Lpl Financial Holdings Inc. · NASDAQ:LPLA

Lpl Financial — Q2 2018 Earnings Presentation

27 slides from Lpl Financial's earnings presentation, Jul 26, 2018

  1. Slide 1: Q2 2018 Earnings Key Metrics

    Q2 2018 Earnings Key Metrics LPL Financial Holdings Inc. Q2 2018 Earnings July 26, 2018 Member FINRA/SIPC 1 LPL Financial Member 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 some or all of this information to analyze the Company’s current performance,

  4. Slide 4: Our business continued to grow and shift towards advisory

    Our business continued to grow and shift towards advisory Total Brokerage and Advisory Assets ($ billions) Advisory Assets as a percent of Total Assets Including NPH  Advisory Assets % of Total Assets Prior to NPH YOY SEQ YOY Change SEQ Change 648 659 Change Change  Advisory Assets % of Total Asse

  5. Slide 5: Financial performance has steadily improved

    Financial performance has steadily improved Gross Profit* ($ millions) EBITDA* ($ millions) Including NPH Including NPH YOY SEQ YOY SEQ Change Change Change Change 233 464 483 213 214 37% 27% 440 440 24% 4% 389 387 403 399 183 376 170 170 345 347 347 152 156 132 139 Prior to NPH 120 119 Prior to NPH

  6. Slide 6: Q2 2018 EPS Prior to Amortization of Intangible Assets was up 61% year-over-year

    Q2 2018 EPS Prior to Amortization of Intangible Assets* was up 61% year-over-year prior to certain items Q2 2018 – Year-over-Year Q2 2018 – Sequential EPS Prior to Amortization of Intangible Assets* ($)(4) EPS Prior to Amortization of Intangible Assets* ($)(4) +$0.12 +$0.12 +$0.25 -4% • $(0.03) of 6

  7. Slide 7: Q2 Total Brokerage and Advisory Assets increased 22% year-over-year to $659 billion

    Q2 Total Brokerage and Advisory Assets increased 22% year-over-year to $659 billion, up 2% sequentially Total Brokerage and Advisory Assets ($ billions) Total Brokerage and Advisory Asset Mix  Hybrid Advisory Assets(6)  Corporate Advisory Assets(7)  Brokerage Assets(8)  Hybrid Advisory  Corpora

  8. Slide 8: Q2 Total Net New Assets were an inflow of $2.5 billion

    Q2 Total Net New Assets were an inflow of $2.5 billion overall, and $1.0 billion prior to NPH Total Net New Assets ($ billions) Net New Advisory Assets(9) ($ billions) Net New Brokerage Assets(10) ($ billions)  Total NNA Prior to NPH  Advisory NNA Prior to NPH  Brokerage NNA Prior to NPH  Total

  9. Slide 9: Q2 Corporate Advisory Assets increased 26% year-over-year to $174 billion

    Q2 Corporate Advisory Assets increased 26% year-over-year to $174 billion, including $12 billion from NPH Corporate and Hybrid Advisory Platform Mix ($ billions) Corporate and Hybrid Advisory NNA Mix ($ billions)  Hybrid Advisory Assets(6)  Hybrid Advisory NNA(12) Including NPH Prior to NPH  Corp

  10. Slide 10: Q2 Centrally Managed Assets increased 40% year over year to $38 billion

    Q2 Centrally Managed Assets increased 40% year over year to $38 billion, including $3 billion from NPH Centrally Managed Assets(14) ($ billions) Centrally Managed NNA(15) ($ billions)  Centrally Managed Assets  Centrally Managed NNA Prior to NPH Centrally Managed Assets % of Total Advisory Assets

  11. Slide 11: Q2 EBIT ROA was 11.9 basis points, up 1.6 basis points year-over-year

    Q2 EBIT ROA was 11.9 basis points, up 1.6 basis points year-over-year Average Total Brokerage & Advisory Assets ($ billions)  Average Total Brokerage & Advisory Assets(16) Gross Profit* ROA(17) OPEX ROA(18) Including NPH Prior to NPH YOY Change SEQ Change YOY Change SEQ Change $645 $657 $586 $574 $

  12. Slide 12: Q2 Gross Profit ROA increased 0.5 basis points year-over-year

    Q2 Gross Profit* ROA increased 0.5 basis points year-over-year Gross Profit* ROA(17) (bps)  Net Commission & Advisory Fees  Cash Sweep  Other Asset-Based(20)  Transaction & Fee, Net of BC&E  Interest & Income and Other Including NPH Prior to NPH YOY Change SEQ Change YOY Change SEQ Change 29.4

  13. Slide 13: Q2 Gross Profit increased 24% year-over-year

    Q2 Gross Profit* increased 24% year-over-year Gross Profit* ($ millions)  Net Commission & Advisory Fees  Cash Sweep  Other Asset-Based(20) Including NPH Prior to NPH  Transaction & Fee, Net of BC&E  Interest & Income and Other $483 YOY Change SEQ Change YOY Change SEQ Change $464 $17 $8 $440 $

  14. Slide 14: Q2 Total OPEX ROA was down 1.0 basis point year-over-year

    Q2 Total OPEX ROA was down 1.0 basis point year-over-year Total OPEX ROA(18) (bps)  Core G&A*  Promotional  Employee Share-based Compensation  D&A Expense (ex Amortization of Intangible Assets)  Amortization of Intangible Assets  Regulatory Including NPH Prior to NPH YOY Change SEQ Change YOY

  15. Slide 15: Q2 Total OPEX increased 15% year-over-year

    Q2 Total OPEX increased 15% year-over-year Total OPEX(18) ($ millions)  Core G&A*  Promotional  Employee Share-based Compensation  D&A Expense (ex Amortization of Intangible Assets) Including NPH Prior to NPH  Amortization of Intangible Assets  Regulatory YOY Change SEQ Change YOY Change SEQ C

  16. Slide 16: Q2 Cash Sweep yields increased year-over-year, and balances increased 3%

    Q2 Cash Sweep yields increased 68 basis points year-over year, and balances increased 3% year-over-year Client Cash Sweep balances ($ billions)  ICA Balances (EOP)  DCA Balances (EOP)  Money Market Balances (EOP) Cash Sweep % of Total Assets Including NPH Prior to NPH YOY Change SEQ Change YOY Ch

  17. Slide 17: Our deposit beta has remained low through this interest rate cycle

    Our deposit beta has remained low through this interest rate cycle, and was ~25% for the June 2018 rate hike ICA deposit beta history and outlook Annual potential ICA Gross Profit* benefit  Deposit beta after Fed rate hike Fed Funds rate target range (bps) 175-200 ~$35M - $45M for each 150-175 addi

  18. Slide 18: Our updated outlook for 2018 Core G&A is $805 to $825 million

    Our updated outlook for 2018 Core G&A* is $805 to $825 million Long-term cost strategy 2018 Core G&A* outlook  Focus on delivering operating leverage  First half 2018 Core G&A* averaged $197 million per quarter  Prioritize investments that drive organic growth  Prior to NPH, first half 2018 Core

  19. Slide 19: In Q2, we reached our NPH year-end outlook of $90 million run-rate EBITDA accretion

    In Q2, we reached our NPH year-end outlook of $90 million run-rate EBITDA accretion Annualized run-rate EBITDA* Impact ($ millions) Onboarding Costs $92 ~$90  Q2 onboarding costs were $4 million of Core G&A* [ ]  Total onboarding costs through Q2 were $40 million  This is at the low end of our $4

  20. Slide 20: LTM EBITDA has grown steadily over the past two years

    LTM EBITDA* has grown steadily over the past two years LTM EBITDA* ($ millions)  LTM EBITDA* LTM EBITDA* Margin as a Percent of LTM Gross Profit*(29) 26% Including NPH Prior to NPH CAGR YOY Change YOY Change $755 27% 35% $711 $711 $648 $651 $597 $616 $561 $508 $523 $473 $484 44.1% 45.4% ~240 bps ~6

  21. Slide 21: Appendix

    Appendix 21 LPL Financial Member FINRA/SIPC

  22. Slide 22: Q2 Key Metrics prior to and including NPH

    Q2 Key Metrics prior to and including NPH Q2 2018 Results Results Prior to NPH + NPH Impact = Including NPH Assets ($ billions): Total Brokerage & Advisory Assets $586.8 $72.3 $659.1 Advisory Assets $277.4 $14.1 $291.5 Brokerage Assets $309.4 $58.1 $367.5 Total Net New Assets $1.0 $1.5 $2.5 Advisory

  23. Slide 23: Calculation of Gross Profit

    Calculation of 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. Set forth below is a calculation of Gross Profit for the periods presented on pages 5 and

  24. Slide 24: Reconciliation of Net Income to EBITDA

    Reconciliation of Net Income to EBITDA EBITDA is a non-GAAP financial measure. Please see a description of EBITDA under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below are reconciliations of the Company’s net income to EBITDA for the periods presented o

  25. Slide 25: Reconciliation of EPS Prior to Amortization of Intangible Assets to GAAP EPS

    Reconciliation of EPS Prior to Amortization of Intangible Assets to GAAP EPS EPS Prior to Amortization of Intangible Assets is a non-GAAP financial measure. Please see a description of EPS Prior to Amortization of Intangible Assets under “Non-GAAP Financial Measures” on page 3 of this presentation f

  26. Slide 26: Reconciliation of Core G&A to total operating expenses

    Reconciliation of Core G&A to total operating expenses Core G&A is a non-GAAP financial measure. Please see a description of Core G&A under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below are reconciliations of Core G&A to the Company’s total operating

  27. Slide 27: Footnotes

    Footnotes (1) Reflects retention of commission and advisory revenues, calculated by deducting the prior year production of the annualized year-to-date attrition rate, over the prior year total production. (2) EPS for Q1 2017 includes a charge related to the Company’s March 2017 debt refinancing that

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