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.