eTrade 2000 Annual Report Download - page 40

Gross revenues 1,973,183 889,683 482,244 122 % 84 %
Interest Expense:
Brokerage-related 222,552 72,789 40,029 206 % 82 %
Banking-related 378,310 142,663 80,305 165 % 78 %
Total interest expense 600,862 215,452 120,334 179 % 79 %
Provision for loan losses 4,003 2,783 905 44 % 208 %
Net revenues $ 1,368,318 $ 671,448 $ 361,005 104 % 86 %
Fiscal Years Ended September 30, 2000, 1999 and 1998
Revenues
Gross revenues increased 122% from fiscal 1999 to fiscal 2000 and 84% from fiscal 1998 to fiscal 1999. Net revenues increased
104% from fiscal 1999 to fiscal 2000 and 86% from fiscal 1998 to fiscal 1999. The increases in fiscal 2000 and 1999 are mainly due
to growth in our diversified and global revenue streams, improvements in our cross-selling ability across business segments, and
sustained growth in customer transaction volumes, net new active bank and brokerage customer accounts and total assets/deposits in
customer accounts. Gross revenues consist principally of commission revenues from domestic retail brokerage transactions, payments
for order flow, interest income, institutional transaction execution fees, license and royalty revenues, and to a lesser degree, revenue
from services and gains on the sale of loans and securities.
Transaction Revenues
Transaction revenues increased 108% from fiscal 1999 to fiscal 2000 and 120% from fiscal 1998 to fiscal 1999. The increases in
transaction revenues for fiscal 2000 and 1999 are due to increases in commission revenues from domestic retail brokerage transactions
and payments for order flow. Growth in transaction revenues during the past two fiscal years reflects an increase in the level of online
trading volumes in U.S. financial markets. Furthermore, sustained growth in new customer accounts coupled with our Power
E*TRADE program, which extends special initiatives to participating, highly active customers who remained active, despite declining
volumes in the market during the third and fourth quarters of fiscal 2000, and the implementation of our Customer Relationship
Management ("CRM") technology, which has enabled us to identify and attract higher quality accounts, contributed to the growth in
transaction revenues. Market conditions in fiscal 2000 coupled with our efforts to diversify revenue streams during the year have
resulted in a reduction in transaction revenues as a percentage of gross revenues. Transaction revenues as a percentage of gross
revenues have decreased to 37% in fiscal 2000 from 40% in fiscal 1999, which increased from 34% in fiscal 1998.
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Commission revenues increased 107% from fiscal 1999 to fiscal 2000 and 132% from fiscal 1998 to fiscal 1999. The increases in
fiscal 2000 and 1999 are due to the increase in the number of active domestic brokerage accounts, net new domestic brokerage
accounts and total domestic brokerage transactions. Active domestic brokerage accounts increased 90% from fiscal 1999 to fiscal
2000 and 185% from fiscal 1998 to fiscal 1999. Net new domestic brokerage accounts increased 39% from fiscal 1999 to fiscal 2000
and 216% from fiscal 1998 to fiscal 1999. Daily average domestic brokerage transactions increased 144% from fiscal 1999 to fiscal
2000 and 148% from fiscal 1998 to fiscal 1999. The average commission per domestic transaction decreased to $15.52 in fiscal 2000
from $18.35 in fiscal 1999, which decreased from $19.53 in fiscal 1998. The decline in average commission per domestic transaction
is a result of promotional activities, changes in the mix of revenue generating transactions and the August 1999 implementation of the
Power E*TRADE program, a component of which provides reduced commissions for active traders. Commission revenues as a
percentage of gross revenues are expected to decrease as we continue to execute on cross-selling initiatives across business lines,
leveraging our diversified business model.
Revenue from order flow is comprised of rebate income from various market makers and market centers for processing transactions
through them. We use other broker-dealers to execute our customers’ orders and, in recent years, have derived a significant portion of
our revenues from these broker-dealers for such order flow. This practice of receiving payment for order flow is widespread in the
securities industry. Under applicable SEC regulations, receipt of these payments requires disclosure of such payments by us to our
customers. Payments for order flow as a percentage of transaction revenues were 11% in fiscal 2000 and 1999, down from 16% in
2002. EDGAR Online, Inc.