TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding Corp. (AMTD)

F1Q10 Earnings Call

January 19, 2010 8:30 am ET

Executives

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

Fred Tomczyk - President and Chief Executive Officer

Bill Gerber - Chief Financial Officer

Analysts

Rich Repetto – Sandler O’Neill

Roger Freeman – Barclays Capital

Daniel Harris – Goldman Sachs

Howard Chen – Credit Suisse

Celeste Brown – Morgan Stanley

Patrick O'Shaughnessy – Raymond James

Mike Vinciquerra – BMO Capital Markets

Michael Hecht – JMP Securities

Michael Carrier – Deutsche Bank

Joel Jeffrey – KBW

Faye Elliott – Bank of America/Merrill Lynch

Presentation

Operator

Welcome to the TD Ameritrade Holding Corporation December quarter 2010 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. Please go ahead, Sir.

Bill Murray

Thank you. Good morning everyone and welcome to the TD Ameritrade December quarter earnings call. Hopefully you have had a chance to get our press release and view our presentation. If not, they can be found on our website at www.AMTD.com.

Before we begin, I would 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 review our description of risk factors contained in our most recent annual and quarterly reports, forms 10-Q and 10-K. As usual 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.

As we begin I will remind you that we have 20 covering analysts and we would like to get through as many as possible so we would appreciate your keeping your questions limited to two.

With that I will turn it over to Fred Tomczyk, President and CEO and Bill Gerber, our CFO here to review the December quarter results and our major accomplishments. Fred?

Fred Tomczyk

Thanks Bill and good morning everyone. Thank you for joining us today. I am pleased to report we had another solid quarter maintaining our focus on our clients and driving organic growth.

This focus has enabled us to take advantage of the markets to grow our business, strengthen our firm and position ourselves for the future. We feel very good about our business model, our strategy and our financial position and we remain positive about our ability to grow earnings over the longer term. On slide three you can see our highlights for the first quarter. EPS came in at $0.23 and reflects a $0.01 charge incurred on refinancing our debt, lower trading and continued investments in marketing which is working for us.

After a strong October, trades began dropping off in mid-November and December as you are well aware and as a result we averaged 379,000 trades per day for the quarter. So far in January trades are averaging 408,000 per day, up 19% from December’s trading levels. Retail investors have re-engaged in the New Year.

We ended the quarter with $34.6 billion in insured deposit account balances and this number increased to $39.1 billion January to date primarily due to the last step in our cash management strategy; moving $4.1 billion from free credits to the IDA in early January. When we started our cash management program we had a goal of moving between $10-14 billion into the IDA from money market mutual funds and client credits. We are very pleased that we were able to over-achieve on this effort and we have now migrated $20 billion. Our IDA balances have now doubled to close to $40 billion over the last year. This bodes well in helping mitigate the impact of a near zero interest rate environment and positions us well for a rising rate environment.

Margin lending has come back nicely as the market has turned around. We ended the quarter with $6.4 billion in margin loans. As I have been saying to you for some time, while quarterly results are important we are focused on delivering value over the longer term and we manage our business with a focus on what we can control and our priority on creating long-term shareholder value.

Our business fundamentals remain very strong with net new assets of close to $9 billion. This represents an annualized growth rate of 12%, another quarter with double digit growth in net new assets. If you think about it, in the first year of our asset gathering journey, 2007, we gathered just over $12 billion of assets. Here we are three years later and we gathered close to $9 billion in one quarter. We are very happy with our continued asset gathering momentum.

Gross new accounts came in at 180,000. Our client assets of $319 billion are now higher than they were when we entered the financial crisis as a result of our strong asset gathering results and the recovery in the markets and client cash at $58 billion is at record levels. As you can see on slide four, net new assets of $8.7 billion for the December quarter were up from $7.8 billion in the same quarter last year and $6.8 billion in the December 2007 quarter after excluding some one-time assets gathered from a competitor. Both our retail and institutional distribution channels continue their strong asset gathering momentum. In fact, we had record net new assets in our advisor channel in the quarter.

We attribute these strong results to a number of things including continued strong service levels in both retail and institutional. In retail our Business League Referral Program continues to provide a steady and strong flow of opportunities to the branch system and we are converting more of these leads into net new assets. One of our long-term goals is to increase our annuitized revenue stream. While still early in this process, sales of our Amerivest family of package products are well up year-over-year. This will not make much of an impact over the short-term but it is important over the longer term.

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