0001397911-19-000063.txt : 20190502 0001397911-19-000063.hdr.sgml : 20190502 20190502160720 ACCESSION NUMBER: 0001397911-19-000063 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20190502 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190502 DATE AS OF CHANGE: 20190502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LPL Financial Holdings Inc. CENTRAL INDEX KEY: 0001397911 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 203717839 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34963 FILM NUMBER: 19791919 BUSINESS ADDRESS: STREET 1: 75 STATE STREET STREET 2: 22ND FLOOR CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 617 423 3644 MAIL ADDRESS: STREET 1: 75 STATE STREET STREET 2: 22ND FLOOR CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: LPL Investment Holdings Inc. DATE OF NAME CHANGE: 20070427 8-K 1 form8-k20190502.htm FORM 8-K Document



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
May 2, 2019
Date of report (date of earliest event reported)
LPL Financial Holdings Inc.
(Exact name of registrant as specified in its charter)
Delaware
001-34963
20-3717839
(State or other jurisdictions of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification Nos.)
75 State Street, Boston MA 02109
(Address of principal executive offices) (Zip Code)
(617) 423-3644
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock -- $0.001 par value per share
LPLA
Nasdaq Global Select Market




Item 2.02
Results of Operations and Financial Condition.
On May 2, 2019, LPL Financial Holdings Inc. (collectively with its subsidiaries, the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2019. A copy of the press release is furnished with this Form 8-K and attached hereto as Exhibit 99.1.
Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01

Financial Statements and Exhibits.
(d)

 
Exhibits
 
 
 
99.1

 




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

LPL FINANCIAL HOLDINGS INC.
 
 
 
By:
/s/ Matthew J. Audette
 
Name: Matthew J. Audette
 
Title: Chief Financial Officer


Dated: May 2, 2019

    



 EX-99.1 2 a2019q1earningsrelease.htm PRESS RELEASE Exhibit


lpllogo541largenewnolinesa11.jpg
Investor Relations - Chris Koegel, (617) 897-4574
 For Immediate Release
Media Relations - Jeff Mochal, (704) 733-3589
 
 
investor.lpl.com/contactus.cfm
LPL Financial Announces First Quarter 2019 Results
First Quarter 2019 Key Performance Indicators
•
Earnings per share ("EPS") increased 77% year-over-year to $1.79.
◦
Net Income increased 66% year-over-year to $155 million.
•
EPS Prior to Amortization of Intangible Assets** increased 74% year-over-year to $1.93.
•
Total Brokerage and Advisory Assets increased 6% year-over-year to $684 billion.
•
Total Net New Assets were an inflow of $4.0 billion, translating to a 2.5% annualized growth rate.
◦
Net new advisory assets were an inflow of $4.6 billion, translating to a 6.5% annualized growth rate.
◦
Net new brokerage assets were an outflow of $0.7 billion, translating to a (0.8)% annualized rate.
◦
Recruited Assets(1) were $7.1 billion.
◦
Advisor count was 16,189, up 80 sequentially, and up 122 year-over-year; production retention rate was 96%.
•
Total client cash sweep balances were $30.7 billion, down $4.1 billion sequentially.
◦
Total client cash sweep balances as a percent of total assets was 4.5%, down from 5.6% in the prior quarter.
•
Gross Profit** increased 20% year-over-year to $556 million.
•
EBITDA** increased 51% year-over-year to $276 million.
◦
EBITDA** as a percentage of Gross Profit** was 50%, up from 40% a year ago.
◦
Core G&A** increased 6% year-over-year to $213 million, down 2% sequentially.
•
Shareholder capital returns were $146 million, translating to $1.68 per share.
◦
Share repurchases were $125 million for 1.7 million shares at an average purchase price of $71.57.
◦
Weighted average fully diluted share count was 86.7 million, down 7% year-over-year.
◦
Dividends were $21 million.
•
Cash available for corporate use was $376 million.
•
Credit Agreement Net Leverage Ratio(2) was 2.05x, down 0.10x from the prior quarter.

Key Updates
•
Maintained 2019 Core G&A** outlook range of $850 to $875 million.
•
Completed $125 million of share repurchases in the first quarter.
•
Reminder that the Company's Investor and Analyst Day is on May 22, 2019 in New York City.

SAN DIEGO - May 2, 2019 — LPL Financial Holdings Inc. (Nasdaq: LPLA) (the “Company”) today announced results for its first quarter ended March 31, 2019, reporting net income of $155 million, or $1.79 per share. This compares with $94 million, or $1.01 per share, in the first quarter of 2018 and $120 million, or $1.36 per share, in the prior quarter.


1


“We continue to focus on providing differentiated capabilities to help our advisors win in the marketplace,” said Dan Arnold, President and CEO.  "In the first quarter, we introduced new CRM capabilities, rolled out goals-based planning, and integrated our AdvisoryWorld acquisition.  These capabilities will help our advisors digitize their workflows to more efficiently turn prospects into clients.  Looking ahead, we remain focused on our strategic priorities of growing our core business and executing with excellence.”

“We began 2019 with another quarter of business and financial strength,” said Matt Audette, CFO. "We grew gross profit while investing for growth and still delivering operating leverage. Looking forward, we plan to continue to invest to drive organic growth and return capital to shareholders. We believe our business results and financial strength position us well to continue creating long-term shareholder value."

Dividend Declaration
The Company's Board of Directors declared a $0.25 per share dividend to be paid on June 3, 2019 to all stockholders of record as of May 20, 2019.
Conference Call and Additional Information
The Company will hold a conference call to discuss its results at 5:00 p.m. EDT on Thursday, May 2. To listen, call 877-677-9122 (domestic) or 708-290-1401 (international); passcode 3794197, 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 May 9 and May 23, respectively. For telephonic replay, call 855-859-2056 (domestic) or 404-537-3406 (international); passcode 3794197.
About LPL Financial
LPL Financial is a leader in the retail financial advice market and the nation’s largest independent broker-dealer*. We serve independent financial advisors and financial institutions, providing them with the technology, research, clearing and compliance services, and practice management programs they need to create and grow their practices. LPL enables them to provide objective guidance to millions of American families seeking wealth management, retirement planning, financial planning and asset management solutions. LPL.com

*Based on total revenues, Financial Planning magazine June 1996-2018.
Securities and Advisory Services offered through LPL Financial. A Registered Investment Advisor, Member FINRA/SIPC.

2


**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 is defined as GAAP EPS plus the per share impact of Amortization of Intangible Assets. The per share impact is calculated as Amortization of Intangible Assets expense, net of applicable tax benefit, divided by the number of shares outstanding for the applicable period. The Company presents EPS Prior to Amortization of Intangible Assets because management believes that the metric can provide investors with useful insight into the Company’s core operating performance by excluding non-cash items that management does not believe impact the Company’s ongoing operations. EPS Prior to Amortization of Intangible Assets is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to GAAP EPS or any other performance measure derived in accordance with GAAP. For a reconciliation of EPS Prior to Amortization of Intangible Assets to GAAP EPS, please see footnote 31 on page 19 of this release.
Gross Profit is calculated as net revenues, which were $1,372 million for the three months ended March 31, 2019, less commission and advisory expenses and brokerage, clearing, and exchange fees, which were $800 million and $16 million, respectively, for the three months ended March 31, 2019. 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 its gross profit amounts to be non-GAAP financial measures that may not be comparable to those of 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.
Core G&A consists of total operating expenses, which were $1,135 million for the three months ended March 31, 2019, excluding the following expenses: commission and advisory, regulatory charges, promotional, employee share-based compensation, depreciation and amortization, amortization of intangible assets, and brokerage, clearing, and exchange. 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 commission and advisory 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 against the Company’s total operating expenses, please see footnote 5 on page 17 of this release. The Company does not provide an outlook for its total operating expenses because it contains expense components, such as commission and advisory 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 is defined as net income plus interest expense, income tax expense, depreciation, amortization and loss on extinguishment of debt. 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, or as an alternative to cash flows from operating activities as a measure of profitability or liquidity. In addition, the Company’s EBITDA can differ significantly from EBITDA calculated by other companies, depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.
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 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, including the Company's acquisition of the broker/dealer network of National Planning Holdings, Inc. ("NPH"). 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

3


with GAAP, or as an alternative to cash flows from operating activities as a measure of profitability or liquidity. In addition, the Company’s Credit Agreement-defined EBITDA can differ significantly from adjusted EBITDA calculated by other companies, depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, capital investments, and types of adjustments made by such companies.
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 2019 Core G&A** outlook), enhanced capabilities and advisor tools, future investments, future capital returns and long-term shareholder value, as well as 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 May 2, 2019. 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 than 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 cash sweep programs, the Company's strategy and success in managing cash sweep program fees; changes in the growth and profitability of the Company's fee-based business; fluctuations in the levels of advisory and brokerage assets, including net new assets, and the related impact on revenue; 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; 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; execution of the Company's plans and its success in realizing the synergies, expense savings, service improvements, and/or efficiencies expected to result from its initiatives and programs, and the other factors set forth in Part I, “Item 1A. Risk Factors” in the Company's 2018 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 SEC. 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.




4


LPL Financial Holdings Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended March 31,
 
 
 
2019
 
2018
 
% Change
REVENUES
 
 
 
 
 
Commission
$
461,359

 
$
474,811

 
(3
%)
Advisory
453,938

 
422,387

 
7
%
Asset-based
296,363

 
219,336

 
35
%
Transaction and fee
122,480

 
116,649

 
5
%
Interest income, net of interest expense
12,321

 
7,781

 
58
%
Other
25,218

 
593

 
n/m

Total net revenues
1,371,679

 
1,241,557

 
10
%
EXPENSES
 
 
 
 
 
Commission and advisory
799,698

 
761,697

 
5
%
Compensation and benefits
136,912

 
123,517

 
11
%
Promotional
51,349

 
67,427

 
(24
%)
Depreciation and amortization
23,470

 
20,701

 
13
%
Amortization of intangible assets
16,168

 
13,222

 
22
%
Occupancy and equipment
33,106

 
27,636

 
20
%
Professional services
19,612

 
22,172

 
(12
%)
Brokerage, clearing and exchange
16,144

 
15,877

 
2
%
Communications and data processing
12,327

 
11,174

 
10
%
Other
26,403

 
28,586

 
(8
%)
Total operating expenses
1,135,189

 
1,092,009

 
4
%
Non-operating interest expense
32,716

 
29,622

 
10
%
INCOME BEFORE PROVISION FOR INCOME TAXES
203,774

 
119,926

 
70
%
PROVISION FOR INCOME TAXES
48,376

 
26,396

 
83
%
NET INCOME
$
155,398

 
$
93,530

 
66
%
EARNINGS PER SHARE
 
 
 
 
 
Earnings per share, basic
$
1.84

 
$
1.04

 
77
%
Earnings per share, diluted
$
1.79

 
$
1.01

 
77
%
Weighted-average shares outstanding, basic
84,487

 
89,997

 
(6
%)
Weighted-average shares outstanding, diluted
86,742

 
92,784

 
(7
%)







5


LPL Financial Holdings Inc.
Condensed Consolidated Statements of Income Trend
(In thousands, except per share data)
(Unaudited)
 
Quarterly Results
 
Q1 2019
 
Q4 2018
 
Q3 2018
REVENUES
 
 
 
 
 
Commission
$
461,359

 
$
469,923

 
$
486,875

Advisory
453,938

 
474,102

 
458,087

Asset-based
296,363

 
265,681

 
248,895

Transaction and fee
122,480

 
119,254

 
118,941

Interest income, net of interest expense
12,321

 
11,784

 
10,512

Other
25,218

 
(23,702
)
 
7,687

Total net revenues
1,371,679

 
1,317,042

 
1,330,997

EXPENSES
 
 
 
 
 
Commission and advisory
799,698

 
793,310

 
821,950

Compensation and benefits
136,912

 
132,766

 
128,007

Promotional
51,349

 
45,141

 
52,628

Depreciation and amortization
23,470

 
21,897

 
22,838

Amortization of intangible assets
16,168

 
15,672

 
15,676

Occupancy and equipment
33,106

 
30,750

 
30,308

Professional services
19,612

 
24,428

 
23,129

Brokerage, clearing and exchange expense
16,144

 
16,000

 
15,844

Communications and data processing
12,327

 
11,776

 
12,334

Other
26,403

 
31,103

 
29,219

Total operating expenses
1,135,189

 
1,122,843

 
1,151,933

Non-operating interest expense
32,716

 
31,756

 
31,705

INCOME BEFORE PROVISION FOR INCOME TAXES
203,774

 
162,443

 
147,359

PROVISION FOR INCOME TAXES
48,376

 
42,145

 
40,494

NET INCOME
$
155,398

 
$
120,298

 
$
106,865

EARNINGS PER SHARE
 
 
 
 
 
Earnings per share, basic
$
1.84

 
$
1.40

 
$
1.22

Earnings per share, diluted
$
1.79

 
$
1.36

 
$
1.19

Weighted-average shares outstanding, basic
84,487

 
85,976

 
87,426

Weighted-average shares outstanding, diluted
86,742

 
88,163

 
89,878


6


LPL Financial Holdings Inc.
Condensed Consolidated Statements of Financial Condition
(Dollars in thousands, except par value)
(Unaudited)
 
 
March 31, 2019
 
December 31, 2018
ASSETS
Cash and cash equivalents
 
$
676,903

 
$
511,096

Cash segregated under federal and other regulations
 
708,241

 
985,195

Restricted cash
 
42,827

 
65,828

Receivables from:
 
 
 
 
Clients, net of allowance of $684 at March 31, 2019 and $640 at December 31, 2018
 
393,099

 
412,944

Product sponsors, broker-dealers, and clearing organizations
 
156,915

 
166,793

Advisor loans, net of allowance of $6,107 at March 31, 2019 and $5,080 at December 31, 2018
 
320,379

 
298,821

Others, net of allowance of $10,386 at March 31, 2019 and $8,099 at December 31, 2018
 
269,153

 
248,711

Securities owned:
 
 
 
 
Trading — at fair value
 
27,361

 
29,267

Held-to-maturity — at amortized cost
 
13,005

 
13,001

Securities borrowed
 
2,670

 
4,829

Fixed assets, net of accumulated depreciation and amortization of $318,520 at March 31, 2019 and $308,155 at December 31, 2018
 
472,528

 
461,418

Operating lease assets
 
106,821

 
—

Goodwill
 
1,490,247

 
1,490,247

Intangible assets, net of accumulated amortization of $495,487 at March 31, 2019 and $479,319 at December 31, 2018
 
468,058

 
484,171

Other assets
 
343,983

 
305,147

Total assets
 
$
5,492,190

 
$
5,477,468

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
 
 
 
 
Drafts payable
 
$
186,116

 
$
225,034

Payables to clients
 
778,902

 
950,946

Payables to broker-dealers and clearing organizations
 
134,375

 
76,180

Accrued commission and advisory expenses payable
 
154,840

 
164,211

Accounts payable and accrued liabilities
 
411,316

 
478,644

Income taxes payable
 
74,740

 
32,990

Unearned revenue
 
99,035

 
80,524

Securities sold, but not yet purchased — at fair value
 
66

 
169

Long-term borrowing, net of unamortized debt issuance cost of $18,707 at March 31, 2019 and $19,525 at December 31, 2018
 
2,368,501

 
2,371,808

Operating lease liabilities
 
147,326

 
—

Finance lease liabilities
 
106,987

 
—

Leasehold financing and capital lease obligations
 
—

 
104,564

Deferred income taxes, net
 
20,291

 
18,325

Total liabilities
 
4,482,495

 
4,503,395

STOCKHOLDERS’ EQUITY:
 
 
 
 
Common stock, $.001 par value; 600,000,000 shares authorized; 125,647,760 shares issued at March 31, 2019 and 124,909,796 shares issued at December 31, 2018
 
126

 
125

Additional paid-in capital
 
1,658,631

 
1,634,337

Treasury stock, at cost — 41,611,603 shares at March 31, 2019 and 39,820,646 shares at December 31, 2018
 
(1,859,484
)
 
(1,730,535
)
Retained earnings
 
1,210,422

 
1,070,146

Total stockholders’ equity
 
1,009,695

 
974,073

Total liabilities and stockholders’ equity
 
$
5,492,190

 
$
5,477,468


7


LPL Financial Holdings Inc.
Management's Statements of Operations(3) 
(In thousands, except per share data)
(Unaudited)
Certain information presented on pages 8-16 of 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" that begins on page 3 of this release.
 
Quarterly Results
 
Q1 2019

Q4 2018
 
% Change
 
Q1 2018
 
% Change
Gross Profit(3)
 
 
 
 
 
 
 
 
 
Sales-based commissions
$
190,999

 
$
199,468

 
(4
%)
 
$
187,233

 
2
%
Trailing commissions
270,360

 
270,455

 
—
%
 
287,578

 
(6
%)
Advisory
453,938

 
474,102

 
(4
%)
 
422,387

 
7
%
Commission and advisory fees
915,297

 
944,025

 
(3
%)
 
897,198

 
2
%
Commission and advisory expense
(799,698
)
 
(793,310
)
 
1
%
 
(761,697
)
 
5
%
Commission and advisory fees, net of payout
115,599

 
150,715

 
(23
%)
 
135,501

 
(15
%)
Cash sweep
173,139

 
147,774

 
17
%
 
104,084

 
66
%
Other asset-based(4)
123,224

 
117,907

 
5
%
 
115,252

 
7
%
Transaction and fee
122,480

 
119,254

 
3
%
 
116,649

 
5
%
Interest income and other
37,539

 
(11,918
)
 
n/m

 
8,374

 
n/m

Total net commission and advisory fees and attachment revenue
571,981


523,732

 
9
%
 
479,860

 
19
%
Brokerage, clearing, and exchange expense
(16,144
)
 
(16,000
)
 
1
%
 
(15,877
)
 
2
%
Gross Profit(3)
555,837

 
507,732

 
9
%
 
463,983

 
20
%
 
 
 
 
 
 
 
 
 
 
G&A Expense
 
 
 
 
 
 
 
 
 
Core G&A(5)
212,520

 
216,185

 
(2
%)
 
201,039

 
6
%
Regulatory charges
7,873

 
9,593

 
n/m

 
6,440

 
n/m

Promotional
51,349

 
45,141

 
14
%
 
67,427

 
(24
%)
Employee share-based compensation
7,967

 
5,045

 
58
%
 
5,606

 
42
%
Total G&A
279,709

 
275,964

 
1
%
 
280,512

 
—
%
EBITDA(3)
276,128

 
231,768

 
19
%
 
183,471

 
51
%
Depreciation and amortization
23,470

 
21,897

 
7
%
 
20,701

 
13
%
Amortization of intangible assets
16,168

 
15,672

 
3
%
 
13,222

 
22
%
Non-operating interest expense
32,716

 
31,756

 
3
%
 
29,622

 
10
%
INCOME BEFORE PROVISION FOR INCOME TAXES
203,774

 
162,443

 
25
%
 
119,926

 
70
%
PROVISION FOR INCOME TAXES
48,376

 
42,145

 
15
%
 
26,396

 
83
%
NET INCOME
$
155,398

 
$
120,298

 
29
%
 
$
93,530

 
66
%
Earnings per share, diluted
$
1.79

 
$
1.36

 
32
%
 
$
1.01

 
77
%
Weighted-average shares outstanding, diluted
86,742

 
88,163

 
(2
%)
 
92,784

 
(7
%)
EPS Prior to Amortization of Intangible Assets
$
1.93

 
$
1.49

 
30
%
 
$
1.11

 
74
%

8


LPL Financial Holdings Inc.
Management's Statements of Operations Trend (3) 
(In thousands, except per share data)
(Unaudited)
 
Quarterly Results
 
Q1 2019

Q4 2018
 
Q3 2018
Gross Profit(3)
 
 
 
 
 
Sales-based commissions
$
190,999

 
$
199,468

 
$
193,545

Trailing commissions
270,360

 
270,455

 
293,330

Advisory
453,938

 
474,102

 
458,087

Commission and advisory fees
915,297

 
944,025

 
944,962

Commission and advisory expense
(799,698
)
 
(793,310
)
 
(821,950
)
Commission and advisory fees, net of payout
115,599

 
150,715

 
123,012

Cash sweep
173,139

 
147,774

 
127,174

Other asset-based(4)
123,224

 
117,907

 
121,721

Transaction and fee
122,480

 
119,254

 
118,941

Interest income and other
37,539

 
(11,918
)
 
18,199

Total net commission and advisory fees and attachment revenue
571,981

 
523,732


509,047

Brokerage, clearing, and exchange expense
(16,144
)
 
(16,000
)
 
(15,844
)
Gross Profit(3)
555,837

 
507,732

 
493,203

 
 
 
 
 
 
G&A Expense
 
 
 
 
 
Core G&A(5)
212,520

 
216,185

 
209,244

Regulatory charges
7,873

 
9,593

 
7,421

Promotional
51,349

 
45,141

 
52,628

Employee share-based compensation
7,967

 
5,045

 
6,332

Total G&A
279,709

 
275,964

 
275,625

EBITDA(3)
276,128

 
231,768

 
217,578

Depreciation and amortization
23,470

 
21,897

 
22,838

Amortization of intangible assets
16,168

 
15,672

 
15,676

Non-operating interest expense
32,716

 
31,756

 
31,705

INCOME BEFORE PROVISION FOR INCOME TAXES
203,774

 
162,443

 
147,359

PROVISION FOR INCOME TAXES
48,376

 
42,145

 
40,494

NET INCOME
$
155,398

 
$
120,298

 
$
106,865

Earnings per share, diluted
$
1.79

 
$
1.36

 
$
1.19

Weighted-average shares outstanding, diluted
86,742

 
88,163

 
89,878

EPS Prior to Amortization of Intangible Assets
$
1.93

 
$
1.49

 
$
1.32


9


LPL Financial Holdings Inc.
Operating Measures(3) 
(Dollars in billions, except where noted) (Unaudited)
 
Q1 2019

Q4 2018

Change

Q1 2018
 
Change
Market Drivers
 
 
 
 
 
 
 
 
 
S&P 500 Index (end of period)
2,834

 
2,507

 
13%
 
2,641

 
7%
Fed Funds Daily Effective Rate (FFER) (average bps)
240

 
222

 
18bps
 
145

 
95bps
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Advisory Assets(6)
$
311.9

 
$
282.0

 
11%
 
$
283.5

 
10%
Brokerage Assets(7)
372.1

 
346.0

 
8%
 
364.1

 
2%
Total Brokerage and Advisory Assets
$
684.0


$
628.1

 
9%
 
$
647.5

 
6%
Advisory % of Total Brokerage and Advisory Assets
45.6
%
 
44.9
%
 
70bps
 
43.8
%
 
180bps
 
 
 
 
 
 
 
 
 
 
Assets by Platform
 
 
 
 
 
 
 
 
 
Corporate Platform Advisory Assets(8)
$
191.8

 
$
172.3

 
11%
 
$
167.7

 
14%
Hybrid Platform Advisory Assets(9)
120.1

 
109.7

 
9%
 
115.7

 
4%
Brokerage Assets
372.1

 
346.0

 
8%
 
364.1

 
2%
Total Brokerage and Advisory Assets
$
684.0


$
628.1

 
9%
 
$
647.5

 
6%
 
 
 
 
 
 
 
 
 
 
Centrally Managed Assets
 
 
 
 
 
 
 
 
 
Centrally Managed Assets(10)
$
42.9

 
$
38.5

 
11%
 
$
35.9

 
19%
Centrally Managed % of Total Advisory Assets
13.8
%
 
13.7
%
 
10bps
 
12.7
%
 
110bps

10


LPL Financial Holdings Inc.
Operating Measures(3) 
(Dollars in billions, except where noted) (Unaudited)
 
Q1 2019
 
Q4 2018
 
Change
 
Q1 2018
 
Change
Net New Assets (NNA)
 
 
 
 
 
 
 
 
 
Net New Advisory Assets(11)
$
4.6

 
$
5.0

 
n/m
 
$
13.1

 
n/m
Net New Brokerage Assets(12)
(0.7
)
 
0.9

 
n/m
 
25.8

 
n/m
Total Net New Assets
$
4.0


$
5.9


n/m

$
38.9


n/m
 
 
 
 
 
 
 
 
 
 
Net Brokerage to Advisory Conversions(13)
$
1.4

 
$
1.4

 
n/m
 
$
2.5

 
n/m
Advisory NNA Annualized Growth(14)
7
%
 
6
%
 
n/m
 
10
%
 
n/m
Total NNA Annualized Growth(14)
3
%
 
3
%
 
n/m
 
2
%
 
n/m
 
 
 
 
 
 
 
 
 
 
Net New Advisory Assets
 
 
 
 
 
 
 
 
 
Corporate Platform Net New Advisory Assets(15)
$
4.2

 
$
5.1

 
n/m
 
$
10.4

 
n/m
Hybrid Platform Net New Advisory Assets(16)
0.4

 
(0.2
)
 
n/m
 
2.7

 
n/m
Total Net New Advisory Assets
$
4.6

 
$
5.0

 
n/m
 
$
13.1

 
n/m
Centrally Managed Net New Advisory Assets(17)
$
1.0

 
$
1.4

 
n/m
 
$
3.3

 
n/m
 
 
 
 
 
 
 
 
 
 
Cash Sweep Balances
 
 
 
 
 
 
 
 
 
Insured Cash Account Balances
$
21.7

 
$
24.8

 
(13%)
 
$
22.6

 
(4%)
Deposit Cash Account Balances
4.3

 
5.1

 
(16%)
 
4.2

 
2%
Money Market Account Cash Balances
4.8

 
4.9

 
(2%)
 
2.9

 
66%
Total Cash Sweep Balances
$
30.7

 
$
34.9

 
(12%)
 
$
29.6

 
4%
Cash Sweep % of Total Assets
4.5
%
 
5.6
%
 
(110bps)
 
4.6
%
 
(10bps)
 
 
 
 
 
 
 
 
 
 
Cash Sweep Average Fees
 
 
 
 
 
 
 
 
 
Insured Cash Account Average Fee - bps(18)
250

 
215

 
35
 
152

 
98
Deposit Cash Account Fee Average Fee - bps(18)
220

 
207

 
13
 
150

 
70
Money Market Account Average Fee - bps(18)
77

 
75

 
2
 
71

 
6
Total Cash Sweep Average Fee - bps(18)
220

 
196

 
24
 
144

 
76
 
 
 
 
 
 
 
 
 
 
Net Buy (Sell) Activity(19)
$
12.9

 
$
2.3

 
461%
 
$
9.7

 
33%

11


LPL Financial Holdings Inc.
Monthly Metrics(3) 
(Dollars in billions, except where noted)
(Unaudited)
 
 
March 2019
 
February 2019
 
Feb to Mar Change
 
January 2019
 
December 2018
Assets Served
 
 
 
 
 
 
 
 
 
 
Advisory Assets(6)
 
$
311.9

 
$
306.4

 
1.8%
 
$
298.5

 
$
282.0

Brokerage Assets(7)
 
372.1

 
369.2

 
0.8%
 
362.3

 
346.0

Total Brokerage and Advisory Assets
 
$
684.0

 
$
675.6

 
1.2%
 
$
660.8

 
$
628.1

 
 
 
 
 
 

 
 
 
 
Net New Assets
 
 
 
 
 
 
 
 
 
 
Net New Advisory Assets(11)
 
$
2.2

 
$
1.5

 
n/m
 
$
0.9

 
$
0.9

Net New Brokerage Assets(12)
 
0.1

 
(0.6
)
 
n/m
 
(0.2
)
 
(0.1
)
Total Net New Assets
 
$
2.3

 
$
0.9

 
n/m
 
$
0.7

 
$
0.8

Net Brokerage to Advisory Conversions(13)
 
$
0.5

 
$
0.5

 
n/m
 
$
0.3

 
$
0.3

 
 
 
 
 
 
 
 
 
 
 
Cash Sweep Balances
 
 
 
 
 
 
 
 
 
 
Insured Cash Account Balances
 
$
21.7

 
$
21.8

 
(0.5%)
 
$
22.9

 
$
24.8

Deposit Cash Account Balances
 
4.3

 
4.3

 
—%
 
4.5

 
5.1

Money Market Account Cash Balances
 
4.8

 
4.7

 
2.1%
 
4.8

 
4.9

Total Client Cash Sweep Balances
 
$
30.7

 
$
30.8

 
(0.3%)
 
$
32.2

 
$
34.9

 
 
 
 
 
 

 
 
 
 
Net Buy (Sell) Activity(19)
 
$
3.6

 
$
4.4

 
(18.2%)
 
$
5.0

 
$
(1.7
)
 
 
 
 
 
 
 
 
 
 
 
Market Indices
 
 
 
 
 

 
 
 
 
S&P 500 Index (end of period)
 
2,834

 
2,784

 
1.8%
 
2,704

 
2,507

Fed Funds Effective Rate (average bps)
 
240

 
240

 
—
 
240

 
227


12


LPL Financial Holdings Inc.
Financial Measures(3) 
(Dollars in thousands, except where noted)
(Unaudited)

 
Q1 2019
 
Q4 2018
 
% Change
 
Q1 2018
 
% Change
Commission Revenue by Product
 
 
 
 
 
 
 
 
 
Variable annuities
$
187,406

 
$
188,439

 
(1%)
 
$
200,043

 
(6%)
Mutual funds
140,662

 
145,780

 
(4%)
 
153,745

 
(9%)
Alternative investments
6,786

 
5,414

 
25%
 
5,567

 
22%
Fixed annuities
51,573

 
50,807

 
2%
 
34,055

 
51%
Equities
18,364

 
22,752

 
(19%)
 
23,601

 
(22%)
Fixed income
29,742

 
29,201

 
2%
 
30,324

 
(2%)
Insurance
18,072

 
19,232

 
(6%)
 
18,494

 
(2%)
Group annuities
8,474

 
7,966

 
6%
 
8,894

 
(5%)
Other
280

 
332

 
(16%)
 
88

 
218%
Total commission revenue
$
461,359

 
$
469,923

 
(2%)
 
$
474,811

 
(3%)
 
 
 
 
 

 
 
 

Commission Revenue by Sales-based and Trailing Commission
 

 
 
 

Sales-based commissions
 
 
 
 
 
 
 
 
 
Variable annuities
$
50,128

 
$
54,744

 
(8%)
 
$
53,902

 
(7%)
Mutual funds
34,631

 
33,687

 
3%
 
37,057

 
(7%)
Alternative investments
1,890

 
2,049

 
(8%)
 
1,830

 
3%
Fixed annuities
44,230

 
43,744

 
1%
 
28,337

 
56%
Equities
18,364

 
22,752

 
(19%)
 
23,601

 
(22%)
Fixed income
24,195

 
23,504

 
3%
 
24,355

 
(1%)
Insurance
16,024

 
17,703

 
(9%)
 
16,865

 
(5%)
Group annuities
1,257

 
953

 
32%
 
1,198

 
5%
Other
280

 
332

 
(16%)
 
88

 
218%
Total sales-based commissions
$
190,999

 
$
199,468

 
(4%)
 
$
187,233

 
2%
Trailing commissions
 
 
 
 

 
 
 

Variable annuities
$
137,278

 
$
133,695

 
3%
 
$
146,141

 
(6%)
Mutual funds
106,031

 
112,093

 
(5%)
 
116,688

 
(9%)
Alternative investments
4,896

 
3,365

 
45%
 
3,737

 
31%
Fixed annuities
7,343

 
7,063

 
4%
 
5,718

 
28%
Fixed income
5,547

 
5,697

 
(3%)
 
5,969

 
(7%)
Insurance
2,048

 
1,529

 
34%
 
1,629

 
26%
Group annuities
7,217

 
7,013

 
3%
 
7,696

 
(6%)
Total trailing commissions
$
270,360

 
$
270,455

 
—%
 
$
287,578

 
(6%)
Total commission revenue
$
461,359

 
$
469,923

 
(2%)
 
$
474,811

 
(3%)



13


LPL Financial Holdings Inc.
Financial Measures(3) 
(Dollars in thousands, except where noted)
(Unaudited)
 
Q1 2019
 
Q4 2018
 
Change
 
Q1 2018
 
Change
Payout Rate
 
 
 
 
 
 
 
 
 
Base Payout Rate
82.84
%
 
82.75
 %
 
9bps
 
82.60
%
 
24bps
Production Based Bonuses
2.04
%
 
3.88
 %
 
(184bps)
 
2.05
%
 
(1bps)
GDC Sensitive Payout
84.88
%
 
86.63
 %
 
(175bps)
 
84.65
%
 
23bps
Non-GDC Sensitive Payout
2.49
%
 
(2.60
)%
 
509bps
 
0.25
%
 
224bps
Total Payout Ratio
87.37
%
 
84.03
 %
 
334bps
 
84.90
%
 
247bps
Production Based Bonuses Ratio (Trailing Twelve Months)
3.02
%
 
3.03
 %
 
(1bps)
 
2.73
%
 
29bps

14


LPL Financial Holdings Inc.
Capital Management Measures(3) 
(Dollars in thousands, except where noted)
(Unaudited)
 
Q1 2019
 
Q4 2018
Cash Available for Corporate Use(20)
 
 
 
Cash at Parent
$
263,122

 
$
272,450

Excess Cash at Broker-Dealer subsidiary per Credit Agreement
103,369

 
56,248

Other Available Cash
9,533

 
10,302

Total Cash Available for Corporate Use
$
376,024

 
$
339,000

 
 
 
 
Credit Agreement Net Leverage
 
 
 
Total Debt (does not include unamortized premium)
$
2,377,500

 
$
2,381,250

Cash Available (up to $300 million)
300,000

 
300,000

Credit Agreement Net Debt
$
2,077,500

 
$
2,081,250

Credit Agreement EBITDA Trailing Twelve Months(21)
$
1,012,397

 
$
969,288

Credit Agreement Net Leverage Ratio
2.05
x
 
2.15
x

 
 
March 31, 2019
 
 
Total Debt
 
Balance
 
Current Applicable
Margin
 
Yield At Issuance
 
Interest Rate
 
Maturity
Revolving Credit Facility(a)
 
$
—

 
LIBOR+125bps(b)
 
 
 
—
%
 
9/21/2022
Senior Secured Term Loan B
 
1,477,500

 
LIBOR+225 bps(b)
 
 
 
4.74
%
 
9/21/2024
Senior Unsecured Notes(c)
 
500,000

 
5.75% Fixed
 
5.750
%
 
5.75
%
 
9/15/2025
Senior Unsecured Notes(c)
 
400,000

(d)
5.75% Fixed
 
5.115
%
 
5.75
%
 
9/15/2025
Total / Weighted Average
 
$
2,377,500

 
 
 
 
 
5.12
%
 
 

(a)
The Revolving Credit Facility has a borrowing capacity of $500 million.
(b)
The LIBOR rate option is one-month LIBOR rate and subject to an interest rate floor of 0 basis points.
(c)
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.
(d)
Does not include unamortized premium of approximately $9.7 million as of March 31, 2019.


15


LPL Financial Holdings Inc.
Key Business and Financial Metrics(3) 
(Dollars in thousands, except where noted)
(Unaudited)
 
Q1 2019

Q4 2018
 
Change
 
Q1 2018
 
Change
Advisors
 
 
 
 
 
 
 
 
 
Advisors
16,189
 
16,109
 
—
%
 
16,067
 
1
%
Net New Advisors
80

 
(65
)
 
n/m

 
857

 
n/m

Annualized commission and advisory fees per Advisor(22)
$
227

 
$
234

 
(3
%)
 
$
230

 
(1
%)
Average Total Assets per Advisor ($ in millions)(23)
$
42.2

 
$
39.0

 
8
%
 
$
40.3

 
5
%
Transition assistance loan amortization($ in millions)(24)
$
23.2

 
$
21.3

 
9
%
 
$
16.8

 
38
%
Total client accounts (in millions)
5.5

 
5.4

 
2
%
 
5.3

 
4
%
 
 
 
 
 
 
 
 
 
 
Employees - period end
4,269
 
4,229
 
1
%
 
3,838
 
11
%
 
 
 
 
 
 
 
 
 
 
Productivity Metrics
 
 
 
 
 
 
 
 


Annualized Advisory Revenue as a percentage of Corporate Advisory Assets
1.05
%
 
1.03
%
 
2
bps
 
1.06
%
 
(1
bps)
Gross Profit ROA(25)
33.0
bps
 
31.5
bps
 
1.5
bps
 
28.8
bps
 
4.2
bps
OPEX ROA(26)
19.0
bps
 
19.4
bps
 
(0.4
bps)
 
19.5
bps
 
(0.5
bps)
EBIT ROA(27)
14.0
bps
 
12.1
bps
 
1.9
bps
 
9.3
bps
 
4.7
bps
Production Retention Rate (YTD annualized)(28)
96.2
%
 
95.9
%
 
30
bps
 
96.2
%
 
—%

Recurring Gross Profit Rate (trailing twelve months) (29)
86.3
%
 
86.7
%
 
(40
bps)
 
83.9
%
 
240
bps
EBITDA as a percentage of Gross Profit
49.7
%
 
45.6
%
 
410
bps
 
39.5
%
 
1,020
bps
 
 
 
 
 
 
 
 
 
 
Capital Expenditure ($ in millions)
$
30.3

 
$
47.5

 
(36
%)
 
$
22.9

 
32
%
 
 
 
 
 
 
 
 
 
 
Share Repurchases
$
125.0

 
$
117.8

 
6
%
 
$
60.8

 
106
%
Dividends
21.1

 
21.5

 
(2
%)
 
22.6

 
(7
%)
Total Capital Allocated
$
146.1

 
$
139.3

 
5
%
 
$
83.4

 
75
%
Weighted-average Share Count, Diluted
86.7

 
88.2

 
(2
%)
 
92.8

 
(7
%)
Total Capital Allocated per Share(30)
$
1.68

 
$
1.58

 
6
%
 
$
0.90

 
87
%

16


Endnote Disclosures
(1)
Represents the estimated total brokerage and advisory 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.
(2)
Compliance with the Credit Agreement Leverage Ratio is only required under the revolving credit facility.
(3)
Certain information presented on pages 8-16 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” on page 3.
(4)
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 cash sweep 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.
(5)
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 expense for the periods presented:
 
Q1 2019
 
Q4 2018
 
Q3 2018
 
Q1 2018
Operating Expense Reconciliation (in thousands)
 
 
 
 
 
 
 
Core G&A
$
212,520

 
$
216,185

 
$
209,244

 
$
201,039

Regulatory charges
7,873

 
9,593

 
7,421

 
6,440

Promotional
51,349

 
45,141

 
52,628

 
67,427

Employee share-based compensation
7,967

 
5,045

 
6,332

 
5,606

Total G&A
279,709

 
275,964

 
275,625

 
280,512

Commissions and advisory
799,698

 
793,310

 
821,950

 
761,697

Depreciation & amortization
23,470

 
21,897

 
22,838

 
20,701

Amortization of intangible assets
16,168

 
15,672

 
15,676

 
13,222

Brokerage, clearing and exchange
16,144

 
16,000

 
15,844

 
15,877

Total operating expense
$
1,135,189


$
1,122,843

 
$
1,151,933


$
1,092,009


(6)
Consists of total advisory assets under custody at LPL Financial.
(7)
Consists of brokerage assets serviced by advisors licensed with LPL Financial.
(8)
Consists of total assets on LPL Financial's corporate advisory platform serviced by investment advisor representatives of LPL Financial.
(9)
Consists of total assets on LPL Financial's independent advisory platform serviced by investment advisor representatives of separate investment advisor firms ("Hybrid RIAs"), rather than of LPL Financial.
(10)
Represents those Advisory Assets in LPL Financial’s Model Wealth Portfolios, Optimum Market Portfolios, Personal Wealth Portfolios, and Guided Wealth Portfolios platforms.
(11)
Consists of total client deposits into advisory accounts less total client withdrawals from advisory accounts. The Company considers conversions from and to brokerage accounts as deposits and withdrawals respectively.
(12)
Consists of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts. The Company considers conversions from and to advisory accounts as deposits and withdrawals, respectively.
(13)
Consists of existing custodied assets that converted from brokerage to advisory, less existing custodied assets that converted from advisory to brokerage.
(14)
Calculated as annualized current period net new assets divided by preceding period assets in their respective categories of advisory assets or total brokerage and advisory assets.

17


(15)
Consists of total client deposits into advisory accounts on LPL Financial's corporate advisory platform (FN 8) less total client withdrawals from advisory accounts on its corporate advisory platform.
(16)
Consists of total client deposits into advisory accounts on LPL Financial's independent advisory platform (FN 9) less total client withdrawals from advisory accounts on its independent advisory platform.
(17)
Consists of total client deposits into Centrally Managed Assets accounts (FN 10) less total client withdrawals from Centrally Managed Assets accounts.
(18)
Calculated by dividing revenue for the period by the average balance during the period.
(19)
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.
(20)
Consists of cash unrestricted by the Credit Agreement and other regulations available for operating, investing, and financing uses.
(21)
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.
(22)
Calculated based on the average advisor count from the current period and prior period.
(23)
Calculated based on the end of period Total Brokerage and Advisory Assets divided by end of period Advisor count.
(24)
Represents the amortization expense amount of forgivable loans for transition assistance to advisors and financial institutions.
(25)
Represents annualized Gross Profit (FN 3) for the period, divided by average month-end Total Brokerage and Advisory Assets for the period.
(26)
Represents annualized operating expenses for the period, excluding production-related expense, divided by average month-end Total Brokerage and Advisory Assets for the 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 (FN 5), Regulatory, Promotional, Employee Share Based Compensation, Depreciation & Amortization, and Amortization of Intangible Assets.
(27)
EBIT ROA is calculated as Gross Profit ROA less OPEX ROA.
(28)
Reflects retention of commission and advisory revenues, calculated by deducting the prior year production of the annualized year-to-date attrition rate, over the prior year total production.
(29)
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, cash sweep 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, such as non-GDC sensitive production expenses, on a pro-rata basis against specific revenue lines at its discretion.
(30)
Capital Allocation per Share equals the amount of capital allocated for share repurchases and cash dividends divided by the diluted weighted-average shares outstanding.

18


(31)
EPS prior to amortization of intangible assets is a non-GAAP financial measure. Please see a description of EPS prior to amortization of intangible assets under “Non-GAAP Financial Measures” on page 3 of this release for additional information. Below is a reconciliation of EPS prior to amortization of intangible assets to the Company’s GAAP EPS for the periods presented:
EPS Reconciliation (in thousands, except per share data)
Q1 2019
EPS
$
1.79

Amortization of Intangible Assets
16,168

Tax Benefit
(4,527
)
  Amortization of Intangible Assets Net of Tax Benefit
$
11,641

Diluted Share Count
86,742

EPS Impact
$
0.13

EPS Prior to Amortization of Intangible Assets
$
1.93





19
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