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Key Financial Results

  • Net Income was $134 million, up 3% from a year ago and translating to diluted earnings per share (“EPS”) of $1.64, up 3% from a year ago.
  • EPS prior to amortization of intangible assets and acquisition costs* increased 10% year-over-year to $1.95.
    • Gross profit* increased 15% year-over-year to $669 million.
    • Core G&A* increased 19% year-over-year to $281 million.
    • EBITDA* of $267 million increased 10% year-over-year and EBITDA* as a percentage of Gross profit* was 40%.

Key Business Results

  • Total advisory and brokerage assets increased 21% year-over-year to $1.16 trillion.
    • Advisory assets increased 26% year-over-year to $624 billion.
    • Advisory assets as a percentage of total assets increased to 53.7%, up from 51.8% a year ago.
  • Total organic net new assets were $18 billion, translating to 6% annualized growth, and $107 billion over the past twelve months, translating to 11% annualized growth.
    • Total organic net new asset annualized growth rate was 6% in January, 5% in February and 7% in March.
    • Organic net new advisory assets were $17 billion, translating to 11% annualized growth.
  • Recruited assets(1) were $10 billion.
    • Recruited assets over the trailing twelve months were $76 billion, up approximately 34% from a year ago.
  • LPL Services Group had annualized revenue of $30 million in Q1, up more than 70% from a year ago.
    • Services Group subscriptions were 3,529 at the end of Q1, more than double a year ago and up by 507 sequentially.
  • Advisor count(2) was 20,091, up 215 sequentially and 2,419 year-over-year.**
  • Total client cash balances were $62 billion, an increase of $5 billion sequentially.
    • Client cash balances as a percentage of total assets were 5.3%, up from 4.7% at the end of Q4.

Key Capital and Liquidity Results

  • Corporate cash(3) was $270 million.
  • Leverage ratio(4) was 2.16x.
  • Share repurchases were $50 million for 292 thousand shares at an average price of $171 per share.
  • Dividends paid of $20 million.

*See the Non-GAAP Financial Measures section and the end notes to this release for further details about these non-GAAP financial measures.
**This included the addition of 1,209 advisors from Waddell & Reed.

Key Updates

  • Bank sweep demand: Added new floating rate capacity, which drove a $3 billion increase in Insured Cash Account balances in Q1.
  • CUNA Brokerage Services, Inc. (“CBSI”): Expected to onboard in the second quarter of 2022. CBSI supports ~550 financial advisors across almost 300 credit unions that collectively serve ~$36 billion in brokerage and advisory assets.***
  • People’s United Bank (“People’s”): Following the close of M&T Bank’s acquisition of People’s, M&T plans for People’s to join LPL’s institutional platform in the second half of 2022. People’s supports ~30 financial advisors who collectively serve ~$6 billion in brokerage and advisory assets.****
  • Investor and Analyst Day: The Company will hold its next event on November 16, 2022 in New York City.

SAN DIEGO, April 28, 2022 (GLOBE NEWSWIRE) — LPL Financial Holdings Inc. (Nasdaq: LPLA) (the “Company”) today announced results for its first quarter ended March 31, 2022, reporting net income of $134 million, or $1.64 per share. This compares with $130 million, or $1.59 per share, in the first quarter of 2021 and $108 million, or $1.32 per share, in the prior quarter.

“Over the past quarter, we remained focused on our mission of taking care of our advisors, so they can take care of their clients,” said Dan Arnold, President and CEO. “This led to the continued enhancement of the appeal of our model in the advisor-centered marketplace and contributed to another quarter of solid business results.”

“As we move into 2022, we remain focused on serving our advisors, growing our business, and delivering shareholder value,” said Matt Audette, CFO. “Additionally, we are looking forward to onboarding CUNA later this quarter and People’s in the second half of this year. We are excited by our strong and growing pipeline, positioning us to drive additional growth and long-term shareholder value.”

Conference Call and Additional Information

The Company will hold a conference call to discuss its results at 5:00 p.m. ET on Thursday, April 28. To listen, call 877-677-9122 (domestic) or 708-290-1401 (international); passcode 3557307, or visit investor.lpl.com (webcast). Replays will be available by phone and on investor.lpl.com beginning two hours after the call and until May 5 and May 19, respectively. For telephonic replay, call 855-859-2056 (domestic) or 404-537-3406 (international); passcode 3557307.

About LPL Financial

LPL Financial Holdings Inc. (Nasdaq: LPLA) was founded on the principle that the firm should work for the advisor, and not the other way around. Today, LPL is a leader in the markets we serve, supporting over 20,000 financial advisors, including advisors at approximately 800 institution-based investment programs and at approximately 500 registered investment advisor (“RIA”) firms nationwide. We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to personalized guidance from a financial advisor. At LPL, independence means that advisors have the freedom they deserve to choose the business model, services, and technology resources that allow them to run their perfect practice. And they have the freedom to manage their client relationships, because they know their clients best. Simply put, we take care of our advisors, so they can take care of their clients.

Top RIA custodian (Cerulli Associates, 2020 U.S. RIA Marketplace Report); No. 1 Independent Broker-Dealer in the U.S (Based on total revenues, Financial Planning magazine 1996-2021); No. 1 provider of third-party brokerage services to banks and credit unions (2020-2021 Kehrer Bielan Research & Consulting Annual TPM Report); Fortune 500 as of June 2021.

LPL and its affiliated companies provide financial services only from the United States.

Securities and Advisory services offered through LPL Financial LLC (“LPL Financial”), an SEC-registered broker-dealer and investment advisor. Member FINRA/SIPC. We routinely disclose information that may be important to shareholders in the “Investor Relations” or “Press Releases” section of our website.

***Estimates as of June 14, 2021. Estimate of brokerage and advisory assets served includes approximately $4.4 billion of assets on third party asset management platforms and retirement plan assets, which LPL will not include in its reporting of total advisory and brokerage assets.
****Estimates as of March 31, 2022. Estimate of brokerage and advisory assets includes approximately $0.5 billion of assets on third party asset management platforms and retirement plan assets, which LPL will not include in its reporting of total advisory and brokerage assets.

Forward-Looking Statements

Statements in this press release regarding:

  • the amount and timing of the onboarding of brokerage and advisory assets from CUNA and People’s;
  • the Company’s future financial and operating results, growth, priorities and business strategies, including forecasts and statements relating to future expenses (including 2022 Core G&A* outlook);
  • future capabilities, future advisor service experience, future investments and capital deployment, long-term shareholder value; and
  • any other statements that are not related to present facts or current conditions or that are not purely historical, constitute forward-looking statements. 

These forward-looking statements are based on the Company’s historical performance and its plans, estimates and expectations as of April 28, 2022. Forward-looking statements are not guarantees that the future results, plans, intentions or expectations expressed or implied will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors, which may cause actual financial or operating results, levels of activity or the timing of events to be materially different from those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include:

  • difficulties and delays in onboarding the assets of People’s or CUNA’s advisors;
  • disruptions in the businesses of the Company, CUNA, or M&T Bank that could make it more difficult to maintain relationships with their respective advisors and their clients;
  • the choice by clients of People’s and CUNA’s advisors not to open brokerage and/or advisory accounts at the Company;
  • changes in general economic and financial market conditions, including retail investor sentiment;
  • changes in interest rates and fees payable by banks participating in the Company’s client cash programs, including the Company’s strategy and success in managing client cash program fees;
  • changes in the growth and profitability of the Company’s fee-based offerings;
  • fluctuations in the levels of advisory and brokerage assets, including net new assets, and the related impact on revenues;
  • effects of competition in the financial services industry and the success of the Company in attracting and retaining financial advisors and institutions;
  • whether the retail investors served by newly-recruited advisors choose to move their respective assets to new accounts at the Company;
  • the effect of current, pending and future legislation, regulation and regulatory actions, including disciplinary actions imposed by federal and state regulators and self-regulatory organizations;
  • the costs of settling and remediating issues related to regulatory matters or legal proceedings, including actual costs of reimbursing customers for losses in excess of our reserves;
  • changes made to the Company’s services and pricing, and the effect that such changes may have on the Company’s gross profit streams and costs;
  • the execution of the Company’s plans and its success in realizing the synergies, expense savings, service improvements and efficiencies expected to result from its initiatives, acquisitions and programs;
  • the effects of the COVID-19 pandemic, including efforts to contain it; and
  • the other factors set forth in Part I, “Item 1A. Risk Factors” in the Company’s 2021 Annual Report on Form 10-K, as may be amended or updated in the Company’s Quarterly Reports on Form 10-Q or other filings with the Securities and Exchange Commission. 

Except as required by law, the Company specifically disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this earnings release, even if its estimates change, and you should not rely on statements contained herein as representing the Company’s views as of any date subsequent to the date of this press release.

 

LPL Financial Holdings Inc.
Condensed Consolidated Statements of Income(5)
(In thousands, except per share data)
(Unaudited)

  Three Months Ended       Three Months Ended    
  March 31,   December 31,       March 31,    
    2022       2021   Change     2021   Change
REVENUE                  
Advisory $ 1,047,097     $ 997,338   5%   $ 722,046   45%
Commission   585,525       612,837   (4%)     557,229   5%
Asset-based   296,401       302,040   (2%)     264,706   12%
Service and fee   112,812       110,385   2%     96,824   17%
Transaction   46,726       39,306   19%     44,120   6%
Interest income   7,745       7,780   —%     6,518   19%
Other   (30,613 )     24,506   n/m     16,174   n/m
Total revenue   2,065,693       2,094,192   (1%)     1,707,617   21%
EXPENSE                  
Advisory and commission   1,374,134       1,431,157   (4%)     1,108,899   24%
Compensation and benefits   192,034       209,630   (8%)     161,540   19%
Promotional   87,002       87,743   (1%)     54,181   61%
Occupancy and equipment   51,112       47,800   7%     43,584   17%
Depreciation and amortization   45,454       40,816   11%     35,499   28%
Interest expense on borrowings   27,211       27,121   —%     25,059   9%
Amortization of other intangibles   21,196       20,373   4%     17,431   22%
Brokerage, clearing and exchange   22,600       20,372   11%     19,364   17%
Professional services   19,022       18,384   3%     15,625   22%
Communications and data processing   15,127       15,549   (3%)     11,993   26%
Loss on extinguishment of debt           —%     24,400   (100%)
Other   37,422       38,688   (3%)     24,900   50%
Total expense   1,892,314       1,957,633   (3%)     1,542,475   23%
INCOME BEFORE PROVISION FOR INCOME TAXES   173,379       136,559   27%     165,142   5%
PROVISION FOR INCOME TAXES   39,635       28,478   39%     35,522   12%
NET INCOME $ 133,744     $ 108,081   24%   $ 129,620   3%
EARNINGS PER SHARE                  
Earnings per share, basic $ 1.67     $ 1.35   24%   $ 1.63   2%
Earnings per share, diluted $ 1.64     $ 1.32   24%   $ 1.59   3%
Weighted-average shares outstanding, basic   79,976       80,064   —%     79,697   —%
Weighted-average shares outstanding, diluted   81,572       81,744   —%     81,622   —%

 

LPL Financial Holdings Inc.
Condensed Consolidated Statements of Financial Condition
(In thousands, except share data)
(Unaudited)

    March 31, 2022   December 31, 2021
ASSETS
Cash and equivalents   $ 1,009,693     $ 495,246  
Cash segregated under federal or other regulations     644,986       1,496,463  
Restricted cash     92,393       80,655  
Receivables from clients, net     624,188       578,889  
Receivables from brokers, dealers and clearing organizations     154,398       102,503  
Advisor loans, net     970,368       963,869  
Other receivables, net     587,601       581,483  
Investment securities ($32,619 and $39,274 at fair value at March 31, 2022 and December 31, 2021, respectively)     43,709       49,192  
Property and equipment, net     685,771       658,841  
Goodwill     1,642,468       1,642,443  
Other intangibles, net     433,925       455,028  
Other assets     883,831       886,988  
Total assets   $ 7,773,331     $ 7,991,600  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:        
Client payables   $ 1,568,025     $ 1,712,224  
Payables to brokers, dealers and clearing organizations     149,237       170,119  
Accrued advisory and commission expenses payable     210,884       222,379  
Corporate debt and other borrowings, net     2,722,396       2,814,044  
Accounts payable and accrued liabilities     331,333       384,025  
Other liabilities     1,056,450       1,018,276  
Total liabilities     6,038,325       6,321,067  
STOCKHOLDERS’ EQUITY:        
Common stock, $0.001 par value; 600,000,000 shares authorized; 129,220,710 shares and 128,758,086 shares issued at March 31, 2022 and December 31, 2021, respectively     129       129  
Additional paid-in capital     1,861,019       1,841,402  
Treasury stock, at cost — 49,160,358 shares and 48,768,145 shares at March 31, 2022 and December 31, 2021, respectively     (2,569,035 )     (2,498,600 )
Retained earnings     2,442,893       2,327,602  
Total stockholders’ equity     1,735,006       1,670,533  
Total liabilities and stockholders’ equity   $ 7,773,331     $ 7,991,600  

 

LPL Financial Holdings Inc.
Management’s Statements of Operations
(In thousands, except per share data)
(Unaudited)

Certain information in this release is presented as reviewed by the Company’s management and includes information derived from the Company’s unaudited condensed consolidated statements of income, non-GAAP financial measures, and operational and performance metrics. For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures” in this release.

  Quarterly Results
  Q1 2022   Q4 2021   Change   Q1 2021   Change
Gross Profit(6)                  
Advisory $ 1,047,097     $ 997,338     5%   $ 722,046     45%
Sales-based commissions   240,331       248,382     (3%)     236,273     2%
Trailing commissions   345,194       364,455     (5%)     320,956     8%
Advisory fees and commissions   1,632,622       1,610,175     1%     1,279,275     28%
Production-based payout(7)   (1,405,698 )     (1,410,458 )   —%     (1,095,377)     28%
Advisory fees and commissions, net of payout   226,924       199,717     14%     183,898     23%
Client cash   84,716       82,109     3%     97,104     (13%)
Other asset-based(8)   211,685       219,931     (4%)     167,602     26%
Service and fee   112,812       110,385     2%     96,824     17%
Transaction   46,726       39,306     19%     44,120     6%
Interest income and other, net(9)   8,696       11,587     (25%)     9,170     (5%)
Total net advisory fees and commissions and attachment revenue   691,559       663,035     4%     598,718     16%
Brokerage, clearing and exchange expense   (22,600 )     (20,372 )   11%     (19,364)     17%
Gross Profit(6)   668,959       642,663     4%     579,354     15%
                   
G&A Expense                  
Core G&A(10)   280,907       299,401     (6%)     236,262     19%
Regulatory charges   7,323       8,442     (13%)     7,595     (4%)
Promotional (ongoing)(11)(12)   87,411       86,071     2%     54,181     61%
Acquisition costs(12)   13,323       14,291     (7%)     2,429     n/m
Employee share-based compensation   12,755       9,589     33%     11,356     12%
Total G&A   401,719       417,794     (4%)     311,823     29%
Loss on extinguishment of debt             —%     24,400     (100%)
EBITDA(13)   267,240       224,869     19%     243,131     10%
Depreciation and amortization   45,454       40,816     11%     35,499     28%
Amortization of other intangibles   21,196       20,373     4%     17,431     22%
Interest expense on borrowings   27,211       27,121     —%     25,059     9%
INCOME BEFORE PROVISION FOR INCOME TAXES   173,379       136,559     27%     165,142     5%
PROVISION FOR INCOME TAXES   39,635       28,478     39%     35,522     12%
NET INCOME $ 133,744     $ 108,081     24%   $ 129,620     3%
Earnings per share, diluted $ 1.64     $ 1.32     24%   $ 1.59     3%
Weighted-average shares outstanding, diluted   81,572       81,744     —%     81,622     —%
EPS prior to amortization of intangible assets and acquisition costs(14) $ 1.95     $ 1.63     20%   $ 1.77     10%

 

LPL Financial Holdings Inc.
Operating Metrics
(Dollars in billions, except where noted)
(Unaudited)

  Q1 2022   Q4 2021   Change   Q1 2021   Change
Market Drivers                  
S&P 500 Index (end of period)   4,530       4,766     (5%)     3,973     14%
Russell 2000 Index (end of period)   2,070       2,245     (8%)     2,221     (7%)
Fed Funds daily effective rate (average bps)   12       8     4bps     8     4bps
                   
Advisory and Brokerage Assets                  
Advisory assets(15) $ 624.3     $ 643.2     (3%)   $ 496.7     26%
Brokerage assets(16)   538.8       563.2     (4%)     461.6     17%
Total Advisory and Brokerage Assets $ 1,163.1     $ 1,206.4     (4%)   $ 958.3     21%
Advisory as a % of Total Advisory and Brokerage Assets   53.7 %     53.3 %   40bps     51.8 %   190bps
                   
Assets by Platform                  
Corporate platform advisory assets(17) $ 415.8     $ 429.6     (3%)   $ 317.5     31%
Independent RIA advisory assets(18)   208.5       213.6     (2%)     179.2     16%
Brokerage assets   538.8       563.2     (4%)     461.6     17%
Total Advisory and Brokerage Assets $ 1,163.1     $ 1,206.4     (4%)   $ 958.3     21%
                   
Centrally Managed Assets                  
Centrally managed assets(19) $ 93.8     $ 96.1     (2%)   $ 77.0     22%
Centrally Managed as a % of Total Advisory Assets   15.0 %     14.9 %   10bps     15.5 %   (50bps)

 

LPL Financial Holdings Inc.
Operating Metrics
(Dollars in billions, except where noted)
(Unaudited)

  Q1 2022   Q4 2021   Change   Q1 2021   Change
Net New Assets (NNA)                  
Net new advisory assets(20) $ 17.4     $ 24.2     n/m   $ 22.7     n/m
Net new brokerage assets(21)   0.2       2.0     n/m     6.2     n/m
Total Net New Assets $ 17.6     $ 26.2     n/m   $ 28.9     n/m
                   
Organic Net New Assets(22)                  
Organic net new advisory assets $ 17.4     $ 24.2     n/m   $ 22.7     n/m
Organic net new brokerage assets   0.2       2.0     n/m     6.2     n/m
Total Organic Net New Assets $ 17.6     $ 26.2     n/m   $ 28.9     n/m
                   
Net brokerage to advisory conversions(23) $ 2.9     $ 3.4     n/m   $ 3.3     n/m
Organic advisory NNA annualized growth(24)   10.8%       16.3%     n/m     19.7%     n/m
Total organic NNA annualized growth(24)   5.8%       9.2%     n/m     12.8%     n/m
                   
Net New Advisory Assets                  
Corporate platform net new advisory assets(25) $ 10.6     $ 17.0     n/m   $ 17.1     n/m
Independent RIA net new advisory assets(26)   6.8       7.2     n/m     5.6     n/m
Total Net New Advisory Assets $ 17.4     $ 24.2     n/m   $ 22.7     n/m
Centrally managed net new advisory assets(27) $ 3.3     $ 4.4     n/m   $ 7.8     n/m
                   
Client Cash Balances                  
Insured cash account balances $ 32.6     $ 30.0     9%   $ 37.4     (13%)
Deposit cash account balances   9.4       9.3     1%     7.9     19%
Total Bank Sweep Balances   42.0       39.3     7%     45.3     (7%)
Money market account cash balances   18.2       16.1     13%     1.3     n/m
Purchased money market funds   1.6       1.9     (16%)     1.6     —%
Total Money Market Balances   19.8       18.0     10%     3.0     n/m
Total Client Cash Balances $ 61.8     $ 57.3     8%   $ 48.3     28%
Client Cash Balances as a % of Total Assets   5.3%       4.7%     60bps     5.0%     30bps
                   
Client Cash Balance Average Fees(28)                  
Insured cash account average fee – bps   102       101     1     99     3
Deposit cash account average fee – bps   24       19     5     29     (5)
Money market account average fee – bps   7       3     4     3     4
Purchased money market fund average fee – bps   7       6     1     9     (2)
Total Client Cash Balance Average Fee – bps   58       62     (4)     81     (23)
                   
Net buy (sell) activity(29) $ 11.0     $ 16.0     n/m   $ 17.4     n/m

 

LPL Financial Holdings Inc.
Monthly Metrics
(Dollars in billions, except where noted)
(Unaudited)

    March 2022   February 2022   Feb to
March
Change
  January 2022   December 2021
Advisory and Brokerage Assets                    
Advisory assets(15)   $ 624.3   $ 612.9     2%   $ 619.6   $ 643.2
Brokerage assets(16)     538.8     531.9     1%     538.2     563.2
Total Advisory and Brokerage Assets   $ 1,163.1   $ 1,144.8     2%   $ 1,157.8   $ 1,206.4
                     
Net New Assets (NNA)                    
Net new advisory assets(20)   $ 6.0   $ 5.4     n/m   $ 5.9   $ 10.5
Net new brokerage assets(21)     0.3     (0.2 )   n/m     0.1     1.6
Total Net New Assets   $ 6.3   $ 5.2     n/m   $ 6.1   $ 12.1
Net brokerage to advisory conversions(23)   $ 0.9   $ 0.9     n/m   $ 1.2   $ 1.1
                     
Organic Net New Assets (NNA)(22)                    
Net new advisory assets(20)   $ 6.0   $ 5.4     n/m   $ 5.9   $ 10.5
Net new brokerage assets(21)     0.3     (0.2 )   n/m     0.1     1.6
Total Organic Net New Assets   $ 6.3   $ 5.2     n/m   $ 6.1   $ 12.1
                     
Client Cash Balances                    
Insured cash account balances   $ 32.6   $ 29.9     9%   $ 29.6   $ 30.0
Deposit cash account balances     9.4     10.5     (10%)     9.7     9.3
Total Bank Sweep Balances     42.0     40.4     4%     39.4     39.3
Money market account cash balances     18.2     18.4     (1%)     17.3     16.1
Purchased money market funds     1.6     1.8     (11%)     1.7     1.9
Total Money Market Balances     19.8     20.1     (1%)     19.0     18.0
Total Client Cash Balances   $ 61.8   $ 60.5     2%   $ 58.4   $ 57.3
                     
Net buy (sell) activity(29)   $ 3.5   $ 4.0     n/m   $ 3.5   $ 4.7
                     
Market Drivers                    
S&P 500 index (end of period)     4,530     4,374     4%     4,516     4,766
Russell 2000 Index (end of period)     2,070     2,048     1%     2,028     2,245
Fed funds effective rate (average bps)     20     8     12bps     8     8

 

LPL Financial Holdings Inc.
Financial Measures
(Dollars in thousands, except where noted)
(Unaudited)

  Q1 2022   Q4 2021   Change   Q1 2021   Change
Commission Revenue by Product                  
Annuities $ 299,734     $ 310,889   (4 %)   $ 280,776     7 %
Mutual funds   189,527       198,210   (4 %)     173,150     9 %
Fixed income   25,205       29,427   (14 %)     32,162     (22 %)
Equities   34,633       33,604   3 %     38,911     (11 %)
Other   36,426       40,707   (11 %)     32,230     13 %
Total commission revenue $ 585,525     $ 612,837   (4 %)   $ 557,229     5 %
                   
Commission Revenue by Sales-based and Trailing            
Sales-based commissions                  
Annuities $ 106,733     $ 108,023   (1 %)   $ 95,539     12 %
Mutual funds   47,545       46,986   1 %     47,279     1 %
Fixed income   25,205       29,427   (14 %)     32,162     (22 %)
Equities   34,633       33,604   3 %     38,911     (11 %)
Other   26,215       30,342   (14 %)     22,382     17 %
Total sales-based commissions $ 240,331     $ 248,382   (3 %)   $ 236,273     2 %
Trailing commissions                  
Annuities $ 193,001     $ 202,866   (5 %)   $ 185,237     4 %
Mutual funds   141,982       151,224   (6 %)     125,871     13 %
Other   10,211       10,365   (1 %)     9,848     4 %
Total trailing commissions $ 345,194     $ 364,455   (5 %)   $ 320,956     8 %
Total commission revenue $ 585,525     $ 612,837   (4 %)   $ 557,229     5 %
                   
Payout Rate(7)   86.10%       87.60%   (150bps)     85.62%     48bps

 

LPL Financial Holdings Inc.
Capital Management Measures
(Dollars in thousands, except where noted)
(Unaudited)

  Q1 2022   Q4 2021
Cash and equivalents $ 1,009,693     $ 495,246  
Cash at regulated subsidiaries   (828,079 )     (284,105 )
Excess cash at regulated subsidiaries per the Credit Agreement   88,551       25,846  
Corporate Cash(3) $ 270,165     $ 236,987  
       
Corporate Cash(3)      
Cash at Parent $ 172,924     $ 202,407  
Excess cash at regulated subsidiaries per the Credit Agreement   88,551       25,846  
Cash at non-regulated subsidiaries   8,690       8,734  
Corporate Cash $ 270,165     $ 236,987  
       
Leverage Ratio      
Total debt $ 2,745,925     $ 2,838,600  
Total corporate cash   270,165       236,987  
Credit Agreement Net Debt $ 2,475,760     $ 2,601,613  
Credit Agreement EBITDA (trailing twelve months)(30) $ 1,147,662     $ 1,150,691  
Leverage Ratio 2.16 x   2.26 x

 

    March 31, 2022    
Total Debt   Balance   Current Applicable
Margin
  Yield At Issuance   Interest Rate   Maturity
Revolving Credit Facility(a)   $   ABR+25bps       3.500 %   3/15/2026
Broker-Dealer Revolving Credit Facility(b)       FFR+125bps       %   7/31/2024
Senior Secured Term Loan B     1,045,925   LIBOR+175 bps(c)       1.981 %   11/12/2026
Senior Unsecured Notes(d)     400,000   4.625% Fixed   4.625 %   4.625 %   11/15/2027
Senior Unsecured Notes(e)     900,000   4.000% Fixed   4.000 %   4.000 %   3/15/2029
Senior Unsecured Notes(f)     400,000   4.375% Fixed   4.375 %   4.375 %   5/15/2031
Unsecured, Uncommitted Lines of Credit(g)       Broker Base Rate+75bps       1.000 %   9/30/2022
Total / Weighted Average   $ 2,745,925           3.377 %    

(a)   Secured borrowing capacity of $1 billion at LPL Holdings, Inc. (the “Parent”).
(b)   Unsecured borrowing capacity of $300 million at LPL Financial LLC.
(c)   The LIBOR rate option is one-month LIBOR rate and subject to an interest rate floor of 0 basis points.
(d)   The Senior Unsecured Notes were issued in November 2019 at par.
(e)   The Senior Unsecured Notes were issued in March 2021 at par.
(f)   The Senior Unsecured Notes were issued in May 2021 at par.
(g)   This unsecured, uncommitted line of credit has borrowing capacity of $75 million at LPL Financial.

 

LPL Financial Holdings Inc.
Key Business and Financial Metrics
(Dollars in thousands, except where noted)
(Unaudited)

  Q1 2022   Q4 2021   Change   Q1 2021   Change
Advisors                  
Advisors 20,091   19,876   1%   17,672   14%
Net new advisors 215   249   n/m   385   n/m
Annualized advisory fees and commissions per advisor(31) $327   $326   —%   $293   12%
Average total assets per advisor ($ in millions)(32) $57.9   $60.7   (5%)   $54.2   7%
Transition assistance loan amortization ($ in millions)(33) $41.4   $39.6   5%   $30.2   37%
Total client accounts (in millions) 7.3   7.2   1%   6.1   20%
                   
Employees – period end 6,051   5,919   2%   4,815   26%
                   
Productivity Metrics                  
Services Group subscriptions(34) 3,529   3,022   17%   1,715   106%
Advisory revenues as a % of corporate advisory assets(35) 0.99%   1.00%   (1bps)   1.01%   (2bps)
Gross profit ROA(36) 22.4bps   22.7bps   (0.3bps)   25.2bps   (2.8bps)
OPEX as a % of advisory and brokerage assets(37) 15.3bps   15.3bps   —bps   16.7bps   (1.4bps)
EBIT ROA(38) 7.1bps   7.4bps   (0.3bps)   8.5bps   (1.4bps)
AUM retention rate (quarterly annualized)(39) 98.3%   98.3%   —bps   98.1%   20bps
Recurring gross profit rate(40) 87.2%   85.2%   200bps   82.4%   480bps
EBITDA as a % of gross profit 39.9%   35.0%   490bps   42.0%   (210bps)
                   
Capital expenditure ($ in millions)(41) $73.5   $76.0   (3%)   $41.1   79%
                   
Share repurchases ($ in millions) $50.0   $50.0   —%   $—   100%
Dividends ($ in millions) 20.0   20.0   —%   20.0   —%
Total Capital Returned ($ in millions) $70.0   $70.0   —%   $20.0   n/m
Weighted-average share count, diluted 81.6   81.7   —%   81.6   —%
Total Capital Returned per Share(42) $0.86   $0.86   —%   $0.25   n/m
                   

Non-GAAP Financial Measures

Management believes that presenting certain non-GAAP financial measures by excluding or including certain items can be helpful to investors and analysts who may wish to use this information to analyze the Company’s current performance, prospects and valuation. Management uses this non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods. Management believes that the non-GAAP financial measures and metrics discussed below are appropriate for evaluating the performance of the Company.

EPS prior to amortization of intangible assets and acquisition costs and Adjusted net income

EPS prior to amortization of intangible assets and acquisition costs is defined as adjusted net income, a non-GAAP measure defined as net income plus the after-tax impact of amortization of other intangibles and acquisition costs, divided by the weighted average number of diluted shares outstanding for the applicable period. The Company presents adjusted net income and EPS prior to amortization of intangible assets and acquisition costs because management believes that these metrics can provide investors with useful insight into the Company’s core operating performance by excluding non-cash items and acquisition costs that management does not believe impact the Company’s ongoing operations. Adjusted net income and EPS prior to amortization of intangible assets and acquisition costs are not measures of the Company’s financial performance under GAAP and should not be considered as alternatives to net income, earnings per diluted share or any other performance measure derived in accordance with GAAP. For a reconciliation of net income and earnings per diluted share to adjusted net income and EPS prior to amortization of intangible assets and acquisition costs, please see the endnote disclosures in this release.

Gross profit

Gross profit is calculated as total revenue less advisory and commission expense and brokerage, clearing and exchange expense. All other expense categories, including depreciation and amortization of property and equipment and amortization of other intangibles, are considered general and administrative in nature. Because the Company’s gross profit amounts do not include any depreciation and amortization expense, the Company considers gross profit to be a non-GAAP financial measure that may not be comparable to similar measures used by others in its industry. Management believes that gross profit can provide investors with useful insight into the Company’s core operating performance before indirect costs that are general and administrative in nature. For a calculation of gross profit, please see the endnote disclosures in this release.

Core G&A

Core G&A consists of total expense less the following expenses: advisory and commission; depreciation and amortization; amortization of other intangibles; brokerage, clearing and exchange; interest expense on borrowings; loss on extinguishment of debt; promotional; acquisition costs; employee share-based compensation; and regulatory charges. Management presents core G&A because it believes core G&A reflects the corporate expense categories over which management can generally exercise a measure of control, compared with expense items over which management either cannot exercise control, such as advisory and commission, or which management views as promotional expense necessary to support advisor growth and retention, including conferences and transition assistance. Core G&A is not a measure of the Company’s total expense as calculated in accordance with GAAP. For a reconciliation of core G&A to the Company’s total expense, please see the endnote disclosures of this release. The Company does not provide an outlook for its total expense because it contains expense components, such as advisory and commission, that are market-driven and over which the Company cannot exercise control. Accordingly a reconciliation of the Company’s outlook for core G&A to an outlook for total expense cannot be made available without unreasonable effort.

EBITDA

EBITDA is defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles. The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations. EBITDA is not a measure of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. For a reconciliation of EBITDA to net income, please see the endnote disclosures in this release.

Credit Agreement EBITDA

Credit Agreement EBITDA is defined in, and calculated by management in accordance with, the Company’s amended and restated credit agreement (“Credit Agreement”) as “Consolidated EBITDA,” which is consolidated net income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, including unusual or non-recurring charges and gains, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions. The Company presents Credit Agreement EBITDA because management believes that it can be a useful financial metric in understanding the Company’s debt capacity and covenant compliance under its Credit Agreement. Credit Agreement EBITDA is not a measure of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. For a reconciliation of Credit Agreement EBITDA to net income, please see the endnote disclosures in this release.

Endnote Disclosures

(1) Represents the estimated total advisory and brokerage assets expected to transition to the Company’s broker-dealer subsidiary, LPL Financial, associated with advisors who transferred their licenses to LPL Financial during the period. The estimate is based on prior business reported by the advisors, which has not been independently and fully verified by LPL Financial. The actual transition of assets to LPL Financial generally occurs over several quarters, including the initial quarter of the transition, and the actual amount transitioned may vary from the estimate.

(2) The terms “Financial Advisors” and “Advisors” refer to registered representatives and/or investment advisor representatives affiliated with LPL Financial, an SEC registered broker-dealer and investment advisor.

(3) Corporate cash, a component of cash and equivalents, is the sum of cash and equivalents from the following: (1) cash and equivalents held at LPL Holdings, Inc., (2) cash and equivalents held at regulated subsidiaries as defined by the Company’s Credit Agreement, which includes LPL Financial LLC and The Private Trust Company N.A., in excess of the capital requirements of the Company’s Credit Agreement (which, in the case of LPL Financial LLC, is net capital in excess of 10% of its aggregate debits, or five times the net capital required in accordance with Exchange Act Rule 15c3-1), and (3) cash and equivalents held at non-regulated subsidiaries.

(4) Compliance with the Leverage Ratio is only required under our revolving credit facility.

(5) Certain financial statement line items in the condensed consolidated statements of income have been reclassified to more closely align with industry practice and the Company’s business, and to better serve financial statement users. Prior period amounts have been reclassified to conform to current presentation; however, these reclassifications did not impact total net income.

(6) Gross profit is a non-GAAP financial measure. Please see a description of gross profit under the “Non-GAAP Financial Measures” section of this release for additional information. Below is a calculation of gross profit for the periods presented (in thousands):

  Q1 2022   Q4 2021   Q1 2021
Total revenue $ 2,065,693   $ 2,094,192   $ 1,707,617
Advisory and commission expense   1,374,134     1,431,157     1,108,899
Brokerage, clearing and exchange expense   22,600     20,372     19,364
Gross profit $ 668,959   $ 642,663   $ 579,354

(7) Production-based payout is a financial measure calculated as advisory and commission expense plus (less) advisor deferred compensation expense. The payout rate is calculated by dividing the production-based payout by total advisory and commission revenue. Below is a reconciliation of the Company’s advisory and commission expense to the production-based payout and a calculation of the payout rate for the periods presented (in thousands except payout rate):

         

  Q1 2022   Q4 2021   Q1 2021
Advisory and commission expense $ 1,374,134     $ 1,431,157     $ 1,108,899  
Plus (Less): Advisor deferred compensation expense   31,564       (20,699 )     (13,522 )
Production-based payout $ 1,405,698     $ 1,410,458     $ 1,095,377  
           
Advisory and commission revenue $ 1,632,622     $ 1,610,175     $ 1,279,275  
           
Payout rate   86.10%       87.60%       85.62%  
                       

(8) Consists of revenue from the Company’s sponsorship programs with financial product manufacturers and omnibus processing and networking services but does not include fees from client cash programs. Other asset-based revenue is a component of asset-based revenue and is derived from the Company’s condensed consolidated statements of income.

(9) Interest income and other, net is a financial measure calculated as interest income plus (less) other revenue, plus (less) advisor deferred compensation expense. Below is a reconciliation of interest income and other, net to the Company’s interest income and other revenue for the periods presented (in thousands):         

  Q1 2022   Q4 2021   Q1 2021
Interest income $ 7,745     $ 7,780     $ 6,518  
(Less) Plus: Other revenue   (30,613 )     24,506       16,174  
Plus (Less): Advisor deferred compensation expense   31,564       (20,699 )     (13,522 )
Interest income and other, net $ 8,696     $ 11,587     $ 9,170  

(10) Core G&A is a non-GAAP financial measure. Please see a description of core G&A under the “Non-GAAP Financial Measures” section of this release for additional information. Below is a reconciliation of the Company’s total expense to core G&A for the periods presented (in thousands):

  Q1 2022   Q4 2021   Q1 2021
Core G&A Reconciliation          
Total expense $ 1,892,314   $ 1,957,633   $ 1,542,475
Advisory and commission   1,374,134     1,431,157     1,108,899
Depreciation and amortization   45,454     40,816     35,499
Interest expense on borrowings   27,211     27,121     25,059
Brokerage, clearing and exchange   22,600     20,372     19,364
Amortization of other intangibles   21,196     20,373     17,431
Loss on extinguishment of debt           24,400
Total G&A   401,719     417,794     311,823
Promotional (ongoing)(11)(12)   87,411     86,071     54,181
Acquisition costs(12)   13,323     14,291     2,429
Employee share-based compensation   12,755     9,589     11,356
Regulatory charges   7,323     8,442     7,595
Core G&A $ 280,907   $ 299,401   $ 236,262

(11)    Promotional (ongoing) for the three months ended March 31, 2022 includes $2.3 million of support costs related to full-time employees that are classified within compensation and benefits expense in the condensed consolidated statements of income and excludes $1.9 million of expenses incurred as a result of acquisitions, which are included in the Acquisition costs line item.

(12) Acquisition costs include the costs to setup, onboard and integrate acquired entities. Acquisition costs incurred during the first quarter of 2022 were driven primarily by $5.7 million of compensation and benefits expense, $5.6 million of professional services expense, and $1.9 million of promotional expense. Acquisition costs incurred during the fourth quarter of 2021 were driven primarily by $6.0 million of compensation and benefits expense, $6.0 million of professional services expense, and $1.7 million of promotional expense. Acquisition costs incurred during the first quarter of 2021 were driven primarily by $1.7 million of compensation and benefits expense and $0.6 million of professional services expense.

(13) EBITDA is a non-GAAP financial measure. Please see a description of EBITDA under the “Non-GAAP Financial Measures” section of this release for additional information. Below is a reconciliation of EBITDA to the Company’s net income for the periods presented (in thousands):

  Q1 2022   Q4 2021   Q1 2021
EBITDA Reconciliation          
Net income $ 133,744   $ 108,081   $ 129,620
Interest expense on borrowings   27,211     27,121     25,059
Provision for income taxes   39,635     28,478     35,522
Depreciation and amortization   45,454     40,816     35,499
Amortization of other intangibles   21,196     20,373     17,431
EBITDA $ 267,240   $ 224,869   $ 243,131

(14) Adjusted net income and EPS prior to amortization of intangible assets and acquisition costs are non-GAAP financial measures. Please see a description of adjusted net income and EPS prior to amortization of intangible assets and acquisition costs under the “Non-GAAP Financial Measures” section of this release for additional information. Below is a reconciliation of net income and earnings per diluted share to adjusted net income and EPS prior to amortization of intangible assets and acquisition costs (in thousands, except per share data):

  Q1 2022   Q4 2021   Q1 2021
  Amount Per Share   Amount Per Share   Amount Per Share
Net income / earnings per diluted share $ 133,744   $ 1.64     $ 108,081   $ 1.32     $ 129,620   $ 1.59  
Amortization of other intangibles   21,196     0.26       20,373     0.25       17,431     0.21  
Acquisition costs   13,323     0.16       14,291     0.17       2,429     0.03  
Tax benefit   (9,078 )   (0.11 )     (9,217 )   (0.11 )     (5,332 )   (0.06 )
Adjusted net income / EPS prior to amortization of intangible assets and acquisition costs $ 159,185   $ 1.95     $ 133,528     1.63     $ 144,148   $ 1.77  
Diluted share count   81,572         81,744         81,622    

(15) Consists of total advisory assets under custody at the Company’s broker-dealer subsidiary, LPL Financial, and Waddell & Reed, LLC. As of March 31, 2022, there were no advisory assets under custody at Waddell & Reed, LLC.

(16) Consists of total brokerage assets under custody at the Company’s broker-dealer subsidiary, LPL Financial, and Waddell & Reed, LLC. As of March 31, 2022, there were no brokerage assets under custody at Waddell & Reed, LLC.

(17) Consists of total assets on LPL Financial’s corporate advisory platform serviced by investment advisor representatives of LPL Financial or Allen & Company of Florida, LLC.

(18) Consists of total assets on LPL Financial’s independent RIA advisory platform serviced by investment advisor representatives of separate registered investment advisor firms rather than of LPL Financial.

(19) Represents those advisory assets in LPL Financial’s Model Wealth Portfolios, Optimum Market Portfolios, Personal Wealth Portfolios and Guided Wealth Portfolios platforms.

(20) Consists of total client deposits into advisory accounts, including advisory assets serviced by former BMO Harris Financial advisors, less total client withdrawals from advisory accounts, plus dividends, plus interest, minus advisory fees. The Company considers conversions from and to brokerage accounts as deposits and withdrawals, respectively.

(21) Consists of total client deposits into brokerage accounts, less total client withdrawals from brokerage accounts, plus dividends, plus interest. The Company considers conversions from and to advisory accounts as deposits and withdrawals, respectively.

(22) Waddell & Reed, LLC assets and net new assets were not included in organic net new assets through Q3 2021 as we completed Waddell & Reed onboarding. Starting in Q4 2021, Waddell & Reed assets and net new assets are included in total organic net new assets.

(23) Consists of existing custodied assets that converted from brokerage to advisory, less existing custodied assets that converted from advisory to brokerage.

(24) Calculated as annualized current period organic net new assets divided by preceding period assets in their respective categories of advisory assets or total advisory and brokerage assets.

(25) Consists of total client deposits into advisory accounts on LPL Financial’s corporate advisory platform less total client withdrawals from advisory accounts on its corporate advisory platform, plus dividends, plus interest, minus advisory fees.

(26) Consists of total client deposits into advisory accounts on LPL Financial’s independent RIA advisory platform less total client withdrawals from advisory accounts on its independent RIA advisory platform, plus dividends, plus interest, minus advisory fees.

(27) Consists of total client deposits into centrally managed assets accounts less total client withdrawals from centrally managed assets accounts, plus dividends, plus interest, minus advisory fees.

(28) Calculated by dividing revenue for the period by the average balance during the period.

(29) Represents the amount of securities purchased less the amount of securities sold in client accounts custodied with LPL Financial. Reported activity does not include any other cash activity, such as deposits, withdrawals, dividends received or fees paid.

(30) EBITDA and Credit Agreement EBITDA are non-GAAP financial measures. Please see a description of EBITDA and Credit Agreement EBITDA under the “Non-GAAP Financial Measures” section of this release for additional information. Under the Credit Agreement, management calculates Credit Agreement EBITDA for a trailing twelve month period at the end of each fiscal quarter, and in doing so may make further adjustments to prior quarters. Below are reconciliations of EBITDA and Credit Agreement EBITDA to net income for the periods presented (in thousands):         

  Q1 2022   Q4 2021
EBITDA and Credit Agreement EBITDA Reconciliations      
Net income $ 463,990   $ 459,866
Interest expense on borrowings   106,566     104,414
Provision for income taxes   145,576     141,463
Depreciation and amortization   161,382     151,428
Amortization of other intangibles   83,025     79,260
EBITDA $ 960,539   $ 936,431
Credit Agreement Adjustments:      
Acquisition costs and other $ 101,215   $ 92,142
Employee share-based compensation expense   43,243     41,844
M&A accretion(43)   40,372     53,550
Advisor share-based compensation expense   2,293     2,324
Loss on extinguishment of debt       24,400
Credit Agreement EBITDA (trailing twelve months) $ 1,147,662   $ 1,150,691

(31) Calculated based on the average advisor count from the current period and prior periods.

(32) Calculated based on the end-of-period total advisory and brokerage assets divided by end-of-period advisor count.

(33) Represents amortization expense on forgivable loans for transition assistance to advisors and financial institutions.

(34) Refers to active subscriptions related to professional services offerings (Business Strategy Services (formerly CFO Solutions), Marketing Solutions, and Admin Solutions) and business optimizer offerings (M&A Solutions, Digital Office, Resilience Plans, and Assurance Plans), as well as planning and advice services (Paraplanning) for which subscriptions are the number of advisors using the service.

(35) Represents advisory revenue as a percentage of Corporate Platform Advisory Assets for the trailing twelve-month period.

(36) Represents gross profit, a non-GAAP financial measure, for the trailing twelve month period, divided by average month-end total advisory and brokerage assets for the trailing twelve month period.

(37) Represents operating expense for the trailing twelve month period, excluding production-related expense, divided by average month-end total advisory and brokerage assets for the trailing twelve month period. Production-related expense includes advisory and commission expense and brokerage, clearing and exchange expense. For purposes of this metric, operating expenses include core G&A, a non-GAAP financial measure, as well as regulatory charges, promotional, employee share-based compensation, depreciation and amortization, and amortization of other intangibles.

(38) EBIT ROA is calculated as gross profit ROA less OPEX as a percentage of advisory and brokerage assets.

(39) Reflects retention of total advisory and brokerage assets, calculated by deducting quarterly annualized attrition from total advisory and brokerage assets, over the prior-quarter total advisory and brokerage assets.

(40) Recurring gross profit rate refers to the percentage of the Company’s gross profit, a non-GAAP financial measure that was recurring for the trailing twelve month period. Management tracks recurring gross profit, a characterization of gross profit and a statistical measure, which is defined to include the Company’s revenues from asset-based fees, advisory fees, trailing commissions, client cash programs and certain other fees that are based upon client accounts and advisors, less the expenses associated with such revenues and certain other recurring expenses not specifically associated with a revenue line. Management allocates such other recurring expenses on a pro-rata basis against specific revenue lines at its discretion.

(41) Capital expenditures represent cash payments for property and equipment during the period.

(42) Total capital returned per share equals the amount of capital allocated for share repurchases and cash dividends divided by the diluted weighted-average shares outstanding.

(43) M&A accretion is an adjustment to reflect the annualized expected run rate EBITDA of an acquisition as permitted by the Credit Agreement for up to eight fiscal quarters following the close of the transaction.

 

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