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LPL Financial Holdings Annual Report, Year Ended Dec 31, 2014

Filing Date
Filed February 20, 2015
Period End
December 31, 2014
Security
LPLA
In the record · 2016–202610-K1210-Q338-K120

LPLA filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 120 current reports (8-K) between 2016 and 2026.

  1. FY2018 annual report10-K · Feb ’19Feb ’19
  2. Leadership change8-K · Jul ’21Jul ’21
  3. Leadership change8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K filed February 20, 2015. Cited figures are marked; the original filing is the authoritative source.

LPL Financial Holdings Inc. (LPLA) describes itself as the nation's largest independent broker-dealer, a top custodian for registered investment advisors, and a leading independent consultant to retirement plans, serving more than 14,000 independent financial advisors, including advisors at more than 700 financial institutions.

The company reported 2014 net revenues of $4.37 billiona, up from $4.14 billion in 2013, and net income of $178.0 million, compared with $181.9 million in 2013. Diluted earnings per share were $1.75, versus $1.72 in 2013. Adjusted EBITDA was $516.5 million and Adjusted Earnings were $247.6 million, or $2.44 per diluted share, flat with 2013.

Advisory and brokerage assets reached $475.1 billionb at year-end 2014, and advisory assets under custody reached $175.8 billion. The filing highlights a shift toward recurring revenue, which was $2.99 billion, or 68% of net revenue, in 2014. The company also flagged that fee compression on its cash sweep programs is expected to increase further in 2015 and 2016 because of the low interest rate environment.

Total debt was $1.63 billionc at December 31, 2014, and the company repurchased $275.1 million of common stock during 2014 while paying $95.6 million in dividends. The Service Value Commitment restructuring program is expected to be completed in 2015, with total charges of approximately $68.0 million and expected annual pre-tax savings of approximately $32.0 million. The company reported that its internal control over financial reporting was effective as of December 31, 2014, and that it was in compliance with all covenants under its senior secured credit agreement.

Legal and regulatory exposure beyond amounts accrued could range from $0 to $15 milliond, according to the filing. On February 18, 2015, the board declared a quarterly dividend of $0.25 per share, payable March 16, 2015.

02—Key points

Key Highlights

  1. Net revenues rose to $4.37 billion in 2014 from $4.14 billion in 2013, while net income declined slightly to $178.0 million from $181.9 million.
  2. Diluted EPS was $1.75 in 2014 versus $1.72 in 2013; Adjusted EPS was $2.44 in both years.
  3. Recurring revenue was $2.99 billion, or 68% of net revenue, in 2014, with commission revenue at $2.12 billion and advisory revenue at $1.34 billion.
  4. Advisory and brokerage assets grew to $475.1 billion at year-end 2014 from $438.4 billion, and advisory assets under custody reached $175.8 billion.
  5. Cash sweep revenue fell to $99.7 million from $119.6 million, and the company expects fee compression to increase further in 2015 and 2016.
  6. Total debt was $1.63 billion at December 31, 2014; the company repurchased $275.1 million of stock and paid $95.6 million in dividends during 2014.
  7. The Service Value Commitment program carries estimated total charges of about $68.0 million and expected annual pre-tax savings of about $32.0 million, with completion expected in 2015.

03—One dollar

04—Financials

Financial Highlights

Figures from 10-KFY2014filed February 20, 2015
Revenue$4.37BNet Income$178.04M4.1% Net MarginEPS (Diluted)$1.75Total Assets$4.04BCash & Equivalents$412.33MFree Cash Flow$142.59M

Financial Statements

FY2014 against FY2013

Line itemFY2014FY2013Change
Revenue$4.37B$4.14B+5.6%
Operating Expenses$4.02B$3.79B+6.2%
Net Income$178.04M$181.86M−2.1%
EPS (Basic)$1.78$1.74+2.3%
EPS (Diluted)$1.75$1.72+1.7%
Shares Outstanding (Basic)99.85M104.70M−4.6%
Shares Outstanding (Diluted)101.65M106.00M−4.1%

05—Questions

Frequently Asked Questions

  1. How did LPL Financial perform financially in 2014?

    Net revenues increased to $4,373.7 million from $4,140.9 million in 2013, but net income decreased to $178.0 million from $181.9 million. Diluted EPS was $1.75 compared with $1.72 a year earlier. Adjusted EBITDA was $516.5 million, and Adjusted Earnings were $247.6 million.

  2. What drives LPL Financial's revenue?

    Commission revenue of $2,118.5 million, advisory revenue of $1,338.0 million, asset-based revenue of $476.6 million, and transaction and fee revenue of $369.8 million made up most of 2014 net revenues. The company states that about 68% of 2014 net revenue was recurring.

  3. What risks does the filing highlight for the cash sweep business?

    The filing states that the low interest rate environment has reduced cash sweep revenue, which fell to $99.7 million in 2014 from $119.6 million. It expects fee compression to increase further in 2015 and 2016 and says sustained low rates could hinder renegotiating bank contracts on comparable terms.

  4. What is the status of the Service Value Commitment initiative?

    The company has incurred $61.1 million of costs through December 31, 2014. It expects total charges of approximately $68.0 million, expected annual pre-tax savings of approximately $32.0 million, and completion of the program in 2015.

  5. How much capital did the company return to shareholders in 2014?

    The company repurchased 5.9 million shares for $275.1 million during 2014 and paid $95.6 million in cash dividends on common stock. The board declared a $0.25 per share dividend on February 18, 2015, payable March 16, 2015.

06—Continue

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