Boston, MA - July 22, 2010 - LPL Investment Holdings Inc. (the "Company"), parent company of LPL Financial Corporation ("LPL Financial"), today announced net income of $8.0 million for the second quarter of 2010, down $7.6 million or 48.7% from the second quarter of 2009. Second quarter results include $23.1 million in after-tax debt financing expense which the Company incurred in a previously announced debt restructuring to enhance financial flexibility, and $2.8 million in after-tax restructuring charges related to the previously announced conversion of the operations of the affiliated entities to the Company's self clearing platform in the third quarter of 2009.
Adjusted Net Income for the second quarter was $46.4 million, up 69.0% from the second quarter of 2009 (1). Adjusted EBITDA for the quarter increased 22.5% to $109.9 million from the second quarter of 2009 (1). A reconciliation of these non-GAAP measures to GAAP measures, along with an explanation of these metrics, is provided below.
For the first six months of 2010, net income of $33.6 million was up 10.5% compared to the same period in 2009. Adjusted Net Income through June year to date was $87.5 million, up 65.8% from the same period in 2009. Adjusted EBITDA for the first six months increased 25.5% to $215.3 million from the same period in 2009.
Net revenue for the second quarter of 2010 increased 18.1% to $790.2 million over the same quarter for the prior year, and year to date increased 16.9% to $1.5 billion over the first six months of 2009. The Company's net revenue growth was driven primarily by the growth in advisory and brokerage assets, which increased 6.9% from $259.0 billion as of June 30, 2009, to $276.9 billion as of June 30, 2010, as well as by growth in the average productivity of the financial advisors.
About LPL Financial
LPL Financial is an independent broker-dealer with over 2,500 employees and offices in Boston, Charlotte, and San Diego. LPL Financial and its affiliates offer proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 12,000 independent financial advisors and financial advisors at financial institutions. Additionally, the company supports over 4,000 financial advisors who are affiliated and licensed with insurance companies with customized clearing, advisory platforms and technology solutions. For more information, please visit www.lpl.com.
This press release may contain forward-looking statements (regarding the Company's future financial condition, results of operations, business strategy and financial needs, and other similar matters) that involve risks and uncertainties. Forward-looking statements can be identified by words such as "anticipates," "expects," "believes," "plans," "predicts," and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. Important factors that may cause such differences include, but are not limited to, changes in general economic and financial market conditions, fluctuations in the value of assets under management, effects of competition in the financial services industry, changes in the number of the Company's financial advisors and institutions and their ability to effectively market financial products and services, the effect of current, pending and future legislation, regulation and regulatory actions, and other factors set forth in the Company's Amendment No. 2 to Form S-1/A filed on July 9, 2010, which is available on www.lpl.com and www.sec.gov.
Use of Non-GAAP Financial Measures
Adjusted Net Income represents net income before: (a) share-based compensation expense, (b) amortization of intangible assets and software, a component of depreciation and amortization, resulting from the merger transaction in 2005 and the 2007 acquisition of UVEST, the Affiliated Entities, and IFMG, (c) debt amendment and extinguishment costs and (d) restructuring and conversion costs. Reconciling items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. Adjusted Net Income per share represents Adjusted Net Income divided by weighted average outstanding shares on a fully diluted basis. The Company prepared Adjusted Net Income and Adjusted Net Income per share to eliminate the effects of items that it does not consider indicative of its core operating performance. The Company believes this measure provides investors with greater transparency by helping illustrate the underlying financial and business trends relating to results of operations and financial condition and comparability between current and prior periods. Adjusted Net Income and Adjusted Net Income per share are not measures of the Company's financial performance under GAAP and should not be considered as an alternative to net income or earnings per share 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.
Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization), further adjusted to exclude certain non-cash charges and other adjustments set forth in the table above. The Company presents Adjusted EBITDA because the Company considers it a useful financial metric in assessing the Company's operating performance from period to period by excluding certain items that the Company believes are not representative of its core business, such as certain material non-cash items and other adjustments that are outside the control of management. Adjusted EBITDA is a non-GAAP measure as defined by Regulation G under the Securities Act and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, Adjusted EBITDA can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments.
Michael Herley / David Lilly
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