TD Ameritrade. Citi Asset Management Broker Dealer & Exchanges Investor Conference New York, NY March 3, Fred Tomczyk Chief Executive Officer

Transcription

1 TD Ameritrade Citi Asset Management Broker Dealer & Exchanges Investor Conference New York, NY March 3, 2016 Fred Tomczyk Chief Executive Officer 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 Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. 1

2 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 forwardlooking 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 forwardlooking statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws. 2

3 Our Mission To Be The Better Investment Firm For Today s Investor 3

4 Six Investment Themes for TD Ameritrade Long-Term Themes 1. Unique and differentiated business model Key Takeaways Low financial risk conservative balance sheet and strong pre-tax margins Significant operating leverage 2. Market leadership in trading (1) Growth in mobile thinkorswim platform 3. Premier asset gatherer Secular trends strong Seven consecutive years of double-digit growth Economics of deposit banking without 4. Unique relationship with TD (2) capital requirements Significant free cash flow 5. Well-positioned for rising interest rates $110B in interest rate sensitive assets (3) 6. Good stewards of shareholder capital Primary uses of cash: investments in business, dividends, share repurchases and acquisitions Continue to build long-term earnings power and deploy/return capital to further enhance shareholder value (1) Source: Internally estimated daily average revenue client trades (DARTS) based on last twelve months publicly available reports for E*Trade Financial and Charles Schwab. (2) TD Ameritrade, Inc. and TD Bank, N.A. are affiliated through their parent companies. (3) Interest rate sensitive assets consist of spread-based assets and money market mutual funds. Balances as of Dec. 31,

5 1. Unique and Differentiated Business Model 50% 40% 30% 20% Pre-Tax Margin $ % $ % $ % $1.42 $ % EPS Forecasted Pre-Tax Margin Range Outlook Range (1) Business model $1.75 combined with TD Bank (2) $1.80 relationship drives: 40% $ % FY11 FY12 FY13 FY14 FY15 FY16 (1) $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Low capital intensity High return on equity Strong cash and capital generation Cash generation approximates net income Scalable business model 97+% of transactions are online Lean/sourcing initiatives Dec Q 15: EPS $0.39 Pre-Tax Margin 41% (1) FY16 forecast per 10/27/15 outlook statement. (2) TD Ameritrade, Inc. and TD Bank, N.A. are affiliated through their parent companies. 5

6 2. Market Leadership in Trading (1) Client Trades Per Day & Activity Rate (2) % Avg. Client Trades Per Day (K) % Derivatives (4) of Total Trades per Day 36% % % 427 Outlook Range (K) (3) 43% % 40% 35% 30% 25% 7.2% 6.3% % (3) 438/ % (5) 20% FY11 FY12 FY13 FY14 FY15 FY16 Activity 7.1% Rate (2) 6.3% 6.9% Dec Q 15 Average client trades per day of 438K; activity rate of 6.6% Derivatives 44% of DARTS (6) Record mobile 18% of DARTS Fiscal % activity rate Commissions per trade (7) of $11.75-$12.00 (3) January DARTS 565K (1) Source: Internally estimated daily average revenue client trades (DARTS) based on last twelve months publicly available reports for E*Trade Financial and Charles Schwab (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) FY16 forecast per 10/27/15 outlook statement. (4) Derivatives include options, futures and foreign exchange (Forex) trades per day. (5) FY16 DARTS and AR% year-to-date as of 12/31/15. (6) Total revenue-generating client trades divided by the number of trading days in the period. This metric is also known as average client trades per day. (7) Average commissions and transaction fees per trade. 6

7 3. Premier Asset Gatherer Net New Client Assets ($B) (1) $80 $70 $60 $50 $40 $30 $41 $41 $50 $53 $63 $73 $47 Outlook Range ($B) (2) Dec Q 15 $17.5B NNA, 10% growth rate Retail Continued strong momentum Key sales drivers performing well Institutional Performed well achieving 2 nd best quarter ever RIA conference $20 $10 $17.5/ 10% (4) $0 FY11 FY12 FY13 FY14 FY15 FY16 Growth 12% 11% 10% 10% 10% 7-11% (2) Rate (3) Fiscal 2016 Long-term goal remains 7-11% growth (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) FY16 forecast per 10/27/15 outlook statement. (3) NNA growth rate is annualized net new assets as a % of client assets as of the beginning of the period. (4) NNA and NNA growth rate year-to-date as of 12/31/15. 7

8 Investment Product Fees (1) $400 $350 $300 $250 Investment Product Fees ($M) CAGR: 19% $250 Outlook Range ($M) (2) $400 $334 $365 $309 Dec Q 15 Average balances up 5% year over year Record revenue, up 11% year over year, represents 11% of net revenues Amerivest and AdvisorDirect average balances both up ~11% year over year in a flat market $200 $150 $166 $196 Fiscal 2016 Continued growth of guidance products $100 $92 (3) FY11 FY12 FY13 FY14 FY15 FY16 Avg. Bal. ($B) $78 $86 $113 $137 $156 $160-$170 (2) (1) Market fee-based plus money market mutual fund revenue. (2) FY16 forecast per 10/27/15 outlook statement. (3) Investment Product Fees year-to-date as of 12/31/15. 8

9 4. Unique Relationship with TD (1) TD Owns ~ 42% (2) of TD Ameritrade (2) Stockholders agreement amended and extended to 2021 Insured deposit account (IDA) (3) agreement Revised agreement effective January 1, 2013 July 1, 2018 Money market mutual funds provided by TD Asset Management Cross-selling to TD Bank customers Access to U.S. markets for TD Waterhouse Canada/UK clients Continue to build long-term earnings power and deploy/return capital to further enhance shareholder value (1) TD Ameritrade, Inc. and TD Bank, N.A. are affiliated through their parent companies. (2) TD Ameritrade Holding Corporation as of Dec. 31, (3) 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. 9

10 5. Well-Positioned for Rising Interest Rates $120 $100 $80 $60 $40 $20 Money Market Mutual Funds Interest Earning Assets IDA (1) $101 $101 $102 $6 $6 $6 $19 $20 $21 Ending Balances ($B) $108 $110 $6 $6 $22 $22 Float $21B $76 $75 $76 $80 $83 Fixed $62B (2) Immediate benefit with Fed Funds increases Benefit over time with Yield Curve due to re-pricing of laddered investment portfolio Balance of $110B, up 9% year over year Ending client cash as % of client assets 15.1% Overall consolidated duration of 2.2 years Sensitivity model - estimated annual impact to EPS on +100bps: Yr. 1 =+$0.32-$0.48 (3) Yr. 2 =+$0.39-$0.55 (3) Yr. 3 =+$0.47-$0.63 (3) $0 Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Fed rate hike adds $0.06- $0.09 EPS to FY16 (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. (2) Ending balances as of Dec. 31, 2015 consisted of $12.3B in client margin balances, $6.0B in segregated cash, and $3.5B in other balances. (3) 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. *Certain totals may not foot due to rounding. *Changes based on rounding numbers to the nearest $ millions. 10

11 6. Good Stewards of Shareholder Capital Strong Cash Generation and Strong Financial Position $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 $0.6 Net Income excl. Amort. of Intangibles ($B) Returned/Deployed ($B) $0.3 $0.7 $0.5 $0.8 $0.7 $0.9 $0.7 51% 64% 87% 79% (3) $0.2 $0.1 FY12 FY13 FY14 FY15 FY16 YTD (2) (1) 57% S&P A, Moody s A3 Fiscal 2015 Paid $0.60 per share in cash dividends ($326M) Repurchased 10.9M shares ($364M) Fiscal 2016 Targeting 60-80% (3) of net income excluding amortization of intangible assets Recurring dividend ~ 40% Share repurchases ~20-40% Increasing quarterly cash dividend by 13% to $0.17/share (1) See attached reconciliation of non-gaap financial measures. (2) Cash used for share repurchases and dividends divided by net income excluding amortization of intangible assets. Excludes shares repurchased for payroll taxes on equity award distributions. (3) FY16 forecast per 10/27/15 outlook statement. 11

12 Dec Q 15 Business Update Continued focus on organic growth Asset gathering Trading Investment product fees Fed rate hike Investing in the business Technology Guidance offerings Return of capital Paid $0.17/share in cash dividends ($91M) Repurchased 1M shares ($38M) Continue to build long-term earnings power and deploy/return capital to further enhance shareholder value 12

13 Six Investment Themes for TD Ameritrade 1. Unique and differentiated business model 2. Market leadership in trading (1) 3. Premier asset gatherer 4. Unique relationship with TD (2) 5. Well-positioned for rising interest rates 6. Good stewards of shareholder capital Continue to build long-term earnings power and deploy/return capital to further enhance shareholder value (1) Source: Internally estimated daily average revenue client trades (DARTS) based on last twelve months publicly available reports for E*Trade Financial and Charles Schwab. (2) TD Ameritrade, Inc. and TD Bank, N.A. are affiliated through their parent companies. 13

14 TD Ameritrade Citi Asset Management Broker Dealer & Exchanges Investor Conference New York, NY March 3, 2016 Fred Tomczyk Chief Executive Officer 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 Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. 14

15 Fiscal 2016 Outlook Range (1) Financial Macro Assumptions Key Metrics $1.75 EPS 10% Market Growth NNA (2) $73B / 11% (3) High 42% Pre-Tax Increasing Fed Funds, Increasing Yield Curve Activity Rate (4) of 7.2% / TPD 490K Margin Operating expense growth of 6% NIM (5) 1.61% / IDA (6) 1.20% $1.45 EPS 0% Market Growth NNA $47B / 7% Low 39% Pre-Tax Margin No change in Fed Funds, declining Yield Curve Operating expense growth of 2% Activity Rate of 6.6% / TPD 450K NIM 1.53% / IDA 1.15% (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. 15

16 Sensitivity Estimated annual impact to EPS 3K average client trades per day = $ % funded activity rate (1) = $0.01 $3.8B fee-based assets (2) = $0.01 $0.6B spread-based assets (3) = $ bps interest rate move = +$0.08-$0.12 (4) (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. 16

17 Activity Rate (1) Thirteen quarter average 6.8% Activity Rate Avg. Trades Per Day (K) FY16 Outlook Range (2) : Activity Rate: 6.6%-7.2% Avg. Trades Per Day (K): % 13 Qtr. Avg. Activity Rate 6.8% % 8.1% % 7.0% 6.5% 6.0% % % % % % 6.5% 7.2% 7.4% % 7.3% % % 5.8% 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 ' (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. 17

18 Cash as % of Client Assets Range 13-18% Based on Current Mix $105 $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $ % $63.7 $66.2 Avg. Client Cash ($B) Avg. Client Cash as % of Client Assets $ % 16.3% $72.5 $74.9 $75.8 $ % 18.8% 17.6% $76.8 $80.9 $83.6 $ % 16.8% 17.1% 16.7% 16.4% $90.2 $ % 15.9% $ % $91.7 $93.7 $95.7 $95.1 $ % 14.3% 14.4% 13.9% 13.5% $99.3 $ % 14.8% 25% 20% 15% $45 $40 $35 Dec Q '10 Mar Q '11 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 10% 18

19 IDA (1) Net Revenue Trend $85 $80 $75 $70 $65 $60 $55 $50 $45 $40 $205 $64.2 Avg. IDA Balances ($B) Total Revenue FY13 : $804-3% YoY Growth $200 $199 $201 $67.1 $68.6 $208 IDA Revenue ($M) Total Revenue FY14 : $820 2% YoY Growth $202 $202 $72.0 $72.7 $73.0 $72.4 $208 $207 $205 $73.6 Total Revenue FY15: $839 2% YoY Growth $209 $75.0 $74.9 $74.8 $218 $78.2 Total Revenue FY16 YTD: 10% YoY Growth $250 $227 $80.3 $225 $200 $175 $150 $125 $100 $75 $50 $35 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 ' % 1.15% 1.10% 1.10% Net Yield 1.25% 1.09% 1.12% 1.10% 1.11% 1.08% 1.09% 1.10% 1.09% Avg. Fed Funds (2) 0.16% 0.15% 0.12% 0.09% 0.09% 0.07% 0.09% 0.09% 0.10% 0.11% 0.13% 0.14% 0.16% 5YR Swap Rates (2) 0.81% 0.96% 1.08% 1.67% 1.54% 1.69% 1.74% 1.82% 1.74% 1.61% 1.66% 1.65% 1.56% (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. (2) Source: Bloomberg quarterly average. *Certain totals may not foot due to rounding. $25 19

20 Libor/Swap Yield Curve Nine quarter trend 3.00 Ending Spreads Dec Q 15 Sep Q 15 Dec Q 14 Forecast per 1/15 Forwards (1) 2 YR vs. 5 YR YR vs. 7 YR Dec Q '14 Mar Q '15 Jun Q '15 Sep Q '15 Dec Q '15 Mar Q '16 Jun Q '16 Sep Q '16 Dec Q '16 2 YR(2) 5 YR(2) 7 YR(2) Fed Funds (3) (1) Assumes January 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). 20

21 Reconciliation of Non-GAAP Financial Measure 21

22 TD AMERITRADE HOLDING CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Dollars in millions (Unaudited) Quarter Ended Fiscal Year Ended Dec. 31, Net Income Excluding Amortization of Intangible Assets (1) Net income, as reported $ 212 $ 813 $ 787 $ 675 $ 586 Adjustments: Amortization of acquired intangible assets Income tax effect of above adjustment (8) (35) (35) (35) (35) Net income excluding amortization of intangible assets $ 226 $ 868 $ 842 $ 731 $ 643 Note: The term "GAAP" in the following explanations refers to generally accepted accounting principles in the United States. (1) Net income excluding amortization of intangible assets is a non-gaap financial measure 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 acquiredintangible assets. We consider net income excluding amortization of intangible assets an important measure of our financialperformance. Amortization of acquiredintangible assets is excluded because management does not believe it is indicative of underlying business performance. Net income excluding amortization of intangible assets should be considered in addition to, rather than as a substitute for, GAAP net income. 22

23 TD Ameritrade 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 Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. 23