E*TRADE Reports Strong First Quarter Results, Driven by Proven Business Fundamentals
Net Revenues Grow 112 Percent Over a Year Ago to $246 Million
330,000 Net New Active Accounts, up 150 Percent; Customer Assets Rise 190 Percent to $44 Billion
First Quarter 2000 Highlights:
-- E*TRADE Brand Drives Growth, Momentum
-- Continued International Expansion
-- Digital Financial Media Leverages Progress in Technology,
CRM, Content
-- Telebanc Close on January 12 Lays Foundation for E*TRADE
Bank, Creates Combined 2 Million Accounts
MENLO PARK, Calif., Jan. 19 /PRNewswire/ --
E*TRADE Group, Inc. (Nasdaq: EGRP) continued its robust growth in the first quarter of fiscal 2000, achieving record results in revenue, accounts, assets and average transactions per day. For the first quarter ended December 31, 1999, revenue grew to $246 million, up 112 percent from $116 million for the same period a year ago, and up 42 percent from $173 million in the fourth quarter of fiscal 1999. E*TRADE continued distancing itself from the field of competitors and acquired 330,000 net new accounts during the first quarter, bringing its total active accounts to nearly 1.9 million. At the same time, E*TRADE continued to maximize the efficiency of its marketing activities by maintaining one of the lowest acquisition costs per net new account in the industry. Average transactions per day increased to 133,000, up 208 percent from 43,000 a year ago, and 65 percent from 80,000 in the fourth fiscal quarter of 1999.
"E*TRADE is not just building a powerful blue-chip brand, we're creating the leading electronic financial services company for the 21st Century," said Christos M. Cotsakos, chairman of the board and chief executive officer of E*TRADE Group, Inc. "Our first quarter results demonstrate the strength of E*TRADE's business model. This record performance also illustrates our ability to execute against our plan and deliver strong results, in all kinds of markets, and amidst competition from all sides. In fact, during a quarter in which competitors significantly increased their promotional spending, our estimates indicate that we continued to gain market share. By building a powerful financial destination for consumers, we are delivering consistent value to our shareowners, Associates and business partners."
During the quarter, E*TRADE continued to accelerate its revenue diversification strategy. The Company doubled investment banking revenue by offering more public offerings to online investors than anyone else in the industry. E*TRADE allocated shares in more than 60 public offerings to customers during the quarter, compared to 33 public offerings in the previous quarter. E*TRADE's Business Solutions Group also played an integral part in expanding the Company's revenue streams. As E*TRADE's standalone business to business unit, the Business Solutions Group provides a growing array of products to over 3,000 corporate clients, and also offers E*TRADE important cross-selling opportunities.
E*TRADE doubled advertising revenues booked in the quarter over the previous quarter, by leveraging its position as the most visited online investing site, as ranked by Media Metrix. Total page views in the quarter were 891 million, up 239 percent from 263 million in the same quarter a year ago and up 30 percent from 686 million in the fourth quarter of fiscal 1999. In addition, with the recent close of the Telebanc acquisition, domestic retail transaction revenue going forward will represent well under 50 percent of gross revenues.
Financial Results
Continuing its strategy of investing in technology and service infrastructure, and building a powerful brand and customer mind-share to drive future growth, E*TRADE incurred a net loss from ongoing operations of $38.1 million, or $0.15 per share, as compared to a net loss of $11.6 million or $0.05 per share for the same period a year earlier.
The Company recognized non-operating charges for expenses incurred in the current quarter related to merger and acquisition activity, and to amortization of goodwill, totaling $3.8 million after tax, or $0.02 per share. In addition, the Company continued its plan to periodically liquidate portions of its strategic investment portfolio and realized an after-tax gain in the current quarter of $19.9 million or $0.08 per share, which compares to an after-tax gain in the fourth quarter of fiscal 1999 of $7.5 million. The Company also recorded $16.8 million or $0.07 per share, after tax, in unrealized gains on its participation in venture funds. These items are reflected in non-operating income (expense). Including all non-operating items, the total net loss as reported for the first quarter of fiscal 2000 was $5.2 million, or $0.02 per share (see table below).
Reconciliation of net after-tax loss from ongoing operations to net loss as reported
Net after-tax amount
in millions per share
Net after-tax loss from
ongoing operations $ (38.1) $ (0.15)
Gain on sale of investments 19.9 0.08
Unrealized gain on venture funds 16.8 0.07
Non operating merger related expenses,
amortization of goodwill, and other (3.8) (0.02)
Net loss after tax applicable
to common stock $ (5.2) $ (0.02)
Key Performance Metrics
The Company continued to maximize the efficiency of its marketing activities and strong brand momentum, as evidenced by the acquisition of 330,000 net new accounts during the quarter, with one of the lowest acquisition costs per account in the industry, of $289. This compares to 310,000 net new accounts and an acquisition cost per net new account of $198 in the previous quarter, and 132,000 net new accounts and an acquisition cost per net new account of $287 in the same period a year earlier.
"During the past quarter, our competitors increased their ad spending as they continued to try to keep up with our marketing success, but they just cannot match our brand momentum," said Cotsakos. "By effectively monetizing our traffic and site stickiness, we have been able to maintain one of the lowest cost per accounts in the industry, while competitors are spending upwards of $700 per account. Our site attracted more than 2.2 million unique visitors to experience E*TRADE in November alone."
Assets held in customer accounts as of December 31, 1999, were $44 billion, up 190 percent versus $15 billion in the same quarter last year and up 55 percent over $28 billion in the fourth quarter of fiscal 1999. Total transactions in the quarter were 8.5 million, up 208 percent from 2.8 million in the same quarter a year earlier, and up 65 percent from 5.1 million in the fourth quarter of 1999. The Company executed a daily average of 133,000 transactions during the quarter, compared to 43,000 in the same quarter a year ago and 80,000 in the previous quarter. (See table below for more detailed performance metrics.)
Key Metrics - First Quarter 2000 Results
Key Metric 1Q00 1Q99 1Q00 v 4Q99 1Q00 v
1Q99 4Q99
Total active accounts
end of period 1,881,000 676,000 178% 1,551,000 21%
Total transactions 8.5 million 2.8 million 208% 5.1 million 65%
Average
transactions/day 133,000 43,000 208% 80,000 65%
Total assets
in customer
accounts $44.1 billion $15.2 billion 190% $28.4 billion 55%
Customer money
market fund
balance $6.3 billion $2.6 billion 145% $4.7 billion 34%
Total quarterly
deposits $5.3 billion $1.8 billion 189% $3.7 billion 42%
Total quarterly
page views 891 million 263 million 239% 686 million 30%
Average daily
page Views 9.7 million 2.9 million 239% 7.5 million 30%
Time on site* (minutes) 60 ** 40*** 52% 51 18%
Reach* 3.5%** 1.9% 84% 2.5% 40%
* Source: Media Metrix, November 1999.
** 1Q00 numbers are based on November 1999 results.
*** 1Q99 number is based on October and December 1998 results.
Telebanc Merger
On January 11, 2000, The Office of Thrift Supervision (OTS) granted final approval for E*TRADE Group, Inc.'s acquisition of Telebanc Financial Corporation, the parent company of Telebank, the largest pure-play Internet bank in the US. The merger was closed on January 12, 2000.
Telebanc today announced that it crossed the threshold of $2.6 billion in customer deposits and total customer accounts of 130,000. As a result of Telebanc's growth, its deposit base is four times larger than all other pure-play Internet banks combined. The acquisition strongly positions E*TRADE to further expand its customer base, while enabling the Company to capture an even greater share of wallet through increased product and service offerings.
Through the new E*TRADE Bank, customers will have access to a distinctive, powerful online financial management experience. The Company plans to offer customers a fully integrated capability -- online banking through an FDIC-insured cash management account, and online investing, thereby reducing the need for multiple financial relationships. E*TRADE customers will be able to complete a full range of transactions online -- including paying bills, trading equities and purchasing mutual funds, CDs, and fixed-income securities. The merger will also diversify and strengthen E*TRADE's revenue base, building on the Company's current asset management businesses.
E*TRADE's Asset Aggregation Gathers Momentum
E*TRADE attracted $83 million in average daily deposits, 189 percent over $29 million in the quarter a year ago and 42 percent over $52 million last quarter, bringing total assets under management to $44 billion. Mutual fund assets under management at E*TRADE grew 70 percent in the quarter, with the launch of two new proprietary mutual funds, the E*TRADE E-Commerce Index Fund and the E*TRADE International Index Fund. The Company will continue to develop asset-allocation oriented products, including the soon to be launched E*TRADE Premier Money Fund later this month.
As part of its evolving strategy to provide its customers with an even broader range of financial products and services, E*TRADE recently announced an equity investment in Financial Engines, as well as a marketing agreement with DirectAdvice.com, to integrate the DirectAdvice financial planning module into the Company's web site. E*TRADE is bringing its customers the personalized financial information they want with the immediacy they need, by delivering it across the electronic platform. The DirectAdvice product is expected to be integrated into the E*TRADE web site during the first half of calendar year 2000.
International Expansion
The Company continued its international expansion during the first quarter, by announcing joint ventures in Korea, Germany, and South Africa, as well as the purchase of E*TRADE UK, E*TRADE Nordic AB and E*TRADE NetBourse. E*TRADE currently has branded sites serving customers in seven countries outside of the U.S.: Canada, Australia, New Zealand, France, Japan, Sweden, and the United Kingdom. Consolidation of its foreign joint partners and affiliates allows E*TRADE to capitalize on the growth potential represented by international markets.
E*TRADE Japan, which was launched at the beginning of the first quarter, has already grown to 47,000 accounts, with over $4 billion in customer assets. E*TRADE Australia also experienced high growth with trading volume up by over 80 percent from the previous quarter. E*TRADE Australia now accounts for about 27 percent of online trades executed on the Australian Stock Exchange. Customer accounts grew in Australia by 32 percent to 34,000. While these metrics are not consolidated in the results of E*TRADE Group, they demonstrate the global strength of the E*TRADE brand.
Global and institutional revenues reached $34 million in the first quarter and consist primarily of revenues from TIR Holdings. During the quarter, E*TRADE made significant progress in integrating its 1999 acquisition of TIR Holdings. The new E*TRADE International/TIR operation is playing a central role in the Company's strategy to build the first fully electronic global cross-border trading network. As the Company continues its revenue diversification efforts, it anticipates that international growth, in addition to increased revenues from an expanding institutional customer base, to be a key driver of this strategy.
Digital Financial Media
E*TRADE continued to drive its Digital Financial Media (DFM) strategy during the first quarter, with a goal to deliver the ultimate customer experience, anytime, anywhere, from any device, by developing the technology backbone for the new Personal Financial Information Manager. This technology will become the foundation for several new multi-platform product releases later this year. Together with robust profiling algorithms that are designed to anticipate a user's needs, the Personal Financial Information Manager will enable investors to develop a "command center" for managing and tracking financial information and events online in real time.
During the first quarter, a new community with ClearStation was introduced with greater functionality into E*TRADE, further consolidating financial services, tools and content. ClearStation also completed a major site upgrade that expanded fundamental information and analysis, increased community idea- sharing functionality, and an event tracking application called "3-Point View," a snapshot of key fundamental, technical and community "events" impacting every stock.
The DFM strategy is being fueled by the expansion of E*TRADE's Customer Relationship Management (CRM) initiative and Customer Information Systems (CIS) data warehouse. Through its expanded CRM initiative, the Company has developed personalized, one-to-one communications through extensive direct mail and e-mail campaigns. With its predictive modeling capabilities, CRM is expected to significantly increase E*TRADE's ability to increase transactions and assets per account for new and existing customers through targeted cross- sell, up-sell support and asset consolidation opportunities. The Company also intends to leverage this powerful customer learning capability to help improve customer relationships, refine targeted service offerings, and further reduce account acquisition costs
|
