TD Ameritrade Holding Corporation (AMTD)

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Start Time: 08:37

End Time: 09:39

TD Ameritrade Holding Corporation (AMTD)

F2Q2014 Earnings Conference Call

April 23, 2014 08:30 AM ET

Executives

Fred Tomczyk - President, CEO

Bill Gerber - CFO

Bill Murray - Managing Director, IR

Analysts

Richard Repetto - Sandler O'Neill & Partners

Patrick O'Shaughnessy - Raymond James & Associates Inc.

Joel Jeffrey - Keefe, Bruyette & Woods

Kenneth Hill – Barclays Capital Inc.

Michael Carrier - Bank of America Merrill Lynch

Alex Kramm - UBS Investment Bank

William Katz - Citigroup Global Markets Inc.

Chris Allen - Evercore Partners

Christian Bolu - Credit Suisse

Christopher Shutler - William Blair & Company

Presentation

Operator

Good day everyone and welcome to the TD Ameritrade Holding Corporation’s March 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 the March quarter earnings call. If you haven’t already refer to our press release and March 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. Description of risk factors can be found 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. This morning Fred and Bill will go through our normal operating review of the quarter results, following that and before Q&A Fred will come back to give his thoughts and perspective on the recent headlines surrounding the recent release of the Flash Boys book. As is our normal custom, please limit your questions to two so that we can get to as many analysts as possible.

With that, let me call -- let me turn the call over to Fred.

Fred Tomczyk

Thank you, Bill and good morning and welcome everyone. The momentum we built in the first quarter has continued through to the second quarter of fiscal 2014. After gathering results remain strong and client trading climb to record levels. The retailer investor is clearly engaged. And we see this in all of our metrics we look at in measuring client engagement.

Let’s take a look at the quarter’s key highlights on Slide 3. We posted our second consecutive record quarter for net revenues with $812 million, up 20% year-over-year and diluted earnings per share of $0.35, up 35% year-over-year. Year-to-date earnings per share were $0.70, up 32% year-over-year.

We cross the $600 billion threshold for total client assets one-year after hitting the $500 billion mark ending the quarter $617 billion, up 19% year-over-year. Net new client assets were $12.2 billion, an 8% annualized growth rate and within our forecasted range.

Our average client trades per day for the quarter were a record 492,000, an activity rate of 8.1%, the best activities rate we’ve seen in a decade. We grew average fee-based balances to $134 billion, up 20% year-over-year. Interest sensitive assets ended the quarter at $96 billion as clients continue to cycle cash back into the markets.

Let’s take a closer look at how each piece of our growth strategy fared, starting with asset gathering on Slide 4. This quarter we brought in $12.2 billion in net new client assets, an 8% annualized growth rate. That brings us to a total of nearly $27 billion or 10% annualized growth for the first six months of fiscal 2014.

Both our retail and institutional channels continue to exhibit strength in asset gathering. Our retail channel had its best quarter for net new client assets in three years continued retail reengagement combined with heavier media spend for the Olympics and retirement season yielded a significant increase in traffic to our Web site. This combined with improvements we made to our online account opening process have resulted in strong new client acquisition.

Technology improvements, like the introduction of a new portfolio analysis tool and the implementation of lean in our branches have led to increased sales production. As a result, retail channel inflows are up and asset retention continues to improve nicely.

On the institutional side, our pipeline remains full as sales efforts continue both with existing RIAs and the breakaway broker market. We also attribute some of this growth to improvements in our client offering that are encouraging more engagement from RIAs.

One of those improvements is our options market center, something we’ve talked about before. This unique offering has increasingly helped us attract a new type of RIA, one that more readily adopts option strategies in its clients’ portfolios. This broader appeal is having a positive impact on our already strong sales funnel.

Let’s move on to trading on Slide 5. Engagement across the board from retail clients to RIAs was up. Our record DARTS of 492,000 were up 30% year-over-year and April is still trending strongly with month-to-date trades averaging 459,000 per day. Our quarterly activity rate of 8.1% is the highest we have seen in a decade as we saw increase in intraday volatility over the quarter.

The S&P 500 moved 1% or more 25 days within the quarter compared to 12 days in the same quarter last year. Nearly every client engagement metric from logins to number of accounts that traded was up for the quarter. More clients were logging in; more clients were logged in were trading, and more of the clients trading where trading more. Engagement was up across all four of our key platforms with mobile leading the way. Retail investor behavior continues to suggest an increasingly bullish sentiment.

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