eTrade 2007 Annual Report Download - page 40
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Other Revenue
Other revenue increased 5% to $35.0 million for 2006 compared to 2005, due primarily to an increase in our
software consulting fees from our Corporate Services business.
Expense Excluding Interest
Expense excluding interest increased 35% to $1.4 billion for 2006 compared to 2005. The increase in
expense excluding interest was driven primarily by an increase in the number of employees in our service
organization, higher trading volumes and loan balances, facility restructuring activities and an increase in fraud
related losses.
Compensation and Benefits
Compensation and benefits increased 23% to $469.2 million for 2006 compared to 2005. This increase
resulted primarily from a higher number of employees in our service organization, a full year of expensing stock
option expense(1) and increased variable and incentive compensation expense. These increases in compensation
are in line with the growth and performance of our business and our focus on enhancing customer service with
additional representatives.
Clearing and Servicing
Clearing and servicing expense increased 33% to $253.0 million for 2006 compared to 2005. This increase
was a result of higher trading volumes and higher loan balances during the period.
Communications
Communications expense increased 34% to $110.3 million for 2006 compared to 2005. The increase was
due primarily to expenses associated with our newly acquired customers from Harrisdirect and BrownCo. In
addition, we experienced higher variable expenses, such as quote services and trade confirmations, related to our
increase in trading volume.
Professional Services
Professional services increased 25% to $96.9 million for 2006 compared to 2005. The increase was due
primarily to third party support services, including technology and transitional service agreements, associated
with our acquisitions of Harrisdirect and BrownCo.
Facility Restructuring and Other Exit Activities
Facility and restructuring costs were $28.5 million for 2006. During the year, we relocated certain functions
out of the state of California. This expense represents certain facility costs as a result of ceasing operations at
these locations in addition to severance charges for those employees to whom we communicated our plans and
who were terminated as part of this relocation during the year.
(1) In July 2005 we adopted SFAS No. 123 (R), Share-Based Payment, which requires the expensing of stock options. Stock option expense
was $22.1 million for 2006 and $13.7 for 2005.
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