Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q1 2023 Earnings Presentation
24 slides from Lpl Financial's earnings presentation, Apr 27, 2023
Slide 1: LPL Financial Holdings Inc. Q1 2023 Earnings Key Metrics
LPL FINANCIAL HOLDINGS INC. Q1 2023 EARNINGS KEY METRICS April 27, 2023 LPL Financial Member Member LPL Financial FINRA/SIPC 1 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, priorities, business strategies and outlook, including forecasts and statements relating
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: 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 $1,163 $1,175 1% $1,112 $1,133 $1,065 $1,111 $106.
Slide 5: Financial Results
Financial Results Gross Profit* ($M) EBITDA* ($M) YOY YOY Change 533 564 Change 52% 111% 972 1,020 414 838 711 311 602 631 643 669 243 243 267 579 225 225 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2021 2022 2023 2021 2022 2023 Acquisition Costs: $2M $24M $36M $14M $13M $9M $7M $6M $3M Op
Slide 6: Net New Asset growth rate was ~7% in Q1 and ~9% for the past year
Net New Asset growth rate was ~7% in Q1 and ~9% for the past year Total Organic Net New Assets(1) ($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 Brok
Slide 7: Centrally Managed Assets grew at a 9% organic growth rate over the past 4 quarters
Centrally Managed Assets grew at a 9% 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 Ra
Slide 8: Net Buy (Sell) Activity was $37B in Q1; the Payout Rate was 86.2%
Net Buy (Sell) Activity was $37B in Q1; the Payout Rate was 86.2% Net Buy (Sell) Activity(9) ($B) Payout Rate (%) Net Buy (Sell) Activity Client Cash % of Total Advisory and Brokerage Assets 85.6 86.3 87.1 87.6 86.1 87.0 87.9 88.4 86.2 36.9 25.0 20.3 17.4 18.1 17.6 16.0 11.0 5.3 ~87.4% average pay
Slide 9: Service and Fee Revenue grew 5% year-over-year
Service and Fee Revenue grew 5% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY Change $122 $120 $119 5% $110 $113 $113 $105 $97 $99 $47 $47 $49 $44 $44 $43 $38 $35 $39 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2
Slide 10: EBIT ROA improved, primarily driven from increased Gross Profit* ROA
EBIT ROA improved, primarily driven from increased Gross Profit* ROA Average Total Advisory & Brokerage Assets ($B) Average Total Advisory & Brokerage Assets(10) Gross Profit* ROA(11) OPEX ROA(12) YOY SEQ Change Change $1,135 $1,144 $1,131 $1,112 $1,114 (2%) 0% $1,079 $998 $915 $835 31.8 bps 9.4 b
Slide 11: Q1 Gross Profit* ROA increased sequentially, driven by client cash revenue
Q1 Gross Profit* ROA increased sequentially, primarily driven by an increase in client cash revenue Gross Profit* ROA(11) (bps) Net Advisory Fees and Commissions Other Asset-Based(14) Transaction, Net of BC&E Service and Fee Interest Income and Other, net Client Cash 31.8 28.7 25.2 25.3
Slide 12: OPEX ROA increased in Q1 as we invest in organic growth
OPEX ROA increased in Q1 as we invest in organic growth Total OPEX % of Assets(12) (bps) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Other Intangible Assets) Amortization of Other Intangible Assets Regulatory 17.9 17.2 16.7 16.5 0.8 16.0 15.8 0
Slide 13: Client cash balances are largely operational and decreased to 4.6% of total assets
Our client cash balances are largely operational and decreased to 4.6% of total assets in Q1 Client Cash Balances(15) ($B) Client cash as a % of assets has averaged ~5% Client Cash percent of Total Assets • Our client cash balances are largely operational 69.6 66.8 − Typically small balances used fo
Slide 14: Client cash revenue and sensitivity to interest rates
Client cash revenue and sensitivity to interest rates Client Cash Balances(15) ($B) Annual potential Gross Profit* benefit from rising interest rates ICA Sweep (EOP) DCA Sweep (EOP) Money Market Sweep (EOP) CCA (EOP) Average Yield(16) • Over the last interest rate cycle, our deposit beta average
Slide 15: ICA balances declined in Q1, driven by record net buying
ICA balances declined in Q1, driven by record net buying ICA Balances, including Money Market Overflow ($B) Overflow balances provide capacity when balances spike Money Market Overflow Balances • Historically, when ICA balances exceeded our fixed and variable contract capacity, we Overflow ICA Ba
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 • Our spending plans are on track with our initial 2023 Core G&A* outlook range of • Deliver operating leverage in core business ~12% to ~1
Slide 17: Our balance sheet remains strong...
Our balance sheet remains strong... Corporate Cash(18) ($M) Leverage Ratio(19) • Our strategy is to maintain a strong balance sheet that can absorb market • A long-term target leverage range of 1.5x to 2.5x positions our balance sheet volatility while having the capacity to invest for growth well ov
Slide 18: ...And we have continued to return capital to shareholders
...And we have continued to return capital to shareholders Share Repurchases and Dividends ($M) Share Repurchases Dividends $299 $2B share repurchase authorization we plan to execute on over ~2 years† $170 $170 $146 $151 $275 $140 Capital deployment focused $95 $150 on organic growth and M&A $70
Slide 19: Appendix
APPENDIX LPL Financial Member Member LPL Financial FINRA/SIPC 19 FINRA/SIPC
Slide 20: Corporate and Independent RIA Advisory assets
Corporate and Independent RIA Advisory assets Corporate and Independent RIA Advisory Asset Mix ($B) Corporate and Independent RIA Advisory NNA Mix ($B) Independent RIA Advisory Assets(20) Organic Independent RIA Advisory NNA(21) Corporate RIA Assets(20) YOY Organic Corporate RIA NNA(21
Slide 21: Monthly Metrics Dashboard through March 2023
Monthly Metrics Dashboard through March 2023 Total Advisory and Brokerage Assets ($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 24.8 1,163 1,096 1,120 1,165 1,148 1,175 1
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
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
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 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Net new organic advisory assets - - $0.2 $1.3 - - - $3.1 $5.0 Ne
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