TD Ameritrade Holding Corporation (AMTD)

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TD AMERITRADE Holding Corporation (AMTD)

F1Q09 Earnings Call

January 20, 2009 8:30 am ET

Executives

Bill Murray - Managing Director, Investor Relations, Communications and Public Affairs

Fredric J. Tomczyk - President and Chief Executive Officer

William J. Gerber - Chief Financial Officer

Analysts

Howard Chen - Credit Suisse

Richard Repetto - Sandler O'Neill & Partners L.P.

Patrick O'Shaughnessy - Raymond James

Daniel Harris - Goldman Sachs

Roger Freeman - Barclays Capital

Michael Vinciquerra - BMO Capital Markets

Michael Carrier - UBS Investment Research

Brian Bedell - Merrill Lynch

Joel Jeffrey - Keefe, Bruyette & Woods

Presentation

Operator

Good day, everyone, and welcome to the TD AMERITRADE Holding Corporation first quarter fiscal year 2009 earnings results conference call. Today's call is being recorded.

With us today from the company is President and Chief Executive Officer Fred Tomczyk and Chief Financial Officer Bill Gerber.

At this time, I'll turn the call over to Bill Murray, Managing Director of Investor Relations, Communications and Public Affairs. Please go ahead, sir.

Bill Murray

Thank you, [Gretchen]. Good morning, everyone, and welcome to the TD AMERITRADE December quarter earnings call. Hopefully you've had a chance to read our press release, which can be found on AMTD.com along with today's presentation.

Before we begin, I'd like to familiarize you with the safe harbor disclosure and other disclosures under the federal securities laws. The call contains forward-looking statements involving risks, uncertainties and assumptions that may cause actual results to differ materially from those anticipated. Please review these risk factors, which are disclosed in our most recent annual report on Form 10-K.

Management will be discussing some non-GAAP financial measures as well such as EBITDA and liquid assets. You can find a reconciliation of these financial measures to the most comparable GAAP financial measures in the slide presentation.

This call is intended for investors and analysts and may not be reproduced in the media in whole or in part without prior consent of TD AMERITRADE.

At this point I'd like to turn the call over to TD AMERITRADE President and CEO Fred Tomczyk, you will be followed by our CFO, Bill Gerber.

Fred?

Fredric J. Tomczyk

Thanks, Bill, and good morning, everyone and thank you for joining us on the call today.

I'd like to start this morning by saying that we're pleased with our results for the December quarter, especially in light of the current difficult market environment. These certainly are unprecedented times. We're in a recession and credit crunch - that is at best halfway true  and we're seeing unprecedented government intervention, low market valuations, and near zero interest rate levels.

As you can see on Slide 3, we earned $0.31 per share, one of the better quarters in TD AMERITRADE's history. It's down from $0.40 a share a year ago, which was a record for us and included a $0.03 one-time tax benefit. Excluding the tax benefit, EPS is down 16% from the same time a year ago.

The fundamentals of our business remain strong, as evidenced by our 49% pre-tax margins and $234 billion in client assets, including $52 billion in client cash. Client assets were down 22%, but this is at the same time that the NASDAQ and the S&P 500 were down about 40% from a year ago. The combination of asset gathering and increased levels of client cash helped cushion the impact of the market downturn.

Strong organic growth is evident in our basic operating metrics - net new assets, new accounts and trades per day. Net new assets were just under $8 billion or 11% of beginning assets on an annualized basis. If you'll recall, we gave you a range of 7% to 11% on net new assets, so we're right at the top end of the range. We continue to see good traction on our asset gathering strategy.

In addition, clients remain engaged in the market. Trades per day averaged 357,000 per day for the quarter, up 15% over the same quarter last year. And our strong brand and investments in advertising helped us open 217,000 new accounts in the quarter, our best quarter for new accounts in nine years, all indications that our strategy is working despite the tough economy.

We'll remain focused on asset gathering and on maintaining our number one position in trades, taking advantage of the current dislocation in the market. The acquisition of thinkorswim will help with that, advancing our trading and investor education strategy by several years. Our strong financial position and our acquisition in integration capabilities will allow us advance our strategy in the midst of this difficult market.

Prudent management of the firm's balance sheet and our ability to generate cash has allowed us not only to produce these strong quarterly results, but also to reach $1.3 billion in liquid assets at the end of the quarter. Bill Gerber will give you more details on that in a few moments.

If you turn to Slide 4, I'd like to give you more detail on our asset gathering efforts. Net new assets in the December quarter were $7.8 billion. That's up about $1 billion from a year ago when you exclude the approximately $2.3 billion attributed to E*TRADE's dislocation last December. As I said earlier, net new assets were 11% of total beginning assets on an annualized basis, clearly putting us in the same league with other premier asset gatherers.

We attribute this success to a number of efforts. First, we benefited from the dislocation in the market. We've seen increasing quote flows from smaller banks and thrifts as well as from full-service brokerage organizations. Clients are coming to us, questioning how much they're paying for their advice and looking for a company with a strong balance sheet and a different value proposition.

Read the rest of this transcript for free on seekingalpha.com