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Author: stward One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10679  
Subject: Quarterly Results Date: 7/25/2000 6:40 PM
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It is time once again for my quarterly review of the online brokerages, now that AMTD results are finally in. Let's dig in.

Performance:

It was a hard quarter for the online brokers, with a major market downturn coming on the heels of a stellar Q1, but they weathered it pretty well. If you compare Q2 with anything except the amazing Q1 results, it actually looks pretty good. As one would expect, revenues, account growth, and assets were all down for the quarter (sequentially) - but the gains of the previous quarter certainly weren't wiped out. Year over year results are still very strong.

Schwab's acquisition of US Trust distorts the figures a bit (especially the asset, asset growth numbers), when compared to pre-acquisition figures. Use those comparisons carefully.

Revenue Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $149,086 $170,305 $110,849 $74,478 $78,094 $63,562 $52,117 $39,557 $0 $0
DIR $83,989 $114,213 $76,314 $54,881 $59,674 $47,202 $35,407 $0 $0 $0
EGRP $330,341 $407,430 $246,008 $173,178 $151,742 $126,848 $115,920 $68,662 $62,316 $53,309
NDB $27,417 $31,408 $18,796 $0 $0 $16,765 $13,162 $0 $0 $0
SCH $1,404,600 $1,571,900 $1,127,400 $883,700 $982,102 $951,485 $788,600 $0 $0 $0
TWE N/A $488,700 $381,600 $253,100 $243,000 $0 $215,000 $169,600 $0 $0

Revenue Growth (Seq) Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD -12% 54% 49% -5% 23% 22% 32%
DIR -26% 50% 39% -8% 26% 33%
EGRP -19% 66% 42% 14% 20% 9% 69% 10% 17%
NDB -13% 67% 27%
SCH -11% 39% 28% -10% 3% 21%
TWE N/A 28% 51% 4%

Assets (End of Qtr) Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $34,800 $38,900 $31,600 $22,900 $22,600 $19,500 $14,900 $11,400 $0
DIR $27,500 $29,400 $20,300 $14,200 $13,300 $11,200 $8,900 $0 $0
EGRP $60,700 $65,200 $44,100 $28,400 $26,000 $21,000 $15,200 $11,200 $11,200
NDB $9,900 $12,200 $8,900 $8,000 $7,000 $6,500 $5,600 $0 $0
SCH $931,000* $823,000 $725,000 $595,000 $591,700 $542,000 $491,100 $408,200 $0
TWE N/A $175,000 $150,200 $121,700 $112,700 $0 $95,700 $0 $0

Asset Growth (Seq) Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD -10.5% 23.1% 38.0% 1.3% 15.9% 30.9% 30.7%
DIR -6.5% 44.8% 43.0% 6.8% 18.8% 25.8%
EGRP -6.9% 47.8% 55.3% 9.2% 23.8% 38.2% 35.7% 0.0%
NDB -18.9% 37.1% 11.3% 14.3% 7.7% 16.1%
SCH 13.1%* 13.5% 21.8% 0.6% 9.2% 10.4% 20.3%
TWE N/A 16.5% 23.4% 8.0%

Accounts (End of Qtr) Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD 1165 992 686 560 505 428 354 306 0 0
DIR 468 429 347 307 277 243 210 190 0 0
EGRP 2945 2614 1881 1551 1241 909 676 544 459 403
NDB 246 208 178 160 144 128 116
SCH 7200 6900 6600 6316 6166 5900 5600 5500 5300 5000
TWE N/A 2732 2356 2168 2066

Account Growth (Seq) Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD 17.4% 44.6% 22.5% 10.9% 18.0% 20.9% 15.7%
DIR 9.1% 23.6% 13.0% 10.8% 14.0% 15.7% 10.5%
EGRP 12.7% 30.0% 21.3% 25.0% 36.5% 34.5% 24.3% 18.5% 13.9%
NDB 18.3% 16.9% 11.3% 11.1% 12.5% 10.3% ERR
SCH 4.3% 4.5% 4.5% 2.4% 4.5% 5.4% 1.8% 3.8% 6.0%
TWE N/A 16.0% 8.7% 4.9%

Risks:

There's still no sign (even in this difficult quarter) that increased competition is forcing the brokers to accept thinner margins. Operating margins remained pretty strong - except for Schwab. The drop in Schwab's margins may be a temporary blip (like the one EGRP suffered in mid-1999), but it bears careful watching. EGRP and AMTD showed much steadier margins (given the very different market environment) than they have in the past - maybe they're growing up.

Operating Margin Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD 32.7% 35.4% 22.5% 14.1% 33.3% 40.4% 29.8% 32.7% ERR ERR
DIR 14.4% 38.1% 32.4% 26.2% 41.0% 36.8% 23.3% ERR ERR ERR
EGRP 34.9% 38.0% 24.1% 16.1% 26.1% 29.1% 29.5% 15.0% 35.0% 11.5%
NDB 15.1% 23.0% 10.8% ERR ERR 18.2% 0.2% ERR ERR ERR
SCH 23.5% 30.9% 31.8% 29.6% 31.0% 30.3% 29.1% ERR ERR ERR
TWE N/A 34.1% 36.0% 25.5% 26.2% ERR 23.1% 23.1% ERR ERR

Advertising spending declined (compared to the huge budgets of Q1), but was still a major expense. Ad costs per new account crept up a little, but not enough to indicate a saturated market - there still seems to be room for significant account growth.

Ad Spending Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $41,222 $54,774 $58,662 $24,815 $12,105 $13,154 $9,643 $3,857 $0 $0
DIR $19,990 $18,070 $25,452 $18,128 $13,232 $6,101 $5,228 $0 $0 $0
EGRP $115,081 $177,484 $119,492 $77,443 $82,369 $60,006 $55,001 $37,171 $11,588 $0
NDB $11,003 $4,724 $5,253 $0 $0 $1,715 $1,169 $0 $0 $0
SCH $77,100 $77,100 $77,100 $57,700 $54,483 $52,591 $53,300 $0 $0 $0
TWE N/A $29,200 $36,100 $24,100 $14,600 $0 $11,500 $9,000 $0 $0

Ad Cost/ New Account Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $238.28 $179.00 $465.57 $451.18 $157.21 $177.76 $200.90
DIR $512.56 $220.36 $636.30 $604.27 $389.18 $184.88 $261.40
EGRP $348.00 $294.33 $362.10 $249.82 $248.10 $257.54 $416.67
NDB $289.55 $157.47 $291.83 $0.00 $0.00 $142.92
SCH $257.00 $257.00 $271.48 $384.67 $204.82 $175.30 $533.00
TWE N/A $77.66 $192.02 $236.27

That's it for now. If there are other comparisons you'd like to see, let me know; I might be able to pull them out of the spreadsheet pretty easily.

Your humble amateur stock analyst,

-- stward
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