Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q3 2024 Earnings Presentation
25 slides from Lpl Financial's earnings presentation, Oct 30, 2024
Slide 1: LPL Financial Holdings Inc. Q3 2024 Key Metrics
LPL Financial Holdings Inc. Q3 2024 Key Metrics October 30, 2024 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, growth, plans, priorities, business strategies, capabilities and outlook, including forecasts and
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) Total Advisory and Brokerage Assets Advisory Assets % of Total Assets YOY Organic Total NNA Acquired Total NNA Organic Annualized Growth Rate Change $1,498 $1,592 29% 10.7% $1,354 $1,441 $1,175 $1,240 $1,
Slide 5: Financial Results
Financial Results Gross Profit* ($M) Adjusted EBITDA* ($M) YOY YOY Change Change 1,128 1,066 1,079 12% 12% 1,020 1,010 567 541 566 990 1,007 540 523 533 972 504 480 422 838 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2022 2023 2024 2022 2023 2024 Adj. Operating Margin (Adj. EBITDA* as a %
Slide 6: Organic Net New Asset growth rate was ~7% in Q3 and ~8% over the past year
Organic Net New Asset growth rate was ~7% in Q3 and ~8% over the past year Total Organic Net New Assets(1) ($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 N
Slide 7: Centrally Managed Assets grew at a 15% organic growth rate over the past 4 quarters
Centrally Managed Assets grew at a 15% 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 YOY Centrally Managed Assets % of Total Advisory Assets Annualized Organic Grow
Slide 8: Net Buy (Sell) Activity was $38B in Q3; the Payout Rate was 87.5%
Net Buy (Sell) Activity was $38B in Q3; the Payout Rate was 87.5% Net Buy (Sell) Activity(9) ($B) Payout Rate (%) Net Buy (Sell) Activity • Client Cash % of Total Advisory and Brokerage Assets 88.4 87.9 87.6 87.5 87.3 87.3 86.7 86.6 86.2 37.8 39.3 37.7 36.9 35.6 32.3 32.8 25.0 20.3 6.4% 5.7% 4.6%
Slide 9: Service and Fee Revenue grew 7% year-over-year
Service and Fee Revenue grew 7% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY $146 Change 7% $136 $135 $131 $132 $122 $123 $120 $119 $57 $59 $59 $49 $50 $54 $43 $47 $47 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 10: EBIT ROA declined slightly
EBIT ROA declined slightly Average Total Advisory & Brokerage Assets ($B) Average Total Advisory & Brokerage Assets(10) Gross Profit* ROA(11) OPEX ROA(12) YOY SEQ Change Change $1,428 20% 5% $1,354 $1,290 $1,231 $1,186 $1,131 $1,112 $1,114 $1,142 33.4 bps 33.6 bps 32.8 bps 31.8 bps 31.6 bps 30.7 b
Slide 11: Q3 Gross Profit* ROA decreased sequentially, driven by a decrease in client cash revenue
Q3 Gross Profit* ROA decreased sequentially, driven by a decrease in client cash revenue Gross Profit* ROA(11) (bps) Net Advisory Fees and Commissions Other Asset-Based(14) Transaction, Net of BC&E Service and Fee Interest Income, net and Other Revenue Client Cash 31.8 33.4 33.6 32.8 31.
Slide 12: OPEX ROA decreased sequentially in Q3
OPEX ROA decreased sequentially in Q3 Total OPEX % of Assets(12) (bps) Core G&A* Regulatory Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Other Intangible Assets) Amortization of Other Intangible Assets 18.5 18.8 18.5 17.9 18.2 18.3 17.9 17.2 0.9 0.9 0.9 0
Slide 13: Our client cash balances are largely operational and remained at 2.9% of total assets in Q3
Our client cash balances are largely operational and remained at 2.9% of total assets in Q3 We generate economics on client cash Client Cash Balances(15) ($B) through a third-party bank network Client Cash as percent of Total Assets • By establishing sweep relationships across our 69.0 ICA and DCA p
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 DCA Sweep • Since Q1 2022, as the Fed increased interest rates, our deposit beta Money Market “MM” Sweep averaged ~15% Client Cash Account “CCA” Average Yiel
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 (end of period, $B) Variable ICA Balances Fixed Rate ICA Balances Variable balances are primarily indexed to Fed Funds Fixed Rate ICA Balance % ~60% ~65% ~60% ~
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 • Our initial 2024 Core G&A* plans were for ~6.25% to ~8.75% year-over-year growth, or $1,455M to $1,490M prior to Prudential and A
Slide 17: Our balance sheet remains strong...
Our balance sheet remains strong... Corporate Cash(17) ($M) Leverage Ratio(18) • Our strategy is to maintain a strong balance sheet that can • A long-term target leverage range of 1.5x to 2.5x positions our absorb market volatility while having the capacity to invest for balance sheet well over a ra
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 Paused share $2B share repurchase repurchases authorization† $299 following the $273 announcement of the acquisition of $248 Atria. We expect to resume repurchases, wi
Slide 19: Appendix
DENS Appendix ee.
Slide 20: Corporate and Independent RIA Advisory assets
Corporate and Independent RIA† Advisory assets Corporate and Independent RIA† Advisory Asset Mix ($B) Corporate and Independent RIA† Advisory NNA Mix ($B) Independent RIA Advisory Assets(19) YOY Organic Independent RIA Advisory NNA(20) Corporate RIA Assets(19) Change Organic Corporate RIA
Slide 21: Monthly Metrics Dashboard through September 2024
Monthly Metrics Dashboard through September 2024 Total Advisory and Brokerage Assets ($B) Total Net New Assets ($B) Total Advisory and Brokerage Assets Advisory Assets % of Total Assets YOY SEQ Organic Total NNA Acquired Total NNA Organic Annualized Growth Rate Change Change 1,592 29% 2% 1,4
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 Institutions. Below are Net New Assets from Large Institutions for the periods presented: $ in billions Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Net new organic advisory assets - - - - $2.3 - - - $0.2 Net ne
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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