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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: 4/26/2001 6:30 PM
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Here's this quarter's summary of the online brokerage results. I don't have results yet for DIR or TWE (they're due in about 3 weeks), but the rest of the numbers are up to date.

Growth:

No surprise, it was yet another dismal quarter for the brokerages (and the market in general). The market environment has badly hurt growth at these companies, and many of them have announced layoffs and other cost-cutting measures. The DIR tracking stock is being re-absorbed into the parent companies (CSFB, which acquired it as part of DLJ). However, there's no indication that any of these companies are in such serious trouble that they might be candidates for bankruptcy.

In spite of everything, the discount brokers continued to attract new accounts, although at a much slower pace than last year. AMTD, the low-commission champ, did particularly well (although they had a hard time by other measures).

Revenue Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $118,987 $130,707 $133,768 $149,086 $170,305 $110,849 $74,478 $78,094 $63,562 $52,117 $39,557 $0 $0
DIR $79,991 $79,250 $83,989 $114,213 $76,314 $54,881 $59,674 $47,202 $35,407 $0 $0 $0
ET $329,581 $333,766 $340,261 $330,341 $407,430 $246,008 $173,178 $151,742 $126,848 $115,920 $68,662 $62,316 $53,309
SCH $1,200,000 $1,335,000 $1,322,500 $1,404,600 $1,571,900 $1,127,400 $883,700 $982,102 $951,485 $788,600 $0 $0 $0
TWE $347,300 $359,500 $345,600 $488,700 $381,600 $253,100 $243,000 $0 $215,000 $169,600 $0 $0

Revenue Growth (Seq) Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD -9% -2% -10% -12% 54% 49% -5% 23% 22% 32%
DIR 1% -6% -26% 50% 39% -8% 26% 33%
ET -1% -2% 3% -19% 66% 42% 14% 20% 9% 69% 10% 17%
SCH -10% 1% -6% -11% 39% 28% -10% 3% 21%
TWE -3% 4% -29% 28% 51% 4%

Accounts (End of Qtr Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD 1478 1356 1233 1165 992 686 560 505 428 354 306 0 0
DIR 520 494 468 429 347 307 277 243 210 190 0 0
ET 3725 3559 3315 2945 2614 1881 1551 1241 909 676 544 459 403
SCH 7600 7500 7400 7200 6900 6600 6316 6166 5900 5600 5500 5300 5000
TWE 3241 3109 2979 2732 2356 2168 2066

Account Growth (Seq) Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD 9.0% 10.0% 5.8% 17.4% 44.6% 22.5% 10.9% 18.0% 20.9% 15.7%
DIR 5.3% 5.6% 9.1% 23.6% 13.0% 10.8% 14.0% 15.7% 10.5%
ET 4.7% 7.4% 12.6% 12.7% 30.0% 21.3% 25.0% 36.5% 34.5% 24.3% 18.5% 13.9%
SCH 1.3% 1.4% 2.8% 4.3% 4.5% 4.5% 2.4% 4.5% 5.4% 1.8% 3.8% 6.0%
TWE 4.2% 4.4% 9.0% 16.0% 8.7% 4.9%

Assets (End of Qtr) Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $23,500 $27,900 $36,000 $34,800 $38,900 $31,600 $22,900 $22,600 $19,500 $14,900 $11,400 $0
DIR $22,800 $27,600 $27,500 $29,400 $20,300 $14,200 $13,300 $11,200 $8,900 $0 $0
ET $47,900 $52,600 $65,900 $60,700 $65,200 $44,100 $28,400 $26,000 $21,000 $15,200 $11,200 $11,200
SCH $805,800 $871,700 $961,000 $931,000 $823,000 $725,000 $595,000 $591,700 $542,000 $491,100 $408,200 $0
TWE $154,100 $158,900 $165,300 $175,000 $150,200 $121,700 $112,700 $0 $95,700 $0 $0

Asset Growth (Seq) Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD -15.8% -22.5% 3.4% -10.5% 23.1% 38.0% 1.3% 15.9% 30.9% 30.7%
DIR -17.4% 0.4% -6.5% 44.8% 43.0% 6.8% 18.8% 25.8%
ET -8.9% -20.2% 8.6% -6.9% 47.8% 55.3% 9.2% 23.8% 38.2% 35.7% 0.0%
SCH -7.6% -9.3% 3.2% 13.1% 13.5% 21.8% 0.6% 9.2% 10.4% 20.3%
TWE -3.0% -3.9% -5.5% 16.5% 23.4% 8.0%


Operating Efficiency:

Operating margins suffered a little bit, but generally held up pretty well (AMTD's operating margin would have been in the 23% range, if not for the ongoing drain of their OnMoney subsdiary).

Advertising spending remained heavy this quarter, although it is expected to decrease sharply in future quarters. Cost per net new account was generally higher, reflecting the difficulty of attracting new customers in the midst of a bear market (SCH's spending is probably overstated, because their account totals are rounded to the nearest 100K; the real figure is probably in the $600-$700 range).

Operating Income Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $7,891 ($23,032) $286 $4,598 $3,201 ($21,711) ($9,197) $8,918 $7,979 $3,742 $5,791 $0 $0
DIR ($9,358) ($1,832) ($4,564) $14,819 ($820) ($2,238) $6,032 $7,173 $1,785 $0 $0 $0
ET $16,168 $5,004 $7,246 ($7,671) ($13,715) ($58,200) ($32,653) ($27,668) ($26,489) ($11,550) ($15,747) $6,560 $6,118
SCH $97,000 $138,700 $142,300 $137,100 $296,900 $170,500 $124,500 $150,991 $142,767 $106,400 $0 $0 $0
TWE $37,100 $42,200 $34,500 $76,600 $57,000 $20,900 $26,400 $0 $20,100 $14,500 $0 $0

Net (pre-tax, pre-ad Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $16,868 $20,315 $33,904 $48,815 $60,326 $24,967 $10,512 $25,995 $25,684 $15,535 $12,941 $0 $0
DIR ($2,125) $6,021 $12,073 $43,539 $24,718 $14,400 $24,473 $17,362 $8,244 $0 $0 $0
ET $96,624 $104,849 $101,019 $115,298 $154,846 $59,264 $27,896 $39,670 $36,926 $34,236 $10,294 $21,789 $6,118
SCH $258,000 $314,800 $303,000 $330,600 $511,800 $358,800 $261,500 $304,062 $288,583 $229,100 $0 $0 $0
TWE $92,900 $98,100 $90,200 $166,500 $137,400 $64,600 $63,600 $0 $49,600 $39,100 $0 $0

Operating Margin Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD 14.2% 15.5% 25.3% 32.7% 35.4% 22.5% 14.1% 33.3% 40.4% 29.8% 32.7% ERR ERR
DIR -2.7% 7.6% 14.4% 38.1% 32.4% 26.2% 41.0% 36.8% 23.3% ERR ERR ERR
ET 29.3% 31.4% 29.7% 34.9% 38.0% 24.1% 16.1% 26.1% 29.1% 29.5% 15.0% 35.0% 11.5%
SCH 21.5% 23.6% 22.9% 23.5% 32.6% 31.8% 29.6% 31.0% 30.3% 29.1% ERR ERR ERR
TWE 26.7% 27.3% 26.1% 34.1% 36.0% 25.5% 26.2% ERR 23.1% 23.1% ERR ERR

Ad Spending Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $45,606 $57,477 $33,619 $41,222 $54,774 $58,662 $24,815 $12,105 $13,154 $9,643 $3,857 $0 $0
DIR $13,075 $9,125 $19,990 $18,070 $25,452 $18,128 $13,232 $6,101 $5,228 $0 $0 $0
ET $93,698 $97,940 $91,773 $115,081 $177,484 $119,492 $77,443 $82,369 $60,006 $55,001 $37,171 $11,588 $0
SCH $94,000 $88,900 $62,600 $77,100 $103,700 $77,100 $57,700 $54,483 $52,591 $53,300 $0 $0 $0
TWE $28,000 $21,900 $23,400 $29,200 $36,100 $24,100 $14,600 $0 $11,500 $9,000 $0 $0

Ad Cost/ New Account Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998
AMTD $373.82 $467.29 $494.40 $238.28 $179.00 $465.57 $451.18 $157.21 $177.76 $200.90
DIR $502.88 $350.96 $512.56 $220.37 $636.30 $604.27 $389.18 $184.88 $261.40
ET $564.45 $401.39 $248.04 $347.68 $294.33 $362.10 $249.82 $248.10 $257.54 $416.67
SCH $940.00 $889.00 $313.00 $257.00 $345.67 $271.48 $384.67 $204.82 $175.30 $533.00
TWE $212.12 $168.46 $94.74 $77.66 $192.02 $236.27


Summary:

Things are bad, but this is still a viable business model.

At current prices, growth by acquisition is starting to look practical (cost per account is < $1000, in several cases), although that doesn't include extra merger costs (goodwill, system integration expenses, loss of disgruntled customers, etc.). Whether the oft-mentioned "consolidation" will actually happen remains to be seen. Several analysts are predicting it, but some prominent industry executives are on record against it.

-- stward

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