TD Ameritrade Delivers A Strong Quarter As Investors Re-engage

TD Ameritrade Holding Corporation (NYSE: AMTD) has released operating results for the first quarter of fiscal 2014. The Company had a strong start to the fiscal year, benefiting from the improved retail trading environment and maintaining its industry-leading, double-digit net new client asset growth rate.

The Company’s results for the quarter ended Dec. 31, 2013 include the following: (1)
  • Net income of $192 million, or $0.35 per diluted share
  • Net new client assets of approximately $14.5 billion, an annualized growth rate of 10 percent
  • Average client trades per day of approximately 414,000, an activity rate of 6.9 percent
  • Record net revenues of $752 million, 54 percent of which were asset-based
  • Investment product fee revenues of $72 million, up 29 percent year-over-year
  • Pre-tax income of $301 million, or 40 percent of net revenues
  • EBITDA(2) of $354 million, or 47 percent of net revenues
  • Record interest rate sensitive assets(3) of $97 billion, up 8 percent year-over-year
  • Record client assets of approximately $596 billion, up 24 percent year-over-year

“TD Ameritrade had a strong quarter across the board, with continued strong asset gathering, an improved trading environment and strength in investment product fee revenues,” said Fred Tomczyk, president and chief executive officer. “We maintained our industry-leading growth rate by gathering $14.5 billion in net new client assets, an annualized growth rate of 10 percent. Additionally, client engagement has trended upward following continued improvement in the macroeconomic environment and retail investor sentiment. We’re seeing more clients logging into accounts, interacting with trading platforms, and adopting mobile technology. Trading activity was at its highest level in more than two years. The trading and investing environment has definitely improved, and we are off to a good start to fiscal 2014.”

“TD Ameritrade delivered record net revenues this quarter of $752 million, up 16 percent year-over-year,” said Bill Gerber, executive vice president and chief financial officer. “We had the second best asset gathering quarter in our history, and both fee-based investment balances and interest rate sensitive assets are at record levels. In addition, we benefited from the improved trading environment that has continued into January. Our strategy is paying off, and we will focus on maintaining that momentum as we move forward.”

Capital DeploymentThe Company has declared a $0.12 per share quarterly cash dividend, payable on Feb. 19, 2014 to all holders of record of common stock as of Feb. 5, 2014.

Company Hosts Conference CallTD Ameritrade will host its December Quarter conference call this morning, Jan. 21, 2014, at 8:30 a.m. EST (7:30 a.m. CST). 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 10038872 beginning at 10:30 a.m. EST (9:30 a.m. CST) on Jan. 21, 2014. The replay will be available until 9:00 a.m. EST (8:00 a.m. CST) on Jan. 29, 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 Wednesday, Jan. 22, 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.

Source: TD Ameritrade Holding Corporation

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 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 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 on Form 10-K, filed with the SEC on Nov. 22, 2013. 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 December 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
Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012
Revenues:
Transaction-based revenues:
Commissions and transaction fees $ 328 $ 306 $ 257
 
Asset-based revenues:
Interest revenue 128 120 118
Brokerage interest expense   (1 )   (1 )   (2 )
Net interest revenue 127 119 116
 
Insured deposit account fees 208 201 205
Investment product fees   72     67     56  
Total asset-based revenues 407 387 377
 
Other revenues   17     16     17  
 
Net revenues   752     709     651  
 
Operating expenses:
Employee compensation and benefits 183 170 168
Clearing and execution costs 30 29 24
Communications 28 27 28
Occupancy and equipment costs 37 40 39
Depreciation and amortization 24 23 20
Amortization of acquired intangible assets 23 23 23
Professional services 38 41 34
Advertising 63 55 52
Other   19     22     22  
Total operating expenses   445     430     410  
 
Operating income 307 279 241
 
Other expense (income):
Interest on borrowings 6 6 6
Gain on investments, net   -     (49 )   (2 )
Total other expense (income)   6     (43 )   4  
 
Pre-tax income 301 322 237
 
Provision for income taxes   109     122     90  
 
Net income $ 192   $ 200   $ 147  
 
Earnings per share - basic $ 0.35 $ 0.36 $ 0.27
Earnings per share - diluted $ 0.35 $ 0.36 $ 0.27
 
Weighted average shares outstanding - basic 551 550 546
Weighted average shares outstanding - diluted 555 555 551
 
Dividends declared per share $ 0.62 $ 0.09 $ 0.59
 
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
       
Dec. 31, 2013 Sept. 30, 2013
Assets:
Cash and cash equivalents $ 1,309 $ 1,062
Segregated cash and investments 5,339 5,894
Broker/dealer receivables 1,202 1,348
Client receivables, net 9,834 8,984
Goodwill and intangible assets 3,285 3,308
Other   1,267   1,240
 
Total assets $ 22,236 $ 21,836
 
Liabilities and stockholders' equity:
 
Liabilities:
Broker/dealer payables $ 2,239 $ 1,973
Client payables 13,379 13,183
Notes payable 155 -
Long-term debt 1,041 1,052
Other   894   952
Total liabilities 17,708 17,160
 
Stockholders' equity   4,528   4,676
 
Total liabilities and stockholders' equity $ 22,236 $ 21,836
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
     
Quarter Ended
Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012

Key Metrics:
Net new assets (in billions) $14.5 $10.1 $15.6
Net new asset growth rate (annualized) 10% 8% 13%
Average client trades per day 413,743 381,657 334,035
 

Profitability Metrics:
Operating margin 40.8% 39.4% 37.0%
Pre-tax margin 40.0% 45.4% 36.4%
Return on average stockholders' equity (annualized) 16.3% 17.3% 13.3%
EBITDA(1) as a percentage of net revenues 47.1% 52.8% 43.9%
 

Liquidity Metrics:
Interest on borrowings (in millions) $6 $6 $6
Interest coverage ratio (EBITDA(1)/interest on borrowings) 59.0 62.3 47.7
Liquid assets - management target(1) (in billions) $0.7 $0.9 $0.8
Cash and cash equivalents (in billions) $1.3 $1.1 $1.9
 

Transaction-Based Revenue Metrics:
Total trades (in millions) 26.1 24.2 20.4
Average commissions and transaction fees per trade(2) $12.56 $12.61 $12.62
Average client trades per funded account (annualized) 17.2 15.9 14.3
Activity rate - funded accounts 6.9% 6.4% 5.8%
Trading days 63.0 63.5 61.0
 

Spread-Based Asset Metrics:
Average interest-earning assets (in billions) $17.6 $16.8 $15.1
Average insured deposit account balances (in billions) 72.7 72.0 64.2
Average spread-based balance (in billions) $90.3 $88.8 $79.3
 
Net interest revenue (in millions) $127 $119 $116
Insured deposit account fee revenue (in millions) 208 201 205
Spread-based revenue (in millions) $335 $320 $321
 
Avg. annualized yield - interest-earning assets 2.81% 2.77% 3.02%
Avg. annualized yield - insured deposit account fees 1.12% 1.09% 1.25%
Net interest margin (NIM) 1.45% 1.41% 1.58%
 

Fee-Based Investment Metrics:

Money market mutual fund fees:
Average balance (in billions) $5.3 $5.3 $5.1
Average annualized yield 0.00% 0.00% 0.05%
Fee revenue (in millions) $0 $0 $1
 

Market fee-based investment balances:
Average balance (in billions) $125.2 $117.0 $94.9
Average annualized yield 0.22% 0.22% 0.23%
Fee revenue (in millions) $72 $67 $55
 
Average fee-based investment balances (in billions) $130.5 $122.3 $100.0
Average annualized yield 0.22% 0.21% 0.22%
Investment product fee revenue (in millions) $72 $67 $56
 
(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
Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012

Client Account and Client Asset Metrics:
 
Funded accounts (beginning of period) 5,993,000 5,943,000 5,764,000
Funded accounts (end of period) 6,048,000 5,993,000 5,836,000
Percentage change during period 1% 1% 1%
 
Client assets (beginning of period, in billions) $555.9 $523.5 $472.3
Client assets (end of period, in billions) $596.5 $555.9 $480.8
Percentage change during period 7% 6% 2%
 

Net Interest Revenue:

Segregated cash:
Average balance (in billions) $5.4 $5.5 $3.8
Average annualized yield 0.11% 0.09% 0.17%
Interest revenue (in millions) $2 $1 $2
 

Client margin balances:
Average balance (in billions) $9.3 $8.5 $8.7
Average annualized yield 3.92% 3.95% 4.02%
Interest revenue (in millions) $93 $86 $89
 

Securities borrowing/lending
Average securities borrowing balance (in billions) $1.2 $1.1 $0.9
Average securities lending balance (in billions) $2.2 $2.2 $1.9
     
Net interest revenue - securities borrowing/lending (in millions) $32 $31 $25
 

Other cash and interest-earning investments:
Average balance (in billions) $1.7 $1.7 $1.7
Average annualized yield 0.07% 0.09% 0.07%
Interest revenue - net (in millions) $0 $1 $0
 

Client credit balances:
Average balance (in billions) $10.7 $10.1 $9.2
Average annualized cost 0.01% 0.01% 0.01%
Interest expense (in millions) ($0) ($0) ($0)
 
Average interest-earning assets (in billions) $17.6 $16.8 $15.1
Average annualized yield 2.81% 2.77% 3.02%
Net interest revenue (in millions) $127 $119 $116
 

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
Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012
$ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA (1)
EBITDA $ 354 47.1 % $ 374 52.8 % $ 286 43.9 %
Less:
Depreciation and amortization (24 ) (3.2 %) (23 ) (3.2 %) (20 ) (3.1 %)
Amortization of acquired intangible assets (23 ) (3.1 %) (23 ) (3.2 %) (23 ) (3.5 %)
Interest on borrowings (6 ) (0.8 %) (6 ) (0.8 %) (6 ) (0.9 %)
Provision for income taxes   (109 ) (14.5 %)   (122 ) (17.2 %)   (90 ) (13.8 %)
Net income $ 192   25.5 % $ 200   28.2 % $ 147   22.6 %
 
 
As of
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2013 2013 2013 2013 2012

Liquid Assets - Management Target (2)
Liquid assets - management target $ 707 $ 874 $ 728 $ 706 $ 774
Plus: Broker-dealer cash and cash equivalents 926 540 555 719 841
Trust company cash and cash equivalents 60 74 39 84 556
Investment advisory cash and cash equivalents 25 19 28 24 15
 
Less: Excess broker-dealer regulatory net capital   (409 )   (445 )   (387 )   (315 )   (334 )
Cash and cash equivalents $ 1,309   $ 1,062   $ 963   $ 1,218   $ 1,852  
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.

Copyright Business Wire 2010

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