Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Investor Presentation (September 2014)
16 slides from Lpl Financial's investor presentation, Sep 16, 2014
Slide 1: The LPL Financial Opportunity
The LPL Financial Opportunity September 16, 2014
Slide 2: Safe Harbor Disclosure and Non-GAAP Financial Measures
Safe Harbor Disclosure and Non-GAAP Financial Measures Statements in this presentation regarding LPL Financial Holdings Inc.'s (the “Company”) future financial and operating results, forecasts, growth, plans, strategies, future market position, ability and plans to repurchase shares and pay dividend
Slide 3: Clear opportunity to extend market leadership and promote earnings growth
Clear opportunity to extend market leadership and promote earnings growth Capitalizing on the industry move to independence with disruptive business model Increasing advisor productivity and asset gathering Unlocking embedded growth and strengthening our financial model Driving operational efficienc
Slide 4: Disruptive business model promotes industry leadership
Disruptive business model promotes industry leadership Established industry Disruptive model LPL Custodian Employee Independent leader Enables independence • #1 independent B/D with 13,840 advisors1 Focused business model • 4th largest brokerage firm2 Robust technology and service support • $465 bil
Slide 5: Positioned to capitalize on favorable industry trends
Positioned to capitalize on favorable industry trends Growing retail assets and Track record of increasing march to independence1 market share Independent Channel Employee Channel • LPL is the #1 destination for advisors looking to move2 n/a ~$13T • Over the past three years, LPL has ~$9T led the in
Slide 6: Strategic focus on expanding leadership within existing footprint
Strategic focus on expanding leadership within existing footprint Unlocking embedded Focusing on chosen markets growth Independent Advisor World class service Institution Services experience Services 744 banks & credit unions ~8,800 advisors $111 bn assets served $276 bn assets served Industry leadi
Slide 7: Delivering sustained growth across market cycles
Delivering sustained growth across market cycles Increasing productivity Growth in advisors + and market appreciation = Gross margin growth Advisors Gross Margin AUM per AUM Advisor per advisor ($ in mm) ($ in mm) 12,444 13,840 $1,294 $34 $24 $25 $939 7,006 $509 2006 2010 6/30/14 2006 2010 6/30/14 2
Slide 8: Focus on operational efficiency positions the company to generate outsized earnings growth
Focus on operational efficiency positions the company to generate outsized earnings growth ~1%-3% ~4%-6% ~2% ~2% ~(1%-2%) Beginning Core Volume Growth* Inflation Investments Simplicity & Ending Core G&A* Productivity* G&A Illustration: Scalability Low growth Higher growth of the business model scena
Slide 9: Strengthening the financial model
Strengthening the financial model Advancing trend to Benefit from normalized Increasing recurring fee-based business interest rates1 revenue AUM CAGR Incremental EBITDA 2010 – 6/30/14 18% $242 mm 66% 9% 61% Brokerage Advisory 2010 TTM 6/30/14 • Advisory AUM is ~35% of • The incremental benefit • Dri
Slide 10: Benefit from anticipated rising interest rates and growth in cash sweep balances
Benefit from anticipated rising interest rates and growth in cash sweep balances Growth in ICA cash Cash sweep opportunity ICA2 MMF2 Total sweep balances3 Assets1 ($ in bn) $16.4 $7.0 $23.4 $22.8 Q2 fee (bps) 58 7 43 $19.1 $12.2 $16.1 Assumed target fee (bps) 185 55 145 $6.9 $6.7 Potential annualize
Slide 11: ICA bank spread outlook
ICA bank spread outlook • Certain ICA bank contracts established in late 2008 provide for fees that are significantly above market. As these contracts gradually reset to market rates, the weighted average bank spread over FFER has and will continue to decline • The anticipated 2016 ending bank sprea
Slide 12: Operational update
Operational update Q3’14 outlook through August 31, 2014 • Including Financial Telesis, for the quarter we expect to be at the high-end of the range Net new of our annualized net new advisor target advisors • The pipeline remains strong and we see growing opportunity with larger enterprises • Recrui
Slide 13: Capital-light model supports opportunity to reinvest in the business and return capital to shareholders
Capital-light model supports opportunity to reinvest in the business and return capital to shareholders Approximate Current Use Potential Future Use of of Cash from Operations Cash from Operations • Cash from operations1 is approximately 50% of Adjusted EBITDA Q2 YTD • 2x-3x leverage $ in mm 2014 20
Slide 14: Appendix
1 LPL Financial Appendix
Slide 15: Diverse and recurring revenue streams
Diverse and recurring revenue streams 2013 Results Advisor and account fees • Increased Sponsor attachment revenue and cash sweep revenue, ex-cash sweep revenue, grew as a percent of advisor production from 19% in 2006 to 23% in 2013 • Adjusted EBITDA as a percent of Gross Trails Margin is 41% Recur
Slide 16: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation The reconciliation from net income to Adjusted EBITDA, a non-GAAP measure, for the periods presented is as follows (in thousands): TTM June 2014 2010 2006 (unaudited) Net income (loss) $178,275 ($56,862) $33,642 Interest expense 52,373 90,407 125,103 Income tax expense
LPL Financial Holdings — Investor Presentation (September 2014) on 6ix