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Press Release Details

TD Ameritrade Second Quarter Results: Strong Momentum Continues

April 23, 2018

Net New Client Assets of $22.2B
Record Average Client Trades per Day of 943,000
GAAP Diluted EPS $0.48; Non-GAAP Diluted EPS $0.73 (1)

OMAHA, Neb.--(BUSINESS WIRE)-- TD Ameritrade Holding Corporation (Nasdaq: AMTD) has released results for the second quarter of fiscal 2018. The Company gathered $22.2 billion in net new client assets for the quarter and reported record client trading activity of approximately 943,000 client trades per day, on average. These results were driven by a resurgence of volatility in the equity markets, which in turn increased investor engagement and trading.

Financial results for the quarter ended March 31, 2018 include the following:(2)

  • Net new client assets of approximately $22.2 billion, an annualized growth rate of 8 percent
  • Record average client trades per day of approximately 943,000, up 82 percent year over year
  • Record net revenues of $1.4 billion, 59 percent of which were asset-based
  • Client assets of approximately $1.2 trillion, up 40 percent year over year
  • $0.48 in GAAP earnings per diluted share, up 20 percent year over year, on net income of $271 million
  • $0.73 in Non-GAAP earnings per diluted share(1), up 66 percent year over year
  • Pre-tax GAAP income of $372 million, or 26 percent of net revenues
  • Interest rate-sensitive assets(3) of $153 billion, up 23 percent year over year

“Early results of our dual strategy to successfully integrate Scottrade while continuing to accelerate and diversify revenue growth in our core business have exceeded our expectations,” said Tim Hockey, TD Ameritrade president and chief executive officer. “With the Scottrade client conversion now successfully behind us, we are turning our focus to increasing our momentum and profitably growing our business. Further enhancing the client experience, investing in innovation and employee development, and increasing our competitive edge will be our priorities as we work through the balance of the fiscal year.”

“In our second quarter, market volatility returned in full force as the implications of tax reform became clearer,interest rates continued to rise, and tariff talks surprised the markets,” said Steve Boyle, executive vice president and chief financial officer. “These events drove record revenue in the quarter and more than offset some volatility-related losses. Scottrade expense synergies remain on track, and we expect total operating expenses to decline significantly over the remainder of the fiscal year. Leading with technology remains a key focus that necessitates continued investment in order to enhance our offerings and drive efficient growth in the future.”

Capital Management
The Company paid $119 million, or $0.21 per share, in cash dividends in its second fiscal quarter.

The Company has declared a $0.21 per share quarterly cash dividend, payable on May 22, 2018 to all holders of record of common stock as of May 8, 2018.

Company Hosts Conference Call
TD Ameritrade will hold its March Quarter conference call tomorrow morning, April 24, 2018, at 8:30 a.m. EDT (7:30 a.m. CDT) to take questions from analysts. Participants may listen to the conference call by dialing 866-393-4306. A complete audio recording of management’s remarks, an abridged text version of the remarks, a financial fact sheet containing associated details, as well as a supplemental FAQ are now available on the “Financial Reports” page of www.amtd.com under the header “Second Quarter 2018.” Conference call participants are encouraged to reference these materials prior to the call.

A replay of the phone call will be available by dialing 855-859-2056 and entering the Conference ID 4581279 beginning at 11:30 a.m. EDT (10:30 a.m. CDT) on April 24, 2018. The replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on May 1, 2018. A transcript of the call will be available on the Company’s corporate web site, www.amtd.com, via the “Financial Reports” page beginning Wednesday, April 25, 2018.

More information about TD Ameritrade’s upcoming corporate events and management speaking engagements, such as quarterly earnings conference calls, are available on the Company’s Corporate Event Calendar. Look for the link “Where are we?” on the “Investor Relations” page of www.amtd.com.

Interested parties should visit or subscribe to newsfeeds at www.amtd.com for the most up-to-date information on corporate financial reports, press releases, SEC filings and events. The Company also communicates this information via Twitter, @TDAmeritradePR. Website 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
TD Ameritrade provides investing services and education to more than 11 million client accounts totaling $1.2 trillion in assets, and custodial services to more than 6,000 registered investment advisors. We are a leader in U.S. retail trading, executing an average of more than 940,000 trades per day for our clients, nearly a quarter of which come from mobile devices. We have a proud history of innovation, dating back to our start in 1975, and today our team of 10,000-strong is committed to carrying it forward. Together, we are leveraging the latest in cutting edge technologies and one-on-one client care to transform lives, and investing, for the better. Learn more by visiting TD Ameritrade’s newsroom at www.amtd.com, or read our stories at Fresh Accounts.

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, stock price or any projections or expectations regarding the acquisition of Scottrade Financial Services, Inc., 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: economic, social and political conditions and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; difficulties and delays in integrating the Scottrade Financial Services, Inc. ("Scottrade") business or fully realizing cost savings and other benefits from the acquisition; business disruption following the Scottrade acquisition; disruptions due to Scottrade integration-related uncertainty or other factors making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with other acquisitions; and the other risks and uncertainties set forth under Item 1A. – Risk Factors of the Company's annual report on Form 10-K for the fiscal year ended September 30, 2017. These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

1 See attached reconciliation of non-GAAP financial measures.

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

3 Interest rate-sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of March 31, 2018.

Brokerage services provided by TD Ameritrade, Inc., member FINRA ( www.FINRA.org ) /SIPC ( www.SIPC.org ).

 
TD AMERITRADE HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
In millions, except per share amounts
(Unaudited)
                   
Quarter Ended Six Months Ended
Mar. 31, 2018 Dec. 31, 2017 Mar. 31, 2017 Mar. 31, 2018 Mar. 31, 2017
Revenues:
Transaction-based revenues:
Commissions and transaction fees $ 556 $ 440 $ 365 $ 996 $ 719
Asset-based revenues:
Bank deposit account fees 381 381 269 762 514
Net interest revenue 308 276 154 585 305
Investment product fees   141   133   103   274   197
Total asset-based revenues 830 790 526 1,621 1,016
Other revenues   29   27   13   55   27
Net revenues   1,415   1,257   904   2,672   1,762
 
Operating expenses:
Employee compensation and benefits 461 415 229 875 443
Clearing and execution costs 56 47 37 103 73
Communications 46 53 29 99 64
Occupancy and equipment costs 79 80 45 160 89
Depreciation and amortization 35 34 25 69 49
Amortization of acquired intangible assets 37 38 19 75 38
Professional services 86 74 59 160 111
Advertising 90 64 80 154 137
Other   129   116   23   245   47
Total operating expenses   1,019   921   546   1,940   1,051
 
Operating income 396 336 358 732 711
Other expense:
 
Interest on borrowings 24 20 14 44 28
Loss on sale of investments - 11 - 11 -
Other   -   2   -   2   -
Total other expense   24   33   14   57   28
 
Pre-tax income 372 303 344 675 683
 
Provision for income taxes(1)   101   6   130   107   253
 
Net income $ 271 $ 297 $ 214 $ 568 $ 430
 
Earnings per share - basic $ 0.48 $ 0.52 $ 0.41 $ 1.00 $ 0.81
Earnings per share - diluted $ 0.48 $ 0.52 $ 0.40 $ 1.00 $ 0.81
 
Weighted average shares outstanding - basic 567 567 528 567 528
Weighted average shares outstanding - diluted 570 569 530 569 530
 
Dividends declared per share $ 0.21 $ 0.21 $ 0.18 $ 0.42 $ 0.36
 
(1) The provision for income taxes was lower for the six months ended March 31, 2018, primarily due to the realization of approximately $78 million of after-tax benefits recognized during the quarter ended December 31, 2017. These after-tax benefits were primarily attributable to the enactment of the Tax Cuts and Jobs Act for which we recorded a provisional estimate for the remeasurement of our deferred income tax balances.
 
 
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
       
Mar. 31, 2018 Sept. 30, 2017
Assets:
Cash and cash equivalents $ 1,373 $ 1,472
Segregated cash and investments 6,863 10,446
Broker/dealer receivables 1,395 1,334
Client receivables, net 20,823 17,151
Investments available-for-sale, at fair value 488 746
Goodwill and intangible assets 5,597 5,683
Other   1,871   1,795
Total assets $ 38,410 $ 38,627
 
Liabilities and stockholders' equity:
 
Liabilities:
Broker/dealer payables $ 3,093 $ 2,504
Client payables 23,848 25,107
Long-term debt and other borrowings 2,795 2,652
Other   1,079   1,117
Total liabilities 30,815 31,380
 
Stockholders' equity   7,595   7,247
 
Total liabilities and stockholders' equity $ 38,410 $ 38,627
 
NOTE: The Condensed Consolidated Balance Sheets include provisional estimates related to property acquired and liabilities assumed in the Scottrade acquisition. These provisional estimates may be prospectively adjusted in the event new information becomes available regarding facts and circumstances which existed at the date of acquisition.
 
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
       
Quarter Ended Six Months Ended
Mar. 31, 2018     Dec. 31, 2017     Mar. 31, 2017 Mar. 31, 2018     Mar. 31, 2017

Key Metrics:

Net new assets (in billions) $22.2 $26.5 $19.5 $48.6 $38.1
Net new asset growth rate (annualized) 8 % 9 % 10 % 9 % 10 %
Average client trades per day 943,058 726,438 516,994 833,432 501,837
 

Profitability Metrics:

Operating margin 28.0 % 26.7 % 39.6 % 27.4 % 40.4 %
Pre-tax margin 26.3 % 24.1 % 38.1 % 25.3 % 38.8 %
Return on average stockholders' equity (annualized) 14.4 % 16.2 % 16.3 % 15.3 % 16.6 %
Net profit margin 19.2 % 23.6 % 23.7 % 21.3 % 24.4 %
EBITDA(1) as a percentage of net revenues 33.1 % 31.4 % 44.5 % 32.3 % 45.3 %
 

Liquidity Metrics:

Interest on borrowings (in millions) $24 $20 $14 $44 $28
Interest coverage ratio (EBITDA(1)/interest on borrowings) 19.5 19.8 28.7 19.6 28.5
Cash and cash equivalents (in billions) $1.4 $1.6 $2.2 $1.4 $2.2

Liquid assets available for corporate investing and financing activities(1) (in billions)

$0.5 $0.1 $1.0 $0.5 $1.0
 

Transaction-Based Revenue Metrics:

Total trades (in millions) 57.5 45.4 32.1 102.9 62.5
Average commissions per trade(2) $7.50 $7.54 $8.79 $7.52 $8.92
Trading days 61.0 62.5 62.0 123.5 124.5
Order routing revenue (in millions) $125 $98 $83 $222 $162
 

Spread-Based Asset Metrics:

Average bank deposit account balances (in billions) $118.3 $119.1 $95.1 $118.7 $94.2
Average interest-earning assets (in billions) 32.0   31.6   24.6   31.8   24.5  
Average spread-based balances (in billions) $150.3   $150.7   $119.7   $150.5   $118.7  
 
Bank deposit account fee revenue (in millions) $381 $381 $269 $762 $514
Net interest revenue (in millions) 308   276   154   585   305  
Spread-based revenue (in millions) $689   $657   $423   $1,347   $819  
 
Avg. annualized yield - bank deposit account fees 1.29 % 1.25 % 1.13 % 1.27 % 1.08 %
Avg. annualized yield - interest-earning assets 3.86 % 3.42 % 2.50 % 3.64 % 2.46 %
Net interest margin (NIM) 1.83 % 1.71 % 1.41 % 1.77 % 1.36 %
 

Fee-Based Investment Metrics:

Money market mutual fund fees:

Average balance (in billions) $4.0 $3.8 $3.5 $3.9 $3.6
Average annualized yield 0.42 % 0.43 % 0.44 % 0.43 % 0.41 %
Fee revenue (in millions) $4   $4   $4   $8   $8  
 

Market fee-based investment balances:

Average balance (in billions) $247.7 $226.2 $176.9 $236.8 $171.8
Average annualized yield 0.22 % 0.22 % 0.22 % 0.22 % 0.22 %
Fee revenue (in millions) $137   $129   $99   $266   $189  
 
Average fee-based investment balances (in billions) $251.7 $230.0 $180.4 $240.7 $175.4
Average annualized yield 0.22 % 0.23 % 0.23 % 0.23 % 0.22 %
Investment product fee revenue (in millions) $141   $133   $103   $274   $197  
 
(1) See attached reconciliation of non-GAAP financial measures.
(2) Effective in September 2017, the average commissions per trade metric was revised to exclude order routing revenue. Prior periods have been updated to conform to the current presentation.
NOTE: See Glossary of Terms on the Company's website at www.amtd.com for definitions of the above metrics.
 
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
               
Quarter Ended Six Months Ended
Mar. 31, 2018 Dec. 31, 2017 Mar. 31, 2017 Mar. 31, 2018     Mar. 31, 2017

Client Account and Client Asset Metrics:

Funded accounts (beginning of period) 11,129,000 11,004,000 7,046,000 11,004,000 6,950,000
Funded accounts (end of period) 11,266,000 11,129,000 7,189,000 11,266,000 7,189,000
Percentage change during period 1 % 1 % 2 % 2 % 3 %
 
Client assets (beginning of period, in billions) $1,178.8 $1,118.5 $797.0 $1,118.5 $773.8
Client assets (end of period, in billions) $1,185.7 $1,178.8 $846.7 $1,185.7 $846.7
Percentage change during period 1 % 5 % 6 % 6 % 9 %
 

Net Interest Revenue:

Segregated cash:

Average balance (in billions) $8.7 $9.9 $8.7 $9.3 $8.7
Average annualized yield 1.31 % 1.09 % 0.46 % 1.19 % 0.38 %
Interest revenue (in millions) $28   $28   $10   $56   $17  
 

Client margin balances:

Average balance (in billions) $19.1 $17.6 $11.9 $18.3 $11.9
Average annualized yield 4.45 % 4.25 % 3.67 % 4.35 % 3.61 %
Interest revenue (in millions) $213   $191   $109   $404   $217  
 

Securities borrowing/lending:

Average securities borrowing balance (in billions) $0.9 $1.1 $0.9 $1.0 $0.9
Average securities lending balance (in billions) $2.8   $2.6   $1.7   $2.7   $1.8  
Net interest revenue - securities borrowing/lending (in millions) $61   $53   $31   $114   $65  
 

Other cash and interest-earning investments:

Average balance (in billions) $3.3 $3.0 $3.1 $3.2 $3.0
Average annualized yield 1.03 % 0.82 % 0.54 % 0.93 % 0.49 %
Interest revenue - net (in millions) $8   $6   $4   $15   $7  
 

Client credit balances:

Average balance (in billions) $21.5 $21.4 $16.1 $21.4 $16.1
Average annualized cost 0.04 % 0.03 % 0.01 % 0.03 % 0.01 %
Interest expense (in millions) ($2 ) ($2 ) ($0 ) ($4 ) ($1 )
 
Average interest-earning assets (in billions) $32.0 $31.6 $24.6 $31.8 $24.5
Average annualized yield 3.86 % 3.42 % 2.50 % 3.64 % 2.46 %
Net interest revenue (in millions) $308   $276   $154   $585   $305  
 
NOTE: See Glossary of Terms on the Company's website at www.amtd.com for definitions of the above metrics.
 
 
TD AMERITRADE HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Dollars in millions, except per share amounts
(Unaudited)
                                         
 
Quarter Ended Six Months Ended
Mar. 31, 2018 Dec. 31, 2017 Mar. 31, 2017 Mar. 31, 2018 Mar. 31, 2017

Non-GAAP Net Income and Non-GAAP Diluted EPS (1)

Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS
 
Net income and diluted EPS - GAAP $ 271 $ 0.48 $ 297 $ 0.52 $ 214 $ 0.40 $ 568 $ 1.00 $ 430 $ 0.81
Non-GAAP adjustments:
Amortization of acquired intangible assets 37 0.06 38 0.07 19 0.04 75 0.13 38 0.07
Acquisition-related expenses 158 0.28 179 0.31 8 0.02 337 0.59 11 0.02
Income tax effect of above adjustments   (52 )   (0.09 )   (59 )   (0.10 )   (10 )   (0.02 )   (111 )   (0.19 )   (19 )   (0.03 )
Non-GAAP net income and non-GAAP diluted EPS $ 414   $ 0.73   $ 455   $ 0.80   $ 231   $ 0.44   $ 869   $ 1.53   $ 460   $ 0.87  
 
 
Quarter Ended Six Months Ended
Mar. 31, 2018 Dec. 31, 2017 Mar. 31, 2017 Mar. 31, 2018 Mar. 31, 2017
$ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA (2)

Net income - GAAP $ 271 19.2 % $ 297 23.6 % $ 214 23.7 % $ 568 21.3 % $ 430 24.4 %
Add:
Depreciation and amortization 35 2.5 % 34 2.7 % 25 2.8 % 69 2.6 % 49 2.8 %
Amortization of acquired intangible assets 37 2.6 % 38 3.0 % 19 2.1 % 75 2.8 % 38 2.2 %
Interest on borrowings 24 1.7 % 20 1.6 % 14 1.5 % 44 1.6 % 28 1.6 %
Provision for income taxes   101   7.1 %   6   0.5 %   130   14.4 %   107   4.0 %   253   14.4 %
EBITDA - non-GAAP $ 468   33.1 % $ 395   31.4 % $ 402   44.5 % $ 863   32.3 % $ 798   45.3 %
 
 
As of
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2018 2017 2017 2017 2017

Liquid Assets Available for Corporate Investing and Financing Activities (3)

Cash and cash equivalents - GAAP $ 1,373 $ 1,644 $ 1,472 $ 2,880 $ 2,231
Less: Non-corporate cash and cash equivalents   (1,013 )   (844 )   (1,174 )   (973 )   (1,286 )
Corporate cash and cash equivalents 360 800 298 1,907 945
Corporate investments 292 - 714 747 747
Less: Corporate liquidity maintained for operational contingencies (248 ) (723 ) (723 ) (723 ) (723 )
Amounts maintained for corporate working capital (65 ) (65 ) (87 ) (87 ) (87 )
Amounts held as collateral for derivative contracts, net   -     (8 )   (40 )   (34 )   (40 )
Excess corporate cash and cash equivalents and investments 339 4 162 1,810 842
Excess regulatory net capital over management targets   119     85     46     8     122  
Liquid assets available for corporate investing and financing activities - non-GAAP $ 458   $ 89   $ 208   $ 1,818   $ 964  
 
 
Note: The term "GAAP" in the following explanation refers to generally accepted accounting principles in the United States.
 
(1)   Non-GAAP net income and non-GAAP diluted earnings per share (EPS) are non-GAAP financial measures as defined by SEC Regulation G. We define non-GAAP net income as net income adjusted to remove the after-tax effect of amortization of acquired intangible assets and acquisition-related expenses. We consider non-GAAP net income and non-GAAP diluted EPS as important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of our underlying business performance. Acquisition-related expenses are excluded as these costs are not representative of the costs of running the Company’s on-going business. Non-GAAP net income and non-GAAP diluted EPS should be considered in addition to, rather than as a substitute for, GAAP net income and diluted EPS.
 

(2)

EBITDA (earnings before interest, taxes, depreciation and amortization) is considered a non-GAAP financial measure as defined by SEC Regulation G. We consider EBITDA to be 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 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, GAAP pre-tax income, net income and cash flows from operating activities.

 

(3)

Liquid assets available for corporate investing and financing activities is considered a non-GAAP financial measure as defined by SEC Regulation G. We consider "liquid assets available for corporate investing and financing activities" to be an important measure of our liquidity. We include the excess capital of our regulated subsidiaries in the calculation of liquid assets available for corporate investing and financing activities, rather than simply including regulated subsidiaries' cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the regulated subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the regulated subsidiaries to the parent company. Liquid assets available for corporate investing and financing activities should be considered as a supplemental measure of liquidity, rather than as a substitute for GAAP cash and cash equivalents.

 

We define liquid assets available for corporate investing and financing activities as the sum of (a) excess corporate cash and cash equivalents and investments, less securities sold under agreements to repurchase, and (b) our regulated subsidiaries' net capital in excess of minimum operational targets established by management. Excess corporate cash and cash equivalents and investments includes cash and cash equivalents from our investment advisory subsidiaries and excludes (i) amounts being maintained to provide liquidity for operational contingencies, including amounts available to be drawn by our broker-dealer and FCM/FDM subsidiaries under the Parent's intercompany committed lines of credit, (ii) amounts maintained for corporate working capital and (iii) the net amounts held as collateral for derivative contracts. Liquid assets available for corporate investing and financing activities is based on more conservative measures of net capital than regulatory requirements because we generally manage to higher levels of net capital at our regulated subsidiaries than the regulatory thresholds require.

 

TD Ameritrade Holding Corporation
Becky Niiya, 402-574-6652
Director, Corporate Communications
rebecca.niiya@tdameritrade.com
or
Jeff Goeser, 402-597-8464
Director, Investor Relations
jeffrey.goeser@tdameritrade.com

Source: TD Ameritrade Holding Corporation

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