NEW YORK, Oct. 30, 2008 (GLOBE NEWSWIRE) -- thinkorswim Group Inc. (Nasdaq:SWIM), a leading provider of online brokerage and investor education services, today announced financial results and select operating metrics for the third quarter ended September 30, 2008. Record revenues and earnings were driven primarily by strong growth in new accounts and trading volume in the Company's brokerage segment.
Consolidated financial results for the quarter:
* Revenues of $98.1 million, 58 percent of which were brokerage-based * Pre-tax income of $27.4 million, 28 percent of revenues * Net income of $19.6 million, or $0.29 per diluted share * Non-GAAP Sales Transaction Volume ("STV") of $81.8 million, 70 percent of which was brokerage-based * Non-GAAP Adjusted EBITDA (before certain items) of $22.8 million, or 28 percent of STV * Customer acquisition cost per new funded account of $640
"thinkorswim delivered record revenues of $98.1 million and net income of $19.6 million, or $0.29 per diluted share, resulting in a record 28% AEBITDA margin during the quarter. We achieved these results by (i) realizing an efficient cost per funded account while rapidly growing our account base to record levels; (ii) delivering service from professional traders to all of our accounts thereby solidifying customer loyalty during highly volatile markets; (iii) increasing productivity by fulfilling fewer but larger workshops to our students during the seasonally slower third quarter; and (iv) effectively managing the cost side of our income statement while remaining committed to growth," said Lee K. Barba, Chairman and CEO of thinkorswim Group Inc. "While all major market indices declined for the fourth consecutive quarter, thinkorswim's customer assets reached a new record of $3.1 billion as annualized brokerage revenue per funded account grew to $2,350 on an increase in average retail DARTs to 57,300 during the quarter-all new records for thinkorswim Group."
Operating Highlights (quarterly year-over-year comparisons):
* New accounts opened of 24,525. Total accounts of 200,300, an increase of 97 percent * New funded accounts of 10,125, an increase of 8 percent * Funded accounts of 87,025 at quarter-end, an increase of 82 percent * Average retail trades per day of approximately 57,300, an increase of 94 percent * Annualized brokerage revenue per funded account of $2,350 * Record client assets of $3.12 billion, including $1.74 billion in client cash and money market funds * Education graduates of 7,620, a decrease of 20 percent
"We believe that the actions we've taken to strengthen the Company's revenue sources and marketing strategies while reducing operating and overhead costs demonstrate a proactive approach to managing key variables in our business in order to deliver continued growth and strong margins in volatile markets that are likely to extend into 2009," Mr. Barba concluded.
The Company will hold a conference call to discuss the financial results at 4:30 p.m. Eastern Time today. The call will be available through our Web site at www.thinkorswim.com under Investor Relations.
About thinkorswim Group Inc. (Nasdaq:SWIM)
thinkorswim Group Inc. (www.thinkorswim.com) offers market-leading online brokerage, investor education and related financial products and services for self-directed investors and active traders. thinkorswim, Inc., our award-winning online brokerage division, provides a suite of trading platforms serving self-directed and institutional traders and money managers. thinkorswim platforms have easy-to-use interfaces, sophisticated analytical and research tools, and fast and efficient order execution for even the most complex trading strategies. thinkorswim customers trade a broad range of products including stock and stock options, index options, futures and futures options, forex, mutual funds and fixed income. Investools' Education Group, a subsidiary of thinkorswim Group Inc., offers a full range of investor education products and services that provide lifelong learning in a variety of interactive delivery formats. Investools' graduates can then apply what they've learned by trading with thinkorswim's online brokerage platforms.
The thinkorswim Group Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5555
Safe Harbor
This press release may contain forward-looking statements. Such forward-looking statements may be identified by words such as "believe," "intend," "expect," "may," "could," "would," "will," "should," "plan," or similar statements. All forward-looking statements are based largely on current expectations, beliefs and assumptions concerning future events that are subject to substantial risks and uncertainties. These risks and uncertainties include, but are not limited to: general changes in economic conditions and changes in conditions affecting the financial services industry specifically, regulatory developments that affect the way we market or sell our products and services, our inability to protect our proprietary technology, our ability to sell existing products and services in both new and existing markets, and other factors which are more fully described in thinkorswim Group Inc.'s filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, actual results may vary in material aspects from those currently anticipated. The forward-looking statements made in this press release relate only to events as of the date of this release. We undertake no ongoing obligation to update these statements.
THINKORSWIM GROUP INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended -------------------------------- Sept. 30, June 30, Sept. 30, 2008 2008 2007 --------- --------- --------- Revenue $ 98,065 $ 96,991 $ 89,332 Costs and expenses Cost of revenue 36,707 34,904 35,656 Selling expense 12,114 14,220 16,165 General and administrative expense 18,943 19,752 15,337 Special charges 1,087 726 310 --------- --------- --------- Total costs and expenses 68,851 69,602 67,468 --------- --------- --------- Income from operations 29,214 27,389 21,864 Other income (expense) Interest expense, net (2,140) (264) (3,903) Interest income 384 272 433 Other (13) -- (6) --------- --------- --------- Other income (expense) (1,769) 8 (3,476) --------- --------- --------- Net income before income taxes 27,445 27,397 18,388 Income tax provision 7,806 8,754 -- --------- --------- --------- Net income $ 19,639 $ 18,643 $ 18,388 ========= ========= ========= Net income per common share: Basic $ 0.30 $ 0.28 $ 0.28 ========= ========= ========= Diluted $ 0.29 $ 0.27 $ 0.27 ========= ========= ========= Weighted average common shares outstanding: Basic 66,406 66,043 65,437 ========= ========= ========= Diluted 68,531 68,754 68,383 ========= ========= ========= Nine Months Ended September 30, -------------------------- 2008 2007 ---------- ---------- Revenue $ 286,046 $ 223,934 Costs and expenses Cost of revenue 106,608 105,620 Selling expense 45,451 52,531 General and administrative expense 57,462 52,346 Special charges 2,206 1,275 ---------- ---------- Total costs and expenses 211,727 211,772 ---------- ---------- Income from operations 74,319 12,162 Other (expense) income Interest expense, net (6,594) (7,681) Interest income 1,111 1,294 Other 1 2 ---------- ---------- Other expense (5,482) (6,385) ---------- ---------- Net income before income taxes 68,837 5,777 Income tax provision 19,028 1,150 ---------- ---------- Net income $ 49,809 $ 4,627 ========== ========== Net income per common share: Basic $ 0.75 $ 0.07 ========== ========== Diluted $ 0.73 $ 0.07 ========== ========== Weighted average common shares outstanding: Basic 66,101 62,076 ========== ========== Diluted 68,528 64,468 ========== ========== THINKORSWIM GROUP INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) (unaudited) September 30, December 31, 2008 2007 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 72,952 $ 61,579 Marketable securities -- 1,501 Accounts receivable, net of allowance ($186 and $198, respectively) 7,472 11,131 Receivable from clearing brokers 12,111 5,503 Income tax receivable 804 -- Deferred tax asset 15,304 13,496 Other current assets 12,306 9,622 --------- --------- Total current assets 120,949 102,832 Long-term restricted cash 373 389 Goodwill 208,477 208,776 Intangible assets, net of accumulated amortization ($28,544 and $17,330, respectively) 121,373 132,587 Software development cost, net of accumulated amortiza- tion ($7,147 and $3,363, respectively) 26,637 26,939 Furniture and equipment, net of accumulated depreciation ($11,867 and $8,726, respectively) 6,599 8,007 Other long-term assets 27,402 29,800 --------- --------- Total assets $ 511,810 $ 509,330 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of deferred revenue $ 94,090 $ 124,486 Other current liabilities 19,747 17,825 Accounts payable 11,194 8,896 Accrued payroll 11,088 13,278 Accrued tax liabilities 6,402 7,544 Current portion of capital- ized lease obligations 231 212 Current portion of notes payable 17,500 17,500 --------- --------- Total current liabilities 160,252 189,741 Long-term portion of deferred revenue 25,872 37,384 Long-term portion of capital- ized lease obligations 164 330 Long-term portion of notes payable 79,400 100,000 Deferred tax liabilities 28,191 18,487 Other long-term accrued liabilities 1,424 1,493 --------- --------- Total liabilities 295,303 347,435 Stockholders' equity: Common stock $0.01 par value (66,500 and 65,655 shares issued and outstanding, respectively) 665 656 Additional paid-in capital 335,832 331,006 Accumulated other comprehensive income (12) 20 Accumulated deficit (119,978) (169,787 --------- --------- Total stockholders' equity 216,507 161,895 --------- --------- Total liabilities and stockholders' equity $ 511,810 $ 509,330 ========= ========= THINKORSWIM GROUP INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- --------- Cash flows from operating activities: Net income $ 19,639 $ 18,388 $ 49,809 $ 4,627 Reconciling adjustments: Depreciation and amortization 6,198 5,108 18,139 14,182 Deferred taxes 4,317 (551) 9,299 173 Stock compensation expense 2,014 1,857 6,292 13,391 Amortization of exclusivity rights 311 293 915 879 Contingent shares in connection with exclusivity rights and intellectual property acquired -- 865 -- 2,191 Amortization of debt issue costs 244 317 804 768 Decrease (increase) in fair value of interest rate swap, included in interest expense 163 1,045 (69) 479 Provision for sales return reserve 328 304 1,125 892 Provision for lease termination -- -- -- 136 Provision for (recovery of) bad debt expense -- (21) -- 243 Provision for inventory reserve -- 70 -- 70 Loss on sale of assets 1 1 4 22 Loss (gain) on marketable securities -- -- (7) 4 Changes in operating assets and liabilities, net of the effect of acquired businesses: Accounts receivable 217 1,630 3,659 (11,417) Receivable from clearing brokers (3,842) (1,581) (6,608) (6,114) Income tax receivable (804) 36 (804) 62 Other assets (2,949) 3,032 (3,063) 5,619 Accounts payable 797 1,900 2,175 (2,345) Deferred revenue (16,251) (11,510) (41,908) 7,792 Accrued payroll 3,898 4,001 (2,190) 4,677 Other liabilities 3,814 (2,961) 2,356 (5,847) Accrued tax liabilities (3,910) (177) (1,142) (170) --------- --------- --------- --------- Net cash provided by operating activities 14,185 22,046 38,786 30,314 --------- --------- --------- --------- Cash flows from investing activities: Proceeds from the sale or maturity of marketable securities -- -- 1,501 19,341 Proceeds from the sale of equipment -- -- -- 25 Payments for capitalized software development costs (1,212) (3,571) (5,122) (11,469) Purchases of furniture and equipment (648) (859) (1,655) (3,102) Cash held in escrow 300 85 1,058 (8,400) Cash paid in business acquisitions, net of cash received (300) (85) (1,058) (149,347) --------- --------- --------- --------- Net cash used in investing activities (1,860) (4,430) (5,276) (152,952) --------- --------- --------- --------- Cash flows from financing activities: Payments on capital leases (54) (48) (147) (139) Payments on notes payable (2,500) (2,500) (20,600) (5,000) Changes in restricted cash -- (3) 16 (8) Proceeds from notes payable -- -- -- 125,000 Payment of debt issuance costs -- -- -- (4,539) Minimum tax withholding on restricted stock awards -- -- (430) -- Repurchase of stock (1,455) -- (1,455) -- Proceeds from exercise of stock options 125 63 504 661 ------------------------------------------ Net cash (used in) provided by financing activities (3,884) (2,488) (22,112) 115,975 --------- --------- --------- --------- Effect of exchange rates on cash and cash equivalents (25) 27 (25) 27 --------- --------- --------- --------- Increase (decrease) in cash and cash equivalents 8,416 15,155 11,373 (6,636) Cash and cash equivalents: Beginning of period 64,536 31,132 61,579 52,923 --------- --------- --------- --------- End of period 72,952 46,287 72,952 46,287 ========= ========= ========= ========= THINKORSWIM GROUP INC. AND SUBSIDIARIES Financial Summary (unaudited) Reconciliation of Non-GAAP Information The following table provides a breakout of Net Income (Loss) on an unaudited basis for all periods presented and a reconciliation of GAAP Net Income (Loss) to non-GAAP Adjusted EBITDA for the periods presented. The Company believes Adjusted EBITDA is an important measure of operating performance given the impact of accounting for deferred revenue and certain other costs. in (millions) Three Nine Months Ended Months Ended Sept 30,June 30,Sept 30,Sept 30,Sept 30, 2008 2008 2007 2008 2007* ------ ------ ------ ------ ------ Net income (loss) $ 19.6 $ 18.6 $ 18.4 $ 49.8 $ (0.9) Depreciation and amortization 6.8 6.2 6.6 19.9 18.5 Stock compensation expense 2.0 2.2 1.9 6.3 13.5 Special charges 1.1 0.7 0.3 2.2 1.2 Interest expense, net 1.8 -- 3.6 5.5 6.4 Income tax provision 7.8 8.8 -- 19.0 1.1 Other acquisition related items -- -- -- -- 10.5 Net change in deferred revenue (16.3) (14.5) (11.5) (41.9) 8.9 ------ ------ ------ ------ ------ Adjusted EBITDA ($) 22.8 22.0 19.3 60.8 59.2 ------ ------ ------ ------ ------ Adjusted EBITDA (as a % of STV) 27.9% 26.7% 24.8% 24.9% 24.3% ------ ------ ------ ------ ------ The following table provides a breakout of Revenue on an unaudited basis for all periods presented and a reconciliation of non-GAAP Sales Transaction Volume ("STV") to GAAP Revenue. STV represents sales in a particular period before the effects of deferred revenue recognition from prior periods and the deferral of current period sales. The Company believes STV is an important measure of business volume in the Investor Education segment. in (000s) Three Months Ended Nine Months Ended Sept 30, June 30, Sept 30, Sept 30, Sept 30, 2008 2008 2007 2008 2007* -------- -------- -------- -------- -------- Brokerage Services Commissions $ 39,290 $ 33,126 $ 19,637 $ 98,674 $ 49,220 Interest & dividends 7,109 6,198 5,960 20,976 14,973 Payment for order flow 8,451 7,869 5,036 22,894 10,927 Other revenue 2,140 1,764 1,953 5,869 4,708 -------- -------- -------- -------- -------- Total Total brokerage services revenue 56,990 48,957 32,586 148,413 79,828 -------- -------- -------- -------- -------- Investor Education Sales transaction volume 24,824 33,582 45,236 95,725 163,261 -------- -------- -------- -------- -------- Total sales transaction volume 81,814 82,539 77,822 244,138 243,089 Change in deferred revenue 16,251 14,452 11,510 41,908 (9,025) -------- -------- -------- -------- -------- Revenue 98,065 96,991 89,332 286,046 234,064 ======== ======== ======== ======== ======== * The Company's SEC filings for 2007 reflect Investools' merger with thinkorswim on February 15, 2007. However, for comparative purposes, the nine months ended September 30, 2007 have included results of operations as if the merger occurred on January 1, 2007 (pro-forma). The Company believes that given the size of the merger, comparing actual to actual would not be the most representative way to explain our operating results.
Segment Information
The following table provides information on an unaudited basis concerning thinkorswim Group Inc.'s operations by reportable segment for the periods presented. The Company's SEC filings and the table below reflects consolidated results following Investools' merger with thinkorswim on February 15, 2007 and stand-alone results for Investools through February 14, 2007.
Three Months Ended Nine months Ended in (000s) September 30, September 30, ------------------ ------------------ 2008 2007 2008 2007 -------- -------- -------- -------- Revenue ------- Brokerage Services $ 56,990 $ 32,586 $148,413 $ 69,441 Investor Education 41,075 56,746 137,633 154,493 -------- -------- -------- -------- Revenue 98,065 89,332 286,046 223,934 -------- -------- -------- -------- Income (Loss) from Operations ----------------------------- Brokerage Services $ 26,176 $ 12,375 $ 66,891 $ 23,971 Investor Education 3,038 9,489 7,428 (11,809) -------- -------- -------- -------- Income from operations 29,214 21,864 74,319 12,162 -------- -------- -------- -------- THINKORSWIM GROUP INC. AND SUBSIDIARIES Operating Metrics (unaudited) ---------------------------------------------- $ or # Q3-08 Q3-07 Change % Change ---------- ---------- ---------- ---------- thinkorswim, Inc. ----------------- Trading Days 63.5 62.5 New Retail Accounts Opened (1) 24,525 18,525 6,000 32% New Funded Retail Accounts 10,125 9,400 725 8% Ending Funded Retail Accounts 87,025 47,850 39,175 82% Retail DARTs (2) 57,300 29,600 27,700 94% Active Trader DARTs (3) 105,800 25,100 80,700 322% Total DARTs 163,100 54,700 108,400 198% Total Trades 10,361,000 3,413,000 6,948,000 204% Ending Client Assets ($MM) $3,120 $2,180 $940 43% Average Client Equity/Retail Account $36.6 $43.5 ($6.9) -16% Retail Commission Per Trade $9.67 $9.25 $0.42 5% Investor Education Group ---------------- Total Paid Graduates (4) 7,620 9,470 (1,850) -20% Ending Cumulative Graduates (5) 375,000 321,000 54,000 17% Ending Active Subscribers (6) 93,900 98,000 (4,100) -4% Upsell Rate (7) 33% 44% PHD Program 10% 17% Masters Program 14% 21% Associates Program 31% 30% Apprentice 26% n/a Trading Rooms 18% 32% (1) Accounts opened are accounts that have initiated the application process with the intent to fund. (2) Retail DARTs are trades executed using the retail thinkorswim platform. (3) Active Trader DARTs are trades executed using an active trader platform such as thinkpipes. (4) Includes students who graduated from both the Foundation Course and the Currency Trader Course. (5) Cumulative graduates include graduates and their guest attendees at workshops. (6) Active Subscribers include subscribers to Investools Online, prophet.net, and Investools FX. (7) This table illustrates the workshop upsell rates during the periods indicated. Workshop upsell rates are the sales that take place at the workshops of advanced product sales. Upsell rates do not include sales from the Company's other sales operations.