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Scotia Financial SummitSeptember 10, 2008
TD AMERITRADE, Inc., member FINRA/SIPC, subsidiary of TD AMERITRADE Holding Corporation. TD AMERITRADE is a trademark jointly owned by TD AMERITRADE IP Company, Inc. and The Toronto-Dominion Bank. TD Bank has an ownership interest in TD AMERITRADE Holding Corporation. © 2008 TD AMERITRADE IP Company, Inc. All rights reserved. Used with permission.
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Safe HarborThis 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, as well as the assumptions on which such expectations are based, and future operations 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, interest rates, market fluctuations and changes in client trading activity, increased competition, systems failures and capacity constraints, ability to service debt obligations, 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. 26, 2007 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.
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Our Mission
• Investment Firm of Choice for the Mass Affluent Investor
• One of the Best-Run Companies
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Primary Strategic Objectives
AcquisitionOrganicApproach
Become an Asset Gatherer
Maintain Leadership Position
Goal
AssetsTradingFocus
Retail Investors
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Approach to Serving the Individual Investor
Client Needs
Multi-Channel Delivery
Trading Investing Advice
Web Phone Branch RIA’s
ProductsFull range of trading products, tools and information; planning
services; packaged products; cash management products
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• Growing Market – Projected 11% CAGR of Active Traders by 2012(2)
• Increase Client Engagement
– Education– Options– Conditional Orders– Quality Trade Execution
TRADES – Maintain Leadership Position
YTD Jun '07 YTD Jun '08
27%
245K310K
(1) Source: Based upon the latest publicly available reports for Charles Schwab, E*Trade Financial, Fidelity Investments, Scottrade and optionsXpress. (2) Active Traders defined as those individuals who trade 36+ times annually. Tower Group: Active Trader Study, 2007(3) Options involve risks and are not suitable for all investors.(4) Please see important information on slide 18.
#1 Market ShareTrades per Day (1)
(3)
(4)
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Asset Gathering Opportunity
Share of Wallet Upside
0%
20%
40%
60%
80%
100%
AMTD Full-Commission
20% = $130B
(1) (2)
OpportunityRetail Share of Wallet
30% = $312B
(1) Analysis includes Retail clients only and is based on December 2006 TD AMERITRADE asset data. Calculations reflect an increase in TD AMERITRADE assets from 12.4% Share of Wallet (SOW). Source: IXI, TD AMERITRADE Market Intelligence analysis.
(2) Source: SRI Macromonitor survey combining Merrill Lynch, Citigroup, Morgan Stanley, Wachovia and UBS.
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Asset Gathering – Good Early Traction
– Completed Conversion– Investments in Branch/Call Centers– Service Enhancements– Long-Term Investor Platform
108%
$9.6B
$20.0B
FYTD Jun ‘07 FYTD Jun ‘08
Early Success Factors
5%*
9%*
Net New Assets(1)
(1) Net new assets consists of total client asset inflows, less total client asset outflows. 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. * NNA annualized as a % of total beginning client assets.
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FYTD Jun '07 Ex FTC W/ FTC
Spread-Based Fee-Based
Avg. Revenue Earning Assets Revenue Growth/Mix
$372M$48.0B
$59.9B$69.2B
$29.3B $30.5B
$77.3B$90.4B
$100.4B17%
$31.2B
FYTD Jun ‘08
Strong Growth in Annuitized Revenue
FYTD Jun '07 FYTD Jun '08
Asset-Based Trans/Other
$618M
$778M
$984M $1,110M
$1,602M
$1,888M18%
Spread-based asset balances include client margin balances, segregated cash, the TD Bank USA, N.A. Money Market Deposit Account (FDIC-Insured) balances, deposits paid on securities borrowing and other cash and interest earning investment balances. Fee-based assets include money market funds, mutual funds, Amerivest and AdvisorDirect.
41%
59%
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Financial Performance – EPS Growth 26%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
FY06 FY07 FY080%
5%
10%
15%
20%
25%
30%
35%
40%
EPS & ROE (1)
(1) Earnings per diluted share excludes investment gains/losses for FY ‘06. The corresponding GAAP EPS amount including investment gains/losses is $0.95. Annualized return on average stockholders equity. Fiscal year 2006 is based on net income excluding investment gains/losses. See attached reconciliation of financial measures.
(2) Represents the midpoint of the July 17, 2008 Outlook Statement.
(2)
$0.87
$1.06
$1.34
Earnings per Share
Return on Equity
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Financial PerformancePre-Tax Margin & ROA
(1) Pre-tax income divided by average client assets. FY ‘06 excludes investment gains and losses.(2) Pre-tax margin excludes investment gains/losses for FY ‘06. The corresponding GAAP pre-tax margin including investment gains/losses is 48%. See attached reconciliation of financial
measures.(3) Represents the midpoint of the July 17, 2008 Outlook Statement.
0%
10%
20%
30%
40%
50%
60%
FY06 FY07 FY080.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
(3)
44%
48%
51%
Pre-Tax Margin
Return on Avg. Client
Assets
bps (2)
(1)
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Strong Balance Sheet - Poised to Invest in Growth
• No credit risk in US Mortgage Market• Strong cash generator - $1.4B EBITDA• Prudent leverage, room to expand if needed
– Debt Outstanding $1.5B– No Dividends– Minimal Share Repurchase
(1)
(1) Represents the midpoint of the July 17, 2008 Outlook Statement. See attached reconciliation of financial measures.
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Significant Differentiators
• SOW Opportunity
• Banking Arrangement
• Opportunities to Leverage TD Further
• Well Positioned to be Opportunistic in Difficult Market
• Opportunity to Deliver Shareholder Value• Earnings Growth
• Multiple Expansion
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September 10, 2008
TD AMERITRADE, Inc., member FINRA/SIPC, subsidiary of TD AMERITRADE Holding Corporation. TD AMERITRADE is a trademark jointly owned by TD AMERITRADE IP Company, Inc. and The Toronto-Dominion Bank. © 2008 TD AMERITRADE IP Company, Inc. All rights reserved. Used with permission.
Scotia Financial Summit
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Appendix
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Mass Affluent Opportunity - $13T
71%
10% 10%
26%
54% 54%
3%
36% 36%
Distribution ofPopulation by HH
2007Distribution ofAssets by HH
2010Distribution ofAssets by HH
U.S. Household Wealth Demographicsby Household Wealth Segment
Affluent(>$1M)
Mass-Affluent($100K to $1M)
Mainstream(<$100K)
30M
1. SRI MacroMonitor 2006-2007 Survey applied to U.S. Federal Reserve – Flow of Funds Accounts 2007:Q4. Excludes Pension Fund Reserves (i.e., DB/DC Plan Assets) and estimated assets of Nonprofit Organizations. 2. SRI MacroMonitor 2006-2007 Survey applied to U.S. Census Bureau - Current Population Survey 2006. 3. Based on historical data from Capgemini World Wealth Report. 4. Based on historical data from SRI MacroMonitor 2006-2007 Survey applied to U.S. Federal Reserve – Flow of Funds Accounts 2007:Q4. TDAmeritrade Internal Analysis.
$13T $16T
CAGR2007 - 2010
10%3
9%4
6%4
2007 HH2
114M
2007 HH Assets1
$24T
2010 HH Assets1
$29T
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Investors Reward Asset Gatherers
10.211.611.7
12.413.113.513.815.3 14.7
17.5
Asset Mgrs PrivateBanks
TrustBanks
InsBrokers
Reg'lBrokers
OnlineBrokers
Money CtrBanks
Reg'lBanks
Nat'lBrokers
LifeInsurance
Nex
t 12
Mon
ths
P/E
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P/E Multiples for Industry SegmentsP/E Multiples for Industry Segments
____________________1 Includes: SF, SMHG, SWS, RJF ; Median: 13.5x 2 Includes: AMTD, TRAD, OXPS; Excludes: ETFC, SCHW; Median: 12.9x Source: Company reports and Merrill Lynch Research as of May 20, 2008
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Market Rewards steady earnings growth and an annuitized revenue stream
Asset Gathering Broker Intermediaries Capital Intensive
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Important Information(4) There is no one single chart, or statistic, you can use to determine whether your brokerage firm is obtaining best execution. Rather, best execution is a weighing of the competing goals of obtaining the best price(s), as quickly as possible, for the entire amount of a client order. One of TD AMERITRADE's goals is to achieve high levels of improvement per share on as many orders as reasonably possible. That is how we measure ourselves against the competition.
Chart data for TD AMERITRADE is calculated pursuant to SEC Rule 605, as provided by TD AMERITRADE Clearing, Inc., an affiliate of TD AMERITRADE, Inc., and derived from Thomson Transaction Analytics, a third-party vendor that is not affiliated with TD AMERITRADE, Inc. Industry statistics are derived from SEC Rule 605 data provided by Thomson Transaction Analytics and represent the volume-weighted average of all industry participants posting Rule 605 data. Except for the Limit Order Price Improvement Chart, order data is derived from market orders for at least 100 shares and up to 1999 shares. The Limit Order Price Improvement Chart is derived from marketable limit orders for at least 100 shares and up to 1999 shares.
Market volatility, volume and system availability may delay account access and trade executions. Price can change quickly in fast market conditions, resulting in an execution price different from the quote displayed at order entry. Execution price, speed and liquidity and account access are affected by many factors, including market volatility, size and type of order and available market centers.
TD AMERITRADE is obligated to seek the best price available for your order, taking into consideration the cost of execution and current market conditions, such as the NBBO, volume and liquidity. Price improvement is not guaranteed and will not occur in all situations. TD AMERITRADE acts as agent. Orders are filled by independent third parties.
Backtesting is the evaluation of a particular trading strategy using historical data. Results presented are hypothetical; they did not actually occur. Past performance of a security or strategy does not guarantee the security or strategy will be successful inthe future. Results could vary significantly, and losses could result. TD AMERITRADE does not recommend any security, strategy or course of action selected through the use of StrategyDesk. Past performance does not guarantee future results or success. In order for an alert to trigger or a programmed trade to be automatically entered when the conditions you set are met, your computer must be on and StrategyDesk must be running. You are responsible for all orders entered in your account when a program trade you set is activated. Please make sure you keep sufficient funds or positions in your account to support program trades.
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Reconciliation of Financial Measures
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Reconciliation of Financial Measures
Fiscal Year Ended
Sept. 29, 2006
Pre-tax income, as reported 857$ Adjustments:
Gain on sale of investments (81) Fair value adjustments of investment-related derivative instruments 12
Pre-tax income excluding investment gains/losses 788$
Pre-tax margin, as reported 48%Adjustments on a percentage basis, net of income tax effect:
Gain on sale of investments (5%)Fair value adjustments of investment-related derivative instruments 1%
Pre-tax margin excluding investment gains/losses 44%
Net income, as reported 527$ Adjustments:
Gain on sale of investments (81) Fair value adjustments of investment-related derivative instruments 12 Income tax effect of above adjustments 25
Net income excluding investment gains/losses 483$
Diluted earnings per share, as reported 0.95$ Adjustments on a per share basis, net of income tax effect:
Gain on sale of investments (0.09) Fair value adjustments of investment-related derivative instruments 0.01
EPS excluding investment gains/losses 0.87$
ROE, as reported 33%Adjustments on a percentage basis, net of income tax effect:
Gain on sale of investments (3%)Fair value adjustments of investment-related derivative instruments 0%
ROE excluding investment gains/losses 30%
Outlook Midpoint*Year EndingSept. 30, 2008
EBITDA 1,447$ Less:
Depreciation and amortization (38) Amortization of acquired intangible assets (59) Interest on borrowings (79)
Pre-tax income 1,271$
Pre-tax Income Excluding Investment Gains/Losses (1)
EPS Excluding Investment Gains/Losses (1)
TD AMERITRADE HOLDING CORPORATIONRECONCILIATION OF FINANCIAL MEASURES
In millions, except percentages and per share amounts(Unaudited)
Pre-tax Margin Exlcuding Investment Gains/Losses (1)
Net Income Excluding Investment Gains/Losses (1)
Return on Average Stockholders' Equity (ROE)Excluding Investment Gains/Losses (1)
EBITDA (2)
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Reconciliation of Financial Measures
Note: The term "GAAP" in the following explanations refers to generally accepted accounting principles in the United States.
*
(1)
(2)
Represents the midpoint from the July 17, 2008 Outlook Statement.
Pre-tax income, pre-tax margin, net income, earnings per share (EPS) and return on average stockholders' equity (ROE) excluding investment gains/losses are Non-GAAP financial measures as defined by SEC Regulation G. We define pre-tax income and net income excluding investment gains/losses as pre-tax income and net income, respectively, adjusted to remove the pre-tax and after-tax effect, respectively, of non-brokerage investment-related gains and losses. We consider pre-tax income, pre-tax margin, net income, EPS and ROE excluding investment gains/losses important measures of our financial performance. Gains/losses on investments and investment-related derivatives are excluded because we believe they are not likely to be indicative of the ongoing operations of our business. Pre-tax income, pre-tax margin, net income, EPS and ROE excluding investment gains/losses should be considered in addition to, rather than as substitutes for, GAAP pre-tax income, net income, EPS and pre-tax margin and ROE caclulated on a GAAP basis.
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 our senior credit facilities. The consolidated leverage ratio determines the interest rate margin charged on the senior credit facilities. 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.