TD Ameritrade. Raymond James 33 rd Annual Institutional Investors Conference Orlando, FL March 5, PDF Free Download

TD Ameritrade Raymond James 33 rd Annual Institutional Investors Conference Orlando, FL March 5, 2012 TD Ameritrade, Inc., member FINRA/SIPC/NFA, is a subsidiary of TD Ameritrade Holding Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. 2012 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

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 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. 18, 2011, 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

OUR MISSION To Be The Better Investment Firm For Today s Investor 3

SIX INVESTMENT THEMES FOR TD AMERITRADE 1. Unique and differentiated business model 2. Market leadership in trading 3. Premier asset gatherer 4. Unique relationship with TD 5. Well-positioned for rising interest rates 6. Strong cash generation and strong financial position CONTINUE TO BUILD LONG-TERM EARNINGS POWER AND DEPLOY/RETURN 40%-60% CAPITAL TO FURTHER ENHANCE SHAREHOLDER VALUE 4

1. UNIQUE AND DIFFERENTIATED BUSINESS MODEL CLIENT NEEDS TRADING, INVESTING, ADVICE Client-Centric Multi-Channel Delivery Web Phone Education Branch RIAs Broad Product Range Open Architecture Tools and information Seminars and coaching Planning services Packaged products Cash management Well-aligned with Secular Growth Trends (1) Growth in the Internet Growth in active traders/self-directed investors Growth in household financial assets & savings Advisors move toward independent models A UNIQUE AND DIFFERENTIATED BUSINESS MODEL WELL-ALIGNED WITH SECULAR GROWTH TRENDS (1) Sources: Cerulli, ICI, Federal Reserve Flow of Funds Report, Tower Group Active Trader Report. 5

UNIQUE AND DIFFERENTIATED BUSINESS MODEL 60% 50% 40% 30% 20% 10% 53% Operating Margin 46% 41 42 Forecasted Operating Margin Range 38% 38% 0% (2) FY08 FY09 FY10 FY11 FY12 EPS (3) $1.33 $1.10 $1.00 $1.11 $1.00-$1.35 28 Return on Avg. Client Assets (bps) (1) 26 36-41% 23-31 60 50 40 30 20 10 0 Business model combined with TD Bank relationship drives: Low capital intensity High return on equity Strong cash and capital generation Cash generation approximates net income Industry-leading operating margin (4) (1) Return on average client assets (ROCA) = annualized pre-tax income divided by average client assets. (2) FY12 forecast per 10/25/11 outlook statement. (3) Earnings per diluted share (EPS). (4) Source: based on last 12 months publicly available reports for E*Trade Financial and Charles Schwab. 6

2. MARKET LEADERSHIP IN TRADING (1) 450 400 350 300 250 301 Trades Per Day & Activity Rate (2) Average Client Trades Per Day (K) 372 372 Forecasted Range (K) 399 370-430 200 FY08 FY09 FY10 FY11 (3) FY12 Activity 6.3% (4) 7.3% (4) 6.9% 7.2% 6.5-7.5% Rate (2) Market: 8-10% projected growth in active traders (5) Rated Best for Options Traders by Barron s (6) Advanced trading platform with robust analytics, tools, functionality Growth Strategies Tiered platform strategy: Trade Architect Product proliferation: options, futures, foreign exchange Education Mobile Dec Q 11 update: 367K/6.5% (2) (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) FY12 forecast per 10/25/11 outlook statement. (4) Pro-forma combined with thinkorswim funded activity rate (trades per day): FY08 7.2% (350K); FY09 8.1% (419K) (5) Source: Celent analysis, May 2010. (6) Source: Barron s 16 th annual online-broker review, March 14, 2011. 7

3. PREMIER ASSET GATHERER $45 $40 $35 $30 $25 $20 $15 Net New Client Assets ($B) (1) $22.8 $26.6 $102 $33.9 Forecasted Range ($B) $41.5 $27-42 $10 $10.2/ $5 11% $0 FY08 FY09 FY10 FY11 FY12 Annualized Growth (2) 8% 10% 11% 12% 7-11% (3) Industry leading asset gatherer (4) Double-digit growth last three years Sales and service culture Highest rated for Best for Long-term Investing by Barron s (5) Maintain momentum in both retail and institutional Ongoing investments in sales, product platform, marketing Growth Strategies: Cash Management Retirement TD cross-selling Breakaway brokers (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 annual net new assets as a % of client assets as of the beginning of the period. (3) FY12 forecast per 10/25/11 outlook statement. (4) Source: Annual NNA growth rate as a % of client assets as of the beginning of the period based on last twelve months of publicly available reports for E*Trade Financial and Charles Schwab. (5) Barron s 16 th annual online-broker review, March 14, 2011. Tied with another Broker-Dealer. 8

4. UNIQUE RELATIONSHIP WITH TD (1) TD OWNS ~ 45% of TD AMERITRADE (2) TD Ameritrade sweeps client cash from brokerage accounts into TD Bank ($59B as of 12/31/11) Economics and rewards of retail deposit banking without risk or capital requirements of banking TD Asset Management provides money market mutual funds to TD Ameritrade clients ($5B as of 12/31/11) TD Ameritrade/TD Bank cross-selling opportunities Provider of wealth management services for TD Bank s 1,300 US stores TD Ameritrade provides access to US Markets for TD Waterhouse UK/Canada clients TD Ameritrade retains balance of management fee TD retains 6 bps (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.,TD Bank USA, N.A., TD Asset Management, TD Waterhouse U.K., and TD Waterhouse Canada are affiliated through The Toronto-Dominion Bank. (2) As of December 31, 2011. 9

5. WELL POSITIONED FOR RISING INTEREST RATES Ending Balances ($B) $80 $60 $40 $20 $0 Money Market Mutual Funds Interest Earning Assets IDA (1) $54.8 $68.0 $60.1 $8.9 $9.7 $13.1 $79.2 $5.1 $15.3 $28.3 $15.8 $58.8 $7.8 $46.1 $34.6 $18.7 Dec '08 Dec '09 Dec '10 Dec '11 (2) (2) Immediate benefit with Fed Funds increases, but capped Immediate benefit with Fed Funds increases Immediate benefit with additional benefit over time with re-pricing of laddered investment portfolio Interest rate sensitive assets (3) up 16% yearover-year Record $79B Continue focus on organic growth Well positioned for rising interest rates +100bps = ~+$0.28 EPS (4) (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, 2011 consisted of $7.6B in client margin balances, $6.1B in segregated cash, and $1.7B in other balances. (3) Interest rate sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of Dec. 31, 2011. (4) Diluted EPS 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. * Certain totals may not foot due to rounding. 10

LIBOR SWAP CURVE 2YR VS. 5YR SPREAD TREND Actual Feb '12 GI Forecast Forwards (1) (2) (3) 1.50% 1.30% 1.10% 1.37% 1.46% 1.33% Spread has narrowed significantly since last Spring/Summer 0.91% 0.90% 0.90% 0.87% 0.70% 0.70% 0.77% 0.68% 0.66% 0.54% 0.57% 0.50% 10/1/10 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12 6/30/12 9/30/12 Managing extension strategy based on market environment (1) Source: Bloomberg end of day close. (2) Source: Global Insight Interest Rate Forecast for FY12 as of February 2012. (3) Source: Bloomberg as of 2/13/12. 11

6. STRONG CASH GENERATION AND STRONG FINANCIAL POSITION GOOD STEWARDS OF SHAREHOLDER CAPITAL Returning/Deploying Capital: (1) $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 Net Income ($B) Returned/Deployed ($B) $0.8 $0.6 $0.6 $0.6 $0.5 $0.4 (130%) (73%) (80%) FY09 FY10 FY11 FY 09 M&A: $267M Bought back 38M shares: $459M Debt repayment: $112M FY 10 Bought back 15M shares: $259M Net debt repayments: $173M Refinanced Debt FY 11 Bought back 23M shares: $395M $0.05 quarterly dividend: $114M (1) Cash used for M&A, debt repayments, share repurchases, and dividends divided by net income. Excludes shares repurchased for payroll taxes or equity award distributions. 12

DECEMBER QUARTER 2011 UPDATE CONTINUED EXECUTION OF STRATEGY Maintain strong momentum in organic growth Focus on process and expense management already yielding results Adapt IDA (1) extension strategy to environment Yield curve continues to be challenging Maintain strong balance sheet and return of capital strategy Returned 92% of earnings to shareholders through share repurchases and dividends 30M shares remaining on stock repurchase authorization Declared $0.06 per share quarterly cash dividend, paid on Feb. 15, 2012 to all holders of record as of Feb. 1, 2012 CONTINUE TO BUILD LONG-TERM EARNINGS POWER AND DEPLOY/RETURN CAPITAL TO FURTHER ENHANCE SHAREHOLDER VALUE (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. 13

CREATING LONG-TERM SHAREHOLDER VALUE 1. Unique and differentiated business model 2. Market leadership in trading 3. Premier asset gatherer 4. Unique relationship with TD 5. Well-positioned for rising interest rates 6. Strong cash generation and strong financial position CONTINUE TO BUILD LONG-TERM EARNINGS POWER AND DEPLOY/RETURN 40%-60% CAPITAL TO FURTHER ENHANCE SHAREHOLDER VALUE 14

SENSITIVTY ANNUAL IMPACT TO EPS 3K average client trades per day = $0.01 0.05% funded activity rate (1) = $0.01 $4.1B fee-based assets (2) = $0.01 $0.5B spread-based assets (3) = $0.01 28K new accounts = $0.01 +25bps fed move = +$0.07 (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 (excluding conduit-based assets) 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. 16

FISCAL 2012 OUTLOOK RANGE (1) Financial Macro Assumptions Key Metrics $1.35 EPS 10% Market Growth NNA (3) $42B / 11% (4) High 41% Operating Margin Activity Rate of 7.5% (2) TPD 430K No change in Fed Funds NIM (5) 1.85% / IDA (6) 1.40% Increasing Yield Curve $1.00 EPS 0% Market Growth NNA $27B / 7% Low 36% Operating Margin Activity Rate of 6.5% TPD 370K No change in Fed Funds or Yield Curve NIM 1.70% / IDA 1.30% (1) See outlook statement published 10/25/2011. (2) Funded account activity rate. Average client trades per day during the period divided by the average number of total funded accounts during the period. (3) 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. (4) Annual NNA growth rate as a % of client assets as of the beginning of 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. 17

TD Ameritrade. Raymond James 33 rd Annual Institutional Investors Conference Orlando, FL March 5, 2012