Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q1 2025 Earnings Presentation
42 slides from Lpl Financial's earnings presentation, May 8, 2025
Slide 1: LPL Financial Holdings Inc. Q1 2025 Investor Presentation
LPL Financial Holdings Inc. Q1 2025 Investor Presentation May 8, 2025 Member FINRA/SIPC
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, plans, priorities, business strategies, capabilities, and outlook, including forecasts an
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
Slide 4: LPL investment highlights
LPL investment highlights 1 Industry leader with scale and structural tailwinds 2 Horizontal expansion strategy with a goal of meeting all ~300,000† advisors where they are Vertical integration strategy, with significant capacity to invest in capabilities that enhance the 3 advisor value proposition
Slide 5: LPL overview
1 Industry leader with scale and structural tailwinds LPL overview Who we are Who we serve • We serve the advisor-mediated marketplace as the largest independent broker- dealer in the U.S.† and a top custodian ~29,500 Advisors ~$1.8T Assets • We provide advisors with the front-, middle- and back-off
Slide 6: LPL by the numbers
1 Industry leader with scale and structural tailwinds LPL by the numbers Industry-leading scale Financial Highlights Total Advisory and Brokerage Assets ($B) Total Organic Net New Assets “NNA” Gross Profit* Contribution (end of period) Annualized Growth(1) 2% 2% 1% $1,795 $1,741 12% Client cash 33
Slide 7: We are a market leader with scale advantages and structural tailwinds
1 Industry leader with scale and structural tailwinds We are a market leader with scale advantages and structural tailwinds Market leader, with expanded Growing demand for advice Independent channel gaining share addressable marketsठProjected Growth in U.S. Retail Total U.S. Retail Advisor-Mediate
Slide 8: Capabilities
1 Industry leader with scale and structural tailwinds We are providing value-added capabilities that drive our market expansion Horizontal expansion strategy Vertical integration strategy Meet advisors and institutions where they are in Deliver advisors and institutions end-to-end the evolution of t
Slide 9: Our horizontal expansion strategy enables us to meet all ~300,000 advisors where they are
2 Horizontal expansion Our horizontal expansion strategy enables us to meet all ~300,000† advisors where they are ~300K advisors in 2019 2020 2021 2022 2023 2024 2025+ the marketplace†: Independent ~45K advisors | $4T Traditional independent markets Hybrid RIAs ~35K advisors | $4T Strategic Wealth E
Slide 10: Our Advisor Channel serves all segments of the advisor-mediated market
2 Horizontal expansion Our Advisor Channel serves all segments of the advisor-mediated market Organic NNA has driven the majority of Growing advisor opportunity Value proposition advisor asset growth • Initially, we served advisors in the • Traditional Independent Model Advisor Assets (end of period
Slide 11: Our Institutional Channel provides a compelling solution for institutions to outsource their wealth business
2 Horizontal expansion Our Institutional Channel provides a compelling solution for institutions to outsource their wealth business Organic NNA has driven the majority Growing institution opportunity Value proposition of institution asset growth • Initially, we focused on depository financial • Enha
Slide 12: We are extending our vertical integration by solving for the needs of advisors at every stage of their practice
3 Vertical Integration We are extending our vertical integration by solving for the needs of advisors at every stage of their practice Life cycle of an advisor Value-added partner across entire life cycle Entry Growth and practice optimization Sunsetting and transition Move to independence Affiliati
Slide 13: Our operating platform delivers industry-leading flexibility and integrated workflows
3 Vertical Integration Our operating platform delivers industry-leading flexibility and integrated workflows Lead with choice and flexibility ClientWorks for advisors • Promote optionality by integrating a broad array of third-party tools Establishing an integrated ecosystem of core capabilities, jo
Slide 14: Our Services Group is an innovation engine and driver of organic growth
3 Vertical Integration Our Services Group is an innovation engine and driver of organic growth Deepening our vertical integration Helping advisors and institutions deliver on their value proposition Asset Management Be a Great Advisor Clearing / Custody Comprehensive advice, prospect engagement Trad
Slide 15: We provide a range of services to advisors and institutions, strengthening their business while enhancing our returns
3 Vertical Integration We provide a range of services to advisors and institutions, strengthening their business while enhancing our returns We have seen a favorable mix shift in our platforms Key points • Brokerage: Asset growth is driven by institutions, Services where asset mix is primarily broke
Slide 16: We are advancing our capabilities to enhance our value proposition and drive growth
3 Vertical Integration We are advancing our capabilities to enhance our value proposition and drive growth Investment areas of focus We are making investments to drive organic growth… Annual Core G&A* ($M) Annual Core G&A* Growth Accelerate Invest in key growth initiatives to drive In 2025, we plan
Slide 17: We continued to drive solid organic growth with a net new asset growth rate of ~14% over the past year
3 Vertical Integration We continued to drive solid organic growth with a net new asset growth rate of ~14% over the past year Total Organic Net New Assets(12)(13) Organic Net New Advisory Assets(14) Organic Net New Brokerage Assets(14) Total Organic NNA ($B) Organic Net New Advisory Assets ($B)
Slide 18: We benefit from rising market levels and interest rates, and our business model has natural hedges
4 Resilient business model with natural hedges to market volatility We benefit from rising market levels and interest rates, and our business model has natural hedges to market volatility Annual Gross Profit* Impact Market Levels (S&P 500) ~$15M (15) Rising market levels drive growth in assets and r
Slide 19: Our client cash balances are largely operational and stable across rate cycles
4 Resilient business model with natural hedges to market volatility Our client cash balances are largely operational and as a percent of client assets, have been stable across rate cycles We generate economics on client cash Client Cash Balances(18) (end of period, $B) through a third-party bank net
Slide 20: We generate compelling economics on client cash balances
4 Resilient business model with natural hedges to market volatility We generate compelling economics on client cash balances Client Cash Balances(18) (end of period, $B) Interest Rate Impact ◼ ICA Sweep • Since Q1 2022, as the Fed increased interest rates, our deposit beta ◼ DCA Sweep averaged ~15%
Slide 21: Fixed rate balances make up ~60% of the ICA portfolio
4 Resilient business model with natural hedges to market volatility Fixed rate balances make up ~60% of the ICA portfolio, reducing our sensitivity to movement in short-term interest rates ICA Balances, including Overflow (end of period, $B) ◼ ◼ Money Market Overflow Balances Overflow ICA Balances V
Slide 22: We remain focused on investing to drive organic growth while delivering long-term operating leverage
5 Disciplined expense management driving operational leverage We remain focused on investing to drive organic growth while delivering long-term operating leverage in our core business Long-term cost strategy 2025 Core G&A* Context • Our 2024 Core G&A* was $1,475M prior to Prudential and Atria, trans
Slide 23: Our capital management strategy is focused on driving growth and maximizing shareholder value
6 Capital-light business model with flexible allocation framework Our capital management strategy is focused on driving growth and maximizing shareholder value Our capital management principles Dynamic capital allocation framework • Disciplined capital management to drive long-term shareholder value
Slide 24: Maintaining a strong balance sheet is critical to our strategy
6 Capital-light business model with flexible allocation framework Maintaining a strong balance sheet is critical to our strategy and a key consideration for advisors and institutions Balance Sheet Principles Leverage Ratio(4) • Maintain a strong balance sheet that can absorb market volatility Prior
Slide 25: We have continued to return capital to shareholders
6 Capital-light business model with flexible allocation framework We have continued to return capital to shareholders Share Repurchases and Dividends ($M) ◼ Share Repurchases ◼ Dividends $2B share repurchase authorization† $1,192 Paused share repurchases following Capital deployment the announcement
Slide 26: We see potential for consolidation given fragmented markets
6 Capital-light business model with flexible allocation framework We see potential for consolidation given fragmented markets Addressable markets for advisor Highly fragmented markets create opportunity channel† for additional consolidation† Growth potential from consolidation Traditional Independen
Slide 27: M&A is a key part of our strategy, and complements our organic growth
6 Capital-light business model with flexible allocation framework M&A† is a key part of our strategy, and complements our organic growth Commonwealth Growth potential from consolidation Financial Network‡ ▪ Our scale, capabilities and economics give us a competitive advantage in M&A in Mid-2025 ~$28
Slide 28: We're delivering liquidity and succession capabilities for advisors seeking to transition
6 Capital-light business model with flexible allocation framework We’re delivering liquidity and succession capabilities for advisors seeking to transition L&S by the ~$690M 56 ~$10-20M ~30-40 deals numbers: Total capital deployed Total deals closed Average deal size § Capacity of deals per year § G
Slide 29: As we continue to invest and increase our scale, we enhance our ability to drive further growth
As we continue to invest and increase our scale, we enhance our ability to drive further growth Increa Attract Invest in se s n ca differentiated sitio le in advisors and opo as institutions, and capabilities and a r se p unique advisor and benefit from lue ts, greater use of ad va institution vis s
Slide 30: We are focused on executing our strategy and delivering results
We are focused on executing our strategy and delivering results Total Advisory and Brokerage Assets(22) ($B) Total Organic Net New Asset Growth Key Earnings Growth Drivers 18% Up Enhanced Value Proposition CAGR ~2x (Capabilities, Technology, Service) $1,741 $1,795 13.2% 13.5% $1,354 Increased Organi
Slide 31: Appendix
ESS Appendix Vi ae ed
Slide 32: Update on our Acquisition of Atria Wealth Solutions
Update on our Acquisition of Atria Wealth Solutions Transaction Details and Timing ▪ On February 12, 2024, we signed an agreement to acquire 100% of the equity of Atria Wealth Solutions as an equity purchase with an upfront price of ~$805M. Potential earn-outs of ~$0M to ~$230M are based on retentio
Slide 33: Atria Wealth Solutions: We estimate reaching an annual EBITDA benefit of $150M+ when fully ramped
Atria Wealth Solutions: We estimate reaching an annual EBITDA* benefit of $150M+ when fully ramped Q1 2023 Q3 2024 Q2 2023 Q4 2024 Q3 Q1 2024 Q4 Q2 2024 Q1 Q3 2025 2024 Q2 Q4 2025 2024 Q3 Q1 2025 2025 Q4 Q2 2025 2025 Transaction Signed Closed 10/1/2024 Advisors Onboarded Transaction Signing and Clos
Slide 34: Acquisition of Commonwealth Financial Network
Acquisition of Commonwealth Financial Network Transaction Details and Timing ▪ On March 28, 2025, we signed an agreement to acquire 100% of the equity of Commonwealth Financial Network as an equity purchase with an upfront price of ~$2.7B ▪ We expect to close the acquisition in the second half of 20
Slide 35: Commonwealth Financial Network: We estimate an annual EBITDA benefit of ~$415M when fully ramped
Commonwealth Financial Network: We estimate an annual EBITDA* benefit of ~$415M when fully ramped Q1 Q3 2025 2023 Q2 Q4 2025 2023 Q3 Q1 2025 2024 Q4 Q2 2025 2024 Q1 Q3 2026 2024 Q2 Q4 2026 2024 Q3 Q1 2026 2025 Q4 Q2 2026 2025 Transaction Signed Expected Closing Advisors Onboarded Transaction Signing
Slide 36: Key drivers of promotional expense growth
Key drivers of promotional expense growth Promotional Expense ($M) $629 $486 Organic Growth investments increased by $354 ~$90M, primarily driven by our strong level of recruiting and the resulting transition assistance Organic Growth investments increased by Conferences increased by ~$10M due to ~$
Slide 37: 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
Slide 38: Reconciliation
Reconciliation Net Income to EBITDA*, Adjusted EBITDA* and Credit Agreement EBITDA* EBITDA*, Adjusted EBITDA* and Credit Agreement EBITDA* are non-GAAP financial measures. Please see a description of EBITDA*, Adjusted EBITDA* and Credit Agreement EBITDA* under “Non-GAAP Financial Measures” on page 3
Slide 39: Reconciliation
Reconciliation Adjusted Pre-Tax Income* Adjusted pre-tax income* is a non-GAAP financial measure. Please see a description of adjusted pre-tax income* under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below is a reconciliation of income before provision f
Slide 40: Reconciliation
Reconciliation Core G&A* to Total expense 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 is a reconciliation of total expense to Core G&A* and of Core G&A, prior to
Slide 41: Endnotes
Endnotes (1) 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. (2) The departure of the Company's former Chief Executive Officer resulted in other income of $26.4
Slide 42: Endnotes
Endnotes (18) During the second quarter of 2022, the Company updated its definition of client cash balances to include client cash accounts and exclude purchased money market funds. Client cash accounts include cash that clients have deposited with LPL Financial that is included in Client payables i
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