EX-99.1 2 a08-13173_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

For Immediate Release

 

May 1, 2008

 

Press Release

 

 

Investools Reports Quarterly Financial Results

 

Online Brokerage and Investor Education Leader Delivers 39% Revenue Growth, Solid Profitability in First Quarter 2008*

 

Company Announces Growth Initiatives, Plans Name Change to thinkorswim Group Inc.

 

NEW YORK – May 1, 2008 – Investools Inc. (NASDAQ:SWIM), the industry-leading online brokerage and provider of investor education services, today announced financial results and selected operating metrics for the first quarter ended March 31, 2008.

 

Consolidated financial highlights for the first quarter* include:

 

·                  Record Revenues of $91 million, up 39% from the year-ago period.

·                  Net Income of $12 million, or $0.17 per diluted share, versus year-ago Net Loss of $25 million.

·                  Non-GAAP Sales Transaction Volume (“STV”) of $80 million, flat from the year ago period.

·                  Non-GAAP Adjusted EBITDA (before certain items) was a record $16 million, or 20% of STV, versus year-ago $15 million, or 19% of STV.

 

“At a time of pronounced market volatility we are pleased with our performance, particularly in our thinkorswim online brokerage business, as traders and investors continued to rely on our superior technology and options expertise.  Another record quarter of account growth and increased trading activity demonstrates the value of our business model, which turns qualified graduates from our investor education programs into active traders,” said Lee K. Barba, Chairman and CEO.  “We have made excellent progress in the first year of our merger and will be further leveraging the expertise of thinkorswim to fuel the continued expansion of our brokerage business which has become the growth engine of the Company.”

 

thinkorswim highlights for the first quarter* compared to the year-ago period:

 

·                  Record brokerage revenue of $42.5 million, up 109%.

·                  New accounts opened of 24,800, up 46%.

·                  New accounts funded of 10,550, up 30%.

·                  Funded accounts totaled 66,950 as of March 31, 2008, up 124%.

·                  Retail DARTs of 45,400, up 199%.

·                  Active Trader DARTs of 41,900, up 102%.

·                  Total client assets $2.69 billion, up 89%.

·                  Average client account balance of $39,700 trading 177 times per year.

 



 

Investor Education Group highlights for the first quarter compared to the year-ago period:

 

·                  Revenue of $48.5 million, up 8%.

·                  STV of $37.3 million, a 37% decline, due to a reduction in product pricing that is expected to increase the number of graduates.

·                  Total graduates of 10,430 during the quarter, up 1%.

·                  Active Investor Toolbox subscribers of 106,400, up 17%.

 


* The Company’s SEC filings for 2007 reflect Investools’ merger with thinkorswim on February 15, 2007. However, for comparative purposes, the quarter ended March 31, 2007 has 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.

 

Name Change and Growth Strategies to Enhance Online Brokerage

 

Investools also announced several initiatives to build on and accelerate the growth and profitability of its core online brokerage business.

 

The Company plans to change its corporate identity to thinkorswim Group Inc., reflecting the growing revenue and margin contribution of the online brokerage business and the highly-regarded reputation that the thinkorswim brand has in the financial services sector.  The corporate name change is expected to be implemented prior to year-end.

 

To support the successful customer acquisition efforts at thinkorswim, the Company will allocate a higher proportion of its marketing resources to expand the thinkorswim acquisition campaigns launched at the end of last year.  In addition, Investools’ education programs will be aligned more closely with thinkorswim to create a cost-effective catalyst for generating profitable brokerage accounts.  Organizational efficiency will be improved by consolidating some education functions into thinkorswim.

 

“The strong performance of thinkorswim since our merger last year clearly shows the potential of this business to drive our future growth, profitability and shareholder value. Our initiatives are designed to focus our resources on the brokerage business, while drawing on our strengths as the leading provider of investor education. This is the right direction for the Company and we expect to see positive results from this strategy in the near term,” Mr. Barba concluded.

 

About Investools (NASDAQ:SWIM)

 

Investools Inc. offers market-leading online brokerage, investor education and related financial products and services for self-directed investors and active traders.   thinkorswim Inc., our  industry-leading online brokerage division and financial technology pioneer, provides a suite of trading platforms to active, self-directed traders, high-net worth individuals, beginning investors, and institutional traders and money managers. 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. 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.  Investools’ Education Group offers a full range of investor education products and services that provide lifelong learning in a variety of interactive delivery

 



 

formats, including instructor-led synchronous and asynchronous online courses, in-person workshops, online coaching programs and telephone, live-chat and email support. Investools’ graduates can then apply what they’ve learned by trading with thinkorswim’s online brokerage platforms.

 

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 Investools 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.

 

 

Investor Contact:

 

 

 

Ida Kane, SVP and CFO

 

801.816.6918

 

ida.kane@investools.com

 

 

 

 

 

Media Contact:

 

 

 

Fran Del Valle

 

212.717.5499

 

frances.delvalle@influencecentral.com

 

 



 

INVESTOOLS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

58,257

 

$

61,579

 

Marketable securities

 

 

1,501

 

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

 

8,135

 

11,131

 

Receivable from clearing brokers

 

7,793

 

5,503

 

Deferred tax assets

 

14,288

 

13,496

 

Other current assets

 

9,915

 

9,622

 

Total current assets

 

98,388

 

102,832

 

 

 

 

 

 

 

Long-term restricted cash

 

391

 

389

 

Goodwill

 

209,215

 

208,776

 

Intangible assets, net of accumulated amortization ($21,074 and $17,330, respectively)

 

128,842

 

132,587

 

Software development costs, net of accumulated amortization ($4,515 and $3,363, respectively)

 

27,087

 

26,939

 

Furniture and equipment, net of accumulated depreciation ($9,736 and $8,726, respectively)

 

7,754

 

8,007

 

Other long-term assets

 

28,268

 

29,800

 

 

 

 

 

 

 

Total assets

 

$

499,945

 

$

509,330

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of deferred revenue

 

$

117,608

 

$

124,486

 

Other current liabilities

 

18,468

 

17,825

 

Accounts payable

 

11,111

 

8,896

 

Accrued payroll

 

4,932

 

13,278

 

Accrued tax liabilities

 

7,395

 

7,544

 

Current portion of capitalized lease obligations

 

216

 

212

 

Current portion of notes payable

 

17,500

 

17,500

 

Total current liabilities

 

177,230

 

189,741

 

 

 

 

 

 

 

Long-term portion of deferred revenue

 

33,057

 

37,384

 

Capitalized lease obligations

 

275

 

330

 

Notes payable

 

90,000

 

100,000

 

Deferred income taxes

 

20,945

 

18,487

 

Other long-term accrued liabilities

 

2,940

 

1,493

 

Total liabilities

 

324,447

 

347,435

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock $0.01 par value (65,846 and 65,655 shares issued and outstanding, respectively)

 

659

 

656

 

Additional paid-in capital

 

333,094

 

331,006

 

Accumulated other comprehensive income

 

5

 

20

 

Accumulated deficit

 

(158,260

)

(169,787

)

Total stockholders’ equity

 

175,498

 

161,895

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

499,945

 

$

509,330

 

 



 

INVESTOOLS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Revenue

 

$

90,990

 

$

54,857

 

Costs and expenses

 

 

 

 

 

Cost of revenue

 

34,500

 

32,083

 

Selling expense

 

19,117

 

19,204

 

General and administrative expense

 

19,264

 

22,438

 

Special charges

 

393

 

127

 

Total costs and expenses

 

73,274

 

73,852

 

 

 

 

 

 

 

Income (loss) from operations

 

17,716

 

(18,995

)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

Interest expense

 

(4,190

)

(1,468

)

Interest income

 

455

 

652

 

Other, net

 

14

 

(1

)

Other expense, net

 

(3,721

)

(817

)

 

 

 

 

 

 

Net income (loss) before income taxes

 

13,995

 

(19,812

)

Income tax provision

 

2,468

 

33

 

 

 

 

 

 

 

Net income (loss)

 

$

11,527

 

$

(19,845

)

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

Basic

 

$

0.18

 

$

(0.36

)

Diluted

 

$

0.17

 

$

(0.36

)

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

65,846

 

55,444

 

Weighted average common shares outstanding – diluted

 

68,869

 

55,444

 

 



 

INVESTOOLS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

11,527

 

(19,845

)

Reconciling adjustments:

 

 

 

 

 

Depreciation and amortization

 

5,908

 

3,151

 

Deferred taxes

 

2,075

 

33

 

Stock compensation expense

 

2,108

 

9,767

 

Amortization of exclusivity rights

 

302

 

293

 

Contingent shares in connection with exclusivity rights

 

299

 

828

 

Decrease in fair value of interest rate swap agreement

 

1,448

 

 

Amortization of debt issue costs

 

374

 

 

Provision for (recovery of) sales return reserve

 

381

 

(6

)

Provision for bad debt

 

 

100

 

(Gain) loss on marketable securities

 

(7

)

4

 

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

 

 

 

 

 

Accounts receivable

 

2,996

 

(7,782

)

Receivable from clearing brokers

 

(2,290

)

(3,119

)

Income tax receivable

 

 

(339

)

Other assets

 

(268

)

(3,209

)

Accounts payable

 

1,974

 

(6,588

)

Deferred revenue

 

(11,205

)

14,714

 

Accrued payroll

 

(8,346

)

(1,118

)

Other liabilities

 

775

 

1,551

 

Accrued tax liabilities

 

(149

)

20

 

Net cash provided by (used in) operating activities

 

7,902

 

(11,545

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Proceeds from the maturity of marketable securities

 

1,501

 

15,313

 

Payments for capitalized software development costs

 

(1,911

)

(2,226

)

Purchases of furniture, fixtures and equipment

 

(540

)

(659

)

Cash held in escrow

 

831

 

(8,500

)

Cash paid in business acquisitions, net of cash received

 

(831

)

(149,976

)

Net cash used in investing activities

 

(950

)

(146,048

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payments on capital leases

 

(51

)

(43

)

Payments on note payable

 

(10,000

)

 

Changes in long-term restricted cash

 

(2

)

(3

)

Repurchase of stock

 

(402

)

 

Proceeds from note payable

 

 

125,000

 

Proceeds from exercise of stock options

 

189

 

230

 

Net cash (used in) provided by financing activities

 

(10,266

)

125,184

 

 

 

 

 

 

 

Effect of foreign exchange rates on cash and cash equivalents

 

(8

)

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(3,322

)

(32,409

)

Cash and cash equivalents:

 

 

 

 

 

Beginning of period

 

61,579

 

52,923

 

 

 

 

 

 

 

End of period

 

$

58,257

 

$

20,514

 

 



 

INVESTOOLS INC. AND SUBSIDIARIES

Financial Summary

(unaudited)

 

Reconciliation of Non-GAAP Information

 


*The Company’s SEC filings for 2007 reflect Investools’ merger with thinkorswim on February 15, 2007. However, for comparative purposes, the quarter ended March 31, 2007 has 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.

 

The following table reconciles the Company’s non-GAAP Adjusted EBITDA for the periods presented which the Company believes is a valuable representation of operating performance given the impact of accounting for deferred revenue and certain other costs. The table provides a reconciliation of Net Income (Loss) to Adjusted EBITDA for the periods indicated.

 

 

 

Three Months Ended
March 31,

 

in (millions)

 

2008

 

2007*

 

 

 

 

 

 

 

Net income (loss)

 

$

11.5

 

$

(25.4

)

Depreciation and amortization

 

6.9

 

4.7

 

Stock compensation expense

 

2.1

 

9.8

 

Special charges

 

0.4

 

0.1

 

Interest expense, net

 

3.7

 

0.7

 

Income tax provision

 

2.5

 

 

Other acquisition related items

 

 

10.5

 

Net change in deferred revenue

 

(11.2

)

14.7

 

Adjusted EBITDA ($)

 

15.9

 

15.1

 

Adjusted EBITDA (as a % of STV)

 

19.9

%

18.8

%

 

The following table provides a breakout of revenue for thinkorswim Group on an unaudited basis for all periods presented and a reconciliation of non-GAAP STV to Revenue. The Company believes that Investor Education Group sales transaction volume is an important measure of business volume. STV is a non-GAAP financial measure and represents sales in a particular period before the effect of recognition of deferred revenue from prior periods and the deferral of current period sales. The table provides a reconciliation of non-GAAP total sales volume to revenue for the periods indicated.

 

 

 

Three Months Ended
March 31,

 

in (000s)

 

2008

 

2007*

 

Brokerage Services

 

 

 

 

 

Commissions

 

$

26,258

 

$

12,880

 

Interest & dividends

 

7,668

 

4,025

 

Other & brokerage related revenue

 

8,540

 

3,444

 

Total thinkorswim Group revenue

 

42,466

 

20,349

 

 

 

 

 

 

 

Investor Education

 

 

 

 

 

Sales Transaction Volume

 

37,319

 

59,690

 

Total Sales Transaction Volume

 

79,785

 

80,039

 

Change in deferred revenue

 

11,205

 

(14,796

)

Revenue

 

90,990

 

65,243

 

 



 

Segment Information

 

The following table provides information concerning our operations by reportable segment. The Company’s SEC filings and the table below reflect Investools’ merger with thinkorswim on February 15, 2007.

 

 

 

Three Months Ended
March 31,

 

in (000s)

 

2008

 

2007

 

Revenue

 

 

 

 

 

Investor Education

 

$

48,524

 

$

44,894

 

Brokerage Services

 

42,466

 

9,963

 

Revenue

 

90,990

 

54,857

 

 

 

 

 

 

 

Income (Loss) from Operations

 

 

 

 

 

Investor Education

 

$

663

 

$

(21,680

)

Brokerage Services

 

17,053

 

2,685

 

Income (loss) from operations

 

17,716

 

(18,995

)

 



 

INVESTOOLS INC. AND SUBSIDIARIES

Operating Metrics

(unaudited)

 

 

 

Three Months Ended

 

Change

 

 

 

3/31/2008

 

3/31/2007

 

$ or #

 

%

 

thinkorswim Inc.

 

61.0

 

61.0

 

 

 

 

 

Trading Days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Retail Accounts Opened (1)

 

24,800

 

16,975

 

7,825

 

46.1

%

New Funded Retail Accounts

 

10,550

 

8,125

 

2,425

 

29.8

%

Period –End Funded Retail Accounts

 

66,950

 

29,925

 

37,025

 

123.7

%

Retail DARTs (2)

 

45,400

 

15,200

 

30,200

 

198.7

%

Active Trader DARTs (3)

 

41,900

 

20,700

 

21,200

 

102.4

%

Total DARTs

 

87,300

 

35,900

 

51,400

 

143.2

%

 

 

 

 

 

 

 

 

 

 

Total Trades

 

5,322,000

 

2,192,000

 

3,130,000

 

142.8

%

 

 

 

 

 

 

 

 

 

 

Ending Client Assets ($MM)

 

$

2,690

 

$

1,420

 

$

1,270

 

89.4

%

Average Client Equity/Retail Account

 

$

39,700

 

$

46,100

 

 

 

 

 

Retail Commission Per Trade

 

$

8.55

 

$

10.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Education Group

 

 

 

 

 

 

 

 

 

Total Paid Graduates (4)

 

10,430

 

10,370

 

60

 

0.6

%

Ending Cumulative Graduates (5)

 

351,000

 

293,000

 

58,000

 

19.8

%

Ending Active Subscribers (6)

 

106,400

 

90,800

 

15,600

 

17.2

%

 

 

 

 

 

 

 

 

 

 

Upsell Rate (7)

 

34

%

41

%

(7

)%

 

 

PHD Program

 

12

%

26

%

(14

)%

 

 

Masters Program

 

16

%

29

%

(23

)%

 

 

Associates Program

 

40

%

29

%

11

%

 

 

Trading Rooms

 

32

%

16

%

16

%

 

 

 


(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.