01—Abstract
Summary
Summary of the 10-K filed February 21, 2024. Cited figures are marked; the original filing is the authoritative source.
LPL Financial Holdings Inc. reported net income of $1.07 billiona, or $13.69 per diluted share, for the year ended December 31, 2023, compared with $845.7 million, or $10.40 per diluted share, in 2022.
Total revenue rose to $10.05 billionb from $8.60 billion, and gross profit, a non-GAAP measure, was $4.0 billion, up 26% from $3.2 billion. Total advisory and brokerage assets reached $1.4 trillion at year-end, up from $1.1 trillion, and total net new assets were $104.1 billion, compared with $95.9 billion in 2022. Client cash revenue grew substantially as federal funds rates rose, even though average client cash balances declined to $48.8 billion from $61.9 billion.
The company returned capital to stockholders, repurchasing 5,075,900 shares for a total of $1.1 billionc and paying $92.2 million in dividends. Total corporate debt and other borrowings stood at $3.7 billion at year-end, and the leverage ratio rose to 1.63 from 1.39. In November 2023 the company issued $750.0 million of 6.750% senior unsecured notes due 2028.
Management also disclosed a $40.0 milliond regulatory charge in anticipation of a potential SEC settlement over records preservation for communications on personal devices, against a proposed $50.0 million civil penalty, with the settlement not yet reached. The filing describes pending strategic events, including a definitive agreement to acquire Atria Wealth Solutions, Inc., expected to close in the second half of 2024 with conversion in mid-2025, and a Prudential strategic relationship under which Prudential Advisors' brokerage and advisory assets are expected to transition to LPL in the second half of 2024, subject to regulatory approval.
02—Key points
Key Highlights
- Net income rose to $1,066.3 million ($13.69 diluted EPS) from $845.7 million ($10.40) in 2022; adjusted EPS was $15.72 versus $11.52.
- Total revenue increased 17% to $10,052.8 million, with asset-based revenue up 35% to $2,377.7 million, driven mainly by client cash revenue of $1,509.9 million versus $953.6 million.
- Total advisory and brokerage assets were $1,354.1 billion at year-end, up from $1,110.8 billion, and total organic net new assets were $100.4 billion.
- Advisors grew to 22,660 from 21,275, and average total assets per advisor increased to $59.8 billion from $52.2 billion.
- The company repurchased $1.1 billion of common stock and paid $92.2 million in dividends; $900.0 million remained under the repurchase program at year-end.
- Total corporate debt and other borrowings were $3.7 billion, with the leverage ratio rising to 1.63 from 1.39; the company was in compliance with its Credit Agreement covenants.
- A $40.0 million regulatory charge was recorded related to a proposed SEC settlement involving a $50.0 million civil monetary penalty over off-channel communications records preservation; no settlement in principle had yet been reached.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 21, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $10.05B$8.60B | +16.9% |
| Operating Expenses | $8.61B$7.49B | +14.9% |
| Interest Expense | $186.80M$126.23M | +48.0% |
| Net Income | $1.07B$845.70M | +26.1% |
| EPS (Basic) | $13.88$10.60 | +30.9% |
| EPS (Diluted) | $13.69$10.40 | +31.6% |
| Shares Outstanding (Basic) | 76.81M79.80M | −3.8% |
| Shares Outstanding (Diluted) | 77.86M81.28M | −4.2% |
05—Questions
Frequently Asked Questions
What drove the increase in LPL's revenue and earnings in 2023?
Total revenue rose to $10,052.8 million from $8,600.8 million, and net income rose to $1,066.3 million from $845.7 million. The filing attributes the asset-based revenue increase of $617.5 million primarily to higher client cash revenue, which reflected increases in the federal funds effective rate, partially offset by lower average client cash balances. Advisory revenue also grew with organic growth and positive market impact.
What is the status of the SEC matter and the related charge?
The company received a request for information from the SEC in October 2022 concerning records preservation for business-related electronic communications stored on personal devices or unapproved messaging platforms. Under the SEC's proposed resolution, the company would pay a $50.0 million civil monetary penalty, and it recorded $40.0 million in other expense for the portion not covered by its captive insurance subsidiary. The company has not yet reached a settlement in principle, and any agreement remains subject to negotiation of the penalty and definitive documentation.
What acquisitions and strategic relationships are pending?
LPL entered into a definitive purchase agreement to acquire Atria Wealth Solutions, Inc. on February 13, 2024, and expects to close the transaction in the second half of 2024, with conversion expected in mid-2025, subject to regulatory approval and other conditions. Separately, Prudential Advisors' brokerage and investment advisory assets are expected to transition to LPL Financial in the second half of 2024, subject to regulatory approval and other conditions.
How is LPL's balance sheet and debt position described?
At December 31, 2023, total corporate debt and other borrowings were $3,734.1 million net, with $1.3 billion subject to floating interest rates. The leverage ratio was 1.63 compared with a covenant maximum of 4.0, and interest coverage was 12.54 compared with a covenant minimum of 3.0. Corporate Cash was $183.7 million, and the company stated a target of approximately $200 million.
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