TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding Corporation (AMTD)

F3Q 2011 Earnings Conference Call

July 19, 2011 08:30 ET


Bill Murray – Managing Director, Investor Relations

Fred Tomczyk – President and Chief Executive Officer

Bill Gerber – Chief Financial Officer


Rich Repetto – Sandler O'Neill

Patrick O'Shaughnessy – Raymond James

Daniel Harris – Goldman Sachs

Eric Bertrand – Barclays Capital

Matt Fischer – CLSA

Joel Jeffrey – KBW

Chris Harris – Wells Fargo

Howard Chen – Credit Suisse

Alex Kramm – UBS

Michael Carrier – Deutsche Bank

Mac Sykes – Gabelli & Company

David Chiaverini – BMO Capital Markets

Michael Tarkan – FBR



Good day, everyone and welcome to the TD Ameritrade Holding Corporation’s June 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 would like to turn the call over to Bill Murray, Managing Director of Investor Relations. Please go ahead, sir.

Bill Murray – Managing Director, Investor Relations

Thank you, operator. Good morning, everyone and welcome to the TD Ameritrade June quarter earnings call. By now, you have most likely seen our press release and I’d like to direct you to to view today’s presentation.

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. We will also be discussing some non-GAAP financial measures such as EBITDA. You can find a reconciliation of these financial measures to the most comparable GAAP financial measures in the slide presentation.

We’d 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. Once again, we have a large number of covering analysts, so if you can keep your questions to two, we will try to get through most of you in the allotted time.

With that, we have Fred Tomczyk and Bill Gerber here to review our third fiscal quarter results and major accomplishments. Fred?

Fred Tomczyk – President and Chief Executive Officer

Thank you, Bill and good morning everyone and thanks for joining us today to discuss our June quarter results. As we all know, the one thing the markets do not like is uncertainty. Well, we have lots of that today, the state of the US economy, the European debt situation, and last but not least, the discussions in Washington around the deficit and the debt ceiling.

As a result, the slowdown in retail engagement that we normally see in the summer months started early this year. However, we are pleased with our performance as we continue to gather assets and build our long-term earnings power despite this difficult environment. While we don’t believe we will see these uncertainties clear in the short-term, we do expect to see some resolution by the fall, which will bring greater certainty to the markets.

Our strategy and business model continues to work for us. Our strong balance sheet and cash position allowed us to buyback close to 5 million shares of our outstanding stock during the quarter, which when combined with our quarterly dividend, means that we returned 80% of our quarterly net income to our shareholders. We continue to be well-positioned to drive further organic growth and to take advantage of opportunities as they present themselves.

Let’s turn to slide three to talk more about our third quarter results. We ended the quarter with $0.27 on earnings per share and net revenues of $685 million. This includes a $0.02 per share charge related to technology related write-offs, which Bill will discuss in more detail shortly.

Turning to our key metrics for the quarter, trades per day were 370,000. Net new assets were $7.9 billion or an 8% annualized growth rate. We ended the quarter with record interest-sensitive assets of $74 billion and total client assets of $414 billion. Overall, we are pleased with our results in light of the environment we find ourselves in. So far in July, trades per day are at 348,000, up 5% from June volumes.

Last quarter, we said our intention was to return 40% to 60% of our net income to shareholders over the fiscal year, more if we saw the opportunity to do so. Well, this quarter we took advantage of the pullback in the markets and our stock to buyback more shares. So far this fiscal year, we have bought back 10 million shares at an average price of $19.05.

Let’s now turn to slide four for a closer look at our asset gathering results. In the March quarter, we brought in $7.9 billion in net new assets and organic growth rate up 8%. Our sales efforts continue to drive growth even as the retail investor has pulled back and we remain focused on maintaining our momentum. Year-to-date, we have gathered over $29 billion in net new assets. That’s $1 billion ahead of where we were last year, which was a record year. And our annualized growth rate year-to-date is a strong 11% at the top end of our target range. Asset gathering has come in a bit from the historical June quarter perspective in the retail channel as a result of the current market environment, but we remain encouraged by the success of our sales efforts and the work we are doing to further expand our offer.

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