TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding Corporation (AMTD)

Q1 2014 Earnings Call

January 21, 2014 8:30 am ET

Executives

Fred Tomczyk – President, Chief Executive Officer

Bill Gerber – Chief Financial Officer

Bill Murray – Managing Director, Investor Relations

Analysts

Rich Repetto – Sandler O’Neill

Michael Carrier – Bank of America Merrill Lynch

Alex Kramm – UBS

Kenneth Hill – Barclays

Steven Chubak – Nomura Securities

Chris Allen – Evercore

Joel Jeffrey – KBW

Chris Harris – Wells Fargo Securities

Alex Blostein – Goldman Sachs

Devin Ryan – JMP Securities

Bill Katz – Citi

Chris Shutler – William Blair

Mac Sykes – Gabelli

Gaston Ceron – Morningstar Equity

Rob Rutschow – CLSA

Presentation

Operator

Good day everyone and welcome to the TD Ameritrade Holding Corporation’s December 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 once again to everyone, and welcome to the December quarter earnings call. Please refer to our press release and December quarter earnings presentations, 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. As well, 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. As is our usual custom, please limit your questions to two so that we can cover as many analysts as possible within the allotted time.

With that, we have Fred Tomczyk, our CEO and Bill Gerber, our CFO here to review our December quarter results and major accomplishments. And with that, I’ll turn the call over to Fred.

Fred Tomczyk

Thank you Bill and good morning everyone, and welcome to our first quarter earnings call for fiscal 2014. We started fiscal 2014 with a strong first quarter, leveraging our continued strong organic growth as the retail investor re-engaged with the markets. With less uncertainty in Washington, an improving macroeconomic environment and the beginning of Fed tapering, retail investors are making their way back to the markets, leaving us with a lot to feel good about.

Let’s take a look at the quarter’s key highlights on Slide 3. Our average client trades per day for the quarter were 414,000, an activity rate of 6.9%, the best quarter for trading in more than two years. Net new client assets were $14.5 billion, a 10% annualized growth rate. Client assets are closing in on a record $600 billion, ending the quarter up 24% over last year. We grew fee-based balances to a record $136 billion, up 31% year-over-year. Interest-sensitive assets remained at a record $97 billion despite clients cycling cash back into the markets. Net revenues came in at a record $752 million, an annualized run rate of $3 billion, up 16% over last year. This brings us to diluted earnings per share for the quarter of $0.35, up 30% over last year. That’s a strong start to fiscal 2014.

Let’s now take a closer look at how each piece of that strategy fared, starting with asset gathering on Slide 4. This quarter was our second-best ever for asset gathering as we brought in $14.5 billion in net new client assets, a 10% annualized growth rate. As it has been for some time, we are seeing encouraging signs from both our retail and our institutional channels. On the retail side, our sales funnel, which covers our engagement with prospective clients through the account opening process, continues to perform well. Visits to our public marketing site, new application starts, new online account openings, and new account fundings were all up nicely from the same quarter a year ago.

Assets gathered from call center referrals to our sales teams continue to be strong despite average daily call volumes being down 13% over last year. Our teams continue to maximize opportunities to bring in new assets and asset retention overall remains very good. We’re encouraged by these results and will continue to focus on building stronger relationships with our clients throughout all phases of their experience with us.

The institutional side of our business remains a strong contributor to our quarterly net new client assets. Our pipelines remain very strong, both in terms of existing advisor and breakaway broker prospects. Our national conference is next week in Orlando and we are expecting a record number of current and prospective RIAs to attend, and we look forward to introducing several new technology enhancements that we believe will be well received.

We remain pleased with our asset gathering results. We’re off to a good start in 2014 and we’ll continue to use the momentum we’ve built to further improve our efforts throughout the rest of the fiscal year.

Now let’s turn to trading on Slide 5. As I said at the start of this call, investors this quarter were more engaged and more bullish on the markets than they’ve been in years. Average unique client account log-ins per day were up 9% over last year. The average number of accounts that traded in the quarter was up 19%. Client margin balances are growing and hit record levels last week. Our investor movement index ended the quarter at its highest level in the four years we’ve been tracking it, and as a result trades per day were up 24% year-over-year. Our quarterly activity rate of 6.9% is the highest we’ve seen since the fourth quarter of fiscal 2011, and the high engagement continues into January. Trades per day month-to-date are 467,000, the highest average trades per day to start a calendar year in our history.

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