1. Vanderbilt Investment Club
Jeremy Thames
Vanderbilt Investment Club
Thaxston McKee, Dean Sisun, Brian Alter, Michael Hite, Kalan Patel, Alex Roed, & Aimee Kawabata
“If only there was a business without the intricacies of a bank that could make money like a bank…”
- Someone not familiar with TD Ameritrade
Vanderbilt Investment Club

2. Vanderbilt Investment Club
Investment Thesis
Ultra High Quality Business
Efficient Asset Gatherer
Massive Operating Leverage
Relationship with TD Bank Gives Them NIM Upside Without the Capital Requirements of a Bank
Advised Asset Business is Growing Very Quickly and Provides Earnings at Very High Margins
Vanderbilt Investment Club

3. Vanderbilt Investment Club
What Ameritrade Does
Online Brokerage Platform
Trading Stocks, Options, ETFs, Mutual Funds, etc.
For Individuals and RIAs
Advised Portfolios for Clients
Cash Management through Sweep Services to TD Bank
$653 Billion in Client Assets
Vanderbilt Investment Club

4. Vanderbilt Investment Club
Management Team
CEO – Fred Tomczyk, since 2008, came over from TD Bank, over half of comp in RSUs
CFO – Bill Gerber, at AMTD since 1999, more than half of comp in RSUs
Joe Ricketts – Ricketts family owns 11% of the company, Joe stepped down from board in 2011
Vanderbilt Investment Club

5. Vanderbilt Investment Club
Capital Allocation
Debt/EBITDA levels have been between 0.8 and 1.2 since pre-crisis
Aggressive Buybacks since 2010
18.9 million shares remaining under authorization
Buybacks will remain a part of the allocation strategy
Vanderbilt Investment Club

6. Relationship with TD Bank
TD Bank owns 41% of Ameritrade
Stake has increased due to buybacks
Ameritrade sweeps idle client cash to TD Bank
TD Bank pays a fee based on the spread they can earn on that cash
Ameritrade makes money like a bank but doesn’t have to hold capital against deposits
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7. Relationship with TD Bank
TD Bank pays Ameritrade an aggregate marketing fee based on the weighted average yield earned on the client insured deposit account balances, less the actual interest paid to clients
Interest paid to clients is based on the nature and scope of the client’s relationship with Ameritrade
Essentially, TD Bank pays Ameritrade to gather deposits for them
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8. Relationship with TD Bank
TD Bank’s ownership was capped at 42%, now 45%
New agreement gives AMTD flexibility to continue buying back stock
TD Bank must liquidate ownership stake in excess of 45%
Bottom line: the buybacks can continue!
Vanderbilt Investment Club

9. Vanderbilt Investment Club
Revenue: Commissions
Client Trading
$9.99 per Trade
Deals for High Volume Traders
43% of 2014 Revenue
Trading Activity is Best in Class
Market Leader in Trading Activity per Client Account
Trades per Account is flat since 2009, Competitors down
Ameritrade has shown resistance to secular trend of less trading
Vanderbilt Investment Club

10. Vanderbilt Investment Club
Attracting Traders
Best in Class Platform
Rated best online stock broker 3 years running
Even with higher per trade fees
ThinkorSwim Platform for High Volume Traders
Lots of features that Traders seem to love
“The broker charges $9.99 per trade a rate that can be up to two times more than some of the cheaper discount brokers but the value and quality delivered is so superior that is easily justifies the higher price tag. Our TD Ameritrade review shows they are the real deal.”
- StockBrokers.com
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11. Revenue: Interest Margin
Client Cash Management
Sweep Feature to TD Bank
Money Market Funds or Deposit Accounts
TD Bank pays AMTD based on Interest Spread
Securities Lending and Margin Lending
In Current Rate Environment, this segment is hugely Under-Earning
Vanderbilt Investment Club

12. Vanderbilt Investment Club

13. Vanderbilt Investment Club
Revenue: Product Fees
Advised Assets Growing faster than 20%
Fees are Holding Stable at ~24 bps
Secular Tailwind Towards Advised Portfolios
ETF and Mutual Fund Trading Platform
Charge Funds to be Listed on their Platform
Tremendous Bargaining Power
Ultra High Margin Business
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14. Valuation: Normalization
TD Ameritrade is worth a multiple of its normalized earning power
Normalized Trading Commissions are lower as a % of assets than today as the secular headwind continues
Normalized Interest Margin is at the level it was in as a % of assets, implies about a 3% Fed Funds Rate
Normal Product Fees assumes long run level of 35% of assets under advice
Total Client Asset growth slows to long term rate of 7%
Vanderbilt Investment Club

15. Vanderbilt Investment Club
Valuation: 12.5x EBITA
Almost all fixed cost business
> 400% Returns on Capital
Upside of a bank without the mess
Excellent management team that loves buying back stock
Long Term Invested Assets grow at 7%, huge advantage for Ameritrade
Vanderbilt Investment Club

16. Vanderbilt Investment Club
Risks
Pricing Pressure in the Trading Commissions Space
Very Competitive Industry, but Scale is Everything
Dependence on Relationship with TD Bank
ZIRP is Weird
Vanderbilt Investment Club