This summary is based on the fourth quarter fiscal 2008 earnings call conducted by TD Ameritrade. (AMTD) on October 23, 2008.
Management:
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Chairman of the Board: Joseph H. Moglia
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President, Chief Executive Officer, Director: Fredric J. Tomczyk
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Chief Financial Officer, Senior Vice President: William J. Gerber
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Managing Director, Investor Relations, Communications and Public Affairs: Bill Murray
Key Investors Issues
- Net income of $172 million, or 29 cents per diluted share, was down 15.7% from $204 million or 34 cents a share in the prior year.
- The firm earned nearly $650 million of revenue, a 13% increase from $624 million in 2007.
Full Year Highlights:
- Net new assets were up 84% to $23 billion, driving net revenues to $2.5 billion an increase of 59%.
- The firm recorded net income of $804 million, or $1.33 per diluted share, up 24% from $649 million in 2007.
Fourth Quarter Highlights
The firm earned nearly $650 million of revenue, a 13% increase from $624 million in 2007 due to changes in transaction-based and asset-based revenue.
- The investments made in the business over the course of the last 18 months continue to pay off, as is demonstrated by the growth in generating assets, with the firm generating $2.8 billion of net new assets, flat year over year.
- The firm closed on the Fiserv integration earlier in the quarter and the legacy TD Ameritrade ex Fiserv generated $5.7 billion in net new assets, up 104% versus $2.8 billion from last year.
- The transaction-based revenue of $263 million increased $38 million, or 17% year over year as client engagement continued through the period.
- Average trades per day came in at 316,000, or 4.6% activity rate, up 38,000 trades per day from last year.
The average commission rate was up 13 cents to $13.13, driven by continued strength in the options business, which now accounts for 12% of overall trades, stronger fixed income activity, and solid payment for order flow.
- Asset-based revenue, which constitutes 58% of total revenue, came in at $378 million, up 11% year over year, reinforcing the stability of the overall revenue stream.
- The firm saw a $24 million or 39% increase in fee-based revenue, 80% of which was due to organic growth and the remainder of which was due to the Fiserv acquisition.
- The $13 million increase in spread-based revenues is primarily due to MMDA balance growth and favorable spreads from the MMDA program.
- In the conduit business, which is a high-balanced, low spread business, the firm has reduced its exposure, resulting in the balance decrease year over year of $1.3 billion, or 23%.
Expenses ex advertising are up $93 million year over year, with the principal change being the $36 million on the reserve fund issue.
- Other significant changes were employment, up $28 million, due to more sales and service associates, increased incentive compensation and severance and benefit related items.
- Occupancy and equipment, depreciation and amortization, and professional services are up in aggregate $25 million due to the investments for growth and Fiserv.
Other expense is up $17 million, primarily due to bad debt of $5 million, trade errors of $4 million, arbitration of $3 million, and writing off of assets no longer in use of $4 million.
- Net income of $172 million, or 29 cents per diluted share, was down 15.7% from $204 million or 34 cents a share in the prior year due to growth in expenses and losses on money market funds.
- The firm spent approximately $44 million on advertising, resulting in 137,000 new accounts with a cost per account of $321.
- The firm used $9 million to buy back approximately 475,000 shares of its own stock, leaving $792 million in liquid assets.
Fiscal 2009 Outlook:
- Strong balance sheet with no U.S. real estate credit risk on it, healthy cash flow, and strong liquidity augurs well for the future of the company.
- The firm is well-positioned to take advantage of this dislocation in the market to grow organically and take market share in both the trading and the asset gathering side of the business, and to continue to pursue acquisition opportunities that make sense for the company.
It will continue to build cash reserves to take advantage of any opportunities in the market and invest in areas that take share and drive incremental trades and net new assets into the company.
- For 2009, the firm is assuming a trade per day range of 266,000 to 316,000 and an increase in the average commission rate of $13.38 to $13.88.
- Clients will increase $700 million to $3.7 billion in aggregate average spread balances in 2009 from the end of 2008 levels.
- NIM is expected to decrease to a range of 3.97% to 4.07% from the 4.5% earned in 2008.
Key questions and answers from the fourth quarter earnings call conducted by TD Ameritrade. (AMTD) on October 23, 2008.
Prashant Bhatia (Citigroup Global Markets):
Has there been any change in terms of transfers of accounts from full service firms and are you seeing any change in the composition of what is driving the net new assets?
Fredric J. Tomczyk: We typically get net new assets from a number of places and typically we are a winner from the full service brokerage firms and we definitely have seen a pick-up in that in the last four or five weeks.
Prashant Bhatia (Citigroup Global Markets):
Will you accelerate any kind of investment initiatives as a result of the environment?
