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Subject: E*TRADE Reports Third Quarter Earnings Increase of 114...
Date: Tue, 21 Jul 1998 17:49:58 EDT
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E*TRADE Reports Third Quarter Earnings Increase of 114 Percent on Revenue
Accelerating An Aggressive Growth Strategy; Now Among Top Ten Financial Sites
PALO ALTO, Calif., July 21 /PRNewswire/ -- E*TRADE Group, Inc. (Nasdaq:
EGRP), a leading branded provider of online investing services, today reported
revenues of $62.3 million for its third fiscal quarter of 1998, ended June 30,
the 24th consecutive quarter of revenue growth. Revenues were up 68 percent
from $37.0 million in last year's third quarter and up 17 percent from $53.3
million in the second quarter of this year.
Net income for the third quarter rose 114 percent to $6.6 million or $0.16 per
share, from $3.1 million or $0.09 per share in last year's third quarter and
up seven percent from this year's second quarter income of $6.1 million or
$0.15 per share.
"Our excellent financial performance was spurred by a surge in activity on our
Web site," said Christos M. Cotsakos, President and Chief Executive Officer of
E*TRADE Group, Inc. "Measured by traffic, E*TRADE is now one of the top three
financial services destination sites on the Internet and one of the top ten
financial destination sites of any type, according to Media Metrix, Inc., a
New York-based Web research firm. During the quarter the average value of
securities traded electronically through E*TRADE was $1.5 billion per week,
almost double the $800 million during the same quarter in 1997."
Total pages viewed at the E*TRADE Web site jumped to an average of 2.2 million
per day, up 57 percent from 1.4 million per day in the second quarter. The
site hosted 22.6 million visits during the quarter and was visited by an
average of 51,107 unique customers per day. Average customer time on the site
continued to be strong at roughly 4 hours per month.
"We expect overall traffic to increase even more in the fall when we
aggressively launch our new destination Web site with free content and
financial tools for the general public," said Cotsakos. The new E*TRADE
destination site which has now been rolled out to all 459,000 customers will
be publicly launched in early September through a major multi-media
advertising and direct response campaign. Increased traffic will come from
visitors, who can access all the information on the site; members, who can
receive enhanced research, track their portfolios and have access to E*TRADE's
new community features which include secure e-mail and chat rooms; and
customers, who can place trades, transfer funds, write checks, as well as
access premium services such as alerts, IPOs and institutional research. Both
this site and E*TRADE's new high performance proprietary Stateless
Architecture(SM) have been well received by customers and industry analysts
alike.
Accelerating An Aggressive Growth Strategy
"We have nearly $600 million available in cash and are one of the best
capitalized online investing companies in the world," said Cotsakos. E*TRADE's
nearly $200 million in cash and equivalents on the balance sheet will be
augmented by $400 million in cash under the terms of the recently announced
investment in the Company by SOFTBANK CORP., which is adding a 27.2 percent
strategic interest in E*TRADE to its substantial portfolio of holdings in
other premier Internet companies, such as 31 percent of Yahoo!, 35 percent of
GeoCities and 71 percent of Ziff-Davis, the company behind the ZDNet Web site.
The SOFTBANK financing is expected to close in early August.
"We are now implementing our growth strategy to establish our new Web site as
a premier global online investing destination site and financial services hub,
one that will be bookmarked by customers. Concurrent with the introduction of
this new site, we will begin to leverage alliances such as the one we recently
forged with America Online, as we pursue our goal to substantially increase
the rate of customer acquisition and grow market share," said Cotsakos.
Company plans call for heavy investments and expenditures over the next
several quarters, including aggressive marketing programs to build brand and
accelerate the growth of E*TRADE's customer base; strategic acquisitions; and
further infrastructure enhancements and research and development activities in
support of the E*TRADE global network.
"We are operating from a position of strength. Our current model has proven
to be highly effective, as our business is flourishing and our financial
position is solid. While our expenditures are expected to result in losses
over the near term through the next several quarters, they are planned to
significantly add to long-term shareholder value as we continue to secure our
leadership position in electronic commerce," said Cotsakos.
"Once again, we are changing the rules of engagement in this rapidly evolving
market," said Cotsakos. "With the industry as a whole at a major inflection
point, E*TRADE is the first all-electronic provider of Internet investing
services to make the substantial financial commitment required to lead the
industry to its next level of growth. Our strategy creates significantly
higher entry and secondary barriers than the early pioneering operating model
that launched E*TRADE and its subsequent imitators. By moving first to occupy
the high ground in the coming campaign for the loyalty of the online investor,
we expect to create a strategic and competitive advantage that will be
challenging for others to match."
Traditional Business Drivers Remain Strong
During the third quarter, the strength of the E*TRADE brand led to a dramatic
rise in the Company's share of the U.S. total equities and options markets.
E*TRADE's share of the equities market, which increased 26 percent
sequentially over the second quarter of fiscal 1998, has risen every quarter
since the Company went public in 1996. Despite market volatility, E*TRADE
customers continued to display strong activity, with total transaction volume
growing by 11 percent sequentially over the previous quarter.
The Company reported 1,837,000 transactions for the quarter or 29,155 per day,
up 79 percent from 1,043,000 or 16,300 per day in last year's third quarter
and up 11 percent from 1,597,000 or 26,200 per day in this year's second
quarter. Net new accounts increased by 56,000 to a total of 459,000, up 153
percent from 182,000 one year ago and up 14 percent from 403,000 at the end of
this year's second quarter. The annualized account retention rate remained at
roughly 95 percent during the third quarter. Customer assets under management
at the end of the quarter totaled $11.2 billion, up 104 percent from $5.5
billion one year ago and up 11 percent from $10.1 billion at the end of the
second quarter.
About E*TRADE
A leading branded provider of online investing services, E*TRADE has
established a popular destination Web site for self-directed investors. The
Company offers independent investors the convenience and control of automated
stock, options, and mutual funds order placement at low commission rates,
along with a suite of value-added products and services that can be
personalized, including portfolio tracking, Java-based charting and quote
applications, real-time market commentary and analysis, news, and other
information services.
Customers can access E*TRADE at etrade.com on the Internet as well
as through WebTV; via Prodigy; via AT&T Worldnet; via Microsoft Investor; by
GO ETRADE on CompuServe; with the keyword ETRADE on America Online; via
personal digital assistant; and via the TELE*MASTER interactive telephone
system. E*TRADE Securities, Inc., and its parent company E*TRADE Group, Inc.,
are headquartered in Palo Alto, Calif.
E*TRADE is a registered trademark of the Company. TELE*MASTER is a trademark
of E*TRADE Securities, Inc. All other trademarks are properties of their
respective owners. The statements contained in this news release that are
forward-looking are based on current expectations that are subject to a number
of uncertainties and risks, and actual results may differ materially. The
uncertainties and risks include, but are not limited to, changes in market
activity, market acceptance of the new E*TRADE Web site, anticipated increases
in the rate of new customer acquisition, seasonality, the development of new
products and services, the enhancement of existing products and services,
competitive pressures, system failures, economic and political conditions,
changes in consumer behavior, and the introduction of competing products
having technological and/or other advantages. Further information about these
matters can be found in the information included in the annual report filed by
the Company with the SEC on Form 10-K and quarterly reports on Form 10-Q.
E*TRADE GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Transaction revenues $43,418 $27,558 $118,880 $72,350
Interest - net 14,136 6,775 38,789 15,646
International 3,045 2,000 4,665 4,000
Computer services and
other 1,717 703 4,421 2,264
Net revenues 62,316 37,036 166,755 94,260
Cost of services:
Cost of services 28,722 17,500 75,749 43,123
Registration charge -- 4,334 -- 4,334
Total cost of
services 28,722 21,834 75,749 47,457
Operating expenses:
Selling and marketing 11,588 5,137 30,251 16,237
Technology development 5,605 2,501 15,762 7,031
Acquired in-process
research and development -- -- 2,756 --
General and
administrative 6,200 2,442 14,862 9,425
Total operating
expenses 23,393 10,080 63,631 32,693
Total cost of
services and
operating expenses 52,115 31,914 139,380 80,150
Pre-tax income 10,201 5,122 27,375 14,110
Income tax expense 3,641 2,054 9,783 5,728
Net income $6,560 $3,068 $17,592 $8,382
Basic net income
per share $0.17 $ 0.10 $ 0.45 $ 0.28
Diluted net income
per share $0.16 $ 0.09 $ 0.42 $ 0.24
Shares used in
computation of basic
net income per share 39,290 30,814 39,028 30,080
Shares used in
computation of diluted
net income per share 41,712 34,493 41,475 34,719
E*TRADE GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
June 30, September 30,
1998 1997
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $21,422 $21,814
Cash and investments required
to be segregated
under Federal or other
regulations 5,000 15,001
Investment securities 172,417 191,398
Brokerage receivables-net 1,131,081 724,365
Other assets 12,509 4,744
Total current assets 1,342,429 957,322
Property and equipment-net 41,176 18,802
Other assets 20,177 13,779
Total assets $1,403,782 $ 989,903
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Brokerage payables $1,034,430 $ 681,106
Bank loan payable 4,000 9,400
Accounts payable, accrued
liabilities and other 63,650 18,122
Total liabilities 1,102,080 708,628
Shareholders' equity 301,702 281,275
Total liabilities and
shareholders' equity $1,403,782 $ 989,903
SOURCE E*TRADE Group, Inc.
CO: E*TRADE Group, Inc.; SOFTBANK CORP.
ST: California
IN: CPR FIN
SU: ERN
07/21/98 17:40 EDT prnewswire.com
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