01—Abstract
Summary
Summary of the 10-K filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
LPL Financial Holdings Inc. reported net income of $845.7 milliona, or $10.40 per diluted share, for the year ended December 31, 2022, compared with $459.9 million, or $5.63 per diluted share, in 2021.
Total revenue rose to $8.60 billionb from $7.72 billion, and gross profit, a non-GAAP measure, was $3.2 billion, up 30% from $2.5 billion. The company describes itself as the nation's largest independent broker-dealer, a leading investment advisory firm, and a top custodian, serving more than 21,000 financial advisors and approximately 7.9 million client accounts. Asset levels declined with markets.
Total advisory and brokerage assets were $1.1 trillionc at December 31, 2022, down from $1.2 trillion, while total net new assets were $95.9 billion compared with $190.0 billion in 2021. Client cash balances rose to $64.1 billion from $57.1 billion, and client cash revenue increased to $953.6 million from $360.8 million, driven by higher federal funds rates. Trailing commission revenue fell 8% to $1.29 billion.
The company completed the acquisition of Financial Resources Group Investment Services on January 31, 2023, and its Board approved a $2.0 billiond share repurchase authorization beginning in 2023. The quarterly cash dividend was increased 20% to $0.30 per share starting in the first quarter of 2023. At year-end, total corporate debt was $2.74 billion, and the reported leverage ratio was 1.39, down from 2.26.
The filing also discloses an SEC request for information from October 2022 regarding records preservation for business communications on personal devices or unapproved messaging platforms, which management does not believe will have a material adverse effect. Management reported that LPL Financial's net capital was 8% of aggregate debits at year-end, below a 10% covenant that was cured within the allowed 5-day period.
02—Key points
Key Highlights
- Net income rose to $845.7 million ($10.40 diluted EPS) in 2022 from $459.9 million ($5.63) in 2021, and total revenue reached $8.60 billion versus $7.72 billion.
- Gross profit, a non-GAAP measure, was $3.2 billion, an increase of 30% from $2.5 billion, and the payout rate rose to 87.32% from 86.74%.
- Total advisory and brokerage assets fell to $1.1 trillion from $1.2 trillion, while net new assets declined to $95.9 billion from $190.0 billion.
- Client cash revenue more than doubled to $953.6 million from $360.8 million, reflecting higher federal funds rates and client cash balances of $64.1 billion.
- Trailing commission revenue declined 8% to $1.29 billion, driven by volatility-related declines in trail-eligible assets.
- The Board approved a $2.0 billion share repurchase authorization beginning in 2023, and the quarterly dividend increased 20% to $0.30 per share.
- An SEC information request from October 2022 concerns records preservation for communications on personal devices or unapproved platforms; management does not expect a material adverse effect.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $8.60B$7.72B | +11.4% |
| Operating Expenses | $7.49B$7.12B | +5.2% |
| Interest Expense | $126.23M$104.41M | +20.9% |
| Net Income | $845.70M$459.87M | +83.9% |
| EPS (Basic) | $10.60$5.75 | +84.3% |
| EPS (Diluted) | $10.40$5.63 | +84.7% |
| Shares Outstanding (Basic) | 79.80M80.00M | −0.3% |
| Shares Outstanding (Diluted) | 81.28M81.74M | −0.6% |
05—Questions
Frequently Asked Questions
How did LPL Financial's profitability change in 2022?
Net income increased to $845.7 million, or $10.40 per diluted share, from $459.9 million, or $5.63 per diluted share, in 2021. Total revenue rose to $8.60 billion from $7.72 billion, with client cash revenue and advisory revenue as major contributors.
Why did total assets and net new assets change?
Total advisory and brokerage assets fell to $1.1 trillion from $1.2 trillion, with the filing attributing the decline to market impact of $(112.5) billion in advisory assets and $(79.0) billion in brokerage assets. Net new assets were $95.9 billion, down from $190.0 billion in 2021.
How much debt does LPL carry, and how is its leverage?
Total corporate debt was $2.74 billion at December 31, 2022, of which $1.0 billion carried floating rates. The leverage ratio was 1.39 compared with 2.26 a year earlier, and the Credit Agreement covenant maximum is 5.0.
What are the capital return plans for shareholders?
The company repurchased $325.0 million of shares in 2022, and the Board authorized a $2.1 billion increase to repurchase capacity, with $2.0 billion available beginning in 2023. The quarterly dividend rises to $0.30 per share starting in the first quarter of 2023.
Are there material regulatory or legal risks disclosed?
The filing discloses an SEC request for information from October 2022 about records preservation for business communications on personal devices or unapproved messaging platforms. The company intends to cooperate fully and does not believe the matter will have a material adverse effect on results, financial position, or cash flows.
06—Continue