Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q2 2022 Earnings Presentation
29 slides from Lpl Financial's earnings presentation, Aug 2, 2022
Slide 1: LPL Financial Holdings Inc. Q2 2022 Earnings Key Metrics
LPL FINANCIAL HOLDINGS INC. Q2 2022 EARNINGS KEY METRICS August 2, 2022 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 this information to analyze the Company’s current performance, prospects and v
Slide 4: We continue to drive long-term business growth...
We continue to drive long-term business growth... Total Advisory and Brokerage Assets ($B) Total Net New Assets ($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 15.5% $
Slide 5: ...And solid financial results
...And solid financial results Gross Profit* ($M) EBITDA* ($M) YOY YOY Change Change 18% 311 28% 669 711 267 602 631 643 243 243 579 207 205 217 225 225 488 506 534 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 2022 2020 2021 2022 Acquisition Costs: $2M $24M $36M $14M $13M $9M EPS
Slide 6: We continued to drive solid organic growth with a Net New Asset growth rate
We continued to drive solid organic growth with a Net New Asset growth rate of ~13% in Q2 and ~10% for the past year Total Organic Net New Assets ($B) Organic Net New Advisory Assets(3) ($B) Organic Net New Brokerage Assets(4) ($B) Organic Total NNA Organic Advisory NNA Organic Brokerage NNA
Slide 7: Waddell & Reed update: Integration is substantially complete
Waddell & Reed update: Integration is substantially complete Transaction Details at Signing Retention Update Financial Update Waddell & Reed’s wealth management client assets Estimated run-rate EBITDA* expectations • On December 2, 2020, we signed decreased to ~$62B driven by equity markets are ~$10
Slide 8: We reached an annual run-rate EBITDA benefit of ~$100M at the end of Q2 2022
We reached an annual run-rate EBITDA* benefit of ~$100M at the end of Q2 2022 Q4 Q4 2020 2020 Q1 2021 Q1 2021 Q2 2021 Q2 2021 Q3 2021 Q3 2021 Q4 2021 Q4 2021 Q1 2022 Q1 2022 Q2 2022 Q2 2022 Transaction Signed Transaction Closed Advisors Onboarded (12/2/20) (4/30/21) (7/22/21) Transaction Signing and
Slide 9: Our Services Group has grown to ~3,900 subscriptions
Our Services Group has grown to ~3,900 subscriptions with annualized revenue of ~$32M in Q2 Professional Services • Digital and employee-powered solutions that provide practice management Services Group Subscriptions expertise to increase practice-level growth and operational efficiency • Higher rev
Slide 10: Centrally Managed Assets grew at a 14% organic growth rate in Q2
Centrally Managed Assets grew at a 14% organic growth rate in Q2 Centrally Managed Assets(6) ($B) Centrally Managed Net New Assets(7) ($B) Centrally Managed Assets Organic Centrally Managed NNA Centrally Managed Assets % of Total Advisory Assets Annualized Organic Growth Rate YOY $7.8 Change $96
Slide 11: Net Buy (Sell) Activity was $5.3B in Q2; the Payout Rate was 87.0%
Net Buy (Sell) Activity was $5.3B in Q2; the Payout Rate was 87.0% Net Buy (Sell) Activity(8) ($B) Payout Rate (%) Net Buy (Sell) Activity Client Cash % of Total Advisory and Brokerage Assets 18.1 17.6 86.6 86.6 87.1 87.6 87.0 17.4 86.2 85.6 86.3 86.1 16.0 12.5 12.2 11.0 9.3 5.9% 5.7% 5.4% 5.3% 6.
Slide 12: Service and Fee Revenue grew 13% year-over-year
Service and Fee Revenue grew 13% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY Change $110 $113 $113 13% $105 $97 $99 $94 $84 $88 $44 $47 $44 $36 $38 $39 $35 $32 $35 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 20
Slide 13: We continued to drive solid EBIT ROA in Q2
We continued to drive solid EBIT ROA in Q2 Average Total Advisory & Brokerage Assets ($B) Average Total Advisory & Brokerage Assets(9) Gross Profit* ROA(10) OPEX ROA(11) YOY SEQ Change Change $1,135 $1,144 25% 1% $1,079 $998 $915 $835 $756 $784 $732 29.3 bps 27.9 bps 26.8 bps 25.2 bps 24.3 bps 23.
Slide 14: Q2 Gross Profit ROA increased sequentially, driven by client cash revenue
Q2 Gross Profit* ROA increased sequentially, primarily driven by an increase in client cash revenue Gross Profit* ROA(10) (bps) Net Advisory Fees and Commissions Other Asset-Based(13) Transaction, Net of BC&E Service and Fee Interest Income and Other, net Client Cash 29.3 27.9 26.8 25.2
Slide 15: OPEX ROA increased in Q2 as we grow assets and manage expenses
OPEX ROA increased in Q2 as we grow assets and manage expenses Total OPEX % of Assets(11) (bps) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Other Intangible Assets) Amortization of Other Intangible Assets Regulatory 18.2 17.8 17.5 0.9 0.9 0.9 1
Slide 16: We are well positioned to benefit from rising interest rates
We are well positioned to benefit from rising interest rates Client Cash Balances(14) ($B) Annual potential Gross Profit* benefit from rising interest rates ICA Sweep (EOP) DCA Sweep (EOP) Money Market Sweep (EOP) • Over the last interest rate cycle, our deposit beta averaged ~15% CCA (EOP) Aver
Slide 17: ICA balances continued to grow, as demand increased for both fixed and variable contracts
ICA balances continued to grow, as demand increased for both fixed and variable contracts ICA Balances, including Money Market Overflow ($B) Overflow balances provide capacity when balances spike Money Market Overflow Balances • When ICA balances exceed our fixed and variable contract capacity, we
Slide 18: Our client cash balances are largely operational and increased to 6.5% of total assets
Our client cash balances are largely operational and increased to 6.5% of total assets in Q2 Client Cash Balances(14) ($B) Client cash as a % of assets has averaged ~5% Client Cash percent of Total Assets 69.6 61.7 57.1 • Our client cash balances are largely operational 48.5 48.1 48.2 50.5 − Typical
Slide 19: We remain focused on investing to drive organic growth while delivering 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 2022 Core G&A* context • Deliver operating leverage in core business • Our most recent 2022 Core G&A* outlook range was $1,150M to $1,175M • Prioritize in
Slide 20: Our balance sheet remained strong in Q2…
Our balance sheet remained strong in Q2… Corporate Cash(17) ($M) Leverage Ratio(18) $340 Management Target Cash: ~$200M Management Target Range: 2x-2.75x $282 $280 $278 $266 $270 $252 2.26x 2.26x $237 $241 2.18x 2.15x 2.16x 2.16x 2.11x 2.09x 2.03x Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q
Slide 21: ...And we have continued to return capital to shareholders
...And we have continued to return capital to shareholders Share Repurchases and Dividends ($M) Share Repurchases Dividends (As of 6/30/22) $160M $170 Remaining $146 $151 $140 $150 $840M $125 $130 $120 $70 $70 $70 Deployed Capital deployment focused $60 on organic growth and M&A Repurchased ~6%
Slide 22: Appendix
APPENDIX LPL Financial Member FINRA/SIPC 22
Slide 23: Management P&L – in total, prior to Waddell, and Waddell standalone
Management P&L – in total, prior to Waddell, and Waddell standalone LPL Total LPL prior to Waddell† Waddell Standalone† Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Gross Profit* Advisory $ 846 $ 960 $ 997 $ 1,047 $ 1,002 $ 7
Slide 24: 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(22) Corporate Advisory Assets(21) Organic Corporate Advisory
Slide 25: Monthly metrics dashboard through June 2022
Monthly metrics dashboard through June 2022 Total Advisory and Brokerage Assets ($B) Total Net New Assets ($B) Total Advisory and Brokerage Assets Advisory Assets % Total YOY SEQ Core Organic NNA Acquired NNA Annualized Organic Growth Rate Change Change 1,206 1,158 1,145 1,163 26.0 24.8 1,11
Slide 26: 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 27: 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
Slide 28: Reconciliation
Reconciliation Core G&A* to Total expense 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 is a reconciliation of total expense to Core G&A* and of Core G&A*, prior to
Slide 29: Endnotes
Endnotes (1) Represents the estimated total advisory and brokerage assets expected to transition to the Company’s broker-dealer subsidiary, LPL Financial LLC (“LPL Financial”), associated with advisors who transferred their licenses to LPL Financial during the period. The estimate is based on prior
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