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TD Ameritrade Holding Corp. (AMTD)

F4Q09 Earnings Call

October 27, 2009 8:00 am ET


Fred Tomczyk - President and Chief Executive Officer

Bill Gerber - Chief Financial Officer

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


Rich Repetto – Sandler O’Neill

Richard Salinger – BMO Capital Markets

Daniel Harris – Goldman Sachs

Roger Freeman – Barclays Capital

Patrick O'Shaughnessy – Raymond James

Howard Chen – Credit Suisse

Michael Hecht – JMP Securities

Matt Fischer – CLSA

Faye Elliott – Bank of America/Merrill Lynch

Joel Jeffrey – KBW



(Operator Instructions) Welcome to the TD Ameritrade Holding Corporation Fourth Quarter Fiscal Year 2009 Earnings Results Conference Call. With us today from the company is President and Chief Executive Officer Fred Tomczyk and Chief Financial Officer Bill Gerber. At this time, I would like to turn the call over to Bill Murray, Managing Director of Investor Relations, Communications and Public Affairs.

Bill Murray

Welcome to the TD Ameritrade September quarter and full year ’09 earnings call. If you haven’t had a chance yet, our press release and today’s presentation can be found on our website at

Before we begin, I'd like to refer you to our safe harbor statement which is on slide two of the presentation as we will be referring to forward looking statements in today’s presentation. We would also like to advise you to review our description of risk factors contained in our most recent annual and quarterly reports, forms 10-Q and 10-K. The 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.

Today’s call is coming from the NASDAQ Market site. We’re here because we’ll be ringing the opening bell. I mention that only because we are under some time constraints for this morning’s call which is scheduled through 9:00am. We expect to be able to take all questions there may not be enough time. Please contact our Investor Relations staff with any questions you may have that was not addressed this morning. Because of these time constraints and the number of covering analysts we’d appreciate your cooperation in limiting yourself to two questions.

With that we have Fred Tomczyk, President and CEO and Bill Gerber, our CFO here to review the major events of ’09 along with comments on the outlook for 2010 and beyond. Then we’ll open it up for questions.

Fred Tomczyk

I’m very happy to report that we had a strong fourth quarter with earnings per share of $0.26 to finish out the year with earnings of $1.10 per share. Bill will walk through the details of the quarter a little later but I want to open this morning by putting some perspective on the year. How the company is positioned for the future and our focus for the next year.

As you know, last year was a very difficult one, especially for those of us in financial services. We had a banking crisis that required unprecedented government intervention, a market that was down 30% to 40% at times and short term interest rates plummeting from over 200 basis points to near zero. All in all it looked to be as about a difficult as an environment as one could imagine for our business.

Looking back, I could not be more proud of how TD Ameritrade responded to this environment and our accomplishments over the last year. We made some good decisions, we avoided most of the problems, and were able to take advantage of the situation to grow our business, strengthen our firm, and position ourselves for the future and future growth.

If you turn to slide three I’d like to give you a brief recap of the past year. As I said earlier, we had a great with year with strong results in all aspects of our business that were within our control. We took advantage of our strengths to capitalize on the dislocation in the market in five ways:

We increased our investment in sales and marketing, at the same time that everyone else was pulling back. Our strong organic growth is evidenced that this worked for us.

We were also very thoughtful about examining our cost structure, focusing our efforts on taking costs out of non-client facing areas. We reduced our expenses without impacting service, organic growth, or our strategic initiatives for the future.

We saw an opportunity to advance our trading strategy and took advantage of it by buying thinkorswim. We now have the leading trading technology platform and the leading investor education business in the country. In essence we acquired the fastest growing company in the online brokerage business at an attractive price and advanced our trading strategy by upwards of three years. On a combined basis our options business now represents 10% of all options clearing corporation volume.

In 2009 with our strong financial position we saw an opportunity to buy back 39 million of our shares at an average price of $11.94 which is well below current trading levels. This buyback allowed us to return in excess of $450 million or approximately 70% of our 2009 earnings to our shareholders.

The near zero interest rate environment also brought an opportunity to do something positive for our clients and for the firm. Clients want capital preservation, liquidity, and yield on their cash and in that order. Our new cash strategy moves $10 to $14 billion of our cash suite balances to an insured MMDA product that better meets client needs and positions us well for our rising interest rate environment.

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