Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Morgan Stanley Financials Conference 2011
20 slides from Lpl Financial's conference presentation, Feb 1, 2011
Slide 1: Morgan Stanley Financials Conference
Morgan Stanley Financials Conference February 1, 2011 Mark Casady, Chairman and CEO Member FINRA/SIPC
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about the Company’s future results of operations. We caution investors that these forward-lo
Slide 3: Overview of LPL Financial
Overview of LPL Financial Leading provider of integrated technology and services, serving nearly 16,000 independent financial advisors - #1 independent broker-dealer for 14 years Unbiased, conflict free business model is unique among leading financial services firms and is a significant competit
Slide 4: Established Leader with Scale
Established Leader with Scale Broker Dealers by Number of Financial Advisors* Independent Advisor Insurance Wirehouse Regional B/D 18,119 16,790 15,900 15,088 Total Industry FAs 334,160 LPL FAs 15,900 3,883 Third- LPL Market Share 4.8% party 12,700 clearing 11,608 12,017 Advisors licensed with LPL F
Slide 5: Serve Three Primary Customer Groups
Serve Three Primary Customer Groups The financial advisors that we support provide impartial financial advice; they are not connected with any financial institution and are not committed to the products of any one company Movement towards open architecture, independent advice and advisory 9,600 fe
Slide 6: Highly Attractive Industry Dynamics and Market Position
Highly Attractive Industry Dynamics and Market Position Market Share of Independent Advisors (% of total financial advisor headcount)* 47% 44% Large and Growing Market 40% 37% Brokerage Industry moving to independence 2004 2009 2012E 2014E Regulatory trends are favorable to the independent model
Slide 7: Unmatched Ability to Support Multiple Advisor Practice Types
Unmatched Ability to Support Multiple Advisor Practice Types Unique ability to recruit across a broad array of channels, business models and practice sizes Insurance RIA Producer Registered Dually Registered RIA Representative Investment Advisor Representative . * Advisors by Channel in 2009, as a
Slide 8: Business Model is Unbiased and Conflict Free
Business Model is Unbiased and Conflict Free Direct to Proprietary Investment Market the Products Banking Making Consumer …distribution strength in: Fixed Annuity sales ~ $4 billion Variable Annuity sales > $8 billion Brokerage Mutual Fund sales > $10 billion Advisory sales of new assets > $
Slide 9: Compelling Track Record of Growth
Compelling Track Record of Growth Revenue fueled from diverse sources with embedded growth - substantial portion is recurring and predictable Expenses are primarily variable - core G&A can be actively managed Strong cash flow generation supports financial flexibility Net Revenue, $ in millions
Slide 10: Limited Balance Sheet Risk
Limited Balance Sheet Risk De-Leveraging Profile, Net Debt / Adj. EBITDA 6.9x Rapidly de-leveraging profile 5.0x Minimal required capital 4.0x Not ratings sensitive 3.7x 3.4x 2.8x Limited-to-no asset / credit risk – No credit-sensitive assets 2005 2006 2007 2008 2009 2010 Q3 LPL Financial Me
Slide 11: Multiple Drivers of Growth for Adjusted EPS
Multiple Drivers of Growth for Adjusted EPS Drivers of Earnings Growth Acquisitions 7 Rising 6 interest 5 rates Long- 4 term market appreciation Scale-driven 3 operating leverage Mature advisor “same-store” 2 sales Maturing and seasoning of new advisors and 1 institutions Advisors and institutions a
Slide 12: Consistent Growth of Advisor Base
1 Consistent Growth of Advisor Base Industry leader in business development with over 50 staff Number of LPL Advisors – Organized by advisor practice type and institution type 11,920 11,950 12,017 – Dedicated team adding advisors to existing 11,089 branches Provide Superior Economics to Advisors K
Slide 13: Growth from Ramp-Up of Recent Advisors
2 Growth from Ramp-Up of Recent Advisors Illustrative Ramp Profile, % of Revenue at Time of Joining LPL, as a % (1) 80% - 85% Advisors come with their own 70% - 75% books of business 55% - 65% Classes ramp in a predictable way providing ability to forecast revenues with accuracy (2) Year 1 Year
Slide 14: Mature Advisor Sales Growth
3 Mature Advisor Sales Growth Significant movement to advisory based solutions – For example, fee based ETF offering Expansion of service and support to monetize more of advisor’s activities – For example, health insurance Supported by superior service – Net promoter score at top of industry L
Slide 15: Profit growth from scale-driven operating leverage
4 Profit growth from scale-driven operating leverage Substantial investments already made in our internet based, server technology Process improvements targeted annually to drive down costs Service Value Chain is our unique approach to improving service while lowering cost Adjusted EBITDA Marg
Slide 16: Long-term market appreciation and rising interest rates
Long-term market appreciation and rising interest rates 5 Long-Term Market Appreciation 6 Rising Interest Rates LPL will benefit from rising interest rates through cash Diversified portfolio of client assets deposits of $15 – 20bn For every 25 bps increase in the Fed Funds rate up to Long-te
Slide 17: Upside in earnings growth from acquisitions
7 Upside in earnings growth from acquisitions Transactions have been successful, fully integrated, and executed on attractive financial terms Highly disciplined approach to evaluation of acquisition opportunities Industry remains fragmented Recent Transactions Target Advisors Announced 206 201
Slide 18: Summary
Summary Leading provider to independent financial advisors Exciting industry and macroeconomic trends Attractive financial model Track record of performance and growth Well positioned to achieve target 20%+ long-term Adjusted EPS Growth LPL Financial Member FINRA/SIPC 18
Slide 19: Appendix
Appendix LPL Financial Member FINRA/SIPC 19
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization), further adjusted to exclude certain non-cash charges and other adjustments. The Company presents Adjusted EBITDA because the Company considers it a
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