Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q1 2022 Earnings Presentation
31 slides from Lpl Financial's earnings presentation, Apr 28, 2022
Slide 1: LPL Financial Holdings Inc. Q1 2022 Earnings Key Metrics
LPL FINANCIAL HOLDINGS INC. Q1 2022 EARNINGS KEY METRICS April 28, 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 ($B) Total Net New Assets(1) ($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 $1,163 21%
Slide 5: ...And solid financial results
...And solid financial results Gross Profit* ($M) EBITDA* ($M) YOY YOY Change Change 15% 280 267 10% 631 643 669 243 243 576 579 602 217 225 225 534 207 205 488 506 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2020 2021 2022 2020 2021 2022 Acquisition Costs: $2M $24M $36M $14M $13M EPS Prio
Slide 6: Solid organic growth with Net New Asset growth rate of ~6% in Q1
We continued to drive solid organic growth with a Net New Asset growth rate of ~6% in Q1 and ~11% for the past year Total Organic Net New Assets(1) ($B) Organic Net New Advisory Assets(4) ($B) Organic Net New Brokerage Assets(5) ($B) Organic Total NNA Organic Advisory NNA Organic Brokerage N
Slide 7: Waddell & Reed update: Run-rate EBITDA expectations increased to $95M+
Waddell & Reed update: Run-rate EBITDA expectations increased to $95M+ 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 ~$72B driven by equity market
Slide 8: Estimated annual EBITDA benefit of $95M+ by end of Q2 2022
We estimate reaching an annual EBITDA benefit of $95M+ by the end of Q2 2022 Apr. 28th 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 Si
Slide 9: Services Group has grown to over 3,500 subscriptions
Our Services Group †, has grown to over 3,500 subscriptions with annualized revenue of ~$30M in Q1 Professional Services • Digital and employee-powered solutions that provide practice management Services Group† Subscriptions expertise to increase practice-level growth and operational efficiency • Hi
Slide 10: Centrally Managed Assets grew at a 14% organic growth rate in Q1
Centrally Managed Assets grew at a 14% organic growth rate in Q1 and are nearly $100B Centrally Managed Assets(7) ($B) Centrally Managed Net New Assets(8) ($B) Centrally Managed Assets Organic Centrally Managed NNA Centrally Managed Assets % of Total Advisory Assets Annualized Organic Growth Rat
Slide 11: Net Buy (Sell) Activity was $11B in Q1; Payout Rate 86.1%
Net Buy (Sell) Activity was $11B in Q1, while the Payout Rate was 86.1% Net Buy (Sell) Activity(9) Payout Rate (%) Net Buy (Sell) Activity ($B) Client Cash % of Total Advisory and Brokerage Assets 86.6 86.6 87.1 87.6 17.4 18.1 17.6 86.2 85.6 86.3 86.1 85.1 16.0 12.5 12.2 11.0 9.3 7.1% 5.9% 5.7% 5.
Slide 12: Service and Fee Revenue grew 17% year-over-year
Service and Fee Revenue grew 17% year-over-year, as our advisor and account base continued to grow Service and Fee Revenue ($M) Transaction Revenue ($M) YOY Change $110 $113 17% $105 $97 $99 $91 $94 $84 $88 $46 $44 $47 $36 $38 $39 $35 $32 $35 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 202
Slide 13: Solid EBIT TTM ROA in Q1
We continued to drive solid EBIT TTM ROA in Q1 Average Total Advisory & Brokerage Assets ($B) Average Total Advisory & Brokerage Assets(10) Gross Profit* ROA(11) OPEX ROA(12) YOY SEQ Change Change $1,135 36% 5% $1,079 $998 $915 $835 $756 $784 $720 $732 30.4 bps 29.3 bps 27.9 bps 26.8 bps 25.2 bps
Slide 14: Q1 TTM Gross Profit ROA decreased year-over-year
Q1 TTM Gross Profit* ROA decreased year-over-year, primarily driven by lower interest rates Gross Profit* ROA(11) (bps) Net Advisory Fees & Commissions Other Asset-Based(14) Transaction, Net of BC&E Service & Fee Interest Income and Other, net Client Cash 30.4 29.3 27.9 26.8 8.8 25.2 8.0
Slide 15: OPEX TTM ROA remained roughly flat
OPEX TTM ROA remained roughly flat as we grow assets and manage expenses Total OPEX % of Assets(12) (bps) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) Amortization of Intangible Assets Regulatory 18.3 18.2 17.8 17.5 0.9 0.9 0.
Slide 16: Well positioned to benefit from rising interest rates on client cash
We are well positioned to benefit from rising interest rates on client cash balances Client Cash balances ($B) Annual potential Gross Profit* benefit from rising interest rates ICA Balances (EOP) DCA Balances (EOP) Money Market Account Balances (EOP) • Over the last interest rate cycle, our depo
Slide 17: Client cash balances continued to grow, including variable ICA balances
Client cash balances continued to grow, including variable ICA balances, as demand increased from third-party banks ICA balances, including Money Market Overflow ($B) Overflow balances provide capacity when balances spike Overflow Money Market Balances • When ICA balances exceed our fixed and vari
Slide 18: Client cash balances largely operational and stable across rate cycles
Our client cash balances are largely operational and remained stable across rate cycles (16) Client Cash balances ($B) Client cash as a % of assets has averaged ~5% Client Cash percent of Total Assets 61.8 57.3 • Our client cash balances are largely operational 50.7 47.8 48.9 48.3 48.4 − Typically s
Slide 19: 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 spending plans are on track with our initial 2022 Core G&A* outlook range of ~7
Slide 20: Our balance sheet remained strong in Q1
Our balance sheet remained strong in Q1… Corporate Cash(18) ($M) Leverage Ratio Management Target Cash: ~$200M Management Target Range: 2x-2.75x $340 $282 $280 $278 $266 $270 $252 2.26x 2.26x $236 $237 2.18x 2.15x 2.16x 2.16x 2.11x 2.07x 2.03x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 20
Slide 21: We have continued to return capital to shareholders
...And we have continued to return capital to shareholders Share Repurchases and Dividends ($M) Share Repurchases Dividends Shareholder Payout Ratio (As of 3/31/22) 100% 115% 111% 109% 58% 65% 52% 20% 19% 18% $210M 15% 17% $170 Remaining $146 $151 $140 $150 $125 $130 $120 Capital deployment fo
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 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Gross Profit* Advisory $ 846 $ 960 $ 997 $ 1,047 $ 779 $ 854 $ 890 $ 939 $ 68 $ 10
Slide 24: Q2 2022 Outlook Summary
Q2 2022 Outlook Summary Payout rate in the low 87% range Prior to additional rate hikes, ICA yield increase of a couple bps sequentially Gross Profit Service & Fee Revenue decrease of a couple of million sequentially Transaction Revenue decrease of ~$5M sequentially 2022 Core G&A of $1,140
Slide 25: Q1 Gross Profit increased 4% sequentially
Q1 Gross Profit* increased 4% sequentially Gross Profit* ($M) Net Advisory Fees & Commissions Other Asset-Based(14) Transaction, Net of BC&E $669 Service & Fee Interest Income and Other, net Client Cash $631 $643 $602 $85 $576 $579 $82 $91 $9 $534 $90 $12 $506 $97 $10 $488 $11 $113 $151
Slide 26: Q1 Total OPEX decreased 2% sequentially, increased 26% year-over-year
Q1 Total OPEX decreased 2% sequentially, and increased 26% year-over-year Total OPEX(17) ($M) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) Amortization of Intangible Assets Regulatory $465 $455 $430 $20 $21 $22 $41 $391 $45 $1
Slide 27: Corporate and Independent RIA Advisory assets continue to grow
Our Corporate and Independent RIA Advisory assets continue to grow Corporate and Independent RIA Advisory Asset Mix ($B) Corporate and Independent RIA Advisory NNA Mix ($B) Independent RIA Advisory Assets(19) Organic Independent RIA Advisory NNA(21) Corporate Advisory Assets(20) Organi
Slide 28: Monthly metrics dashboard through March 2022
Monthly metrics dashboard through March 2022 Total Advisory and Brokerage Assets ($B) Total Net New Assets ($B) Total Advisory and Brokerage Assets Advisory Assets % Total YOY SEQ Core Organic NNA Change Change Acquired NNA Annualized Organic Growth Rate 21% 2% 73.8 1,180 1,171 1,206 1,158 1
Slide 29: 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. Set forth below is a calculation of gross profit* for the periods presented herein. $ in
Slide 30: 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 31: Endnotes
Endnotes (1) In April 2020, the Company updated its definition of net new assets to include dividends plus interest, minus advisory fees (see FNs 4 and 5). Net new assets figures for periods prior to Q2 2020 appearing in this presentation have been recast using the updated definition. (2) Represents
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