UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 22, 2019

 

 

TD Ameritrade Holding Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   1-35509   82-0543156

(State or Other Jurisdiction of

Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

200 South 108 th Avenue

Omaha, Nebraska 68154

(Address of Principal Executive Offices/Zip Code)

(800) 669-3900

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  ☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ☐

Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock - $0.01 par value   AMTD  

The Nasdaq Stock Market LLC

Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

On July 22, 2019, TD Ameritrade Holding Corporation (the “Company”) released its financial results for its third fiscal quarter ended June 30, 2019. A copy of the news release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On July 22, 2019, Tim Hockey and the Board of Directors of the Company agreed that Mr. Hockey will step down as President, Chief Executive Offer and director, effective upon the date his successor commences employment, but in no event later than February 29, 2020. Until his successor commences employment, Mr. Hockey will continue to serve as the President, Chief Executive Officer and a director of the Company, and Mr. Hockey will serve as a senior advisor to the Company and will act as a special advisor to the incoming President and Chief Executive Officer through February 29, 2020 if a successor commences employment before that date.

On July 22, 2019, the Company and Mr. Hockey entered into a transition agreement providing for the following:

 

  •  

Continued payment of Mr. Hockey’s base salary at the current rate of $1 million per year through February 29, 2020.

 

  •  

For the fiscal year ending September 30, 2019, Mr. Hockey will receive an annual cash bonus and a performance stock unit grant in the normal course in November 2019, with the amounts determined based on actual performance against the pre-established goals (with the individual component of the goals deemed at 100%). For the current fiscal year, Mr. Hockey’s target annual cash incentive bonus is $2,250,000 and his target performance stock unit grant is $5,250,000.

 

  •  

Mr. Hockey will receive an additional lump sum transition payment of $3,540,000 as compensation for the fiscal year commencing October 1, 2019.

 

  •  

Following his termination of employment on February 29, 2020, Mr. Hockey will receive the severance benefits specified in his employment agreement, which include:

 

  •  

a lump sum payment of two times his base salary and average annual cash bonuses for the prior two years (assuming target level performance for purposes of calculating the bonus component for the fiscal year ending September 30, 2019, this amount would be $6,675,000);

 

  •  

vesting of his outstanding restricted stock units, which have a value of $8,597,319, based on the closing price of the Company’s stock on July 19, 2019 of $51.59, and the right of Mr. Hockey to exercise his stock options (all of which will be vested as of his date of termination) for the term of those options;

 

  •  

the continued ability to vest in his performance stock units based on actual performance, which have a value of $10,942,187, based on the $51.59 stock price noted above, and excluding the units that will vest in the ordinary course in November 2019 and the new grants for the fiscal year ending September 30, 2019 that will be made in November 2019, as noted above; and

 

  •  

payment of the employer portion of “COBRA” health continuation coverage for 24 months.

 

  •  

Reimbursement of certain legal and tax preparation fees.

 

  •  

Customary non-competition, non-solicitation and confidentiality covenants on the part of Mr. Hockey and mutual non-disparagement covenants.

  •  

Standard release of claims in favor of the Company and its officers, directors, employees, shareholders, affiliates, subsidiaries, predecessor and successor corporations and assigns, to be entered into when his employment terminates.

A copy of the news release is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

(d)     Exhibits .

 

Exhibit
No.

  

Description

99.1    News Release issued by the Company on July 22, 2019
99.2    News Release issued by the Company on July 22, 2019

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

TD AMERITRADE HOLDING CORPORATION
By:  

/s/ Stephen J. Boyle

Name:   Stephen J. Boyle
Title:   Executive Vice President, Chief
  Financial Officer

Dated: July 22, 2019

Exhibit 99.1

 

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FOR IMMEDIATE RELEASE   
At the Company   
Becky Niiya    Jeff Goeser
Director, Corporate Communications    Managing Director, Investor Relations
(402) 574-6652    (402) 597-8464
rebecca.niiya@tdameritrade.com    jeffrey.goeser@tdameritrade.com

TD Ameritrade Reports Third Quarter Fiscal 2019 Results

Company Conference Call Moved to Monday (7/22) at 5:00 p.m. EDT

GAAP Diluted EPS $1.00; Non-GAAP Diluted EPS $1.04 (1)

Net New Client Assets of $19.5B

Average Client Trades per Day of 825,000

OMAHA, Neb., July  22, 2019 – TD Ameritrade Holding Corporation (Nasdaq: AMTD) has released results for the third quarter of fiscal 2019.

Financial results for the quarter ended June 30, 2019 include the following: (2)

 

  •  

Net revenues of $1.5 billion, up 8 percent year-over-year

 

  •  

$1.00 in GAAP earnings per diluted share, up 27 percent year over year, on net income of $555 million

 

  •  

$1.04 in Non-GAAP earnings per diluted share, (1) up 17 percent year over year

 

  •  

Pre-tax GAAP income of $743 million, or 50 percent of net revenues

 

  •  

Net new client assets of approximately $19.5 billion, an annualized growth rate of 6 percent

 

  •  

Average client trades per day of approximately 825,000, up 5 percent year over year

“After markets hit new record highs early in the quarter and then pulled back sharply in May, the S&P 500 posted its strongest June return in more than 60 years. Investors are pleased with the market’s strong 2019 performance although they are mindful of persisting uncertainty related to U.S. trade relations and global economic growth,” said Tim Hockey, president and chief executive officer, TD Ameritrade. “One sign of optimism and a driver of investor engagement this quarter was a robust season of high profile IPOs which reinforces the broad-based desire of retail investors to invest in the brands they know and trust.

“Our business fundamentals are solid and we’re pleased with our year-to-date performance that reflects the strength and diversity of our business model,” Hockey continued. “Client satisfaction scores are on the rise as our focused efforts to transform the client experience are gaining momentum. At TD Ameritrade, the client is at the center of everything we do, and we’re well positioned to deliver an easy, personal and enlightening experience for them in any macroeconomic environment.”

 

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“We delivered strong results in the quarter which were further enhanced as we recognized some notable items that were net favorable to earnings,” said Steve Boyle, executive vice president and chief financial officer, TD Ameritrade. “Both revenue and pre-tax margins rose, buoying our strong balance sheet. As we have demonstrated in the past, our sound financial position, disciplined expense management and long-term view will help us successfully navigate through various market cycles and deliver on our financial targets.”

Capital Management

The Company paid $166 million in cash dividends its third fiscal quarter, or $0.30 per share.

The Company has declared a $0.30 per share quarterly cash dividend, payable on August 20, 2019 to all holders of record of common stock as of August 6, 2019.

During the June quarter, the Company paid $242 million in cash to repurchase 4.7 million shares. As of June 30, 2019, the Company has approximately 7 million shares remaining for share repurchases under its stock repurchase program.

*NEW* Company Updates Time of Conference Call

TD Ameritrade will hold a conference call to discuss these financial results, as well as a special leadership announcement, and to take questions from analysts today, July  22, 2019, at 5:00 p.m. EDT (4:00 p.m. CDT) . Participants may listen to the conference call by dialing 866-393-4306.

A replay of the phone call will be available by dialing 855-859-2056 and entering the Conference ID 9195175 beginning at 8:00 p.m. EDT (7:00 p.m. CDT) on July 22, 2019. The replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on July 29, 2019. A transcript of the call will be available on the company’s corporate web site, www.amtd.com , via the “ Earnings ” page beginning Friday, July 26, 2019.

More information about TD Ameritrade’s upcoming corporate events and management speaking engagements, such as quarterly earnings conference calls, is available via the Company’s Calendar which is located on the “ Investor Relations ” page of www.amtd.com .

Interested parties should visit or subscribe to newsfeeds at www.amtd.com for the most up-to-date information on corporate financial reports, press releases, SEC filings and events. The Company also communicates this information via Twitter, @TDAmeritradePR . Website links, corporate titles and telephone numbers provided in this release, although correct when published, may change in the future.

Source: TD Ameritrade Holding Corporation

 

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About TD Ameritrade Holding Corporation

TD Ameritrade provides investing services and education to more than 11 million client accounts totaling approximately $1.3 trillion in assets, and custodial services to more than 7,000 registered investment advisors. We are a leader in U.S. retail trading, executing an average of approximately 800,000 trades per day for our clients, more than a quarter of which come from mobile devices. We have a proud history of innovation, dating back to our start in 1975, and today our team of 10,000-strong is committed to carrying it forward. Together, we are leveraging the latest in cutting edge technologies and one-on-one client care to transform lives, and investing, for the better. Learn more by visiting TD Ameritrade’s newsroom at www.amtd.com, or read our stories at Fresh Accounts.

Brokerage services provided by TD Ameritrade, Inc., member FINRA (www.FINRA.org) / SIPC (www.SIPC.org)

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, forward-looking statements contained in this discussion include our expectations regarding: the effect of client trading activity on our results of operations; the effect of changes in interest rates on our net interest spread; the amount of net revenues; average commissions per trade; the amounts of total operating expenses and advertising expense; our effective income tax rate; our capital and liquidity needs and our plans to finance such needs; and our plans to return capital to stockholders through cash dividends and share repurchases.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: economic, social and political conditions and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; difficulties and delays in integrating the Scottrade Financial Services, Inc. (“Scottrade”) business or fully realizing cost savings and other benefits from the acquisition; disruptions from the Scottrade acquisition; or other factors making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with other acquisitions; and the other risks and uncertainties set forth under Item 1A. – Risk Factors of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2018. These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

 

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1  

See attached reconciliation of non-GAAP financial measures.

2  

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

Brokerage services provided by TD Ameritrade, Inc., member FINRA ( www.FINRA.org ) / SIPC ( www.SIPC.org ).

Advisory services are provided by TD Ameritrade Investment Management, LLC (“TD Ameritrade Investment Management”), a registered investment advisor. Brokerage services provided by TD Ameritrade, Inc. TD Ameritrade Investment Management provides discretionary advisory services for a fee. Risks applicable to any portfolio are those associated with its underlying securities. For more information, please see the Disclosure Brochure (Form ADV Part 2A) http://www.tdameritrade.com/forms/TDA4855.pdf

 

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TD AMERITRADE HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

In millions, except per share amounts

(Unaudited)

 

     Quarter Ended      Nine Months Ended  
     June 30, 2019     Mar. 31, 2019      June 30, 2018      June 30, 2019     June 30, 2018  

Revenues:

            

Transaction-based revenues:

            

Commissions and transaction fees

   $ 477     $ 487      $ 490      $ 1,500     $ 1,487  

Asset-based revenues:

            

Bank deposit account fees

     421       430        387        1,280       1,149  

Net interest revenue

     383       362        332        1,120       916  

Investment product fees

     151       137        140        431       414  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total asset-based revenues

     955       929        859        2,831       2,479  

Other revenues

     59       35        33        126       88  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net revenues

     1,491       1,451        1,382        4,457       4,054  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Operating expenses:

            

Employee compensation and benefits

     325       340        352        982       1,228  

Clearing and execution costs

     59       53        46        161       149  

Communications

     39       38        42        119       141  

Occupancy and equipment costs

     67       65        67        199       226  

Depreciation and amortization

     38       36        37        109       106  

Amortization of acquired intangible assets

     31       31        32        93       107  

Professional services

     71       74        70        218       230  

Advertising

     80       74        63        213       218  

Other

     61       35        42        142       286  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

     771       746        751        2,236       2,691  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

     720       705        631        2,221       1,363  

Other expense (income):

            

Interest on borrowings

     37       37        28        107       72  

Gain on business-related divestiture

     (60 )      —          —          (60 )      —    

Loss on sale of investments

     —         —          —          —         11  

Other

     —         —          —          (14 )      2  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total other expense (income)

     (23 )      37        28        33       85  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Pre-tax income

     743       668        603        2,188       1,278  

Provision for income taxes (1)

     188       169        152        530       259  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 555     $ 499      $ 451      $ 1,658     $ 1,019  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per share - basic

   $ 1.01     $ 0.89      $ 0.79      $ 2.97     $ 1.80  

Earnings per share - diluted

   $ 1.00     $ 0.89      $ 0.79      $ 2.96     $ 1.79  

Weighted average shares outstanding - basic

     552       560        568        558       567  

Weighted average shares outstanding - diluted

     554       562        570        560       570  

Dividends declared per share

   $ 0.30     $ 0.30      $ 0.21      $ 0.90     $ 0.63  

 

(1)

The provision for income taxes was lower for the nine months ended June 30, 2018, primarily due to the realization of approximately $78 million of after-tax benefits recognized during the quarter ended December 31, 2017. These after-tax benefits were primarily attributable to the enactment of the Tax Cuts and Jobs Act.

 

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TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

In millions

(Unaudited)

 

     June 30, 2019      Sept. 30, 2018  

Assets:

     

Cash and cash equivalents

   $ 2,953      $ 2,690  

Segregated cash and investments

     7,124        3,185  

Broker/dealer receivables

     1,780        1,374  

Client receivables, net

     20,847        22,616  

Investments available-for-sale, at fair value

     1,129        484  

Goodwill and intangible assets

     5,463        5,556  

Other

     1,823        1,615  
  

 

 

    

 

 

 

Total assets

   $ 41,119      $ 37,520  
  

 

 

    

 

 

 

Liabilities and stockholders’ equity:

     

Liabilities:

     

Broker/dealer payables

   $ 3,210      $ 2,980  

Client payables

     24,588        22,884  

Long-term debt and other borrowings

     3,574        2,535  

Other

     1,254        1,118  
  

 

 

    

 

 

 

Total liabilities

     32,626        29,517  

Stockholders’ equity

     8,493        8,003  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 41,119      $ 37,520  
  

 

 

    

 

 

 

 

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TD AMERITRADE HOLDING CORPORATION

SELECTED OPERATING DATA

(Unaudited)

 

     Quarter Ended     Nine Months Ended  
     June 30, 2019     Mar. 31, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
Key Metrics:           

Net new assets (in billions)

   $ 19.5     $ 19.6     $ 19.8     $ 71.0     $ 68.4  

Net new asset growth rate (annualized)

     6 %      7 %      7 %      7 %      8 % 

Average client trades per day

     824,600       860,359       783,665       870,744       816,445  
Profitability Metrics:           

Operating margin

     48.3 %      48.6 %      45.7 %      49.8 %      33.6 % 

Pre-tax margin

     49.8 %      46.0 %      43.6 %      49.1 %      31.5 % 

Return on average stockholders’ equity (annualized)

     26.5 %      23.7 %      23.3 %      26.5 %      18.0 % 

Net profit margin

     37.2 %      34.4 %      32.6 %      37.2 %      25.1 % 

EBITDA (1) as a percentage of net revenues

     56.9 %      53.2 %      50.7 %      56.0 %      38.6 % 
Liquidity Metrics:           

Interest on borrowings (in millions)

   $ 37     $ 37     $ 28     $ 107     $ 72  

Interest coverage ratio (EBITDA (1) /interest on borrowings)

     22.9       20.9       25.0       23.3       21.7  

Cash and cash equivalents (in billions)

   $ 3.0     $ 2.7     $ 1.3     $ 3.0     $ 1.3  

Liquid assets (1) (in billions)

   $ 2.8     $ 2.6     $ 0.9     $ 2.8     $ 0.9  
Transaction-Based Revenue Metrics:           

Total trades (in millions)

     51.9       52.5       50.2       162.0       153.1  

Average commissions per trade

   $ 6.92     $ 7.01     $ 7.40     $ 7.01     $ 7.48  

Trading days

     63.0       61.0       64.0       186.0       187.5  

Order routing revenue (in millions)

   $ 117     $ 119     $ 119     $ 365     $ 341  
Spread-Based Asset Metrics:           

Average bank deposit account balances (in billions)

   $ 110.3     $ 114.7     $ 116.3     $ 113.1     $ 117.9  

Average interest-earning assets (in billions)

     32.6       31.0       30.3       31.2       31.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average spread-based balances (in billions)

   $ 142.9     $ 145.7     $ 146.6     $ 144.3     $ 149.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bank deposit account fee revenue (in millions)

   $ 421     $ 430     $ 387     $ 1,280     $ 1,149  

Net interest revenue (in millions)

     383       362       332       1,120       916  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Spread-based revenue (in millions)

   $ 804     $ 792     $ 719     $ 2,400     $ 2,065  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Avg. annualized yield - bank deposit account fees

     1.51 %      1.50 %      1.32 %      1.49 %      1.28 % 

Avg. annualized yield - interest-earning assets

     4.65 %      4.66 %      4.34 %      4.73 %      3.86 % 

Net interest margin (NIM)

     2.23 %      2.17 %      1.94 %      2.19 %      1.83 % 

 

(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.

 

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TD AMERITRADE HOLDING CORPORATION

SELECTED OPERATING DATA

(Unaudited)

 

    Quarter Ended     Nine Months Ended  
    June 30, 2019     Mar. 31, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
Client Account and Client Asset Metrics:          

Funded accounts (beginning of period)

    11,763,000       11,630,000       11,266,000       11,514,000       11,004,000  

Funded accounts (end of period)

    11,876,000       11,763,000       11,399,000       11,876,000       11,399,000  

Percentage change during period

    1 %      1 %      1 %      3 %      4 % 

Client assets (beginning of period, in billions)

  $ 1,297.1     $ 1,161.6     $ 1,185.7     $ 1,297.5     $ 1,118.5  

Client assets (end of period, in billions)

  $ 1,306.6     $ 1,297.1     $ 1,229.6     $ 1,306.6     $ 1,229.6  

Percentage change during period

    1 %      12 %      4 %      1 %      10 % 
Net Interest Revenue:          

Segregated cash:

         

Average balance (in billions)

  $ 5.7     $ 5.8     $ 5.6     $ 4.8     $ 8.1  

Average annualized yield

    2.37 %      2.26 %      1.61 %      2.25 %      1.29 % 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest revenue (in millions)

  $ 34     $ 33     $ 23     $ 82     $ 79  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Client margin balances:

         

Average balance (in billions)

  $ 20.6     $ 19.4     $ 20.6     $ 20.7     $ 19.1  

Average annualized yield

    5.19 %      5.28 %      4.69 %      5.19 %      4.47 % 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest revenue (in millions)

  $ 271     $ 257     $ 244     $ 816     $ 648  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Securities borrowing/lending:

         

Average securities borrowing balance (in billions)

  $ 1.3     $ 0.9     $ 0.8     $ 0.9     $ 0.9  

Average securities lending balance (in billions)

  $ 3.0     $ 2.3     $ 3.1     $ 2.7     $ 2.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest revenue - securities borrowing/lending (in millions)

  $ 54     $ 49     $ 55     $ 158     $ 168  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other cash and interest-earning investments:

         

Average balance (in billions)

  $ 5.0     $ 4.9     $ 3.3     $ 4.8     $ 3.2  

Average annualized yield

    2.03 %      2.03 %      1.49 %      1.97 %      1.12 % 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest revenue - net (in millions)

  $ 26     $ 25     $ 12     $ 71     $ 27  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Client credit balances:

         

Average balance (in billions)

  $ 19.0     $ 19.2     $ 19.6     $ 19.2     $ 20.8  

Average annualized cost

    0.05 %      0.05 %      0.04 %      0.05 %      0.03 % 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense (in millions)

  ($ 2 )    ($ 2 )    ($ 2 )    ($ 7 )    ($ 6 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average interest-earning assets (in billions)

  $ 32.6     $ 31.0     $ 30.3     $ 31.2     $ 31.3  

Average annualized yield

    4.65 %      4.66 %      4.34 %      4.73 %      3.86 % 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest revenue (in millions)

  $ 383     $ 362     $ 332     $ 1,120     $ 916  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Investment Product Fee Revenue:          

Fee-based investment balances:

         

Average balance (in billions)

  $ 290.6     $ 273.7     $ 256.8     $ 275.9     $ 246.1  

Average annualized yield

    0.21 %      0.20 %      0.22 %      0.21 %      0.22 % 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investment product fee revenue (in millions)

  $ 151     $ 137     $ 140     $ 431     $ 414  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE: See Glossary of Terms on the Company’s website at www.amtd.com for definitions of the above metrics.

 

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TD AMERITRADE HOLDING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Dollars in millions, except per share amounts

(Unaudited)

 

    Quarter Ended     Nine Months Ended  
    June 30, 2019     Mar. 31, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
    Amount     Diluted EPS     Amount     Diluted EPS     Amount     Diluted EPS     Amount     Diluted EPS     Amount     Diluted EPS  
Non-GAAP Net Income and Non-GAAP Diluted EPS (1)                    

Net income and diluted EPS - (GAAP)

  $ 555     $ 1.00     $ 499     $ 0.89     $ 451     $ 0.79     $ 1,658     $ 2.96     $ 1,019     $ 1.79  

Non-GAAP adjustments:

                   

Amortization of acquired intangible assets

    31       0.06       31       0.06       32       0.06       93       0.17       107       0.19  

Acquisition-related expenses

    —         —         —         —         46       0.08       —         —         384       0.67  

Income tax effect of above adjustments

    (8 )      (0.02 )      (8 )      (0.02 )      (21 )      (0.04 )      (24 )      (0.05 )      (133 )      (0.23 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income and non-GAAP diluted EPS

  $ 578     $ 1.04     $ 522     $ 0.93     $ 508     $ 0.89     $ 1,727     $ 3.08     $ 1,377     $ 2.42  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Quarter Ended     Nine Months Ended  
    June 30, 2019     Mar. 31, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
    $     % of Net Rev.     $     % of Net Rev.     $     % of Net Rev.     $     % of Net Rev.     $     % of Net Rev.  
EBITDA (2)                    

Net income - (GAAP)

  $ 555       37.2 %    $ 499       34.4 %    $ 451       32.6 %    $ 1,658       37.2 %    $ 1,019       25.1 % 

Add:

                   

Depreciation and amortization

    38       2.5 %      36       2.5 %      37       2.7 %      109       2.4 %      106       2.6 % 

Amortization of acquired intangible assets

    31       2.1 %      31       2.1 %      32       2.3 %      93       2.1 %      107       2.6 % 

Interest on borrowings

    37       2.5 %      37       2.5 %      28       2.0 %      107       2.4 %      72       1.8 % 

Provision for income taxes

    188       12.6 %      169       11.6 %      152       11.0 %      530       11.9 %      259       6.4 % 
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

EBITDA - (non-GAAP)

  $ 849       56.9 %    $ 772       53.2 %    $ 700       50.7 %    $ 2,497       56.0 %    $ 1,563       38.6 % 
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   
    As of                                
    June 30,     Mar. 31,     Dec. 31,     Sept. 30,     June 30,                                
    2019     2019     2018     2018     2018                                
Liquid Assets (3)                    

Cash and cash equivalents - (GAAP)

  $ 2,953     $ 2,674     $ 5,117     $ 2,690     $ 1,343            

Less: Non-corporate cash and cash equivalents

    (2,004 )      (2,020 )      (4,247 )      (2,307 )      (1,044 )           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

Corporate cash and cash equivalents

    949       654       870       383       299            

Corporate investments

    1,129       894       884       386       388            

Excess regulatory net capital over management targets

    689       1,061       862       296       166            
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

Liquid assets - (non-GAAP)

  $ 2,767     $ 2,609     $ 2,616     $ 1,065     $ 853            
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

Note: The term “GAAP” in the following explanation refers to generally accepted accounting principles in the United States.

 

(1)

Non-GAAP net income and non-GAAP diluted earnings per share (EPS) are non-GAAP financial measures as defined by SEC Regulation G. We define non-GAAP net income as net income adjusted to remove the after-tax effect of amortization of acquired intangible assets and acquisition-related expenses. We consider non-GAAP net income and non-GAAP diluted EPS as important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of our underlying business performance. Acquisition-related expenses are excluded as these costs are not representative of the costs of running the Company’s on-going business. Non-GAAP net income and non-GAAP diluted EPS should be considered in addition to, rather than as a substitute for, GAAP net income and diluted EPS.

(2)

EBITDA (earnings before interest, taxes, depreciation and amortization) is considered a non-GAAP financial measure as defined by SEC Regulation G. We consider EBITDA to be 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, GAAP pre-tax income, net income and cash flows from operating activities.

(3)

Liquid assets is considered a non-GAAP financial measure as defined by SEC Regulation G. Liquid assets represents available capital, including any capital from our regulated subsidiaries in excess of established management operational targets. We include the excess capital of our regulated subsidiaries in the calculation of liquid assets, rather than simply including regulated subsidiaries’ cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the regulated subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the regulated subsidiaries to the parent company. Liquid assets should be considered as a supplemental measure of liquidity, rather than as a substitute for GAAP cash and cash equivalents.

Liquid assets may be utilized for general corporate purposes and is defined as the sum of (a) corporate cash and cash equivalents, (b) corporate investments, less securities sold under agreements to repurchase, and (c) our regulated subsidiaries’ net capital in excess of minimum operational targets established by management. Corporate cash and cash equivalents includes cash and cash equivalents from our investment advisory subsidiaries. Liquid assets is based on more conservative measures of net capital than regulatory requirements because we generally manage to higher levels of net capital at our regulated subsidiaries than the regulatory thresholds require.

 

9

Exhibit 99.2

 

LOGO

FOR IMMEDIATE RELEASE

 

At the Company   
Kim Hillyer    Jeff Goeser
Managing Director, Corporate Communications    Managing Director, Investor Relations
(402) 574-6523    (402) 597-8464
kim.hillyer@tdameritrade.com    jeffrey.goeser@tdameritrade.com

TD Ameritrade Provides Leadership Update

President and CEO Tim Hockey to leave company in February 2020

Management Conference Call to be held Monday (7/22) at 5 p.m. EDT

OMAHA, Neb., July  22, 2019 – In discussing the best path forward for TD Ameritrade Holding Corporation (Nasdaq: AMTD) – its clients, Associates and shareholders – the company’s board of directors and President and Chief Executive Officer Tim Hockey have made the decision that he will leave the company upon the appointment of a new leader to guide its next phase of growth.

The board will begin a search for Hockey’s successor, engaging a nationally-recognized executive search firm to assist in the process, which will include internal and external candidates. Hockey has agreed to stay in his role as the board conducts its search, until the end of February 2020. If his successor is named before that time, he will move into an advisory role to help with the transition.

On behalf of the board, Chairman Joe Moglia said: “We are grateful to Tim for his leadership and the contributions he made to the company over his tenure as CEO. He played a key role in the successful integration of Scottrade and has taken important steps to position TD Ameritrade for long-term success. We are pleased that he has agreed to remain in his role to ensure a smooth transition while we conduct our search to identify the right candidate to lead the company in its next chapter of growth.”

“The time I’ve spent working alongside my fellow Associates at TD Ameritrade has been one of the highlights of my career,” Hockey said. “Together we embarked on a journey to transform lives and investing for the better, and we’ve accomplished a lot. I believe TD Ameritrade is well-positioned to continue as an industry leader and innovator, and until my last day, 100 percent of my energy will be focused on helping our Associates drive our strategy forward. I’m intent on keeping our momentum going, and setting up my successor for long-term success.”

 

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Bharat Masrani, vice-chair of the TD Ameritrade board, and group president and CEO of TD Bank Group, the company’s largest shareholder, added: “TD Ameritrade is an important strategic investment for TD, opening new opportunities for both organizations, and we remain confident in the business and its continued success. We also extend our thanks to Tim for his leadership and for the important contributions he has made at TD Ameritrade. We wish him the very best for the future.”

Company to hold Conference Call

TD Ameritrade will hold a conference call to discuss this announcement and its third quarter earnings release, and to take questions from analysts today, July  22, 2019, at 5:00 p.m. EDT (4:00 p.m. CDT) . Participants may listen to the conference call by dialing 866-393-4306.

A replay of the phone call will be available by dialing 855-859-2056 and entering the Conference ID 9195175 beginning at 8:00 p.m. EDT (7:00 p.m. CDT) on July 22, 2019. The replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on July 29, 2019. A transcript of the call will be available on the company’s corporate web site, www.amtd.com , via the “ Earnings ” page beginning Friday, July 26, 2019.

About TD Ameritrade Holding Corporation

TD Ameritrade provides investing services and education to more than 11 million client accounts totaling approximately $1.3 trillion in assets, and custodial services to more than 7,000 registered investment advisors. We are a leader in U.S. retail trading, executing an average of approximately 800,000 trades per day for our clients, more than a quarter of which come from mobile devices. We have a proud history of innovation, dating back to our start in 1975, and today our team of 10,000-strong is committed to carrying it forward. Together, we are leveraging the latest in cutting edge technologies and one-on-one client care to transform lives, and investing, for the better. Learn more by visiting TD Ameritrade’s newsroom at www.amtd.com, or read our stories at Fresh Accounts.

Brokerage services provided by TD Ameritrade, Inc., member FINRA (www.FINRA.org) / SIPC (www.SIPC.org)

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, forward-looking statements contained in this discussion include our expectations regarding: the effect of client trading activity on our results of operations; the effect of changes in interest rates on our net interest spread; the amount of net revenues; average commissions per trade; the amounts of total operating expenses and advertising expense; our effective income tax rate; our capital and liquidity needs and our plans to finance such needs; and our plans to return capital to stockholders through cash dividends and share repurchases. 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

 

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or performance to differ materially from those contained in the forward-looking statements. These risks, uncertainties and assumptions include, but are not limited to: economic, social and political conditions and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; difficulties and delays in integrating the Scottrade Financial Services, Inc. (“Scottrade”) business or fully realizing cost savings and other benefits from the acquisition; disruptions from the Scottrade acquisition; or other factors making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with other acquisitions; and the other risks and uncertainties set forth under Item 1A. – Risk Factors of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2018. These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

 

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