TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding (AMTD)

Q4 2013 Earnings Call

October 29, 2013 8:30 am ET

Executives

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

Fredric J. Tomczyk - Chief Executive Officer, President, Director and Member of Non-Td Directors Committee

William J. Gerber - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division

Michael Carrier - BofA Merrill Lynch, Research Division

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division

Howard Chen - Crédit Suisse AG, Research Division

Christopher J. Allen - Evercore Partners Inc., Research Division

Christopher Harris - Wells Fargo Securities, LLC, Research Division

Neil Stratton

Kenneth Hill - Barclays Capital, Research Division

Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division

Christopher Shutler - William Blair & Company L.L.C., Research Division

Gaston F. Ceron - Morningstar Inc., Research Division

Presentation

Operator

Good day, everyone, and welcome to the TD Ameritrade Holding Corporation's September Quarter Earnings Results Conference Call. This 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'd like to turn the call over to Bill Murray, Managing Director of Investor Relations. Please go ahead, sir.

Bill Murray

Thank you, operator, and good morning, everyone, and welcome to our September earnings call.

On this call, we will be covering the September quarter and full year 2013 results, as well as our guidance for 2014.

Please refer to our press release and September quarter earnings presentation, which can be found on amtd.com.

Our Safe Harbor statement and reconciliation of certain non-GAAP financial measures to the most comparable GAAP financial measures are included in the slide presentation, and descriptions of risk factors are included in our most recent financial reports Forms 10-Q and 10-K.

As usual, 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. [Operator Instructions]

With that, we have Fred and Bill here to review the September quarter and full year results. Fred?

Fredric J. Tomczyk

Thank you, Bill, and good morning, everyone, and thanks for joining us today to discuss our September quarter and 2013 fiscal year-end results.

2013 was another strong year for TD Ameritrade. Once again, we delivered a strong performance in the face of an ongoing difficult environment. Uncertainty still exists, primarily due to ongoing political gridlock, which, while good for trading, has kept the average retail investor largely on the sidelines. And yet, our growth continues, giving us good momentum as we start 2014.

Let's take a look at how we ended the year with the fourth quarter's key highlights on Slide 3. Average client trades per day were 382,000, an activity rate of 6.4%. Net new client assets of $10 billion, an 8% annualized growth rate. Record total client assets of $556 billion were up 18% year-over-year. The record interest sensitive assets of $96 billion were up 16% year-over-year and net revenues of $709 million, up 10% year-over-year. And diluted earnings per share were $0.36, up 38% year-over-year, inclusive of the $0.06 gain from our investment in Knight Capital Group that we told you about last quarter.

Let's now turn to Slide 4 for a look at what those results meant for our fiscal year. Once again, we delivered another strong organic growth year. Trades per day were 374,000, an activity rate of 6.3%. And 2013 was our fifth consecutive year of double-digit asset gathering, with net record net new client assets of $50 billion, a 10% annualized growth rate.

Total client assets ended the year at $556 billion, up 18% year-over-year. And we ended the year with record interest sensitive assets of $96 billion, up 16% over 2012. Each of these contributed to the highest net revenues we earned in our history of $2.8 billion, an increase of 5% year-over-year. And operating expenses were, again, flat year-over-year, something that we're quite proud of.

We have now held expenses at the same level in each of the last 3 years, while continuing to invest in the business and deliver record organic growth. This leaves us with diluted earnings per share of $1.22, up 15% year-over-year.

And last but not least, we returned 107% of our earnings to our shareholders via cash dividends and debt repayments. In fact, for shareholders who held our stock since the end of last fiscal year, the effective dividend yield on that investment was 5.6%. And when you combine that 5.6% with our 70% stock appreciation over the fiscal year, our total shareholder return into fiscal 2013 was over 75%. We also received another credit rating upgrade when Moody's moved us up to A3.

All in all, it was a good year, a strong year, and we're pleased with the results.

Let's look at the key components of our growth strategy in more detail starting with asset gathering on Slide 5. For 5 years, we have grown net new client assets at double-digit rates, accumulating nearly $200 billion. In 2013, we gathered a record $50 billion, a 10% annual growth rate.

In our retail channel, growth was driven by our sales and service efforts to create new client relationships and deepen existing client relationships. Cross-selling is going well, and our asset retention rates were the best we've ever seen. And we completed a major overhaul of our branch technology in the year, helping our branch investment consultants be more productive as we eliminated inefficiencies and improved our sales processes.

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