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Press Release: LPL Financial Announces Fourth -7-

· 02/04/2021 16:05
Q4 2020 Q3 2020 -------- ---------- EBITDA and Credit Agreement EBITDA Reconciliations Net income $472,640 $487,768 Non-operating interest expense and other 105,765 112,170 Provision for income taxes 153,433 157,471 Loss on extinguishment of debt -- 3,156 Depreciation and amortization 109,732 106,745 Amortization of intangible assets 67,358 66,719 -------- -------- EBITDA $908,928 $934,029 Credit Agreement Adjustments: Employee share-based compensation expense $ 31,650 $ 31,287 Advisor share-based compensation expense 2,321 2,404 Other 18,326 13,107 -------- -------- Credit Agreement EBITDA (trailing twelve months) $961,225 $980,827 ======= =======Q4 2020 Q3 2020 Q2 2020 Q4 2019 ---------- ---------- ---------- ------------ Operating Expense Reconciliation (in thousands) Core G&A $ 252,391 $ 227,099 $ 222,406 $ 230,182 Regulatory charges 8,775 8,326 6,115 7,893 Promotional 48,342 57,970 44,540 51,050 Employee share-based compensation 7,542 7,420 8,040 7,179 Total G&A 317,050 300,815 281,101 296,304 ---------- ---------- ---------- ---------- Advisory and commission 1,029,739 936,766 859,847 893,831 Depreciation and amortization 28,650 27,548 26,890 25,663 Amortization of intangible assets 17,270 16,829 16,689 16,631 Brokerage, clearing and exchange 17,762 17,834 18,565 15,927 ---------- ---------- ---------- ---------- Total operating expenses $1,410,471 $1,299,792 $1,203,092 $1,248,356 ========= ========= ========= =========Q4 2020 Q3 2020 Q2 2020 Q4 2019 -------- ---------- ---------- ---------- Interest income, net of interest expense $ 6,707 $ 6,623 $ 6,540 $10,966 Plus: Other revenue 45,232 20,796 42,751 19,534 Less: Advisor deferred compensation expense (41,857) (18,935) (39,894) (17,177) ------- --------- --------- ------- Interest income and other, net $10,082 $ 8,484 $ 9,397 $13,323 ====== ===== ===== ======

(9) Interest income and other, net is an operating measure calculated as interest income, net of interest expense plus other revenue, less advisor deferred compensation expense. Below is a reconciliation of interest income and other, net against the Company's interest income, net of interest expense and other revenue for the periods presented (in thousands):

(10) Core G&A is a non-GAAP financial measure. Please see a description of Core G&A under "Non-GAAP Financial Measures" on page 3 of this release for additional information. Below is a reconciliation of Core G&A against the Company's total operating expenses for the periods presented:

(11) Consists of total advisory assets under custody at LPL Financial. Q4 2019 also included advisory assets serviced by investment advisor representatives of Allen & Company of Florida, LLC ("Allen & Company") that were onboarded to LPL Financial's custodial platform in Q4 2019.

(12) Consists of brokerage assets serviced by advisors licensed with LPL Financial. Q4 2019 also included brokerage assets serviced by advisors licensed with Allen & Company that were onboarded to LPL Financial's custodial platform in Q4 2019.

(13) Consists of total assets on LPL Financial's corporate advisory platform serviced by investment advisor representatives of LPL Financial or Allen & Company.

(14) 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.

(15) Represents those advisory assets in LPL Financial's Model Wealth Portfolios, Optimum Market Portfolios, Personal Wealth Portfolios and Guided Wealth Portfolios platforms.

(16) Consists of total client deposits into advisory accounts, including advisory assets serviced by Allen & Company 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. Figures for Net New Advisory Assets reported prior to April 2020 did not include dividends and interest or subtract advisory fees. The figure previously reported for Q4 2019 was an inflow of $9.6 billion. See FN 1.

(17) Consists of total client deposits into brokerage accounts, including brokerage assets serviced by Allen & Company advisors, 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. Figures for Net New Brokerage Assets reported prior to April 2020 did not include dividends and interest. The figure previously reported for Q4 2019 was an outflow of $0.8 billion. See FN 1.

(18) Consists of net new assets excluding the acquisitions of Lucia Securities, LLC and E.K. Riley Investments, LLC. Acquired assets include $2.5 billion of net new assets related to E.K. Riley Investments, LLC in November 2020, and $1.5 billion of net new assets from Lucia Securities, LLC in October 2020.

(19) Consists of existing custodied assets that converted from brokerage to advisory, less existing custodied assets that converted from advisory to brokerage.

(20) Calculated as annualized current period net new assets divided by preceding period assets in their respective categories of advisory assets or total advisory and brokerage assets. (See FN 18)

(21) Consists of total client deposits into advisory accounts on LPL Financial's corporate advisory platform (FN 13) less total client withdrawals from advisory accounts on its corporate advisory platform, plus dividends, plus interest, minus advisory fees. Figures for Corporate Platform Net New Advisory Assets reported prior to April 2020 did not include dividends and interest or subtract advisory fees. The figure previously reported for Q4 2019 was an inflow of $7.5 billion. See FN 1.

(22) Consists of total client deposits into advisory accounts on LPL Financial's independent advisory platform (FN 14) less total client withdrawals from advisory accounts on its independent advisory platform, plus dividends, plus interest, minus advisory fees. Figures for Hybrid Platform Net New Advisory Assets reported prior to April 2020 did not include dividends and interest or subtract advisory fees. The figure previously reported for Q4 2019 was an inflow of $2.1 billion. See FN 1.

(23) Consists of total client deposits into centrally managed assets accounts (FN 15) less total client withdrawals from centrally managed assets accounts, plus dividends, plus interest, minus advisory fees. Figures for Centrally Managed Net New Advisory Assets reported prior to April 2020 did not include dividends and interest or subtract advisory fees. The figure previously reported for Q4 2019 was an inflow of $2.0 billion. See FN 1.

(24) Calculated by dividing revenue for the period by the average balance during the period.

(25) 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.

(26) Consists of cash unrestricted by the Credit Agreement and other regulations available for operating, investing and financing uses.

(27) EBITDA and Credit Agreement EBITDA are non-GAAP financial measures. Please see a description of EBITDA and Credit Agreement EBITDA under "Non-GAAP Financial Measures" on page 3 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 (dollars in thousands):

(28) Calculated based on the average advisor count from the current period and prior period.

(29) Calculated based on the end-of-period total advisory and brokerage assets divided by end-of-period advisor count.

(30) Represents the amortization expense amount of forgivable loans for transition assistance to advisors and financial institutions.

(31) Represents advisory revenue as a percentage of Corporate Platform Advisory Assets (FN 13) for the trailing twelve month period.

(32) Represents Gross Profit (FN 6), 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.

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