shareholder meeting february 10, 2004
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Shareholder Meeting February 10, 2004. 1. Safe Harbor Statement. - PowerPoint PPT PresentationTRANSCRIPT
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Shareholder MeetingFebruary 10, 2004
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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>>
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Management Team
Phylis Esposito
Executive Vice President
Chief Strategy Officer
Mike Feigeles
Executive Vice President
Special Projects
Pete Ricketts
President,
Private Client Division
Randy MacDonald
Executive Vice President
Chief Financial Officer
Kurt Halvorson
Executive Vice President
Chief Administrative
Officer
Asiff Hirji
Executive Vice President
Chief Information Officer
Ellen Koplow
Executive Vice President
General Counsel
Anne Nelson
Executive Vice President
Chief Marketing Officer
Almost 190 years
combined financial services
experience
Joe MogliaChief Executive
Officer
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Record 2003 Highlights
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$0.32 EPS
$264M EBITDA
$188M Synergies = $245M Run-Rate
$55B Client Assets
(1) See attached reconciliation of financial measures.
(1)
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Record Dec 03 QTR
Highlights>>
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(1) See attached reconciliation of financial measures.
Net income $72M, $0.17 EPS
EBITDA $127M, 56% of net revenues
Pre-tax income $120M, 53%
Operating margin$143M, 63%
Net revenues of $226M
(1)
(1)
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(1) For the quarter ended 12/01 and 12/03 based on Company reports.
(2) See attached reconciliation of financial measures
12/03
Change
12/01
Qtr(1)
$226.4M175K
109%101%
$108.2M87K
RevenuesTradesPer Day
175K
109%101%
$108.2M87K
RevenuesTradesPer Day
$71.9M
700%
$9.0M
Net Income
$83.4M
10%
$75.8M
Expenses(2) Excluding
Advertising
$226.4M175K
109%101%
$108.2M87K
RevenuesTradesPer Day
$6B
600%
$1B
Market Cap
$83.4M
10%
$75.8M
Expenses(2)
ExcludingAdvertising
$226.4M175K
109%101%
$108.2M87K
RevenuesTradesPer Day
$71.9M
700%
$9.0M
Net Income
POWER OF OPERATING LEVERAGE AND SCALABILITY
$83.4M
10%
$75.8M
Expenses (2) Excluding
Advertising
175K
109%101%
$108.2M87K
RevenuesTradesPer Day
$226.4M
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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.
#1 PRE-TAX MARGIN
162K 92K 175K
53%
28%
21%
Schwab E*Trade AmeritradeAvg. Daily Trades(1)
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STRONG ROE GROWTH
(1) Annualized earnings for the period October-January FY 04.
-38.2%FY 01
11.9%
33.8%
FY 02 FY 03 FY 04E(1)
-5.5%
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(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.
#1: RETAIL EQUITY TRADES
AMTDJAN 04
PER DAY(OOOs)
92 95
119
162175
254
ET(1) FIDELITY TD SCH(2) AMTD
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STRONG CLIENT ASSET GROWTH
95% GROWTH
$28.5
$59.5$8.6
$12.9
As of Jan. 30, 2004
Client Cash & Money Market Funds
($ IN BILLIONS)
$37.1
$72.4
As of Dec. 31, 2002
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LEADER IN M&A
(1) M&A transactions in Online Brokerage Industry since 07/31/01.
Announced Company
NOV. O3
OCT. 03
JUNE 03
APR. 02
JULY 01
Bidwell
BrokerageAmerica
MDB.com
Datek
NDB.com
5 OF 13 IN INDUSTRY
(1)
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OVER-DELIVERED SYNERGIES
$164M
OriginalEstimate
DATEKPRE-TAX
SYNERGIES
$245M
Achieved - Run-Rate 4Q 03
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(1) See attached reconciliation of financial measures.
SIGNIFICANT OPERATING LEVERAGE
RevenuesCommissionsNet Interest SpreadOther Revenue
Net RevenueVariable ExpenseFixed Expense
Operating Expense Adjusted(1)
Operating Margin(1)
Advertising
Pre-tax Income
$ 13.504.751.83
67%24%
9%
$ 20.073.014.40
7.41
15%22%
37%
$ 12.66
2.04
$ 10.62
63%
10%
53%
PER TRADE ANALYSIS
DEC. 03 QTR.
% OF REVENUE
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GrowthOpportunities
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Expand Leading ActiveTrader Position
Attract Long-TermInvestors
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SHARE REPURCHASE
(1) Weighted average share price since inception of program on 09/19/02. (2) Share price as of close 1/30/04.
27.3M
27.3M
Shares
$8.29(1)
$15.8(2)
$226M
$433M
$207M
Price Value
Repurchased
Market Price
Shareholder Return
91%
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37 - JUNE 02
124 - JAN. 04
Daily Avg. Share VolumeJUN Q 02: 0.9M sharesDEC Q 04: 4.8M shares
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Institutional Investor
Note: Excludes the PEIs and Intrust 401(k) provider. Data from 6/30/02 and 1/20/04.
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Analyst Firm Recommendation
Credit Suisse First Boston Outperform
Friedman, Billings, Ramsey Outperform
Keefe, Bruyette & Woods Outperform
Raymond James Outperform
Sandler O’Neill Buy
Smith Barney Buy
Merrill Lynch Neutral
ANALYST COVERAGE
Note: data from First Call Report 2/09/04.
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STRONG EPS GROWTH
$0.53
($0.22)(1)
$0.12(1)
$0.32
FY 01 FY 02 FY 03 FY 04E
(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.
$0.79
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SHAREHOLDER RETURN:SIGNIFICANT OUTPERFORMANCE
LEH MWD MER JEF LM ET
173%
AMTDGSRJFBSCSCHAGE
50%
100%
150%
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
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In thousands, except percentages, per trade measures and EPS
Qtr Ended Dec. 31, 2001
$ Per Trade % of Rev. $
Operating Expenses, Adjusted (2)
Operating Expenses, Adjusted 83,418$ 7.41$ 36.8% 75,845$ Plus: Advertising 23,066 2.04 10.2% 17,105Total expenses 106,484$ 9.45$ 47.0% 92,950$
Qtr Ended Dec. 31, 2003
$ % of Rev. $ % of Rev.
Operating Expenses, Adjusted (2)
Operating Expenses, Adjusted 389,512$ 54.6% 362,489$ 79.7%Less: Gain on sale of investment - - (9,692) -2.1%Plus: Restructuring and asset impairment charges 5,991 0.8% 38,268 8.4%Plus: Debt conversion expense - - 62,082 13.7%Plus: Advertising 90,394 12.7% 147,975 32.5%Total expenses 485,897$ 68.1% 601,122$ 132.2%
Fiscal Year EndedSept. 26, 2003 Sept. 28, 2001
RECONCILIATION OF FINANCIAL MEASURES
Sept. 27, Sept. 28,2002 2001
0.12$ (0.22)$ (0.25) (0.10)
(0.20) - 0.03
EPS from Ongoing Operations (1)
Earnings (loss) per share from ongoing operationsLess: Restructuring and asset impairment chargesLess: Debt conversion expensePlus: Gain on sale of investmentBasic and diluted earnings (loss) per share (0.13)$ (0.49)$
Fiscal Year Ending
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In thousands, except percentages and per trade measures
Fiscal Year Ended
Sept. 26, 2003
$
EBITDA 126,750$ 264,141$
Less:Depreciation and amortization (5,957) (31,708)
Interest on borrowings (837) (5,076)
Pre-tax income 119,956$ 227,357$
EBITDA (3) Qtr Ended
Dec. 31, 2001
$
$ % of Rev.
Operating margin 142,842$ 63.1%
Less:
Advertising (23,066) -10.2%
Gain/(loss) on disposal of property 180 0.1%
Pre-tax income 119,956$ 53.0%
Qtr Ended Dec. 31, 2003Operating Margin (4)
RECONCILIATION OF FINANCIAL 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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(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.
RECONCILIATION OF FINANCIAL MEASURES
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