TD Ameritrade Holding Corporation (



F4Q11 and Yearend Earnings Call

October 25, 2011 8:30 am ET


Fredric J. Tomczyk – President, Chief Financial Officer & Director

William J. Gerber – Chief Financial Officer & Executive Vice President

Bill Murray – Managing Director Investor Relations


Richard Repetto – Sandler O’Neill & Partners

Patrick O’Shaughnessy – Raymond James.

Daniel Harris – Goldman Sachs

Matt Fischer – CLSA

Michael Carrier – Deutsche Bank

Joel Jeffrey – Keefe, Bruyette & Woods

Eric Bertrand – Barclays Capital

Bill Katz – Citi

Howard Chen – Credit Suisse

Brian Bedell – ISI Group

Mac Sykes – Gabelli & Company

Alex Kramm – UBS



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Good day everyone and welcome to the TD Ameritrade Holding Corporation’s September 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

Good morning everyone and welcome to the TD Ameritrade fiscal 2011 earnings call. As is our custom on the yearend call we will be covering the September quarter and fiscal 2011 results as well as our outlook for 2012. As a result, we will be allocating extra time to the call this morning.

Hopefully you’ve seen our press release and if you’d like to follow along with the slide presentation it can be found on

. Before we begin, I’d 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. Reconciliation of these financial measures to the most comparable GAAP financial measures are in the slide presentation.

We would also like you to review our description of risk factors contained in our most recent financial reports forms 10Q and 10K. 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. 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 all of your questions today in the allotted time.

With that, we have Fred Tomczyk and Bill Gerber here to review the 2011 results and major accomplishments.

Fredric J. Tomczyk

Good morning everyone and thanks for joining us today to discuss our September quarter and our fiscal yearend results. 2011 was a strong year in the face of a very difficult environment. For three years we’ve been talking about our game plan in that environment: management we can control; take advantage of the dislocation in the market; focus on driving organic growth; continue to build long range earnings power; and use our balance sheet to our advantage. I’m proud to say we accomplished all of those things again this year.

I’d like to take a minute to discuss those achievements within the context of what we’ve done over the last there years which included the most difficult economic environment since the Great Depression. In 2008 we launched our two pronged growth strategy tightly focused on trading and asset gathering. We knew that we could no longer focus just on trading, we had to balance that more volatile trading revenue stream with a more durable revenue stream.

We also knew it would be a journey and we didn’t have the platform, products, or brand for long term investors. But we established our growth goals early on and we didn’t want to just start asset gathering, we wanted to become a premier asset gather gathering assets at a rate on par or better than our competitors. Very few thought we could do it, but we took advantage of our strong financial position in the face of a difficult market environment to invest in areas that would make the most impact.

We transitioned from a service organization to one focused on service and sales. We launched a long term investor platform and expanded those services over time to fill gaps and to help differentiate our firm. We acquired the fastest growing broker and a leader in trading technology thinkorswim to build out our capabilities for options trading. We pushed forward to take advantage of dislocation when others held back as the financial downturn spread throughout the country, by investing in marketing, distribution, and technology. We improved the availability, reliability, and scalability of our technology platforms, and we did it all while maintaining our industry leading operating margins.

We are now gathering assets at a faster rate than anyone in our space and our growth rate is more than double our next closest competitor. And, we remain a leader in trading, expanding our share in the growing derivatives market. That’s a lot to accomplish in just three years, particularly the last three years. I credit our strong financial position, our clean balance sheet, our revamped business model, and most importantly the determination to our people and the focus of our management team with helping us successfully execute our game plan.

When I look at how we responded to some of the key events in 2011, like the dramatic increase in intraday volatility that followed the country’s credit rating downgrade, we’re very proud. We processed nearly 900,000 trades in one day with virtually no interruptions for clients. Quite simply, that would not have been possible three years ago. We’ve built tremendous momentum and we will need all of it as we look ahead to 2012. The economic environment is unlikely to change. We’re expecting at least two more years of near zero interest rates. We have continued gridlock in Washington with the 2012 presidential race looming before us adding to consumer and investor uncertainty.

And of course, we have the situation in Europe which continues to create significant uncertainty in the markets and for the global economy. But, we remain focused on executing our strategy and we’re well positioned to continue delivering on our goals. With that, let’s take a look at our results for the September quarter on Slide Four.

When we last talked in July, the summer slowdown was upon us. Traders and long term investors alike were taking a wait and see approach to the markets. However, as we all know, sharp increase in volatility created a ripe environment to investors of all types to participate in the markets. We had four of the top five trading days in our history in one week. The result for us was a strong September quarter. Earnings per share worth $0.29 up 45% from a year ago despite an increase in expenses and compression in our net interest margin.

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