Transcript Document

Shareholder Meeting
February 10, 2004
1
Safe Harbor Statement
This presentation 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
expectations regarding the effect of our acquisitions of Mydiscountbroker.com and
Bidwell & Company and the prospective acquisition of BrokerageAmerica.com
accounts, and any projections regarding our future revenues, expenses, synergies,
earnings or activity rates 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 market fluctuations and changes in client trading activity, general economic
and political conditions, increased competition, systems failures and capacity
constraints, regulatory and legal matters and uncertainties and other risk factors
described in our latest Annual Report on Form 10-K and Quarterly Report on Form
10-Q. 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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>>
Management Team
>>
2003 Highlights
>>
YTD Highlights
>>
Strategy – Future – Outlook
3
Management Team
Almost 190
years
combined
financial
services
experience
Phylis Esposito
Anne Nelson
Mike Feigeles
Ellen Koplow
Executive Vice President
Chief Strategy Officer
Executive Vice President
Special Projects
Kurt Halvorson
Joe Moglia
Chief Executive
Officer
Executive Vice President
Chief Marketing Officer
Executive Vice President
General Counsel
Executive Vice President
Chief Administrative
Officer
Randy MacDonald
Asiff Hirji
Pete Ricketts
Executive Vice President
Chief Information Officer
Executive Vice President
Chief Financial Officer
President,
Private Client Division
4
Record 2003
Highlights
>>
$0.32 EPS
>>
$264M EBITDA(1)
>>
$188M Synergies = $245M Run-Rate
>>
$55B Client Assets
(1) See attached reconciliation of financial measures.
5
Record
Dec 03 QTR
Highlights
>>
>>
>>
>>
>>
Net income $72M, $0.17 EPS
EBITDA (1) $127M, 56% of net
revenues
Pre-tax income $120M, 53%
Operating margin(1)
$143M, 63%
Net revenues of $226M
(1) See attached reconciliation of financial measures.
6
POWER OF OPERATING
LEVERAGE AND SCALABILITY
Revenues
(2)
Expenses(2)
Excluding
Advertising
Net
Income
Market
Cap
87K
$108.2M
$75.8M
$9.0M
$1B
12/03
175K
$226.4M
$83.4M
$71.9M
$6B
Change
101%
109%
10%
700% 600%
Qtr(1)
Trades
Per Day
12/01
(1) For the quarter ended 12/01 and 12/03 based on Company reports.
(2) See attached reconciliation of financial measures
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#1 PRE-TAX MARGIN
53%
28%
21%
Schwab
E*Trade
Ameritrade
162K
92K
175K
Avg. Daily Trades(1)
Note: For the quarter ended 12/31/03 based on Company reports. E*Trade pre-tax income from ongoing operations.
(1) ET includes US and International retail trades. SCH includes revenue trades only and excludes mutual fund
OneSource trades.
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STRONG ROE GROWTH
33.8%
11.9%
-5.5%
-38.2%
FY 01
FY 02
FY 03
FY 04E(1)
(1) Annualized earnings for the period October-January FY 04.
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#1: RETAIL EQUITY TRADES
PER DAY
254
(OOOs)
175
162
119
92
ET(1)
95
FIDELITY
TD
SCH(2)
AMTD
AMTD
JAN 04
(1) E*Trade includes US and International retail trades and excludes professional trades.
(2) Schwab includes revenue trades only and excludes mutual fund OneSource trades.
Source: Ameritrade, E*Trade, Schwab and Waterhouse from Company reports for the quarter ended 12/31/03. Fidelity Online from Merrill Lynch
Online Brokers Report dated 11/7/03.
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STRONG CLIENT ASSET GROWTH
$72.4
($ IN BILLIONS)
$12.9
GROWTH
$37.1
$8.6
95%
$59.5
$28.5
As of
Dec. 31, 2002
As of
Jan. 30, 2004
Client Cash & Money Market Funds
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LEADER IN M&A
5 OF 13(1)
IN INDUSTRY
Announced
Company
NOV. O3
Bidwell
OCT. 03
BrokerageAmerica
JUNE 03
MDB.com
APR. 02
Datek
JULY 01
NDB.com
(1) M&A transactions in Online Brokerage Industry since 07/31/01.
12
OVER-DELIVERED SYNERGIES
$245M
DATEK
PRE-TAX
SYNERGIES
$164M
Original
Estimate
Achieved Run-Rate 4Q 03
13
SIGNIFICANT
OPERATING LEVERAGE
PER TRADE ANALYSIS
Revenues
Commissions
Net Interest Spread
Other Revenue
Net Revenue
Variable Expense
Fixed Expense
DEC. 03
QTR.
$
13.50
4.75
1.83
67%
24%
9%
$
20.07
3.01
4.40
15%
22%
7.41
37%
12.66
63%
2.04
10%
10.62
53%
Operating Expense Adjusted(1)
Operating Margin(1)
$
Advertising
Pre-tax Income
% OF
REVENUE
$
(1) See attached reconciliation of financial measures.
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Growth
Opportunities
>>
>>
Expand Leading Active
Trader Position
Attract Long-Term
Investors
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SHARE REPURCHASE
Shares
Price
Repurchased
27.3M
$8.29(1)
$226M
Market Price
27.3M
$15.8(2)
$433M
Shareholder Return
Value
$207M
91%
(1) Weighted average share price since inception of program on 09/19/02.
(2) Share price as of close 1/30/04.
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Institutional
Investor
>>
37 - JUNE 02
>>
124 - JAN. 04
>>
Daily Avg. Share Volume
JUN Q 02: 0.9M shares
DEC Q 04: 4.8M shares
Note: Excludes the PEIs and Intrust 401(k) provider. Data from 6/30/02 and 1/20/04.
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ANALYST COVERAGE
Analyst Firm
Recommendation
Credit Suisse First Boston
Friedman, Billings, Ramsey
Keefe, Bruyette & Woods
Raymond James
Sandler O’Neill
Smith Barney
Merrill Lynch
Outperform
Outperform
Outperform
Outperform
Buy
Buy
Neutral
Note: data from First Call Report 2/09/04.
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STRONG EPS GROWTH
$0.79
$0.53
$0.32
$0.12(1)
FY 01
FY 02
FY 03
FY 04E
($0.22)(1)
(1) Earnings per share is operating EPS, excluding restructuring and asset impairment charges for FY 01 and FY 02.
See attached reconciliation of financial measures.
Orange dotted lines indicate Company’s earnings guidance.
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SHAREHOLDER RETURN:
SIGNIFICANT OUTPERFORMANCE
173%
150%
100%
50%
AGE
SCH
BSC
RJF
GS
LEH
MWD
MER
JEF
LM
ET
AMTD
Calculation shows the increase in total shareholder value based upon three month average stock prices (to normalize data) at the beginning and end of the calendar year 2003 plus dividends.
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Reconciliation of
Financial Measures
21
RECONCILIATION OF FINANCIAL MEASURES
Fiscal Year Ending
Sept. 27,
Sept. 28,
2002
2001
EPS from Ongoing Operations (1)
Earnings (loss) per share from ongoing operations
Less: Restructuring and asset impairment charges
Less: Debt conversion expense
Plus: Gain on sale of investment
Basic and diluted earnings (loss) per share
$
$
Operating Expenses, Adjusted (2)
$
Operating Expenses, Adjusted
Plus: Advertising
Total expenses
Operating Expenses, Adjusted (2)
$ 83,418
23,066
$ 106,484
0.12
(0.25)
(0.13)
$
$
(0.22)
(0.10)
(0.20)
0.03
(0.49)
Qtr Ended
Dec. 31, 2003
Per Trade % of Rev.
$
$
7.41
2.04
9.45
36.8%
10.2%
47.0%
Qtr Ended
Dec. 31, 2001
$
$ 75,845
17,105
$ 92,950
Fiscal Year Ended
Sept. 26, 2003
Sept. 28, 2001
$
$
% of Rev.
% of Rev.
Operating Expenses, Adjusted
$ 389,512
Less: Gain on sale of investment
Plus: Restructuring and asset impairment charges 5,991
Plus: Debt conversion expense
Plus: Advertising
90,394
Total expenses
$ 485,897
54.6% $ 362,489
(9,692)
0.8%
38,268
62,082
12.7%
147,975
68.1% $ 601,122
79.7%
-2.1%
8.4%
13.7%
32.5%
132.2%
In thousands, except percentages, per trade measures and EPS
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RECONCILIATION OF FINANCIAL MEASURES
Qtr Ended
EBITDA (3)
Dec. 31, 2001
Fiscal Year Ended
Sept. 26, 2003
$
EBITDA
$
Less:
Depreciation and amortization
Interest on borrowings
Pre-tax income
$
Operating Margin (4)
126,750
(5,957)
(837)
119,956
$
$
264,141
$
(31,708)
(5,076)
227,357
Qtr Ended Dec. 31, 2003
$
Operating margin
% of Rev.
$ 142,842
63.1%
Less:
Advertising
Gain/(loss) on disposal of property
Pre-tax income
(23,066)
-10.2%
180
0.1%
$ 119,956
53.0%
In thousands, except percentages and per trade measures
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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)
EPS from ongoing operations is considered a Non-GAAP financial measure as defined by SEC Regulation
G. We define EPS from ongoing operations as earnings (loss) per share, adjusted to remove any
significant unusual gains or charges. We believe EPS from ongoing operations provides an important
measure of the financial performance of our ongoing business. Unusual gains and charges are excluded
because we believe they are not likely to be indicative of the ongoing operations of our business. EPS
from ongoing operations should be considered in addition to, rather than as a substitute for, basic and
diluted earnings per share.
(2)
Operating expenses, adjusted is considered a Non-GAAP financial measure as defined by SEC Regulation
G. Operating expenses, adjusted consists of total expenses, adjusted to remove advertising expense
and one time charges and revenues. We believe operating expenses, adjusted provides an important
measure of the financial performance of our ongoing business. Advertising spending is excluded
because it is largely at the discretion of the Company, varies significantly from period to period based on
market conditions and relates to the acquisition of future revenues through new accounts rather than
current revenues from existing accounts. Operating expenses, adjusted should be considered in
addition to, rather than as a substitute for, total expenses.
(3)
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 eliminates the non-cash effect of
tangible asset depreciation and intangible asset amortization, as well as any non-cash gains or charges.
EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income
and cash flows from operating activities.
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RECONCILIATION OF FINANCIAL MEASURES
(4)
Operating margin is considered a Non-GAAP financial measure as defined by SEC Regulation G. We
define operating margin as pre-tax income, adjusted to remove advertising expense and any unusual
gains or charges. We believe operating margin provides an important measure of the financial
performance of our ongoing business. Advertising spending is excluded because it is largely at the
discretion of the Company, varies significantly from period to period based on market conditions and
relates to the acquisition of future revenues through new accounts rather than current revenues from
existing accounts. Unusual gains and charges are excluded because we believe they are not likely to be
indicative of the ongoing operations of our business. Operating margin should be considered in addition
to, rather than as a substitute for, pre-tax income and net income.
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www.amtd.com
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