TD Ameritrade Holding Corporation (NYSE: AMTD) has released operating results for the second quarter of fiscal 2014. The Company posted its second consecutive quarter of record net revenues, bolstered by the continued re-engagement of retail investors.

The Company’s results for the quarter ended Mar. 31, 2014 include the following:(1)

  • Net income of $194 million, or $0.35 per diluted share
  • Net new client assets of approximately $12.2 billion, an annualized growth rate of 8 percent
  • Record average client trades per day of approximately 492,000, an activity rate of 8.1 percent
  • Record net revenues of $812 million, 52 percent of which were asset-based
  • Investment product fee revenues of $75 million, up 21 percent year-over-year
  • Pre-tax income of $317 million, or 39 percent of net revenues
  • EBITDA(2) of $369 million, or 45 percent of net revenues
  • Interest rate sensitive assets(3) of $96 billion, up 9 percent year-over-year
  • Record client assets of approximately $617 billion, up 19 percent year-over-year

“TD Ameritrade’s earnings for the second quarter were up 35 percent year-over-year, driven by record trades per day as retail investor engagement continued to improve. In fact, our quarterly activity rate was the highest we’ve seen in a decade,” said Fred Tomczyk, president and chief executive officer. “Additionally, we continue to see strong asset gathering and demand for our guidance-based offerings. We remain focused on giving our clients access to a wide range of products, tools and education to help them pursue their goals.”

“TD Ameritrade delivered strong results in the second quarter with net revenues reaching a record $812 million, up 20 percent year-over-year,” said Bill Gerber, executive vice president and chief financial officer. “Trading reached record levels, asset gathering remained strong, fee-based investment balances were once again at a record high, and interest rate-sensitive assets were up 9 percent year-over-year. We will continue to focus on growing our earnings power and delivering long-term value to our shareholders.”

Capital Deployment
The Company has declared a $0.12 per share quarterly cash dividend, payable on May 16, 2014 to all holders of record of common stock as of May 2, 2014.

Company Hosts Conference Call
TD Ameritrade will host its March Quarter conference call this morning, Apr. 23, 2014, at 8:30 a.m. EDT (7:30 a.m. CDT). Participants may listen to the conference call by dialing 866-270-1533. The Company will webcast the conference call through www.amtd.com, via the “Presentations & Events” page of the web site. A replay of the phone call will be available by dialing 877-344-7529 and entering the Conference ID 10041264 beginning at 10:30 a.m. EDT (9:30 a.m. CDT) on Apr. 23, 2014. The replay will be available until 9:00 a.m. EDT (8:00 a.m. CDT) on May 1, 2014. A transcript of the call will be available on the Company’s corporate web site, www.amtd.com, via either the “Investor Relations” page or the “Presentations & Events” page beginning Thursday, Apr. 24, 2014.

Interested parties can visit or subscribe to newsfeeds at www.amtd.com for the most up-to-date corporate financial information, presentation announcements, transcripts and archives. The company also communicates this information via Twitter, @TDAmeritradePR. Web site links, corporate titles and telephone numbers provided in this release, although correct when published, may change in the future.

About TD Ameritrade Holding Corporation
Millions of investors and independent registered investment advisors (RIAs) have turned to TD Ameritrade’s (NYSE: AMTD) technology, people and education to help make investing and trading easier to understand and do. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how – bringing Wall Street to Main Street for more than 38 years. An official sponsor of the 2014 and 2016 U.S. Olympic and Paralympic Teams, TD Ameritrade has time and again been recognized as a leader in investment services. Please visit TD Ameritrade’s newsroom or www.amtd.com, or follow @TDAmeritradePR for more information.

Safe Harbor
This document contains forward-looking statements within the meaning of the federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws. In particular, any projections regarding our future revenues, expenses, earnings, capital expenditures, effective tax rates, client trading activity, accounts or stock price, as well as the assumptions on which such expectations are based, are forward-looking statements. These statements reflect only our current expectations and are not guarantees of future performance or results. These statements involve risks, uncertainties and assumptions that could cause actual results or performance to differ materially from those contained in the forward-looking statements. These risks, uncertainties and assumptions include, but are not limited to: general economic and political conditions and other securities industry risks, fluctuations in interest rates, stock market fluctuations and changes in client trading activity, credit risk with clients and counterparties, increased competition, systems failures, delays and capacity constraints, network security risks, liquidity risks, new laws and regulations affecting our business, regulatory and legal matters and uncertainties and other risk factors described in our latest Annual Report on Form 10-K, filed with the SEC on Nov. 22, 2013 and our latest Quarterly Report on Form 10-Q filed thereafter. These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

1 Please see the Glossary of Terms, located in “Investor” section of www.amtd.com for more information on how these metrics are calculated.

2 See attached reconciliation of non-GAAP financial measures.

3 Interest rate-sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of March 31, 2014.

Brokerage services provided by TD Ameritrade, Inc., member FINRA (www.FINRA.org) /SIPC (www.SIPC.org) /NFA (www.nfa.futures.org).

 
TD AMERITRADE HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
In millions, except per share amounts
(Unaudited)
                   
Quarter Ended Six Months Ended
Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Mar. 31, 2014 Mar. 31, 2013
Revenues:
Transaction-based revenues:
Commissions and transaction fees $ 374 $ 328 $ 287 $ 702 $ 544
 
Asset-based revenues:
Interest revenue 148 128 116 276 234
Brokerage interest expense   (2 )   (1 )   (2 )   (4 )   (3 )
Net interest revenue 146 127 114 272 231
 
Insured deposit account fees 202 208 200 410 405
Investment product fees   75     72     62     147     117  
Total asset-based revenues 423 407 376 829 753
 
Other revenues   15     17     16     33     33  
Net revenues   812     752     679     1,564     1,330  
 
Operating expenses:
Employee compensation and benefits 193 183 178 376 346
Clearing and execution costs 34 30 27 63 51
Communications 28 28 29 56 57
Occupancy and equipment costs 40 37 40 77 79
Depreciation and amortization 24 24 20 48 41
Amortization of acquired intangible assets 22 23 22 45 45
Professional services 37 38 33 75 67
Advertising 94 63 76 157 128
Other   17     19     17     37     38  
Total operating expenses   489     445     442     934     852  
 
Operating income 323 307 237 630 478
 
Other expense (income):
Interest on borrowings 6 6 6 12 12
Gain on sale of investments   -     -     -     -     (2 )
Total other expense (income)   6     6     6     12     10  
 
Pre-tax income 317 301 231 618 468
 
Provision for income taxes   123     109     87     232     177  
 
Net income $ 194   $ 192   $ 144   $ 386   $ 291  
 
Earnings per share - basic $ 0.35 $ 0.35 $ 0.26 $ 0.70 $ 0.53
Earnings per share - diluted $ 0.35 $ 0.35 $ 0.26 $ 0.70 $ 0.53
 
Weighted average shares outstanding - basic 551 551 549 551 547
Weighted average shares outstanding - diluted 556 555 554 555 552
 
Dividends declared per share $ 0.12 $ 0.62 $ 0.09 $ 0.74 $ 0.68
 
 
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
       
Mar. 31, 2014 Sept. 30, 2013
Assets:
Cash and cash equivalents $ 933 $ 1,062
Segregated cash and investments 5,216 5,894
Broker/dealer receivables 1,114 1,348
Client receivables, net 11,250 8,984
Goodwill and intangible assets 3,263 3,308
Other   1,311   1,240
Total assets $ 23,087 $ 21,836
 
Liabilities and stockholders' equity:
Liabilities:
Broker/dealer payables $ 3,032 $ 1,973
Client payables 13,215 13,183
Notes payable 115 -
Long-term debt 1,040 1,052
Other   1,018   952
Total liabilities 18,420 17,160
 
Stockholders' equity   4,667   4,676
 
Total liabilities and stockholders' equity $ 23,087 $ 21,836
 
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
                   
Quarter Ended Six Months Ended
Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Mar. 31, 2014 Mar. 31, 2013

Key Metrics:

Net new assets (in billions) $12.2 $14.5 $12.9 $26.7 $28.5
Net new asset growth rate (annualized) 8% 10% 11% 10% 12%
Average client trades per day 491,963 413,743 378,096 452,222 355,884
 

Profitability Metrics:

Operating margin 39.8% 40.8% 34.9% 40.3% 35.9%
Pre-tax margin 39.0% 40.0% 34.0% 39.5% 35.2%
Return on average stockholders' equity (annualized) 16.9% 16.4% 13.2% 16.6% 13.2%
EBITDA(1) as a percentage of net revenues 45.4% 47.1% 41.1% 46.2% 42.6%
 

Liquidity Metrics:

Interest on borrowings (in millions) $6 $6 $6 $12 $12
Interest coverage ratio (EBITDA(1)/interest on borrowings) 61.5 59.0 46.5 60.3 47.2
Liquid assets - management target(1) (in billions) $0.7 $0.7 $0.7 $0.7 $0.7
Cash and cash equivalents (in billions) $0.9 $1.3 $1.2 $0.9 $1.2
 

Transaction-Based Revenue Metrics:

Total trades (in millions) 30.0 26.1 22.7 56.1 43.1
Average commissions and transaction fees per trade(2) $12.47 $12.56 $12.63 $12.51 $12.62
Average client trades per funded account (annualized) 20.2 17.2 16.0 18.7 15.2
Activity rate - funded accounts 8.1% 6.9% 6.5% 7.5% 6.1%
Trading days 61.0 63.0 60.0 124.0 121.0
 

Spread-Based Asset Metrics:

Average interest-earning assets (in billions) $18.5 $17.6 $15.5 $18.0 $15.3
Average insured deposit account balances (in billions) 73.0 72.7 67.1 72.9 65.6
Average spread-based balance (in billions) $91.5 $90.3 $82.6 $90.9 $80.9
 
Net interest revenue (in millions) $146 $127 $114 $272 $231
Insured deposit account fee revenue (in millions) 202 208 200 410 405
Spread-based revenue (in millions) $348 $335 $314 $682 $636
 
Avg. annualized yield - interest-earning assets 3.17% 2.81% 2.95% 2.99% 2.99%
Avg. annualized yield - insured deposit account fees 1.10% 1.12% 1.19% 1.11% 1.22%
Net interest margin (NIM) 1.52% 1.45% 1.52% 1.49% 1.55%
 

Fee-Based Investment Metrics:

Money market mutual fund fees:

Average balance (in billions) $5.2 $5.3 $5.2 $5.2 $5.1
Average annualized yield 0.00% 0.00% 0.01% 0.00% 0.03%
Fee revenue (in millions) $0 $0 $0 $0 $1
 

Market fee-based investment balances:

Average balance (in billions) $128.4 $125.2 $105.7 $126.8 $100.3
Average annualized yield 0.23% 0.22% 0.23% 0.23% 0.23%
Fee revenue (in millions) $75 $72 $62 $147 $116
 
Average fee-based investment balances (in billions) $133.6 $130.5 $110.9 $132.0 $105.4
Average annualized yield 0.22% 0.22% 0.22% 0.22% 0.22%
Investment product fee revenue (in millions) $75 $72 $62 $147 $117
 
(1) See attached reconciliation of non-GAAP financial measures.
(2) Average commissions and transaction fees per trade excludes TD Waterhouse UK business.
 

NOTE: See Glossary of Terms on the Company's web site at www.amtd.com for definitions of the above metrics.

 
 

TD AMERITRADE HOLDING CORPORATION

SELECTED OPERATING DATA

(Unaudited)

       

Quarter Ended

Six Months Ended

Mar. 31, 2014

    

Dec. 31, 2013

    

Mar. 31, 2013

Mar. 31, 2014

    

Mar. 31, 2013

Client Account and Client Asset Metrics:

Funded accounts (beginning of period) 6,048,000 5,993,000 5,836,000 5,993,000 5,764,000
Funded accounts (end of period) 6,146,000 6,048,000 5,880,000 6,146,000 5,880,000
Percentage change during period 2% 1% 1% 3% 2%
 
Client assets (beginning of period, in billions) $596.5 $555.9 $480.8 $555.9 $472.3
Client assets (end of period, in billions) $617.1 $596.5 $516.8 $617.1 $516.8
Percentage change during period 3% 7% 7% 11% 9%
 

Net Interest Revenue:

Segregated cash:

Average balance (in billions) $5.3 $5.4 $4.5 $5.4 $4.2
Average annualized yield 0.14% 0.11% 0.13% 0.12% 0.15%
Interest revenue (in millions) $2 $2 $1 $3 $3
 

Client margin balances:

Average balance (in billions) $10.5 $9.3 $8.5 $9.9 $8.6
Average annualized yield 3.85% 3.92% 3.99% 3.88% 4.00%
Interest revenue (in millions) $101 $93 $85 $194 $174
 

Securities borrowing/lending

Average securities borrowing balance (in billions) $1.1 $1.2 $1.0 $1.1 $0.9
Average securities lending balance (in billions) $2.8 $2.2 $2.2 $2.5 $2.0
Net interest revenue - securities borrowing/lending (in millions) $43 $32 $28 $75 $54
 

Other cash and interest-earning investments:

Average balance (in billions) $1.6 $1.7 $1.5 $1.6 $1.6
Average annualized yield 0.09% 0.07% 0.07% 0.08% 0.07%
Interest revenue - net (in millions) $0 $0 $0 $1 $1
 

Client credit balances:

Average balance (in billions) $11.0 $10.7 $9.1 $10.8 $9.1
Average annualized cost 0.01% 0.01% 0.01% 0.01% 0.01%
Interest expense (in millions) ($0) ($0) ($0) ($1) ($1)
 
Average interest-earning assets (in billions) $18.5 $17.6 $15.5 $18.0 $15.3
Average annualized yield 3.17% 2.81% 2.95% 2.99% 2.99%
Net interest revenue (in millions) $146 $127 $114 $272 $231
 

NOTE: See Glossary of Terms on the Company's web site at www.amtd.com for definitions of the above metrics.

 
 
TD AMERITRADE HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Dollars in millions
(Unaudited)
                                       
 
Quarter Ended Six Months Ended
Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Mar. 31, 2014 Mar. 31, 2013
$ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA (1)

EBITDA $ 369 45.4 % $ 354 47.1 % $ 279 41.1 % $ 723 46.2 % $ 566 42.6 %
Less:
Depreciation and amortization (24 ) (3.0 %) (24 ) (3.2 %) (20 ) (2.9 %) (48 ) (3.1 %) (41 ) (3.1 %)
Amortization of acquired intangible assets (22 ) (2.7 %) (23 ) (3.1 %) (22 ) (3.2 %) (45 ) (2.9 %) (45 ) (3.4 %)
Interest on borrowings (6 ) (0.7 %) (6 ) (0.8 %) (6 ) (0.9 %) (12 ) (0.8 %) (12 ) (0.9 %)
Provision for income taxes   (123 ) (15.1 %)   (109 ) (14.5 %)   (87 ) (12.8 %)   (232 ) (14.8 %)   (177 ) (13.3 %)
Net income $ 194   23.9 % $ 192   25.5 % $ 144   21.2 % $ 386   24.7 % $ 291   21.9 %
 
 
As of
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2014 2013 2013 2013 2013

Liquid Assets - Management Target (2)

Liquid assets - management target $ 706 $ 707 $ 874 $ 728 $ 706

Plus: Broker-dealer cash and cash equivalents

508 926 540 555 719
Trust company cash and cash equivalents 64 60 74 39 84
Investment advisory cash and cash equivalents 14 25 19 28 24

Less: Excess broker-dealer regulatory net capital

  (359 )   (409 )   (445 )   (387 )   (315 )
Cash and cash equivalents $ 933   $ 1,309   $ 1,062   $ 963   $ 1,218  
 
 
Note: The term "GAAP" in the following explanation refers to generally accepted accounting principles in the United States.
   
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is considered a non-GAAP financial measure as defined by SEC Regulation G. We consider EBITDA an important measure of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our holding company's senior revolving credit facility. EBITDA eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.
 
(2) Liquid assets - management target is considered a non-GAAP financial measure as defined by SEC Regulation G. We include the excess capital of our broker-dealer subsidiaries in the calculation of liquid assets - management target, rather than simply including broker-dealer cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the broker-dealer subsidiaries to the parent company. We consider liquid assets - management target to be an important measure of our liquidity and of our ability to fund corporate investing and financing activities. Liquid assets - management target should be considered a supplemental measure of liquidity, rather than a substitute for cash and cash equivalents.
 
We define liquid assets - management target as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments and (c) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 10% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of a minimum operational target established by management ($50 million in the case of our primary introducing broker-dealer, TD Ameritrade, Inc.). Liquid assets - management target is based on more conservative measures of broker-dealer net capital than regulatory thresholds require because we prefer to maintain significantly more conservative levels of net capital at the broker-dealer subsidiaries. We consider liquid assets - management target to be a measure that reflects our liquidity that would be readily available for corporate investing and financing activities under normal operating circumstances.