Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q1 2021 Earnings Presentation
30 slides from Lpl Financial's earnings presentation, Apr 29, 2021
Slide 1: Q1 2021 Earnings Key Metrics
Q1 2021 EARNINGS KEY METRICS LPL Financial Holdings Inc. Q1 2021 Earnings April 29, 2021 LPL Financial Member FINRA/SIPC 1
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 some or all of this information to analyze the Company’s current performance,
Slide 4: We continue to drive long-term business growth...
We continue to drive long-term business growth... Total Advisory and Brokerage Assets ($ billions) Total Net New Assets(1) ($ billions) Total Advisory and Brokerage Assets Advisory Assets % of Total Assets YOY SEQ Organic Total NNA Acquired Total NNA Organic Annualized Growth Rate Change Change
Slide 5: ...And solid financial results
...And solid financial results Gross Profit* ($ millions) EBITDA* ($ millions) 556 576 579 276 268 280 268 536 543 538 506 534 250 488 242 207 205 217 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2019 2020 2021 2019 2020 2021 EPS Prior to Amortization of Intangible Assets and EBITDA* as a %
Slide 6: Solid organic growth with Net New Asset growth rate of ~13% in Q1
We continued to drive solid organic growth with a Net New Asset growth rate of ~13% in Q1 and ~11% for the past year Total Net New Assets(1) ($ billions) Net New Advisory Assets(4) ($ billions) Net New Brokerage Assets(5) ($ billions) Organic Total NNA Organic Advisory NNA Organic Brokerage NN
Slide 7: Waddell & Reed update: retention improved to 95%, run-rate EBITDA $80M+
Waddell & Reed update: Our estimated retention improved to 95% and our expected run-rate EBITDA increased to $80M+ Transaction Details at Signing Retention Update Financial Update Waddell & Reed’s wealth management client assets increased Estimated Run-Rate EBITDA* expectations On December 2nd,
Slide 8: We estimate reaching an annual EBITDA benefit of $80M+ by end of Q2 2022
We estimate reaching an annual EBITDA benefit of $80M+ by the end of Q2 2022 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Transaction Signed Expected Closing (12/2/20) (as early as 4/30/21) Transaction Signing and Closing Advisor Recruiting Acquisition Costs Integration (with majority of
Slide 9: We continue to scale and expand our Business Solutions portfolio
We continue to scale and expand our Business Solutions portfolio Business Solutions has grown to ~1,700 subscribers, more than double a year ago Annualized revenue from Business Solutions has increased to ~$19M, up by ~$9M from a year ago Launched our 6th Business Solution – M&A Solutions – in Q1 20
Slide 10: Our Corporate and Hybrid Advisory platforms continue to grow
Our Corporate and Hybrid Advisory platforms continue to grow Corporate and Hybrid Advisory Platform Mix ($ billions) Corporate and Hybrid Advisory NNA Mix ($ billions) Hybrid Advisory Assets(7) Organic Hybrid Advisory NNA (9) Corporate Advisory Assets (8) YOY SEQ Organic Corporate Advisory N
Slide 11: Centrally Managed Assets grew at a 47% organic growth rate
Centrally Managed Assets grew at a 47% organic growth rate, or a 20% organic growth rate excluding Large Banks in Q1 Centrally Managed Assets(11) ($ billions) Centrally Managed NNA(12) ($ billions) Centrally Managed Assets YOY SEQ Organic Centrally Managed NNA Centrally Managed Assets % of Total
Slide 12: We continued to drive solid EBIT ROA in Q1
We continued to drive solid EBIT ROA in Q1 Average Total Advisory & Brokerage Assets ($ billions) Average Total Advisory & Brokerage Assets(13) Gross Profit* ROA(14) OPEX ROA(15) YOY SEQ Change Change $835 16% 7% $784 $732 $756 $708 $720 $663 $672 $682 30.8 bps 31.1 bps 31.4 bps 30.7 bps 30.4 bps
Slide 13: Gross Profit ROA decreased year-over-year, driven by lower interest rates
Gross Profit* ROA decreased year-over-year, primarily driven by lower interest rates Gross Profit* ROA(14) (bps) Net Advisory Fees & Commissions Other Asset-Based(17) Interest Income and Other, net Our Gross Profit* ROA is primarily Transaction & Fee, Net of BC&E Client Cash impacted by 3
Slide 14: OPEX % of Assets continued to decrease, driven by Core G&A
OPEX % of Assets continued to decrease, primarily driven by Core G&A* Total OPEX % of Assets(15) (bps) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) YOY SEQ Amortization of Intangible Assets Regulatory Change Change 18.6 18.6 1
Slide 15: Q1 Client Cash balances decreased 1% sequentially
Q1 Client Cash balances decreased 1% sequentially Client Cash balances ($ billions) Annual potential Gross Profit* benefit from rising interest rates ICA Balances (EOP) DCA Balances (EOP) Money Market Account Balances (EOP) Estim ated Interest Rate Sensitivity w ith ICA Balances of ~$37B (w ith
Slide 16: In Q1, ICA balances remained well above 2019 levels
In Q1, ICA balances remained well above 2019 levels ICA balances remain elevated Overflow balances provide capacity when balances spike Overflow ICA Balances ($B) • When elevated market volatility leads ICA balances to temporarily exceed our Variable ICA Balances ($B) variable contract capacity,
Slide 17: Investing to drive organic growth while delivering long-term operating leverage
We remain focused on investing to drive organic growth while delivering long-term operating leverage in our core business Long-term cost strategy 2021 Core G&A* context Deliver operating leverage in core business Our 2021 Core G&A* plans are for a range of $975M to $1,000M prior to Waddell & Ree
Slide 18: Our balance sheet remained strong in Q1
Our balance sheet remained strong in Q1… Corporate Cash ($ millions) Credit Agreement Net Leverage Ratio Management Target Cash: (~$200M) $376 $340 Management Target Range v $296 (2x-2.75X) $282 $280 $236 $252 $227 $204 2.15x 2.16x 2.11x 2.05x 2.05x 2.07x 2.00x 2.03x 1.99x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 19: Prioritizing capital deployment to organic growth and M&A
...And we are currently prioritizing capital deployment to organic growth and M&A Shareholder Capital Returns ($ millions) Share Repurchases Dividends Total Payout Ratio (As of 3/31/21) 93% 105% 101% 101% 87% 18% 17% 16% 14% $350M $170 Remaining $146 $146 $151 $140 $150 $125 $125 $130 $120 Capi
Slide 20: Appendix
APPENDIX LPL Financial Member FINRA/SIPC 20
Slide 21: Disclosure Update – AUM Retention vs. Production Retention
Disclosure Update – AUM Retention vs. Production Retention AUM Retention Rate(3) (Quarterly Annualized) Context • In an effort to provide 98.4 98.7 more clarity into our 97.6 98.1 Updated 96.4 96.6 97.3 97.3 97.3 business results, we Retention have evolved our Metric ~98% av erage retention ov er pa
Slide 22: Monthly metrics dashboard through March 2021
Monthly metrics dashboard through March 2021 Total Advisory and Brokerage Assets ($ billions) Total Net New Assets ($ billions) YOY SEQ Total Organic NNA Div idends plus interest minus Adv isory Fees Acquired NNA Total Adv isory and Brokerage Assets Adv isory Assets % Total Change Change 2
Slide 23: Q1 Gross Profit increased 9% sequentially
Q1 Gross Profit* increased 9% sequentially Gross Profit* ($ millions) Net Advisory Fees & Commissions Other Asset-Based(17) Interest Income and Other, net Transaction & Fee, Net of BC&E Client Cash $576 $579 $556 $543 $536 $538 $534 $506 $97 $488 $151 $173 $105 $9 $162 $163 $155 $109 $8 $1
Slide 24: Q1 Total OPEX was flat sequentially, up 8% year-over-year
Q1 Total OPEX was flat sequentially, and increased 8% year- over-year Total OPEX(20) ($ millions) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) Amortization of Intangible Assets Regulatory $363 $365 $339 $339 $345 $17 $17 $333
Slide 25: Net Buy (Sell) Activity was $17.4 billion in Q1; Payout Ratio 85.6%
Net Buy (Sell) Activity was $17.4 billion in Q1, while Payout Ratio was 85.6% Net Buy (Sell) Activity(21) Payout Ratio (%) Net Buy (Sell) Activity ($billions) Client Cash % of Total Advisory and Brokerage Assets 17.4 86.5 86.7 86.8 86.2 86.6 86.6 85.0 85.1 85.6 12.9 12.5 12.2 9.7 9.8 9.3 9.2 9.0 7
Slide 26: 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, 12,
Slide 27: 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
Slide 28: Reconciliation of GAAP EPS to EPS Prior to Amortization and Acquisition Costs
Reconciliation of GAAP EPS to EPS Prior to Amortization of Intangible Assets and Acquisition Costs EPS Prior to Amortization of Intangible Assets and Acquisition Costs is a non-GAAP financial measure. Please see a description of EPS Prior to Amortization of Intangible Assets and Acquisition Costs un
Slide 29: 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
Slide 30: Footnotes
Footnotes (1) In April 2020, the Company updated its definition of net new assets to include dividends plus interest, minus advisory fees (see FNs 4 and 5). Net new assets figures for periods prior to Q2 2020 appearing in this presentation have been recast using the updated definition. (2) Represent
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