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TD Ameritrade Holding Corp. : TD Ameritrade's Strong Asset Gathering Momentum Continues

04/16/2013 | 07:35am US/Eastern
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Net New Client Assets of $13 Billion, 11% Annualized Growth Rate

Record Market Fee-based Revenue of $62 Million, up 38% Year-Over-Year

Diluted Earnings per Share of $0.26

TD Ameritrade Holding Corporation (NYSE: AMTD) has released results for the second quarter of fiscal 2013. The Company ended the quarter with a record $517 billion in total client assets, driven by its continued double-digit organic client asset growth rate and market appreciation.

The Company's results for the quarter ended Mar. 31, 2013 include the following:(1)

  • Net income of $144 million, or $0.26 per diluted share
  • Net new client assets of approximately $13 billion, an annualized growth rate of 11 percent
  • Average client trades per day of approximately 378,000, an activity rate of 6.5 percent(2)
  • Net revenues of $679 million, 55 percent of which were asset-based
  • Record market fee-based revenue of $62 million, up 38 percent year-over-year
  • Pre-tax income of $231 million, or 34 percent of net revenues
  • EBITDA(3) of $279 million, or 41 percent of net revenues
  • Interest rate sensitive assets(4) of $88 billion, up 10 percent year-over-year
  • Record client assets of approximately $517 billion

"Halfway through fiscal 2013, following the two best quarters for asset gathering in our history, we have gathered a record $29 billion in net new client assets. In addition, we have increased our market fee-based revenue for the first six months by 32 percent year-over-year and kept our expenses well in check," said Fred Tomczyk, president and chief executive officer. "While retail investor sentiment has improved, a large number of investors remain cautious in this environment, and yet we continue to execute well against our strategy and on the items we can control."

"Over the last five years, we have gathered more than $170 billion in net new client assets, despite facing ongoing challenges from market and economic conditions, bringing our total client assets to over $500 billion for the first time in our history," said Bill Gerber, executive vice president and chief financial officer. "Remaining disciplined on expenses as we invest in the future and continuing to generate strong free cash flow provides us with considerable flexibility to take advantage of opportunities as they present themselves."

Capital Deployment
The Company has declared a $0.09 per share quarterly cash dividend, payable on May 15, 2013 to all holders of record of common stock as of May 1, 2013.

Company Hosts Conference Call
TD Ameritrade will host its March Quarter conference call this morning, Apr. 16, 2013, at 8:30 a.m. EDT (7:30 a.m. CDT). Participants may listen to the call by dialing 877-881-2595. The Company will also webcast the conference live at www.amtd.com and will make all accompanying materials available to participants prior to the call. A phone replay of the call will be available by dialing 855-859-2056 and entering the Conference ID 22315975 beginning at 11:30 a.m. EDT (10:30 a.m. CDT) on Apr. 16, 2013. This replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on Apr. 23, 2013. Interested parties may also view an archived version of the webcast, which will be available on www.amtd.com immediately following the call.

The company asks that interested parties 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.

AMTD-E

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 nearly 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, as amended, on Form 10-K/A, filed with the SEC on Feb. 4, 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 Funded account activity rate (AR%). Average client trades per day during the period divided by the average number of total funded accounts during the period.

3 See attached reconciliation of non-GAAP financial measures.

4 Interest rate-sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of March 31, 2013.

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, 2013 Dec. 31, 2012 Mar. 31, 2012 Mar. 31, 2013 Mar. 31, 2012
Revenues:
Transaction-based revenues:
Commissions and transaction fees $ 287 $ 257 $ 292 $ 544 $ 566
 
Asset-based revenues:
Interest revenue 116 118 108 234 219
Brokerage interest expense   (2 )   (2 )   (1 )   (3 )   (3 )
Net interest revenue 114 116 107 231 216
 
Insured deposit account fees 200 205 209 405 414
Investment product fees   62     56     46     117     90  
Total asset-based revenues 376 377 362 753 720
 
Other revenues   16     17     19     33     41  
 
Net revenues   679     651     673     1,330     1,327  
 
Operating expenses:
Employee compensation and benefits 178 168 174 346 347
Clearing and execution costs 27 24 24 51 44
Communications 29 28 27 57 55
Occupancy and equipment costs 40 39 37 79 75
Depreciation and amortization 20 20 18 41 35
Amortization of acquired intangible assets 22 23 23 45 46
Professional services 33 34 44 67 89
Advertising 76 52 84 128 140
Other   17     22     23     38     48  
Total operating expenses   442     410     454     852     879  
 
Operating income 237 241 219 478 448
 
Other expense (income):
Interest on borrowings 6 6 7 12 14
Gain on sale of investments   -     (2 )   -     (2 )   -  
Total other expense (income)   6     4     7     10     14  
 
Pre-tax income 231 237 212 468 434
 
Provision for income taxes   87     90     75     177     145  
 
Net income $ 144   $ 147   $ 137   $ 291   $ 289  
 
Earnings per share - basic $ 0.26 $ 0.27 $ 0.25 $ 0.53 $ 0.53
Earnings per share - diluted $ 0.26 $ 0.27 $ 0.25 $ 0.53 $ 0.52
 
Weighted average shares outstanding - basic 549 546 549 547 549
Weighted average shares outstanding - diluted 554 551 554 552 555
 
Dividends declared per share $ 0.09 $ 0.59 $ 0.06 $ 0.68 $ 0.12
 
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
       
Mar. 31, 2013 Sept. 30, 2012
Assets:
Cash and cash equivalents $ 1,218 $ 915
Short-term investments 4 154
Segregated cash and investments 4,384 4,030
Broker/dealer receivables 1,299 1,110
Client receivables, net 8,850 8,647
Goodwill and intangible assets 3,354 3,399
Other   1,411   1,258
 
Total assets $ 20,520 $ 19,513
 
Liabilities and stockholders' equity:
 
Liabilities:
Broker/dealer payables $ 2,316 $ 1,992
Client payables 11,517 10,728
Notes payable 165 -
Long-term debt 1,079 1,345
Other   1,031   1,023
Total liabilities 16,108 15,088
 
Stockholders' equity   4,412   4,425
 
Total liabilities and stockholders' equity $ 20,520 $ 19,513
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
         
Quarter Ended Six Months Ended
Mar. 31, 2013 Dec. 31, 2012 Mar. 31, 2012 Mar. 31, 2013 Mar. 31, 2012

Key Metrics:

Net new assets (in billions) $12.9 $15.6 $10.8 $28.5 $21.0
Net new asset growth rate (annualized) 11% 13% 11% 12% 11%
Average client trades per day 378,096 334,035 387,571 355,884 377,485
 

Profitability Metrics:

Operating margin 34.9% 37.0% 32.5% 35.9% 33.8%
Pre-tax margin 34.0% 36.4% 31.5% 35.2% 32.7%
Return on client assets (annualized) 0.18% 0.20% 0.20% 0.19% 0.21%
Return on average stockholders' equity (annualized) 13.2% 13.3% 13.0% 13.2% 13.9%
EBITDA(1) as a percentage of net revenues 41.1% 43.9% 38.6% 42.6% 39.9%
 

Debt and Liquidity Metrics:

Interest on borrowings (in millions) $6 $6 $7 $12 $14
Average debt outstanding (in billions) $1.2 $1.2 $1.3 $1.2 $1.3
Leverage ratio (average debt/annualized EBITDA(1)) 1.1 1.0 1.2 1.1 1.2
Interest coverage ratio (EBITDA(1)/interest on borrowings) 46.5 47.7 37.1 47.2 37.8
Liquid assets - management target(1) (in billions) $0.7 $0.8 $0.9 $0.7 $0.9
Liquid assets - regulatory threshold(1) (in billions) $1.3 $1.3 $1.5 $1.3 $1.5
Cash and cash equivalents (in billions) $1.2 $1.9 $1.0 $1.2 $1.0
 

Transaction-Based Revenue Metrics:

Total trades (in millions) 22.7 20.4 24.0 43.1 47.0
Average commissions and transaction fees per trade(2) $12.63 $12.62 $12.15 $12.62 $12.03
Average client trades per funded account (annualized) 16.0 14.3 17.1 15.2 16.7
Activity rate - funded accounts 6.5% 5.8% 6.8% 6.1% 6.7%
Trading days 60.0 61.0 62.0 121.0 124.5
 

Spread-Based Asset Metrics:

Average interest-earning assets (in billions) $15.5 $15.1 $15.7 $15.3 $14.7
Average insured deposit account balances (in billions) 67.1 64.2 58.4 65.6 58.6
Average spread-based balance (in billions) $82.6 $79.3 $74.1 $80.9 $73.3
 
Net interest revenue (in millions) $114 $116 $107 $231 $216
Insured deposit account fee revenue (in millions) 200 205 209 405 414
Spread-based revenue (in millions) $314 $321 $316 $636 $630
 
Avg. annualized yield - interest-earning assets 2.95% 3.02% 2.69% 2.99% 2.88%
Avg. annualized yield - insured deposit account fees 1.19% 1.25% 1.42% 1.22% 1.39%
Net interest margin (NIM) 1.52% 1.58% 1.69% 1.55% 1.69%
 
Interest days 90 92 91 182 183
 

Fee-Based Investment Metrics:

Money market mutual fund fees:

Average balance (in billions) $5.2 $5.1 $5.0 $5.1 $5.4
Average annualized yield 0.01% 0.05% 0.04% 0.03% 0.06%
Fee revenue (in millions) $0 $1 $1 $1 $2
 

Market fee-based investment balances:

Average balance (in billions) $105.7 $94.9 $79.9 $100.3 $76.0
Average annualized yield 0.23% 0.23% 0.23% 0.23% 0.23%
Fee revenue (in millions) $62 $55 $45 $116 $88
 
Average fee-based investment balances (in billions) $110.9 $100.0 $84.9 $105.4 $81.4
Average annualized yield 0.22% 0.22% 0.22% 0.22% 0.22%
Investment product fee revenue (in millions) $62 $56 $46 $117 $90
 

Client Account and Client Asset Metrics:

New accounts opened 197,000 174,000 183,000 371,000 323,000
 
Funded accounts (beginning of period) 5,836,000 5,764,000 5,645,000 5,764,000 5,617,000
Funded accounts (end of period) 5,880,000 5,836,000 5,703,000 5,880,000 5,703,000
Percentage change during period 1% 1% 1% 2% 2%
 
Client assets (beginning of period, in billions) $480.8 $472.3 $406.3 $472.3 $378.7
Client assets (end of period, in billions) $516.8 $480.8 $452.4 $516.8 $452.4
Percentage change during period 7% 2% 11% 9% 19%
 

(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, 2013 Dec. 31, 2012 Mar. 31, 2012 Mar. 31, 2013 Mar. 31, 2012

Net Interest Revenue:

Segregated cash:

Average balance (in billions) $4.5 $3.8 $5.6 $4.2 $4.8
Average annualized yield 0.13% 0.17% 0.07% 0.15% 0.06%
Interest revenue (in millions) $1 $2 $1 $3 $1
 

Client margin balances:

Average balance (in billions) $8.5 $8.7 $7.9 $8.6 $7.8
Average annualized yield 3.99% 4.02% 4.06% 4.00% 4.19%
Interest revenue (in millions) $85 $89 $81 $174 $166
 

Securities borrowing/lending

Average securities borrowing balance (in billions) $1.0 $0.9 $0.8 $0.9 $0.7
Average securities lending balance (in billions) $2.2 $1.9 $1.8 $2.0 $1.8
 
Interest revenue (in millions) $30 $27 $26 $56 $51
Interest expense (in millions) (2) (2) (1) (2) (2)
Net interest revenue - securities borrowing/lending (in millions) $28 $25 $25 $54 $49
 

Other cash and interest-earning investments:

Average balance (in billions) $1.5 $1.7 $1.4 $1.6 $1.4
Average annualized yield 0.07% 0.07% 0.09% 0.07% 0.11%
Interest revenue - net (in millions) $0 $0 $0 $1 $1
 

Client credit balances:

Average balance (in billions) $9.1 $9.2 $10.1 $9.1 $9.4
Average annualized cost 0.01% 0.01% 0.01% 0.01% 0.02%
Interest expense (in millions) ($0) ($0) ($0) ($1) ($1)
 
Average interest-earning assets (in billions) $15.5 $15.1 $15.7 $15.3 $14.7
Average annualized yield 2.95% 3.02% 2.69% 2.99% 2.88%
Net interest revenue (in millions) $114 $116 $107 $231 $216
 
 

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, 2013 Dec. 31, 2012 Mar. 31, 2012 Mar. 31, 2013 Mar. 31, 2012
$ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA (1)

EBITDA $ 279 41.1 % $ 286 43.9 % $ 260 38.6 % $ 566 42.6 % $ 529 39.9 %
Less:
Depreciation and amortization (20 ) (2.9 %) (20 ) (3.1 %) (18 ) (2.7 %) (41 ) (3.1 %) (35 ) (2.6 %)
Amortization of acquired intangible assets (22 ) (3.2 %) (23 ) (3.5 %) (23 ) (3.4 %) (45 ) (3.4 %) (46 ) (3.5 %)
Interest on borrowings (6 ) (0.9 %) (6 ) (0.9 %) (7 ) (1.0 %) (12 ) (0.9 %) (14 ) (1.1 %)
Provision for income taxes   (87 ) (12.8 %)   (90 ) (13.8 %)   (75 ) (11.1 %)   (177 ) (13.3 %)   (145 ) (10.9 %)
Net income $ 144   21.2 % $ 147   22.6 % $ 137   20.4 % $ 291   21.9 % $ 289   21.8 %
 
 
As of
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,

 

2013 2012 2012 2012 2012

Liquid Assets - Management Target (2)

Liquid assets - management target $ 706 $ 774 $ 1,054 $ 993 $ 917
Plus: Broker-dealer cash and cash equivalents 719 841 406 387 507
Trust company cash and cash equivalents 84 556 95 74 75
Investment advisory cash and cash equivalents 24 15 11 25 18
 
Less: Corporate short-term investments - - (150 ) (126 ) (50 )
Excess broker-dealer regulatory net capital   (315 )   (334 )   (501 )   (443 )   (441 )
Cash and cash equivalents $ 1,218   $ 1,852   $ 915   $ 910   $ 1,026  
 
 
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2013 2012 2012 2012 2012

Liquid Assets - Regulatory Threshold (2)

Liquid assets - regulatory threshold $ 1,288 $ 1,337 $ 1,611 $ 1,554 $ 1,485
Plus: Broker-dealer cash and cash equivalents 719 841 406 387 507
Trust company cash and cash equivalents 84 556 95 74 75
Investment advisory cash and cash equivalents 24 15 11 25 18
 
Less: Corporate short-term investments - - (150 ) (126 ) (50 )
Excess trust company Tier 1 capital (8 ) (10 ) (10 ) (10 ) (10 )
Excess broker-dealer regulatory net capital   (889 )   (887 )   (1,048 )   (994 )   (999 )
Cash and cash equivalents $ 1,218   $ 1,852   $ 915   $ 910   $ 1,026  
 
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) Our liquid assets metrics are considered non-GAAP financial measures as defined by SEC Regulation G. We include the excess capital of our broker-dealer and trust company subsidiaries in the calculation of our liquid assets metrics, rather than simply including broker-dealer and trust company cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust company subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the broker-dealer and trust company subsidiaries to the parent company. We consider our liquid assets metrics to be important measures of our liquidity and of our ability to fund corporate investing and financing activities. The liquid assets metrics should be considered as supplemental measures of liquidity, rather than as substitutes 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 "liquid assets - regulatory threshold" (defined below) because we prefer to maintain significantly more conservative levels of net capital at the broker-dealer subsidiaries than the regulatory thresholds require. We consider "liquid assets - management target" to be a measure that reflects our liquidity that would be readily available for corporate investing or financing activities under normal operating circumstances.
 
We define "liquid assets - regulatory threshold" as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments, (c) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 5% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of the applicable "early warning" net capital requirement and (d) Tier 1 capital of our trust company in excess of the minimum dollar requirement. We consider "liquid assets - regulatory threshold" to be a measure that reflects our liquidity that would be available for corporate investing or financing activities under unusual operating circumstances, such as the need to provide funding for significant strategic business transactions.

TD Ameritrade Holding Corporation
Kim Hillyer, 402-574-6523
Director, Communications
kim.hillyer@tdameritrade.com
or
Jeff Goeser, 402-597-8464
Director, Investor Relations and Finance
jeffrey.goeser@tdameritrade.com


© Business Wire 2013
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