LPL Financial(LPLA) - 2025 Q2 - Quarterly Report

Cover Page Table of Contents Where You Can Find More Information Special Note Regarding Forward-Looking Statements Glossary of Terms Part I — Financial Information Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes LPL Financial Holdings Inc.'s financial condition and operational results for periods ended June 30, 2025, including business, revenue, key metrics, and risk management Business Overview LPL Financial Holdings Inc. is a top independent broker-dealer and custodian, supporting 29,000+ advisors and $1.9 trillion in assets - LPL Financial Holdings Inc. is the nation's largest independent broker-dealer, a leading investment advisory firm, and a top custodian, supporting over 29,000 financial advisors and approximately 1,100 financial institutions[27] - The company services and custodies approximately $1.9 trillion in brokerage and advisory assets[27] - LPL offers an integrated technology platform, comprehensive self-clearing services, and access to a wide range of curated non-proprietary products, free from conflicts of product manufacturing, underwriting, and market-making[29] Our Sources of Revenue Revenue is primarily from advisor fees and commissions, supplemented by technology, custody, and asset-based fees - Primary revenue sources include fees and commissions from products and advisory services, with a substantial portion paid to advisors[30] - Additional revenue comes from fees for technology, custody, clearing, trust, and reporting platforms, as well as asset-based revenue from insured bank sweep vehicles, money market accounts, and product provider access[30] - The company custodies the majority of client assets on its self-clearing platform, earning fees from mutual funds, insurance companies, banks, and other financial product sponsors based on asset levels or accounts managed[30] Significant Events LPL Financial completed the $2.7 billion Commonwealth acquisition, financed by recent equity and debt offerings - Closed acquisition of Commonwealth Financial Network on August 1, 2025, for approximately $2.7 billion cash, with asset conversion expected in Q4 2026[33] - Completed a $1.7 billion equity offering on April 2, 2025, by issuing approximately 5.4 million shares at $320.00 per share[34] - Completed a $1.5 billion debt offering on April 3, 2025, consisting of $500.0 million in 4.900% senior unsecured notes due 2028, $500.0 million in 5.150% senior unsecured notes due 2030, and $500.0 million in 5.750% senior unsecured notes due 2035[35] Executive Summary Q2 2025 net income was $273.2 million, total assets $1.9 trillion, with net new assets at $20.5 billion Financial Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $273.2 million | $243.8 million | +12.1% | | Diluted EPS | $3.40 | $3.23 | +5.3% | | Gross Profit | $1.3 billion | $1.1 billion | +21% | Asset Trends (June 30, 2025 vs. June 30, 2024) | Metric | June 30, 2025 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Advisory & Brokerage Assets | $1.9 trillion | $1.5 trillion | +26.7% | | Advisory Assets | $1.1 trillion | $829.1 billion | +28% | | Brokerage Assets | $858.5 billion | $668.7 billion | +28% | | Total Net New Assets (3 months) | $20.5 billion | $34.0 billion | -39.7% | | Net New Advisory Assets (3 months) | $23.1 billion | $26.8 billion | -13.8% | | Net New Brokerage Assets (3 months) | -$2.6 billion | $7.2 billion | N/A (outflow) | - Paid cash dividends of $24.0 million during the three months ended June 30, 2025[41] Key Performance Metrics Q2 2025 metrics show $1.9 trillion in total assets, 29,353 advisors, and strong growth in Adjusted EPS and EBITDA Operating Metrics (Q2 2025 vs. Q2 2024) | Metric (dollars in billions) | June 30, 2025 | June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Advisory assets | $1,060.7 | $829.1 | 28.0% | | Brokerage assets | $858.5 | $668.7 | 28.4% | | Total Advisory and Brokerage Assets | $1,919.2 | $1,497.8 | 28.1% | | Advisory as a % of total | 55.3% | 55.4% | -0.1 pp | | Net new advisory assets | $23.1 | $26.8 | -13.8% | | Net new brokerage assets | $(2.6) | $7.2 | N/A | | Total Net New Assets | $20.5 | $34.0 | -39.7% | | Total Client Cash Balances | $50.6 | $44.0 | 15.0% | Business and Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | June 30, 2025 | June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Advisors | 29,353 | 23,462 | 25.1% | | Average total assets per advisor | $65.4 | $63.8 | 2.5% | | Dividends | $24.0 | $22.4 | 7.1% | | Leverage ratio | 1.23 | 1.68 | -26.9% | | Total revenue (3 months) | $3,835.0 | $2,931.8 | 30.8% | | Net income (3 months) | $273.2 | $243.8 | 12.1% | | Diluted EPS (3 months) | $3.40 | $3.23 | 5.3% | | Adjusted EPS (3 months) | $4.51 | $3.88 | 16.2% | | Gross profit (3 months) | $1,304.3 | $1,079.2 | 20.9% | | Adjusted EBITDA (3 months) | $688.3 | $532.9 | 29.2% | | Core G&A (3 months) | $425.6 | $370.9 | 14.7% | - Share repurchases were $100.0 million for the six months ended June 30, 2025, with no repurchases in Q2 2025[42] Legal and Regulatory Matters The company faces extensive regulatory oversight, with potential impacts on operations, costs, and financial results - The financial services industry is subject to extensive regulation, requiring significant investment in compliance functions[59] - New laws, regulations, or changes in their interpretation/enforcement can affect operations, costs, and financial condition[61] - The company accrues for probable and reasonably estimable losses related to regulatory matters and legal proceedings, but outcomes could result in liabilities exceeding accruals and insurance, materially impacting financial results[64][65] Economic Overview and Impact of Financial Market Events The U.S. economy grew 3.0% in Q2 2025, with equity and bond markets rising, while the Federal Reserve maintained stable rates - U.S. economy grew at an annualized pace of 3.0% in Q2 2025, following a 0.5% contraction in Q1 2025[66] - Equity markets (S&P 500) rose **10