For the sixth consecutive quarter, LPL Financial Holdings beat analysts’ quarterly estimates.
After the market closed on Thursday, the San Diego-based company announced adjusted earnings of $3.94 per share in the quarter that ended June 30, 2023, surpassing average analysts’ estimates by $0.06. This represented a year-over-year increase of 76%.
Quarterly revenue was $2.47 billion, a 21.1% annual increase that outstripped expectations by $20 million.
Gross profit for the quarter grew 39% year-over-year to $990 million, and earnings before interest, taxation, depreciation, and amortization (EBITDA), a commonly used measure of corporate health, jumped 67% to $519 million.
At the same time, net income was $286 million or $3.65 in diluted EPS for the quarter. Though that was an 85% increase from the corresponding period a year ago, it was a 14% drop from the previous quarter.
“Over the past quarter, we remained focused on our mission of taking care of our advisors, so they can take care of their clients,” said Dan Arnold, president and CEO, in a prepared statement. “This focus led to another quarter of solid recruiting, retention, and business growth. As we look ahead, we will continue to invest in order to enhance the appeal of our model, as we strive to increase our market share within the advisor-centered marketplace.”
LPL currently has 21,942 financial advisors, a net gain of 421 from the prior quarter and 1,071 more than it had a year ago, including those at approximately 1,100 enterprises and 550 RIAs nationwide. Advisory assets increased 18% year-over-year to $662 billion, partly helped by the bull market, and advisory assets as a percentage of total assets surged to 53.3%, up from 52.5% a year ago. Total advisory and brokerage assets leapt 16% year-over-year to $1.24 trillion.
Total organic net new assets were $22 billion, representing 7.4% annualized growth.
The LPL Services Group posted annualized revenue of $39 million, up 22% from a year ago. Subscriptions to that group amounted to 5,238, up 1,342 year-over-year.
But overall client cash balances were $50 billion, a decrease of $5 billion sequentially and down $20 billion year-over-year. As a percentage of total assets, client cash balances were 4.0%, which is 4.6% less than in the prior quarter and 6.5% less than a year ago.
“For the past quarter, our advisors continued to provide their clients with personalized financial guidance on the journey to help them achieve their life goals,” said Arnold, in an earnings call. To help support them, he went on, the firm stayed focused on a mission of “taking care of our advisors so they can take care of their clients.” Specifically, he cited the company’s “robust and feature-rich platform, stability and scale of our industry leading model, and our capacity [for] and commitment to best practices.”
Besides organic growth, the company has been growing inorganically. Earlier this week, it announced an agreement to acquire Crown Capital Securities’ wealth management business, a deal that’s expected to close in early 2024. Crown Capital, a full-service broker-dealer and RIA based in Orange County, Calif., has some 260 financial advisors and $6.5 billion under administration.
In the spring, LPL onboarded Bank of the West’s squad of 85 financial advisors and roughly $7.8 billion in client assets. LPL is also preparing to integrate St. Louis-based Commerce Bank’s $4.4 billion wealth management business, and its 30 advisors, next month. That deal was announced last November.
Later in the call, LPL CFO Matt Audette reiterated the firm’s areas of emphasis. “We have remained focused on serving our advisors, growing our business, and delivering shareholder value,” he said. “This focus led to strong organic growth in both traditional and new markets.”
LPL shares have struggled somewhat this year. Before the announcement, the stock was up roughly 10% year-to-date, lagging the S&P 500 by roughly 8.5 percentage points. Its most recent quarterly dividend payment, issued on June 1, was $0.30 per share. Its annualized dividend amounts to $1.20 per share or a current dividend yield of roughly 0.52%.
Still, LPL remains the nation’s largest independent broker-dealer in terms of revenue.