TD Ameritrade Delivers Strong Third Quarter On Record Net Revenue

Paragraph under "Company Hosts Conference Call" fourth sentence should read: A phone replay of the call will be available by dialing 855-859-2056 and entering the Conference ID 71491981 beginning at 11:30 a.m. EDT (10:30 a.m. CDT) on July 23, 2013 (sted 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 July 23, 2013).

The corrected release reads:

TD AMERITRADE DELIVERS STRONG THIRD QUARTER ON RECORD NET REVENUE

Net New Client Assets of $11B, up 11% Year-Over-Year

Record Net Revenues of $725M, up 9% Year-Over-Year

Diluted Earnings per Share of $0.33, up 18% Year-Over-Year

TD Ameritrade Holding Corporation (NYSE: AMTD) has released results for the third quarter of fiscal 2013. The Company ended the quarter with improved trading activity; record interest rate sensitive assets, record net revenues and record market fee-based revenue; and diluted earnings per share of 33 cents.

The Company’s results for the quarter ended June 30, 2013 include the following: (1)
  • Net income of $184 million, or $0.33 per diluted share
  • Net new client assets of approximately $11 billion, an annualized growth rate of 8 percent
  • Average client trades per day of approximately 399,000, an activity rate of 6.7 percent (2)
  • Record net revenues of $725 million, 53 percent of which were asset-based
  • Record market fee-based revenue of $65 million, up 23 percent year-over-year
  • Pre-tax income of $298 million, or 41 percent of net revenues
  • EBITDA (3)of $349 million, or 48 percent of net revenues
  • Record interest rate sensitive assets (4) of $94 billion, up 19 percent year-over-year
  • Client assets of approximately $524 billion

“TD Ameritrade had a strong third quarter in virtually all metrics, as we continue to execute well against our growth strategy while being disciplined on expenses,” said Fred Tomczyk, president and chief executive officer. “We had record interest rate sensitive assets, record net revenues and record market fee-based revenue during the quarter. We are encouraged by the increase in the yield curve and the more positive trends we’re seeing in terms of retail investor sentiment.”

“We are pleased with our performance this quarter,” said Bill Gerber, executive vice president and chief financial officer. “Earnings per share came in at 33 cents – the third highest ever and the highest since the June quarter in 2008. We benefited from the improved trading environment, and we kept our eyes focused on disciplined expense management and maintaining our strong balance sheet. We have good momentum, and we’re well positioned as we look ahead to fiscal 2014.”

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

Notable ItemsOn July 1, 2013, Knight Capital Group, Inc. (NYSE: KCG) closed its merger with GETCO Holding Company LLC. As a result, TD Ameritrade expects to record a pre-tax gain on its investment in Knight of approximately $54 million, or $0.06 per share. The Company will record this gain in its fourth fiscal quarter, which ends on Sept. 30, 2013.

Additionally, the Company received a credit rating upgrade from Moody’s Investors Service on May 14, 2013. The rating agency increased the Company’s issuer and senior unsecured ratings from Baa1 to A3.

Company Hosts Conference CallTD Ameritrade will host its June Quarter conference call this morning, July 23, 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 71491981 beginning at 11:30 a.m. EDT (10:30 a.m. CDT) on July 23, 2013. This replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on July 30, 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 CorporationMillions 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 HarborThis 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 June 30, 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 Nine Months Ended
June 30, 2013 Mar. 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Revenues:
Transaction-based revenues:
Commissions and transaction fees $ 321 $ 287 $ 266 $ 865 $ 832
 
Asset-based revenues:
Interest revenue 122 116 120 356 339
Brokerage interest expense   (2 )   (2 )   (2 )   (5 )   (5 )
Net interest revenue 120 114 118 351 334
 
Insured deposit account fees 199 200 206 604 621
Investment product fees   65     62     54     182     144  
Total asset-based revenues 384 376 378 1,137 1,099
 
Other revenues   20     16     23     53     63  
 
Net revenues   725     679     667     2,055     1,994  
 
Operating expenses:
Employee compensation and benefits 176 178 176 522 524
Clearing and execution costs 30 27 22 81 66
Communications 28 29 29 85 83
Occupancy and equipment costs 42 40 36 121 111
Depreciation and amortization 22 20 18 63 53
Amortization of acquired intangible assets 23 22 23 68 69
Professional services 36 33 40 103 129
Advertising 56 76 50 184 191
Other   14     17     19     52     66  
Total operating expenses   427     442     413     1,279     1,292  
 
Operating income 298 237 254 776 702
 
Other expense (income):
Interest on borrowings 6 6 7 19 22
Gain on sale of investments   (6 )   -     -     (8 )   -  
Total other expense (income)   -     6     7     11     22  
 
Pre-tax income 298 231 247 765 680
 
Provision for income taxes   114     87     93     291     238  
 
Net income $ 184   $ 144   $ 154   $ 474   $ 442  
 
Earnings per share - basic $ 0.33 $ 0.26 $ 0.28 $ 0.86 $ 0.81
Earnings per share - diluted $ 0.33 $ 0.26 $ 0.28 $ 0.86 $ 0.80
 
Weighted average shares outstanding - basic 550 549 548 548 549
Weighted average shares outstanding - diluted 554 554 553 553 554
 
Dividends declared per share $ 0.09 $ 0.09 $ 0.06 $ 0.77 $ 0.18
 
 
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
       
June 30, 2013 Sept. 30, 2012
Assets:
Cash and cash equivalents $ 963 $ 915
Short-term investments 4 154
Segregated cash and investments 5,779 4,030
Broker/dealer receivables 1,064 1,110
Client receivables, net 8,707 8,647
Goodwill and intangible assets 3,331 3,399
Other   1,335   1,258
 
Total assets $ 21,183 $ 19,513
 
Liabilities and stockholders' equity:
 
Liabilities:
Broker/dealer payables $ 2,914 $ 1,992
Client payables 11,630 10,728
Notes payable 95 -
Long-term debt 1,053 1,345
Other   940   1,023
Total liabilities 16,632 15,088
 
Stockholders' equity   4,551   4,425
 
Total liabilities and stockholders' equity $ 21,183 $ 19,513
 
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
         
Quarter Ended Nine Months Ended
June 30, 2013 Mar. 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012

Key Metrics:
Net new assets (in billions) $ 10.8 $ 12.9 $ 9.7 $ 39.4 $ 30.7
Net new asset growth rate (annualized) 8 % 11 % 9 % 11 % 11 %
Average client trades per day 399,216 378,096 355,449 370,874 370,081
 

Profitability Metrics:
Operating margin 41.1 % 34.9 % 38.1 % 37.8 % 35.2 %
Pre-tax margin 41.1 % 34.0 % 37.0 % 37.2 % 34.1 %
Return on client assets (annualized) 0.23 % 0.18 % 0.22 % 0.20 % 0.21 %
Return on average stockholders' equity (annualized) 16.4 % 13.2 % 14.3 % 14.3 % 14.0 %
EBITDA (1) as a percentage of net revenues 48.1 % 41.1 % 44.2 % 44.5 % 41.3 %
 

Debt and Liquidity Metrics:
Interest on borrowings (in millions) $ 6 $ 6 $ 7 $ 19 $ 22
Average debt outstanding (in billions) $ 1.1 $ 1.2 $ 1.3 $ 1.2 $ 1.3
Leverage ratio (average debt/annualized EBITDA (1)) 0.8 1.1 1.1 1.0 1.1
Interest coverage ratio (EBITDA (1)/interest on borrowings) 58.2 46.5 42.1 48.2 37.5
Liquid assets - management target (1) (in billions) $ 0.7 $ 0.7 $ 1.0 $ 0.7 $ 1.0
Liquid assets - regulatory threshold (1) (in billions) $ 1.3 $ 1.3 $ 1.6 $ 1.3 $ 1.6
Cash and cash equivalents (in billions) $ 1.0 $ 1.2 $ 0.9 $ 1.0 $ 0.9
 

Transaction-Based Revenue Metrics:
Total trades (in millions) 25.5 22.7 22.4 68.6 69.4
Average commissions and transaction fees per trade (2) $ 12.57 $ 12.63 $ 11.88 $ 12.60 $ 11.98
Average client trades per funded account (annualized) 16.8 16.0 15.5 15.7 16.3
Activity rate - funded accounts 6.7 % 6.5 % 6.2 % 6.3 % 6.5 %
Trading days 64.0 60.0 63.0 185.0 187.5
 

Spread-Based Asset Metrics:
Average interest-earning assets (in billions) $ 16.1 $ 15.5 $ 15.2 $ 15.5 $ 14.9
Average insured deposit account balances (in billions)   68.6     67.1     59.0     66.6     58.7  
Average spread-based balance (in billions) $ 84.7   $ 82.6   $ 74.2   $ 82.1   $ 73.6  
 
Net interest revenue (in millions) $ 120 $ 114 $ 118 $ 351 $ 334
Insured deposit account fee revenue (in millions)   199     200     206     604     621  
Spread-based revenue (in millions) $ 319   $ 314   $ 324   $ 955   $ 955  
 
Avg. annualized yield - interest-earning assets 2.95 % 2.95 % 3.08 % 2.97 % 2.94 %
Avg. annualized yield - insured deposit account fees 1.15 % 1.19 % 1.38 % 1.19 % 1.39 %
Net interest margin (NIM) 1.49 % 1.52 % 1.73 % 1.53 % 1.70 %
 
Interest days 91 90 91 273 274
 

Fee-Based Investment Metrics:

Money market mutual fund fees:
Average balance (in billions) $ 5.1 $ 5.2 $ 4.9 $ 5.1 $ 5.2
Average annualized yield   0.00 %   0.01 %   0.09 %   0.02 %   0.07 %
Fee revenue (in millions) $ 0   $ 0   $ 1   $ 1   $ 3  
 

Market fee-based investment balances:
Average balance (in billions) $ 113.0 $ 105.7 $ 83.3 $ 104.5 $ 78.5
Average annualized yield   0.23 %   0.23 %   0.25 %   0.23 %   0.24 %
Fee revenue (in millions) $ 65   $ 62   $ 53   $ 181   $ 141  
 
Average fee-based investment balances (in billions) $ 118.1 $ 110.9 $ 88.2 $ 109.6 $ 83.6
Average annualized yield   0.22 %   0.22 %   0.24 %   0.22 %   0.23 %
Investment product fee revenue (in millions) $ 65   $ 62   $ 54   $ 182   $ 144  
 

Client Account and Client Asset Metrics:
New accounts opened 195,000 197,000 171,000 565,000 494,000
 
Funded accounts (beginning of period) 5,880,000 5,836,000 5,703,000 5,764,000 5,617,000
Funded accounts (end of period) 5,943,000 5,880,000 5,736,000 5,943,000 5,736,000
Percentage change during period 1 % 1 % 1 % 3 % 2 %
 
Client assets (beginning of period, in billions) $ 516.8 $ 480.8 $ 452.4 $ 472.3 $ 378.7
Client assets (end of period, in billions) $ 523.5 $ 516.8 $ 445.0 $ 523.5 $ 445.0
Percentage change during period 1 % 7 % (2 %) 11 % 18 %
 
(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 Nine Months Ended
June 30, 2013 Mar. 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012

Net Interest Revenue:

Segregated cash:
Average balance (in billions) $ 4.7 $ 4.5 $ 4.0 $ 4.3 $ 4.6
Average annualized yield   0.11 %   0.13 %   0.10 %   0.13 %   0.07 %
Interest revenue (in millions) $ 1   $ 1   $ 1   $ 4   $ 2  
 

Client margin balances:
Average balance (in billions) $ 8.6 $ 8.5 $ 8.7 $ 8.6 $ 8.1
Average annualized yield   3.91 %   3.99 %   4.13 %   3.97 %   4.17 %
Interest revenue (in millions) $ 85   $ 85   $ 91   $ 259   $ 258  
 

Securities borrowing/lending
Average securities borrowing balance (in billions) $ 1.2 $ 1.0 $ 0.9 $ 1.0 $ 0.7
Average securities lending balance (in billions) $ 2.3 $ 2.2 $ 2.3 $ 2.1 $ 1.9
 
Interest revenue (in millions) $ 35 $ 30 $ 28 $ 92 $ 78
Interest expense (in millions)   (1 )   (2 )   (2 )   (4 )   (4 )
Net interest revenue - securities borrowing/lending (in millions) $ 34   $ 28   $ 26   $ 88   $ 74  
 

Other cash and interest-earning investments:
Average balance (in billions) $ 1.6 $ 1.5 $ 1.6 $ 1.6 $ 1.5
Average annualized yield   0.11 %   0.07 %   0.06 %   0.08 %   0.09 %
Interest revenue - net (in millions) $ 0   $ 0   $ 0   $ 1   $ 1  
 

Client credit balances:
Average balance (in billions) $ 9.4 $ 9.1 $ 9.1 $ 9.2 $ 9.3
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) $ 16.1 $ 15.5 $ 15.2 $ 15.5 $ 14.9
Average annualized yield   2.95 %   2.95 %   3.08 %   2.97 %   2.94 %
Net interest revenue (in millions) $ 120   $ 114   $ 118   $ 351   $ 334  
 
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 Nine Months Ended
June 30, 2013 Mar. 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
$ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA (1)
EBITDA $ 349 48.1 % $ 279 41.1 % $ 295 44.2 % $ 915 44.5 % $ 824 41.3 %
Less:
Depreciation and amortization (22 ) (3.0 %) (20 ) (2.9 %) (18 ) (2.7 %) (63 ) (3.1 %) (53 ) (2.7 %)
Amortization of acquired intangible assets (23 ) (3.2 %) (22 ) (3.2 %) (23 ) (3.4 %) (68 ) (3.3 %) (69 ) (3.5 %)
Interest on borrowings (6 ) (0.8 %) (6 ) (0.9 %) (7 ) (1.0 %) (19 ) (0.9 %) (22 ) (1.1 %)
Provision for income taxes   (114 ) (15.7 %)   (87 ) (12.8 %)   (93 ) (13.9 %)   (291 ) (14.2 %)   (238 ) (11.9 %)
Net income $ 184   25.4 % $ 144   21.2 % $ 154   23.1 % $ 474   23.1 % $ 442   22.2 %
 
 
As of
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2013 2013 2012 2012 2012

Liquid Assets - Management Target (2)
Liquid assets - management target $ 728 $ 706 $ 774 $ 1,054 $ 993

Plus: Broker-dealer cash and cash equivalents
555 719 841 406 387
Trust company cash and cash equivalents 39 84 556 95 74
Investment advisory cash and cash equivalents 28 24 15 11 25
 

Less: Corporate short-term investments
- - - (150 ) (126 )
Excess broker-dealer regulatory net capital   (387 )   (315 )   (334 )   (501 )   (443 )
Cash and cash equivalents $ 963   $ 1,218   $ 1,852   $ 915   $ 910  
 
 
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2013 2013 2012 2012 2012

Liquid Assets - Regulatory Threshold (2)
Liquid assets - regulatory threshold $ 1,301 $ 1,288 $ 1,337 $ 1,611 $ 1,554

Plus: Broker-dealer cash and cash equivalents
555 719 841 406 387
Trust company cash and cash equivalents 39 84 556 95 74
Investment advisory cash and cash equivalents 28 24 15 11 25
 

Less: Corporate short-term investments
- - - (150 ) (126 )
Excess trust company Tier 1 capital (8 ) (8 ) (10 ) (10 ) (10 )
Excess broker-dealer regulatory net capital   (952 )   (889 )   (887 )   (1,048 )   (994 )
Cash and cash equivalents $ 963   $ 1,218   $ 1,852   $ 915   $ 910  
 
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 and 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 requirement. We consider "liquid assets - regulatory threshold" to be a measure that reflects our liquidity that would be available for corporate investing and financing activities under unusual operating circumstances, such as the need to provide funding for significant strategic business transactions.
 

Copyright Business Wire 2010

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