Citing weak investor activity and the company's long-term capital investment plans, LPL Financial Holdings Inc. today reported a second-quarter earnings drop of 15 percent and net revenue growth of 1.5 percent.
LPL Financial Holdings Inc., parent company of LPL Financial LLC, reported second-quarter net income of $39.5 million, or $0.35 per diluted share, down $6.0 million or 15 percent, compared with net income of $45.5 million, or $0.40 per diluted share for the second quarter of 2011.
The company reported adjusted earnings, which excludes certain non-cash charges and other adjustments, of $55.0 million, or $0.49 per diluted share, down $3.8 million or 6.5% compared with $58.8 million, or $0.52 per diluted share, for the same quarter last year.
LPL Financial Holdings' also posted net revenues of $907.8 million for the quarter, just a 1.5 percent increase over sales of $894.0 million for the same quarter last year.
"Investors are exhibiting more cautious behavior in light of the uncertain market conditions, which manifests itself in lower investment activity and reduced trading. As a result, net revenues only grew 1.5 percent year over year," noted Mark Casady, LPL Financial chairman and CEO.
Robert Moore, president and chief operating officer of LPL Financial, said the company's second-quarter performance is in line with the firm's expectations, given investor caution and the company's long-term expansion plans of investing money back into the firm.
"In an environment where you know that the uncertainty levels are rising and that is translating into caution by end investors and the need for advisors to spend more time with those investors, coupled with known investments that we are making, it's reasonable to assume that you are going to have some pressure on margin and on earnings as a result of that," Moore says.
"We characterize ourselves as a growth company," Moore added. "We're continuing to expand (market) share. We added 223 new advisors, have had asset growth we're experiencing on our RIA platform and underlying account growth. These are all healthy metrics for future growth."
Moore noted that sluggish second-quarter activity did little to help fuel the company's long-term growth plan. "Up against a particular quarter of more muted top line activity, there's less oxygen to fuel that growth," he said.
For the first six months of 2012, LPL posted net income of $80.7 million, down $13.8 million or 14.6 percent, compared with $94.5 million for the same period in 2011.
Executives attributed the first-half decline primarily to a $16.5 million pre-tax charge related to the completion of the refinancing of LPL's senior secured credit facilities in the first quarter.
Adjusted earnings through June 30, 2012, were $118.2 million, which were consistent with the comparable period in 2011. Net revenues for the first six months of 2012 were $1.8 billion, an increase of 2.4 percent over the comparable period of 2011.