Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q4 2023 Earnings Presentation
25 slides from Lpl Financial's earnings presentation, Feb 1, 2024
Slide 1: LPL Financial Holdings Inc. Q4 2023 Earnings Key Metrics
LPL FINANCIAL HOLDINGS INC. Q4 2023 EARNINGS KEY METRICS February 1, 2024 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 $1,354 22% $1,206 $1,175 $1,240 $1,238 $1,163 $1,111 $1,065
Slide 5: Financial Results
Financial Results Gross Profit* ($M) EBITDA* ($M) YOY YOY Change 533 564 519 Change 4% 458 (17)% 414 445 972 1,020 990 1,010 1,007 838 311 711 267 643 669 225 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2022 2023 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Acquisition costs and Regulatory charges that are excluded from Adjusted
Slide 6: Net New Asset growth rate was ~8% in Q4 and ~9% over the past year
Net New Asset growth rate was ~8% in Q4 and ~9% over the past year Total Organic Net New Assets(1) ($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
Slide 7: Centrally Managed Assets grew at a 12% organic growth rate
Centrally Managed Assets grew at a 12% 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
Slide 8: Net Buy (Sell) Activity was $33B in Q4; Payout Rate was 87.6%
Net Buy (Sell) Activity was $33B in Q4; the Payout Rate was 87.6% Net Buy (Sell) Activity(9) ($B) Payout Rate (%) Net Buy (Sell) Activity Client Cash % of Total Advisory and Brokerage Assets 88.4 87.9 87.6 87.6 87.3 36.9 87.0 86.7 35.6 32.3 32.8 86.1 86.2 25.0 20.3 16.0 11.0 5.3 ~87% average payou
Slide 9: 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 $136 9% $131 $122 $120 $119 $123 $110 $113 $113 $50 $54 $47 $47 $49 $47 $44 $43 $39 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 10: EBIT ROA declined slightly
EBIT ROA declined slightly Average Total Advisory & Brokerage Assets ($B) Average Total Advisory & Brokerage Assets(10) Gross Profit* ROA(11) OPEX ROA(12) YOY SEQ Change Change $1,186 $1,231 11% 4% $1,135 $1,144 $1,131 $1,112 $1,114 $1,142 $1,079 33.4 bps 33.6 bps 32.8 bps 4.1 bps (0.8) bps 31.8 b
Slide 11: Q4 Gross Profit ROA decreased sequentially, driven by client cash revenue
Q4 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 28.7 25.3 1
Slide 12: 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 18.5 18.8 17.9 18.2 0.9 0.9 17.2 0.
Slide 13: Our client cash balances are largely operational and increased by ~$1B in Q4
Our client cash balances are largely operational and increased by ~$1B in Q4 Client Cash Balances(15) ($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 balances used fo
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) 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 de
Slide 15: Fixed rate balances make up ~60% of the ICA portfolio
Fixed rate balances make up ~60% 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 Balances Overflow ICA Balances Variable balances are primarily indexed to Fed Funds Variable ICA B
Slide 16: 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 • Our 2023 Core G&A* was $1,369M, translating to 15% year-over-year growth • Deliver operating leverage in core business • These in
Slide 17: Our balance sheet remains strong...
Our balance sheet remains strong... Corporate Cash(18) ($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 $373 $2B share repurchase authorization $299 we plan to execute on over ~2 years† $273 $248 $170 $170 $350 $146 $151 $140 $275 $250 $225 Capital deployment focused on organ
Slide 19: Appendix
APPENDIX LPL Financial Member Member LPL Financial FINRA/SIPC 19 FINRA/SIPC
Slide 20: Corporate and Independent RIA Advisory assets
Corporate and Independent RIA Advisory assets Corporate and Independent RIA Advisory Asset Mix ($B) Corporate and Independent RIA Advisory NNA Mix ($B) Independent RIA Advisory Assets(20) YOY Organic Independent RIA Advisory NNA(21) Corporate RIA Assets(20) Change Organic Corporate RIA
Slide 21: Monthly Metrics Dashboard through December 2023
Monthly Metrics Dashboard through December 2023 Total Advisory and Brokerage Assets ($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 1,354 1,240 1,278 1,271 1,238 1,219 1,3
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 Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Net new organic advisory assets - $2.3 - - - $0.2 $1.3 - - Net n
Slide 25: Endnotes
Endnotes (17) Calculated by dividing interest income earned on cash held in the Client Cash Account (“CCA”) for the period by the average CCA balance, excluding cash held in CCA that has been used to fund margin lending, during the period. The remaining cash is primarily held in cash segregated unde
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