TD Ameritrade Reports Record 2016 Earnings

Record Diluted Earnings per Share of $1.58, up 6% Year-Over-Year

Record Net Revenues of $3.3B, up 2% Year-Over-Year

Net New Client Assets of $60B, 9% Annualized Growth Rate

OMAHA, Neb.--()--TD Ameritrade Holding Corporation (Nasdaq:AMTD) has released results for fiscal year 2016. The Company generated record earnings and a record $1.58 per diluted share, driven by strong organic growth.

The Company’s results for the fiscal year ended Sept. 30, 2016 include the following: (1)

  • Record $1.58 in earnings per diluted share, on net income of $842 million
  • Net new client assets of approximately $60 billion, a growth rate of 9 percent
  • Average client trades per day of approximately 463,000, up slightly year over year
  • Record net revenues of $3.3 billion, 57 percent of which were asset-based
  • Investment product fee revenue of $374 million, up 12 percent year over year
  • Pre-tax income of $1.3 billion, or 38 percent of net revenues
  • EBITDA(2) of $1.5 billion, or 45 percent of net revenues
  • Interest rate-sensitive assets(3) of $119 billion, up 10 percent year over year
  • Record client assets of approximately $774 billion, up 16 percent year over year

“We’re pleased to report another year of strong growth across all our businesses,” said Tim Hockey, TD Ameritrade president and chief executive officer. “Strong asset-gathering and growth in investment products helped us deliver higher earnings despite a challenging rate environment. We averaged 463,000 trades per day and gathered $60 billion in net new client assets, a 9 percent growth rate. We end 2016 with strong momentum and plans firmly in place to continue building long-term earnings power.”

“We have a solid competitive position and a strong, healthy culture. Our organic growth strategy will not change, but how we execute that strategy will continue to evolve,” Hockey continued. “Over the next 12 months we will continue driving greater organizational efficiency and invest in initiatives that will help us deliver a superior client experience that address the needs of today’s investor -- and tomorrow’s. An intensified commitment to agility and increasing our speed to market will be paramount to our success and a key focus for our management team going forward.”

“Fiscal 2016 was a good year with record earnings of $1.58 per diluted share, despite the persistence of near-zero interest rates, and our capital-light model allowed us to return more than $700 million to our shareholders through dividends and share buybacks. Building our long-term earnings power remains our primary focus, and with interest rate-sensitive assets up 10 percent to $119 billion, we remain well-positioned for a rising-rate environment,” said Steve Boyle, executive vice president and chief financial officer. “Looking ahead, we expect trading and organic growth to drive fiscal 2017 results, and we’ll remain disciplined on managing expenses while generating savings that can be invested in initiatives to fuel future growth.”

Fourth Quarter 2016 Results

TD Ameritrade also released its results for the quarter ended Sept. 30, 2016, which include the following: (1)

  • Net income of $185 million, or $0.35 per diluted share, down 13 percent year over year
  • Net new client assets of approximately $15 billion
  • Average client trades per day of approximately 444,000, down 7 percent year over year
  • Net revenues of $829 million, 58 percent of which were asset-based
  • Investment product fee revenue of $98 million, up 20 percent year over year
  • Pre-tax income of $270 million, or 33 percent of net revenues
  • EBITDA(2) of $327 million, or 39 percent of net revenues
  • Return on average stockholders’ equity (annualized) of 15 percent

Capital Management

During the 2016 fiscal year, the Company paid $362 million, in cash dividends, which included four quarterly dividends of $0.17 per share. The Company also repurchased approximately 12 million shares of its common stock.

The Company has declared an $0.18 per share quarterly cash dividend, an increase of 6 percent year-over-year, payable on Nov. 22, 2016 to all holders of record of common stock as of Nov. 8, 2016.

Fiscal 2017 Outlook

The Company has also released its outlook for the 2017 fiscal year, which reflects expected earnings of $1.50 to $1.80 per diluted share for its 2017 fiscal year.

More information on the fiscal 2017 forecast is available through the Company’s Outlook Statement, located in the “Financials & reports” section of its corporate web site, www.amtd.com.

Company Hosts Conference Call

TD Ameritrade will host a conference call this morning, Oct. 24, 2016, at 8:30 a.m. EDT (7:30 a.m. CDT). Participants may listen to the conference call by dialing 877-648-7976. The Company will webcast the conference call through www.amtd.com, via the “Presentations & Events” page of the web site. A replay of the phone call will be available beginning at 12:00 p.m. EDT (11:00 a.m. CDT) on Oct. 24, 2016 by dialing 855-859-2056 and entering the Conference ID 69450485. The replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on Oct. 31, 2016. A transcript of the call will be available on the Company’s corporate web site, www.amtd.com, via either the “Investor Relations” page or the “Presentations & Events” page beginning Tuesday, Oct. 25, 2016.

Information about the Company’s corporate events, including earnings conference calls and webcasts, can be found by visiting www.amtd.com and clicking on “Investor Relations” and “Presentations & Events.” Click on the date of the event to access all pertinent links and resources. A high speed Internet connection is required in order to view the webcast.

The Company asks that interested parties visit or subscribe to newsfeeds at www.amtd.com for the most up-to-date corporate financial information, presentation announcements, transcripts and archives. The Company also communicates this information via Twitter, @TDAmeritradePR. Web site links, corporate titles and telephone numbers provided in this release, although correct when published, may change in the future.

About TD Ameritrade Holding Corporation

Millions of investors and independent registered investment advisors (RIAs) have turned to TD Ameritrade’s (NASDAQ: AMTD) technology, people and education to help make investing and trading easier to understand and do. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how - bringing Wall Street to Main Street for more than 40 years. An official sponsor of the 2016 U.S. Olympic and Paralympic Teams, as well as an official sponsor of the National Football League, TD Ameritrade has time and again been recognized as a leader in investment services. Please visit TD Ameritrade's newsroom or www.amtd.com for more information, or read our stories at http://freshaccounts.amtd.com.

Source: TD Ameritrade Holding Corporation

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

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

2See attached reconciliation of non-GAAP financial measures.

3Interest rate-sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of Sept. 30, 2016.

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 Fiscal Year Ended
Sept. 30, 2016 June 30, 2016 Sept. 30, 2015 Sept. 30, 2016 Sept. 30, 2015
Revenues:
Transaction-based revenues:

Commissions and transaction fees

$ 336 $ 347 $ 364 $ 1,372 $ 1,401
 
Asset-based revenues:
Insured deposit account fees 230 234 218 926 839
Net interest revenue 151 143 155 595 622
Investment product fees   98   96   82   374   334  
Total asset-based revenues 479 473 455 1,895 1,795
 
Other revenues   14   18   12   60   51  
Net revenues   829   838   831   3,327   3,247  
 
Operating expenses:
Employee compensation and benefits 222 209 199 839 807
Clearing and execution costs 34 35 39 136 148
Communications 38 33 32 137 125
Occupancy and equipment costs 43 43 42 171 163
Depreciation and amortization 24 23 22 92 91
Amortization of acquired intangible assets 20 22 23 86 90
Professional services 57 47 39 178 159
Advertising 59 58 49 260 248
Other   49   20   26   110   91  
Total operating expenses   546   490   471   2,009   1,922  
 
Operating income 283 348 360 1,318 1,325
 
Other expense (income):
Interest on borrowings 13 14 13 53 43
Gain on sale of investments - - - - (7 )
Other   -   -   -   -   1  
Total other expense (income)   13   14   13   53   37  
 
Pre-tax income 270 334 347 1,265 1,288
Provision for income taxes   85   94   131   423   475  
Net income $ 185 $ 240 $ 216 $ 842 $ 813  
 
Earnings per share - basic $ 0.35 $ 0.45 $ 0.40 $ 1.59 $ 1.50
Earnings per share - diluted $ 0.35 $ 0.45 $ 0.40 $ 1.58 $ 1.49
 
Weighted average shares outstanding - basic 526 529 541 531 543
Weighted average shares outstanding - diluted 529 531 545 534 547
 
Dividends declared per share $ 0.17 $ 0.17 $ 0.15 $ 0.68 $ 0.60
 
 
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
       
Sept. 30, 2016 Sept. 30, 2015
Assets:
Cash and cash equivalents $ 1,855 $ 1,978
Segregated cash and investments 8,729 6,305
Broker/dealer receivables 1,190 862
Client receivables, net 11,941 12,770
Investments available-for-sale, at fair value 761 4
Goodwill and intangible assets 3,042 3,128
Other   1,300   1,328
Total assets $ 28,818 $ 26,375
 
Liabilities and stockholders' equity:
Liabilities:
Broker/dealer payables $ 2,040 $ 2,707
Client payables 19,055 16,035
Long-term debt 1,817 1,800
Other   855   930
Total liabilities 23,767 21,472
Stockholders' equity   5,051   4,903
Total liabilities and stockholders' equity $ 28,818 $ 26,375
 
 
TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
         
 
Quarter Ended Fiscal Year Ended
Sept. 30, 2016 June 30, 2016 Sept. 30, 2015 Sept. 30, 2016 Sept. 30, 2015

Key Metrics:

Net new assets (in billions) $15.1 $13.6 $16.2 $60.3 $63.0
Net new asset growth rate (annualized) 8% 8% 9% 9% 10%
Average client trades per day 444,281 461,941 478,776 462,918 461,541
 

Profitability Metrics:

Operating margin 34.1% 41.5% 43.3% 39.6% 40.8%
Pre-tax margin 32.6% 39.9% 41.8% 38.0% 39.7%
Return on average stockholders' equity (annualized) 14.7% 19.5% 17.4% 17.0% 16.7%
Net profit margin 22.3% 28.6% 26.0% 25.3% 25.0%
EBITDA(1) as a percentage of net revenues 39.4% 46.9% 48.7% 45.0% 46.6%
 

Liquidity Metrics:

Interest on borrowings (in millions) $13 $14 $13 $53 $43
Interest coverage ratio (EBITDA(1)/interest on borrowings) 25.2 28.1 31.2 28.2 35.2
Cash and cash equivalents (in billions) $1.9 $1.9 $2.0 $1.9 $2.0

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

$0.8 $0.7 $0.5 $0.8 $0.5
 

Transaction-Based Revenue Metrics:

Total trades (in millions) 28.4 29.6 30.6 116.7 115.8
Average commissions and transaction fees per trade $11.82 $11.72 $11.89 $11.76 $12.09
Trading days 64.0 64.0 64.0 252.0 251.0
Order routing revenue (in millions) $75 $77 $76 $299 $299
 

Spread-Based Asset Metrics:

Average insured deposit account balances (in billions) $87.1 $83.4 $78.2 $83.7 $75.7
Average interest-earning assets (in billions) 23.8 22.7 21.6 22.7 20.2
Average spread-based balances (in billions) $110.9 $106.1 $99.8 $106.4 $95.9
 
Insured deposit account fee revenue (in millions) $230 $234 $218 $926 $839
Net interest revenue (in millions) 151 143 155 595 622
Spread-based revenue (in millions) $381 $377 $373 $1,521 $1,461
 
Avg. annualized yield - insured deposit account fees 1.03% 1.11% 1.09% 1.09% 1.09%
Avg. annualized yield - interest-earning assets 2.48% 2.50% 2.81% 2.59% 3.03%
Net interest margin (NIM) 1.35% 1.41% 1.46% 1.41% 1.50%
 

Fee-Based Investment Metrics:

Money market mutual fund fees:

Average balance (in billions) $5.3 $5.8 $5.7 $5.7 $5.6
Average annualized yield 0.28% 0.26% 0.02% 0.19% 0.01%
Fee revenue (in millions) $4 $4 $0 $11 $0
 

Market fee-based investment balances:

Average balance (in billions) $163.7 $156.3 $151.4 $155.0 $150.5
Average annualized yield 0.22% 0.23% 0.21% 0.23% 0.22%
Fee revenue (in millions) $94 $92 $82 $363 $334
 
Average fee-based investment balances (in billions) $169.0 $162.1 $157.1 $160.7 $156.1
Average annualized yield 0.23% 0.23% 0.20% 0.23% 0.21%
Investment product fee revenue (in millions) $98 $96 $82 $374 $334
 
(1) See attached reconciliation of non-GAAP financial measures.

 

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 Fiscal Year Ended
Sept. 30, 2016   June 30, 2016   Sept. 30, 2015 Sept. 30, 2016   Sept. 30, 2015

Client Account and Client Asset Metrics:

Funded accounts (beginning of period) 6,872,000 6,777,000 6,551,000 6,621,000 6,301,000
Funded accounts (end of period) 6,950,000 6,872,000 6,621,000 6,950,000 6,621,000
Percentage change during period 1% 1% 1% 5% 5%
 
Client assets (beginning of period, in billions) $736.3 $711.2 $702.3 $667.4 $653.1
Client assets (end of period, in billions) $773.8 $736.3 $667.4 $773.8 $667.4
Percentage change during period 5% 4% (5%) 16% 2%
 

Net Interest Revenue:

Segregated cash:

Average balance (in billions) $8.0 $7.4 $5.1 $7.0 $4.7
Average annualized yield 0.27% 0.25% 0.08% 0.21% 0.11%
Interest revenue (in millions) $5 $5 $1 $15 $5
 

Client margin balances:

Average balance (in billions) $11.7 $11.5 $12.6 $11.8 $12.1
Average annualized yield 3.60% 3.69% 3.57% 3.65% 3.60%
Interest revenue (in millions) $107 $107 $115 $436 $443
 

Securities borrowing/lending:

Average securities borrowing balance (in billions) $1.2 $1.0 $0.9 $0.9 $0.9
Average securities lending balance (in billions) $1.9 $2.1 $2.4 $2.1 $2.3
 
Net interest revenue - securities borrowing/lending (in millions) $37 $30 $39 $141 $174
 

Other cash and interest-earning investments:

Average balance (in billions) $2.9 $2.8 $3.0 $3.0 $2.5
Average annualized yield 0.28% 0.21% 0.03% 0.18% 0.04%
Interest revenue - net (in millions) $2 $1 $0 $5 $1
 

Client credit balances:

Average balance (in billions) $15.5 $14.7 $13.3 $14.7 $12.4
Average annualized cost 0.01% 0.01% 0.01% 0.01% 0.01%
Interest expense (in millions) ($0) ($0) ($0) ($2) ($1)
 
Average interest-earning assets (in billions) $23.8 $22.7 $21.6 $22.7 $20.2
Average annualized yield 2.48% 2.50% 2.81% 2.59% 3.03%
Net interest revenue (in millions) $151 $143 $155 $595 $622
 

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
(Unaudited)
                     
 
Quarter Ended Fiscal Year Ended
Sept. 30, 2016 June 30, 2016 Sept. 30, 2015 Sept. 30, 2016 Sept. 30, 2015
$ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev. $ % of Net Rev.

EBITDA (1)

Net income $ 185 22.3 % $ 240 28.6 % $ 216 26.0 % $ 842 25.3 % $ 813 25.0 %
Add:
Depreciation and amortization 24 2.9 % 23 2.7 % 22 2.6 % 92 2.8 % 91 2.8 %
Amortization of acquired intangible assets 20 2.4 % 22 2.6 % 23 2.8 % 86 2.6 % 90 2.8 %
Interest on borrowings 13 1.6 % 14 1.7 % 13 1.6 % 53 1.6 % 43 1.3 %
Provision for income taxes   85   10.3 %   94   11.2 %   131   15.8 %   423 12.7 %   475 14.6 %
EBITDA $ 327   39.4 % $ 393   46.9 % $ 405   48.7 % $ 1,496 45.0 % $ 1,512 46.6 %
 
As of
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2016 2016 2016 2015 2015
Liquid Assets Available for Corporate Investing and Financing Activities (2)
Cash and cash equivalents $ 1,855 $ 1,917 $ 2,476 $ 1,735 $ 1,978
Less: Non-corporate cash and cash equivalents   (1,395 )   (1,088 )   (1,430 )   (934 )   (909 )
Corporate cash and cash equivalents 460 829 1,046 801 1,069
Corporate investments 757 400 - 201 -
Less: Corporate liquidity maintained for operational contingencies   (773 )   (764 )   (764 )   (764 )   (750 )
Excess corporate cash and cash equivalents and investments 444 465 282 238 319
Excess broker-dealer regulatory net capital   369     263     431     346     211  
Liquid assets available for corporate investing and financing activities $ 813   $ 728   $ 713   $ 584   $ 530  
 
Note: The term "GAAP" in the following explanation refers to generally accepted accounting principles in the United States.
 
(1)   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 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, pre-tax income, net income and cash flows from operating activities.
 
(2) 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 broker-dealer subsidiaries in the calculation of liquid assets available for corporate investing and financing activities, rather than simply including broker-dealer cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the broker-dealer 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 cash and cash equivalents.
 
We define liquid assets available for corporate investing and financing activities as the sum of (a) corporate cash and cash equivalents and investments, excluding an amount that is being maintained to provide liquidity for operational contingencies, including lending to our broker-dealer, futures commission merchant and forex dealer member subsidiaries under intercompany credit agreements and (b) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 10% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of a minimum operational target established by management ($50 million in the case of our primary introducing broker-dealer, TD Ameritrade, Inc.). Liquid assets available for corporate investing and financing activities is based on more conservative measures of broker-dealer net capital than regulatory requirements because we generally manage to higher levels of net capital at the broker-dealer subsidiaries than the regulatory thresholds require.

Contacts

TD Ameritrade Holding Corporation
For Media:
Kim Hillyer, 402-574-6523
Director, Communications & Public Affairs
kim.hillyer@tdameritrade.com
@TDAmeritradePR
or
For Stockholders and Analysts:
Jeff Goeser, 402-597-8464
Director, Investor Relations & Finance
jeffrey.goeser@tdameritrade.com

Release Summary

TD Ameritrade releases fourth quarter and fiscal year-end earnings.

$Cashtags

Contacts

TD Ameritrade Holding Corporation
For Media:
Kim Hillyer, 402-574-6523
Director, Communications & Public Affairs
kim.hillyer@tdameritrade.com
@TDAmeritradePR
or
For Stockholders and Analysts:
Jeff Goeser, 402-597-8464
Director, Investor Relations & Finance
jeffrey.goeser@tdameritrade.com