TD Ameritrade Holding Corporation (AMTD)

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TD Ameritrade Holding Corporation (AMTD)

F1Q2012 (Qtr End 12/31/11) Earnings Call

January 17, 2012 8:30 am ET

Executives

Fred Tomczyk - President and CEO

Bill Gerber - EVP and CFO

Bill Murray - MD, IR

Analysts

Bill Katz - Citigroup

Rich Repetto - Sandler O'Neill

Alex Kramm - UBS

Michael Carrier - Deutsche Bank

Brian Bedell - ISI Group

Matt Fischer - CLSA

Chris Harris - Wells Fargo

Howard Chen - Credit Suisse

Daniel Harris - Goldman Sachs

Joel Jeffrey - KBW

Eric Bertrand - Barclays Capital

Chris Allen - Evercore Partners

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 would like to turn the call over to Bill Murray, Managing Director of Investor Relations.

Bill Murray

Good morning, everyone, and welcome to the TD Ameritrade December quarter earnings call. In a minute, we'll be hearing from Fred and Bill, but first hopefully you've had seen our press release and located today's slide presentation. It can be found on amtd.com.

I'd also like to refer you to our Safe Harbor statement which is on Slide 2 of the presentation that we will be referring to forward-looking statements. We will also be discussing some non-GAAP financial measures such as EBITDA. Reconciliations of these financial measures to the most comparable GAAP financial measures are in the slide presentation as well. We'd also like you to review our description of risk factors contained in our most recent financial reports Forms 10-Q and 10-K.

As usual, the call is intended for the investors and analysts and may not be reproduced in the media in whole or in part without prior consent of TD Ameritrade. As usual, we have a large number of covering analysts. So if you can keep your questions to two, we'd appreciate it and I'm sure we'll get to everyone.

With that, we have Fred and Bill here to review the December quarter results and major accomplishments. Let me turn the call over to Fred.

Fred Tomczyk

Thanks, Bill. Good morning, everyone, and thanks for joining us today to discuss our December quarter results.

When we met last quarter, we talked about the high degree of uncertainty in the markets and the fear of a double-dip recession in the U.S. Well, one quarter later, there are signs of the U.S. economy improving. We seem to have avoided a double-dip recession, but growth is at a pace that continues to suggest this will be a long slow recovery.

At the same time, the cloud of uncertainty over Europe remains. It is clearly impacting the markets and as a result investor sentiment. And the Fed continues to intervene in the markets which when combined with the European debt crisis has flattened the yield curve considerably over the last six months.

I think we all need to recognize that none of us knows how this is all going to play out. In this type of environment, I think it's important to focus on what you can control, keep a healthy balance sheet, protect yourself from the downside and be ready to take up advantage of opportunities that may come along.

With that in mind, our game plan continues to be to: first, focus on maintaining our strong organic growth momentum; second, focus on keeping expenses in check and identifying and realizing greater operating efficiencies from an increased focus on what we do and how we do it; third, adopting our IDA expenses strategy to incur an expected interested rate levels and the shape of the yield curve. And fourth, maintaining a strong balance sheet that could be used to take advantage of opportunities as they arise.

Our results for the quarter are a reflection of us executing on that strategy. We'll look at the results for our December quarter, let's turn to Slide 3. Earnings per share was $0.27, up 8% from a year ago. We are net revenues of $653 million, essentially flat with last year. Our operating expenses excluding advertising were down $18 million or 5% sequentially.

We've invested in our growth over the last two years and those investments have paid off for us. We're now focused on finding ways to keep expenses in check and self-fund new investments that will drive growth over the next two or three years.

Net new client assets for the quarter came in at $10.2 billion and 11% annualized growth rate, as we continue to gather assets at double digit rates. Client trades came in at an average of 367,000 trades per day, essentially flat with last year and we repurchased 6.7 million shares or over 1% of our outstanding shares during the quarter. This combined with our $0.06 quarterly dividend result in us returning over 90% of our quarterly earnings to our shareholders.

Let's now turn to Slide 4 for a closer look at progress on our growth strategy. At the end of the quarter we're 10.2 billion net new client assets and 11% annualized growth rate. We continue to average double-digit annualized growth as we have over the last three years.

Both our retail and institutional channels continue to gather assets at healthy rates. Both channels continue to benefit from sales and service strategy that generate strong referral opportunities. And we continue to add new services that our clients tell us they are looking for in order to expand the relationship with us.

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