LPL Financial Announces First Half and Second Quarter Financial Results
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.
- The Company redeemed all of its senior unsecured subordinated notes, strengthening the balance sheet and enhancing financial flexibility. The decline in net income for the first six months and second quarter of 2010 is largely attributed to non-operating expenses incurred in connection with this debt retirement.
- On May 13, 2010, Moody's Investors Service revised the Company's corporate family rating outlook to positive from stable. On the same day, Standard & Poor's revised the Company's counterparty credit rating outlook to positive from stable.
- The Company continued to achieve growth with its fee-based platforms. Advisory assets were $78.9 billion as of June 30, 2010, up 20.8% from advisory assets of $65.3 billion as of June 30, 2009.
- Assets in the Company's cash sweep programs, which impacts asset-based fees, averaged $18.6 billion for the second quarter of 2010 and $21.3 billion for the same period in the prior year. Variance in fees generated from these assets are also impacted by the effective federal funds rate which averaged 0.19% for the second quarter of 2010 compared to 0.18% for the same period in the prior year.
- In the second quarter of 2010, the Company added new bank and credit union partnerships, as well as continued to attract financial advisors and RIAs from wirehouses, insurance broker-dealers and other independent brokerage firms. Year over year growth was offset due to anticipated attrition related to the integration of the operations of three of the Company's affiliated broker-dealers, which was experienced in the third quarter of 2009 through the first quarter of 2010. Excluding the impact of the attrition due to this integration (720 advisors), LPL Financial added 297 net new advisor relationships year over year, representing 2.5% advisor growth.
- Financial advisors affiliated with the Company continued to earn distinction in key media and industry rankings. In June, six advisors were named to the Barron's Top 100 Women Financial Advisors in America, a prestigious ranking based on data provided by over 400 women financial advisors across the United States. Two LPL Financial advisors were among the ten advisors named in the Outstanding Advisor Awards of Registered Rep., a leading industry publication, which recognizes advisors who are superior performers in money management, client service and philanthropic activities. Additionally, two bank and credit union-based program managers affiliated with LPL Financial were named to the Bank Investment Consultant Top 20 Program Managers, a ranking based principally on average advisor productivity.
- Subsequent to the second quarter close, the Company announced on July 14, 2010, a definitive agreement under which it will acquire certain assets from National Retirement Partners Inc. ("NRP"). NRP's advisors offer products and services to retirement plan sponsors and participants and comprehensive financial services to high net worth individuals. Through this asset purchase, NRP's independent advisors will have the opportunity to join LPL Financial. This transaction will further enhance the capabilities and presence of LPL Financial in the group retirement plan space, while providing unique benefits for both NRP advisors who join LPL Financial as well as for existing LPL Financial advisors. The transaction is expected to close in the fourth quarter of 2010, subject to customary closing conditions including regulatory approvals. Please see the Company's July 14, 2010 press release for additional details.
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.
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