Lpl Financial Holdings Inc. · NASDAQ:LPLA

Lpl Financial — Q4 2022 Earnings Presentation

25 slides from Lpl Financial's earnings presentation, Feb 2, 2023

  1. Slide 1: LPL Financial Holdings Inc. Q4 2022 Earnings Key Metrics

    LPL FINANCIAL HOLDINGS INC. Q4 2022 EARNINGS KEY METRICS February 2, 2023 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 and outlook, including forecasts and statements relating

  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)  Total Advisory and Brokerage Assets Advisory Assets % of Total Assets YOY  Organic Total NNA Acquired Total NNA Organic Annualized Growth Rate Change $106.0 $1,206 $1,163 $1,112 $1,133 $1,111 (8%) 15.5% $1,0

  5. Slide 5: Financial Results

    Financial Results Gross Profit* ($M) EBITDA* ($M) YOY YOY Change 533 Change 51% 137% 972 414 838 311 643 669 711 243 243 267 579 602 631 217 225 225 534 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2021 2022 2020 2021 2022 Acquisition Costs: $2M $24M $36M $14M $13M $9M $7M $6M EPS Prio

  6. Slide 6: Net New Asset growth rate was ~8% in Q4 and ~8% for the past year

    Net New Asset growth rate was ~8% in Q4 and ~8% 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

  7. Slide 7: Planning & Advice Services Business Services

    Our Services Group has grown to ~4,500 subscriptions with annualized revenue of ~$36M in Q4 Planning and Advice Advice Services • Digital and employee-powered solutions that help advisors expand the Services Group Subscriptions Planning & breadth and depth of their advice Planning & Advice Services‡

  8. Slide 8: Centrally Managed Assets grew at a 10% organic growth rate over the past 4 quarters

    Centrally Managed Assets grew at a 10% 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

  9. Slide 9: Net Buy (Sell) Activity was $25B in Q4; the Payout Rate was 88.4%

    Net Buy (Sell) Activity was $25B in Q4; the Payout Rate was 88.4% Net Buy (Sell) Activity(9) ($B) Payout Rate (%)  Net Buy (Sell) Activity Client Cash % of Total Advisory and Brokerage Assets 86.6 85.6 86.3 87.1 87.6 86.1 87.0 87.9 88.4 25.0 20.3 17.4 18.1 17.6 16.0 12.2 11.0 5.3 ~87.4% average pay

  10. Slide 10: Service and Fee Revenue grew 9% year-over-year

    Service and Fee Revenue grew 9% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY Change $122 $120 9% $110 $113 $113 $105 $94 $97 $99 $44 $47 $44 $43 $47 $36 $38 $35 $39 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 20

  11. Slide 11: 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 3% (2)% $1,079 $998 $915 $835 $784 28.7 bps 6.0 bps

  12. Slide 12: Q4 Gross Profit* ROA increased sequentially, driven by client cash revenue

    Q4 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 28.7 26.8 25.2 25.3

  13. Slide 13: OPEX ROA increased in Q4 as we invest in organic growth

    OPEX ROA increased in Q4 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 17.5 17.2 0.9 16.7 16.5 16.0 15.8 0

  14. Slide 14: Client cash balances are largely operational and decreased to 5.8% of total assets

    Our client cash balances are largely operational and decreased to 5.8% of total assets in Q4 Client Cash Balances(15) ($B) Client cash as a % of assets has averaged ~5% Client Cash percent of Total Assets 69.6 66.8 • Our client cash balances are largely operational 64.1 61.7 57.1 − Typically small b

  15. Slide 15: 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) $69.6 • Over the last interest rate cycle, our deposit beta a

  16. Slide 16: ICA balances declined in Q4, driven by record net buying

    ICA balances declined in Q4, 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

  17. Slide 17: As we look ahead to 2023, accelerate investments to advance strategic priorities

    As we look ahead to 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 2022 Core G&A* was $1,192M, translating to ~13% year-over-year growth • Deliver operating leverage in core business

  18. Slide 18: 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

  19. Slide 19: ...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 $2B share repurchase authorization we plan to execute on over ~2 years beginning in Q1’23† $170 $170 $146 $151 $140 $95 $150 Capital deployment focused $150 $125 $130 $120

  20. Slide 20: Appendix

    APPENDIX LPL Financial Member Member LPL Financial FINRA/SIPC 20 FINRA/SIPC

  21. Slide 21: 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

  22. Slide 22: Monthly Metrics Dashboard through December 2022

    Monthly Metrics Dashboard through December 2022 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 1,206 1,158 1,145 1,163 1,096 1,120 1,0

  23. Slide 23: 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

  24. Slide 24: Reconciliation

    Reconciliation EPS prior to amortization of intangible assets and acquisition costs* and Adjusted Net Income* EPS prior to amortization of intangible assets and acquisition costs* and adjusted net income* are non-GAAP financial measures. Please see a description of EPS prior to amortization of intan

  25. Slide 25: 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 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Q4 2020 Net new organic advisory assets - $0.2 $1.3 - - - $3.1 $5.0 - Ne

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