The net loss for the first quarter ending December 31, 2000 was $2,249,597, or $0.26 per share. This compares to a net loss of $1,055,973, or $0.14 per share, in the comparable quarter ending December 31, 1999 and a net loss of $5,788,684, or $0.71 per share, in the fourth quarter ending September 30, 2000.
The Company’s gross revenues per account from its online trading business remained among the industry’s highest with the figure exceeding $411 per client for the quarter despite the market downturn. Meanwhile, acquisition cost per client, which includes all advertising and customer incentives, stood at $956 per net new account. A.B. Watley clients continue to be among the most lucrative in the industry, stated A.B. Watley’s Chief Financial Officer Joseph Ramos.
Mr. Ramos continued, The quarter was marked by low volumes and continued market volatility, which led to decreased customer activity. The decrease in trading volume impacted total revenues, as they remained relatively flat as compared to the previous year. During the quarter, approximately $2.6 million of cost savings resulted from the conversion of 75% of our UltimateTrader client base to our proprietary direct access trading platform. In the coming months, we will be transitioning an additional 700 clients of the remaining 1,200 yet to be transitioned, which will save on average $200 per customer per month. More importantly, on an EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) basis the Company experienced a modest loss of $663,071, or $0.08 per share, and is well positioned to be cashflow positive going forward.
Chairman and Chief Executive Officer Steven Malin commented, Given overall market conditions, I was pleased with the results for the first quarter, in particular the narrow EBITDA loss. We are now in the process of broadening our revenue stream through the implementation of our first major licensing arrangement (please visit our website or contact us for specific details) and are optimistic that we will see significant revenue from our B2B group in fiscal year 2002. This revenue will be realized after applying proceeds against the carrying value of our software development which is approximately $11.0 million.
Additionally, the Company is eliminating 28 positions, or approximately 20% of the work force, through attrition and layoffs. The cost savings resulting from the layoffs will total approximately $106,000 per month and the Company will have a one-time charge of $100,000. The decision was made as a result of volatile market conditions and the Company’s continued repositioning efforts as a software development firm. This cost cutting measure combined with other cost cutting measures should assist the Company in reaching positive cashflow going forward, Mr. Malin continued.
For the first quarter of fiscal year 2001, the Company’s breakdown of revenues for its three product lines: UltimateTrader(R), WatleyTrader(TM) and the Institutional Sales and Trading desk are as follows: UltimateTrader net revenue declined 16% as compared to the year ago period, contributing $5,537,180 in revenue. WatleyTrader generated $516,023 in revenue, an increase of 35%, and the Institutional Sales and Trading desk generated $2,209,632, an increase of 25.4%.
The Company experienced account growth during the twelve month period ending December 31, 2000 of 156.9%, with total funded customer accounts growing to 12,424. Total accounts grew 5.3% as compared to the fourth quarter ending September 30, 2000. The breakout of accounts on the two distinctive trading platforms is as follows: 5,181 UltimateTrader accounts, an increase of 70.3% from the year ago period, and 7,243 WatleyTrader accounts, an increase of 303.7% from the year ago period.
Market conditions led to a decrease in transactional volume during the quarter with total billable transactions at 298,050. This figure represents a 2.0% decrease from the year ago period and a 10.4% decrease as compared to the fourth quarter of fiscal 2000. During the first quarter of fiscal 2001 average daily trades were 4,731.
Total customer assets decreased 16.8% to approximately $266.4 million compared to the same period in fiscal 2000 and a 33.3% decline as compared to the fourth quarter of fiscal 2000. The average account balances for the Company’s two distinct trading platforms, UltimateTrader and WatleyTrader, stand at approximately $35,782 and $11,179, respectively.
A.B. Watley’s Institutional trading desk experienced another strong quarter of business with total revenue for the quarter at $2,209,632, an increase of 25.4%. I am extremely pleased with the continued growth of the Institutional trading desk in light of what was a very difficult market environment, stated Thomas Messina, Senior Vice President – Institutional Sales and Trading.
During The Quarter
A.B. Watley announced several major corporate achievements during the first quarter of fiscal 2001.
A.B. Watley announced on December 1st that E*TRADE Group Inc. licensed features of Watley’s proprietary ‘Direct Access’ trading software and will work together with A.B. Watley to create a customized trading product.
On October 11th, the Company announced the creation of a strategic alliance with Islandsbanki-FBA, which is the largest financial institution in Iceland offering a comprehensive range of financial services to individuals and corporate clients. Under the agreement, A.B. Watley, Inc. will provide Islandsbanki-FBA / ERGO customers the ability to invest and trade in all U.S. equities, equity options and mutual funds through Watley’s web-based systems.
On November 17th, the Company announced it would soon launch an upgraded version of WatleyTrader(TM). The upgraded platform will incorporate a ‘Direct Access’ trading system, including the ability to route orders to various ECNs and Alternative Trading Systems – ATSs. Other features include detailed real-time order status, real-time account balances and buying power, and real-time order execution updates.
