Filed by thinkorswim Group Inc.

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12

under the Securities and Exchange Act of 1934

 

Subject Company: thinkorswim Group Inc.

Commission File No. 000-52012

 

 

 

For Immediate Release

 

 

March 4, 2009

 

Press Release

 

GRAPHIC

 

thinkorswim Group Inc. Reports Record 2008 Financial Results

 

Record New Accounts and Trading Volume Drive 164% Rise in Full-Year Net Income

 

NEW YORK — March 4, 2009 — thinkorswim Group Inc. (NASDAQ:SWIM), a leading provider of online brokerage and investor education services, today announced financial results for the full year and fourth quarter ended December 31, 2008.

 

Full Year Highlights (year-over-year comparisons):

 

·                  Record revenues of $371.8 million, 53 percent of which were brokerage-based

·                  Record pre-tax income of $81.0 million, 22 percent of revenues

·                  Record net income of $59.4 million, or $0.87 per diluted share

·                  Non-GAAP Sales Transaction Volume (“STV”) of $320.7 million, 62 percent of which was brokerage-based

·                  Non-GAAP Adjusted EBITDA (before certain items) of $76.5 million, or 24 percent of STV

·                  Record new accounts opened of 108,850. Total accounts of 233,025, an increase of 88 percent

·                  Record funded accounts of 97,800 at year-end, an increase of 69 percent

·                  Record average retail trades per day of 54,200, an increase of 101 percent

·                  Record client assets of $3.0 billion, an increase of 17 percent

 

Fourth Quarter Highlights (quarterly year-over- year comparisons):

 

·                  Revenues of $85.8 million, 57 percent of which were brokerage-based

·                  Pre-tax income of $12.2 million, 14 percent of revenues

·                  Net income of $9.5 million, or $0.14 per diluted share

·                  Non-GAAP Sales Transaction Volume (“STV”) of $76.6 million, 64 percent of which was brokerage-based

·                  Non-GAAP Adjusted EBITDA (before certain items) of $15.7 million, or 21 percent of STV;  Pro forma non-GAAP Adjusted EBITDA (before certain items) of $19.4 million, or 25 percent of STV

·                  New accounts opened of 32,700, an increase of 44 percent

·                  New funded accounts of 12,175 during the quarter, an increase of 10 percent

·                  Average retail trades per day of approximately 61,400, an increase of 47 percent

·                  Annualized brokerage revenue per funded account of $1,800

·                  Customer acquisition cost per new funded account of $440

 

“thinkorswim delivered strong performance in a highly volatile market, primarily driven by robust growth in new accounts and trading volume in our brokerage business.  Full year revenue increased 17 percent from the prior year and reached a record $371.8 million for 2008, while non-GAAP Adjusted EBITDA was $76.5 million.  These results reflect the continued appeal of thinkorswim’s brokerage platform, our relevance to the needs of active traders, and our position as an industry leader,” said Lee Barba, chairman and chief executive officer of thinkorswim.

 

Analysis of Fourth Quarter 2008 Results

 

(All comparisons are to the corresponding year-ago period unless otherwise indicated)

 

For the fourth quarter, brokerage revenue increased 18% to $48.9 million, driven by a 35% increase in transaction revenues (commissions and payment for order flow) offset by a 54% decrease in interest revenue. The increase in transaction revenue was primarily due to the 69% increase year-over-year in

 



 

retail funded accounts and 47% year-over-year increase in retail DARTs. The net interest revenue decline was primarily due to the dramatic year-over-year decline in the average federal funds rate, partly offset by the 17% increase in client assets to $3.0 billion at year end, of which $1.5 billion is held in cash.

 

Fourth Quarter 2008 Pro Forma Results

 

Financial results for the quarter include approximately $3.7 million in brokerage, clearing and execution costs related to unusually large amounts of customer write-offs and trade errors, as well as approximately $1.0 million in other costs and expenses related to the proposed acquisition by TD AMERITRADE.  Adjusting for these items, the Company had pro forma operating income of $19.6 million, net income of $13.2 million and earnings per diluted share of $0.20.  Non-GAAP Adjusted EBITDA excluding these items was $19.4 million and 25% of STV.

 

Proposed Acquisition by TD AMERITRADE Announced January 8, 2009

 

On January 8, 2009, thinkorswim Group Inc. and TD AMERITRADE (NASDAQ: AMTD) announced that they had entered into a definitive agreement for TD AMERITRADE to acquire thinkorswim in a cash and stock deal valued at that time at approximately $606 million.

 

Basis of Presentation

 

The Company has concluded that, in an effort to provide a better understanding of its operations, the level of detail presented on the face of the Statements of Operations should be modified from the “Analysis by Function of expense” approach, to the “Analysis by Nature of Expense” approach. In the Company’s opinion, this new methodology will provide greater transparency of management direction while fairly presenting its results of operations.

 

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.

 

Additional Information and Where to Find It

 

In connection with the proposed acquisition, TD AMERITRADE filed with the Securities and Exchange Commission (the “SEC”), a Registration Statement on Form S-4 that includes a proxy statement of thinkorswim, which also constitutes a prospectus of TD AMERITRADE. Thinkorswim will mail the proxy statement/prospectus to its stockholders after the foregoing registration statement is declared effective by the SEC. TD AMERITRADE and thinkorswim urge investors and security holders to read the proxy statement/prospectus regarding the proposed acquisition because it contains important information. You may obtain a free copy of the proxy statement/prospectus and other related documents filed by thinkorswim and TD AMERITRADE with the SEC at the SEC’s website at www.sec.gov. The proxy statement/prospectus (when the registration statement in which it is included is declared effective) and the other documents may also be obtained for free by accessing thinkorswim’s website at www.thinkorswim.com by clicking on the link for “Investors”, then clicking on the link for “Financial Reports” and then clicking on the link for “SEC Filings” or by accessing TD AMERITRADE’s website at www.amtd.com and clicking on the “Investor Relations” link and then clicking on the link for “SEC Filings”.

 



 

Participants in this Transaction

 

thinkorswim, TD AMERITRADE and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from thinkorswim stockholders in favor of the acquisition. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of thinkorswim stockholders in connection with the proposed acquisition is set forth in the proxy statement/prospectus filed with the SEC by TD AMERITRADE. You can find information about thinkorswim’s executive officers and directors in thinkorswim’s definitive proxy statement filed with the SEC on April 29, 2008. You can find information about TD AMERITRADE’s executive officers and directors in their definitive proxy statement filed with the SEC on January 6, 2009. You can obtain free copies of these documents from thinkorswim or TD AMERITRADE using the contact information above.

 

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 SEC. 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.

 

Investor Contacts:

 

Ida Kane, SVP and CFO

 

801.816.6918

 

ida.kane@thinkorswim.com

Media Contact:

 

Frank Milano

Fran Del Valle

203.682.8343

212.717.5499

frank.milano@icrinc.com

frances.delvalle@influencecentral.com

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 

 

 

Three Months Ended

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

 

2008

 

2008

 

2008

 

2008

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Commissions

 

$

35,216

 

$

39,290

 

$

33,126

 

$

26,258

 

Interest & dividends

 

3,659

 

7,109

 

6,198

 

7,668

 

Payment for order flow

 

7,386

 

8,451

 

7,869

 

6,574

 

Other brokerage related revenue

 

2,594

 

2,140

 

1,764

 

1,966

 

Total brokerage revenue

 

48,855

 

56,990

 

48,957

 

42,466

 

 

 

 

 

 

 

 

 

 

 

Education revenue

 

36,904

 

41,075

 

48,034

 

48,524

 

Net revenues

 

85,759

 

98,065

 

96,991

 

90,990

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

19,411

 

19,955

 

22,545

 

22,057

 

Brokerage, clearing and execution costs

 

13,000

 

11,950

 

7,962

 

7,570

 

Marketing

 

7,058

 

8,599

 

10,164

 

13,359

 

Partner commissions

 

9,075

 

4,954

 

6,795

 

6,530

 

Events, travel and venue

 

4,818

 

5,810

 

4,501

 

6,268

 

Technology and telecommunications

 

6,338

 

5,780

 

6,220

 

6,246

 

Depreciation and amortization

 

6,121

 

6,198

 

6,033

 

5,908

 

Other

 

5,003

 

5,605

 

5,382

 

5,336

 

Total costs and expenses

 

70,824

 

68,851

 

69,602

 

73,274

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

14,935

 

29,214

 

27,389

 

17,716

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(2,916

)

(2,140

)

(264

)

(4,190

)

Interest income

 

220

 

384

 

272

 

455

 

Other

 

(89

)

(13

)

 

14

 

Other income (expense)

 

(2,785

)

(1,769

)

8

 

(3,721

)

 

 

 

 

 

 

 

 

 

 

Net income before income taxes

 

12,150

 

27,445

 

27,397

 

13,995

 

Income tax provision

 

2,606

 

7,806

 

8,754

 

2,468

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

9,544

 

$

19,639

 

$

18,643

 

$

11,527

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.14

 

$

0.30

 

$

0.28

 

$

0.18

 

Diluted

 

$

0.14

 

$

0.29

 

$

0.27

 

$

0.17

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

66,500

 

66,406

 

66,043

 

65,846

 

Diluted

 

68,283

 

68,531

 

68,754

 

68,860

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Commissions

 

$

35,216

 

$

25,310

 

$

133,890

 

$

67,734

 

Interest & dividends

 

3,659

 

7,985

 

24,634

 

20,961

 

Payment for order flow

 

7,386

 

6,186

 

30,280

 

16,293

 

Other brokerage related revenue

 

2,594

 

1,960

 

8,464

 

5,894

 

Total brokerage revenue

 

48,855

 

41,441

 

197,268

 

110,882

 

 

 

 

 

 

 

 

 

 

 

Education revenue

 

36,904

 

52,634

 

174,537

 

207,127

 

Net revenues

 

85,759

 

94,075

 

371,805

 

318,009

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

19,411

 

23,164

 

83,968

 

95,743

 

Brokerage, clearing and execution costs

 

13,000

 

6,351

 

40,482

 

16,052

 

Marketing

 

7,058

 

13,388

 

39,180

 

51,832

 

Partner commissions

 

9,075

 

8,649

 

27,354

 

35,542

 

Events, travel and venue

 

4,818

 

6,355

 

21,397

 

28,566

 

Technology and telecommunications

 

6,338

 

4,987

 

24,584

 

18,565

 

Depreciation and amortization

 

6,121

 

5,419

 

24,260

 

19,601

 

Other

 

5,003

 

5,155

 

21,326

 

19,339

 

Total costs and expenses

 

70,824

 

73,468

 

282,551

 

285,240

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

14,935

 

20,607

 

89,254

 

32,769

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(2,916

)

(3,378

)

(9,510

)

(11,059

)

Interest income

 

220

 

574

 

1,331

 

1,868

 

Other

 

(89

)

5

 

(88

)

7

 

Other expense

 

(2,785

)

(2,799

)

(8,267

)

(9,184

)

 

 

 

 

 

 

 

 

 

 

Net income before income taxes

 

12,150

 

17,808

 

80,987

 

23,585

 

Income tax provision

 

2,606

 

 

21,634

 

1,150

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

9,544

 

$

17,808

 

$

59,353

 

$

22,435

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.14

 

$

0.27

 

$

0.90

 

$

0.36

 

Diluted

 

$

0.14

 

$

0.26

 

$

0.87

 

$

0.34

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

66,500

 

65,510

 

66,202

 

62,942

 

Diluted

 

66,283

 

68,497

 

68,485

 

65,790

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

December 31,

 

December 31,

 

 

 

2008

 

2007

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

82,560

 

$

61,579

 

Marketable securities

 

 

1,501

 

Accounts receivable, net of allowance ($150 and $198, respectively)

 

4,980

 

11,131

 

Receivable from clearing brokers

 

5,738

 

5,503

 

Income tax receivable

 

3,207

 

 

Deferred tax asset

 

16,972

 

13,496

 

Other current assets

 

9,179

 

9,622

 

Total current assets

 

122,636

 

102,832

 

 

 

 

 

 

 

Long-term restricted cash

 

373

 

389

 

Goodwill

 

209,546

 

208,776

 

Intangible assets, net of accumulated amortization ($32,278 and $17,330, respectively)

 

117,639

 

132,587

 

Software development cost, net of accumulated amortization ($8,470 and $3,363, respectively)

 

26,198

 

26,939

 

Furniture and equipment, net of accumulated depreciation ($12,931 and $8,726, respectively)

 

6,259

 

8,007

 

Other long-term assets

 

25,557

 

29,800

 

 

 

 

 

 

 

Total assets

 

$

508,208

 

$

509,330

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of deferred revenue

 

$

80,391

 

$

124,486

 

Other current liabilities

 

19,889

 

17,825

 

Accounts payable

 

4,196

 

8,896

 

Accrued payroll

 

9,463

 

13,278

 

Accrued tax liabilities

 

6,019

 

7,544

 

Current portion of capitalized lease obligations

 

235

 

212

 

Current portion of notes payable

 

30,000

 

17,500

 

Total current liabilities

 

150,193

 

189,741

 

 

 

 

 

 

 

Long-term portion of deferred revenue

 

30,392

 

37,384

 

Long-term portion of capitalized lease obligations

 

104

 

330

 

Long-term portion of notes payable

 

64,400

 

100,000

 

Income tax payable

 

2,096

 

 

Deferred tax liabilities

 

30,555

 

18,487

 

Other long-term accrued liabilities

 

2,579

 

1,493

 

Total liabilities

 

280,319

 

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

 

337,805

 

331,006

 

Accumulated other comprehensive (loss) income

 

(147

)

20

 

Accumulated deficit

 

(110,434

)

(169,787

)

Total stockholders’ equity

 

227,889

 

161,895

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

508,208

 

$

509,330

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

9,544

 

$

17,808

 

$

59,353

 

$

22,435

 

Reconciling adjustments:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

6,121

 

5,419

 

24,260

 

19,601

 

Deferred taxes

 

657

 

(136

)

9,956

 

37

 

Stock compensation expense

 

1,960

 

1,934

 

8,252

 

15,325

 

Amortization of exclusivity rights

 

311

 

293

 

1,226

 

1,172

 

Contingent shares in connection with exclusivity rights and intellectual property acquired

 

 

1,359

 

 

3,550

 

Amortization of debt issue costs

 

240

 

275

 

1,044

 

1,043

 

Change in fair value of interest rate swap, included in interest expense

 

1,155

 

999

 

1,086

 

1,478

 

Provision for (recovery of) sales return reserve

 

(93

)

471

 

1,032

 

1,363

 

Provision for (gain) on lease termination

 

 

(31

)

 

105

 

Provision for bad debt expense

 

3

 

70

 

3

 

313

 

Provision for (recovery of) inventory reserve

 

 

(68

)

 

2

 

(Gain) Loss on sale of assets

 

(3

)

(3

)

1

 

19

 

Gain on marketable securities

 

 

(4

)

(7

)

 

Changes in operating assets and liabilities, net of the effect of acquired businesses:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

2,489

 

7,776

 

6,148

 

(3,641

)

Receivable from clearing brokers

 

6,373

 

4,959

 

(235

)

(1,155

)

Income tax receivable

 

(2,403

)

(62

)

(3,207

)

 

Other assets

 

3,163

 

(5,492

)

100

 

127

 

Accounts payable

 

(7,356

)

(4,942

)

(5,181

)

(7,287

)

Deferred revenue

 

(9,179

)

(5,497

)

(51,087

)

2,295

 

Accrued payroll

 

(1,625

)

81

 

(3,815

)

4,758

 

Other liabilities

 

284

 

(1,903

)

2,639

 

(7,750

)

Accrued tax liabilities

 

1,953

 

(498

)

812

 

(668

)

Net cash provided by operating activities

 

13,594

 

22,808

 

52,380

 

53,122

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Proceeds from the sale or maturity of marketable securities

 

 

1,300

 

1,501

 

20,641

 

Proceeds from the sale of equipment

 

 

5

 

 

30

 

Payments for capitalized software development costs

 

(918

)

(4,888

)

(6,040

)

(16,357

)

Purchases of furniture and equipment

 

(450

)

(648

)

(2,105

)

(3,750

)

Cash held in escrow

 

130

 

102

 

1,188

 

(8,298

)

Cash paid in business acquisitions, net of cash received

 

(130

)

(1,040

)

(1,188

)

(150,387

)

Net cash used in investing activities

 

(1,368

)

(5,169

)

(6,644

)

(158,121

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Payments on capital leases

 

(56

)

(51

)

(203

)

(190

)

Payments on notes payable

 

(2,500

)

(2,500

)

(23,100

)

(7,500

)

Changes in restricted cash

 

 

(4

)

16

 

(12

)

Proceeds from notes payable

 

 

 

 

125,000

 

Payment of debt issuance costs

 

 

 

 

(4,539

)

Disqualifying dispositions in exercise of stock options

 

75

 

 

75

 

 

Minimum tax withholding on restricted stock awards

 

(4

)

 

(434

)

 

Repurchase of stock

 

 

 

(1,455

)

 

Proceeds from exercise of stock options

 

2

 

221

 

506

 

882

 

Net cash (used in) provided by financing activities

 

(2,483

)

(2,334

)

(24,595

)

113,641

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(135

)

(13

)

(160

)

14

 

 

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

9,608

 

15,292

 

20,981

 

8,656

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

Beginning of period

 

72,952

 

46,287

 

61,579

 

52,923

 

 

 

 

 

 

 

 

 

 

 

End of period

 

82,560

 

61,579

 

82,560

 

61,579

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Financial Summary

(unaudited)

 

Reconciliation of Non-GAAP Information

 

The following table provides a reconciliation of GAAP Net Income 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.

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

in (millions)

 

2008

 

2008

 

2007

 

2008

 

2007 *

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

9.5

 

$

19.6

 

$

17.8

 

$

59.4

 

$

16.9

 

Depreciation and amortization

 

6.7

 

6.8

 

7.2

 

26.5

 

25.7

 

Stock compensation expense

 

2.0

 

2.0

 

1.9

 

8.3

 

15.3

 

Special charges, including deal related

 

1.4

 

1.1

 

 

3.6

 

11.7

 

Interest expense, net

 

2.7

 

1.8

 

2.8

 

8.2

 

9.1

 

Income tax provision

 

2.6

 

7.8

 

 

21.6

 

1.1

 

Net change in deferred revenue

 

(9.2

)

(16.3

)

(5.5

)

(51.1

)

3.5

 

Adjusted EBITDA ($)

 

15.7

 

22.8

 

24.2

 

76.5

 

83.3

 

Adjusted EBITDA (as a % of STV)

 

20.5

%

27.9

%

27.3

%

23.9

%

25.1

%

 

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.

 

 

 

Three Months Ended

 

Years  Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

in (000s)

 

2008

 

2008

 

2007

 

2008

 

2007 *

 

 

 

 

 

 

 

 

 

 

 

 

 

Brokerage Services Commissions

 

$

35,216

 

$

39,290

 

$

25,310

 

$

133,890

 

$

74,530

 

Interest & dividends

 

3,659

 

7,109

 

7,985

 

24,634

 

22,958

 

Payment for order flow

 

7,386

 

8,451

 

6,186

 

30,280

 

17,114

 

Other revenue

 

2,594

 

2,140

 

1,960

 

8,464

 

6,667

 

Total brokerage services revenue

 

48,855

 

56,990

 

41,441

 

197,268

 

121,269

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Education

 

 

 

 

 

 

 

 

 

 

 

Sales transaction volume

 

27,725

 

24,824

 

47,137

 

123,450

 

210,398

 

Total sales transaction volume

 

76,580

 

81,814

 

88,578

 

320,718

 

331,667

 

Change in deferred revenue

 

9,179

 

16,251

 

5,497

 

51,087

 

(3,528

)

Revenue

 

85,759

 

98,065

 

94,075

 

371,805

 

328,139

 

 


* The Company’s SEC filings for 2007 reflect Investools’ merger with thinkorswim Holdings, Inc. on February 15, 2007. However, for comparative purposes, the year ended December 31, 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 the Company’s  merger with thinkorswim Holdings, Inc., on February 15, 2007 and the Company’s stand-alone results through February 14, 2007.

 

 

 

Three Months Ended 
December 31,

 

Years Ended 
December 31,

 

in (000s)

 

2008

 

2007

 

2008

 

2007

 

Revenue

 

 

 

 

 

 

 

 

 

Brokerage Services

 

$

48,855

 

$

41,441

 

$

197,268

 

$

110,882

 

Investor Education

 

36,904

 

52,634

 

174,537

 

207,127

 

Revenue

 

85,759

 

94,075

 

371,805

 

318,009

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from Operations

 

 

 

 

 

 

 

 

 

Brokerage Services

 

$

15,466

 

$

18,627

 

$

82,361

 

$

42,598

 

Investor Education

 

(531

)

1,980

 

6,893

 

(9,829

)

Income from operations

 

14,935

 

20,607

 

89,254

 

32,769

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Operating Metrics thru December 31, 2008

 

 

 

Three Months Ended 
December 31,

 

Year Ended 
December 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

thinkorswim Inc.

 

 

 

 

 

 

 

 

 

Trading Days

 

63.0

 

63.0

 

251.5

 

249.5

 

 

 

 

 

 

 

 

 

 

 

New Retail Accounts Opened(1)

 

32,700

 

22,675

 

108,850

 

75,875

 

New Funded Retail Accounts

 

12,175

 

11,075

 

45,200

 

38,325

 

Period-End Funded Retail Accounts

 

97,800

 

57,775

 

97,800

 

57,775

 

 

 

 

 

 

 

 

 

 

 

Retail DARTs(2)

 

61,400

 

41,900

 

54,200

 

27,000

 

Active Trader DARTs(3)

 

118,300

 

20,400

 

78,400

 

23,300

 

Total DARTs

 

179,700

 

62,300

 

132,600

 

50,300

 

 

 

 

 

 

 

 

 

 

 

Total Trades

 

11,325,000

 

3,926,000

 

33,361,000

 

12,552,000

 

 

 

 

 

 

 

 

 

 

 

Ending Client Assets ($MM)

 

$

3,020

 

$

2,580

 

$

3,020

 

$

2,580

 

Average Client Equity/Retail Account

 

$

30,900

 

$

44,900

 

$

30,900

 

$

44,900

 

Retail Commission Per Trade

 

$

8.41

 

$

9.01

 

$

8.41

 

$

9.01

 

 

 

 

 

 

 

 

 

 

 

Investor Education Group

 

 

 

 

 

 

 

 

 

Total Paid Graduates(4)

 

18,330

 

12,260

 

47,890

 

43,090

 

Ending Cumulative Graduates(5)

 

398,000

 

337,000

 

398,000

 

337,000

 

Ending Active Subscribers(6)

 

97,600

 

102,800

 

97,600

 

102,800

 

 

 

 

 

 

 

 

 

 

 

Upsell Rate (7)

 

25

%

40

%

32

%

42

%

PHD program

 

10

%

16

%

10

%

19

%

Masters program

 

14

%

20

%

14

%

24

%

Associates program

 

34

%

31

%

36

%

30

%

Apprentice

 

34

%

0

%

14

%

0

%

Trading rooms

 

8

%

33

%

26

%

27

%

 


(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.