TD Ameritrade March Quarter Earningss1.q4cdn.com/959385532/files/doc_presentations/... ·...

TD Ameritrade Holding Corporation (Nasdaq: AMTD). Brokerage services provided by TD Ameritrade, Inc., member FINRA/SIPC, and TD Ameritrade Clearing, Inc., member FINRA/SIPC, subsidiaries of TD Ameritrade Holding Corp. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

TD Ameritrade June Quarter Earnings

1

July 19, 2016

Fiscal 2016

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. 20, 2015 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.

2

Safe Harbor

June Quarter 2016 Key Highlights

3

Average client trades per day of 462K, up 6% year over year; activity rate(1) of 6.8%

Net new client assets(2) of $13.6B, 8% annualized growth rate(3), up 16% year over year

Record client assets of $736B, up 5% year over year

Record fee-based investment balances(4) of $164B, up 3% year over year

Record interest rate sensitive assets(5) of $113B, up 10% year over year

Net revenues of $838M, up 6% year over year

Record diluted earnings per share of $0.45, up 25% year over year Includes a favorable $33M tax liability adjustment(6) - $0.06 impact

(1) 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. (2) Net new assets (NNA) consist of total client asset inflows, less total client asset outflows, excluding activity from business combinations. Client asset inflows include interest and

dividend payments and exclude changes in client assets due to market fluctuations. Net new assets are measured based on the market value of the assets as of the date of the inflows and outflows.

(3) NNA growth rate is annualized net new assets as a % of client assets as of the beginning of the period. (4) Market fee-based investment balances plus money market mutual funds. Ending balances as of Jun. 30, 2016. (5) Interest rate sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of Jun. 30, 2016. (6) Accounting rules for uncertain tax positions require that any change in measurement of a tax position taken in a prior year be recognized as a discrete event in the period in which the

change occurs. These measurement changes may cause some volatility in our effective income tax rate and affect the comparability of our results of operations from period to period. *Changes based on rounding numbers to the nearest $ millions.

Asset Gathering

4

Net New Client Assets ($B)(1)

(1) Net new assets (NNA) consists of total client asset inflows, less total client asset outflows, excluding activity from business combinations. Client asset inflows include interest and dividend payments and exclude changes in client assets due to market fluctuations. Net new assets are measured based on the market value of the assets as of the date of the inflows and outflows.

(2) NNA growth rate is annualized net new assets as a % of client assets as of the beginning of the period.

Jun Q ’16 $13.6B NNA, 8% growth rate; up 16% year over year Jun YTD ’16 $45.2B NNA, 9%

growth rate

Retail NNA slightly down year over year Cautious client sentiment

Institutional NNA up 25% year over year Strong inflows from new and

existing RIAs

$11.7

$16.2 $17.5 $14.1 $13.6

$0$4$8

$12$16$20

Jun Q '15 Sep Q '15 Dec Q '15 Mar Q '16 Jun Q '16

$10.8 $13.4

$11.7 $13.6

$0

$4

$8

$12

$16

$20

Jun Q '13 Jun Q '14 Jun Q '15 Jun Q '16

Sequential Five Quarters

June Quarter ‘13-‘16

7%(2) 9%(2) 10%(2) 8%(2) 8%(2)

8%(2) 9%(2) 7%(2) 8%(2)

Avg. Client Trades Per Day (K)

Trading

5

% Derivatives(1) of Total Trades per Day

(1) Derivatives include options, futures and foreign exchange (Forex) trades per day. (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) Total revenue trades divided by the number of trading days in the period. This metric is also known as average client trades per day. *Certain totals may not foot due to rounding.

Average client trades per day of 462K, up 6% year over year July month-to-date 467K

Activity rate of 6.8%

DARTS(3) distribution: Derivatives – 44%, DARTs of

202K ‒ Options - 31%, Futures - 11%,

Forex – 1%

Mobile – record 21%; record DARTs of 95K

434

479

438

509

462

325

375

425

475

525


6.7 %(2) 7.3%(2) 6.6%(2) 7.6%(2) 6.8%(2)

399 401 434

462

40% 42%

44% 44%

35%

40%

45%

50%

275

325

375

425

475

525


6.7%(2) 6.5%(2) 6.7%(2) 6.8%(2)



$85 $82

$92 $88

$96

$40

$50

$60

$70

$80

$90

$100


Investment Product Fees(1)

6

Investment Product Fees ($M)

Record average balances, up 1% year-over-year and 6% sequentially Amerivest $11.7B, up 6% year

over year Advisor Direct $32.0B, up 3%

year over year

Revenue up 13% year over year to a record $96M Amerivest up $6M(2)

Money market mutual funds up $4M

Amerivest update Ending fee guarantee program

Amerivest Digital Upgrade

(1) Market fee-based plus money market mutual fund revenue. (2) Includes a revenue deferral of $4M related to an Amerivest fee rebate offer.

$65

$79 $85

$96

$40

$50

$60

$70

$80

$90

$100


Avg. Bal. ($B) $161 $157 $159 $153 $162

Avg. Bal. ($B) $118 $139 $161 $162



DOL – New Fiduciary Rule Update

7

Business model well-positioned to adapt to new rules IRA assets represent ~30% of client assets

− Retail - predominantly self-directed − Institutional - operating under fiduciary standard

Impact assessment completed Key areas of focus: IRA rollovers and Advisory products

Implementation costs manageable Principally in Technology and Compliance

Opportunity Well-positioned to take advantage of the dislocation

Jun Q '16 Jun Q '15 Variance % Variance Jun YTD '16 Jun YTD '15 Variance % Variance

1 $347 $328 $19 6% Transaction-Based Revenues $1,035 $1,036 ($1) 0%2 $473 $450 $23 5% Asset-Based Revenues $1,416 $1,340 $76 6%3 $18 $16 $2 13% Other Revenues $46 $39 $7 18%4 $838 $794 $44 6% Net Revenues $2,497 $2,415 $82 3%

5 $432 $415 $17 4% Operating Expenses, excl. Advertising(1) $1,261 $1,251 $10 1%6 $58 $54 $4 7% Advertising $202 $199 $3 2%7 $490 $469 $21 4% Total Operating Expenses $1,463 $1,450 $13 1%

8 $348 $325 $23 7% Operating Income $1,034 $965 $69 7%

9 $14 $6 $8 Other $39 $24 $15

10 $334 $319 $15 5% Pre-Tax Income $995 $941 $54 6%11 40% 40% 0% Pre-Tax Margin 40% 39% 1%

12 $240 $197 $43 22% Net Income $657 $597 $60 10%13 $0.45 $0.36 $0.09 25% EPS $1.23 $1.09 $0.14 13%14 19% 16% 3% ROE(2) 18% 16% 2%

Cash-generation statistics:15 $254 $210 $44 21% Net Income excl. Amortization of Intangibles(1) $698 $638 $60 9%16 $0.48 $0.38 $0.10 26% EPS excl. Amortization of Intangibles(1) $1.30 $1.17 $0.13 11%17 $393 $377 $16 4% EBITDA(1) $1,167 $1,107 $60 5%18 47% 47% 0% EBITDA(1)/Net Revenues 47% 46% 1%

Financial Overview

8

(Dollars in millions, except per share amounts) Year-over-Year Comparison Year-to-Date Comparison

(1) See attached reconciliation of non-GAAP financial measures. (2) Return on average stockholders’ equity (annualized). * Certain totals may not foot due to rounding.

$95 $100 $103 $106 $106

1.51% 1.46% 1.45% 1.43% 1.41%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

$45

$55

$65

$75

$85

$95

$105

$115


Spread Based Revenue

9

Spread-Based Revenue ($M)

$365 $373

$381 $382 $377

$300

$325

$350

$375

$400


Avg. Spread-Based Balance ($B) NIM(1)

Revenue of $377M, up $12M, 3% year over year IDA up $25M Stock lending down $13M

Average balances of $106B, up $11B, 11% year over year Predominantly due to IDA

growth of $9B Margin balances down $1B

Overall consolidated duration of 2.1 years

(1) NIM (net interest margin) is a measure of the net yield on our average spread-based assets. *Changes based on rounding numbers to the nearest $ millions.

$75 $78 $80

$84 $83

1.10% 1.09% 1.10% 1.11% 1.11%

1.00%

1.05%

1.10%

1.15%

1.20%

$30

$40

$50

$60

$70

$80

$90


IDA(1) Net Revenue

10

IDA Net Revenue ($M)

Avg. IDA Balance ($B) Net Yield

$209 $218

$227 $235 $234

$125

$150

$175

$200

$225

$250


(1) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A. and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through The Toronto-Dominion Bank.

*Changes based on rounding numbers to the nearest $ millions.

Revenue of $234M, up $25M, 12% year over year

Average balances of $83B, up $9B, 11% year over year Net yield up 1 basis point

year over year, flat sequentially

FDIC surcharge – 7/1/16 Flattened yield curve

$76 $80 $83 $84 $84

$21 $22 $22 $23 $23 $6 $6 $6 $6 $6

$0

$20

$40

$60

$80

$100

$120

Jun '15 Sep '15 Dec '15 Mar '16 Jun '16

Money Market Mutual Funds

Interest Earning Assets

IDA

Interest Rate Sensitive Assets(1)

11

Ending Balances ($B)

Immediate benefit with Fed Funds increases

Benefit over time with Yield Curve due to re-pricing of laddered investment portfolio

Float $22B

$110 $112 $108

$113

(1) Interest rate sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of Jun. 30, 2016. (2) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A. and TD Bank USA, N.A. TD Ameritrade, TD Bank, N.A., and TD Bank USA, N.A. are affiliated through

The Toronto-Dominion Bank. (3) Ending balances as of Jun. 30, 2016 consisted of $12.0B in client margin balances, $7.1B in segregated cash, and $3.9B in other balances. (4) Impact on spread-based and money market mutual fund revenues in the next twelve months following an interest rate increase. Assumes fed funds increase results in a parallel

shift to the LIBOR/SWAP yield curve. Range impacted by investments in the business and client sharing assumptions with greater sharing/investing anticipated after the first +50bps of increases. Over 90% of the benefit in year one is attributable to short-term rates. Model updated as of 10/27/15.

*Certain totals may not foot due to rounding. *Changes based on rounding numbers to the nearest $ millions.

Balance of $113B, up 10% year over year Ending client cash as %

of client assets 14.6%

Sensitivity model - estimated annual impact to EPS on +100bps: Yr. 1 =+$0.32-$0.48(4)

Yr. 2 =+$0.39-$0.55(4)

Yr. 3 =+$0.47-$0.63(4)

(2)

Fixed$62B

$102 (3)

Float $22B

Float $21B

Float $21B Float

$17B

Fixed$62B

Fixed$62B

Fixed$59B

Fixed$59B

Business Update

12

Continued focus on organic growth Asset gathering Trading Investment product fees

Investing in the business – Amerivest Digital Upgrade

Department of Labor – new fiduciary rule update

Return of capital Paid $0.17/share in cash dividends ($90M) Repurchased 1.7M shares ($49M)

Continue to build long-term earnings power and deploy/return capital to further enhance shareholder value

Fred Tomczyk

13

Then Now

$278B 10/1/08 CLIENT

ASSETS

$736B 6/30/16

12% of DARTS

FY2008 DERIVATIVES

44% of DARTS

JUNE Q FY2016

Virtually non-

existent FY2008 MOBILE

21% of DARTS

JUNE Q FY2016

$23B FY2008 NET NEW

ASSETS

$63B FY2015

SEVEN CONSECUTIVE YEARS OF DOUBLE-DIGIT ASSET GROWTH

INDUSTRY-LEADING SHAREHOLDER RETURNS

BEST-IN-CLASS ASSOCIATE ENGAGEMENT

* Please see the Glossary of Terms, located in “Investor” section of www.amtd.com for more information on how these metrics are calculated. .

http://www.amtd.com/



14

July 19, 2016

Fiscal 2016

Fiscal 2016 Outlook Range(1)

Financial Macro Assumptions Key Metrics

High

$1.75 EPS 10% Market Growth NNA(2) $73B / 11%(3)

42% Pre-Tax Margin

Increasing Fed Funds Increasing Yield Curve

Activity Rate(4) of 7.2% / TPD 490K

Operating expense growth of 6% NIM(5) 1.61% / IDA(6) 1.20%

Low

$1.45 EPS 0% Market Growth NNA $47B / 7%

39% Pre-Tax Margin

No change in Fed Funds, declining Yield Curve

Activity Rate(4) of 6.6% / TPD 450K

Operating expense growth of 2%

NIM 1.53% / IDA 1.15%

15

(1) FY16 forecast per 10/27/15 outlook statement. (2) NNA (net new assets) consists of total client asset inflows, less total client asset outflows, excluding activity from business combinations. Client asset inflows include interest and

dividend payments and exclude changes in client assets due to market fluctuations. Net new assets are measured based on the market value of the assets as of the date of the inflows and outflows.

(3) NNA growth rate is annual net new assets as a % of client assets as of the beginning of the period. (4) Funded account activity rate. Average client trades per day during the period divided by the average number of total funded accounts during the period. (5) NIM (net interest margin) is a measure of the net yield on our average spread-based assets. (6) Client cash is held in FDIC-insured deposit accounts (IDA) at TD Bank, N.A. and TD Bank USA N.A. TD Ameritrade, TD Bank, N.A. and TD Bank USA, N.A. are affiliated through

The Toronto Dominion Bank.

Sensitivity

3K average client trades per day = $0.01

0.04% funded activity rate(1) = $0.01

$3.8B fee-based assets(2) = $0.01

$0.6B spread-based assets(3) = $0.01

+25bps interest rate move = +$0.08-$0.12(4)

Estimated annual impact to EPS

16

(1) Funded account activity rate. Average client trades per day during the period divided by the average number of funded accounts during the period. (2) Client assets invested in money market mutual funds, other mutual funds and Company programs such as AdvisorDirect and Amerivest, on which we earn fee revenues. (3) Client and brokerage-related asset balances, including client margin balances, segregated cash, insured deposit account balances, deposits paid on securities borrowing and other

cash and interest-earning investment balances. (4) Impact on spread-based and money market mutual fund revenues in the first twelve months following an interest rate increase. Assumes fed funds increase results in a parallel shift

to the LIBOR/SWAP yield curve. Sensitivity relates to first 100bps increase and is the average impact of each +25bps interest rate move . Range impacted by components of interest rate sensitive balances, investments in the business and client sharing assumptions - more sharing/investing anticipated after the first +50bps of increases. Over 90% of the benefit in year one is attributable to short-term rates. Model updated as of 10/27/15.

399 382

414

492

401 403

457

477

434

479

438

509

462

6.7%

6.4%

6.9%

8.1%

6.5% 6.4%

7.2%

7.4%

6.7%

7.3%

6.6%

7.6%

6.8%

300

325

350

375

400

425

450

475

500

525

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

Jun Q'13

Sep Q'13

Dec Q'13

Mar Q'14

Jun Q'14

Sep Q'14

Dec Q'14

Mar Q'15

Jun Q'15

Sep Q'15

Dec Q'15

Mar Q'16

Jun Q'16

Activity Rate(1)

(1) 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. (2) FY16 forecast per 10/27/15 outlook statement.

Thirteen quarter average 7.0%

Activity Rate

13 Qtr. Avg. Activity Rate

7.0%

FY16 Outlook Range(2):

Activity Rate: 6.6%-7.2% Avg. Trades Per Day (K): 450-490

Avg. Trades Per Day (K)

17

Cash as % of Client Assets Range 13-18% Based on Current Mix

Avg. Client Cash ($B) Avg. Client Cash as % of Avg. Client Assets

18

$68.2 $72.5

$74.9

$75.8 $75.0 $76.8 $80.9

$83.6 $85.8

$90.2 $91.6 $91.8 $91.7 $93.7

$95.7 $95.1 $95.1 $99.3 $102.6

$106.0 $106.6

16.3%

18.1% 18.8%

17.6% 16.9% 16.8% 17.1% 16.7% 16.4% 16.7%

15.9% 15.2%

14.5% 14.3% 14.4% 13.9%

13.5% 14.4% 14.8%

15.4% 14.7%

10%

15%

20%

25%

$35

$40

$45

$50

$55

$60

$65

$70

$75

$80

$85

$90

$95

$100

$105

$110

Jun Q'11

Sep Q'11

Dec Q'11

Mar Q'12

Jun Q'12

Sep Q'12

Dec Q'12

Mar Q'13

Jun Q'13

Sep Q'13

Dec Q'13

Mar Q'14

Jun Q'14

Sep Q'14

Dec Q'14

Mar Q'15

Jun Q'15

Sep Q'15

Dec Q'15

Mar Q'16

Jun Q'16

0.90

0.75

1.18

0.85 0.73

0.91 0.94 0.98 1.02

1.79

1.39

1.73

1.17

0.98 1.12 1.16 1.19 1.23

2.15

1.70

1.95

1.39

1.15 1.26 1.30 1.33 1.36

0.08 0.07

0.34 0.36 0.38 0.41 0.47 0.53 0.57

0.00

0.50

1.00

1.50

2.00

2.50

Jun Q '15 Sep Q '15 Dec Q '15 Mar Q '16 Jun Q '16 Sep Q '16 Dec Q '16 Mar Q '17 Jun Q '17

2 YR 5 YR 7 YR Fed Funds

Libor/Swap Yield Curve Nine quarter trend

(1) Assumes July 15, 2016 Forward curve. (2) Source: Bloomberg daily (end of period). (3) Source: Board of Governors of the Federal Reserve website Daily Fed Funds Effective Rate (end of period).

(3) (2) (2)

Ending Spreads Jun Q ’15 Mar Q ‘16 Jun Q ‘16

2 YR vs. 5 YR 0.89 0.32 0.25

2 YR vs. 7 YR 1.25 0.54 0.42

19

(2)

Forward Curve(1)

Reconciliation of Non-GAAP Financial Measures

20

21

2016 2015 2016 2015

Net income, as reported 240$ 197$ 657$ 597$ Adjustments:

Amortization of acquired intangible assets 22 22 66 67 Income tax effect of above adjustment (8) (9) (25) (26)

Net income excluding amortization of intangible assets 254$ 210$ 698$ 638$

Diluted earnings per share, as reported 0.45$ 0.36$ 1.23$ 1.09$ Adjustments on a per share basis:

Amortization of acquired intangible assets 0.04 0.04 0.12 0.12 Income tax effect of above adjustment (0.01) (0.02) (0.05) (0.04)

EPS excluding amortization of intangible assets 0.48$ 0.38$ 1.30$ 1.17$

$ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA 393$ 46.9% 377$ 47.5% 1,167$ 46.7% 1,107$ 45.8%Less:

Depreciation and amortization (23) (2.7%) (23) (2.9%) (67) (2.7%) (69) (2.9%)Amortization of acquired intangible assets (22) (2.6%) (22) (2.8%) (66) (2.6%) (67) (2.8%)Interest on borrowings (14) (1.7%) (13) (1.6%) (39) (1.6%) (30) (1.2%)Provision for income taxes (94) (11.2%) (122) (15.4%) (338) (13.5%) (344) (14.2%)

Net income 240$ 28.6% 197$ 24.8% 657$ 26.3% 597$ 24.7%

2016 2015 2016 2015

Operating expenses excluding advertising 432$ 415$ 1,261$ 1,251$ Plus: Advertising 58 54 202 199 Total operating expenses 490$ 469$ 1,463$ 1,450$

EPS Excluding Amortization of Intangible Assets (1)

Nine Months Ended June 30,Quarter Ended June 30,

TD AMERITRADE HOLDING CORPORATIONRECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Dollars in millions, except per share amounts(Unaudited)

Operating Expenses Excluding Advertising (3)

EBITDA (2)

2016

Net Income Excluding Amortization of Intangible Assets (1)

Quarter Ended Nine Months Ended

20152016

June 30, June 30,

2015

Quarter Ended Nine Months Ended

June 30, June 30,

22

Note: The term "GAAP" in the following explanations refers to generally accepted accounting principles in the United States.

(1)

(2)

(3)

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.

Operating expenses excluding advertising is considered a non-GAAP financial measure as defined by SEC Regulation G. Operating expenses excluding advertising consists of total operating expenses, adjusted to remove advertising expense. We consider operating expenses excluding advertising an important measure of the financial performance of our ongoing business. Advertising spending is excluded because it is largely at the discretion of the Company, varies significantly from period to period based on market conditions and generally relates to the acquisition of future revenues through new accounts rather than current revenues from existing accounts. Operating expenses excluding advertising should be considered in addition to, rather than as a substitute for, total operating expenses.

Net income and earnings per share (EPS) excluding amortization of intangible assets are non-GAAP financial measures as defined by SEC Regulation G. We define net income excluding amortization of intangible assets as net income adjusted to remove the after-tax effect of amortization of acquired intangible assets. We consider net income and EPS excluding amortization of intangible assets important measures of our financial performance. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of underlying business performance. Net income and EPS excluding amortization of intangible assets should be considered in addition to, rather than as a substitute for, GAAP net income and EPS.



23

July 19, 2016

Fiscal 2016

TD Ameritrade March Quarter Earningss1.q4cdn.com/959385532/files/doc_presentations/... ·...

Documents

Transcript of TD Ameritrade March Quarter Earningss1.q4cdn.com/959385532/files/doc_presentations/... ·...