INVESTools Inc. News
Investools Reports Quarterly Financial Results
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
thinkorswim highlights for the first quarter* compared to the year-ago period:
— Record brokerage revenue of $42 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 $49 million, up 8%. — STV of $37 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%.
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. "To sustain this level of performance, we will invest in the thinkorswim operation and brand, more closely align our education services with the brokerage operations, and support our business with innovative marketing and a consolidated organizational structure."
* The Company's SEC filings for 2007 reflect Investools' merger with thinkorswim on
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) March 31, December 31, 2008 2007 (unaudited) 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 68,983 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
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 in (millions) March 31, 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 (%) 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 in (000s) March 31, 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
in (000s) Three Months Ended March 31, 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 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.
SOURCE Investools Inc.
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