Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q1 2018 Earnings Presentation
28 slides from Lpl Financial's earnings presentation, May 3, 2018
Slide 1: Q1 2018 Earnings Key Metrics
Q1 2018 Earnings Key Metrics LPL Financial Holdings Inc. Q1 2018 Earnings May 3, 2018 Member FINRA/SIPC 1 LPL Financial Member 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, and outlook, including forecasts and statements relating to the Company’s future deposit betas (a
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: Q1 Total Brokerage and Advisory Assets increased 22% year-over-year to $648 billion
Q1 Total Brokerage and Advisory Assets increased 22% year-over-year to $648 billion, up 5% sequentially Total Brokerage and Advisory Assets ($ billions) Total Brokerage and Advisory Asset Mix Brokerage Assets(1) Hybrid Advisory Assets(2) Corporate Advisory Assets(3) Brokerage Assets Hybrid
Slide 5: Financial performance has steadily improved on four key metrics
Financial performance has steadily improved on four key metrics Gross Profit* ($ millions) EBITDA* ($ millions) Including NPH Including NPH YOY SEQ $213 YOY SEQ $464 Change Change Change Change $440 $183 $389 $387 $403 $399 23% 15% $170 $170 21% 32% $356 $376 $156 $345 $347 $347 $152 $137 $132 $139
Slide 6: Q1 2018 EPS Prior to Amortization of Intangible Assets was up 86% year-over-year
Q1 2018 EPS Prior to Amortization of Intangible Assets* was up 86% year-over-year prior to certain items Q1 2018 – Year-over-Year Q1 2018 – Sequential EPS Prior to Amortization of Intangible Assets* ($)(6) EPS Prior to Amortization of Intangible Assets* ($)(6) 53% 86% -$0.25 -$0.25 • $(0.13) of +$
Slide 7: Q1 Total Net New Assets were an inflow of $2.9 billion prior to NPH
Q1 Total Net New Assets were an inflow of $2.9 billion prior to NPH Total Net New Assets ($ billions) Net New Advisory Assets(8) ($ billions) Net New Brokerage Assets(9) ($ billions) Total NNA Prior to NPH Advisory NNA Prior to NPH Brokerage NNA Prior to NPH Total NNA from NPH Advisory NNA
Slide 8: Q1 Corporate Advisory Assets increased 26% year-over-year to $168 billion
Q1 Corporate Advisory Assets increased 26% year-over-year to $168 billion, including $12 billion from NPH Corporate and Hybrid Advisory Platform Mix ($ billions) Corporate and Hybrid Advisory NNA Mix ($ billions) Hybrid Advisory Assets(2) Hybrid Advisory NNA(13) Including NPH Prior to NPH Corp
Slide 9: Q1 Centrally Managed Assets increased 44% year over year to $36 billion
Q1 Centrally Managed Assets increased 44% year over year to $36 billion, including $3 billion from NPH Centrally Managed Assets(15) ($ billions) Centrally Managed NNA(16) ($ billions) Centrally Managed Assets Centrally Managed NNA Prior to NPH Centrally Managed Assets % of Total Advisory Assets
Slide 10: Q1 EBIT ROA prior to NPH was 12.5 basis points
Q1 EBIT ROA prior to NPH was 12.5 basis points, up 3.2 basis points year-over-year Average Total Brokerage & Advisory Assets ($ billions) Average Total Brokerage & Advisory Assets(17) Gross Profit* ROA(18) OPEX ROA(19) Including NPH Prior to NPH YOY Change SEQ Change YOY Change SEQ Change $645 $58
Slide 11: Q1 Gross Profit ROA prior to NPH increased 1.3 basis points year-over-year
Q1 Gross Profit* ROA prior to NPH increased 1.3 basis points year- over-year Gross Profit* ROA(18) (bps) Net Commission & Advisory Fees Cash Sweep Other Asset-Based(21) Transaction & Fee, Net of BC&E Interest & Income and Other Including NPH Prior to NPH YOY Change SEQ Change YOY Change SE
Slide 12: Q1 Gross Profit prior to NPH increased 17% year-over-year
Q1 Gross Profit* prior to NPH increased 17% year-over-year Gross Profit* ($ millions) Net Commission & Advisory Fees Cash Sweep Other Asset-Based(21) Including NPH Prior to NPH Transaction & Fee, Net of BC&E Interest & Income and Other YOY Change SEQ Change YOY Change SEQ Change $464 $8 $4
Slide 13: Q1 Total OPEX ROA prior to NPH was down 1.9 basis points
Q1 Total OPEX ROA prior to NPH was down 1.9 basis points year- over-year and down 0.5 basis points sequentially Total OPEX ROA(19) (bps) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) Amortization of Intangible Assets Regulatory
Slide 14: Q1 Total OPEX prior to NPH increased 1% year-over-year
Q1 Total OPEX prior to NPH increased 1% year-over-year and was roughly flat sequentially Total OPEX(19) ($ millions) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) Including NPH Prior to NPH Amortization of Intangible Assets Reg
Slide 15: Q1 Cash Sweep yields increased 64 basis points year-over-year, balances decreased 8%
Q1 Cash Sweep yields increased 64 basis points year-over year, and balances decreased 8% year-over-year prior to NPH Client Cash Sweep balances ($ billions) ICA Balances (EOP) DCA Balances (EOP) Money Market Balances (EOP) Cash Sweep % of Total Assets Including NPH Prior to NPH YOY Change SEQ
Slide 16: Deposit betas remained low through this rate cycle, ~25% for March 2018 hike
Our deposit betas have remained low through this rate cycle and were ~25% for the March 2018 rate hike ICA deposit beta history and outlook Annual potential ICA Gross Profit* benefit Deposit beta after Fed rate hike Fed Funds rate target range (bps) ~$30M - $40M for each additional rate hike 150-1
Slide 17: Our outlook for 2018 Core G&A is $800 to $830 million
Our outlook for 2018 Core G&A* is $800 to $830 million, with most year- over-year growth driven by costs to support NPH Lower Recent Expense Trajectory Long-term cost strategy Annual Core G&A* Growth Focus on delivering operating leverage Prioritize investments that drive organic growth 7% Dri
Slide 18: NPH Wave 2 onboarding drove higher Q1 promotional expense
NPH Wave 2 onboarding drove higher Q1 promotional expense Promotional ($ millions) $67 $60 NPH • $10 of Onboarding NPH • $10 of Onboarding • $19 of Cash Assistance • $12 of Cash Assistance $33 • $4 of Loan Amortization $23 • $1 of Loan Amortization NPH: ~$7 • Primarily from Loan Amortization • +$6 o
Slide 19: NPH onboarding costs and financial assistance consistent with initial outlook
NPH onboarding costs and financial assistance through Q1 2018 were consistent with initial outlook Onboarding Costs ($ millions) Financial Assistance ($ millions) Total financial assistance substantially complete Roughly $100 $97 • $36 through Q1 Cash • Anticipate final onboarding costs in the lower
Slide 20: Outlook for NPH annual run-rate EBITDA accretion increased to ~$90 million
Our outlook for NPH annual run-rate EBITDA accretion increased to ~$90 million, and we are on track to achieve that outlook by end of 2018 Annualized run-rate EBITDA* Impact ($ millions) ~$90 Updated outlook of ~$90M primarily driven by increased rates and markets ~$85 Prior outlook of ~$85M $26 -$8
Slide 21: LTM EBITDA has grown steadily over the past two years
LTM EBITDA has grown steadily over the past two years LTM EBITDA* ($ millions) LTM EBITDA* LTM EBITDA* Margin as a Percent of LTM Gross Profit*(28) 24% Including NPH Prior to NPH CAGR YOY Change YoY Change $711 24% 36% $648 $651 $597 $616 $561 $508 $523 $466 $473 $484 42.0% 44.1% ~240 bps ~700 bps
Slide 22: Appendix
Appendix 22 LPL Financial Member FINRA/SIPC
Slide 23: Q1 Key Metrics prior to and including NPH
Q1 Key Metrics prior to and including NPH Q1 2018 Results Results Prior to NPH + NPH Impact = Including NPH Assets: Total Brokerage & Advisory Assets $578.1 B $69.4 B $647.5 B Advisory Assets $269.8 B $13.7 B $283.5 B Brokerage Assets $308.4 B $55.7 B $364.1 B Total Net New Assets $2.9 B $36.0 B $38
Slide 24: 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 release for additional information. Set forth below is a calculation of Gross Profit for the periods presented on pages 5 and 10-12
Slide 25: 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 26: Reconciliation of EPS Prior to Amortization of Intangible Assets to GAAP EPS
Reconciliation of EPS Prior to Amortization of Intangible Assets to GAAP EPS EPS Prior to Amortization of Intangible Assets is a non-GAAP financial measure. Please see a description of EPS Prior to Amortization of Intangible Assets under “Non-GAAP Financial Measures” on page 3 of this presentation f
Slide 27: 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 28: Footnotes
Footnotes (1) Consists of brokerage assets serviced by advisors licensed with the Company’s broker-dealer subsidiary LPL Financial LLC (“LPL Financial”). (2) Consists of total assets on LPL Financial’s independent advisory platform serviced by investment advisor representatives of separate investmen
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