OF SHARES (3,570) - (3,597) -
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DEFICIT, END OF PERIOD $ (23,170) $ (12,603) $ (23,170) $ (12,603)
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WEIGHTED AVERAGE SHARES
OUTSTANDING * 7,469,635 6,459,771 6,957,089 6,462,109
LOSS PER SHARE * $ (0.23) $ (0.18) $ (0.40) $ (0.33)
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* adjusted retroactively for effects of share consolidation
VERSUS TECHNOLOGIES INC.
Consolidated Cash Flow Statements
(thousands of dollars, unaudited)
Three months ended Six months ended
March 31, March 31,
1999 1998 1999 1998
--------------------------------------------
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES
OPERATING
Net loss $ (1,703) $ (1,151) $ (2,750) $ (2,114)
Non-cash items
Depreciation and
amortization 585 516 1,120 988
Net change in income taxes
receivable 28 (13) 51 (4)
Net change in other non-cash
working capital items 1,422 (352) 1,519 (413)
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332 (1,000) (60) (1,543)
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INVESTING
Purchases of capital assets,
net (638) (227) (1,224) (470)
(Investment in) proceeds from
VERSUS Employees' Option Trust 1,797 (42) 1,797 (38)
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1,159 (269) 573 (508)
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FINANCING
Issuance of shares for cash 41,975 - 41,975 -
Conversion of warrants for cash 200 - 200 -
Repurchase of shares from
VERSUS Employees' Option Trust (1,797) - (1,797) -
Costs of issuance of shares (3,570) - (3,597) -
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36,808 - 36,781 -
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INCREASE (DECREASE) IN CASH
DURING PERIOD 38,299 (1,269) 37,294 (2,051)
CASH, BEGINNING OF PERIOD 6,761 6,840 7,766 7,622
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CASH, END OF PERIOD $ 45,060 $ 5,571 $ 45,060 $ 5,571
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CASH IS COMPRISED OF:
Cash $ 3,953 $ 1,715 $ 3,953 $ 1,715
Short-term investments 41,107 3,856 41,107 3,856
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$ 45,060 $ 5,571 $ 45,060 $ 5,571
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VERSUS TECHNOLOGIES INC.
Consolidated Summary Segmented Information
(thousands of dollars, unaudited)
Six months ended March 31, 1999
E*TRADE Institutional
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Canada Investor Dealer Total
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Revenues from external
customers $ 2,799 $ 5,384 $ 2,056 $ 10,239
Interest revenue 109 109 109 327
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Total revenue 2,908 5,493 2,165 10,566
Expenses 5,831 4,571 1,735 12,137
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Operating income (loss) before
depreciation and
amortization $ (2,923) $ 922 $ 430 $ (1,571)
Depreciation and amortization 1,120
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Operating loss before income taxes $ (2,691)
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For further information: please call Amanda Ram, Chief Financial
Officer, VERSUS Technologies Inc., (416) 214-6244, or e-mail
investors@tradeit.com |
