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TD Ameritrade Reports Strong Fiscal Year 2019 Earnings

OMAHA, Neb.--(BUSINESS WIRE)--

GAAP Diluted EPS $3.96; Non-GAAP Diluted EPS $4.13(1)

Net New Client Assets of $93B, 7% Annualized Growth Rate

Capital Return of 72% of Non-GAAP Net Income

Move to Zero Commissions Expected to Have 15-16% Adverse Impact on Net Revenues

TD Ameritrade Holding Corporation (AMTD) has released results for its 2019 fiscal year.

The company’s results for the fiscal year ended Sept. 30, 2019 include the following:(2)

  • Record net new client assets of approximately $93 billion, a year-over-year growth rate of 7 percent
  • Record average client trades per day of approximately 860,000, up 6 percent year over year
  • Record net revenues of $6 billion, up 10 percent year over year
  • Ending client assets of approximately $1.3 trillion, up 2 percent year over year
  • $3.96 in GAAP earnings per diluted share, up 53 percent year over year, on net income of $2.2 billion
  • $4.13 in Non-GAAP earnings per diluted share,(1) up 24 percent year over year
  • Pre-tax GAAP income of $2.9 billion, or 49 percent of net revenues, versus 35 percent of net revenues for the comparable prior period
  • Ending interest rate-sensitive assets of $160 billion, up 9 percent year over year

“Fiscal 2019 was another good year for TD Ameritrade, as we enhanced the investing experience for our clients and delivered strong results across all core metrics. We saw record trading in the fiscal year, averaging 860,000 trades per day, and gathered a record $93 billion in net new client assets, driven by strong asset gathering from both our institutional and retail channels,” said Tim Hockey, president and chief executive officer, TD Ameritrade. “It was a year of significant accomplishment and change as we took full advantage of our scale to deliver on our financial targets, diversify revenue, and further increase our operational efficiency.”

“Despite the volatile year in the market and interest rate variations, our strong full-year results demonstrate the strength of the diversity of our business,” said Steve Boyle, executive vice president and chief financial officer, TD Ameritrade. “Integrating greater efficiency and long-term resiliency throughout our business has allowed us to keep expense growth in check, making it easier for us to respond to shifting market and competitive dynamics.”

Fourth Quarter 2019 Results
TD Ameritrade also released results for the quarter ended Sept. 30, 2019, which include the following: (2)

  • Net revenues of $1.6 billion, 65 percent of which were asset-based
  • $1.00 in GAAP earnings per diluted share, up 25 percent year over year, on net income of $551 million
  • $1.05 in Non-GAAP earnings per diluted share,(1) up 14 percent year over year
  • Pre-tax GAAP income of $741 million, or 48 percent of net revenues, versus 44 percent of net revenues versus prior year
  • Net new client assets of approximately $22 billion, an annualized growth rate of 7 percent
  • Average client trades per day of approximately 837,000, up 5 percent year over year

Company Hosts Conference Call
TD Ameritrade will hold its September Quarter conference call tomorrow morning, Oct. 22, 2019, at 8:30 a.m. EDT (7:30 a.m. CDT) to take questions from analysts. Participants may listen to the conference call by dialing 866-393-4306. Management’s remarks and a company overview are now available on the "Investor Relations" page of www.amtd.com under the “Earnings" header. Conference call participants are encouraged to reference these materials prior to the call.

A replay of the phone call will be available by dialing 855-859-2056 and entering the Conference ID 9987126 beginning at 11:30 a.m. EDT (10:30 a.m. CDT) on Oct. 22, 2019. The replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on Oct. 29, 2019. A transcript of the call will be available on the company’s corporate website, www.amtd.com, via the “Earnings" page beginning Wednesday, Oct. 23, 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.

Expected Impacts of Zero Commision Environment
Effective Oct. 3, 2019, TD Ameritrade eliminated commissions for its online exchange-listed stock, ETF and option trades, moving from $6.95 to $0. As previously disclosed, the company expects this decision to have a revenue impact of approximately $220-240 million per quarter, or approximately 15-16 percent of net revenues, based on June Quarter fiscal 2019 revenue.

“We were well positioned to quickly respond and are entering the new zero-commission environment from a position of strength. TD Ameritrade has been taking market share with a premium price point, and now with zero commissions, we’re even more confident in our competitive position and total value proposition. With price no longer in the mix, we will compete on the value of our offering with an exceptional client experience via our award-winning platforms and investor education, cutting-edge technology, and a full range of offerings,” Hockey continued. “We are working diligently to take advantage of new revenue opportunities and control expenses to replace the lost economics.”

Regarding fiscal year 2020 expectations, Boyle said: “The commission pricing changes implemented on October 3 represent near-term challenges for us. However, our focus is on balancing them with the long-term opportunity. Earnings are expected to decline in the first quarter of fiscal year 2020, but with a stronger competitive position, we expect to see stronger organic growth. TD Ameritrade is methodically working on new plans for profitable growth and will take measured strategic actions as needed. We will continue to invest in our business and expect results to provide significant shareholder value.”

$0 commission applies to online U.S. exchange-listed stocks, ETFs, and option trades. $0.65 per options contract fee applies to options trades, with no exercise or assignment fees. A $6.95 commission applies to online trades of over-the-counter (OTC) stocks which includes stocks not listed on a U.S. exchange.

Capital Management
During the 2019 fiscal year, the company paid $667 million in cash dividends, which included four quarterly dividends of $0.30 per share.

The company will increase its quarterly cash dividend by $0.01 per share for fiscal 2020 to $0.31, a 3 percent increase from fiscal 2019. It has declared a $0.31 per share quarterly cash dividend, payable on Nov. 19, 2019 to all holders of record of common stock as of Nov. 5, 2019.

During the September Quarter, the company paid $295 million in cash to repurchase 5.8 million shares, and the board authorized an additional 30 million shares for repurchases. As of Sept. 30, 2019, the company has 32 million shares remaining for share repurchases under its stock repurchase programs.

Fiscal 2020 Outlook
The company has also released its outlook for the 2020 fiscal year, which reflects a range of $4.9 billion to $5.3 billion in revenue and a range of $2.8 billion to $3.0 billion of GAAP operating expense.

More information on the fiscal 2020 forecast is available in the company overview document, located on the "Investor Relations" page of www.amtd.com under the “Earnings" heading.

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.

Forward-Looking Statements Subject to Risks, Uncertainties and Assumptions
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, the forward-looking statements contained in this document include all statements made under the captions “Expected Impacts of Zero Commission Environment” and “Fiscal 2020 Outlook” above.

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. In particular, we need to introduce new products and services and update or enhance existing products and services to remain competitive. Inability to do so could have adverse effects on our business and results of operations. Other risks, uncertainties and assumptions that could cause our actual results or performance to differ materially from those contained in our forward-looking statements include, but are not limited to: economic, social and political conditions and other securities industry risks; interest rate risks; liquidity risks; client and counterparty credit risks; clearing function risks; systemic risk; aggressive competition; information system risks, network security risks; investment advisory services risks; merger and acquisition risks; external service provider risks; employee misconduct risks; LIBOR phase-out risks; new laws, rules, regulations and regulatory guidance affecting our business; net capital requirements; extensive regulation and regulatory uncertainties; and litigation, investigations and proceedings involving our business. We also are subject to other risks, uncertainties and assumptions set forth under Item 1A. – Risk Factors of the Company's annual report on Form 10-K for the fiscal year ended Sept. 30, 2018 and in other periodic reports of the Company filed with the SEC after that Form 10-K, as well as the risk that our risk management practices may leave us exposed to unidentified or unanticipated risks.

Our forward-looking statements speak only as of the date on which they were made. We undertake no obligation to publicly update or revise such statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

Source: TD Ameritrade Holding Corporation

About TD Ameritrade Holding Corporation
TD Ameritrade provides investing services and education to approximately 12 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)

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

TD AMERITRADE HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
In millions, except per share amounts
(Unaudited)
   
  Quarter Ended Fiscal Year Ended
  Sept. 30, 2019 June 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
Revenues:  
Transaction-based revenues:  
Commissions and transaction fees  

$

502

$

477

 

$

482

$

2,002

 

$

1,969

Asset-based revenues:  
Bank deposit account fees  

 

437

 

421

 

 

392

 

1,717

 

 

1,541

Net interest revenue  

 

413

 

383

 

 

356

 

1,533

 

 

1,272

Investment product fees  

 

155

 

151

 

 

142

 

586

 

 

557

Total asset-based revenues  

 

1,005

 

955

 

 

890

 

3,836

 

 

3,370

Other revenues  

 

51

 

59

 

 

26

 

178

 

 

113

Net revenues  

 

1,558

 

1,491

 

 

1,398

 

6,016

 

 

5,452

Operating expenses:  
Employee compensation and benefits  

 

341

 

325

 

 

327

 

1,322

 

 

1,555

Clearing and execution costs  

 

48

 

59

 

 

40

 

209

 

 

189

Communications  

 

36

 

39

 

 

38

 

155

 

 

179

Occupancy and equipment costs  

 

67

 

67

 

 

76

 

267

 

 

302

Depreciation and amortization  

 

39

 

38

 

 

37

 

148

 

 

142

Amortization of acquired intangible assets  

 

32

 

31

 

 

34

 

125

 

 

141

Professional services  

 

75

 

71

 

 

73

 

294

 

 

303

Advertising  

 

85

 

80

 

 

75

 

298

 

 

293

Other  

 

55

 

61

 

 

63

 

197

 

 

350

Total operating expenses  

 

778

 

771

 

 

763

 

3,015

 

 

3,454

Operating income  

 

780

 

720

 

 

635

 

3,001

 

 

1,998

Other expense (income):  
Interest on borrowings  

 

37

 

37

 

 

26

 

144

 

 

99

Gain on business-related divestiture  

 

-

 

(60

)

 

-

 

(60

)

 

-

Loss on sale of investments  

 

-

 

-

 

 

-

 

-

 

 

11

Other, net  

 

2

 

-

 

 

-

 

(12

)

 

1

Total other expense (income)  

 

39

 

(23

)

 

26

 

72

 

 

111

Pre-tax income  

 

741

 

743

 

 

609

 

2,929

 

 

1,887

Provision for income taxes(1)  

 

190

 

188

 

 

155

 

721

 

 

414

Net income  

$

551

$

555

 

$

454

$

2,208

 

$

1,473

Earnings per share - basic  

$

1.01

$

1.01

 

$

0.80

$

3.98

 

$

2.60

Earnings per share - diluted  

$

1.00

$

1.00

 

$

0.80

$

3.96

 

$

2.59

Weighted average shares outstanding - basic  

 

547

 

552

 

 

567

 

555

 

 

567

Weighted average shares outstanding - diluted  

 

549

 

554

 

 

569

 

557

 

 

569

Dividends declared per share  

$

0.30

$

0.30

 

$

0.21

$

1.20

 

$

0.84

   
(1) The provision for income taxes was lower for the fiscal year ended September 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.
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions
(Unaudited)
     
  Sept. 30, 2019   Sept. 30, 2018
Assets:    
Cash and cash equivalents  

$

2,852

 

$

2,690

Segregated cash and investments  

 

8,684

 

 

3,185

Broker/dealer receivables  

 

2,439

 

 

1,374

Client receivables, net  

 

20,618

 

 

22,616

Investments available-for-sale, at fair value  

 

1,668

 

 

484

Goodwill and intangible assets  

 

5,431

 

 

5,556

Other  

 

2,094

 

 

1,615

Total assets  

$

43,786

 

$

37,520

Liabilities and stockholders' equity:    
Liabilities:    
Broker/dealer payables  

$

3,308

 

$

2,980

Client payables  

 

27,067

 

 

22,884

Long-term debt and other borrowings  

 

3,594

 

 

2,535

Other  

 

1,117

 

 

1,118

Total liabilities  

 

35,086

 

 

29,517

Stockholders' equity  

 

8,700

 

 

8,003

Total liabilities and stockholders' equity  

$

43,786

 

$

37,520

TD AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
(Unaudited)
 
  Quarter Ended   Fiscal Year Ended
  Sept. 30, 2019   June 30, 2019   Sept. 30, 2018   Sept. 30, 2019   Sept. 30, 2018
Key Metrics:          
Net new assets (in billions)  

$22.0

 

 

$19.5

 

 

$23.9

 

 

$93.1

 

 

$92.3

 

Net new asset growth rate (annualized)  

7

%

 

6

%

 

8

%

 

7

%

 

8

%

Average client trades per day  

837,009

 

 

824,600

 

 

795,104

 

 

862,158

 

 

811,110

 

Profitability Metrics:  

 

 

 

 

 

 

 

 

 

Operating margin  

50.1

%

 

48.3

%

 

45.4

%

 

49.9

%

 

36.6

%

Pre-tax margin  

47.6

%

 

49.8

%

 

43.6

%

 

48.7

%

 

34.6

%

Return on average stockholders' equity (annualized)  

25.6

%

 

26.5

%

 

22.6

%

 

26.3

%

 

19.2

%

Net profit margin  

35.4

%

 

37.2

%

 

32.5

%

 

36.7

%

 

27.0

%

EBITDA(1) as a percentage of net revenues  

54.5

%

 

56.9

%

 

50.5

%

 

55.6

%

 

41.6

%

Liquidity Metrics:  

 

 

 

 

 

 

 

 

 

Interest on borrowings (in millions)  

$37

 

 

$37

 

 

$26

 

 

$144

 

 

$99

 

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

22.9

 

 

22.9

 

 

27.2

 

 

23.2

 

 

22.9

 

Cash and cash equivalents (in billions)  

$2.9

 

 

$3.0

 

 

$2.7

 

 

$2.9

 

 

$2.7

 

Liquid assets(1) (in billions)  

$2.9

 

 

$2.8

 

 

$1.1

 

 

$2.9

 

 

$1.1

 

Transaction-Based Revenue Metrics:  

 

 

 

 

 

 

 

 

 

Total trades (in millions)  

53.2

 

 

51.9

 

 

49.7

 

 

215.1

 

 

202.8

 

Average commissions per trade  

$7.04

 

 

$6.92

 

 

$7.35

 

 

$7.02

 

 

$7.45

 

Trading days  

63.5

 

 

63.0

 

 

62.5

 

 

249.5

 

 

250.0

 

Order routing revenue (in millions)  

$128

 

 

$117

 

 

$117

 

 

$492

 

 

$458

 

Spread-Based Asset Metrics:  

 

 

 

 

 

 

 

 

 

Average bank deposit account balances (in billions)  

$111.5

 

 

$110.3

 

 

$113.1

 

 

$112.7

 

 

$116.7

 

Average interest-earning assets (in billions)  

35.3

 

 

32.6

 

 

29.6

 

 

32.2

 

 

30.8

 

Average spread-based balances (in billions)  

$146.8

 

 

$142.9

 

 

$142.7

 

 

$144.9

 

 

$147.5

 

Bank deposit account fee revenue (in millions)  

$437

 

 

$421

 

 

$392

 

 

$1,717

 

 

$1,541

 

Net interest revenue (in millions)  

413

 

 

383

 

 

356

 

 

1,533

 

 

1,272

 

Spread-based revenue (in millions)  

$850

 

 

$804

 

 

$748

 

 

$3,250

 

 

$2,813

 

Avg. annualized yield - bank deposit account fees  

1.54

%

 

1.51

%

 

1.36

%

 

1.50

%

 

1.30

%

Avg. annualized yield - interest-earning assets  

4.58

%

 

4.65

%

 

4.70

%

 

4.69

%

 

4.07

%

Net interest margin (NIM)  

2.27

%

 

2.23

%

 

2.05

%

 

2.21

%

 

1.88

%

           
(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, 2019   June 30, 2019   Sept. 30, 2018   Sept. 30, 2019   Sept. 30, 2018
Client Account and Client Asset Metrics:          
Funded accounts (beginning of period)  

11,876,000

 

 

11,763,000

 

 

11,399,000

 

 

11,514,000

 

 

11,004,000

 

Funded accounts (end of period)  

11,971,000

 

 

11,876,000

 

 

11,514,000

 

 

11,971,000

 

 

11,514,000

 

Percentage change during period  

1

%

 

1

%

 

1

%

 

4

%

 

5

%

Client assets (beginning of period, in billions)  

$1,306.6

 

 

$1,297.1

 

 

$1,229.6

 

 

$1,297.5

 

 

$1,118.5

 

Client assets (end of period, in billions)  

$1,327.7

 

 

$1,306.6

 

 

$1,297.5

 

 

$1,327.7

 

 

$1,297.5

 

Percentage change during period  

2

%

 

1

%

 

6

%

 

2

%

 

16

%

Net Interest Revenue:          
Segregated cash:          
Average balance (in billions)  

$7.6

 

 

$5.7

 

 

$3.1

 

 

$5.5

 

 

$6.8

 

Average annualized yield  

2.10

%

 

2.37

%

 

2.00

%

 

2.20

%

 

1.37

%

Interest revenue (in millions)  

$41

 

 

$34

 

 

$16

 

 

$123

 

 

$95

 

Client margin balances:          
Average balance (in billions)  

$20.4

 

 

$20.6

 

 

$22.0

 

 

$20.6

 

 

$19.8

 

Average annualized yield  

4.98

%

 

5.19

%

 

4.85

%

 

5.14

%

 

4.58

%

Interest revenue (in millions)  

$259

 

 

$271

 

 

$273

 

 

$1,075

 

 

$920

 

Securities borrowing/lending:          
Average securities borrowing balance (in billions)  

$1.7

 

 

$1.3

 

 

$0.9

 

 

$1.1

 

 

$0.9

 

Average securities lending balance (in billions)  

$3.3

 

 

$3.0

 

 

$3.0

 

 

$2.8

 

 

$2.9

 

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

$91

 

 

$54

 

 

$54

 

 

$248

 

 

$222

 

Other cash and interest-earning investments:          
Average balance (in billions)  

$5.6

 

 

$5.0

 

 

$3.6

 

 

$5.0

 

 

$3.3

 

Average annualized yield  

1.88

%

 

2.03

%

 

1.63

%

 

1.94

%

 

1.26

%

Interest revenue - net (in millions)  

$27

 

 

$26

 

 

$15

 

 

$98

 

 

$42

 

Client credit balances:          
Average balance (in billions)  

$19.6

 

 

$19.0

 

 

$19.2

 

 

$19.3

 

 

$20.4

 

Average annualized cost  

0.09

%

 

0.05

%

 

0.04

%

 

0.06

%

 

0.03

%

Interest expense (in millions)  

($5

)

 

($2

)

 

($2

)

 

($11

)

 

($7

)

Average interest-earning assets (in billions)  

$35.3

 

 

$32.6

 

 

$29.6

 

 

$32.2

 

 

$30.8

 

Average annualized yield  

4.58

%

 

4.65

%

 

4.70

%

 

4.69

%

 

4.07

%

Net interest revenue (in millions)  

$413

 

 

$383

 

 

$356

 

 

$1,533

 

 

$1,272

 

Investment Product Fee Revenue:          
Fee-based investment balances:          
Average balance (in billions)  

$267.1

 

 

$290.6

 

 

$271.6

 

 

$273.7

 

 

$252.5

 

Average annualized yield  

0.23

%

 

0.21

%

 

0.21

%

 

0.21

%

 

0.22

%

Investment product fee revenue (in millions)  

$155

 

 

$151

 

 

$142

 

 

$586

 

 

$557

 

           
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, except per share amounts
(Unaudited)
   
  Quarter Ended Fiscal Year Ended
  Sept. 30, 2019 June 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
Non-GAAP Net Income and Non-GAAP Diluted EPS (1)   Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS
   
Net income and diluted EPS - (GAAP)  

$

551

 

$

1.00

 

$

555

 

$

1.00

 

$

454

 

$

0.80

 

$

2,208

 

$

3.96

 

$

1,473

 

$

2.59

 

Non-GAAP adjustments:  
Amortization of acquired intangible assets  

 

32

 

 

0.06

 

 

31

 

 

0.06

 

 

34

 

 

0.06

 

 

125

 

 

0.22

 

 

141

 

 

0.25

 

Acquisition-related expenses  

 

-

 

 

-

 

 

-

 

 

-

 

 

61

 

 

0.11

 

 

-

 

 

-

 

 

445

 

 

0.78

 

Income tax effect of above adjustments  

 

(8

)

 

(0.01

)

 

(8

)

 

(0.02

)

 

(26

)

 

(0.05

)

 

(32

)

 

(0.05

)

 

(158

)

 

(0.28

)

Non-GAAP net income and non-GAAP diluted EPS  

$

575

 

$

1.05

 

$

578

 

$

1.04

 

$

523

 

$

0.92

 

$

2,301

 

$

4.13

 

$

1,901

 

$

3.34

 

   
  Quarter Ended Fiscal Year Ended
  Sept. 30, 2019 June 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
 

$

% of Net Rev.

$

% of Net Rev.

$

% of Net Rev.

$

% of Net Rev.

$

% of Net Rev.
EBITDA (2)  
Net income - (GAAP)  

$

551

 

 

35.4

%

$

555

 

 

37.2

%

$

454

 

 

32.5

%

$

2,208

 

 

36.7

%

$

1,473

 

 

27.0

%

Add:  
Depreciation and amortization  

 

39

 

 

2.5

%

 

38

 

 

2.5

%

 

37

 

 

2.6

%

 

148

 

 

2.5

%

 

142

 

 

2.6

%

Amortization of acquired intangible assets  

 

32

 

 

2.1

%

 

31

 

 

2.1

%

 

34

 

 

2.4

%

 

125

 

 

2.1

%

 

141

 

 

2.6

%

Interest on borrowings  

 

37

 

 

2.4

%

 

37

 

 

2.5

%

 

26

 

 

1.9

%

 

144

 

 

2.4

%

 

99

 

 

1.8

%

Provision for income taxes  

 

190

 

 

12.2

%

 

188

 

 

12.6

%

 

155

 

 

11.1

%

 

721

 

 

12.0

%

 

414

 

 

7.6

%

EBITDA - (non-GAAP)  

$

849

 

 

54.5

%

$

849

 

 

56.9

%

$

706

 

 

50.5

%

$

3,346

 

 

55.6

%

$

2,269

 

 

41.6

%

   
  As of
  Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
 

2019

 

2019

 

2019

 

2018

 

2018

Liquid Assets (3)  
Cash and cash equivalents - (GAAP)  

$

2,852

 

$

2,953

 

$

2,674

 

$

5,117

 

$

2,690

 

Less: Non-corporate cash and cash equivalents  

 

(2,478

)

 

(2,004

)

 

(2,020

)

 

(4,247

)

 

(2,307

)

Corporate cash and cash equivalents  

 

374

 

 

949

 

 

654

 

 

870

 

 

383

 

Corporate investments  

 

1,668

 

 

1,129

 

 

894

 

 

884

 

 

386

 

Excess regulatory net capital over management targets  

 

859

 

 

689

 

 

1,061

 

 

862

 

 

296

 

Liquid assets - (non-GAAP)  

$

2,901

 

$

2,767

 

$

2,609

 

$

2,616

 

$

1,065

 

   
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 GAAP 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.

 

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