TD Ameritrade Delivers Another Strong Asset Gathering Quarter

By: TD Ameritrade Holding Corporation via Business Wire News Releases

July 22, 2014 at 07:30 AM EDT

TD Ameritrade Holding Corporation (NYSE: AMTD) has released operating results for the third quarter of fiscal 2014.

The Company’s results for the quarter ended Jun. 30, 2014 include the following:(1)

Net income of $190 million, or $0.34 per diluted share
Net new client assets of approximately $13.4 billion, an annualized growth rate of 9 percent
Average client trades per day of approximately 401,000, an activity rate of 6.5 percent
Net revenues of $763 million, up 5 percent year-over-year, 56 percent of which were asset-based
Investment product fee revenues of $79 million, up 22 percent year-over-year
Pre-tax income of $310 million, or 41 percent of net revenues
EBITDA(2) of $362 million, or 47 percent of net revenues
Interest rate sensitive assets(3) of $97 billion, up 3 percent year-over-year
Record client assets of approximately $650 billion, up 24 percent year-over-year

“TD Ameritrade’s earnings per share is up 21 percent year-to-date, driven primarily by strong revenue growth. We’re seeing strong demand for guidance-based solutions, increased adoption of mobile platforms and our distribution channels continue to perform well resulting in more than $40 billion in net new client assets, a 10 percent annualized growth rate,” said Fred Tomczyk, president and chief executive officer. “While the markets are experiencing low volatility and summer seasonality, retail investors have remained bullish. We have good momentum to finish out the year and we’re well positioned going forward.”

“TD Ameritrade delivered strong results in the third quarter and we are on pace for another solid year of asset growth. Year-to-date, revenue is $2.3 billion, up 13 percent year-over-year. Net new assets for the third quarter were up 24 percent year-over-year, and interest rate-sensitive assets were up 3 percent. Investment product fees now account for 10 percent of revenues and fee-based investment balances were once again at a record high for the quarter,” said Bill Gerber, executive vice president and chief financial officer. “We also continue to deliver value to our shareholders through a robust return of capital strategy. We returned $155 million to shareholders this quarter through a mix of dividends and stock repurchases.”

Capital Deployment
During the third quarter of fiscal 2014, TD Ameritrade repurchased 2.9 million shares of its common stock at an average price of $30.48 per share for approximately $89 million.

The Company has also declared a $0.12 per share quarterly cash dividend, payable on Aug. 15, 2014 to all holders of record of common stock as of Aug. 1, 2014.

Company Hosts Conference Call
TD Ameritrade will host its June Quarter conference call this morning, July 22, 2014, at 8:30 a.m. EDT (7:30 a.m. CDT). Participants may listen to the conference call by dialing 888-317-6003. 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 10048473 beginning at 10:30 a.m. EDT (9:30 a.m. CDT) on July 22, 2014. The replay will be available until 9:00 a.m. EDT (8:00 a.m. CDT) on July 30, 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, July 23, 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 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 39 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 June 30, 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									Nine Months Ended
	June 30, 2014			Mar. 31, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Revenues:
Transaction-based revenues:
Commissions and transaction fees	$	317		$	374		$	321		$	1,019		$	865

Asset-based revenues:
Interest revenue		150			148			122			426			356
Brokerage interest expense		(1	)		(2	)		(2	)		(5	)		(5	)
Net interest revenue		149			146			120			421			351

Insured deposit account fees		202			202			199			612			604
Investment product fees		79			75			65			226			182
Total asset-based revenues		430			423			384			1,259			1,137

Other revenues		16			15			20			49			53
Net revenues		763			812			725			2,327			2,055

Operating expenses:
Employee compensation and benefits		189			193			176			565			522
Clearing and execution costs		35			34			30			98			81
Communications		29			28			28			84			85
Occupancy and equipment costs		39			40			42			116			121
Depreciation and amortization		24			24			22			71			63
Amortization of acquired intangible assets		22			22			23			68			68
Professional services		42			37			36			117			103
Advertising		48			94			56			205			184
Other		19			17			14			57			52
Total operating expenses		447			489			427			1,381			1,279

Operating income		316			323			298			946			776

Other expense (income):
Interest on borrowings		6			6			6			18			19
Gain on sale of investments		-			-			(6	)		-			(8	)
Total other expense (income)		6			6			-			18			11

Pre-tax income		310			317			298			928			765
Provision for income taxes		120			123			114			352			291

Net income	$	190		$	194		$	184		$	576		$	474

Earnings per share - basic	$	0.34		$	0.35		$	0.33		$	1.05		$	0.86
Earnings per share - diluted	$	0.34		$	0.35		$	0.33		$	1.04		$	0.86

Weighted average shares outstanding - basic		551			551			550			551			548
Weighted average shares outstanding - diluted		555			556			554			555			553

Dividends declared per share	$	0.12		$	0.12		$	0.09		$	0.86		$	0.77

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)

			June 30, 2014		Sept. 30, 2013
Assets:
	Cash and cash equivalents		$	1,260	$	1,062
	Segregated cash and investments			5,258		5,894
	Broker/dealer receivables			1,315		1,348
	Client receivables, net			11,231		8,984
	Goodwill and intangible assets			3,240		3,308
	Other			1,275		1,240
		Total assets	$	23,579	$	21,836

Liabilities and stockholders' equity:
Liabilities:
	Broker/dealer payables		$	2,537	$	1,973
	Client payables			14,265		13,183
	Notes payable			150		-
	Long-term debt			1,041		1,052
	Other			888		952
		Total liabilities		18,881		17,160
Stockholders' equity				4,698		4,676
		Total liabilities and stockholders' equity	$	23,579	$	21,836

TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)

	Quarter Ended			Nine Months Ended
	June 30, 2014	Mar. 31, 2014	June 30, 2013	June 30, 2014	June 30, 2013
Key Metrics:
Net new assets (in billions)	$13.4	$12.2	$10.8	$40.0	$39.4
Net new asset growth rate (annualized)	9%	8%	8%	10%	11%
Average client trades per day	401,468	491,963	399,216	435,123	370,874

Profitability Metrics:
Operating margin	41.4%	39.8%	41.1%	40.7%	37.8%
Pre-tax margin	40.6%	39.0%	41.1%	39.9%	37.2%
Return on average stockholders' equity (annualized)	16.2%	16.9%	16.4%	16.5%	14.3%
EBITDA(1) as a percentage of net revenues	47.4%	45.4%	48.1%	46.6%	44.5%

Liquidity Metrics:
Interest on borrowings (in millions)	$6	$6	$6	$18	$19
Interest coverage ratio (EBITDA(1)/interest on borrowings)	60.3	61.5	58.2	60.3	48.2
Liquid assets - management target(1) (in billions)	$0.8	$0.7	$0.7	$0.8	$0.7
Cash and cash equivalents (in billions)	$1.3	$0.9	$1.0	$1.3	$1.0

Transaction-Based Revenue Metrics:
Total trades (in millions)	25.3	30.0	25.5	81.4	68.6
Average commissions and transaction fees per trade(2)	$12.52	$12.47	$12.57	$12.51	$12.60
Average client trades per funded account (annualized)	16.2	20.2	16.8	17.9	15.7
Activity rate - funded accounts	6.5%	8.1%	6.7%	7.1%	6.3%
Trading days	63.0	61.0	64.0	187.0	185.0
Order routing revenue (in millions)	$72	$84	$64	$226	$174

Spread-Based Asset Metrics:
Average interest-earning assets (in billions)	$18.8	$18.5	$16.1	$18.3	$15.5
Average insured deposit account balances (in billions)	72.4	73.0	68.6	72.7	66.6
Average spread-based balance (in billions)	$91.2	$91.5	$84.7	$91.0	$82.1

Net interest revenue (in millions)	$149	$146	$120	$421	$351
Insured deposit account fee revenue (in millions)	202	202	199	612	604
Spread-based revenue (in millions)	$351	$348	$319	$1,033	$955

Avg. annualized yield - interest-earning assets	3.13%	3.17%	2.95%	3.04%	2.97%
Avg. annualized yield - insured deposit account fees	1.10%	1.10%	1.15%	1.11%	1.19%
Net interest margin (NIM)	1.52%	1.52%	1.49%	1.50%	1.53%

Fee-Based Investment Metrics:
Money market mutual fund fees:
Average balance (in billions)	$5.2	$5.2	$5.1	$5.2	$5.1
Average annualized yield	0.00%	0.00%	0.00%	0.00%	0.02%
Fee revenue (in millions)	$0	$0	$0	$0	$1

Market fee-based investment balances:
Average balance (in billions)	$133.3	$128.4	$113.0	$129.0	$104.5
Average annualized yield	0.24%	0.23%	0.23%	0.23%	0.23%
Fee revenue (in millions)	$79	$75	$65	$226	$181

Average fee-based investment balances (in billions)	$138.5	$133.6	$118.1	$134.2	$109.6
Average annualized yield	0.23%	0.22%	0.22%	0.22%	0.22%
Investment product fee revenue (in millions)	$79	$75	$65	$226	$182

(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, 2014	Mar. 31, 2014	June 30, 2013	June 30, 2014	June 30, 2013
Client Account and Client Asset Metrics:
Funded accounts (beginning of period)	6,146,000	6,048,000	5,880,000	5,993,000	5,764,000
Funded accounts (end of period)	6,237,000	6,146,000	5,943,000	6,237,000	5,943,000
Percentage change during period	1%	2%	1%	4%	3%

Client assets (beginning of period, in billions)	$617.1	$596.5	$516.8	$555.9	$472.3
Client assets (end of period, in billions)	$650.2	$617.1	$523.5	$650.2	$523.5
Percentage change during period	5%	3%	1%	17%	11%

Net Interest Revenue:
Segregated cash:
Average balance (in billions)	$5.2	$5.3	$4.7	$5.3	$4.3
Average annualized yield	0.14%	0.14%	0.11%	0.13%	0.13%
Interest revenue (in millions)	$2	$2	$1	$5	$4

Client margin balances:
Average balance (in billions)	$11.0	$10.5	$8.6	$10.3	$8.6
Average annualized yield	3.79%	3.85%	3.91%	3.85%	3.97%
Interest revenue (in millions)	$105	$101	$85	$299	$259

Securities borrowing/lending:
Average securities borrowing balance (in billions)	$1.0	$1.1	$1.2	$1.1	$1.0
Average securities lending balance (in billions)	$2.6	$2.8	$2.3	$2.5	$2.1
Net interest revenue - securities borrowing/lending (in millions)	$42	$43	$34	$117	$88

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

Client credit balances:
Average balance (in billions)	$11.5	$11.0	$9.4	$11.1	$9.2
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)	$18.8	$18.5	$16.1	$18.3	$15.5
Average annualized yield	3.13%	3.17%	2.95%	3.04%	2.97%
Net interest revenue (in millions)	$149	$146	$120	$421	$351

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, 2014						Mar. 31, 2014						June 30, 2013					June 30, 2014					June 30, 2013
		$			% of Net Rev.			$			% of Net Rev.			$			% of Net Rev.		$			% of Net Rev.		$			% of Net Rev.
EBITDA (1)
EBITDA		$	362			47.4	%	$	369			45.4	%	$	349		48.1	%	$	1,085		46.6	%	$	915		44.5	%
Less:
	Depreciation and amortization		(24	)		(3.1	%)		(24	)		(3.0	%)		(22	)	(3.0	%)		(71	)	(3.1	%)		(63	)	(3.1	%)
	Amortization of acquired intangible assets		(22	)		(2.9	%)		(22	)		(2.7	%)		(23	)	(3.2	%)		(68	)	(2.9	%)		(68	)	(3.3	%)
	Interest on borrowings		(6	)		(0.8	%)		(6	)		(0.7	%)		(6	)	(0.8	%)		(18	)	(0.8	%)		(19	)	(0.9	%)
	Provision for income taxes		(120	)		(15.7	%)		(123	)		(15.1	%)		(114	)	(15.7	%)		(352	)	(15.1	%)		(291	)	(14.2	%)
Net income		$	190			24.9	%	$	194			23.9	%	$	184		25.4	%	$	576		24.8	%	$	474		23.1	%


		As of
		June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,
		2014			2014			2013			2013			2013
Liquid Assets - Management Target (2)
Liquid assets - management target		$	767		$	706		$	707		$	874		$	728
Plus:	Broker-dealer cash and cash equivalents		871			508			926			540			555
	Trust company cash and cash equivalents		54			64			60			74			39
	Investment advisory cash and cash equivalents		9			14			25			19			28
Less:	Excess broker-dealer regulatory net capital		(441	)		(359	)		(409	)		(445	)		(387	)
Cash and cash equivalents		$	1,260		$	933		$	1,309		$	1,062		$	963

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.

Contacts:

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