01—Abstract
Summary
Summary of the 10-K filed February 22, 2022. Cited figures are marked; the original filing is the authoritative source.
LPL Financial Holdings Inc. (LPLA) reported net income of $459.9 milliona, or $5.63 per diluted share, for 2021, compared with $472.6 million, or $5.86 per diluted share, in 2020.
Total revenue rose to $7.72 billionb from $5.87 billion, and total advisory and brokerage assets reached $1.2 trillion at December 31, 2021, up 33.6% from $903.1 billion. The company describes itself as the nation's largest independent broker-dealer, supporting nearly 20,000 financial advisors and approximately 7.2 million client accounts. Growth was driven largely by the April 30, 2021 acquisition of the wealth management business of Waddell & Reed Financial, Inc. for $300.0 million, and by organic net new assets of $118.8 billion, which included roughly $35.0 billion onboarded from M&T Bank and BMO Harris.
Gross profit rose 16.7% to $2.45 billionc, while expenses grew faster, with advisory and commission expense up 40.1% and net income declining 2.7%. Acquisition costs of $76.4 million weighed on results. Balance-sheet items include total corporate debt and other borrowings of $2.81 billion, a leverage ratio of 2.26 against a covenant maximum of 5.0, and corporate cash of $237.0 million.
The company paid $80.1 milliond in dividends and repurchased $90.0 million of shares during 2021. Management also flagged ongoing exposure to COVID-19, low interest rates affecting client cash program revenue, and regulatory matters, and noted that Fed officials signaled a possible rate increase at the March 2022 meeting.
02—Key points
Key Highlights
- Net income was $459.9 million, or $5.63 per diluted share, versus $472.6 million, or $5.86 per diluted share, in 2020.
- Total revenue increased to $7,720.8 million from $5,871.6 million, and total advisory and brokerage assets reached $1.2 trillion, up 33.6%.
- Organic net new assets totaled $118.8 billion in 2021, including about $35.0 billion from M&T Bank and BMO Harris.
- The Waddell & Reed Financial wealth management acquisition, completed April 30, 2021 for $300.0 million, added $71.2 billion of client assets.
- Gross profit, a non-GAAP measure, rose 16.7% to $2,454.7 million, while EBITDA was $936.4 million.
- Total indebtedness was $2.8 billion, with a leverage ratio of 2.26 against a 5.0 covenant maximum; the company refinanced its 5.75% 2025 notes with 4.00% 2029 notes.
- The company paid $80.1 million in dividends and repurchased $90.0 million of shares in 2021, and declared a $0.25 quarterly dividend in February 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 22, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $7.72B$5.87B | +31.5% |
| Operating Expenses | $7.12B$5.25B | +35.7% |
| Interest Expense | $104.41M$105.77M | −1.3% |
| Net Income | $459.87M$472.64M | −2.7% |
| EPS (Basic) | $5.75$5.96 | −3.5% |
| EPS (Diluted) | $5.63$5.86 | −3.9% |
| Shares Outstanding (Basic) | 80.00M79.24M | +1.0% |
| Shares Outstanding (Diluted) | 81.74M80.70M | +1.3% |
05—Questions
Frequently Asked Questions
How did LPL Financial perform financially in 2021?
Total revenue rose to $7.72 billion from $5.87 billion, but net income fell 2.7% to $459.9 million, or $5.63 per diluted share, from $472.6 million, or $5.86 per diluted share, in 2020. Total expense grew 35.7%, led by a 40.1% increase in advisory and commission expense.
What drove growth in advisory and brokerage assets?
Total advisory and brokerage assets reached $1.2 trillion at year-end 2021, up 33.6%. Growth came from $190.0 billion of total net new assets, including $118.8 billion of organic net new assets, plus market gains and the $71.2 billion onboarded from the Waddell & Reed acquisition.
How much debt does LPL Financial carry and how is it managed?
Total corporate debt and other borrowings were $2.84 billion at December 31, 2021, of which $1.1 billion bore floating rates. The leverage ratio was 2.26 against a covenant maximum of 5.0, and the interest coverage ratio was 12.40 against a minimum of 3.0. The company issued $900.0 million of 4.00% notes due 2029 and $400.0 million of 4.375% notes due 2031 in 2021.
What risks does the filing highlight for investors?
Key risks include dependence on attracting and retaining advisors, sensitivity of client cash program revenue to interest rates, market volatility affecting asset-based fees, regulatory and legal proceedings, cybersecurity and reliance on third-party service providers, and ongoing COVID-19 effects. The filing also notes that the Federal Reserve's federal funds rate was near zero throughout 2021.
What capital returns did LPL Financial make in 2021?
The company paid cash dividends of $80.1 million, or $1.00 per share for the year, and repurchased 579,771 shares for $90.0 million after resuming buybacks in the third quarter. A $0.25 per share dividend was declared on February 3, 2022, payable March 29, 2022.
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