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

May 8, 2009

 

Press Release

 

GRAPHIC

 

thinkorswim Group Inc. Reports Quarterly Financial Results

 

Brokerage Segment Delivers Revenue Growth, Record Retail Trades and Increased Client Assets; Education Segment Achieves Record Graduates

 

NEW YORK — May 8, 2009 — thinkorswim Group Inc. (NASDAQ:SWIM), a leading provider of online brokerage and investor education services, today announced financial results and selected operating metrics for the first quarter ended March 31, 2009.

 

Consolidated financial results for the quarter (quarterly year-over-year comparisons):

 

·                  Revenues of $77.1 million, 61 percent of which were brokerage-based

·                  Pre-tax income of $8.2 million, 11 percent of revenues

·                  Net income of $4.8 million, or $0.07 per diluted share

·                  Non-GAAP Sales Transaction Volume (“STV”) of $74.2 million, 63 percent of which was brokerage-based

·                  Non-GAAP Adjusted EBITDA (before certain items) of $20.0 million, or 27 percent of STV

·                  New accounts opened of 32,675, an increase of 32 percent. Total accounts of 265,675 at quarter end

·                  New funded accounts of 11,475 during the quarter, an increase of 9 percent. Total accounts of 108,000 at quarter end

·                  Average retail trades per day of approximately 69,000, an increase of 52 percent

·                  Client assets of $3.2 billion, an increase of 19 percent

·                  Annualized brokerage revenue per funded account of $1,600

·                  Customer acquisition cost per new funded account of $340

·                  Record education graduates of 15,100, an increase of 45 percent

 

“thinkorswim’s first quarter performance reflects continued strength in our brokerage business, as shown by our record retail DARTs, up 52 percent from the year-ago quarter to 69,000; new account openings of 32,675 sustaining recent record levels; and growth of customer assets to $3.2 billion from a total of 108,000 funded and 265,675 open accounts,” said Lee K. Barba, Chairman and CEO of thinkorswim Group Inc.  “The high level of brokerage activity underscores our customers’ continuing preference for thinkorswim’s advanced financial trading technology and cross-market transaction capabilities, which empower clients to execute derivative-based trading strategies in today’s fast moving, volatile markets.  At the same time, our education segment set a record of 15,100 graduates, demonstrating that our education value proposition continues to attract informed investors.”

 



 

“We also are honored that thinkorswim was recently rated #1 by Barron’s in its annual ranking of the best overall online brokers for 2008, and placed highest in the critical ‘Best for Frequent Traders’ and ‘Best for Options Traders’ categories.  This is the third time in the last four years that thinkorswim has earned this coveted distinction, which reflects our ongoing commitment to leadership in products and services for active traders,” said Mr. Barba.

 

Analysis of First Quarter 2009 Results

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

For the first quarter, brokerage revenue increased 11% to $46.9 million, driven by a 31% increase in transaction revenues (commissions and payment for order flow) offset by a 78% decrease in interest revenue. The increase in transaction revenue was primarily due to the 61% increase year-over-year in retail funded accounts and 52% year-over-year increase in retail DARTs. The net interest revenue decline was primarily due to the dramatic decrease in the average federal funds rate, partly offset by the 19% increase in client assets to $3.2 billion at quarter end, of which $1.8 billion is held in cash.

 

Update Related to Legal Matters

With regard to the previously announced non-public inquiry by the SEC, the Company has agreed in principle to a settlement which the staff has indicated it will recommend to the Commission.  In view of this development, the Company has accrued $2.5 million in the first quarter of 2009, for a total accrual of $3.0 million, in connection with this matter.  There can be no assurance as to whether the offer will be accepted by the Commission, whether a definitive settlement of this inquiry will occur or, if a definitive settlement does occur, what the monetary and non-monetary consequences will be for the Company or its operations.

 

Proposed Acquisition by TD AMERITRADE

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.

 

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 products and services offered by thinkorswim have received numerous accolades from third parties, including Barron’s ranking as its top rated software-based online broker in three of the past four years (March 6, 2006; March 5, 2007 and March 16, 2009).  Barron’s is a registered trademark of Dow Jones & Company(c) 2006, 2007, 2009.

 

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 
March 31,

 

 

 

2009

 

2008

 

Revenue

 

 

 

 

 

Commissions

 

$

35,674

 

$

26,258

 

Interest & dividends

 

1,699

 

7,668

 

Payment for order flow

 

7,180

 

6,574

 

Other brokerage related revenue

 

2,386

 

1,966

 

Total brokerage revenue

 

46,939

 

42,466

 

 

 

 

 

 

 

Education revenue

 

30,192

 

48,524

 

Net revenues

 

77,131

 

90,990

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

Compensation and benefits

 

20,646

 

22,057

 

Brokerage, clearing and execution costs

 

7,176

 

7,570

 

Marketing

 

7,121

 

13,359

 

Partner commissions

 

9,906

 

6,530

 

Events, travel and venue

 

2,571

 

6,268

 

Technology and telecommunications

 

6,725

 

6,246

 

Depreciation and amortization

 

6,194

 

5,908

 

Other

 

7,202

 

5,336

 

Total costs and expenses

 

67,541

 

73,274

 

 

 

 

 

 

 

Income from operations

 

9,590

 

17,716

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

Interest expense, net

 

(1,443

)

(4,190

)

Interest income

 

96

 

455

 

Other

 

(33

)

14

 

Other expense

 

(1,380

)

(3,721

)

 

 

 

 

 

 

Net income before income taxes

 

8,210

 

13,995

 

Income tax provision

 

3,462

 

2,468

 

 

 

 

 

 

 

Net income

 

$

4,748

 

$

11,527

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic

 

$

0.07

 

$

0.18

 

Diluted

 

$

0.07

 

$

0.17

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

Basic

 

66,671

 

65,846

 

Diluted

 

68,766

 

68,860

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2009

 

2008

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

74,138

 

$

82,560

 

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

 

8,229

 

4,980

 

Receivable from clearing brokers

 

6,952

 

5,738

 

Income tax receivable

 

1,325

 

3,207

 

Deferred tax asset

 

18,472

 

19,106

 

Other current assets

 

8,568

 

9,179

 

Total current assets

 

117,684

 

124,770

 

 

 

 

 

 

 

Long-term restricted cash

 

373

 

373

 

Goodwill

 

209,637

 

209,546

 

Intangible assets, net of accumulated amortization ($36,114 and $32,278, respectively)

 

113,803

 

117,639

 

Software development cost, net of accumulated amortization ($9,821 and $8,470, respectively)

 

26,099

 

26,198

 

Furniture and equipment, net of accumulated depreciation ($13,308 and $12,931, respectively)

 

5,412

 

6,259

 

Other long-term assets

 

24,663

 

25,557

 

 

 

 

 

 

 

Total assets

 

$

497,671

 

$

510,342

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of deferred revenue

 

$

76,461

 

$

80,391

 

Other current liabilities

 

31,256

 

25,259

 

Accounts payable

 

4,912

 

4,196

 

Accrued payroll

 

6,850

 

9,463

 

Accrued tax liabilities

 

4,513

 

6,019

 

Current portion of capitalized lease obligations

 

240

 

235

 

Current portion of notes payable

 

17,500

 

27,900

 

Total current liabilities

 

141,732

 

153,463

 

 

 

 

 

 

 

Long-term portion of deferred revenue

 

31,363

 

30,392

 

Long-term portion of capitalized lease obligations

 

42

 

104

 

Long-term portion of notes payable

 

56,500

 

66,500

 

Income tax payable

 

2,096

 

2,096

 

Deferred tax liabilities

 

31,615

 

30,555

 

Other long-term accrued liabilities

 

2,311

 

2,579

 

Total liabilities

 

265,659

 

285,689

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock $0.01 par value (66,804 and 66,500 shares issued and outstanding, respectively)

 

668

 

665

 

Additional paid-in capital

 

340,411

 

337,805

 

Accumulated other comprehensive income

 

(145

)

(147

)

Accumulated deficit

 

(108,922

)

(113,670

)

Total stockholders’ equity

 

232,012

 

224,653

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

497,671

 

$

510,342

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2009

 

2008

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

4,748

 

$

11,527

 

Reconciling adjustments:

 

 

 

 

 

Depreciation and amortization

 

6,194

 

5,908

 

Deferred taxes

 

1,694

 

2,075

 

Stock compensation expense

 

2,351

 

2,108

 

Amortization of exclusivity rights

 

311

 

302

 

Contingent shares in connection with exclusivity rights

 

 

299

 

Amortization of debt issue costs

 

440

 

374

 

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

 

(269

)

1,448

 

Provision for (recovery of) sales return reserve

 

(33

)

381

 

Loss on sale of assets

 

1

 

 

Gain on marketable securities

 

 

(7

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(3,249

)

2,996

 

Receivable from clearing brokers

 

(1,214

)

(2,290

)

Income tax receivable

 

1,882

 

 

Other assets

 

663

 

(268

)

Accounts payable

 

1,064

 

1,974

 

Deferred revenue

 

(2,959

)

(11,205

)

Accrued payroll

 

(2,613

)

(8,346

)

Other liabilities

 

6,030

 

775

 

Accrued tax liabilities

 

(1,506

)

(149

)

Net cash provided by operating activities

 

13,535

 

7,902

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Proceeds from the sale or maturity of marketable securities

 

 

1,501

 

Payments for capitalized software development costs

 

(1,088

)

(1,911

)

Purchases of furniture and equipment

 

(525

)

(540

)

Cash released from escrow

 

91

 

831

 

Cash paid in business acquisitions

 

(91

)

(831

)

Net cash used in investing activities

 

(1,613

)

(950

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payments on capital leases

 

(57

)

(51

)

Payments on notes payable

 

(20,400

)

(10,000

)

Changes in restricted cash

 

 

(2

)

Minimum tax withholding on restricted stock awards

 

(224

)

(402

)

Proceeds from exercise of stock options

 

335

 

189

 

Net cash used in financing activities

 

(20,346

)

(10,266

)

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

2

 

(8

)

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(8,422

)

(3,322

)

Cash and cash equivalents:

 

 

 

 

 

Beginning of period

 

82,560

 

61,579

 

 

 

 

 

 

 

End of period

 

$

74,138

 

$

58,257

 

 



 

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
March 31,

 

in (millions)

 

2009

 

2008

 

 

 

 

 

 

 

Net income

 

$

4.8

 

$

11.5

 

Depreciation and amortization

 

6.9

 

6.9

 

Stock compensation expense

 

2.4

 

2.1

 

Special charges, including deal related

 

4.1

 

0.4

 

Interest expense, net

 

1.3

 

3.7

 

Income tax provision

 

3.5

 

2.5

 

Net change in deferred revenue

 

(3.0

)

(11.2

)

Adjusted EBITDA ($)

 

20.0

 

15.9

 

Adjusted EBITDA (as a % of STV)

 

27.0

%

19.9

%

 

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
March 31,

 

in (thousands)

 

2009

 

2008

 

Brokerage Services

 

 

 

 

 

Commissions

 

$

35,674

 

$

26,258

 

Interest & dividends

 

1,699

 

7,668

 

Payment for order flow

 

7,180

 

6,574

 

Other revenue

 

2,386

 

1,966

 

Total brokerage services revenue

 

46,939

 

42,466

 

 

 

 

 

 

 

Investor Education

 

 

 

 

 

Sales transaction volume

 

27,233

 

37,319

 

Total sales transaction volume

 

74,172

 

79,785

 

Change in deferred revenue

 

2,959

 

11,205

 

Revenue

 

$

77,131

 

$

90,990

 

 



 

Segment Information

 

The following table provides information on an unaudited basis concerning thinkorswim Group Inc.’s operations by reportable segment for the periods presented.

 

 

 

Three Months Ended
March 31,

 

in (thousands)

 

2009

 

2008

 

Revenue

 

 

 

 

 

Brokerage Services

 

$

46,939

 

$

42,466

 

Investor Education

 

30,192

 

48,524

 

Revenue

 

$

77,131

 

$

90,990

 

 

 

 

 

 

 

Income (Loss) from Operations

 

 

 

 

 

Brokerage Services

 

$

16,879

 

$

17,623

 

Investor Education

 

(7,289

)

93

 

Income from operations

 

$

9,590

 

$

17,716

 

 



 

THINKORSWIM GROUP INC. AND SUBSIDIARIES

Operating Metrics thru March 31, 2009

(unaudited)

 

 

 

Three Months Ended
March 31,

 

Change

 

 

 

2009

 

2008

 

$ or #

 

%

 

thinkorswim Inc.

 

 

 

 

 

 

 

 

 

Trading Days

 

61.0

 

61.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Retail Accounts Opened(1)

 

32,675

 

24,800

 

7,875

 

32

 

New Funded Retail Accounts

 

11,475

 

10,550

 

925

 

9

 

Period-End Funded Retail Accounts

 

108,000

 

66,950

 

41,050

 

61

 

 

 

 

 

 

 

 

 

 

 

Retail DARTs(2)

 

69,000

 

45,400

 

23,600

 

52

 

Active Trader DARTs(3)

 

65,300

 

41,900

 

23,400

 

56

 

Total DARTs

 

134,300

 

87,300

 

47,000

 

54

 

 

 

 

 

 

 

 

 

 

 

Total Trades

 

8,190,000

 

5,322,000

 

2,868,000

 

54

 

 

 

 

 

 

 

 

 

 

 

Ending Client Assets ($MM)

 

$

3,190

 

$

2,690

 

$

500

 

19

 

Average Client Equity/Retail Account

 

$

29,500

 

$

39,700

 

$

(10,200

)

(26

)

Retail Commission Per Trade

 

$

7.90

 

$

8.55

 

$

(0.65

)

(8

)

 

 

 

 

 

 

 

 

 

 

Investor Education Group

 

 

 

 

 

 

 

 

 

Total Paid Graduates(4)

 

15,100

 

10,430

 

4,670

 

45

 

Ending Cumulative Graduates(5)

 

418,000

 

351,000

 

67,000

 

19

 

Ending Active Subscribers(6)

 

95,500

 

106,400

 

(10,900

)

(10

)

 

 

 

 

 

 

 

 

 

 

Upsell Rate (7)

 

27

%

34

%

(7

)%

(21

)%

PHD program

 

9

%

12

%

(3

)%

(25

)%

Masters program

 

17

%

16

%

1

%

6

%

Associates program

 

27

%

40

%

(13

)%

(33

)%

Apprentice

 

34

%

0

%

34

%

0

%

Trading rooms

 

13

%

32

%

(19

)%

(59

)%

 


(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.