LPL Financial Announces Third Quarter 2021 Results
LPL Financial Holdings Inc. (Nasdaq: LPLA) announced its Q3 2021 results, reporting a net income of $103 million and diluted earnings per share (EPS) of $1.26. The EPS prior to amortization increased 23% year-over-year to $1.77. Gross profit rose 25% to $631 million. Total advisory and brokerage assets increased 40% year-over-year to $1.13 trillion. The company onboarded $71 billion of Waddell & Reed client assets with a retention rate of 99%. Additionally, a quarterly dividend of $0.25 was declared for November 29, 2021.
- Net income of $103 million, EPS of $1.26.
- EPS prior to amortization increased 23% year-over-year to $1.77.
- Gross profit increased 25% year-over-year to $631 million.
- Total advisory and brokerage assets increased 40% year-over-year to $1.13 trillion.
- Onboarded $71 billion of Waddell & Reed client assets with a retention rate of 99%.
- Business Solutions subscriptions grew to 2,598, a 60% year-over-year increase.
- Net income decreased from $119 million in the prior quarter to $103 million.
- Core G&A increased 19% year-over-year to $271 million.
- EPS declined from $1.29 per share in Q3 2020.
Key Financial Results
- Net Income was
$103 million , translating to diluted earnings per share ("EPS") of$1.26 . - EPS prior to amortization of intangible assets and acquisition costs* increased
23% year-over-year to$1.77 .- Gross profit* increased
25% year-over-year to$631 million . - Core G&A* increased
19% year-over-year to$271 million . - EBITDA* increased
10% year-over-year to$225 million and EBITDA* as a percentage of Gross profit* was36% .
- Gross profit* increased
Key Business Results
- Total advisory and brokerage assets increased
40% year-over-year to$1.13 trillion .- Advisory assets increased
46% year-over-year to$594 billion . - Advisory assets as a percentage of total assets increased to
52.4% , up from50.1% a year ago.
- Advisory assets increased
- Total organic net new assets were
$27 billion , translating to10% annualized growth, and$110 billion over the past twelve months, translating to14% annualized growth.- Organic net new advisory assets were
$21 billion , translating to16% annualized growth. - Organic net new brokerage assets were
$6 billion , translating to4% annualized growth. - Acquired net new assets were
$2.3 billion , of which$0.6 billion were advisory and$1.7 billion were brokerage, bringing us to a total of$71 billion of acquired net new assets from our acquisition of Waddell & Reed.
- Organic net new advisory assets were
- Recruited assets(1) were
$13 billion , up by24% from a year ago.- Recruited assets over the trailing twelve-months were
$83 billion , more than double a year ago.
- Recruited assets over the trailing twelve-months were
- Business Solutions subscriptions increased to 2,598, up 513 sequentially and more than double a year ago.
- Annualized revenue from Business Solutions increased to approximately
$25 million , up by over60% year-over-year.
- Annualized revenue from Business Solutions increased to approximately
- Advisor count(2) was 19,627, up 513 sequentially and 2,459 year-over-year**.
- Total client cash balances were
$51 billion , an increase of$2 billion sequentially.- Client cash balances as a percentage of total assets were
4.5% .
- Client cash balances as a percentage of total assets were
*See the Non-GAAP Financial Measures section and the end notes to this release for further details about these non-GAAP financial measures.
**This included the addition of approximately 280 associate advisors with Waddell & Reed that became financial professionals with LPL Financial upon onboarding to LPL's platform.
Key Updates
- Waddell & Reed: Completed onboarding of
$71 billion of Waddell & Reed client assets in Q3, translating to retention of approximately99% . - M&T Bank: Onboarded
$4.5 billion of brokerage assets from M&T Bank in Q3, which substantially completes the onboarding of M&T's approximately$22 billion total assets.
Key Capital and Liquidity Results
- Corporate cash(3) was
$266 million . - Leverage ratio(4) was 2.18x.
- Share repurchases were
$40 million for 277 thousand shares at an average price of$145 per share. - Dividends paid of
$20 million .
SAN DIEGO, Oct. 28, 2021 (GLOBE NEWSWIRE) -- LPL Financial Holdings Inc. (Nasdaq: LPLA) (the “Company”) today announced results for its third quarter ended September 30, 2021, reporting net income of
"Over the past quarter, we remained focused on our mission of taking care of our advisors, so they can take of their clients,” said Dan Arnold, President and CEO. “At the same time, we continued to enhance the appeal of our model and increase our market share within the advisor-centered marketplace. This combination contributed to another quarter of solid recruiting, retention, and business growth.”
“We delivered another quarter of strong results in Q3”, said Matt Audette, CFO. “We drove assets to new highs and recorded another quarter of double-digit organic growth. With the onboarding of Waddell & Reed, BMO, and M&T complete, we are continuing to help advisors acclimate and leverage our platform and capabilities, while also preparing to onboard CUNA next year. As we look ahead, we are excited by a strong and growing pipeline, which positions us to drive additional growth and long-term shareholder value.”
Dividend Declaration
The Company's Board of Directors declared a
Conference Call and Additional Information
The Company will hold a conference call to discuss its results at 5:00 p.m. ET on Thursday, October 28. To listen, call 877-677-9122 (domestic) or 708-290-1401 (international); passcode 2968493, or visit investor.lpl.com (webcast). Replays will be available by phone and on investor.lpl.com beginning two hours after the call and until November 4, and November 18, respectively. For telephonic replay, call 855-859-2056 (domestic) or 404-537-3406 (international); passcode 2968493.
About LPL Financial
LPL Financial Holdings Inc. (Nasdaq: LPLA) was founded on the principle that the firm should work for the advisor, and not the other way around. Today, LPL is a leader* in the markets we serve, supporting more than 19,000 financial advisors, and approximately 800 institution-based investment programs and 450 independent RIA firms nationwide. We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to objective guidance from a financial advisor. At LPL, independence means that advisors have the freedom they deserve to choose the business model, services, and technology resources that allow them to run their perfect practice. And they have the freedom to manage their client relationships, because they know their clients best. Simply put, we take care of our advisors, so they can take care of their clients.
* Top RIA custodian (Cerulli Associates, 2019 U.S. RIA Marketplace Report)
No. 1 Independent Broker-Dealer in the U.S (Based on total revenues, Financial Planning magazine 1996-2021)
No. 1 provider of third-party brokerage services to banks and credit unions (2020-2021 Kehrer Bielan Research & Consulting Annual TPM Report)
Fortune 500 as of June 2021
Securities and Advisory services offered through LPL Financial LLC ("LPL Financial"), a registered investment advisor. Member FINRA/SIPC. We routinely disclose information that may be important to shareholders in the "Investor Relations" or "Press Releases" section of our website.
Forward-Looking Statements
Statements in this press release regarding:
- the Company's future financial and operating results, growth, priorities and business strategies, including forecasts and statements relating to future expenses (including 2021 Core G&A* outlook);
- future capabilities, future advisor service experience, future investments and capital deployment, long-term shareholder value and the continued integration of Waddell & Reed's wealth management business (the “Waddell & Reed Acquisition”); and
- any other statements that are not related to present facts or current conditions or that are not purely historical, constitute forward-looking statements.
These forward-looking statements are based on the Company's historical performance and its plans, estimates and expectations as of October 28, 2021. Forward-looking statements are not guarantees that the future results, plans, intentions or expectations expressed or implied will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors, which may cause actual financial or operating results, levels of activity or the timing of events to be materially different from those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include:
- changes in general economic and financial market conditions, including retail investor sentiment;
- changes in interest rates and fees payable by banks participating in the Company's client cash programs, including the Company's strategy and success in managing client cash program fees;
- changes in the growth and profitability of the Company's fee-based offerings;
- fluctuations in the levels of advisory and brokerage assets, including net new assets, and the related impact on revenues;
- effects of competition in the financial services industry and the success of the Company in attracting and retaining financial advisors and institutions;
- whether the retail investors served by newly-recruited advisors choose to move their respective assets to new accounts at the Company; the effect of current, pending and future legislation, regulation and regulatory actions, including disciplinary actions imposed by federal and state regulators and self-regulatory organizations and the implementation of Regulation BI (Best Interest);
- the costs of settling and remediating issues related to regulatory matters or legal proceedings, including actual costs of reimbursing customers for losses in excess of our reserves;
- changes made to the Company’s services and pricing, and the effect that such changes may have on the Company’s gross profit streams and costs;
- the execution of the Company's plans and its success in realizing the synergies, expense savings, service improvements and efficiencies expected to result from its initiatives, acquisitions and programs;
- the effects of the COVID-19 pandemic, including efforts to contain it;
- the successful onboarding of advisors and client assets in connection with the Waddell & Reed Acquisition; and
- the other factors set forth in Part I, “Item 1A. Risk Factors” in the Company's 2020 Annual Report on Form 10-K, as may be amended or updated in the Company's Quarterly Reports on Form 10-Q or other filings with the Securities and Exchange Commission.
Except as required by law, the Company specifically disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this earnings release, even if its estimates change, and you should not rely on statements contained herein as representing the Company's views as of any date subsequent to the date of this press release.
Investor Relations - Chris Koegel, (617) 897-4574
Media Relations – Lauren Hoyt-Williams, (813) 351-9203
investor.lpl.com/contactus.cfm
| LPL Financial Holdings Inc. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) | |||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||
| September 30, | June 30, | September 30, | |||||||||||||||
| 2021 | 2021 | % Change | 2020 | % Change | |||||||||||||
| REVENUE | |||||||||||||||||
| Advisory | $ | 959,733 | $ | 846,313 | 13 | % | $ | 586,941 | 64 | % | |||||||
| Commission | 610,384 | 598,233 | 2 | % | 472,643 | 29 | % | ||||||||||
| Asset-based | 301,701 | 279,620 | 8 | % | 253,551 | 19 | % | ||||||||||
| Transaction and fee | 140,362 | 137,100 | 2 | % | 119,747 | 17 | % | ||||||||||
| Interest income | 7,365 | 6,914 | 7 | % | 6,623 | 11 | % | ||||||||||
| Other | 1,218 | 30,078 | (96 | %) | 20,796 | (94 | %) | ||||||||||
| Total revenue | 2,020,763 | 1,898,258 | 6 | % | 1,460,301 | 38 | % | ||||||||||
| EXPENSE | |||||||||||||||||
| Advisory and commission | 1,366,832 | 1,273,202 | 7 | % | 936,766 | 46 | % | ||||||||||
| Compensation and benefits | 185,980 | 183,853 | 1 | % | 151,271 | 23 | % | ||||||||||
| Promotional | 96,012 | 64,349 | 49 | % | 57,970 | 66 | % | ||||||||||
| Depreciation and amortization | 38,409 | 36,704 | 5 | % | 27,548 | 39 | % | ||||||||||
| Amortization of intangible assets | 21,531 | 19,925 | 8 | % | 16,829 | 28 | % | ||||||||||
| Occupancy and equipment | 52,695 | 41,452 | 27 | % | 41,874 | 26 | % | ||||||||||
| Professional services | 16,722 | 22,500 | (26 | %) | 12,301 | 36 | % | ||||||||||
| Brokerage, clearing and exchange | 22,828 | 23,459 | (3 | %) | 17,834 | 28 | % | ||||||||||
| Communications and data processing | 17,824 | 14,930 | 19 | % | 12,547 | 42 | % | ||||||||||
| Other | 36,888 | 31,064 | 19 | % | 24,852 | 48 | % | ||||||||||
| Total operating expense | 1,855,721 | 1,711,438 | 8 | % | 1,299,792 | 43 | % | ||||||||||
| Non-operating interest expense and other | 27,063 | 25,171 | 8 | % | 25,179 | 7 | % | ||||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 137,979 | 161,649 | (15 | %) | 135,330 | 2 | % | ||||||||||
| PROVISION FOR INCOME TAXES | 34,915 | 42,548 | (18 | %) | 31,541 | 11 | % | ||||||||||
| NET INCOME | $ | 103,064 | $ | 119,101 | (13 | %) | $ | 103,789 | (1 | %) | |||||||
| EARNINGS PER SHARE | |||||||||||||||||
| Earnings per share, basic | $ | 1.29 | $ | 1.49 | (13 | %) | $ | 1.31 | (2 | %) | |||||||
| Earnings per share, diluted | $ | 1.26 | $ | 1.46 | (14 | %) | $ | 1.29 | (2 | %) | |||||||
| Weighted-average shares outstanding, basic | 80,182 | 80,063 | — | % | 79,176 | 1 | % | ||||||||||
| Weighted-average shares outstanding, diluted | 81,849 | 81,728 | — | % | 80,550 | 2 | % | ||||||||||
| LPL Financial Holdings Inc. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) | ||||||||||
| Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| 2021 | 2020 | % Change | ||||||||
| REVENUE | ||||||||||
| Advisory | $ | 2,528,092 | $ | 1,689,338 | 50 | % | ||||
| Commission | 1,765,846 | 1,403,540 | 26 | % | ||||||
| Asset-based | 846,027 | 786,124 | 8 | % | ||||||
| Transaction and fee | 418,406 | 376,321 | 11 | % | ||||||
| Interest income | 20,797 | 22,705 | (8 | %) | ||||||
| Other | 47,470 | 12,329 | 285 | % | ||||||
| Total revenue | 5,626,638 | 4,290,357 | 31 | % | ||||||
| EXPENSE | ||||||||||
| Advisory and commission | 3,748,933 | 2,667,408 | 41 | % | ||||||
| Compensation and benefits | 531,373 | 441,393 | 20 | % | ||||||
| Promotional | 214,542 | 159,908 | 34 | % | ||||||
| Depreciation and amortization | 110,612 | 81,082 | 36 | % | ||||||
| Amortization of intangible assets | 58,887 | 50,088 | 18 | % | ||||||
| Occupancy and equipment | 137,731 | 124,486 | 11 | % | ||||||
| Professional services | 54,847 | 40,526 | 35 | % | ||||||
| Brokerage, clearing and exchange | 65,651 | 53,423 | 23 | % | ||||||
| Communications and data processing | 44,747 | 37,743 | 19 | % | ||||||
| Other | 92,852 | 73,274 | 27 | % | ||||||
| Total operating expense | 5,060,175 | 3,729,331 | 36 | % | ||||||
| Non-operating interest expense and other | 77,293 | 80,786 | (4 | %) | ||||||
| Loss on extinguishment of debt | 24,400 | — | 100 | % | ||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 464,770 | 480,240 | (3 | %) | ||||||
| PROVISION FOR INCOME TAXES | 112,985 | 119,148 | (5 | %) | ||||||
| NET INCOME | $ | 351,785 | $ | 361,092 | (3 | %) | ||||
| EARNINGS PER SHARE | ||||||||||
| Earnings per share, basic | $ | 4.40 | $ | 4.56 | (4 | %) | ||||
| Earnings per share, diluted | $ | 4.30 | $ | 4.48 | (4 | %) | ||||
| Weighted-average shares outstanding, basic | 79,981 | 79,207 | 1 | % | ||||||
| Weighted-average shares outstanding, diluted | 81,772 | 80,612 | 1 | % | ||||||
| LPL Financial Holdings Inc. Condensed Consolidated Statements of Financial Condition (In thousands, except share data) (Unaudited) | ||||||||||||
| September 30, 2021 | June 30, 2021 | December 31, 2020 | ||||||||||
| ASSETS | ||||||||||||
| Cash and cash equivalents | $ | 977,789 | $ | 906,720 | $ | 808,612 | ||||||
| Cash segregated under federal and other regulations | 811,716 | 741,432 | 923,158 | |||||||||
| Restricted cash | 85,381 | 78,648 | 67,264 | |||||||||
| Receivables from: | ||||||||||||
| Clients, net of allowance | 592,170 | 531,784 | 405,106 | |||||||||
| Product sponsors, broker-dealers and clearing organizations | 257,742 | 275,189 | 233,192 | |||||||||
| Advisor loans, net of allowance | 814,514 | 776,513 | 547,372 | |||||||||
| Others, net of allowance | 453,245 | 371,240 | 306,640 | |||||||||
| Securities owned: | ||||||||||||
| Trading — at fair value | 32,085 | 30,169 | 29,252 | |||||||||
| Held-to-maturity — at amortized cost | 11,183 | 10,708 | 13,235 | |||||||||
| Securities borrowed | 10,217 | 13,395 | 30,130 | |||||||||
| Fixed assets, net of accumulated depreciation and amortization | 624,529 | 600,763 | 582,868 | |||||||||
| Operating lease assets | 96,716 | 96,844 | 101,921 | |||||||||
| Goodwill | 1,641,238 | 1,646,631 | 1,513,866 | |||||||||
| Intangible assets, net of accumulated amortization | 470,989 | 486,355 | 397,486 | |||||||||
| Deferred income taxes, net | 24,489 | 24,364 | 24,112 | |||||||||
| Other assets | 651,803 | 629,261 | 539,357 | |||||||||
| Total assets | $ | 7,555,806 | $ | 7,220,016 | $ | 6,523,571 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| LIABILITIES: | ||||||||||||
| Drafts payable | $ | 190,451 | $ | 154,230 | $ | 178,403 | ||||||
| Payables to clients | 1,419,889 | 1,329,397 | 1,356,083 | |||||||||
| Payables to broker-dealers and clearing organizations | 148,193 | 109,089 | 89,743 | |||||||||
| Accrued advisory and commission expenses payable | 224,438 | 215,107 | 187,040 | |||||||||
| Accounts payable and accrued liabilities | 815,632 | 747,669 | 681,554 | |||||||||
| Income taxes payable | 8,082 | 5,718 | 28,145 | |||||||||
| Unearned revenue | 168,331 | 135,600 | 95,328 | |||||||||
| Securities sold, but not yet purchased — at fair value | 170 | 1,398 | 206 | |||||||||
| Long-term and other borrowings, net | 2,725,691 | 2,727,336 | 2,345,414 | |||||||||
| Operating lease liabilities | 132,394 | 133,321 | 139,377 | |||||||||
| Finance lease liabilities | 106,146 | 106,239 | 107,424 | |||||||||
| Total liabilities | 5,939,417 | 5,665,104 | 5,208,717 | |||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||||||
| Common stock, issued at September 30, 2021 and 127,585,764 shares issued at December 31, 2020 | 128 | 128 | 127 | |||||||||
| Additional paid-in capital | 1,826,247 | 1,808,135 | 1,762,770 | |||||||||
| Treasury stock, at cost — 48,475,390 shares at September 30, 2021 and 48,115,037 shares at December 31, 2020 | (2,447,933 | ) | (2,407,035 | ) | (2,391,062 | ) | ||||||
| Retained earnings | 2,237,947 | 2,153,684 | 1,943,019 | |||||||||
| Total stockholders’ equity | 1,616,389 | 1,554,912 | 1,314,854 | |||||||||
| Total liabilities and stockholders’ equity | $ | 7,555,806 | $ | 7,220,016 | $ | 6,523,571 | ||||||
LPL Financial Holdings Inc.
Management's Statements of Operations
(In thousands, except per share data)
(Unaudited)
Certain information in this release is presented as reviewed by the Company’s management and includes information derived from the Company’s unaudited condensed consolidated statements of income, non-GAAP financial measures, and operational and performance metrics. For information on non-GAAP financial measures, please see the section titled "Non-GAAP Financial Measures" in this release.
| Quarterly Results | |||||||||||||||||
| Q3 2021 | Q2 2021 | % Change | Q3 2020 | % Change | |||||||||||||
| Gross Profit(5) | |||||||||||||||||
| Advisory | $ | 959,733 | $ | 846,313 | 13 | % | $ | 586,941 | 64 | % | |||||||
| Sales-based commissions | 239,804 | 249,596 | (4 | %) | 180,357 | 33 | % | ||||||||||
| Trailing commissions | 370,580 | 348,637 | 6 | % | 292,286 | 27 | % | ||||||||||
| Advisory fees and commissions | 1,570,117 | 1,444,546 | 9 | % | 1,059,584 | 48 | % | ||||||||||
| Production-based payout(6) | (1,368,348 | ) | (1,247,321 | ) | 10 | % | (917,831 | ) | 49 | % | |||||||
| Advisory fees and commissions, net of payout | 201,769 | 197,225 | 2 | % | 141,753 | 42 | % | ||||||||||
| Client cash | 91,257 | 90,377 | 1 | % | 108,705 | (16 | %) | ||||||||||
| Other asset-based(7) | 210,444 | 189,243 | 11 | % | 144,846 | 45 | % | ||||||||||
| Transaction and fee | 140,362 | 137,100 | 2 | % | 119,747 | 17 | % | ||||||||||
| Interest income and other, net(8) | 10,099 | 11,111 | (9 | %) | 8,484 | 19 | % | ||||||||||
| Total net advisory fees and commissions and attachment revenue | 653,931 | 625,056 | 5 | % | 523,535 | 25 | % | ||||||||||
| Brokerage, clearing and exchange expense | (22,828 | ) | (23,459 | ) | (3 | %) | (17,834 | ) | 28 | % | |||||||
| Gross Profit(5) | 631,103 | 601,597 | 5 | % | 505,701 | 25 | % | ||||||||||
| G&A Expense | |||||||||||||||||
| Core G&A(9) | 270,865 | 251,679 | 8 | % | 227,099 | 19 | % | ||||||||||
| Regulatory charges | 5,976 | 7,416 | (19 | %) | 8,326 | (28 | %) | ||||||||||
| Promotional (ongoing)(10) | 83,630 | 64,135 | 30 | % | 57,970 | 44 | % | ||||||||||
| Acquisition costs(10) | 35,887 | 23,782 | 51 | % | — | 100 | % | ||||||||||
| Employee share-based compensation | 9,763 | 11,136 | (12 | %) | 7,420 | 32 | % | ||||||||||
| Total G&A | 406,121 | 358,148 | 13 | % | 300,815 | 35 | % | ||||||||||
| EBITDA(11) | 224,982 | 243,449 | (8 | %) | 204,886 | 10 | % | ||||||||||
| Depreciation and amortization | 38,409 | 36,704 | 5 | % | 27,548 | 39 | % | ||||||||||
| Amortization of intangible assets | 21,531 | 19,925 | 8 | % | 16,829 | 28 | % | ||||||||||
| Non-operating interest expense and other | 27,063 | 25,171 | 8 | % | 25,179 | 7 | % | ||||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 137,979 | 161,649 | (15 | %) | 135,330 | 2 | % | ||||||||||
| PROVISION FOR INCOME TAXES | 34,915 | 42,548 | (18 | %) | 31,541 | 11 | % | ||||||||||
| NET INCOME | $ | 103,064 | $ | 119,101 | (13 | %) | $ | 103,789 | (1 | %) | |||||||
| Earnings per share, diluted | $ | 1.26 | $ | 1.46 | (14 | %) | $ | 1.29 | (2 | %) | |||||||
| Weighted-average shares outstanding, diluted | 81,849 | 81,728 | — | % | 80,550 | 2 | % | ||||||||||
| EPS prior to amortization of intangible assets and acquisition costs(12) | $ | 1.77 | $ | 1.85 | (4 | %) | $ | 1.44 | 23 | % | |||||||
| LPL Financial Holdings Inc. Operating Metrics (Dollars in billions, except where noted) (Unaudited) | |||||||||||||||||
| Q3 2021 | Q2 2021 | Change | Q3 2020 | Change | |||||||||||||
| Market Drivers | |||||||||||||||||
| S&P 500 Index (end of period) | 4,308 | 4,298 | — | % | 3,363 | 28 | % | ||||||||||
| Fed Funds daily effective rate (average bps) | 9 | 7 | 2bps | 9 | —bps | ||||||||||||
| Advisory and Brokerage Assets | |||||||||||||||||
| Advisory assets(13) | $ | 594.0 | $ | 577.6 | 3 | % | $ | 405.9 | 46 | % | |||||||
| Brokerage assets(14) | 538.6 | 534.7 | 1 | % | 404.4 | 33 | % | ||||||||||
| Total Advisory and Brokerage Assets | $ | 1,132.6 | $ | 1,112.3 | 2 | % | $ | 810.4 | 40 | % | |||||||
| Advisory as a % of Total Advisory and Brokerage Assets | 52.4 | % | 51.9 | % | 50bps | 50.1 | % | 230bps | |||||||||
| Assets by Platform | |||||||||||||||||
| Corporate platform advisory assets(15) | $ | 395.6 | $ | 383.6 | 3 | % | $ | 253.9 | 56 | % | |||||||
| Hybrid platform advisory assets(16) | 198.4 | 194.0 | 2 | % | 152.0 | 31 | % | ||||||||||
| Brokerage assets | 538.6 | 534.7 | 1 | % | 404.4 | 33 | % | ||||||||||
| Total Advisory and Brokerage Assets | $ | 1,132.6 | $ | 1,112.3 | 2 | % | $ | 810.4 | 40 | % | |||||||
| Centrally Managed Assets | |||||||||||||||||
| Centrally managed assets(17) | $ | 88.6 | $ | 84.7 | 5 | % | $ | 59.0 | 50 | % | |||||||
| Centrally Managed as a % of Total Advisory Assets | 14.9 | % | 14.7 | % | 20bps | 14.5 | % | 40bps | |||||||||
| LPL Financial Holdings Inc. Operating Metrics (Dollars in billions, except where noted) (Unaudited) | |||||||||||||||||
| Q3 2021 | Q2 2021 | Change | Q3 2020 | Change | |||||||||||||
| Net New Assets (NNA) | |||||||||||||||||
| Net new advisory assets(18) | $ | 21.7 | $ | 54.9 | n/m | $ | 10.4 | n/m | |||||||||
| Net new brokerage assets(19) | 7.3 | 51.1 | n/m | 0.7 | n/m | ||||||||||||
| Total Net New Assets | $ | 29.0 | $ | 106.0 | n/m | $ | 11.1 | n/m | |||||||||
| Organic Net New Assets (NNA)(20) | |||||||||||||||||
| Organic net new advisory assets | $ | 21.1 | $ | 21.4 | n/m | $ | 10.4 | n/m | |||||||||
| Organic net new brokerage assets | 5.6 | 15.6 | n/m | 0.7 | n/m | ||||||||||||
| Total Organic Net New Assets | $ | 26.7 | $ | 37.1 | n/m | $ | 11.1 | n/m | |||||||||
| Net brokerage to advisory conversions(21) | $ | 3.1 | $ | 3.2 | n/m | $ | 2.0 | n/m | |||||||||
| Organic advisory NNA annualized growth(22) | 15.6 | % | 17.3 | % | n/m | 11.0 | % | n/m | |||||||||
| Total organic NNA annualized growth(22) | 10.2 | % | 15.5 | % | n/m | 5.8 | % | n/m | |||||||||
| Net New Advisory Assets | |||||||||||||||||
| Corporate platform net new advisory assets(23) | $ | 15.2 | $ | 49.0 | n/m | $ | 7.8 | n/m | |||||||||
| Hybrid platform net new advisory assets(24) | 6.5 | 6.0 | n/m | 2.6 | n/m | ||||||||||||
| Total Net New Advisory Assets | $ | 21.7 | $ | 54.9 | n/m | $ | 10.4 | n/m | |||||||||
| Centrally managed net new advisory assets(25) | $ | 3.9 | $ | 4.0 | n/m | $ | 1.9 | n/m | |||||||||
| Client Cash Balances | |||||||||||||||||
| Insured cash account balances | $ | 30.5 | $ | 34.1 | (11 | %) | $ | 34.7 | (12 | %) | |||||||
| Deposit cash account balances | 8.6 | 7.6 | 13 | % | 8.0 | 8 | % | ||||||||||
| Total Bank Sweep Balances | 39.0 | 41.7 | (6 | %) | 42.7 | (9 | %) | ||||||||||
| Money market account cash balances | 9.9 | 5.0 | 98 | % | 1.5 | n/m | |||||||||||
| Purchased money market funds | 1.8 | 1.7 | 6 | % | 2.3 | (22 | %) | ||||||||||
| Total Money Market Balances | 11.7 | 6.7 | 75 | % | 3.9 | 200 | % | ||||||||||
| Total Client Cash Balances | $ | 50.7 | $ | 48.4 | 5 | % | $ | 46.6 | 9 | % | |||||||
| Client Cash Balances as a % of Total Assets | 4.5 | % | 4.4 | % | 10bps | 5.7 | % | (120bps) | |||||||||
| Client Cash Balance Average Fees(26) | |||||||||||||||||
| Insured cash account average fee - bps | 101 | 98 | 3 | 118 | (17 | ) | |||||||||||
| Deposit cash account average fee - bps | 24 | 24 | —bps | 38 | (14 | ) | |||||||||||
| Money market account average fee - bps | 3 | 1 | 2 | 9 | (6 | ) | |||||||||||
| Purchased money market fund average fee - bps | 7 | 9 | (2 | ) | 20 | (13 | ) | ||||||||||
| Total Client Cash Balance Average Fee - bps | 74 | 77 | (3 | ) | 95 | (21 | ) | ||||||||||
| Net buy (sell) activity(27) | $ | 17.6 | $ | 18.1 | n/m | $ | 9.3 | n/m | |||||||||
| LPL Financial Holdings Inc. Monthly Metrics (Dollars in billions, except where noted) (Unaudited) | |||||||||||||||||||
| September 2021 | August 2021 | Aug to September Change | July 2021 | June 2021 | |||||||||||||||
| Advisory and Brokerage Assets | |||||||||||||||||||
| Advisory assets(13) | $ | 594.0 | $ | 604.6 | (2 | %) | $ | 588.4 | $ | 577.6 | |||||||||
| Brokerage assets(14) | 538.6 | 552.3 | (2 | %) | 541.4 | 534.7 | |||||||||||||
| Total Advisory and Brokerage Assets | $ | 1,132.6 | $ | 1,156.9 | (2 | %) | $ | 1,129.9 | $ | 1,112.3 | |||||||||
| Net New Assets (NNA) | |||||||||||||||||||
| Net new advisory assets(18) | $ | 9.6 | $ | 6.4 | n/m | $ | 5.7 | $ | 11.2 | ||||||||||
| Net new brokerage assets(19) | 1.8 | 1.2 | n/m | 4.3 | 14.8 | ||||||||||||||
| Total Net New Assets | $ | 11.4 | $ | 7.6 | n/m | $ | 10.0 | $ | 26.0 | ||||||||||
| Net brokerage to advisory conversions(21) | $ | 1.1 | $ | 1.2 | n/m | $ | 0.8 | $ | 0.9 | ||||||||||
| Organic Net New Assets (NNA)(20) | |||||||||||||||||||
| Net new advisory assets(18) | $ | 9.0 | $ | 6.4 | n/m | $ | 5.7 | $ | 11.2 | ||||||||||
| Net new brokerage assets(19) | 0.1 | 1.2 | n/m | 4.3 | 14.8 | ||||||||||||||
| Total Organic Net New Assets | $ | 9.1 | $ | 7.6 | n/m | $ | 10.0 | $ | 26.0 | ||||||||||
| Client Cash Balances | |||||||||||||||||||
| Insured cash account balances | $ | 30.5 | $ | 33.2 | (8 | %) | $ | 34.4 | $ | 34.1 | |||||||||
| Deposit cash account balances | 8.6 | 8.2 | 5 | % | 7.9 | 7.6 | |||||||||||||
| Total Bank Sweep Balances | 39.0 | 41.4 | (6 | %) | 42.2 | 41.7 | |||||||||||||
| Money market account cash balances | 9.9 | 6.3 | 57 | % | 4.3 | 5.0 | |||||||||||||
| Purchased money market funds | 1.8 | 1.9 | (5 | %) | 1.9 | 1.7 | |||||||||||||
| Total Money Market Balances | 11.7 | 8.3 | 41 | % | 6.3 | 6.7 | |||||||||||||
| Total Client Cash Balances | $ | 50.7 | $ | 49.7 | 2 | % | $ | 48.5 | $ | 48.4 | |||||||||
| Net buy (sell) activity(27) | $ | 5.5 | $ | 5.6 | n/m | $ | 6.5 | $ | 6.0 | ||||||||||
| Market Indices | |||||||||||||||||||
| S&P 500 index (end of period) | 4,308 | 4,523 | (5 | %) | 4,395 | 4,298 | |||||||||||||
| Fed funds effective rate (average bps) | 8 | 9 | (1bps) | 10 | 8 | ||||||||||||||
| LPL Financial Holdings Inc. Financial Measures (Dollars in thousands, except where noted) (Unaudited) | |||||||||||||||||
| Q3 2021 | Q2 2021 | Change | Q3 2020 | Change | |||||||||||||
| Commission Revenues by Product | |||||||||||||||||
| Annuities | $ | 314,134 | $ | 305,100 | 3 | % | $ | 250,823 | 25 | % | |||||||
| Mutual funds | 201,120 | 195,688 | 3 | % | 146,788 | 37 | % | ||||||||||
| Fixed income | 30,092 | 34,862 | (14 | %) | 16,731 | 80 | % | ||||||||||
| Equities | 28,943 | 30,517 | (5 | %) | 30,283 | (4 | %) | ||||||||||
| Other | 36,095 | 32,066 | 13 | % | 28,018 | 29 | % | ||||||||||
| Total commission revenues | $ | 610,384 | $ | 598,233 | 2 | % | $ | 472,643 | 29 | % | |||||||
| Commission Revenues by Sales-based and Trailing | |||||||||||||||||
| Sales-based commissions | |||||||||||||||||
| Annuities | $ | 108,983 | $ | 112,619 | (3 | %) | $ | 81,475 | 34 | % | |||||||
| Mutual funds | 46,934 | 50,250 | (7 | %) | 33,871 | 39 | % | ||||||||||
| Fixed income | 30,092 | 34,862 | (14 | %) | 16,731 | 80 | % | ||||||||||
| Equities | 28,943 | 30,517 | (5 | %) | 30,283 | (4 | %) | ||||||||||
| Other | 24,852 | 21,348 | 16 | % | 17,997 | 38 | % | ||||||||||
| Total sales-based commissions | $ | 239,804 | $ | 249,596 | (4 | %) | $ | 180,357 | 33 | % | |||||||
| Trailing commissions | |||||||||||||||||
| Annuities | $ | 205,151 | $ | 192,481 | 7 | % | $ | 169,348 | 21 | % | |||||||
| Mutual funds | 154,186 | 145,438 | 6 | % | 112,917 | 37 | % | ||||||||||
| Other | 11,243 | 10,718 | 5 | % | 10,021 | 12 | % | ||||||||||
| Total trailing commissions | $ | 370,580 | $ | 348,637 | 6 | % | $ | 292,286 | 27 | % | |||||||
| Total commission revenues | $ | 610,384 | $ | 598,233 | 2 | % | $ | 472,643 | 29 | % | |||||||
| Payout Rate(6) | 87.15 | % | 86.35 | % | 80bps | 86.62 | % | 53bps | |||||||||
| LPL Financial Holdings Inc. Capital Management Measures (Dollars in thousands, except where noted) (Unaudited) | |||||||||||
| Q3 2021 | Q2 2021 | Q4 2020 | |||||||||
| Corporate Cash(3) | |||||||||||
| Cash at Parent | $ | 181,061 | $ | 170,258 | $ | 201,385 | |||||
| Excess cash at LPL Financial LLC per Credit Agreement | 62,637 | 74,152 | 67,574 | ||||||||
| Other available cash | 21,953 | 33,983 | 10,960 | ||||||||
| Total Corporate Cash | $ | 265,651 | $ | 278,393 | $ | 279,919 | |||||
| Leverage Ratio | |||||||||||
| Total debt | $ | 2,751,275 | $ | 2,753,950 | $ | 2,359,300 | |||||
| Total corporate cash | 265,651 | 278,393 | 279,919 | ||||||||
| Credit Agreement Net Debt | $ | 2,485,624 | $ | 2,475,557 | $ | 2,079,381 | |||||
| Credit Agreement EBITDA (trailing twelve months)(28) | $ | 1,141,569 | $ | 1,094,465 | $ | 961,225 | |||||
| Leverage Ratio | 2.18 | x | 2.26 | x | 2.16 | x | |||||
| September 30, 2021 | ||||||||||||||
| Total Debt | Balance | Current Applicable Margin | Yield At Issuance | Interest Rate | Maturity | |||||||||
| Revolving Credit Facility(a) | $ | — | ABR+25bps | — | % | 3/15/2026 | ||||||||
| Broker-Dealer Revolving Credit Facility(b) | — | FFR+125bps | — | % | 7/31/2024 | |||||||||
| Senior Secured Term Loan B | 1,051,275 | LIBOR+175 bps(c) | 1.834 | % | 11/12/2026 | |||||||||
| Senior Unsecured Notes(d) | 400,000 | 4.625 | % | 4.625 | % | 11/15/2027 | ||||||||
| Senior Unsecured Notes(e) | 900,000 | 4.000 | % | 4.000 | % | 3/15/2029 | ||||||||
| Senior Unsecured Notes(f) | 400,000 | 4.375 | % | 4.375 | % | 5/15/2031 | ||||||||
| Total / Weighted Average | $ | 2,751,275 | 3.318 | % | ||||||||||
(a) Secured borrowing capacity of
(b) Unsecured borrowing capacity of
(c) The LIBOR rate option is one-month LIBOR rate and subject to an interest rate floor of 0 basis points.
(d) The Senior Unsecured Notes were issued in November 2019 at par.
(e) The Senior Unsecured Notes were issued in March 2021 at par.
(f) The Senior Unsecured Notes were issued in May 2021 at par.
| LPL Financial Holdings Inc. Key Business and Financial Metrics (Dollars in thousands, except where noted) (Unaudited) | |||||||||||||||||
| Q3 2021 | Q2 2021 | Change | Q3 2020 | Change | |||||||||||||
| Advisors | |||||||||||||||||
| Advisors | 19,627 | 19,114 | 3 | % | 17,168 | 14 | % | ||||||||||
| Net new advisors | 513 | 1,442 | n/m | 195 | n/m | ||||||||||||
| Annualized advisory fees and commissions per advisor(29) | $ | 324 | $ | 314 | 3 | % | $ | 248 | 31 | % | |||||||
| Average total assets per advisor ($ in millions)(30) | $ | 57.7 | $ | 58.2 | (1 | %) | $ | 47.2 | 22 | % | |||||||
| Transition assistance loan amortization ($ in millions)(31) | $ | 38.4 | $ | 34.7 | 11 | % | $ | 30.4 | 26 | % | |||||||
| Total client accounts (in millions) | 7.1 | 6.7 | 6 | % | 5.9 | 20 | % | ||||||||||
| Employees - period end | 5,457 | 5,344 | 2 | % | 4,658 | 17 | % | ||||||||||
| Productivity Metrics | |||||||||||||||||
| Business Solutions subscriptions(32) | 2,598 | 2,085 | 25 | % | 1,219 | 113 | % | ||||||||||
| Advisory revenues as a % of corporate advisory assets(33) | 1.00 | % | 1.00 | % | —bps | 1.02 | % | (2bps) | |||||||||
| Gross profit ROA(34) | 23.5 | bps | 24.3 | bps | (0.8bps) | 27.9 | bps | (4.4bps) | |||||||||
| OPEX as a % of advisory and brokerage assets(35) | 15.5 | bps | 16.0 | bps | (0.5bps) | 17.8 | bps | (2.3bps) | |||||||||
| EBIT ROA(36) | 8.0 | bps | 8.3 | bps | (0.3bps) | 10.1 | bps | (2.1bps) | |||||||||
| AUM retention rate (quarterly annualized)(37) | 97.8 | % | 98.4 | % | (60bps) | 97.3 | % | 50bps | |||||||||
| Recurring gross profit rate(38) | 84.4 | % | 83.2 | % | 120bps | 86.1 | % | (170bps) | |||||||||
| EBITDA as a % of gross profit | 35.6 | % | 40.5 | % | (490bps) | 40.5 | % | (490bps) | |||||||||
| Capital expenditure ($ in millions)(39) | $ | 54.9 | $ | 43.9 | 25 | % | $ | 40.1 | 37 | % | |||||||
| Share repurchases ($ in millions) | $ | 40.0 | $ | — | 100 | % | $ | — | 100 | % | |||||||
| Dividends ($ in millions) | 20.1 | 20.0 | 1 | % | 19.8 | 2 | % | ||||||||||
| Total Capital Allocated ($ in millions) | $ | 60.1 | $ | 20.0 | 201 | % | $ | 19.8 | 204 | % | |||||||
| Weighted-average share count, diluted | 81.8 | 81.7 | — | % | 80.6 | 2 | % | ||||||||||
| Total Capital Allocated per Share(40) | $ | 0.73 | $ | 0.25 | 192 | % | $ | 0.25 | 192 | % | |||||||
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 valuation. Management uses this non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods. Management believes that the non-GAAP financial measures and metrics discussed below are appropriate for evaluating the performance of the Company.
EPS prior to amortization of intangible assets and acquisition costs and Adjusted net income
EPS prior to amortization of intangible assets and acquisition costs is defined as adjusted net income, a non-GAAP measure defined as net income plus the after-tax impact of amortization of intangible assets and acquisition costs, divided by the weighted average number of diluted shares outstanding for the applicable period. The Company presents adjusted net income and EPS prior to amortization of intangible assets and acquisition costs because management believes that these metrics can provide investors with useful insight into the Company’s core operating performance by excluding non-cash items and acquisition costs that management does not believe impact the Company’s ongoing operations. Adjusted net income and EPS prior to amortization of intangible assets and acquisition costs are not measures of the Company's financial performance under GAAP and should not be considered as an alternative to net income, earnings per diluted share or any other performance measure derived in accordance with GAAP. For a reconciliation of net income and earnings per diluted share to adjusted net income and EPS prior to amortization of intangible assets and acquisition costs, please see the endnote disclosures in this release.
Gross profit
Gross profit is calculated as total revenues, less advisory and commission expenses and brokerage, clearing and exchange fees. All other expense categories, including depreciation and amortization of fixed assets and amortization of intangible assets, are considered general and administrative in nature. Because the Company’s gross profit amounts do not include any depreciation and amortization expense, the Company considers gross profit to be a non-GAAP financial measure that may not be comparable to similar measures used by others in its industry. Management believes that gross profit can provide investors with useful insight into the Company’s core operating performance before indirect costs that are general and administrative in nature. For a calculation of gross profit, please see the endnote disclosures in this release.
Core G&A
Core G&A consists of total operating expenses less the following expenses: advisory and commission, regulatory charges, promotional, employee share-based compensation, depreciation and amortization, amortization of intangible assets, brokerage, clearing and exchange and acquisition costs. Management presents core G&A because it believes core G&A reflects the corporate operating expense categories over which management can generally exercise a measure of control, compared with expense items over which management either cannot exercise control, such as advisory and commission expenses, or which management views as promotional expense necessary to support advisor growth and retention, including conferences and transition assistance. Core G&A is not a measure of the Company’s total operating expenses as calculated in accordance with GAAP. For a reconciliation of core G&A to the Company’s total operating expenses, please see the endnote disclosures of this release. The Company does not provide an outlook for its total operating expenses because it contains expense components, such as advisory and commission expenses, that are market-driven and over which the Company cannot exercise control. Accordingly a reconciliation of the Company’s outlook for core G&A to an outlook for total operating expenses cannot be made available without unreasonable effort.
EBITDA
EBITDA is defined as net income plus interest and other expense, income tax expense, depreciation and amortization, and amortization of intangible assets. The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations. EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. For a reconciliation of EBITDA to net income, please see the endnote disclosures of this release.
Credit Agreement EBITDA
Credit Agreement EBITDA is defined in, and calculated by management in accordance with, the Company's credit agreement (“Credit Agreement”) as “Consolidated EBITDA,” which is consolidated net income (as defined in the Credit Agreement) plus interest expense, tax expense, depreciation and amortization, and amortization of intangible assets, and is further adjusted to exclude certain non-cash charges and other adjustments, including unusual or non-recurring charges and gains, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions. The Company presents Credit Agreement EBITDA because management believes that it can be a useful financial metric in understanding the Company’s debt capacity and covenant compliance under its Credit Agreement. Credit Agreement EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. For a reconciliation of Credit Agreement EBITDA to net income, please see the endnote disclosures of this release.
Endnote Disclosures
(1) Represents the estimated total advisory and brokerage assets expected to transition to the Company's broker-dealer subsidiary, LPL Financial, associated with advisors who transferred their licenses to LPL Financial during the period. The estimate is based on prior business reported by the advisors, which has not been independently and fully verified by LPL Financial. The actual transition of assets to LPL Financial generally occurs over several quarters, including the initial quarter of the transition, and the actual amount transitioned may vary from the estimate.
(2) The terms “Financial Advisors” and “Advisors” refer to registered representatives and/or investment advisor representatives affiliated with LPL Financial, an SEC registered broker-dealer and investment adviser.
(3) We define corporate cash as the sum of cash and cash equivalents from the following: (1) cash held at the Parent, (2) excess cash at LPL Financial per the Credit Agreement, which is the net capital held at LPL Financial in excess of
(4) Compliance with the Leverage Ratio is only required under our revolving credit facility.
(5) Gross profit is a non-GAAP financial measure. Please see a description of gross profit under the "Non-GAAP Financial Measures" section of this release for additional information. Below is a calculation of gross profit for the periods presented (in thousands):
| Q3 2021 | Q2 2021 | Q3 2020 | |||||||||
| Total revenue | $ | 2,020,763 | $ | 1,898,258 | $ | 1,460,301 | |||||
| Advisory and commission expense | 1,366,832 | 1,273,202 | 936,766 | ||||||||
| Brokerage, clearing and exchange fees | 22,828 | 23,459 | 17,834 | ||||||||
| Gross profit(+) | $ | 631,103 | $ | 601,597 | $ | 505,701 | |||||
____________________
(+) Balances may not foot due to rounding.
(6) Production-based payout is an operating measure calculated as advisory and commission expenses less advisor deferred compensation expenses. The payout rate is calculated by dividing the production-based payout by total advisory fees and commissions revenue. Below is a reconciliation of production-based payout to the Company’s advisory and commission expenses and a calculation of the payout rate for the periods presented (in thousands except payout rate):
| Q3 2021 | Q2 2021 | Q3 2020 | |||||||||
| Production-based payout | $ | 1,368,348 | $ | 1,247,321 | $ | 917,831 | |||||
| Advisor deferred compensation expenses | (1,516 | ) | 25,881 | 18,935 | |||||||
| Advisory and commission expense | $ | 1,366,832 | $ | 1,273,202 | $ | 936,766 | |||||
| Advisory fees and commissions revenue | $ | 1,570,117 | $ | 1,444,546 | $ | 1,059,584 | |||||
| Payout rate | 87.15 | % | 86.35 | % | 86.62 | % | |||||
(7) Consists of revenues from the Company's sponsorship programs with financial product manufacturers and omnibus processing and networking services, but does not include fees from client cash programs. Other asset-based revenues are a component of asset-based revenues and are derived from the Company's unaudited condensed consolidated statements of income.
(8) Interest income and other, net is an operating measure calculated as interest income plus other revenues, less advisor deferred compensation expenses. Below is a reconciliation of interest income and other, net against the Company’s interest income and other revenues for the periods presented (in thousands):
| Q3 2021 | Q2 2021 | Q3 2020 | |||||||||
| Interest income | $ | 7,365 | $ | 6,914 | $ | 6,623 | |||||
| Plus: Other revenue | 1,218 | 30,078 | 20,796 | ||||||||
| Plus (Less): Advisor deferred compensation expenses | 1,516 | (25,881 | ) | (18,935 | ) | ||||||
| Interest income and other, net | $ | 10,099 | $ | 11,111 | $ | 8,484 | |||||
(9) Core G&A is a non-GAAP financial measure. Please see a description of core G&A under the “Non-GAAP Financial Measures” section of this release for additional information. Below is a reconciliation of core G&A to the Company’s total operating expenses for the periods presented (in thousands):
| Q3 2021 | Q2 2021 | Q3 2020 | |||||||||
| Core G&A Reconciliation | |||||||||||
| Total operating expenses | $ | 1,855,721 | $ | 1,711,438 | $ | 1,299,792 | |||||
| Advisory and commission | 1,366,832 | 1,273,202 | 936,766 | ||||||||
| Depreciation and amortization | 38,409 | 36,704 | 27,548 | ||||||||
| Amortization of intangible assets | 21,531 | 19,925 | 16,829 | ||||||||
| Brokerage, clearing and exchange | 22,828 | 23,459 | 17,834 | ||||||||
| Total G&A | 406,121 | 358,148 | 300,815 | ||||||||
| Promotional (ongoing)(10) | 83,630 | 64,135 | 57,970 | ||||||||
| Acquisition costs(10) | 35,887 | 23,782 | — | ||||||||
| Employee share-based compensation | 9,763 | 11,136 | 7,420 | ||||||||
| Regulatory charges | 5,976 | 7,416 | 8,326 | ||||||||
| Core G&A | $ | 270,865 | $ | 251,679 | $ | 227,099 | |||||
(10) Acquisition costs incurred during the third quarter of 2021 include the cost to setup, onboard and integrate acquired entities and are driven primarily by
(11) EBITDA is a non-GAAP financial measure. Please see a description of EBITDA under the "Non-GAAP Financial Measures" section of this release for additional information. Below is a reconciliation of EBITDA to the Company's net income for the periods presented (in thousands):
| Q3 2021 | Q2 2021 | Q3 2020 | |||||||||
| EBITDA Reconciliation | |||||||||||
| Net income | $ | 103,064 | $ | 119,101 | $ | 103,789 | |||||
| Non-operating interest expense and other | 27,063 | 25,171 | 25,179 | ||||||||
| Provision for income taxes | 34,915 | 42,548 | 31,541 | ||||||||
| Depreciation and amortization | 38,409 | 36,704 | 27,548 | ||||||||
| Amortization of intangible assets | 21,531 | 19,925 | 16,829 | ||||||||
| EBITDA | $ | 224,982 | $ | 243,449 | $ | 204,886 | |||||
(12) Adjusted net income and EPS prior to amortization of intangible assets and acquisition costs are non-GAAP financial measures. Please see a description of adjusted net income and EPS prior to amortization of intangible assets and acquisition costs under the “Non-GAAP Financial Measures” section of this release for additional information. Below is a reconciliation net income and earnings per diluted share to adjusted net income and EPS prior to amortization of intangible assets and acquisition costs (in thousands, except per share data):
| Q3 2021 | Q2 2021 | Q3 2020 | ||||||||||||||||||||
| Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||
| Net income / earnings per diluted share | $ | 103,064 | $ | 1.26 | $ | 119,101 | $ | 1.46 | $ | 103,789 | $ | 1.29 | ||||||||||
| Amortization of intangible assets | 21,531 | 0.26 | 19,925 | 0.24 | 16,829 | 0.21 | ||||||||||||||||
| Acquisition costs | 35,887 | 0.44 | 23,782 | 0.29 | — | — | ||||||||||||||||
| Tax benefit | (15,399 | ) | (0.19 | ) | (11,700 | ) | (0.14 | ) | (4,712 | ) | (0.06 | ) | ||||||||||
| Adjusted net income / EPS prior to amortization of intangible assets and acquisition costs | $ | 145,083 | $ | 1.77 | $ | 151,108 | 1.85 | $ | 115,906 | $ | 1.44 | |||||||||||
| Diluted share count | 81,849 | 81,728 | 80,550 | |||||||||||||||||||
(13) Consists of total advisory assets under custody at LPL Financial and Waddell & Reed, LLC.
(14) Consists of brokerage assets serviced by advisors licensed with LPL Financial and Waddell & Reed, LLC.
(15) Consists of total assets on LPL Financial's corporate advisory platform serviced by investment advisor representatives of LPL Financial or Allen & Company of Florida, LLC.
(16) Consists of total assets on LPL Financial's independent advisory platform serviced by investment advisor representatives of separate registered investment advisor firms ("Hybrid RIAs"), rather than of LPL Financial.
(17) Represents those advisory assets in LPL Financial’s Model Wealth Portfolios, Optimum Market Portfolios, Personal Wealth Portfolios and Guided Wealth Portfolios platforms.
(18) Consists of total client deposits into advisory accounts, including advisory assets serviced by former BMO Harris Financial Advisors, Lucia and E.K. Riley advisors, less total client withdrawals from advisory accounts, plus dividends, plus interest, minus advisory fees. The Company considers conversions from and to brokerage accounts as deposits and withdrawals, respectively.
(19) Consists of total client deposits into brokerage accounts, less total client withdrawals from brokerage accounts, plus dividends, plus interest. The Company considers conversions from and to advisory accounts as deposits and withdrawals, respectively.
(20) Consists of net new assets excluding the Waddell & Reed Acquisition.
(21) Consists of existing custodied assets that converted from brokerage to advisory, less existing custodied assets that converted from advisory to brokerage.
(22) Calculated as annualized current period organic net new assets divided by preceding period assets in their respective categories of advisory assets or total advisory and brokerage assets.
(23) Consists of total client deposits into advisory accounts on LPL Financial's corporate advisory platform less total client withdrawals from advisory accounts on its corporate advisory platform, plus dividends, plus interest, minus advisory fees.
(24) Consists of total client deposits into advisory accounts on LPL Financial's independent advisory platform less total client withdrawals from advisory accounts on its independent advisory platform, plus dividends, plus interest, minus advisory fees.
(25) Consists of total client deposits into centrally managed assets accounts less total client withdrawals from centrally managed assets accounts, plus dividends, plus interest, minus advisory fees.
(26) Calculated by dividing revenue for the period by the average balance during the period.
(27) Represents the amount of securities purchased less the amount of securities sold in client accounts custodied with LPL Financial. Reported activity does not include any other cash activity, such as deposits, withdrawals, dividends received or fees paid.
(28) EBITDA and Credit Agreement EBITDA are non-GAAP financial measures. Please see a description of EBITDA and Credit Agreement EBITDA under the “Non-GAAP Financial Measures” section of this release for additional information. Under the Credit Agreement, management calculates Credit Agreement EBITDA for a trailing twelve month period at the end of each fiscal quarter, and in doing so may make further adjustments to prior quarters. Below are reconciliations of EBITDA and Credit Agreement EBITDA to net income for the periods presented (in thousands):
| Q3 2021 | Q2 2021 | Q4 2020 | |||||||||
| EBITDA and Credit Agreement EBITDA Reconciliations | |||||||||||
| Net income | $ | 463,333 | $ | 464,058 | $ | 472,640 | |||||
| Non-operating interest expense and other | 102,272 | 100,388 | 105,765 | ||||||||
| Provision for income taxes | 147,270 | 143,896 | 153,433 | ||||||||
| Depreciation and amortization | 139,262 | 128,401 | 109,732 | ||||||||
| Amortization of intangible assets | 76,157 | 71,455 | 67,358 | ||||||||
| EBITDA | $ | 928,294 | $ | 908,198 | $ | 908,928 | |||||
| Credit Agreement Adjustments: | |||||||||||
| Employee share-based compensation expense | $ | 39,797 | $ | 37,454 | $ | 31,650 | |||||
| Advisor share-based compensation expense | 2,316 | 2,252 | 2,321 | ||||||||
| M&A accretion | 65,379 | 77,017 | — | ||||||||
| Loss on extinguishment of debt | 24,400 | 24,400 | — | ||||||||
| Other | 81,383 | 45,144 | 18,326 | ||||||||
| Credit Agreement EBITDA (trailing twelve months) | $ | 1,141,569 | $ | 1,094,465 | $ | 961,225 | |||||
(29) Calculated based on the average advisor count from the current period and prior period.
(30) Calculated based on the end-of-period total advisory and brokerage assets divided by end-of-period advisor count.
(31) Represents amortization expense on forgivable loans for transition assistance to advisors and financial institutions.
(32) Refers to active and contracted subscriptions related to Professional Services (Admin, Marketing and CFO Solutions) and Business Optimizers (Assurance Plan, Remote Office and M&A Solutions).
(33) Represents advisory revenues as a percentage of Corporate Platform Advisory Assets for the trailing twelve month period.
(34) Represents gross profit, a non-GAAP financial measure, for the trailing twelve month period, divided by average month-end total advisory and brokerage assets for the trailing twelve month period.
(35) Represents operating expenses for the trailing twelve month period, excluding production-related expense, divided by average month-end total advisory and brokerage assets for the trailing twelve month period. Production-related expense includes commissions and advisory expense and brokerage, clearing and exchange expense. For purposes of this metric, operating expenses includes core G&A, a non-GAAP financial measure, as well as regulatory charges, promotional, employee share-based compensation, depreciation and amortization, and amortization of intangible assets.
(36) EBIT ROA is calculated as gross profit ROA less OPEX as a percentage of advisory and brokerage assets.
(37) Reflects retention of total advisory and brokerage assets, calculated by deducting quarterly annualized attrition from total advisory and brokerage assets, over the prior-quarter total advisory and brokerage assets.
(38) Recurring gross profit rate refers to the percentage of the Company’s gross profit, a non-GAAP financial measure, that was recurring for the trailing twelve month period. Management tracks recurring gross profit, a characterization of gross profit and a statistical measure, which is defined to include the Company’s revenues from asset-based fees, advisory fees, trailing commissions, client cash programs and certain other fees that are based upon client accounts and advisors, less the expenses associated with such revenues and certain other recurring expenses not specifically associated with a revenue line. Management allocates such other recurring expenses on a pro-rata basis against specific revenue lines at its discretion.
(39) Capital expenditures represent cash payments for fixed assets during the period.
(40) Total capital allocated per share equals the amount of capital allocated for share repurchases and cash dividends divided by the diluted weighted-average shares outstanding.
FAQ
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