LPL Financial reported today that its net income for 2009 rose 4.4% to $47.5 million, up from $45.5 million in 2008. The gain in profits came despite an 11.8% decline in revenues last year to $2.7 billion, down from $3.1 billion in 2008, according to an 8-K filing with the Securities and Exchange Commission.
It would appear that the major part of LPL's revenue shortfall came during the challenging first half of 2009, since revenues turned the corner by the fourth quarter. Revenues for the final quarter in 2009 actually advanced 4.4% to $734.9 million, up from $703.8 million in the comparable period in 2008.
Total assets at LPL, including both fee-based and brokerage accounts, grew 19.5% to $279.4 billion at the end of 2009, up from $233.9 billion in 2008. Fee-based platforms experienced the most rapid growth, rising 29.5% to $77.2 billion.
LPL CEO Mark Casady commented, "With increasing advisor production in the fourth quarter of 2009, and much improved market conditions, we are encouraged to believe that economic activity driven by the private sector will continue to improve in 2010." The firm also said it added 750 new advisor relationships last year and retained 96% of its production.
Since private equity firms Hellman, Friedman and TPG acquired LPL in 2005, the firm has virtually doubled its revenues from the $1.4 billion it generated in 2005. (The $3.1 billion revenue number in 2008 was actually more than twice the figure at the time of the deal.)
According to chief financial officer Robert Moore, approximately 50% of the growth has come through acquisition, while the rest has been organic growth, including strong recruiting results. Absent restructuring charges largely associated with acquisitions, LPL's non-GAAP net income climbed 52.5% to $82.9 million in 2009.
"Our particularly strong fourth-quarter net income was also propelled by cost savings already being realized from the successful integration of the operations of our affiliated broker-dealers," Moore said in a prepared statement. "At the same time, revenue growth for the fourth quarter was underpinned by both increased AUM-based revenue streams and an improvement in the savings and investing activities of the retail investors served by our customers, in line with recent market improvements."
Since many of the firm's reps own stock in LPL, they have a direct interest in its bottom line. Analysts expect LPL to go public in the next few years via an IPO, although company executives refuse any comment on that subject.