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 2006 | 2005 | 2004 | 2003 Archipelago Announces Fourth Quarter and 2004 Year End Results -- Fourth Quarter Sees Continued Revenue Growth; Highlights for 2004 Include Highly Successful IPO -- CHICAGO, Jan. 21 /PRNewswire-FirstCall/ -- Archipelago Holdings, Inc. (PCX: AX), owner and operator of the Archipelago Exchange(R) (ArcaEx(R)), the nation's first totally open, all-electronic stock exchange, reported net income attributable to common stockholders of $59.3 million, or $1.38 per diluted share, for the year ended December 31, 2004, compared to $1.8 million, or $0.05 per diluted share, for the year ended December 31, 2003. On a sequential basis, for the fourth quarter of 2004, net income was $12.5 million, or $0.26 per diluted share, up from $7.5 million, or $0.17 per diluted share, reported for the third quarter of 2004. Total revenues for the fourth quarter of 2004 were $138.7 million as compared to $127.1 million for the third quarter of 2004 and $131.4 million for the fourth quarter of 2003. Jerry Putnam, Chairman and CEO of Archipelago, commented, "The fourth quarter proved to be another solid quarter for Archipelago. We've been able to produce consistent results by focusing on cost efficiencies, such as completing the move to self-clearing for our routed trades and by remaining committed to providing our customers with enhanced tools and resources for trading." Full-Year Results Total revenues for 2004 were $541.3 million, up 18.1% from $458.3 million in 2003. Net income attributable to common stockholders was $59.3 million, which compares to net income of $1.8 million in 2003. Diluted earnings per share for 2004 totaled $1.38 versus $0.05 in 2003. "2004 was an outstanding year for Archipelago," Putnam commented. "We believe we remained at the forefront of innovation and progress in the electronic trading environment, much to the benefit of our company and the investment community as a whole. Early successes in 2005 -- from our announced acquisition of the PCX and its options business to AIG's dual listing -- suggest we are in a position to make an even greater impact in the year ahead." Fourth Quarter Financial Highlights
Fourth Quarter Business and Volume Highlights
Fiscal 2004 Business and Volume Highlights
Archipelago Holdings, Inc. (PCX: AX) owns and operates the Archipelago Exchange (ArcaEx). ArcaEx is the first totally open all-electronic stock market in the United States. Through its alliance with the Pacific Exchange, Inc., Archipelago operates ArcaEx as the exclusive equities trading facility of PCX Equities, Inc. Through ArcaEx, Archipelago customers can trade over 8,000 equity securities, including securities listed on the New York Stock Exchange(R), Nasdaq(R), American Stock Exchange(R) and Pacific Exchange(R). ArcaEx is regulated by the Pacific Exchange. Archipelago Holdings, Inc., announced on January 3, 2005 that the company had entered into a definitive agreement to acquire PCX Holdings, Inc., parent company of the Pacific Exchange and PCX Equities, Inc. Certain statements in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on Archipelago's current expectations and involve risks and uncertainties that could cause Archipelago's actual results to differ materially from those set forth in the statements. There can be no assurance that such expectations will prove to be correct. Factors that could cause Archipelago's results to differ materially from current expectations include without limitation: general economic and business conditions, industry trends, competitive conditions, regulatory developments as well as other risks identified in Archipelago's Prospectus, dated August 12, 2004, filed with the Securities and Exchange Commission, which is available on Archipelago's website. This press release is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Archipelago Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended
December 31, September 30, December 31,
2004 2004 2003
(unaudited)
Revenues
Transaction fees $120,392 $112,738 $121,174
Market data fees 18,141 14,285 10,143
Listing fees 121 118 42
Total revenues 138,654 127,141 131,359
Cost of revenues
Liquidity payments 51,696 47,504 48,630
Routing charges 21,563 20,289 24,563
Clearance, brokerage and
other transaction expenses 6,828 8,888 12,769
Total cost of revenues 80,087 76,681 85,962
Gross margin 58,567 50,460 45,397
Gross margin as a % of total
revenues 42.2% 39.7% 34.6%
Indirect expenses
Employee compensation
and benefits 11,041 10,589 10,782
Depreciation and amortization 5,452 4,976 11,020
Communications 5,380 5,058 4,218
Marketing and promotion 7,979 7,825 2,746
Legal and professional 2,908 2,736 1,729
Occupancy 1,412 1,211 1,025
General and administrative 4,834 3,215 2,023
Total indirect expenses 39,006 35,610 33,543
Operating income 19,561 14,850 11,854
Interest and other, net 1,235 950 553
Income before income tax expense
(benefit) 20,796 15,800 12,407
Income tax expense (benefit) 8,271 (1,315) -
Net income 12,525 17,115 12,407
Deemed dividend on convertible
preferred shares - (9,619) -
Net income attributable to common
stockholders $12,525 $7,496 $12,407
Per share data:
Basic income before income tax
expense (benefit) per share $0.44 $0.38 $0.34
Basic income tax expense (benefit)
per share (0.18) 0.03 -
Basic net income per share 0.27 0.41 0.34
Basic deemed dividend per share - (0.23) -
Basic net income attributable to
common stockholders
per share, GAAP $0.27 $0.18 $0.34
Diluted income before income tax
expense (benefit) per share $0.44 $0.36 $0.32
Diluted income tax expense (benefit)
per share (0.17) 0.03 -
Diluted net income per share 0.26 0.39 0.32
Diluted deemed dividend per share - (0.22) -
Diluted net income attributable to
common stockholders
per share, GAAP $0.26 $0.17 $0.32
Basic weighted average shares
outstanding (a) 47,137 41,640 36,169
Diluted weighted average shares
outstanding (a) 47,635 43,994 38,275
(a) Adjusted to reflect our recapitalization from a Delaware limited
liability company to a Delaware corporation on August 11, 2004.
Archipelago Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended
December 31,
2004 2003
(unaudited)
Revenues
Transaction fees $484,208 $428,428
Market data fees 56,598 29,461
Listing fees 445 449
Total revenues 541,251 458,338
Cost of revenues
Liquidity payments 200,655 152,834
Routing charges 90,364 115,050
Clearance, brokerage and
other transaction expenses 39,141 65,717
Total cost of revenues 330,160 333,601
Gross margin 211,091 124,737
Gross margin as a % of total revenues 39.0% 27.2%
Indirect expenses
Employee compensation and benefits 42,794 39,986
Depreciation and amortization 26,680 30,530
Communications 19,598 20,687
Marketing and promotion 20,286 8,267
Legal and professional 11,520 8,611
Occupancy 4,609 4,155
General and administrative 12,605 11,668
Total indirect expenses 138,092 123,904
Operating income 72,999 833
Interest and other, net 2,897 940
Income before income tax expense
(benefit) 75,896 1,773
Income tax expense (benefit) 6,956 -
Net income 68,940 1,773
Deemed dividend on convertible
preferred shares (9,619) -
Net income attributable to common
stockholders $59,321 $1,773
Per share data:
Basic income before income tax expense
(benefit) per share $1.88 $0.05
Basic income tax expense (benefit) per
share (0.17) -
Basic net income per share 1.71 0.05
Basic deemed dividend per share (0.24) -
Basic net income attributable to
common stockholders
per share, GAAP $1.47 $0.05
Diluted income before income tax
expense (benefit) per share $1.77 $0.05
Diluted income tax expense (benefit)
per share (0.16) -
Diluted net income per share 1.61 0.05
Diluted deemed dividend per share (0.22) -
Diluted net income attributable to
common stockholders
per share, GAAP $1.38 $0.05
Basic weighted average shares
outstanding (a) 40,301 36,169
Diluted weighted average shares
outstanding (a) 42,915 36,980
(a) Adjusted to reflect our recapitalization from a Delaware limited
liability company to a Delaware corporation on August 11, 2004.
Archipelago Holdings, Inc.
Consolidated Statements of Financial Condition
(In thousands)
December 31, December 31,
2004 2003
Assets (unaudited)
Current assets:
Cash and cash equivalents $177,878 $111,815
Accounts receivable, net 73,126 77,214
Total current assets 251,004 189,029
Fixed assets, net 49,495 49,753
Goodwill 131,865 129,666
Other intangible assets, net 92,169 93,796
Deferred tax asset, net 1,701 -
Other assets 8,076 3,648
Total assets $534,310 $465,892
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
expenses $71,892 $104,372
Current portion of note payable
and capital lease obligations 1,545 4,089
Total current liabilities 73,437 108,461
Note payable - 2,593
Capital lease obligations - 1,545
Total liabilities 73,437 112,599
Redeemable convertible preferred
shares - 50,000
Stockholders' equity
Members' equity - 303,293
Common stock 471 -
Additional paid-in capital 451,625 -
Unearned stock-based compensation (19) -
Retained earnings 8,796 -
Total stockholders' equity 460,873 303,293
Total liabilities and stockholders'
equity $534,310 $465,892
Archipelago Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended
December 31,
2004 2003
Cash flows from operating activities (unaudited)
Net income $68,940 $1,773
Adjustments to reconcile net income to
net cash provided
by operating activities:
Depreciation and amortization 25,053 29,445
Amortization of other intangible
assets 1,627 1,085
Provision for doubtful accounts (900) 8,020
Deferred taxes (1,701) -
Stock-based compensation 151 334
Tax benefit from stock option
exercises 18 -
Gain on sale of investment owned - (232)
Changes in operating assets and
liabilities:
Accounts receivable 4,988 (40,977)
Other assets (4,428) 1,172
Accounts payable and accrued
expenses (32,480) 30,774
Net cash provided by operating
activities 61,268 31,394
Cash flows from investing activities
Additions to fixed assets (24,795) (23,361)
Proceeds from sale of investments - 2,202
Net cash used in investing activities (24,795) (21,159)
Cash flows from financing activities
Proceeds from initial public offering,
net of underwriting discounts 67,646 -
Direct costs of initial public
offering (6,777) -
Cash distribution to former Members (24,613) -
Proceeds from exercises of stock
options 16
Proceeds from issuance of redeemable
convertible preferred shares - 50,000
Costs related to issuance of
redeemable convertible preferred
shares - (1,636)
Proceeds from issuance of note payable - 5,681
Repayments of note payable (4,429) (1,252)
Principal payments under capital lease
obligations (2,253) (177)
Net cash provided by financing
activities 29,590 52,616
Net increase in cash and cash
equivalents 66,063 62,851
Cash and cash equivalents at beginning
of year 111,815 48,964
Cash and cash equivalents at end of
year $177,878 $111,815
Archipelago Holdings, Inc.
Operating Data
(unaudited)
Three months ended Year Ended
December September December
31, 30, 31, December 31,
2004 2004 2003 2004 2003
Trading Days 64 64 64 252 252
Total U.S. market volume
(millions of shares)(1) 260,045 220,785 238,011 990,511 926,500
Our total U.S. market
volume
(millions of shares)(1) 36,168 32,793 33,955 140,306 116,800
Our share of total U.S.
market volume(1)(2) 13.91% 14.85% 14.27% 14.17% 12.61%
% of handled shares
matched internally(3) 10.84% 11.50% 10.73% 10.85% 8.58%
% of handled shares
routed out(3) 3.07% 3.35% 3.54% 3.32% 4.03%
Total volume of
Nasdaq- listed securities
(millions of shares) 121,008 99,636 112,636 455,550 424,607
Our total volume of
Nasdaq-listed securities
(millions of shares) 28,682 26,460 30,253 115,008 104,312
Our share of total
volume of Nasdaq-listed
securities(2) 23.70% 26.56% 26.86% 25.25% 24.57%
% of handled shares
matched internally(3) 18.26% 20.31% 20.29% 19.20% 16.78%
% of handled shares
routed out(3) 5.44% 6.25% 6.57% 6.05% 7.79%
Total volume of
NYSE-listed securities
(millions of shares) 120,810 104,025 107,901 460,455 439,608
Our volume in NYSE-listed
securities (millions of
shares) 2,828 1,843 1,245 8,375 4,904
Our share of total volume of
NYSE-listed securities(2) 2.34% 1.77% 1.15% 1.82% 1.12%
% of handled shares
matched internally(3) 1.69% 1.22% 0.70% 1.21% 0.54%
% of handled shares
routed out(3) 0.65% 0.55% 0.45% 0.61% 0.58%
Total volume of AMEX-listed
securities
(millions of shares) 18,227 17,124 17,474 74,506 62,285
Our volume in AMEX-listed
securities
(millions of shares) 4,658 4,490 2,457 16,924 7,585
Our share of total volume on
AMEX-listed secutities(2) 25.56% 26.22% 14.06% 22.71% 12.18%
% of handled shares
matched internally(3) 22.28% 22.74% 11.12% 19.45% 9.41%
% of handled shares
routed out(3) 3.28% 3.48% 2.94% 3.26% 2.77%
Our ETF volume
(millions of shares) 4,618 4,190 1,969 15,637 6,349
Our U.S. equity
transaction volume
(thousands of
transactions) 112,255 103,543 87,591 416,629 295,107
Our average U.S. equity
transaction size
(shares per transaction) 322 317 388 337 396
Our average U.S. equity
transactions per day
(thousands of
transactions) 1,754 1,618 1,390 1,653 1,176
Our average transaction-
related revenue
(per share)(4) $0.0033 $0.0034 $0.0036 $0.0035 $0.0037
Our average transaction-
related cost of revenue
(per share)(5) $0.0020 $0.0021 $0.0022 $0.0021 $0.0023
Our average transaction-
related gross margin
(per share)(6) $0.0013 $0.0013 $0.0014 $0.0014 $0.0014
% of customer order volume
matched internally(7) 87.4% 87.1% 85.5% 86.6% 80.6%
% of customer order volume
routed out(7) 12.6% 12.9% 14.5% 13.4% 19.4%
(1) U.S. market volume is calculated based on the number of shares of
equity securities traded on the NYSE, AMEX and Nasdaq, including
exchange-traded funds, as reported in the consolidated tape. The
"consolidated tape" is the system that continuously provides the last
sale price and volume of securities transactions in listed securities
to the public.
(2) Our market share is calculated based on the number of shares handled
on the Archipelago system as a percentage of total volume. For
example, if a customer's 10,000 share buy order is matched with
another customer's 10,000 share sell order in our internal liquidity
pool, our handled volume will be 10,000 shares. If the buy or sell
order were routed out, our handled volume would still be 10,000
shares.
(3) Represents our share of the total volume of such securities handled
on ArcaEx that was either matched internally on ArcaEx or routed out
to an external market center.
(4) The per share amount is calculated based on our total revenues
derived from transaction fees of $120.4 million, $112.7 million and
$121.2 million for the three months ended December 31, 2004,
September 30, 2004 and December 31, 2003, respectively, and $484.2
million and $428.4 million for the years ended December 31, 2004 and
and 2003, respectively.
(5) The per share amount is calculated based on our cost of revenues
derived (from transaction fees, which consist of routing charges and
liquidity) payments, of $73.3 million, $67.8 million and $73.2
million for the three months ended December 31, 2004, September 30,
2004 and December 31, 2003, respectively, and $291.0 million and
$267.9 million for the years ended December 31, 2004 and 2003,
respectively, and our total U.S. market volume for the relevant
period. The cost of revenue from transaction fees used in the per
share computation does not include clearance, brokerage and other
transaction expenses.
(6) The per share amount is calculated based on our net revenues received
from transaction fees, and our total U.S. market volume for the
relevant period.
(7) The percentage of customer order volume matched internally is
calculated by dividing the volume of customer orders executed within
our internal liquidity pool (including the volume of both buy orders
and sell orders) by the total volume of customer orders (again
including the volume of both buy orders and sell orders when such
orders are matched internally). The percentage of customer orders
routed out is calculated by dividing the volume of customer orders
routed to other market centers by the total volume of customer
orders.
Contacts: SOURCE Archipelago Holdings, Inc. 01/21/2005CONTACT: (Press) - Margaret Nagle, +1-312-442-7083, or (Investor Relations) - Patrick Murphy, +1-312-442-7005, both for Archipelago Holdings, Inc. Web site: http://www.archipelago.com (AX) "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Archipelago Holdings, Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year. |
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