Lpl Financial Holdings Inc. · NASDAQ:LPLA

Lpl Financial — Q3 2023 Earnings Presentation

24 slides from Lpl Financial's earnings presentation, Oct 26, 2023

  1. Slide 1: LPL Financial Holdings Inc. Q3 2023 Earnings Key Metrics

    LPL FINANCIAL HOLDINGS INC. Q3 2023 EARNINGS KEY METRICS October 26, 2023 LPL Financial Member Member LPL Financial FINRA/SIPC 1 FINRA/SIPC

  2. Slide 2: Notice to Investors: Safe Harbor Statement

    Notice to Investors: Safe Harbor Statement Statements in this presentation regarding LPL Financial Holdings Inc.’s (together with its subsidiaries, the “Company”) future financial and operating results, growth, priorities, business strategies and outlook, including forecasts and statements relating

  3. Slide 3: Notice to Investors: Non-GAAP Financial Measures

    Notice to Investors: 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 v

  4. Slide 4: Operating Metrics

    Operating Metrics Total Advisory and Brokerage Assets ($B) Total Net New Assets(1) ($B) YOY ◼ Total Advisory and Brokerage Assets Advisory Assets % of Total Assets ◼ Organic Total NNA Acquired Total NNA Organic Annualized Growth Rate Change $1,206 $1,240 $1,238 19% $1,133 $1,163 $1,175 $1,065 $1,1

  5. Slide 5: Financial Results

    Financial Results Gross Profit* ($M) EBITDA* ($M) YOY YOY Change 533 564 Change 519 21% 458 11% 1,020 990 1,010 414 972 838 311 711 267 631 643 669 225 225 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2021 2022 2023 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Acquisition costs and Regulatory charges that are excluded from Adjusted Ne

  6. Slide 6: Net New Asset growth rate was ~11% in Q3 and ~9% over the past year

    Net New Asset growth rate was ~11% in Q3 and ~9% over the past year Total Organic Net New Assets(1) ($B) Organic Net New Advisory Assets(1)(5) ($B) Organic Net New Brokerage Assets(1)(5) ($B)  Organic Total NNA  Organic Advisory NNA ◼ Organic Brokerage NNA Organic Annualized Growth Rate Net Br

  7. Slide 7: Centrally Managed Assets grew at an 11% organic growth rate over the past 4 quarters

    Centrally Managed Assets grew at an 11% organic growth rate over the past 4 quarters Centrally Managed Assets(7) ($B) Centrally Managed Net New Assets(8) ($B) ◼ Centrally Managed Assets ◼ Organic Centrally Managed NNA Centrally Managed Assets % of Total Advisory Assets YOY Annualized Organic Growth

  8. Slide 8: Net Buy (Sell) Activity was $36B in Q3; the Payout Rate was 87.3%

    Net Buy (Sell) Activity was $36B in Q3; the Payout Rate was 87.3% Net Buy (Sell) Activity(9) ($B) Payout Rate (%) ◼ Net Buy (Sell) Activity Client Cash % of Total Advisory and Brokerage Assets 87.1 87.6 86.1 87.0 87.9 88.4 86.2 86.7 87.3 36.9 35.6 32.3 25.0 20.3 17.6 16.0 11.0 5.3 ~87.2% average pay

  9. Slide 9: Service and Fee Revenue grew 11% year-over-year

    Service and Fee Revenue grew 11% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY Change $136 11% $122 $120 $119 $123 $110 $113 $113 $105 $47 $47 $49 $47 $50 $44 $43 $35 $39 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

  10. Slide 10: EBIT ROA was essentially flat as we invest to drive organic growth

    EBIT ROA was essentially flat as we invest to drive organic growth Average Total Advisory & Brokerage Assets ($B) ◼ Average Total Advisory & Brokerage Assets(10) Gross Profit* ROA(11) OPEX ROA(12) YOY SEQ Change Change $1,144 $1,142 $1,186 5% 4% $1,135 $1,131 $1,112 $1,114 $1,079 $998 33.4 bps 33.6

  11. Slide 11: Q3 Gross Profit ROA increased sequentially, driven by client cash revenue

    Q3 Gross Profit* ROA increased sequentially, primarily driven by an increase in client cash revenue Gross Profit* ROA(11) (bps) ◼ Net Advisory Fees and Commissions ◼ Other Asset-Based(14) ◼ Transaction, Net of BC&E ◼ Service and Fee ◼ Interest Income and Other, net ◼ Client Cash 33.4 33.6 31.8 28.7

  12. Slide 12: OPEX ROA increased in Q3 as we invest in organic growth

    OPEX ROA increased in Q3 as we invest in organic growth Total OPEX % of Assets(12) (bps) ◼ Core G&A* ◼ Promotional ◼ Employee Share-based Compensation ◼ D&A Expense (ex Amortization of Other Intangible Assets) ◼ Amortization of Other Intangible Assets ◼ Regulatory 18.2 18.5 17.9 17.2 0.8 0.9 16.5 0.

  13. Slide 13: Our client cash balances are largely operational and decreased to 3.8% of total assets

    Our client cash balances are largely operational and decreased to 3.8% of total assets in Q3 Client Cash Balances(15) ($B) Client cash as a % of assets has averaged ~5% Client Cash percent of Total Assets 69.6 • Our client cash balances are largely operational 66.8 64.1 − Typically small balances us

  14. Slide 14: Client cash revenue and sensitivity to interest rates

    Client cash revenue and sensitivity to interest rates Client Cash Balances(15) ($B) Annual potential Gross Profit* benefit from rising interest rates ICA Sweep (EOP) ◼ DCA Sweep (EOP) ◼ Money Market Sweep (EOP) CCA (EOP) Average Yield(16) • Over the last interest rate cycle, our deposit beta average

  15. Slide 15: Fixed rate balances increased to ~65% of the ICA portfolio

    Fixed rate balances increased to ~65% of the ICA portfolio, reducing our sensitivity to movement in short-term interest rates ICA Balances, including Overflow ($B)  Money Market Overflow Balances  Overflow ICA Balances Variable balances are primarily indexed to Fed Funds  Variable ICA Balances ~6

  16. Slide 16: In 2023, the environment is creating an opportunity to accelerate investments

    In 2023, the environment is creating an opportunity to accelerate investments to advance our strategic priorities Long-term cost strategy 2023 Core G&A* context • Deliver operating leverage in core business • Our most recent 2023 Core G&A* plans were for a range of $1,345M to $1,370M • Given our str

  17. Slide 17: Our balance sheet remains strong...

    Our balance sheet remains strong... Corporate Cash(18) ($M) Leverage Ratio(19) • Our strategy is to maintain a strong balance sheet that can absorb market • A long-term target leverage range of 1.5x to 2.5x positions our balance sheet volatility while having the capacity to invest for growth well ov

  18. Slide 18: ...And we have continued to return capital to shareholders

    ...And we have continued to return capital to shareholders Share Repurchases and Dividends ($M) ◼ Share Repurchases ◼ Dividends $373 $2B share repurchase authorization $299 we plan to execute on over ~2 years† $273 $170 $170 $350 $146 $151 $140 $275 $250 Capital deployment focused $95 on organic gro

  19. Slide 19: Appendix

    APPENDIX LPL Financial Member Member LPL Financial FINRA/SIPC 19 FINRA/SIPC

  20. Slide 20: Corporate and Independent RIA Advisory assets

    Corporate and Independent RIA Advisory assets Corporate and Independent RIA Advisory Asset Mix ($B) Corporate and Independent RIA Advisory NNA Mix ($B) ◼ Independent RIA Advisory Assets(20) YOY ◼ Organic Independent RIA  Advisory NNA(21) ◼ Corporate RIA Assets(20) Change ◼ Organic Corporate RIA

  21. Slide 21: Monthly Metrics Dashboard through September 2023

    Monthly Metrics Dashboard through September 2023 Total Advisory and Brokerage Assets ($B) Total Net New Assets ($B) ◼ Total Advisory and Brokerage Assets Advisory Assets % Total YOY SEQ ◼ Organic NNA ◼ Acquired NNA Annualized Organic Growth Rate  Change Change 1,240 1,278 1,271 1,238 1,136 1,111 1,

  22. Slide 22: Reconciliation

    Reconciliation Gross Profit* Gross profit* is a non-GAAP financial measure. Please see a description of gross profit under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below is a calculation of gross profit* for the periods presented herein: $ in millions

  23. Slide 23: Reconciliation

    Reconciliation Adjusted EPS* and Adjusted Net Income* Adjusted EPS* and adjusted net income* are non-GAAP financial measures. Please see a description of adjusted EPS* and adjusted net income* under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below are th

  24. Slide 24: Endnotes

    Endnotes (1) Organic Net New Assets include assets from Large Enterprises. Below are Net New Assets from Large Enterprises for the periods presented: $ in billions Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Net new organic advisory assets $2.3 - - - $0.2 $1.3 - - - Net n

LPL Financial Holdings — Q3 2023 Earnings Presentation on 6ix