TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding Corporation (AMTD)

CLSA AsiaUSA Forum Conference Call

November 9, 2011 1:30 pm EST

Executives

William J. Gerber – Executive Vice President and Chief Financial Officer

Analysts

Matthew Fischer – CLSA Asia-Pacific Markets

Presentation

Matthew Fischer – CLSA Asia-Pacific Markets

Good morning, I’m Matt Fischer, CLSA’s U.S. Brokerage Analyst. It's my pleasure to welcome back TD Ameritrade’s CFO, Bill Gerber to our AsiaUSA Forum. Once again, Bill is accompanied by Bill Murray, TD Ameritrade’s Head of Investor Relations. Bill Gerber has been with TD Ameritrade since ’99, and CFO since 2006. Bill oversaw 10 acquisitions over the past decade, and was a major force in transforming TD Ameritrade from primarily an online platform to execute trades to a more full-service platform that includes multiple investment products and distribution channels.

I think the most compelling number that you will see in Bill’s presentation is 12%. This is TD Ameritrade’s organic growth in client assets, and is more than double that of their competitors. Hopefully, Bill can touch on, how they’re able to achieve this growth, and how it helps to drive EPS growth and industry leading pre-tax margins.

With that I think, that’s all enough of your time, and I’ll hand it over to Bill Gerber.

William J. Gerber

Thanks, Matt, and thanks to CLSA for inviting us back. Sometimes after introductions like that, you just want to say thank you, and I’ll take questions. We do have a lot to talk about, we have had several good years, and I think that as we go through this, you will understand a little bit more about the excitement that we have relative to the next few years at Ameritrade.

Bill Murray as Matt said, works with me and incharge of Investor Relations. And certainly, we can wait to the Q&A at the end, but it’s also fun if it’s a little more interactive. So if you have something that you don’t understand, right at the time we can go from there.

The Safe Harbor basically, as I’ve said may be a couple of other occasions, we could boil this down that the future is inherently uncertain, and there is – we’ll just leave it with that, I always like thank our legal team for participating. Our mission; what are we trying to do? We have a couple of key words in here that I think are indicative of what the mission is, that the TD Ameritrade is trying to do. The key word here being better, better implying that we’re never satisfied, we are trying to be a better firm, we’re not going to rest on our laurels, we are going to continue to go forward.

Today’s investor also, we want to stay relevance to where the clients are, and the client’s needs. So what we are trying to stay relevant to today’s investor. So there are six things that I would suggest that would be the investment themes, that I would ask you to think about low risk, high operating leverage, high cash flow business, so we’ll touch on some of that.

We have an insured deposit account agreement with TD Bank in the United States. That at the end of the September quarter, and whether we’re a September 30 year-end company so you might hear me talking about our year-end, but we just went through our year-end. But the IDA agreement insured deposit account agreement with TD had $57 billion of client assets, and at the end of the September quarter. And the revenue that comes off the IDA agreement represents roughly 30% of our revenue streams. So something to be aware of.

Also on our business model, we are very client centric (audio gap) and objective, I will talk about that, you are not going to (audio gap) find any products that had TD Ameritrade’s name on them. No one gets paid in our whole organization to trade a bond. There is no additional compensation that goes to our associates from that. So we’ll touch on that a little bit more later.

We are a market leader in DARTs, Daily Average Revenue Trades and have been for years. We are a premier asset gatherer as Matt mentioned. We’ve had double-digit net new asset growth for the past three years. And I will show you that in a moment, but our net new asset growth has been remarkable.

Our relationship with TD, which again is Toronto-Dominion Bank. TD is extremely important for us, the IDA agreement as I mentioned earlier is critical. We also are going through and going into select TD branches up-and-down the Eastern seaboard to try to cross sell between the TD Bank clients and the TD Ameritrade business. And so, I’ll touch on that a little bit more later as well. But we do have a very, very strong relationship with TD, one of the few AAA-rated banks remaining in the world.

So we are extremely well positioned for rising interest rates, and someday they will rise, but we right now have over $77 billion of interest-sensitive balances within the four walls of the company, which we’ll touch on, but that's very important.

And we have extremely strong cash generation and a strong financial position, very clean balance sheet, very strong EBITDA, our EBITDA-to-debt ratio is 1:1, and we’re growing that, we’ll talk about that too. And we’re really looking right now in this environment to continue to build a long-term core earnings power to company and deploy in the 40% to 60% of our net income every quarter back to the shareholders through a combination of stock buybacks and dividends, and we’ll touch on that as well throughout the presentation.

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