Investor Presentation - February David Kalt, CEO David Fisher, CFO

Transcription

1 Investor Presentation - February 2006 David Kalt, CEO David Fisher, CFO

2 Forward-Looking Statements. This presentation may contain forward-looking statements. These statements relate to future events or our future financial performance rmance and involve known and unknown risks. We urge you to carefully consider these risks in evaluating the information in this presentation, including ing risks related to general economic conditions, regulatory developments, the competitive landscape, the volume of securities trading generally or by our customers specifically and other risks described in our filings with the Securities S and Exchange Commission. In some cases, you can identify forward- looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events s or results may differ materially. The forward-looking statements made in this presentation relate only to events as of the date of this presentation. We undertake no ongoing obligation to update these statements. 2

3 Welcome to Xpress. Leading online broker focused on retail investor Started opening accounts in cash flow positive within 1 year IPO in January 05 (Nasdaq( OXPS). Current Mkt Cap - $1.8B 167,100 customer accounts as of 1/31/06 32,700 Daily Average Revenue Trades (DARTs) in January Record financial results in 4Q Company Overview 60% DART growth vs. 4Q04 (peer average = 10%) 1 60% account growth vs. 4Q04 (peer average = 0%) 1 Pretax margin of 64% (peer average = 39%) 1 Barron s s #1 Online Broker three years in a row Ranked #10 in the Inc 500 List of Fastest Growing Companies 1 Peers include Ameritrade, E*Trade and Schwab. E*Trade DART and Account growth excluded due to acquisition impact 3

4 . Key Investment Themes

5 Key Investment Themes Rapidly Growing Market Attractive Customers and Product Additional Growth Channels Robust Market with Great Momentum Industry- Leading Platform Differentiated and Efficient Technology Persistent Innovation High Value Interface at a Low Price High Growth and Highly Profitable 5

6 . Robust Market

7 . Robust Market with Great Momentum Option Market is Large, Broad-Based and Growing Opportunity for OXPS is large. Less than 6% market share of total retail option contract volume 1,400..and growing quickly 3 Total Daily Estimated Retail Contract Volume = 3.0MM Contracts 1 ~4% of online accounts 2 Market Buzz Electronic market development Growing customer acceptance Bulge-bracket investment in PHLX NYSE entering market via ARCA 4 of 5 biggest volume trading days in January Xpress U.S. Listed Equity Options Contracts (MM) 1,200 1, CAGR CAGR = 23% 23% Based on a 50% assumption for retail market share of 2005 volume, estimated from industry sources 2 Based on management estimates 3 Options Clearing Corporation 7

8 . Robust Market with Great Momentum Attractive Demographics and Great Product Dynamics High Net Worth/ High Income 1 50% 40% 30% 20% 10% 0% Net Worth of Options Traders <$100K $100K- $250K $250K- $500K >$500K 60% have net worth > $250K 50% earn > $100K annually 50% are over 55 years old More Active Traders % of Traders >50 Equity Trades/Year 1 50% 40% 30% 20% 10% 0% Options Traders Non-Option Traders Xpress customers traded at a rate of 39 trades/year in 4Q vs. 9 trades/year at peers 2 Nature of Options Promotes More Consistent Trading than Equities Recurring trading due to expirations Strategies to make money in all markets Many strategies require multiple legs,, or positions 1 The Options Industry Council Harris Interactive Study April, Based on responding participants 2 Company Reports. Peers include Ameritrade, E*Trade and Schwab 8

9 . Industry-Leading Platform

10 Industry-Leading Platform Differentiated and Efficient Technology. Focus on the Three E s E Education Differentiated Customer-focused interface Unique trading tools Cutting-edge position management and order execution Efficient Execution Customer Experience Evaluation Low cost and highly scalable DART capacity double current peak volumes. Marginal costs to scale Persistent Innovation Evaluation tools Active trader platform Cash management tools Security 10

11 Industry-Leading Platform Customer Interface. 11

12 Industry-Leading Platform Customer Interface. 12

13 . Low-Cost Growth

14 Significant Growth Opportunity Organic Growth A Growing Share of a Growing Market Customer Referrals #1 Source of New Accounts Channel Partners Missionary Marketers Traditional Advertising Technology Partners Public Relations Barron s, SmartMoney, Forbes Frequently quoted as industry experts by the media Online Advertising Highly targeted Rigorous analytics/fine-tuning tuning Leveraging the Platform Additional Channels and Products 14

15 Growth at a Low-Cost Advertising Expense/ Net New Account Xpress $93 E*Trade $598 Ameritrade $855 Schwab Net loss of accounts $0 $200 $400 $600 $800 $1,000 Source: Company Reports. Net new accounts=change in accounts. ET excludes acquisitions analyst estimates 15

16 . Performance Overview

17 Demonstrated Profitability and Growth Consistent Top-line and Bottom-line Growth Annual Results CAGR Revenue Net Income % 123% Net Income Revenue $129.0 ($ in millions) (20) $93.1 $48.2 $48.7 $31.2 $2.1 $4.4 $17.3 ($1.4) $ Pre-Tax Margin: NM 36% 56% 56% 62% 17

18 Demonstrated Profitability and Growth Highly Profitable Growth Model Top-line Leverage Robust option market growth Product that promotes repeat/multiple purchases High average commissions Bottom-line Leverage Low account acquisition costs Efficient Operations Scalable Technology High Revenue, High Margins, High Growth 18

19 Demonstrated Profitability and Growth Strong Growth in Accounts and DARTS Indexed Growth in Accounts DART Growth (1Q04 4Q05) 150% 125% 131% 100% 80% 77% 100% 60% 75% 50% 40% 20% 29% 25% 0% 9% 7% -5% 0% -20% 0% -25% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q OXPS AMTD ET SCHW -40% -26% OXPS AMTD ET SCHW Source: Company Reports Note: ET figures exclude acquisitions of Brown and Harris. Analyst estimates 19

20 Demonstrated Profitability and Growth High Commission per Trade and Low Rates. $35 $30 Average Commission per Trade Better tools, better service and better execution at a better price Commission for 10 Contract (Average) Trade 1 SCHW Xpress $15.00 $25 Ameritrade $18.49 $20 OXPS $15 ET Schwab $23.95 $10 AMTD E*Trade $25.45 $5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Fidelity $27.45 $0 $10 $20 $30 Source: Company Reports 1 Base pricing for online trades 20

21 Demonstrated Profitability and Growth Increasing Ancillary Revenues. Non-Commission Revenues per Trade $9 $8 $7 $6 63% Growth $5 $4 $3 $2 $1 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

22 Demonstrated Profitability and Growth Efficient Infrastructure. Trades / Account Revenues / Employee ($000s) 38 $931 $481 $470 Peer Average $ $ Xpress Ameritrade E*Trade Schwab Xpress Ameritrade* E*Trade Schwab *Ameritrade Rev/Employee is Calendar 2005 Source: Company Reports 22

23 Demonstrated Profitability and Growth High Profit per Account Pre-Tax Profit/Account $611 Peer Average $163 $146 $180 $163 Xpress Ameritrade E*Trade Schwab Source: Company Reports. Pre-tax from continuing operations 23

24 Demonstrated Profitability and Growth Strong Balance Sheet. Strong cash flow generation Current annual dividend of $.16 per share No debt Minimal capital requirements Assets: Cash & Short-Term Investments $106.1 Receivables 11.8 Other Assets 8.7 Liabilities: 12/31/2005 ($MM) Long-term Debt $ 0.0 Total Liabilities 8.1 Shareholders Equity Total Capitalization $

25 Demonstrated Profitability and Growth Quarterly Performance ($mm) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY Revenues Commissions Other Brok Rev Interest & Other Total Revenues Expenses Brok & Clearing Salaries & Benefits Advertising Other Total Expenses Pre-Tax Income Pre-Tax Margin 64% 59% 43% 57% 56% 60% 61% 62% 64% 62% Net Income

26 Industry Awards. Three-Peat Customer service is flawless SmartMoney A A remarkable display of consistency, easily the leading browser-based based brokerage -Barron s Best of the Web Favorite Option Site Forbes 26

27 . Questions