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Press Release: LPL Financial Announces Fourth -6-

· 02/04/2021 16:05
Q3 Q2 Q4 2020 2020 2020 Q4 2019 ---------- -------- -------- ---------- Production based payout $ 987,882 $917,831 $819,953 $876,654 Advisor deferred compensation expense 41,857 18,935 39,894 17,177 ---------- -------- -------- -------- Advisory and commission expense $1,029,739 $936,766 $859,847 $893,831 ========= ======= ======= =======Q4 2020 Q3 2020 Q2 2020 Q4 2019 --------- --------- --------- ----------- Total net revenues $ 1,581 $ 1,460 $ 1,367 $ 1,448 Advisory and commission expense 1,030 937 860 894 Brokerage, clearing and exchange fees 18 18 19 16 --------- --------- --------- --------- Gross profit(+) $ 534 $ 506 $ 488 $ 538 ===== ===== ===== =====Q4 2020 Q3 2020 Change Q4 2019 Change ------------- ------------- ---------- ----------- ---------- Advisors Advisors 17,287 17,168 1% 16,464 5% Net New Advisors 119 195 n/m 115 n/m Annualized advisory and commission fees per Advisor(28) $ 265 $ 248 7% $ 246 8% Average Total Assets per Advisor ($ in millions)(29) $ 52.2 $ 47.2 11% $ 46.4 13% Transition assistance loan amortization ($ in millions)(30) $ 29.7 $ 30.4 (2%) $ 26.1 14% Total client accounts (in millions) 6.0 5.9 2% 5.7 5% Employees - period end 4,756 4,658 2% 4,343 10% Productivity Metrics Advisory Revenue as a % of Corporate Advisory Assets(31) 1.02% 1.02% -- bps 1.02% -- bps Gross Profit ROA(32) 26.8 bps 27.9 bps (1.1 bps) 30.7 bps (3.9 bps) OPEX as a % of Advisory and Brokerage Assets(33) 17.5 bps 17.8 bps (0.3 bps) 18.3 bps (0.8 bps) EBIT ROA(34) 9.3 bps 10.1 bps (0.8 bps) 12.4 bps (3.1 bps) Production Retention Rate (YTD annualized)(35) 97.7% 98.1% (40 bps) 96.5% 120 bps Recurring Gross Profit Rate(36) 84.8% 86.1% (130 bps) 85.9% (110 bps) EBITDA as a % of Gross Profit 40.6% 40.5% 10 bps 44.9% (430 bps) Capital Expenditure ($ in millions) $ 43.6 $ 40.1 9% $ 52.1 (16%) Share Repurchases ($ in millions) $ -- $ -- --% $120.0 (100%) Dividends ($ in millions) 19.8 19.8 --% 20.2 (2%) -------- --- -------- --- ------ --- Total Capital Allocated ($ in millions) $ 19.8 $ 19.8 --% $140.2 (86%) Weighted-average Share Count, Diluted 80.9 80.6 --% 82.7 (2%) -------- --- -------- --- ------ --- Total Capital Allocated per Share(37) $ 0.25 $ 0.25 --% $ 1.70 (85%)Q4 2020 Q3 2020 Cash Available for Corporate Use(26) Cash at Parent $ 201,385 $ 162,035 Excess Cash at Broker-Dealer subsidiary per Credit Agreement 67,574 78,739 Other Available Cash 10,960 11,337 ---------- ---------- Total Cash Available for Corporate Use $ 279,919 $ 252,111 ========= ========= Credit Agreement Net Leverage Total Debt (does not include unamortized premium) $2,359,300 $2,361,975 Cash Available 279,919 252,111 ---------- ---------- Credit Agreement Net Debt $2,079,381 $2,109,864 ========= ========= Credit Agreement EBITDA (trailing twelve months)(27) $ 961,225 $ 980,827 ========= ========= Credit Agreement Net Leverage Ratio 2.16 x 2.15 x ========== ========== December 31, 2020 ------------------------------------------------------ Current Applicable Yield At Interest Total Debt Balance Margin Issuance Rate Maturity -------------- ---------- ------------ ----------- ---------- ---------- Revolving Credit Facility(a) $ -- ABR+25bps -- % 11/12/2024 Broker-Dealer Revolving Credit Facility(b) -- FFR+125bps -- % 7/31/2024 Senior Secured LIBOR+175 Term Loan B 1,059,300 bps(c) 1.898% 11/12/2026 Senior Unsecured Notes(d) 500,000 5.75% Fixed 5.750% 5.750% 9/15/2025 Senior Unsecured Notes(d) 400,000 (e) 5.75% Fixed 5.115% 5.750% 9/15/2025 Senior Unsecured Notes(f) 400,000 4.625% Fixed 4.625% 4.625% 11/15/2027 ---------- ----- Total / Weighted Average $2,359,300 3.830%

(Unaudited)

(a) The Revolving Credit Facility is secured and has a borrowing capacity of $750 million.

(b) The Broker-Dealer Revolving Credit Facility is unsecured and at LPL Financial LLC, the Company's broker-dealer subsidiary, and has a borrowing capacity of $300 million.

(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 two separate transactions; $500 million in notes were issued in March 2017 at par; the remaining $400 million were issued in September 2017 and priced at 103% of the aggregate principal amount.

(e) Does not include unamortized premium of approximately $7.1 million as of December 31, 2020.

(f) The Senior Unsecured Notes were issued in November 2019 at par.

LPL Financial Holdings Inc.

Key Business and Financial Metrics(5)

(Dollars in thousands, except where noted)

(Unaudited)

Endnote Disclosures

(1) In April 2020, the Company updated its definition of net new assets to include Dividends plus Interest, minus Advisory Fees. See FNs 16, 17, 21, 22 and 23.

(2) Represents the estimated total advisory and brokerage assets expected to transition to the Company's broker-dealer subsidiary, LPL Financial LLC ("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.

(3) 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. Q4 2020 advisor count included 32 advisors from the acquisition of E.K. Riley.

(4) Compliance with the Credit Agreement Net Leverage Ratio is only required under our revolving credit facility.

(5) Certain information presented on pages 8-15 includes non-GAAP financial measures and operational and performance metrics. For more information on non-GAAP financial measures, please see the section titled "Non-GAAP Financial Measures" that begins on page 3 of this release.

(6) 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. Below is a calculation of Gross Profit for the periods presented (in millions):

(+) Balances may not foot due to rounding.

(7) Production based payout is an operating measure calculated as an advisory and commission expense less advisor deferred compensation expense. Below is a reconciliation of production based payout against the Company's advisory and commission expense for the periods presented (in thousands):

(8) 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.

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February 04, 2021 16:05 ET (21:05 GMT)