Lpl Financial Holdings Inc. · NASDAQ:LPLA

Lpl Financial — Q1 2024 Earnings Presentation

25 slides from Lpl Financial's earnings presentation, Apr 30, 2024

  1. Slide 1: LPL Financial Holdings Inc. Q1 2024 Earnings Key Metrics

    LPL FINANCIAL HOLDINGS INC. Q1 2024 EARNINGS KEY METRICS April 30, 2024 LPL Financial Member Member LPL Financial FINRA/SIPC 1 FINRA/SIPC

  2. 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, capabilities and outlook, including forecasts and statem

  3. 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

  4. 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 $1,441 23% $1,354 $1,175 $1,240 $1,238 $1,163 $1,111 $1,065

  5. Slide 5: Financial Results

    Financial Results Gross Profit* ($M) Adjusted EBITDA* ($M) YOY YOY Change Change 5% (5%) 567 972 1,020 990 1,010 1,007 1,066 540 523 504 541 480 838 422 669 711 320 281 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2022 2023 2024 2022 2023 2024 Adj. Operating Margin (Adj. EBITDA* as a % of G

  6. Slide 6: Net New Asset growth rate was ~5% in Q1 and ~8% over the past year

    Net New Asset growth rate was ~5% in Q1 and ~8% over 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 Brokera

  7. Slide 7: Centrally Managed Assets grew at a 14% organic growth rate over the past 4 quarters

    Centrally Managed Assets grew at a 14% 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 R

  8. Slide 8: Net Buy (Sell) Activity was $38B in Q1; the Payout Rate was 86.6%

    Net Buy (Sell) Activity was $38B in Q1; the Payout Rate was 86.6% Net Buy (Sell) Activity(9) ($B) Payout Rate (%)  Net Buy (Sell) Activity Client Cash % of Total Advisory and Brokerage Assets 88.4 87.9 87.3 87.6 36.9 37.8 87.0 35.6 86.7 86.6 32.3 32.8 86.1 86.2 25.0 20.3 11.0 6.5% 6.4% 5.3% 5.8% 4.

  9. Slide 9: Service and Fee Revenue grew 11% year-over-year

    Service and Fee Revenue grew 11% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY Change 11% $136 $131 $132 $122 $120 $119 $123 $113 $113 $54 $57 $47 $47 $49 $47 $50 $44 $43 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

  10. Slide 10: EBIT ROA declined slightly

    EBIT ROA declined slightly Average Total Advisory & Brokerage Assets ($B)  Average Total Advisory & Brokerage Assets(10) Gross Profit* ROA(11) OPEX ROA(12) YOY SEQ Change Change $1,290 16% 5% $1,231 $1,186 $1,135 $1,144 $1,131 $1,112 $1,114 $1,142 33.4 bps 33.6 bps 32.8 bps (0.2) bps (1.2) bps 31.8

  11. Slide 11: Q1 Gross Profit ROA decreased sequentially, driven by a decrease in client cash revenue

    Q1 Gross Profit* ROA decreased sequentially, driven by a decrease 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 33.4 33.6 32.8 31.8 31.6 28.7 2

  12. Slide 12: OPEX ROA decreased in Q1

    OPEX ROA decreased in Q1 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 18.5 18.8 18.5 17.9 18.2 0.9 0.9 0.9 17.2 0.8 16.5 0.8 0.8 2.0 15.

  13. Slide 13: Our client cash balances are largely operational and decreased to 3.2% of total assets

    Our client cash balances are largely operational and decreased to 3.2% of total assets in Q1 We generate economics on client cash Client Cash Balances(15) ($B) through a third-party bank network Client Cash percent of Total Assets • By establishing sweep relationships across our ICA and DCA programs

  14. Slide 14: We generate compelling economics on client cash balances

    We generate compelling economics on client cash balances Client Cash Balances(15) (end of period, $B) Interest Rate Impact  ICA Sweep (EOP)  DCA Sweep (EOP)  Money Market Sweep (EOP) • Since Q1 2022, as the Fed started to increase interest rates, our deposit  CCA (EOP) beta averaged ~15% Average

  15. Slide 15: Fixed rate balances make up ~65% of the ICA portfolio

    Fixed rate balances make up ~65% 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 (EOP)  Overflow ICA (EOP) Variable balances are primarily indexed to Fed Funds  Variable ICA (EOP) 

  16. Slide 16: We remain focused on 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 2024 Core G&A* context • Given the evolving market backdrop, and our ongoing efficiency efforts, we plan to slow Core • Deliver operating leverage in core

  17. Slide 17: Our balance sheet remains strong...

    Our balance sheet remains strong... Corporate Cash(17) ($M) Leverage Ratio(18) • 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

  18. 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 $373 $2B share repurchase authorization† $299 $273 $248 Paused share repurchases following the $350 announcement of $170 $170 the acquisition of $146 $151 Atria $140 $275 $

  19. Slide 19: Appendix

    APPENDIX LPL Financial Member Member LPL Financial FINRA/SIPC 19 FINRA/SIPC

  20. 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(19) YOY  Organic Independent RIA  Advisory NNA(20)  Corporate RIA Assets(19) Change  Organic Corporate RIA

  21. Slide 21: Monthly Metrics Dashboard through March 2024

    Monthly Metrics Dashboard through March 2024 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 1,362 1,403 1,441 1,278 1,271 1,238 1,219

  22. 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

  23. 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

  24. Slide 24: Endnotes

    Endnotes (1) Organic Net New Assets include assets from Large Institutions. Below are Net New Assets from Large Institutions for the periods presented: $ in billions Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Net new organic advisory assets - - $2.3 - - - $0.2 $1.3 - Net

  25. Slide 25: Endnotes

    Endnotes (17) Corporate cash, a component of cash and equivalents, is the sum of cash and equivalents from the following: (1) cash and equivalents held at LPL Holdings, Inc., (2) cash and equivalents held at regulated subsidiaries as defined by the Company’s Credit Agreement, which include LPL Finan

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