LPLA - Earnings call transcript Q2 2018 | LPL Financial Holdings Inc.

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Operator

Good evening and thank you for joining the Second Quarter 2018 Earnings Conference Call for LPL Financial Holdings Inc. Today's the call – joining the call today are our President and Chief Executive Officer, Dan Arnold; and Chief Financial Officer, Matt Audette. Dan and Matt will offer introductory remarks and then the call will be opened for questions. The company would appreciate if each analyst would limit their questions to one question and one follow-up. The company has posted its earnings press release and supplementary information on the Events section of the company's website at investor.lpl.com. well forward-looking and statements results, foresees. other strategies plans, include future LPL outlook, will and and expenses, opportunities revenue, financial as call statements, that about including Financial's business potential Today's risks other management as and operating forward-looking differ estimates beliefs materially. subject management's and may cause current uncertainties risks and that reflect actual statements are Such or to results to to to the company's or refers to listeners or the those filings earnings latest in contemplated release company disclosures financial in from forward-looking Safe differ that The contained the factors statements. the press and SEC actual matters may appreciate important Harbor those such timing cause of results operating

the discuss governed During financial the also will company call, Regulation non-GAAP G. measures by SEC

measures refer to figures, to call which non-GAAP GAAP Mr. that, investor.lpl.com. release, earnings the of to company's be will comparable please found can at over Arnold. I With the reconciliation a turn the now For

Dan Hogan Arnold

and you business priorities our you, financial supportive of Thank strategic assimilate a executing growth. for core quarter, In growing our led This the environment, with another joining today. to our call NPH. continuing combined business focus, thank remained on advisors to of while second macro with and James, we focused excellence, quarter to from everyone and

starting recognition. Let's want review progress, to external recent our second where with I advisors, moment our some quarter to take highlight a

Wealth Advisors the LPL quarter, last and advisors were Top named list the Women the Top Over Advisors both Women to Barron's list. Financial Forbes

of the of serve, as and Top Bank attract on Consultant financial our several inclusion we magazine LPL by reflects as advisors to addition, clients its quality type Manager This emphasis institution and Program to Investment advisors more well diversity clients LPL. named were to the list. In recognition

grow to growth second we our year-over-year, increased profit financial all XX% our to across generate lines. driven continued by quarter leverage. and operating of Gross results, Moving revenue

depth. more up second financial led disciplined review $X.XX, EPS year ago. Matt a expenses. will quarter This of than remained on in XX% combination also our greater to from We performance

were of the results. NPH market up new X% of existing performance and of billion, solid year-over-year. Organic of our by assets were advisory new assets driven growth, advisory quarter key organic financial onboarding and driver including $XXX advisors. net a The of billion, billion, recruited in This assets of which was increase combination primary assets, Second drivers by $X organic these $X.X XX% quarter $X growth business gathering net assets second to rate. a and growth. annualized billion translates was Brokerage were growth asset assets

Asset growth was reduced by hybrid firms. outflows from of a small group

see XX% advisory, Our solutions, which overall continue use assets. same corporate, time, enhances to on our we production retention and was centrally increasing the return At managed year-to-date. our of

remaining of the more the we at onboarding Looking NPH, completed from closely transaction. this assets

we the $X.X our our to new quarter, are second billion. Advisors on net and $XX with practices had now billion of total NPH running the their assets associated actively For NPH, platform transition bringing from than a expected, on a to for to are They and beginning our their suite clients. up services. to we their of continuity which ramped commitment maintaining is testament faster focus use

result, quarter. a second the goal reached EBITDA run-rate of in As $XX million our of we year-end

take full we help forward, to these will platform to with and continue Looking advisors of partner them capabilities. advantage our

our grow, existing that driving With new which, about think to advisors business growth, respect with core advisors, a driving now core business as assets. reminder, in Let's terms to strategic are excellence. better and return and on priorities, helping a our in of turn executing primarily growth adding we

benefits focus performance solid of on business improving our recruiting. the capabilities team's quarter emerging This to development sales with return team. of recruiting adding let our So second financial with We respect the by was processes across advisors, reengineering a to month. full new turn each driven recruiting, and the me and had

increase our building by Given assistance, second interest in the well-positioned solid quarter. in momentum and generated quarter the the we transition entering third a feel pipeline temporary the with

forward next greater look Business record Rich month skills, having we new and addition, a a Head outside forward. set of will join our us Steinmeier moving us leadership help as brings diverse believe We an perspective to Development. In success. of of track Rich achieve his growth

expand strategic of In as that as long as M&A to a align our strategy, platform operationally. terms financially broader assets us with lever we see opportunities view we and our onto our bring strategically, and growth capabilities,

gained the leverage deploy we future capabilities experience any and investing advisors transactions. in acquisition are to We the With our and respect sales, in through to will to NPH differentiate look help we that also In help simplicity and into we their them two marketplace. practices. modernizing management their execute their to and businesses. working drive by the in These will win spirit, digitizing by are efficiency, things practice scalability same-store

admin service this first, from thinking insights Let on solution. enhance used piloted we We me little management. provide on pilot a and virtual modern color our and our iterate the the practice to

fully efficiency who We practice, processes are the now trained administrative of access advisors in the and advisor's market, while avoiding and also systems. personnel. sourcing, LPL are challenges on This to of managing the offering support, hiring enhances the

virtual addition have pilot in In admin, the services virtual more to we three stage.

new help communicate clients, serve existing designed chief marketing find to well with and and officer as clients. as better virtual our win First, advisors is

improving officer their aligns Second, and stimulating into virtual by advisors efficient, more financial growth. practices, on chief a plan to business value mix becoming our drive

with this part acquisitions. also advisors effort, for practice are of As or providing expansions we capital

computers practice maintain our suite Third, chief A manage and and will costs is lower of on of growth their technology, second set virtual effectively are local technology and we more believe efficiently advisor scale, technology Altogether, working simplify, advisors capabilities services virtual our within officer advisors' and help we across workflows. including phones. their accelerate practices will and up, digitizing practices. set stacks

clients, advisors' consistent pursuing will prospects integrated month, As service and improved this to ongoing end-to-end and a we support. These providing across the their capabilities we provide the announced an ClientWorks. example, that with building lifecycle are from experience inside capabilities entire

select are open of the group a environment most. they architecture moving This We technology advisors with tools within value also providers. new access integrations third-party establishing data to both to a and more ClientWorks by allows enhanced

invest turn easier second making solution, over operating our to our technology advisors strategic respect and and and technology will time. their core that us. excellence. for to to we it enhancing remain executing to priority, our business on We with With evolve platform our continue now focused ClientWorks Let's with it into is clients do

set investments We which we those three phases, have pursuing up parallel. in in are

immediate functionality, the tactical to we and the resiliency executing First, performance of improvements system. are

We the focuses And components. and have primary version ClientWorks major increasing on version third, system in view. these increased of of advisors' with from on technology ClientWorks streamlining believe an X.X experience all levels efficiency efforts, and which of Second, investment, can practice. we drive are increased workflows working advisor's service our improve point on combined then and efficiency greater we reimagine work X.X, to of started growth

doing Let's business. to next move of ease

for are personalized making opportunities. advisors, on problems simple things We advisor into and our providing focused turning service,

and clients. the XXX XXX Over improvements. quarter, that the capabilities wave made and to their past we transforming be better initiative make kicked continuous improvement, and off the of as serve our spirit of We initiative policies, to in a to begin to this our recently catalyst could quickly we In and advisors support culture XXX We next used technology. procedures days. completed changes implemented our improvements

that, a In to deliver a building our financial models redesign We We of core and to also believe lessons deliver from this are another of activities simpler, service benefits Matt. personalized priorities well for our model, to to advisors leading We with excellence. outside We their summary, the from and industry. quarter our clients. on create growth. to scale turn strategic combination remain strategy long-term scalable experience call incorporating of serve value. our to business advisors, pleased positions leverage plan shareholder the roadmap including our I'll and growing executing our service of profitable believe and growth we're our drive our will more business over us With focused

Matthew J. Audette

on quarter I'm in QX. speak another Thank you, everyone Dan, We strong and with call. glad today's to had

profit, and to operating disciplined assets grow on remaining to continued leverage. while We gross drive expenses

$X.XX, As result, to up QX year-over-year. prior a intangibles was XX% our EPS

of focus strategy we We to results execution. are our continue as pleased with these and growth on

growth, including onboarding quarter, business assets new in advisory appreciation. NPH greater billion, net sequentially, assets. remaining billion depth, $X new organic the by assets driven market the net assets finished and billion starting Total $XXX with at or NPH. quarter billion brokerage for and from total organic were the and results our at $X.X We look up X% Let's $XX billion of $X.X

in to in advisory net Looking detail, or rate. conversions at This billion greater X% brokerage growth organic a $X.X were assets advisory. growth included billion $X.X annualized from new

annualized new net totaling mix advisory billion corporate were of rate. $X.X advisory our a at or XX% the over on inflows, our of X% the platform, assets Looking

or Our third a grow net platforms with as approximately of to quarter. billion well, assets our centrally new this managed continued advisory of inflows $X.X

our transaction, assets. this approximately of to $X.X we QX billion net onboarded billion total, $X.X for and new results, Turning billion billion, brokerage were including advisory. assets of NPH In $XX of $X.X

accretion, year-end ramped We expected, in run-rate $XX than we approximately million As this generated advisors faster outlook EBITDA their on we for $XX of than above quarter anticipated. million as delivered basis, earlier run million. rate our this annualized business an up or $XX NPH

focus reached to forward, our end pro have now going assets reporting we and results, As our plan on our consolidated NPH and forma finished NPH. including onboarding EBITDA we outlook,

advisors new after their transfer, the estimated us two on, this transfer advisors into represents a platform, licenses I assets over results. the metric licenses onto the to provide new expect to our moving the we've net assets. disclosures quarters to to added is This The this additional that recruited also ultimately three good quarter quarter. come that leading moved typically our Before of assets recruiting indicator assets quarters to our platform contribution recruiting want during to we insight metric onto of so to their of amount highlight our from from

$XX primarily increase revenues. our from $XX bonus, let's and Now was offset advisors our profit cash X% by activity who sweep million from million, QX, Gross increased joined with to higher Prior profit. flat back or it gross well turn $XXX was sequentially, NPH, in transaction results, were up million seasonal million, as as as to by sequentially. was driven fee to starting revenues It $XXX the up QX production platform. million, $XX lower NPH

to as platforms. centrally continued also in our corporate advisory, trends more see We to mix, assets business move and managed positive

QX, commission bonus they in were X% in advisory of typical the fees production seasonal advisory and or payout, $XXX and more growth in expense to Moving than offset million down $X commission increase million fees. net as sequentially,

million, $XXX they increased sequentially, primarily Prior $XXX $X NPH X% or $X or commissions NPH, were in sales commissions by Looking at were million advisors. more driven million from sales down detail, up QX, in activity million sequentially. X% to

ahead, increases reminder, And QX, XX% production typically advisors a in we few commissions decline see levels QX as from sales over our seasonally averaged higher bonus the a expense seasonal about Looking production. has years. to the achieve of throughout year as which past

about year, by from million. or QX our example, bonus XX to For increased basis rate points, production QX last $X

As asset levels. sponsor include from were for million, asset-based which million cash by and QX, primarily sweep $X revenues revenues, average sponsor up driven fees $XXX higher

sweep they $XXX XX% up as yields. cash to increased or million, sequentially, Moving rates revenues, interest higher $XX were our short-term million

client so declined a and also money market to tax engaged in QX for balances, assets As cash X.X%. season, percent total of for in remained investors the as cash withdrew

QX. up cash Looking from sweep yields, XX was at basis points, ICA basis points QX yield XXX our

due As in a rate June of X-month QX, we to And to funds the LIBOR, reminder, in while to a X-month increased March LIBOR amount, anticipation Fed ICA a well as also mostly basis of June and by hikes, and rate increased rate it as rose but greater Fed the balances some points about amount average our as have average fixed hike. balances. XX indexed are indexed small funds,

about the QX. benefit up yield half June showed So hike of rate of in ICA actually the

to a points average. As about connection we of rate basis deposit will on with we about client In have June hike, our think the deposit benefit this X or rates beta rate QX XX%, of hike. the increased remaining we ICA equivalent yield,

in assuming our interest rates, deposit we be So upper-XXX from mid- no will changes benefits rate increases to anticipate basis further our point or QX to yield the ICA range.

account fee hike, rate DCA, cap our the DCA. we is what June we on with target a earn to rather moves fee And a revenue to reached is max the the a on increased on the based July, the ICA In level had cap consistent we yield. DCA than that with changes a in Fed balances, with on along per as Turning and funds range. rate reminder,

With rate DCA per these of about will changes, we now have on $X upside million revenue. hike

with million rate gross we hike. $XX our beta to deposit $XX So estimate ICA million upside profit outlook, approximately together of taken per

with on fee NPH, down Moving $XXX transaction million to from they QX. $XXX revenues trading revenues, Prior to fee were million, were sequentially flat and lower million, QX $X primarily and transaction revenue.

Looking decline will would could increase conference, decline a ahead advisor our will we that million. anticipate QX $X tend We by remained QX, million revenue summer of over fees activity I sequentially. decline also approximately above and note the in offset conference so IRA in to our volumes $X by have national QX, transaction we to as revenues partially average, trading expect be this see a historical in months. we seasonal

NPH of of NPH down G&A. run-rate by Core primarily Prior from QX, costs two QX, Core with was was to $XXX million, G&A $XX Core million NPH, including expense. and $XXX expense driven In starting million $X G&A onboarding factors. million million, $X expenses, to turning Now

typical First, payroll a we seasonal taxes. had in decline

we more quarter. this Second, product resources quarter, technology had working our also on drove of the in prior capitalization development than more which

total $XXX million quarter. under in per G&A for of averaged first the the half year, just So Core

the As level plan And associated plan half. and service half, technology, of at will second the run in we to more rate. end our for look development technology. we increase increased to Within the invest ahead QX in our and the increase service, costs of work we we second QX, to hiring

an Core about of million, to million As tightening to $XXX a quarter translates G&A which result, range the we our million $XXX half. average are to for per outlook full-year second $XXX

promotional million QX, sequentially, $XX million to in higher QX Prior million, driven they Moving XX% or conference costs, up promotional primarily to were on expenses, $XX $XX down expense. sequentially. by NPH million $X was

costs, from $X NPH at million, they for run primarily were a loan rate As amortization. promotional forgivable of

QX, by we expect million conference $X ahead our by approximately increase Focus will Looking to conference. expense driven

loans. the years. assistance forgivable the Additionally, pipeline have receive is in be could we would which recruiting we note as transition several the drive the would period increase see I as who advisors assistance in higher our future, expensed that to larger recruiting loan, could positive momentum also building That QX. been transition which over in trend typically transition assistance impact of tend

to by we discussed to regulatory now primarily million up blue insurance deductibles expenses, our settlements, in totaled state Turning they sequentially, captive $X sky quarter. driven QX, $X which related million last

by the we reminder, our expense insurance a spending most As settlement be or captive existing covered expect company of will plans.

drive jurisdictions expect individual Given up the that small we all matter, the in to quarter. to participate in added regulatory this this overall increase the expense deductibles

Looking forward, predict. difficult them continues the make nature to of inherently regulatory to expenses

on could actual year, in down of Our the or timing matters move size and given expense captive available any up or based quarter coverage. and

million sequentially, depreciation our $X in million at increased in $XX it Looking expense, technology. QX, investments was driven up by

in depreciation invest expect we more forward, technology. we grow Going to as to continue

to XX%. taxes, of XX% expected rate our rate to in Turning with QX our line was effective annual XX%,

to strong times. available declined down QX, from was Moving our Cash million, remained and ratio capital corporate million to on sheet X.X $XXX in use management, net leverage for QX. our $XX balance

capital Turning and we organic capital to shareholders. continued in deployment, growth to invest to return

capital returns, $XX quarterly QX. For regular in paid dividends million we in

We our amount. roughly to repurchases also $XXX increased share QX double million, our

to the that to just to capital Looking forward, continue the stock quarter, the where growing please our returns. size Specific create buyback appropriate, financial are we and growth and movement leverage, given drive the on pleased repurchase could timing operating share We repurchases, assets to our investing strong drive have of any questions. we staying quarter operator, focused on gross disciplined shareholders. actual deploying note we price. plan and that, another returning delivered in In expenses profit, and M&A to in program and vary capital organic With and for and on shareholder to results. closing, of to remain call depending business growth, open amount

Operator

Thank you.

Our with first Citigroup. Katz Bill comes question from

open. now is line Your

William Katz

the appreciate enhanced very you much. Thank Okay. I disclosure.

maybe was sequentially, to elsewhere. count and look of that better Just at as modestly you continue lower see there, much FA a sort the starting trend

triangulate you between FAs, lead undesired how sort then wondering spill that was attrition? So could recruited in that, AUM, just might I of indicator how and of into of much sort sort help if maybe attrition of desired that was terms highlighted versus you within

Dan Hogan Arnold

And Thanks. so, Bill, it's Dan.

then any take of I provide you all, a Let back me color on Bill, couple not those that. Matt, purpose. certainly, it's And just if and get come it around didn't it,

around a for think take new I quarter, let's net the inside assets the minute for the So question quarter. assets the

the $X for quarters, saw line I think that at little of $X.X our billion. in they where couple a when lighter which around you were came look more average last around quarter, in second than you billion,

the profitable of through and aligning RIA billion growth billion are deferred RIAs. you group in that about alignment a didn't both, some $X both those we with they're one, just in tax where then So outflows growth, quarter. we've hybrid of last and which $X.X for billion changes – with this went the group $X.X the And of out differential, seen assets strategic small driving key I the in of year, corporate had and RIA associated of think hybrid RIAs, teased for drivers we group have as small April, purposes hybrid was payments that a continued outflows of of we

said, advisors the RIA We'll and obviously to that and our the platforms. likely we're You're the win. of both level invest committed outflows think next hybrid sure make both that two strategically same differentiate see corporate in to That can offering continue quarters. I both to and in

we assets the that rest desirable question, missed it answers NNA hopefully, outflows. may questions your some have around question fill that please of maybe in. your the of I just where – If around saw and So, any of

William Katz

interested a quarter-to-quarter to was decline, circles more or follow-up offline, RIA and other but other the just that. thank that's count, follow-up, helpful, to actually I sort more and in and we interested I sort of having of the you Yes. sort can the of back very – I related minus FA similarly guess talk sort XX so management. of my capital Maybe outflows. for

So question, maybe Matt. two-part

if a think repurchase? as cash question about be of model help earnings is, payout one free some of adjusted either is kind given like or about M&A, look, went we big ratio to large First what you seems thinking broader a should the at you changed, sponsor? that maybe and pretty all, flow to a multiple property then, has the for if pipeline that to how there does And how combined equity way will, a looks private is, be

Matthew J. Audette

Yes.

those, think both share with forecasting about there's going to repurchase, classic so that of to I payout taking So respect forward. rate don't think think I a in

when want to think think capital, first it's, for where foremost, about organic we I deploy we growth. and

quarter. up. this seen flat on a depending I you've They're most more individual share think up something quarter that just lot that us naturally to lot think on repurchases going just down not just going stable, more us and are I an Dividends folks. what's do basis, to for are of quarter. little for bit are a And a in move typically but that on

shareholders think capital a through quarter go. we would use So predict our how think an on just basis that that just individual repurchases I would to share tough to of it's good is but I capital, emphasize returning

interested, the M&A grow remarks, I way prepared think think I think look a and our and financially, match forward. side, platform, to to And at that'll philosophy said a Dan going good it's think is, think and I I the just and think for when capital what M&A, to not good we don't be And if the but we there, we a are. I in if be good it's a it on match use it's emphasize it's got our strategically we're now operationally.

Dan Hogan Arnold

your And, I part missed add apologize. question that Bill, in FA your the let to I me of just first question,

and XX second to the a any then driven the both had NPH, I that advisors XX may Obviously, recruiting to platform within back we net gain you we were through advisors. down advisors of get think, left quarter. that yes, have net out When number. that's

of typical the think would you came at great and of XX, transaction noise they I be cleanup. that advisors, look admin when is A were reclassifying around just NPH that of down the status. advisors' post some most your over license that to example

as see noise you'll think cleanup. I just more the around that

number about advisors ex-NPH is in to think quarter efforts. that way the perhaps the and recruiting So growth reflective the of

William Katz

That's Thank actually you guys. very color. helpful so much,

Operator

you. Thank

Dai Ann from with comes question next KBW. Our

Your open. now line is

Matthew Gruseke

This about the on Matthew XX%. yes. coming at Hi, Gruseke actually �� being betas know the for in I deposit Ann. about call we talked is

forward? think kind prior further XX% to was I what see coming of rate XX% on range Any long-term. you might you guidance a hikes? Do color anticipate

Matthew J. Audette

have beta that Yes, unchanged, XX%, XX% at you've so sure. an on through highlight think that average, overall, two to a think about This cycle, look at the is And rate I when averaged and building you I cycle I'd long-term Matt. the I also our been this last of is And the up. mean think we've XX% I seen right. kind right. view is XX% XX%

So on larger amount the XX%. lower deposits. beta like are you across we look at the based deposits price are to spectrum, smaller XX% it balances of versus in X% much more much that range a When accounts the

but So the view is there's the XX%. XX% last betas, couple, XX% on to seen range at we've average, and on for certainly unchanged of a really it long-term our at

Matthew Gruseke

very you I it. Thank you. Thank appreciate much.

Operator

Thank you.

Our next question comes from Suisse. with Craig Credit Siegenthaler

Suisse now line Securities Your open. (USA) here. LLC guys, - Credit Craig Siegenthaler Siegenthaler is Craig it's Hey

Matthew J. Audette

quarter. brokerage to more Hi, the is if (USA) So Craig. continue migration one here. decelerate world slowed you the wondering dealer advisory LLC probably in little advisory this looks has in just of to just quarter if just blip? also it a migration died or the I'm will think quarter like a Suisse Credit to And the Craig Siegenthaler - brokerage Securities bit the

Dan Hogan Arnold

associated quarter Yes, or with too into one and that. it's read Dan, much I try trends conclusions to wouldn't any draw

products I as general the transition end brokerage commissions and much as too believe it environment do more the advisory more the and you commission But level. into think we macro about clarity of and brokerage ongoing a demand I a I utilization that of to think see the and We from predictable we brokerage does the client have regulatory read around get blip. bigger at probably associated probably solutions quarterly make that brokerage dynamic today. with do than wouldn't – that that

I good have think stay Suisse dynamics believe very you LLC and those of Thank place that over will ultimate in similar - (USA) will those dynamics Siegenthaler you. mix to we've ongoing the dynamics two Credit the be outcome seen the and we last Craig year. Securities

Operator

you. Thank

next Our Christian comes Bernstein. question from with Bolu

open. now is line Your

Christian Bolu

Good afternoon Dan and Matt.

on Can that question. that deals competitive property follow-up just the the have happened. on, seen think addition a you Just to M&A I the M&A to earlier private large was for in other led deals? we've speak equity landscape referenced broader

Just these deals. thought how issue deals else, understand or trying upon it your just passion a understand here? Was operational evaluating to financial and process you're to trying something or

Dan Hogan Arnold

little a I'll anything and color it. then please add maybe to so Matt give Yes,

platform. a said, standpoint, we associated So, can't to add to deal. with That to any we speak our opportunity M&A assets specific from conceptual see to continue

any property potential available operational that alignment this prospects may have strategic on assets We through of be we that of and capitalize if then interesting also and on that think financial, platform right create alignment, our for think which opportunity. can vertical integration, revenue our us an find synergies our expense and we space. a pull both more again opportunity and we compelling and scenario think because to we work to ultimately synergies in our And opportunities

we you would anything it. have don't possibilities know explore add continue in to so to to that something the that. market I try the pursue And ultimately to look those extent out Then I that's to think if we Matt, interested. want we to

Matthew J. Audette

well something of a said. we're And just be going No, to I and think would patient. to emphasize be we'd match, around is disciplined all interested. mean I if continue I that and

Christian Bolu

industry a a up. for asset Client if a LPL a quick also. guess and as to given of about as speaking of cash client help framework you're of you to lows follow to I cash you whole, guys reach I how one Okay a guess behavior got can Matt the think new sort jump yield go. continues then client just percentage the seeking Curious and just as at drivers. that and could seeing forecast you in low And us competitor

Matthew J. Audette

and where mean, net it's nearly is see at our and we said see last the I mean we've I Yes, We're investor that. going, we buying well. it space it When Chris been what rate of the don't engagement, look we right. you as the seeing money I -- you think – double this before see have levels into that in moved cycle we across

in So overall. going we high good that it's a I market. emphasize prediction I investor deploying going. a don't where into on positive or overall money, just have it's forecast engagement the it's you the would it for a thing, like levels of

Christian Bolu

Great. very much. Thank you Okay.

Operator

you. Thank

Chris comes next question with from Blair. Shutler Our William

open. is line Your

Chris Charles Shutler

Hi, guys. Good afternoon.

the the it's just a run higher that, I how of have that that reached quite much of than in there's because, much kind actually annual – rate, you guesstimate how new guess that of NPH, a is EBITDA higher because rate and is run rate the the million Is of On helped – $XX bit? timing QX. rates run

Matthew J. Audette

Yes, Chris. was I put mean, – hike at quarter. impact say in really so right. a I'd the June on million, NPH $X maybe had really it the minor

to million, $XX we clients getting for $XX thought. on to you'd really It our about of ramping than work platform earlier million. was instead and their move that So prior advisors the up NPH just be at

about it is more So that.

Chris Charles Shutler

higher rate other So is rate the run hike the than then, or not?

Matthew J. Audette

platforms. the similar – would platform there emphasize next $XX No, our the hike guidance run advisory second the continuing rate will move as to continuing million, are the I and the the opportunities think bit within business brokerage in be the – managed rate to well, our a comes that say NPH broadly. into quarter. That's on I opportunities quarter. assets advisory, is the ICA included from that move though in yields next to or benefit benefit of to The for of have we little corporate on have rest I'd overall on centrally from overall, to of

opportunities benefits rate think the million I current at with plus all of guidance a are run gave. So, those the we overall rate standpoint, But it's are from that the in $XX NPH. hikes

Chris Charles Shutler

fee the some the you Matt, how than sense then, revenue give us expectation? quantify on And higher related trading and in came Okay. much can your line QX, to in transaction

Matthew J. Audette

drove I think at look that mean, you benefit had in I that up X%. of quarter-over-quarter, I you when it some there NPH the so. think flat line about

conference one some that had had to our the were quarter up then larger conferences also that, of X%. moved the We so by down in revenue. down transactions of X%. We offset And it

So, bit have a little idea next higher expect the would that quarter, bit hopefully think helps of of we some we why in a still you decline give QX. but that's I than changes little That's seen a typically there.

Chris Charles Shutler

in I'll queue. back Thanks. right. hop Thanks. the All

Operator

you. Thank

Our Ryan comes next from question with Securities. Devin JMP

line Your now is open.

Devin P. Ryan

guys. afternoon, great. Hey, Good

here, important I Development, former I'm The of integration theme curious a first a the Chief know you Officer. prepared Head And the was new Digital kind so of new for technology as I question Business not company. it's in here, but so mean, mentioned remarks, it the is

is that perspective with to this someone read background, the just change So if it? what comes that I'm with to I guess what strategy about trying think or into changes from a or

Dan Hogan Arnold

is wouldn't anything I Dan. This into it. read Yes.

someone and going get you and that's agility, A begin see point his someone general track at of want framework can is to us to B, accountable, I into very way people I is from lead things a and skills we who look the operationally think lead And then a to effectively. that's leader, management who We someone for who he in someone doing his who someone looked framework manager an and of think us to have which and about him. who very that that diversity results those that and that's we're attracted with looking does I asset general drive success, help solves is a has can you different forward. extraordinary think, if what clear attributes, big better who a and were can strategic profile you for, we problems after record went what very

hopefully, provides color. some you that So helpful

Devin P. Ryan

about here, think of Thanks. kind year? next ourselves, step that you base a great. of to but the a And don't of of year How a back the of half into half. heading like just seems Yes. far want bit back the then I year get on the into should provided the I kind today. on little maybe some appreciate there's and too expenses, we commentary the out up just range of it It's follow-up full

starting parts to think P&L? moving is with that of some And of are so, flow launching from here of the XH way about technology initiatives some good Or to the to a about point that to the trying now think kind through just XH. the

Matthew J. Audette

I we'll a individual guidance quarters, moving Yes, Devin, think in XXXX always at we've seasonality later quarters. give had I think mean point. I individual And the in some

in So, year. I the you have we'll see, on give guidance just XXXX to and think wait later and

Devin P. Ryan

I'd one. try figured I quick Great. Thanks. there. And more But just Okay. one

at been recently peers. based that of just where guys product? the the securities just given think on opportunity embraced initiative that your for changed a I'm you long-term industry to loans, trying has that recent I'm product about it that trajectory you has and has with Just curious the education in a all are think know there? Goldman. well there I curious been has advisors if with And some I'm done

Matthew J. Audette

success been we the that assess the thinking sort industry. Yes, seeing through I of in that the think, opportunity certain of and were we've set, certainly marketplace parts

not that end optimistic but, drives as advisors for additional you investor So, are our and does point only providing we better a economics. leverage experience a service, additional say, it the create that for by

And it's experiment of I the And and learn in very serve But with the and that to because overall I process and for it. something of that learn opportunity. advisors educational with certainly terms think as be clients, of dialog economics is with we're we sort that they're it. it'll to to drive there better trying using with it into. optimistic are and leverage value, early think having advisors an we that it opportunity

Devin P. Ryan

you. Thank Great.

Operator

Thank you.

Our Ken next JPMorgan. with Worthington question comes from

line Your now open. is

William V. Cuddy

for Bill This in Ken. filling is Hi. Cuddy

continues core grow. first, So portfolios to managed

percent what a be growth potential that the the your limit of for upper business, we of As portfolios advisory about managed portion as assets? think for would centrally long-term total

Dan Hogan Arnold

Yes, in think, that it's a about fair necessarily, think way. don't question. Look, I it I think we

for enhance that operational $XX advisory we administrative to centrally of And advisors think if the of and great invest I continuing to our every advisory place portfolio, the want to when a managed certain do overall to managing is $X overall leverage continue they in one outsource right. advisors continue differentiate our continuing because platform, win. to a as components the the things to we point around out invest as efforts at to platform And of are platform going and are see for we look and the this. that we

So our we'll platforms. we're our and continue year investing in capabilities advisors. the enrich half That second in to said, I appeal its also deliver that to of new value rep-driven the think

I And capabilities to tasks standpoint. offload advisors, more it advisory of so, And going robustly. as a at more find with these ways look they're and think enhance again, platforms continue to to which operational our from and these I would from platforms the associated administrative more use macro we

within I content so, we've two over enhancements and the with last pricing the think years. to investment the growth the the made centrally and you've where platform, changes that's features managed seen And

And so reason we there's more believe no create we – there's continue value. to if

gives continue I but down color. some to hopefully you macro of that platforms. think a don't our that's sort of to drive prices those to of a get mix you lower leverage about continue utilization know that We and healthy it, directional qualitative scale way to more

William V. Cuddy

that as year? you recognizing so assistance that Thank that actually recruiting question advisors changing last So, in you for And metrics could or this seeing time? other question, a it's of advisory to helpful, you're temporary a over to relative second on then, just change the And to advisors. hard your relatedly, pinpoint production you. types had elaborate brokerage had a number pipeline initiative, pipeline? year that's my is larger driving how the mix Yes, Dan, transition there looks mentioned mentioned such on. Matt Are in your recruiting

Dan Hogan Arnold

Yes.

one that first. take me Let

way set. our an I think challenge to to opportunity experiment relative a own that strategic and offered as we obviously agility

was think draw I that. any we and conclusions had some And time-bound to that early on from so early it. And it's interest too

clarity of to across see your the we the in question. we'll to quarter, have activity way in better a think probably broad offered more said, industry. a in third end on quarter the I that next so board the that point That at of view relative

to a necessarily of advisors that change So relative attract. as mix see I overall the don't or that would we

it you the utilization relative think I helps assistance will, and simplified elasticity more pricing. understand to if us of demand, of transition

please get advisors and both question so your to for pipeline a characteristics benefits the benefits don't looking if advisory not in the relative think independent around pricing it, space may right, who capabilities, maybe set we to me continue look, differently. space. But yours, in around I broader be word, the integration, for advisory better vertical own my that the the of our of that I of recruit, platform, those guide

space. recruit to continue independent in the we so And

from the places consistent of pulled see model recruit the And and structural that's progress in to we've historically trends, model those that also We or continue to employee from opportunity places. are wires those And whether we regionals. the two occurring base independent from. so

big so of a overall advisors the historical we're And attracting. difference in don't mix we terms the in that see

the that's advisors. And a our driven a strategy shift to I wouldn't larger I think as of something And I coincidental more opportunity that's mix think anything or really Matt in said, we're read that. just marketplace. out seeing into in

think casting appeal broad and it's in our we're and model, how got positioned. think a we like net I we've broad

enrich to look strategy to in what our maximize make we've respect well. systems roles. terms perform to are giving put a in capabilities new picking new a and to go-to-market had and advisors We want we've them past that of and test optimize it. to things training, opportunity trying to the executing own are think of to in in take it I position continually would new or it leading the a to like their better on extraordinarily just team it. worked and similar data to continue they selling good try with do try We those I think to own techniques the them But in pipeline that how

and So, invest continue to we the some benefit there on we believe pipeline. beginning growing that's do have to

but you So, was more was that probably look hopefully helpful. than for, that

William V. Cuddy

No. It's helpful. Thanks, Dan.

Operator

Thank you.

with Cyprys from Stanley. question Morgan Our comes next Michael

Your line now open. is

Zachary N. Feierstein

Hey, it's Zach for in Feierstein going Mike.

to are NPH. we out? quarter. years would saw be softness about some or from say on about should forward three on thinking maybe question advisors How quick that this stickiness How think the of a Just you the brought advisors over that color leave about XX think going those some great? We

Dan Hogan Arnold

would be I XX careful left. so Yes, concluding

I should roles that we I As those some earlier, been said of have they reassigning post-transaction and was as most just administrative up when of think they over. licenses customary say, first in came at clean which to put

need to their We anything have We capabilities solve read if and a that. them have advisors' profile. they well, similar that rates, clients, think very we retention compelling So, were business. our we we for core do serve the and the proposition. the then good we think I wouldn't higher opportunities price, to and think give value these them challenges LPL into do advisors' a all have Remember, good like that just chance profile we a to at in problems

to So, them we going think support forward. serve and we're well them continue positioned to

Zachary N. Feierstein

going industry, Matt, across that be to the pricing great. to And levels. continue or just lower as consider making drift back have If they sort cash on would or your they to attract maybe of you changing more cash, color would changes any the

Matthew J. Audette

sitting just I line not. rate don't – our pricing get is emphasize in cash there I to sensitive This the is trying the folks rate market. about higher or and with deployed market is right. interest or a I a pricing product, it's think it's whether I'll set in we Sure. not deposit rate. think cash our mean,

a and range our I positioned. think And we're about XX% deposit where the to just XX% good a range. a betas lower feel reminder, we it's It's end. at and right now we're

So I just to think about you that encourage it way.

Zachary N. Feierstein

it. appreciate Great. I

Operator

question-and-answer session. Thank our you. This concludes

Mr. over to for it So, to closing Arnold I'd like remarks. turn back

Dan Hogan Arnold

good this everyone and thank time day. to for wanted forward to look just you taking join again quarter. I Have we Thanks, with next to James. And speaking evening a us

Operator

Ladies and conclude you. that day. conference. Please now today's disconnect Thank a gentlemen, great have does and

LPL Financial (LPLA) 27 Jul 182018 Q2 Earnings call transcript