LPL Financial Holdings Inc. (NASDAQ: LPLA) announced its second quarter of 2017 earnings yesterday and held a conference call to discuss the results. Earnings per share increased 40 percent year-over-year, while revenue increased 5 percent.
On yesterday’s call, CEO Dan Arnold said that industry changes such as the Department of Labor’s fiduciary rule will create “more adviser movement and opportunities for industry consolidation,” and noted that LPL has been winning business by building on these trends.
“We believe our size and scale is our competitive advantage that positions us to provide our advisers with better capabilities at lower costs,” said Arnold. “We are also prepared to deploy our excess cash and balance sheet capacity to growth opportunities that makes sense both strategically and financially.”
The firm will also roll out its new mutual fund-only brokerage platform early next year, a move that Arnold says will standardize brokerage mutual fund compensation for advisers, and help them differentiate and grow their practices.
• Earnings per share increased 40 percent year-over-year to $0.74, and increased 42 percent since the first quarter of 2017.
• Net Income increased 43 percent year-over-year to $68 million, up 42 percent since the first quarter of 2017.
• Total brokerage and advisory assets increased 11 percent year-over-year to $542 billion, up 2 percent since last quarter.
• Total net new assets were an inflow of $0.4 billion, translating to a 0.3 percent annualized growth rate.
• Net new advisory assets were an inflow of $5.9 billion, translating to a 10 percent annualized growth rate.
• Net new brokerage assets were an outflow of $5.5 billion, translating to a (7 percent) annualized rate.
• Advisor count decreased to 14,256, down 98 since last quarter and up 63 year-over-year. The company noted that excluding anticipated departures discussed during the Q1 2017 earnings call, total net new assets were an inflow of $2.1 billion, net new advisory assets were an inflow of $6.1 billion, net new brokerage assets were an outflow of $4.0 billion, and advisor count increased by 2.
• Gross profit increased 13 percent year-over-year to $389 million, up 3 percent since last quarter.
• EBITDA increased 29 percent year-over-year to $170 million, up 12 percent since last quarter.
• EBITDA as a percentage of gross profit was 44 percent, up from 38 percent a year ago, and up from 40 percent since the fourth quarter of 2016.
• Core general and administrative expenses increased 5 percent year-over-year to $176 million, but decreased slightly compared to the fourth quarter of 2016.
• S&P 500 index ended the quarter at 2,423, up 3 percent sequentially. The S&P 500 index averaged 2,398 during the quarter, up 3 percent sequentially.
• Federal Funds Daily Effective Rate averaged 95 bps during the quarter, up 25 bps sequentially.
• Production retention rate was 93.4 percent. Excluding anticipated departures announced on the company’s Q1 2017 earnings call, production retention was 96.5 percent.
• Gross profit increased 3 percent since last quarter, which the company said was primarily driven by higher advisory fees, cash sweep, and sponsor revenues.
•Core G&A expenses decreased slightly since last quarter, which the company said was primarily driven by lower payroll taxes.
• Promotional expenses decreased 13 percent sequentially, which the company said was primarily driven by lower conference-related expenses.
• Returned capital to shareholders totaling $59 million or $0.64 per share.
• Repurchased 910,000 shares for $36 million, at an average price of $39.78 per share.
• Paid dividends of $23 million on May 25, 2017. For the third quarter, the company’s board has declared a $0.25 cent quarterly dividend to be paid on August 24, 2017 to shareholders of record as of August 10, 2017.
• Capital expenditures were $28 million, primarily driven by technology spend.
• Cash available for corporate use was $527 million as of quarter-end.
LPL Financial, a wholly owned subsidiary of LPL Financial Holdings Inc. (NASDAQ: LPLA), served approximately $542 billion in brokerage and advisory assets as of June 30, 2017. LPL is the nation’s largest independent broker-dealer based on total revenues. The company provides proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to more than 14,000 independent financial advisors and more than 700 financial institutions. LPL Financial and its affiliates have more than 3,400 employees with primary offices in Boston, Charlotte, and San Diego.