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ANNUAL
SHAREHOLDERS
MEETING
February 27, 2007
TD AMERITRADE, Inc., member NASD/SIPC.
TD AMERITRADE is a trademark jointly owned
by TD AMERITRADE IP Company, Inc. and
The Toronto-Dominion Bank. © 2007
TD AMERITRADE IP Company, Inc.
All rights reserved. Used with permission.
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, stock price or anticipated benefits of the TD Waterhouse
transaction, 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, integration
associated with the TD Waterhouse transaction, realization of synergies from the
TD Waterhouse transaction, 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 Dec. 7, 2006 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.
2
Agenda
• Record Performance
• Stock Performance
• Our Strategy
• Looking Forward
3
RECORD
PERFORMANCE
4
4th Record Year
Ex-Inv. Gains(1)
• EPS
$0.95
$0.87*
• Non-GAAP EPS(1) N/A
$1.02*
• Net Income
$527M
$483M*
• Net Revenues
$1.8B
$1.8B*
• Pre-Tax Income
$857M 48% $788M* 44%
• EBITDA(1)
N/A
$933M* 52%
– Debt Pay-Down
N/A
$497M
– Stock Repurchase N/A
$67M
(2)
• ROE
33%
30%
Reported
*Denotes Records(3)
5
(1) See attached reconciliation of financial measures.
(2) Annualized return on average stockholders' equity.
(3) All records referenced exclude a one-time gain realized on the sale of the Company’s
investment in Knight Capital Group, Inc. when comparing to the second fiscal quarter of 2006.
Best Quarter in History - Dec Q ‘06
• EPS
(1)
• Non-GAAP EPS
• Net Income
• Net Revenues
• Pre-Tax Income
(1)
• EBITDA
– Debt Pay-Down
– Stock Repurchase
(2)
•ROE
$0.24*
$0.28*
$146M*
$535M
$239M* 45%
$291M* 54%
$6M
$130M
34%
*Denotes Records(3)
6
(1) See attached reconciliation of financial measures.
(2) Annualized return on average stockholders' equity.
(3) All records referenced exclude a one-time gain realized on the sale of the Company’s
investment in Knight Capital Group, Inc. when comparing to the second fiscal quarter of 2006.
STOCK
PERFORMANCE
7
5-Year Stock Performance
350%
300%
250%
AMTD
200%
Broker
Dealer
Index
150%
100%
S&P Fin.
S&P 500
50%
0%
-50%
Feb-02
8
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
1-Year Stock Performance
January
$6 Dividend
40.00
%
30.00
%
20.00
%
10.00
%
April
New Pricing
October
B of A $0
Broker
Dealer
Index
S&P Fin.
S&P 500
0.00
%
-10.00
%
-20.00
%
-30.00
%
AMTD
-40.00
%
%
-50.00
Jan-06
9
Feb-07
‘07 Outlook – EPS CAGR
EARNINGS PER SHARE (1)
$1.10
$0.81
$0.87
$0.64
$0.32
FY ‘03
FY ‘04
FY ‘05
FY ‘06
Actual (2)
10
(1) Earnings are per diluted share.
(2) Excludes Investment gains/losses. The corresponding GAAP EPS amounts including
investment gains/losses are as follows: FY ‘03 EPS = $0.25, FY ‘04 EPS = $0.66,
FY ‘05 EPS = $0.82, FY ‘06 EPS = $0.95. See reconciliation of financial measures.
FY ‘07
Outlook Midpoint
Financial Strength
50%
PRE-TAX
MARGINS
35% ROE
FY ‘03
FY ‘04
FY ‘05
FY ‘06
Actual (2)
11
(1) Earnings are per diluted share.
(2) Excludes Investment gains/losses. The corresponding GAAP EPS amounts including
investment gains/losses are as follows: FY ‘03 EPS = $0.25, FY ‘04 EPS = $0.66,
FY ‘05 EPS = $0.82, FY ‘06 EPS = $0.95. See reconciliation of financial measures.
FY ‘07
Outlook Midpoint
Credibility
Accounts
Pre-Tax Margins
Client Assets
Market Cap
ROE(2)
12
Spring ‘01(1)
Current
Change
1.5M
6.3M
> 300%
(-)
45%
∞
$24B
$278B
> 1,000%
$700M
$11B
> 1,500%
(-)
34%
∞
(1) Spring ‘01 is as of the March Q, 2001 ended 3/30/01, except for Market Cap,
which is based on closing price for April 4, 2001.
(2) Excluding the gain on the disposal of Knight Investment.
OUR
STRATEGY
13
Why We Exist
Three Priorities: Clients - Shareholders - Associates
Three Objectives: Growth - Retention - Yield
Three Client Segments: Active - Long-Term - RIA
14
Priorities
• Integration
• Client Segmentation Strategy
15
Integration Progress
• 2006
–
–
–
–
Investor Services (Call Center) Consolidation
Increased TPD Capacity - Now 600K
Completed MMDA Sweep & Extension
Divested Non-Core Businesses
• 2007
– New Web Experience
– Clearing Conversion Jun Q
• ‘06 – ‘08 Philosophy
16
Client Segmentation Strategy
Market
Opportunity
Strategy
Unique set
of Assets
to Succeed
17
Active
Trader
Long-Term
Investor
RIA
Maintain #1
Position
Leverage
Technology
Advocacy
& Service
Low Cost Scalable Platform, Branches,
People & Sales
Strategy Execution
• Marketing
• Service
Marketing and Sales
Service and Sales
• Brand Extension into Long-Term Investing
18
Retail Opportunity
Trades(1)
Client Assets(1)
TDA 26%
Online 74%
19
TDA 10%
Online 90%
(1) Source: Company reports for Q ended 12/31/06. Online competitors include Charles Schwab,
E*Trade Financial, Fidelity Investments, OptionsXpress, Scottrade and TD AMERITRADE.
Retail Opportunity
Client Assets
Full
Commission
64%
(1)
Share of Wallet
TDA Mass Affluent Client Base
TDA 4%
Online 32%
20
(2)
(1) Source: Company websites and internal company estimates.
(2) Source: IXI data and internal company estimate for Q ended 12/31/06.
100% ~ $1.7T
TDA 12%
Revenue Transition
FY ‘03 = $0.7B
Asset
Based
23%
FY ‘07(1) = $2.2B
Asset
Based
60%
$1.3B Asset Based Revenues > $1.1B Total Expenses(1)
21
(1) Based upon the midpoint of the January 16, 2007 outlook statement.
LOOKING
FORWARD
22
TD AMERITRADE
• Challenge
• ‘06 – ‘08 Philosophy
• Strong Operating Leverage
– Leading Pre-Tax Margins and ROE
• Scalable Technology
• 4 Record Years, Record Dec Q
• AMTD
23
ANNUAL
SHAREHOLDERS
MEETING
February 27, 2007
TD AMERITRADE, Inc., member NASD/SIPC.
TD AMERITRADE is a trademark jointly owned
by TD AMERITRADE IP Company, Inc. and
The Toronto-Dominion Bank. © 2007
TD AMERITRADE IP Company, Inc.
All rights reserved. Used with permission.
RECONCILIATION OF
FINANCIAL MEASURES
25
Reconciliation of Financial Measures
Quarter Ended
Dec. 31, 2006
Pre-tax Income Excluding Investment Gains/Losses (1)
Pre-tax income, as reported
Adjustments:
Gain on sale of investments
Fair value adjustments of investment-related
derivative instruments
Pre-tax income excluding investment gains/losses
Net Income Excluding Investment Gains/Losses (1)
Net income, as reported
Adjustments:
Gain on sale of investments
Fair value adjustments of investment-related
derivative instruments
Income tax effect of above adjustments
Net income excluding investment gains/losses
EPS Excluding Investment Gains/Losses (1)
Diluted earnings per share, as reported
Adjustments on a per share basis, net of income tax effect:
Gain on sale of investments
Fair value adjustments of investment-related
derivative instruments
EPS excluding investment gains/losses
26
$
239,371
Sept. 29, 2006
$
(614)
857,305
Fiscal Year Ended
Sept. 30, 2005
Sept. 24, 2004
$
(81,422)
553,492
$
-
459,087
Sept. 26, 2003
$
-
180,689
-
$
238,757
$
11,703
787,586
$
(8,315)
545,177
$
(17,930)
441,157
$
46,668
227,357
$
145,633
$
526,759
$
339,753
$
282,818
$
108,641
(614)
(81,422)
-
-
-
$
(8,315)
3,345
334,783
(17,930)
7,459
272,347
46,668
(18,667)
136,642
$
$
230
145,249
$
11,703
26,145
483,185
$
0.24
$
0.95
-
$
0.24
(0.09)
$
In thousands, except percentages and per share amounts (Unaudited)
0.01
0.87
0.82
$
$
-
$
(0.01)
0.81
0.66
$
$
-
$
(0.02)
0.64
0.25
-
$
0.07
0.32
Reconciliation of Financial Measures
Quarter Ended
Dec. 31, 2006
Non-GAAP Net Income (2)
Net income, as reported
Adjustments:
Amortization of acquired intangible assets
Interest on borrowings
Gain on sale of investments
Fair value adjustments of investment-related
derivative instruments
Income tax effect of above adjustments
Non-GAAP net income
Non-GAAP EPS (2)
Diluted earnings per share, as reported
Adjustments on a per share basis, net of income tax effect:
Amortization of acquired intangible assets
Interest on borrowings
Gain on sale of investments
Fair value adjustments of investment-related
derivative instruments
Non-GAAP earnings per share
27
$
$
$
145,633
Sept. 29, 2006
$
$
339,753
$
282,818
Sept. 26, 2003
$
108,641
13,824
31,117
(614)
42,286
93,988
(81,422)
13,887
1,967
-
12,158
2,581
-
17,791
5,076
-
(16,968)
172,992
11,703
(26,015)
567,299
(8,315)
(2,903)
344,389
(17,930)
1,244
280,871
46,668
(27,814)
150,362
0.24
$
$
0.01
0.03
-
$
526,759
Fiscal Year Ended
Sept. 30, 2005
Sept. 24, 2004
0.28
0.95
$
$
0.04
0.11
(0.09)
$
In thousands, except percentages and per share amounts (Unaudited)
0.01
1.02
0.82
$
$
0.02
-
$
(0.01)
0.83
0.66
$
$
0.02
-
$
(0.02)
0.66
0.25
0.02
0.01
-
$
0.07
0.35
Reconciliation of Financial Measures
Quarter Ended
Dec. 31, 2006
$
% of Rev.
EBITDA and EBITDA Excluding Investment Gains (3)
EBITDA excluding investment gains
Plus: Gain on sale of investments
EBITDA
Less:
Depreciation and amortization
Amortization of acquired intangible assets
Interest on borrowings
Pre-tax income
28
$
$
290,729
614
291,343
54.3%
0.1%
54.4%
(7,031)
(13,824)
(31,117)
239,371
(1.3%)
(2.6%)
(5.8%)
44.7%
In thousands, except percentages and per share amounts (Unaudited)
Fiscal Year Ended
Sept. 29, 2006
$
% of Rev.
$
$
933,356
81,422
1,014,778
(21,199)
(42,286)
(93,988)
857,305
51.8%
4.5%
56.3%
(1.2%)
(2.3%)
(5.2%)
47.5%
Note: The term "GAAP" in the following explanations refers to generally accepted accounting principles in the United States.
1) Pre-tax income, net income and earnings per share (EPS) 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
investment-related gains and losses. We consider pre-tax income, net income and EPS 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, net income and EPS excluding investment gains/losses should be considered in addition to, rather than as a
substitute for, GAAP pre-tax income, net income and EPS.
2) Non-GAAP net income and Non-GAAP 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, interest on borrowings, investment-related gains and losses and any unusual gains or charges.
We consider Non-GAAP net income and Non-GAAP EPS important measures 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. Amortization of acquired intangible assets are excluded because they are non-cash expenses that do not
require further cash investment. Interest on borrowings is excluded because we use these measures as an indicator of the
earnings available to service debt. Investment-related gains and losses and unusual gains and charges are excluded
because we believe they are not likely to be indicative of the ongoing operations of our business. Non-GAAP net income
and EPS should be considered in addition to, rather than as a substitute for, GAAP net income and EPS.
3) EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA excluding investment gains are
considered Non-GAAP financial measures as defined by SEC Regulation G. We consider EBITDA and EBITDA excluding
investment gains important measures 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 noncash effect of tangible asset depreciation and intangible asset amortization. EBITDA excluding investment gains also
eliminates the effect of investment-related gains that are not likely to be indicative of the ongoing operations of our
business. EBITDA and EBITDA excluding investment gains should be considered in addition to, rather than as a substitute
for, pre-tax income, net income and cash flows from operating activities.
29