Good day, everyone, and welcome to the TD Ameritrade Holding Corporation June quarter earnings results conference call. This call is being recorded. With us today from the company is President and Chief Executive Officer, Tim Hockey, and Chief Financial Officer, Steve Boyle. An audio file containing Mr. Hockey's and Mr. Boyle's comments on the quarter can be found on the company's corporate website, atmd.com, under Investor Relations. This call is intended to address related questions from investors and analysts. Questions from reporters can be directed to the company's media relations team or you can follow their Twitter handle @TDAmeritradePR, which will be live tweeting this morning's call.

This is Jeff Goeser, Director of Investor Relations for TD Ameritrade. I'm here with TD Ameritrade President and CEO, Tim Hockey, and CFO, Steve Boyle, to share with you some perspective on our third quarter fiscal 2018 earnings results. You can find everything related to today's announcement on our corporate website, amtd.com, including our press release, these prepared remarks, our company fact sheet and some frequently asked questions. Just click on Investor Relations. A reminder that the company fact sheet includes our Safe Harbor statement and the reconciliation of certain non-GAAP financial measures to our most comparable GAAP financial measures. Information about relevant risk factors can be found in our Forms 10-Q and 10-K, which are also available online. And now, I'd like to turn it over to Tim Hockey. Tim?

Thanks, Jeff. Well, with the third quarter now complete, all signs point to a strong finish for the fiscal year, with plenty of momentum as we prepare for 2019. A meaningful increase in net income, up 66%% from the previous quarter to $451 million, is indicative of the strength of our operations. Non-GAAP net income was $508 million or $0.89 in non-GAAP earnings per share. In addition to our organic growth, we are also seeing the expected benefit of our acquisition of Scottrade coming through. In our first full quarter following February's clearing conversion, we realized additional expense synergies in areas such as technology, retail and operations, many of which we achieved earlier than originally planned. And we're seeing early signs of success on generating incremental revenue opportunities as we get to know our new clients – and they get to know us. In planning for these opportunities, we looked at areas of the former Scottrade client experience that we can improve by filling gaps in service or enhancing the overall experience with more advanced tools, technology and education. We considered how a broader offering and experience might help us grow our share of wallet and increase client engagement across a broader array of investment products and trading platforms. We set goals over a five-year period to track our progress. And what we've seen so far, while still very early, is quite encouraging. Asset retention rates remain within expectations. While attrition has been elevated, we are seeing it normalize. We're seeing healthy client migration and adoption of our trading platforms. Change can be difficult, and many of the clients who transitioned from Scottrade had been with them for many years. They were used to very specific tools and functionality. So, our Trading Solutions team has gone over and above to help them through the change. Our trading platforms, particularly thinkorswim, are very customizable. And by spending a little one-on-one time with these clients, we can create an experience for them based on their preferences. We're learning a great deal from these interactions. So much so that we've created custom "Scottrade like" settings that can be more quickly and easily adopted by the clients who want them. This commitment to care is earning praise amongst our clients, enhancing their experience and strengthening our growing relationship with them. The markets just didn't have the same oomph that we saw in the March quarter. Intraday volatility receded, as did the VIX. While there's less in-and-out trading of equities, derivatives made up a larger piece of the pie, as clients who trade them tend to trade more consistently regardless of the market environment. As a result, client trading remained strong in the quarter, although it was down from a pretty frothy previous quarter. Trades averaged approximately 784,000 per day, up 54% from last year. July month-to-date, we are averaging 742,000 trades per day. Net new assets for the quarter were $20 billion, down 10% from last year. We're seeing good growth within the institutional channel, while retail results were impacted by lingering, but improving attrition due to the integration. Retail asset inflows were solid, as was new account growth. Overall, net new assets came in consistent with our expectations. Much of this is possible due to continued marketing effectiveness. We continue to lower our acquisition costs, allowing us to do more with the same or slightly increased spend. We are 100% focused on our clients. Their experience with us is our top priority and we are reprioritizing work internally, with additional investments to improve our digital client experience, focusing on simplicity and ease of doing business with us. Quarterly enhancements addressed the bank set-up process and money movement capabilities, among other things, with more on the way. This quarter, we launched our latest advice offering – Personalized Portfolios. This product addresses the needs of more affluent clients that are looking for more personalized support and advice, but want to remain self-directed. It effectively closes the experience gap between our more digital and robo products and AdvisorDirect, providing a smooth transition path for clients as their financial support needs evolve over time. Client feedback has been very positive. We completed the initial launch and sales force training in May. And while it's still early, results are encouraging. Goal planning conversations play an important role in helping our clients identify the solutions that best fit their needs. These more productive, meaningful conversations with our financial consultants are enhancing both relationships and overall satisfaction. And we're seeing more of this activity coming from the legacy Scottrade branches as financial consultants grow more familiar and adept at introducing these solutions to clients. Fiscal year to-date, completed goal plans are up 42% from the same three quarters in 2017. On the Institutional front, our focus on delivering exceptional service and cutting-edge technology to independent advisors continues to pay off. Growth from all advisor segments – new, existing, and breakaway – contributed to strong asset gathering. We continue to attract new advisors to our platform. Breakaway broker additions were up 33% from last year and the sales pipeline remains robust. We continue to enhance Veo One, adding new features addressing client feedback and growing our number of vendor integrations. Our Model Market Center, which gives advisors access to third-party asset manager models and strategies, continues to expand as well. We've seen healthy interest since our initial launch, which included a diverse line-up of free models for advisors to choose from. Our next enhancement will be to add paid models to the platform, which will enhance the selection for our clients, and provide us with the potential to earn incremental revenue that we will look to grow over time. Enhancements made earlier this year to our ETF Market Center continue to pay off. Revenue through the third quarter is exceeding expectations. This is a competitive space, and the breadth and quality of funds in our offering has proven to be attractive among our clients. On the technology front, agility and efficiency continue to improve. We have transitioned 72% of our development teams to Agile methods, well on our way to our goal of 80% by year-end. And the cost per go live continues to drop. Focus areas for the coming year will include achieving further throughput gains and efficiencies, enabling more fluid sharing of data and information across the company, leveraging advanced technology to enhance our cyber security defenses and ongoing resiliency and capacity. Our teams remain focused on bringing the TD Ameritrade experience to the apps and platforms our clients use in their everyday lives. Our integration with Apple Business Chat earlier in the quarter has seen good traction, and our roadmap is filled with enhancements and new integrations that we hope to explore and bring to market soon. Being a client-first company means not just optimizing existing platforms and experiences, identifying dis-satisfiers and addressing known gaps and irritants. It also means staying ahead of the curve to test and learn from new opportunities that may shape or inspire the experiences of tomorrow. We're fiercely committed to both; and as always, we'll continue to update you on our progress. And now, over to Steve Boyle for the financial commentary. Steve?

Thanks, Tim. It was an excellent quarter as linked-quarter expense reductions drove record net income and EPS, and continued client engagement drove strong revenue. Commission revenue, excluding order routing revenue, declined by $60 million, due to 159,000 fewer trades per day following a record quarter. Order routing revenue was similarly strong at $119 million. Asset-based revenue of $859 million was up 3.5% sequentially, driven by a $31 million increase in margin revenue, and represented 62% of net revenue in the quarter. Net interest margin increased 11 basis points sequentially, primarily due to the strong growth in margin lending and higher interest rates. Client credit balances and bank deposit account, or BDA balances, were down versus the end of last quarter as new money was more than offset by strong client net buying of $28 billion. Our BDA net yield increased sequentially due to tailwinds from interest rates. Our BDA float versus fixed split percentage at the end of the quarter was 22 to 78. The $2 billion of excess float at the beginning of the quarter was absorbed by clients' continued strong buying. The current overall duration is 2.0 years as most extensions during the quarter were at the 5-year, given that the spread between the 5 and 7-year point in the curve is relatively small. Over the next 12 months, about $1.2 billion in BDA balances mature monthly, with the rate earned on extensions expected to continue to exceed maturities by more than 100 basis points. The blended beta for deposits and free credits following the most recent move was 13% on the 20-basis-point increase in interest on excess reserves or a blended 3 basis points. Net stock lending was a solid $55 million in the quarter, down from last quarter's record, but reflective of good, broad-based demand. Margin revenue was $244 million in the quarter, up $31 million from last quarter, with an average balance of $20.6 billion, up $1.5 billion. We increased pricing on all margin balances following the most recent Fed move. Our new rate sensitivity for the next 25 basis point Fed Funds increase is $55 million to 95 million in pretax income, which assumes deposit and free credit betas of 15% to 20% and an increase in the interest on excess reserves of 20 to 25 basis points. Further changes will depend on competitive forces and mix, which we are monitoring closely. Fee-based revenue was essentially flat. For the year, total net revenue is trending in excess of $5.4 billion or $500 million above the original midpoint of guidance, which has provided us the opportunity to increase investments in the business. GAAP operating expenses were down 26%, or $268 million sequentially, to $751 million, reflecting significant synergy realization, lower bad debt expense, and lower acquisition-related costs. This quarterly reduction exceeded expectations due to early synergy realization, lower technology and advertising investments than planned, as well as lower acquisition-related vendor costs. We incurred $46 million in acquisition-related costs, comprised mainly of $29 million recorded in employment and $13 million recorded in other operating expense. Total acquisition-related costs are expected to remain around $50 million in the September quarter and the vast majority should be complete as we end this fiscal year. Regarding Scottrade expense synergies, please see our company fact sheet on amtd.com for a quarterly summary on both a realized and a run rate basis. From that schedule, you will note that we have realized $212 million of expense synergies through June, with an annualized run rate expense reduction of approximately $435 million for the June quarter. By year-end, we expect to have achieved virtually all expense synergies. The ongoing annual benefit is expected to be $488 million. As we evaluate total operating expenses looking forward, the September quarter should be roughly flat excluding advertising, which we expect will increase by $10 million to $15 million. Based on the expected declines in acquisition costs, intangible amortization, and bad debt expense, as well as additional expense synergies, our fiscal year 2019 estimated GAAP operating expenses before growth approximates $2.8 billion. We have historically targeted 2% to 4% organic growth, but more recently we have targeted 4% to 8% expense growth as strong revenues have enabled investments in growth, capabilities, and efficiencies. So, for 2019, if revenue remains strong, we'll likely continue in that 4% to 8% range above the baseline jump-off. We'll provide an update in October. Regarding fiscal 2018 earnings guidance, based on the strong pre-tax results year-to-date through June, we are expecting to exceed both the GAAP and non-GAAP EPS ranges. Finally, regarding capital deployment, we paid $119 million in dividends in the quarter, or 26% of net income and 23% of non-GAAP net income. Given our successful Scottrade client conversion, increased EBITDA, and strengthened capital and liquidity, we expect to opportunistically re-commence share repurchases. We currently have board authorization to repurchase up to 26 million shares and could repurchase approximately 47 million shares before TD reaches its 45% ownership limit. We do not pre-announce share repurchases and we'll give additional guidance on dividends and capital returns next quarter. Tim, back to you.

Thanks, Steve. We started the year with a new purpose and a concerted mission to compete and win on the client experience. Now, it's on us to ensure that everything we do – operationally for our clients and shareholders and for our associates and communities where we live and work – aligns. We're looking inward and outward to ensure we've considered the right data, trends, and facts in deciding how our growth strategy will evolve further and set us up for long-term success. The pieces are coming into place. Our clients are first and foremost on our minds and our roadmap is full of the things we plan to do to win their continued trust and business. There is a lot to feel good about. We have strong momentum and we're heading into a year without the disruption of a massive client integration on our plates. 100% of our efforts can be focused on our clients and executing against these plans. And with that, we'll see you in October.

Let me take a moment to combine the questions. Our first question comes from the line of Bill Katz from Citigroup. Please go ahead.

Okay. Thank you very much for taking the questions this morning. Appreciate all the information last night. I just wanted to center around maybe capital management. I think, at the last call, you had mentioned that once you got on the other side of the integration of the clearing business between Ameritrade and Scottrade, you would look to potentially reaccelerate the repurchase. And I think there was some commentary in there, but then maybe a more formal update coming in concert with the fiscal update at the end of the year. Just sort of wondering, A, why the delay; and how you're thinking about priorities from here and how that might change if there was a potential acquisition in the wind?

Thanks, Bill. It's Steve. So, I think as we look at our capital, we wanted to make sure, coming out of Scottrade, that we had built our capital back up and received. And we've seen very significant growth in our margin balances. Since the close, our margin balances are up over $5 billion. So, we've been building our capital to make sure that we're in good shape for that. And now, we feel like we're in a position to start our normal buyback programs. We'll give a little bit more guidance on that next quarter, but we feel like we're sort of back to a level that we're comfortable with to start – we'll be looking at share buybacks.

Okay. And just from a quick follow-up perspective, just on the BDA, like many of your peers, you still continue to see sort of decline in cash as percentage of assets or even just some sluggish in BDA. Can we maybe take it back a level or two and just sort of give us some of the ins and outs of what's driving the softness here and then how we think about, with all the money coming in, the sort of percent of cash as a percentage of the assets that are being brought over?

Yeah. I think we've seen sort of the perfect storm here, Bill, in terms of cash level. So, our investors continue to be excited about the market. We're seeing very strong buying activity. At the same time, we've seen enough of an increase in rates that the folks that are rate sensitive have started to move a little bit of cash out from sort of their operating cash that they've kept over time into alternative instruments. So, we would expect that this is going to normalize over time. As you look back over history, there have been ebbs and flows in the level of cash. We think we have a nice natural offset, in that when our cash tends to go low, our margin balances tend to go high, and so we continue to make a lot of spread income on that. So, we think that cash balances will bounce back at some point in the future as the market environment changes. But for now, we'll probably continue to see relatively flat cash levels.

Okay, thank you.

Your next question comes from the line of Rich Repetto from Sandler O'Neill. Please go ahead.

Yeah. Good morning, Tim. Good morning, Steve.

Good morning.

Good morning. I'm still getting used to this no intro call, but anyway. So, I guess, my question, Tim, is on technology investment spending. And when you've talked about the increased throughput that you get from the tech investing, and I'm just trying to see, it feels like the investments you're making that – at least, the guidance has been not one-off. Like, you don't invest in something in a technology investment and then you get the efficiencies and then you can use – if you invested $1 million, you could use that $1 million at another place. It appears like they're more recurrent. Is that correct? I guess, could you address sort of the issue of recurring versus one-off technology investment. Could we see that – it's actually holding expense level pretty high in fiscal 2019. The guidance anyway.

Yeah, it's not only the tech spend, Rich, that's driving that. Obviously, given the revenue growth we expect, there is a little bit of operational expense increase that you would expect as a result of that. But to your point on tech expense, yes, we're very comfortable that we're ramping up our overall development, what we call, sort of build for the future type spending versus manage the past. But I think what you're getting to is when you make an investment in some of the new technology and platforms, there is an ongoing technology support expense that gets built into the results of that. That's a bit of a cost of doing business, as you can imagine. But I still believe that a focus on increasing our relative spend on building for the future versus supporting the platforms of the past is a very virtuous thing to do. It helps you improve your client experience, it helps you take costs out. And you do that when revenues are stronger, and so it builds up a much more resilient base. In fact, as we shift now from the synergies that we've realized as a result of Scottrade acquisition, Steve and the team have a focus and a project moving forward to really start to take some of those additional revenues and capabilities and build up our resiliency, really start to drive down our [indiscernible] over the next number of years. And to do that, you need to spend on technology to take those costs out.

And that's exactly the follow-up question. The synergies are much higher than what you initially laid out. I thought the initial plan was for 450 and I think it's 488 after you exit the first quarter in 2019, the fiscal quarter. So, I guess, the question to Steve is, what areas are you seeing these your incremental synergies than what you planned? And then, how far can you take it? Could it even be more than the 488 since we're far this far ahead of the plan as far as cost synergies?

Yeah. Thanks, Rich. So, I think in terms of the synergies, the back office areas, I think, we largely achieved the synergies that we thought we would. I think we – on the other branches, we closed a few more branches than we had initially anticipated and we've seen the branch headcount is a little bit lower. We're also seeing that we're able to take out a little bit more of the non-people cost than we thought. So, those are running ahead of expectations. And then, marketing is a little bit less than we had expected. We decided to maintain some of the offer spend that Scottrade had. So, you put all those together and you get to the overall 488 number. In terms of exceeding that number, we've really largely taken or have scheduled all the major synergy items. So, we wouldn't expect that that number in and of itself would grow. But as Tim pointed out, I think there's a lot of opportunity to get more efficient over time. And so, we hope that we'll be able to continue to reduce our BAU run rate over time as some of these technology investments start to pay off.

Got it. And I just want to thank you for all the expense transparency and the roadmap you put out. So, thanks.

You're quite welcome.

Your next question comes from the line of Chris Harris from Wells Fargo. Please go ahead.

Thanks. Another one on the cash balances. At what point might it make sense for you guys to raise the pay rates a little bit more than you have been in order to retain more of those balances? Does that make sense at all?

Yes. So, we really look at it, Chris, like this is folks operating cash – as a reformed banker, I think almost – more like your checking account or your interest-bearing checking balance as opposed to high-yield product. And so, I don't think you'll see us change our strategy on beta. We'll keep a competitive level on that operating cash, but really we'll be trying to compete on rates we'll offer. We'll make available to our customers other products if they want to really chase yield. But we think this is your core brokerage operating account and we would expect that the yield on that to remain relatively low. And I think that's what you'll see from our peers as well.

Okay, got it. And then, in terms of the Scottrade integration, you guys mentioned that the attrition is running in line with the original plan, but it did sound like, from the commentary, that maybe things were a little bit elevated in the June quarter. I guess the question is, do you think the worst of the attrition is now done and what are these customers telling you guys?

Yeah. So, a couple of points on that. Remember the timing of the integration, which was the event itself that drives the disturbance that usually causes the attrition. It happened at the end of February. So, literally, two months into the previous quarter. And so, this is the first full month of the integration. In fact, this is precisely when we saw, and we expected to see, the most attrition. It just takes a little bit of time, obviously. And, in fact, if you look at the months inside the quarter, you start to see the most negative effect in the first month and it starts to abate as we come out of the quarter. So, we certainly – it's in line with expectations. It certainly did have a dip inside our expectations, but it's nicely rebounding now. I think it's probably worth talking a little bit about the effect as much as we were pleased with the quality of the execution, of the integration weekend itself, balance to the penny and all these great things, it is a very disruptive event, obviously, for Scottrade clients themselves, but also for the rest of the team. Here, everybody, heads down, working on that project and of the training, of the additional staff that are brought onside, there's quite an efficiency and a sort of normal organic growth impact that you see as a result of that. And so, we are experiencing that. On the other hand, we're now through it and we've got the new combined teams. We're quite excited about the new established larger platform to grow from here and the distraction effect, if you will, has abated substantially.

Your next question comes from the line of Mike Carrier from Bank of America Merrill Lynch. Please go ahead.

Thanks, guys. Just on the fiscal – new 2019 expense guide, so you guys were at – I think it's $2.8 billion on a GAAP and probably a little under $2.7 billion on the adjusted. I just wanted to get your sense, when you guys discussed – historically, expense growth has been in that 2 to 4. And then, in this high revenue backdrop, you've been in that 4 to 8. When we think about, like, going forward, you've set a pretty wide range of 2 to 8. But, more importantly, just wanted to get your thoughts on maybe the operating leverage and where the expense growth will be relative to a range of maybe revenue growth outlooks.

Yeah, thanks. So, I'll take this one. Philosophically, I'm a big believer in operating leverage and driving down your costs as a function of your assets. Cost as a function of revenue is driving your margin up. And so, rather than establishing a range 2 to 4 for the ages, so to speak, I much prefer to think of it in terms of a driving towards a lower [indiscernible], but at the same time having an operating leverage that's through a cycle, frankly, because of the nature of this particular business, trading revenues, et cetera, the revenue up and down intra-quarter can be a bit choppy. So, we sort of target the idea of a couple of points of operating leverage. And as we look forward, then we're comfortable that we can reinvest a good portion of that revenue growth back in the business. Again, back to the earlier question from Rich, we've really tried to say we need to shift our spending back to that – I tend to call it, a golden dollar, the technology spend that is so virtuous in many ways, it can improve your customer experience, it can improve your cost basis. And so, you really want to invest there when times are good. But on the other hand, if revenue starts to abate, then you need to be able to have opportunities to lower that run rate as well. But op leverage, I'm sort of focusing on the 2-point GAAP.

Got it, okay. That's helpful. And then, just on the investment product fees, it seems like the fee rate, maybe it's ticked down and we've seen that throughout the industry, just given different products and services. But in terms of the outlook that you guys mentioned, launching some new paid models ahead, just wondered if there's anything in the quarter that maybe weighed on it and then how we should be thinking about that going forward, given sort of the products and services offered and what the demand that you're seeing.

Yeah. So, I think, in general, we see a very slow change in the rate over time. It really hasn't been a dramatic move. In this particular quarter, we had a timing item that was a couple of million dollars, which is more than the whole difference in the change. So, I don't think there's really anything significant there. And you'll probably see it pop up a million or two again next quarter.

Okay, thanks a lot.

Your next question comes from the line of Devin Ryan from JMP Securities. Please go ahead.

Thanks. Good morning, guys. I guess, first question here, just following up on the retail attrition. Appreciate the color that you gave. Outside of the advertised price cut, we've seen a few percent decline in commission rates annually in recent years. I know some of that is mix as well, but it just seems like, right now, there are some pretty aggressive promotions going on in trading and then you have firms like Robin Hood that are seeing some pretty good growth and increasing their offerings as well. So, I'm just curious if you feel like some of these low-price offerings are eating into growth at all. Or, I guess, really, what do you see happening competitively behind the scenes with commission pricing and how is that changing anything that you're thinking about doing or shaping your view?

Yeah. So, it's Tim. My view, first of all, the particular environment right now is a little bit more competitive perhaps because of the client disturbance we were talking about that happened as a result of the integration. Have said that, the more macro picture about broader trends – look, everybody knows it's an industry secret that there's been an inexorable decrease in commission trading revenues. We're planning for that to be continued. We're certainly not going to be the ones to lead because we believe we can win on the client experience and clients are quite comfortable paying for what is already a very, very inexpensive investment in trading platform for what you get. Great education, great tools. Having said that, as I said earlier, we need to prepare for that continued trend downward. Our additional scale from the Scottrade acquisition helps us be resilient towards that. And as I just said, Steve is going to lead an initiative to continue to drive us down to be prepared for that eventuality. But as we know, it tends to be fairly lumpy every few years. There is a pricing action and then it settles out for a period of time and we seem to be in that period of having settled out for a period.

Got it. Okay. Thanks, Tim. And then, just a follow-up here, great job on the expense synergies with Scottrade. And appreciate the detailed update this quarter. What are your current thoughts on revenue synergies there, now that the conversion is behind us? Is there anything new that you're doing to realize, though? And then, if you could share any kind of newer updated expectations on kind of where those might end up?

Yeah. Great question. So, the detail that you've got on the expense synergies, I'm quite proud of the team. They're very good at tracking the initial – both the expense synergies, which are sort of coming to an end, if you will, but the revenue synergies are just starting to ramp up. So, let me give you a little bit of color. First, obviously, the biggest revenue synergy we got was just almost immediately after announcing the deal, the interest rates started to rise. So, that's enormous in terms of its uplift. But, frankly, we don't take credit for any of that, of course. What we do do is we track the revenue synergies on a number of categories. So, just to give you some color, there's basically about 11 categories. So, it's things like share of wallet, it's the adoption of our thinkorswim platform which drives activity changes, it's the use of sec lending, margin, et cetera. So, there's 11 different categories. And as you know, we said 300 million plus in, call it, five-year timeframe, three plus. So, each one of those categories, we're already tracking. So, here we are one quarter in, and as we do our reviews nicely, it's different spaces for different ones of those 11 categories. But if I had to sum it all up and say where are we tracking, we're tracking somewhere between the 2 to 3-year mark of what we expect our revenues to be as a result of the synergy. So, we're quite comfortable that some of these numbers were blowing the doors off; and on others, we're just getting started because they're harder. So, there's couple of things. Part of that is just natural. Clients are interested in our technology and our platforms and tools. But now that we have again gone through the integration and have mostly handled much of the inbound calls from our new Scottrade clients, we're actually turning that around and saying, okay, how can we now do – take those same great resources and call out to our best clients and help them through the transition and show them the new tools and capabilities that they now have available to them. So, it's sort of a combination of going from defense to offense and it's paying off beautifully.

That's great. Thank you, Tim. Appreciate the color.

Your next question comes from the line of Christian Bolu from Bernstein. Please go ahead.

Good morning. Can we just follow-up on the comments there on revenue synergies. It seems pretty impressive if I heard you right. With a quarter in, your year two or five-year plan, could you help us just put numbers around that? Is that $50 million of the $300 million, $100 million of $300 million? Just help us, like, quantify that in dollars please.

If I remember correctly, what we said was that the revenue synergies would be somewhere between $50 million to $100 million between years two and three. And so, again, if I go through the chart and say, what is that – if you take our annualized revenue uptick as a result of what those categories I was just talking about, then, yes, conservatively, we're already running somewhere between the two and three-year annualized revenue mark.

Great. On the attrition side for Scottrade, maybe a two-part question here. Obviously, organic growth has slowed a little bit for the firm, partly, as you say, because of the Scottrade attrition. Can you help us quantify that? And maybe let us know if you think you can get back to historical growth rates for next quarter as we get past attrition. And then, bigger picture, as you think about maybe future large-scale brokerage deals, does the Scottrade attrition experience give you any pause?

So, a couple of things. On the first point, yes, as I said previously, because of the timing of the integration itself, we saw the first month of this quarter, I think, being the deepest, if you will, from an attrition and it's been climbing back out. So, we expect the current quarter that we're in than – and we're already seeing it, the attrition rate is starting to abate. And that is precisely in line with our expectations when we modeled it out. And we've done previous deals. We showed the asset attrition precisely when it happened frankly. So, that's a good factor. In terms of the second part of your question, again, any additional deals that might happen in terms of giving you pause, no. It's just a factor that happens anytime you do a particular deal of this size. There's quite a client disturbance effect and your job is really to minimize it for a short period of time and then maximize the opportunities that you're now making available to clients going forward after you're through it.

Great. Thank you, Tim.

Your next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks for taking the questions. Just want to follow up on the revenue synergies. Sounded like you're already operating at 2 to 3 years in. Just curious which of those 11 categories that you mentioned are you seeing the greatest strength? How does that mix compare within those 11 categories versus your expectations? And if you were, say, in three or five years' time to exceed your guidance, which categories do you think it might come from? Where do you see the biggest potential?

Yeah. I'm not going to break it down because it will shift. But I'll give you one little anecdote just to sort of give you a sense and it's a bit of a fun one and some of you've heard it before. Literally, the day after the integration weekend itself, so our thinkorswim download, our platform, that is our preeminent trading platform, we expected to have a certain number of downloads at year five. A download in and of itself, obviously, doesn't drive any additional revenues. It's the behavior change that you get when clients use the new platform. And so, just the interesting anecdote is that, literally, day one, in fact, within, I think, 48 hours, we downloaded more thinkorswim clients for Scottrade – I should say, applications and platforms to Scottrade clients than we were expecting at year five. Now, an element to that is, obviously, just kicking the tires because people will try it and they may or may not continue to adopt it, but that particular goal is far exceeding what we're expecting. And, of course, now we're tracking the change in behavior. So, all of those other 11 categories are somewhere along the spectrum depending on where [indiscernible]. One of the ones that, obviously, will take longer is share of wallet, right? Share of wallet is a big one. And that will build up over time, again, as our clients get comfortable with our offering and decide that they want to bring more of their assets over to us. So, just gives you a little bit of the insights of how we're managing.

Okay. And just a follow-up on margin balances. They were up nicely in the quarter, I think, about 8%. Just curious how much of that sort of increase is coming from increased engagement from Scottrade customers. And then, if you kind of look back historically at your margin balances, they were near like 3% of client assets. Today, it's well under 2%. Just curious if there's a reason why you're mix toward margin would be different from where it was, say, pre-crisis? Or how does the profile of your customer change and their tendency to use margin? Can we expect it to creep up over time?

Yeah. I think we're seeing pretty consistent margin activity among our legacy TD Ameritrade and legacy Scottrade clients. I think the margin behavior really is very consistent with what we've seen in the past. I think one thing that's different is we're growing our RIA business pretty quickly. And so, that's a bigger piece of our mix today that it was several years ago.

Okay, thank you.

Your next question comes from the line of Chris Shutler from William Blair. Please go ahead.

Hey, thanks. Hey, Steve, just to follow up on that point, can you give some sense of the margin balances. Roughly, how much is RIA versus retail?

Yeah. We, historically, don't disclose that. But it's mostly retail.

Okay, fair enough. Vanguard extended its commission for ETF offering, I think, a couple of weeks ago. They said they were going to. I'm guessing, very little impact near term for your business. But longer term, do you think this is kind of where the industry ends up or is this just another one of several talking points firms are going to use in their marketing?

It's Tim. I'd say a few things. Last fall, if you remember, we relaunched our own ETF market center. We tripled the offering. It's been great. It's exceeded our expectations. It's now over $30 billion. In fact, we grew 18% in linked quarters. So, clearly, ETF as a category has got a lot of high interest and we think it's a bit of a win-win. And so, I think this will continue to be an offering that is important on all of our platforms and it'll change and expand out. There does get to be a little bit of a point where there is just an overabundance of offerings from a client point of view. There's just a little bit of confusion. In fact, five of those ETFs in our 300 plus hold about 20% of the assets, and they're extremely low cost, and we cover off all of the major market indices and sectors at this point. So, it will continue to be a rapidly evolving competitive space, but we're really pleased with how our relaunch is going.

I'm just going to sneak one more quick one in here if you don't mind. Just transfer of asset metrics, can you give us the latest and greatest there versus your major competitors? Thanks.

We don't disclose the TOA metric. But I can tell you, it's still fairly good. Although it is – in keeping with the conversation we've just had around the Scottrade integration, there is an effect of the result of the transfers out that we expect it to rebound going forward.

All right. Thank you.

Your next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Hi. Good morning. Just a couple of questions on the launch of personalized portfolios. You said some positive initial client feedback there. Any additional color there maybe in terms of early flows? And also, maybe any detail on what you expect the average revenue yield to be for that product as you scale it up? And then, I'll just ask my follow-up now. Just wondering if you have experienced any pushback or feedback from your RIA community given that this is more personalized advice and also filling a gap in your product offering that's maybe a step closer to an RIA's offering. Thanks.

Yes. So, let me start with the first one. We literally had our best RIA client conference literally at the same time as launching Personalized Portfolios. So, we had a great conversation. I personally had a great conversation with many of our RIA clients. No pushback whatsoever. They understand very clearly that this is an offering that is still highly oriented towards our self-directed clients, leading the technology and augmented with our great people. So, they expected this and believe that we were going to be there. In terms of revenue yield, we're sort of in the, call it, 80 to 90 basis point range. And it's so early. It's literally weeks since the launch. But I can tell you that we have a very robust pipeline. I've been seeing some of the stories and the anecdotes of the conversations with clients that say, this is exactly what I was looking for. And once you offer them a great product with our technology and our people, then they're looking to consolidate assets. So, very nice start; and I'm really proud of the team.

Thanks for the color.

Your next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Great, thanks. Good morning, folks. Maybe just to start out with the Scottrade accretion as you measure. I know this can be subjective given how we've seen rates move and trading volumes move relative to sort of what you originally thought back when you did the deal. But it's looking, even in the second year here, coming into the second year of fiscal 2019, like it's potentially well over 30% accretive. Just want to see if you have an assessment about – given your outlook on expenses, where you think you're on that, if you would agree with that or you think it's much higher than that.

Yeah. I think, Brian, we don't really want to track the separate accretion of the deal. As Tim said, a lot of it is due to interest rates and things like that that are really out of our control. So, I think – we think about ourselves as a combined firm, and that's really the way we'd like to think about it going forward.

What do you give credit to if you're trying to measure the accretion. So, it's really not worth the energy. I'd rather have the team focus on serving clients and growing the business from here. On the other hand, it's been spectacular and it's been well above what we expected when we announced through a series of factors of things that we can control and things that were out of control, but very positive for us in terms of tailwind.

Definitely. And so, that leads me to the second question. Looks like you're tracking about 65% cost saves versus the initial 60% goal. You're at least two years ahead on the revenue synergies. The attrition is tracking roughly in line. And even your organic growth has held up at the low end of your range. So, the disruption has been relatively contained. So, as you think about the industry going forward, maybe, Tim, if you can just share your thoughts on – given you guys are a very successful consolidator and we could have another property potentially in the market at some point, why not be sort of more aggressive, given that that could enable pretty strong earnings growth through any adverse market conditions in the future, such as a potential recession or a trade price war?

Well, a couple of things. First, the standard answer is that we will do anything that we think makes strategic and financial sense. Having said that, we now have the scale that we want and we're quite comfortable to grow it from here. And on the other hand, we know that there is a – we're good at doing integrations. On the other hand, there is a distraction factor. So, there's pros and cons. But as I said, we'll always look at deals if they make financial and strategic sense.

Okay, fair enough. Thank you.

Your next question comes from the line of Jeremy Campbell from Barclays. Please go ahead.

Hey. Thanks, guys. So, I know you guys mentioned, you had like $20 billion of net buying activity that, obviously, adversely impacted cash balances, kind of similar to everybody else in the sector right now. But, I guess, when you think about client cash allocations moving down to net buying, how do you think about trying to increase the capture rates of those flows into kind of fee revenue-generating portfolios versus like simple stocks and ETFs where you might only get a trading commission? Is it really like, if you build it, they will come type of thing with, like, personalized portfolios and introducing that, or are there actions that you guys are taking to really try to increase that capture rate?

Yeah, it's a great question. Thanks. We do have some alternatives. There are mutual funds, money funds that clients can buy that we do fees back on. And so, I think that's part of the offering going forward. And our hope would be that, as clients move from the operating cash, they tighten their operating cash a little bit that we'd see that a little bit. We also, through your goal-planning conversations with clients, we help them with what their allocations ought to look like. And often, they'll decide to buy some products that generate fees for us as well, and so that's a big positive.

Got it. Great. And just one kind of quick thing on OpEx, appreciate all the information you guys put in the prepared remarks, but you've got $2.8 billion of pre-growth for 2019 on a GAAP basis. I presume there is still maybe like $125 million of intangibles at like the 3Q run rate. And I think you guys mentioned that acquisition-related adjustments will be basically out of the P&L, I think, next fiscal year. So, if I kind of put that together, you're like $2.7 billion, a little below that for non-GAAP OpEx. Would be – if you take the 4% to 8% kind of high revenue expectation for OpEx growth, I think that would get you somewhere around like $2.84 billion for non-GAAP. I just wanted to, one, kind of sanely [ph] check that logic; and two, from our seat, it's kind of hard to tell where blended consensus is modeling for non-GAAP OpEx for 2019 because Bloomberg and Thomson tend to mix those up a little bit. I know you guys collect models ahead of earnings, so just kind of wondering, based on your audit of Street models, where folks were modeling non-GAAP 2019 OpEx before last night's update.

So, I think you got the pieces right on in terms of the amortization of intangibles and things like that. So, we would expect sort of the – if the baseline is $2.8 billion, the non-GAAP baseline is about $2.7 billion. And then, the $2.84 billion that you mentioned would be right around the midpoint of the sort of range of growth that we talked about for non-GAAP OpEx. And then, in terms of the consensus, we think that that's pretty close to the consensus for next year for non-GAAP. A little bit under.

Perfect. Thanks so much, guys.

Your next question comes from the line of Mac Sykes from Gabelli. Please go ahead.

Good morning. Can you provide an update on the overnight offerings as well as progress on the international business, perhaps if there's been any changes in Asia over there in terms of business opportunity?

So, for the overnight offerings, you're talking about our 24/5 trading. Still relatively early days. It's for a relatively narrow set of clients, but we're pleased at how it's rolling out. And on Asia, continue to be quite excited about our future there. We've had good growth from our Singapore operations and now our relatively new – just opened in January, Hong Kong operations. And we continue to have discussions with potential partners and think about the opportunity for growth on mainland China. So, lots and lots of growth there, but it's a relatively small base. As we've said, it will be a high growth rate on a small percentage of our assets for the first little while.

Thank you.

Your next question comes from the line of Patrick O'Shaughnessy from Raymond James. Please go ahead. Patrick O'Shaughnessy: Hey, good morning, guys. First question, real quick one, can you give us the percentage split for your net new assets between retail and institutional in the quarter?

Yeah. It's about 85-15 institutional this quarter. As we said, depressed by the integration activities, which affected our organic growth rate, but at the same time, the elevated attrition rate as well on the retail side. And as you can imagine, the institutional wasn't really impacted as a result of Scottrade having a very small institutional business. Patrick O'Shaughnessy: Got it, thank you. And then, speaking of institutional, I was curious about your take on the implications to TD Ameritrade or the rapid growth of the RIA consolidated business model, the dynasties in the high towers of the world. Should we expect those RIAs to exert more negotiating leverage going forward? Has it become partnered with larger entities or is there really nothing like that that's catching your attention?

Well, first of all, we partner with aggregators now. There's many different models of aggregators in the marketplace. Some try to take synergies out from the firms that they tend to acquire. Others just want to have the – sort of an umbrella structure. So, that's not a new model. What might be relatively new is some public offerings being floated for consolidation. And we know this to be the case. Many of our RIA clients are looking for exit strategies themselves as they near retirement. It's one of the reasons why we focus on the next generation of financial planners to really fill that transition need for them. So, I don't think it's going to accelerate any pricing pressure. It's just something we're very comfortable when working with and that's part of our growth because we're an attractive platform for them as well. Patrick O'Shaughnessy: Great, thank you.

There are no further questions at this time. I will now turn the call back over to Mr. Hockey for closing remarks.

Great. Thanks very much, everybody. And I appreciate you calling in. As you heard, it was a great quarter. Very, very nice financial quarter, but also we're feeling excited about the future, given that we just literally now started to see the light at the end of the tunnel, in the sense that we can look forward to do a better job of serving our new Scottrade clients that are on our platform, but also our existing clients. So, we're quite excited about the road ahead. So, we'll talk to you next quarter.

This concludes today's conference call. You may now disconnect.