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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."
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
- Pre-tax income increased to $20.8 million for the fourth quarter of 2004, an $8.4 million improvement from the comparable period in 2003.
- Total revenues increased to $138.7 million for the fourth quarter of 2004 from $131.4 in the fourth quarter of 2003. In the fourth quarter of 2004, market data fees included $1.7 million received from Nasdaq in December 2004 representing payment for market data fees earned in 2003.
- Cost of revenues declined $5.9 million to $80.1 million for the fourth quarter of 2004 from $86.0 million for the same period in 2003.
- Gross margin increased to $58.6 million for the fourth quarter of 2004 from $45.4 million for the fourth quarter of 2003, representing an increase of $13.2 million, or 29.1%. As a percentage of total revenues, gross margin increased to 42.2% for the fourth quarter of 2004 from 34.6% for the fourth quarter of 2003.
- Liquidity payments increased slightly to $51.7 million, or 37.3% of total revenues, in the fourth quarter of 2004 from $48.6 million, or 37.0% of total revenues, in the fourth quarter of 2003.
- Clearance, brokerage and other transaction expenses declined to $6.8 million, or 4.9% of total revenues, in the fourth quarter of 2004 from $12.8 million, or 9.7% of total revenues, in the fourth quarter of 2003.
- Indirect expenses increased to $39.0 million for the fourth quarter of 2004 from $33.5 million in the fourth quarter of 2003.
- As of December 31, 2004, Archipelago had $177.9 million of cash and cash equivalents and no long-term debt.
Fourth Quarter Business and Volume Highlights
- Clients executed 36.2 billion shares or 13.9% of total U.S. equity securities on ArcaEx during the fourth quarter of 2004 compared to 34.0 billion shares or 14.3% in the fourth quarter a year ago.
- ArcaEx market share decreased to 23.7% in Nasdaq-listed stocks from 26.6% in the third quarter of 2004 and 26.9% from the fourth quarter of 2003.
- ArcaEx market share increased to 2.3% in NYSE-listed stocks from 1.8% in the third quarter of 2004 and 1.2% from the fourth quarter of 2003.
- ArcaEx market share was 25.6% in AMEX-listed stocks down slightly from 26.2% in the third quarter of 2004 and up from 14.1% from the fourth quarter of 2003.
- The movement of the listing of QQQ from Amex to Nasdaq in December 2004 caused our market share of Tape B trades to decline from 53.4% in November 2004 to 48.8% in December 2004, which in turn reduced the market data fees we earned from trading this ETF. The impact of this change on our December 2004 results was a reduction in gross margin of approximately $0.2 million.
- The internal match rate rose slightly to 87.4% on ArcaEx compared to an internal match rate of 87.1% in the third quarter of 2004 and 85.5% in the fourth quarter a year ago.
- In January 2005, Archipelago Securities completed its transition to self-clearing.
Fiscal 2004 Business and Volume Highlights
- ArcaEx achieved a new total daily volume record trading over 800 million shares on January 29, 2004. This included a new record of approximately 125 million listed shares traded.
- Clients executed 140.3 billion shares or 14.2% of total U.S. equity securities on Archipelago during 2004 compared to 116.8 billion shares or 12.6% a year ago.
- ArcaEx market share was 25.3% in Nasdaq-listed stocks in 2004, up from 24.6% in 2003.
- ArcaEx market share was 1.8% in NYSE-listed stocks, up from 1.1% in 2003.
- ArcaEx market share was 22.7% in AMEX-listed stocks in 2004, up from 12.2% in 2003.
- ArcaEx formed a Corporate Client Group focused on listings.
- Archipelago Holdings had a highly successful IPO in August.
- Archipelago launched an advertising campaign dedicated to branding ArcaEx and to winning new primary and dual listings.
Archipelago Holdings, Inc.Consolidated Statements of Operations
Archipelago Holdings, Inc. Consolidated Statements of Financial Condition
Archipelago Holdings, Inc. Consolidated Statements of Cash Flows
Archipelago Holdings, Inc. Operating Data
About Archipelago
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.
