eTrade 2006 Annual Report Download - page 23

Download and view the complete annual report

Please find page 23 of the 2006 eTrade annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 163

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163

Management monitors a number of metrics in evaluating the Company’s performance. The most significant
of these are shown in the table and discussed in the text below:
At or For the Year Ended December 31, Variance
2006 2005 2004 2006 vs. 2005
Customer Activity Metrics:
Retail client assets (dollars in billions)(1) $ 194.9 $ 177.9 $ 100.0 10 %
Customer cash and deposits (dollars in billions)(1) $ 33.6 $ 28.2 $ 18.7 19 %
Daily average revenue trades 159,348 97,740 83,643 63 %
Average commission per trade $ 12.05 $ 13.82 $ 15.63 (13)%
Products per customer 2.1 2.1 1.9 0 %
Company Financial Metrics:
Net revenue growth(2) 42% 15% 10% 27 %
Enterprise net interest spread (basis points) 285 249 229 14 %
Enterprise interest-earning assets (average in billions) $ 45.4 $ 32.4 $ 26.2 40 %
Operating margin (%) 41% 38% 33% 3 %
Compensation and benefits as a % of revenue 19% 22% 24% (3)%
(1) Customer cash and deposits, as well as retail client assets, have been re-presented to account for a methodology change in the metric to
settlement date from trade date reporting as of December 31, 2005 which reduced both metrics by $564 million. This is not a
methodology change in accounting policy and does not impact the reporting of these items on our balance sheet.
(2) Revenue growth is the difference between the current and prior comparable period total net revenue divided by the prior comparable
period total net revenue.
• Customer Activity Metrics
• Retail client assets are an indicator of the value of our relationship with the customer. An increase in
retail client assets generally indicates that the use of our products and services by existing and new
customers is expanding. Changes in this metric are also driven by changes in the valuations of our
customers’ underlying securities.
• Customer cash and deposits are an indicator of a deepening engagement with our customers and a
key driver of net operating interest income.
• Daily average revenue trades (“DARTs”) are the predominant driver of commission revenue from
our retail customers.
• Average commission per trade is impacted by the mix between our retail domestic and international
businesses and the mix between active traders, mass affluent and main street customers. This metric
is an indicator of changes in our customer mix, product mix and/or product pricing.
• Products per customer is an indicator of our customer engagement and how well our suite of
products and services appeal to our customer base. We believe increases to this measure represent
better overall customer engagement with our products and services.
• Company Financial Metrics
• Net revenue growth is an indicator of our overall financial well-being and our ability to execute on
our strategy. When coupled with operating margin, the two provide information about the general
success of our business.
• Enterprise net interest spread is a broad indicator of our ability to generate net operating interest
income.
• Enterprise interest-earning assets are an indicator of our ability to generate net operating interest
income, and growth in these assets, in conjunction with net operating interest spread, indicates our
ability to grow net operating interest income.
20