LPLA - Earnings call transcript Q1 2020 | LPL Financial Holdings Inc.

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Operator

Good afternoon and thank you for joining the First Quarter 2020 Earnings Conference Call for LPL Financial Holdings Inc.

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 will appreciate if analysts would limit themselves to one question and one follow-up each. The company has posted its earnings press release and supplementary information on the Investor Relations section of the company's website investor.lpl.com.

and forward-looking operating statements and results, well other include future LPL plans, will management as and that financial outlook, opportunities call statements, about including Financial's as foresees. Today's risks potential business strategy in Such differ and subject forward-looking expressed materially may actual from to beliefs timing the implied that are results uncertainties those statements or current such and of or statements. management's cause reflect forward estimates looking risks events or to

under and the to earnings company's listeners the contained Securities forth Commission information the in well disclosures refers and in with Forward-Looking company the for caption set about press as The Statements the other the as risk release such filings uncertainties. Exchange risk recent factors disclosures and

the will financial company non-GAAP discuss call, measures. also During the

of non-GAAP GAAP release, which to the reconciliation refer the investor.lpl.com. a at found measures such company's comparable to financial can earnings please figures, For be

turn over With call to will I Arnold. now Mr. that, the

Dan Arnold

joining and Josh you, Thank call. thanks everyone for our to

the quarter, altered past daily both the our and COVID-XX lives. Over economy the has virus

our provide first to millions time And work advisors for Americans thank hard for remarkable supporting their to it to commitment when to to needed at and the this, want want thank also is past continuing few over Given I financial our months. guidance employees I a advisors of our most.

in and years, More our their well over but built environments, have we several strength organization excels broadly, for an to on not in past clients. provide advisors executing performs good after the challenging also that only strategy times

provide. but stability clients an and also seeking advice, even only As greater we can number their envision and look the LPL capabilities advisors ahead, not we of

from driving that market I'm are and are momentum finally, growing to COVID-XX our increase executing we spirit, our we three plans forward to our entering areas; are this focus position meet leadership. positioned here. need climate; the how this how our business on discussion We second, contingency today first, and going well and In

over our robust to investing This environments. with clients, a a combination of focus experience. enhanced saw us more on Now, serving stability, built sheet business years a resilient in service and the our has and positive model range our quarter financial platform, and momentum broad We on same in strength increased their and innovated of and our in levels continue the positions made our macro higher and have lead which results. capacity the all and of capabilities At appealing advisors to operating several time, we growth. this of first reflected past balance we differentiated marketplace

Organic growth growth continued to billion, This the quarter, X.X% recorded to increase and translates annualized new XX.X rate. assets all in store sales, new store and sales the as net X.X% same highest level on a retention we first prior have the quarter basis. up increased from is sequential which in as totaled a

closely store sales, were new billion more over XX past in year. Looking the X.X first at and billion quarter the recruited assets

EPS our $X.XX, up from ago. to X% year was to first was which results, a quarter financial Turning prior intangibles

experience, area. advisory two of in to progress the our I key results With this respect want around to highlight indicators

our increased over scores for QX XX roughly points points two First, advisor total increase a in Net by another years. Promoter nine of in just

new a Second, annualized first production quarter. the retention XX% was high of in

investing work our service with talent As and developing drive model like in our ahead, and attracting to favorable to driven culture. and continue will transforming outcomes we by technology, we capabilities look mission these extraordinary

effort. approach and they first for their mattered then employees. data principles are driven of identified of COVID-XX. a Now, can our executing health our clients that to our efforts, the We We agile care care used let's most to of plans work guide move the so through this our contingency to how taking we protecting take advisors

travel, met Committee by to gatherings. included and our avoid our large changing stopping Management principals. These conferences take actions group employee to to iterate of actions changing the daily quickly guided our on a dynamics, and assess series plan, approach Our advisor

of while service XX% our over their maintaining extended to our to placement a in of their the our to employees for staff office moved levels own services. effectively those To advisors give roles evolving offered support more and day. Remaining and at from to we of employees other this high to responsive home family period, jobs our temporary service members hours the work who advisors additional we bonus companies, to provide also flexibility cash we come through paid We for expect. required work lost conditions,

average trading interruptions. no guidance team of by Through to to support Our help our And all daily work clock forums resilient, around with volumes we enrich fee the insights of two research lower and also added keep advisors to and cost, communications sponsors our informed. they this, clients to to were times more increased providing their their as handling advisors updates, up and our no platform. trading ETF transaction stable seven systems level

assistance out problems ways working we increased the We're their challenges will nimbly feedback indicates of more a them in new in provided utilization Advisor continuity of and quickly transition also on we and of how manage clients. our model, solved organization to artificial so pleased that to period our this ways. help have serving through our maintained focus these advisors broadly, into worked business and and new see and the such More automation we with could they come continue of distributed intelligence. thinking emergence as workforce the their own appreciate

opportunities These of are incorporating structural and we evolve work which advisors, to into our serve how we our are plans. certain aspects creating trends

of an share. our positioned shape compete ahead, even for the we existing additional greater solutions for serve of and and regardless see market As need our we advisors than the recovery, look to better ever are

our on it progress. Given on to this, plays, color focused helpful thought three some our we remain be I strategic and might share

while institutional reminder, new As our our in winning compete our also involves to in affiliation models play strategic a markets. independent first expanding traditional markets, and

respect to bring our markets, advisors continue pipeline. With platform our to traditional our and onto we grow

greater approaches reach and balance which are order interesting team alternative has capitalize sheet onboarding recruiting to capabilities in competitive is platform to to continue interest, an even an environment, increase development Our prospective differentiated increased on created leading point in digital development leverage provide To this advisors. forward. stable and this business advisors. going resilient prospective our in turn our These business and capabilities, from efficiency interest also advantage

clients pipeline volatility work and more slowed serving February from were activity, Then the transitioning in and some months our recent Looking as through activity home. at market recruiting to highest closely focused on of their growth. March, January of advisors

pipeline climate returned time in April, their to January on the similar to to the strategic levels advisors in As stabilized of and had our elements business, February. more growth work

largest quarter, a the is the result, recruited were above our now its As April assets at first and average monthly pipeline history. slightly in in the

our is advisors Later we our expand. And April, on work on continues offering Wealth and officially Services. LPL models progressing and Our now we results. launched starting first to and markets additional deliver scheduled our the our team platform. operating to pipeline our and in advisory join have this quarter, expanding premium clients serving joined affiliation In oriented to employee and is as Strategic

solid are prospective end and both of independent our from hearing the for with this offering, the still plans employee we at employee on quarter. we're channels, interest track independent go-to-market Across As advisors. our to

technology assets. continue X.X Securities, transaction also our this and to use capabilities, will organic This billion service, this advisors to Lucia firm forward complement client differentiated We M&A announced Earlier we week, San Diego in acquisition growth. them and based to we and Lucia's joining of later access look our XX year. platform to give advisors a with our

our our to main involves experience components play attract and client that by care model, creating enhance leading model robotics service a and and instantaneous into this are increases differentiate strategic investing second artificial of ability processing and intelligence. The retain industry Our works, delivering play client driven to strategic service an advisors. transforming

transformation, voice to question. can over answer This our As based advisors who ensure providing to connect XXXX now specific with combines is capabilities skills routing certified we omni-channel part service model service professional easily and a to of our recognition interactive trained of are with advisors. their approach our

from out capabilities the advisors the feedback we these quarter. to rest our we positive heard over roll advisors, the Given plan next to of have

their and is are as have reinforced and outsourced primary focused Our such focused using run advisors The workflows, about this business of to can the play last partners. on value helping best third strategic effort. independent play as business focused halfway advisors remain solutions, We on we innovations through marketplace, six the capital workflows, few digitized advisor lead businesses importance the this advisor the generation. in months digitizing and solutions bring the strategic

which workflow, first quarter, of end-to-end into completed is prospects the first we clients. In turning the integration the

client information into advisor accepts turn proposal a then their new a As business. of proposal, efficient much all and to prospects for an it, prospective click a they button a more result, clients integration generates into when This advisors grow now a populates as makes system. it account our

focus for through move successful advisors that easier to we businesses to forward, As it continue we solutions innovative on run any make conditions. market

years advisors and focused unique enabled a strategy support us the the strength of execution need. for past be a few to their during summary, source over has of of In our and time clients

insights our and we look strategy, in gained we've advisors the and to execution envision opportunities this with position continued to continue creating shareholder like, and all look believe clients we long-term and us ahead what As their shape may more learnings even try for of the to new combined value. climate, future our

to turn I'll call Matt. that, over the With

Matt Audette

everyone Alright, thank glad with speak you, call. and on Dan today's I'm to

technology support invested review are years with strength. to over some record the over of both our our past I led growth on clients. that doubling first to of capabilities, I'd improving advisors We like our to business our more EBITDA few our focus These billion enhance service experience financial our last and of in key year. investments and and some than progress X their factors the Before in the quarter a results, to and highlight of

with XX%. to our margins management our XX% Additionally, disciplined combined low increased expense the operating growth range from nearly

and increase period, while of clients, positioned the cutting same nearly refinancings, drove impact advisors all our the supporting on taking on sheet expense, level our term stability the in us interest in liquidity, and positioned their focus and the to longer steps most debt maturities, we unwavering leverage all, even look which in ratio into an balance And lower long-term are while we growth resulted And highest of as turn, our our in greater perhaps flexibility of of growth. history. half. drive we COVID-XX have through organic important account several which better During these environment, the to corporate ahead,

business our our volatile and growth, to natural financial trading turn QX At another client high quarter first a organic now strong cash of from result X% to resiliency $X.XX. let's are results. a our management This is our lead of expense results of combination that, of in during example highest and The EPS hedges prior model up year history. from With the ago, intangibles times. and the balances and discipline was to level,

as on results, which quarter, and our April, And annualized by saw billion, organic March of new And as to Looking at growth to are Total for X.X continued see were of growth. net with to assets assets, decline net our similar strengthen were new trending the a billion, highlight of average by business QX. would driven XX% markets, QX, have our the we QX in advisory in down billion impact net assets I or new look X.X% assets monthly levels COVID-XX we offset brokerage in in XXX we that we QX, month equity the the from second within XX.X month the best at rate. ever. finished total growth, partially

or over continue were assets, trends rate. annualized total our assets Now this driven inflows of advisory managed growth primarily X.X new our advisory looking increased Advisory XX% assets XX.X XX% billion a by growth billion annualized or mix, at see Within business to we centrally XX% net quarter. a of rate. positive platforms,

net on assets. like Before share item new I'd moving one on, to final

new both is metric to and our individual evaluate assets space. As company growth compare organic you a across know, industry, to rates in performance our net key

the both be So is we reflects are generating across organic and important net definition growth it that our asset new comparable companies. full

fees, we well of interest while prevalent the combined our With do. peers. we advisory In found contribution sources most growth approximately definition, our these evaluated business, the include of that as generate as perspective, We year. practice do firms not dividends, X.X% asset of and per that our

organic This across reporting. new So in the reflect will in growth these more more beginning comparable our we fully asset QX, and make factors update results our industry. include will net our

key presentation. historical our provided metrics have We in data

assets generated net can see sources. the you from these So new

financial our let's Now to results. qX turn

as was or X% XXX line growth gross million XX top sequentially. continued million, Our profit up

net million, production Looking by expense, higher mostly XXX advisory fees at payout from fees and was as were increase million of the components, The commission bonus advisory up seasonally QX. as driven XX lower sales commissions. well

to I quarter would fees that off primarily of Looking QX, ahead priced advisory prior balances. are highlight

saw decline results. reflected be first fully So in equity in our the quarter impact the will QX the we of in markets

to on fund assets. revenues Moving million greater up and partially transaction based fee X mutual QX, asset sequentially, driven no lower average usage were in ETF offset revenues, million sponsor platforms, XXX by of by our

offset mostly from higher revenues, The they million, decrease to QX. by was cash cash Turning client client XXX short-term or million balances. X rates, X% driven lower were by interest down

balances, QX, of cash billion sequentially, or XX.X nearly in coming increase billion that they XX March. with XX of at closely end more up were at billion month the of the all Looking

have look April, slightly the only cash When impact billings. fee advisory steady we from declined at have balances and of remained

As QX, driven mostly for basis short-term by client in the yield points, XXX interest was yields, in ICA our points rates down basis QX March. XX from decline cash

we light QX, provide it'd to to helpful the environment. some in disclosure dynamic ahead be thought Looking additional of

have variable hope our part key as through vary fixed, ICA when new we in and our yield balances shared into how will overflow of metrics our We you environments. helpful presentation. this different find thinking So insight

ICA were we yield our cash be rates, assumes rates interest given no further basis QX, So expect and the XXX around QX client balances. where This of to changes in points. rates end balances or at

by trading activity to increase March. revenues, on Moving they QX XX the million, were transaction driven up sequentially, fee in XXX in primarily million

to As they transaction similar in April, have we levels were now look ahead, elevated returned while to early volumes somewhat QX.

average. QX this, X monthly our was million transaction April about revenue Given higher than

or Now about core expenses It annualized an to rate let's with QX turn run starting was of XXX million. G&A. million in XXX

opportunities focused to look year ahead X% spending can this to growth. reminder, to levels. range our as I we of investments, our like as some year, we XXX provide with a on to balancing the outlook started a discipline, environments wanted expense on the XXXX or organic X.X% the remain growth to of drive some We full As context growth share with especially XXX And best from a G&A million, core rate plans.

traditional entirely almost organic in is growth, both like QX, investment to new markets as increased our we as saw The driving in in dedicated well markets.

to of range, to dynamic, We rate expenses, us a further QX position. have and gradually also the build below positions end the year sequenced our through which outlook our and with our flexible low depending spending the out be how strengthens plans on plays run that year, year full

at way investments our continuing spending more given a that, down the G&A flexible are as year prepared environment lower organic right now, the range. as we and though the now to believe the half So in macro long-term think about we the from we're depending level, invest, our are will we or is best results and well planning growth of growth we be our up said, in as evolve by value to opportunities That to remain generating, are outlook core here. our shareholder on drive modest adjust to for our how full

promotional by X million, they higher expenses, QX up to Now back expense. sequentially, primarily million driven turning were conference XX advisor

anticipate decrease large expenses we approximately ahead, million by no in will Looking so QX, have conferences XX we sequentially. conference

our we macro environment while cash would scenarios serving positions from management, and to we been look balance capital in flow. deteriorates capital generate still needs, if flow excess the strong at growth, our for meaningfully on cash volatile, while to our deploy Even here, macro continue the be advisors, where well to strong including has Moving paying regular investing dividends. of continue This sheet. well us a to maintaining current

environment provide for is capital discussed, pursue and and We foremost, more business finally return organic opportunities to as As unchanged. appropriate, our strength deploy value growth for framework even allocation, where think organic our us given the capital to for have our invest opportunity first this and And shareholders. can proposition. growth, capital to we M&A with we approach excess of then

This the here may approach climate create our opportunities, and remains M&A more also same.

we're multiple firms second client and in anticipated and close aligned interested that to in the Securities this and of approximately an has advisors see year. like of EBITDA we We firm are are in The operationally six are and starting assets. times with X.X financially They announced this opportunities the strategically, earlier materialize of XX Lucia purchase acquisition we it billion week. half expect transaction to

excited to LPL the family. advisors to Lucia's are welcome We

QX As for shares repurchased shareholders, XX in capital dividends. of and of our we to regular paid returns XXX million million

opportunities program in growth, of Given deploy QX. increasing our capital and the towards environment, our the end paused we uncertainty for macro repurchase to share the

We and will the macro revisit path our we have plans more the clarity here. from stabilizes on as

another the history. results excited look we growth growth our including are best our value. to delivered as closing, driving QX, quarter earnings strong organic opportunities of in continue about in and we shareholder long-term creating forward, we In and And

operator, open that please questions. for call With the

Operator

Chubak first with Thank [Operator from Instructions] Our Wolfe Research. comes you. question Steven

You may question. proceed your with

Steven Chubak

Hey, good afternoon.

wanted question a on with off Matt, just So ICA. the start I to

the appreciate the disclosure XX Now Slide enhanced for really ICA including on maturity the contracts. schedule

trend long there has as of saw this of the given April, Now you unique elevated I some although and material would then was in pressures the and be a uplift quarter to cash say noted, industry end. cash you broader and that in remained just

given balances floating today You deploy same but pressures curve? on into of to your fixed what's fixed your the of XX% target, XX% still just rate those some the some have to appetite

Matt Audette

think first long-term. few think play I a I to I our there. there's approach with at factors mean, so Yeah,

to of our overtime, still holds still XX%, makes XX% target and sense. I think

and I interest key is think our subject having period short-term from our rates. to think environment, to advisors while makes standpoint. them time, flow our here an really rate helps through on about the financials reducing the a longer we're of for course I much of investment interest most focus over sensitivity movements us And that what sense

the when amount to sheets Steve just on with XX Things that your much, with cash than points. about look is balance on of at and ago today, an I right now. I'm at different of are think months point XX rates the few understatement your I market you much basis than year the zero for to point suspect call the a and – short-term

think versus And amount I those think XX the contracts place market another in those right that the sure I of I'm it of put end the meaning kind now, in of demand now there but light. contracts, that's contracts for I of on end floating spread the quarter, referred to some are overflow XX balances years the we're spread. the it you But on with and opportunities – the range, tactical fixed you on with kind cash the I really two the a we're in saw of I the out to variable contracts And a that more be zone, fixed combined the billion towards just contract curve, putting – focused that flat. disclosure rate pretty the the there. short basis at think is in one of think that that we there kind point of in $X to broadly so rate There's might for think in demand part

environment long-term you gives color hopefully, really So I the now, is little the think of that about strategy right bit but a unchanged.

Steven Chubak

provide Dan. that and I color backdrop. thoughts some to question could thanks updated hoping switching M&A or the with that over just us Matt Now you maybe on was color then for for

recently hoping same can industry just a leverage You I the much the you a balance of your and opportunity some was the that hearing give how executed perception players of feeling ability the is more for your increasing stress April. time, M&A employ and of numbers how At that to also are the evolving we're some of deals, the given lot across deal. context just strong competitors levels as that what private some is to sheets weaker you enhancing also in of recruit more maybe transformational saw maybe –

Dan Arnold

hit so it there's If Yeah, don't try. there. all a Steven, first on lot I the

piece continues which I'll as redirect perhaps let's just start our strategic me, to radar. and know, can place, from with You but M&A you start the guys the strategic is stay M&A on

capital use first As a we growth priority complement. organic reminder our and is to as of the use M&A then a drive

with of those the One we segment RIA BDs across small is of marketplace. the opportunities see M&A do and

as is As for you value said, example our of and those practice both their opportunity business create principals great onto a we the of advisors Lucia where platform. transaction that the transition can we

see there. an would opportunity environments there what So that be coming we of the would based continued we're tell on that them, do continue segment demand for of would out us In like marketplace. to history within anticipate opportunity we this consolidation is and

And marketplace so, of as we to that look our the we segment said opportunity. in at for continue remarks,

I around with asked opportunities. question to the respect you think transformational broader

I tell that organic like perhaps think to disrupt the would to of you've this, and the to invest add macro again, meaningful have on drivers in their sheet potentially overall growth. conditions generating firms. that, to tough times businesses history got Yeah, in of economic that conditions where they us tougher a a way creates thus continue that forward capacity balance leverage have, those types that drive

a having and think will an conversations have from strategically, aligned as with If interest begin We you operationally backdrop, believe to growth. would about some that recovery, financially again, at we organic see is by as M&A it of firms, complement I and business, way in we on our a I in the dialogues some dialogue. so V sort radar. look standpoint strategic our pivots with segment so an do other type that it's of And absent to strategic shaped think with the look potential same that those that at we we and

landscape. So least you at perspective, M&A on gives that the hopefully some

relative over be highly line the I propositions sheet the it question given that tough, about of type to financial a growth that with I of balance were the think asking you competition. value can in conditions the you your macro flip leveraged and to of challenged fact alluded some this top environment. if to drivers the

I in to and competitive continue invest enrich we it today. appeal services, just to we think capabilities, for that model the of value model us, we look baseline technology, our through that good its its feel about that offer at its

and you when like think appealing this our with pretty resiliency, we that an advisors new environment to possibilities to alternative come to And explore we'll we've to about our across add of and for consider. stability continue and think that position I that strength advisors an through new the that the terms creates then space those to those scenario capabilities you invest, attracting and in markets capacity continued platform. talked of independent take and a the

to it associated you So those model, a us have compelling opportunities we with tough a if then team think alternative your option that and pretty don't makes beat. pretty creates

Steven Chubak

great and for up thanks will. you that's if Well, Dan follow three part indulging my

Operator

Thank you.

Sachs. Our comes Blostein next Goldman from question with Alex

may your You question. with proceed

Alex Blostein

Hey are how you. guys,

just around, First question growth. guess, I organic

the guess to the to different than to and periods net months can about distancing. see factor over of your strong new of times we've a key I in of solutions talked in market ability new and coming past. you sustainability differentiating about your you you at seen really do more assets I growth, we've in in during pipeline also much into growth a about March net So that convert new in as volatility. and guess kind what robust that extent point asset Obviously, picture slowdown April different quarters. the – much a assets digital were of comments net seen the social what tech investments talk And past,

Dan Arnold

question it's Yeah, a so great Alex.

that. welcome take on And cover of don't a at again a stab you're follow me to I ask if that. all Let

of And that – I one that of think sustaining continued primary QX, of focus. quarter, the and I respect is aspiration our with I growth. that growth, certainly trajectory think And the coming a on areas we trend. think we that our type in had NNA to good organic into

nice a off point. jumping certainly that's So

investments forward, look you made that invest we as us advantage. the competitive continue three years, our that ability give differentiation we over think strong think will a And extend invest, appeal, positioning again, real as I to and to we've competitive we to the continue talked that a capacity past from believe about. to

with our you also platform is a then serve of think, through you and had match what environment resiliency the and our that add ability advisors I you that baseline, we've the and to that tough support take and to challenging that new sales, the And to sustaining an add invest that you growth, for it. ability about sales store it, same organic as in across but we again, across and think retention. combination creates opportunity interesting us also both store

continue trajectory to alternatives time. over package with think that our I NNA so that that that and of respect And at and can drive we're levers pretty to encouraged look we we when options, trend

order advantages, is, alternatives focus about and answer our we our in continued and short good yeah, on options, sustaining to So that. that competitive do feel pretty tools

Alex Blostein

Thanks for that.

Dan Arnold

don't had you second think you. part. got a I Yeah, I

Alex Blostein

pretty it well. think I covered you No,

up second color more balances just my around to around, of also for think those there's ICA. I pick to to spread. if accommodate the overflow the expand little bit guess to hoping I a Matt, in it was points XX variable to any some XX was opportunity basis order contract question capacity get

Matt Audette

around them there quarter mean, with think a I put we of put X of in most I quarter, at at in disclosure billion. contract in the I you place additional got of think just for we've we Sure, the this that look if the end

look of those now of just think extended I you've period think for be X and long-term billion that not overflow the balances cash got under over in So to I are balances the opportunities. an probably we'll for But in going course, always time. here,

I between pretty happy a March. portfolio bit improve at good the think on we're the fixed variable think we tactical there'll were things but done get Again, I and from increase of that X So I the think by to the little working the end we feel here, of it, capacity be might this of that bulk quarter. billion

Alex Blostein

thanks Great, much. very

Matt Audette

bet. You

Operator

Thank you.

Craig Our next comes from question Siegenthaler Credit Suisse. with

with may You question. proceed your

Craig Siegenthaler

evening without staying person to had much healthy. better first business competitors. How your gal new Thanks. I like are hope pretty April actively Zoom can credit Good survive recruiting and you hold the And it meetings? a probably and to question sounds in assets. your you're than Skype, everyone Alex's the all using impressive ability advisors on

Dan Arnold

or and recruiting in as that you and And a good quite and over take organic lever speak to ability And the last were – you we what we make them And pandemic marketplace. recruited assets the efficacy recruiting to year, the progress person. and traditional in see is a distinction billion we're well, drivers where continued There's the about model earlier. was if the with that that a look growth. in of feel we're create full our appeal business key competitive I for their the as to nice Yeah, and the midst continue the trend that creating of there. done We I of to delivering in continue obviously about take big many to invest the that of investment in I It's second the capabilities disruptive part of of I'll opportunity us. and in we've talked capabilities competitive Look, create team that the ongoing differentiated the I some solution it certainly processes said, that it making feel there XX think go to couple March good think effectively and guess, new that. a a is to continuing trajectory. of that hit, differentiated at development to typical force about

transition see into solve the to and those had on it'd the some couldn't that leverage we be activities. in of to quite so think terms pushed the as overall that I an We some second that where go our help in did couldn't And March able Then to complexity. that ability were options continue we could of those deals recruiting. said and into done of visit the some though, mitigate of a We things quarter the agile back of explore office travel off And and because get digitized of tools impact to bring work you we them or a had alternatives challenges think that continue to and seen you creating opportunity And digitized onboard about have seeing where April ramp a in different the lot platform. forward. than what some them created going with But assets you couldn't team's and really our set the and and we I overcome a were leverage board an cases in visit were them these to automate home as means digitize in traditionally. accentuate or they someone, processes office use pull we certainly we've points. up digitized past faster to capabilities, we're we'll ways some

spirit it's cool of that work possibilities continue refine, on, learn. we'll there's getting continuously things all the some still to in have So But there to better. we'll we

Craig Siegenthaler

strong that change in was composition rough you and number If new same contribution, new know sales March the mix there sales saw March into what and versus any in February? and store do store we you asset January split in net

Dan Arnold

I'll first. take additional stab that let maybe at Matt Yeah, you And color. a some give I'll

would new took of that if the store trends, beginning the interestingly seen impact created think at the pandemic and I had quarter, a you sales you bigger at in look, as some some impact. if the you March sort have of stronger

quarter through actually in still store strengthened a the sentiment and was goals the clients good completely as think value I but beginning well help to as engagement lot sales positive, there advisors dreams. when their proposition engagement financial think, their was of the of the changed, March the contrary both insight sentiment again was quarter, providing they in strong was to these that but as with had perspective of same life where terms and as futures about and the how

to higher put store throughout that? a capstone And on you want build so, quarter. we actually sales saw the Do same

Matt Audette

thing. was I No, to going same say

So you well. summarized it

Craig Siegenthaler

guys. thank Great, you,

Operator

Thank you.

Our with next Citigroup. Bill question from comes Katz

question. your proceed may You with

Bill Katz

and thank but super was too perhaps just extra soon. very structurally appreciate the one you Maybe disclosure, for and Okay, Dan, doing maybe much you it's helpful, okay.

April, where of equal? reached the you're like of point despite back. kind sense all think What's Do just your in client tremendous in peers cash some sort You the have higher state relatively assets and markets being seen in cash a steady we've conversations becomes a percentage spike and seeing your your bouncing a else others of you in field?

Dan Arnold

about – Yeah, data one of to look is source Bill. history think that to We way question. as it And can it's a really as question great to early. a

does in or have see I also this, think an people and look ongoing human do it less think advisors believe to just cash impact more this. go an when like is how sort allocation volatility. through i.e. of of impact normalized market My what sense tail it I allocations? you'll environments behavior about on you can even you

levels? than long You'll sure, and of to that's percentage a cash risk return probably sustained see overall more X% get work. the those I'm back one money backs have to think appetite taking put Do the of not I we asset market a normally as might. on more bull

So X% the we to in of, think X% it's jumped about now of as roughly range assets. off that assets total you

which thinking. think I over time that that to long-term, a to to think about least six at way be data to play there's but five the may this collect and says your a more enrich in acknowledging and you framework, a reasonable out, lots range to live that be of historically might of

Bill Katz

and little been may on little conversations quarter the Matt you. of pipeline? – to one the quarter? acceleration decision just truly to the volatility is back you, from in those so business a buyback, for solutions you And your us apologize. second a heat have that. much desperate, sort bit of that evolving, the thank Can two versus bit the to question, how second how an I'm macro Okay, going slow for first my going of you then particularly just And to Thank pause parter, M&A with update I give building in maybe of sort – of

Dan Arnold

Yeah.

business So over turn I'll then solutions I'll to and first the Matt. take it Bill

advisors around it's in our good value continues the to the grow up a good in things solid And help arrived, And and just we look, and are noting. a quarter, we roughly is start had operate good So quarter. base that. that when maybe which baseline really their saw reminder, saw worth way solutions XX subscriber proposition affordable over the that's providing businesses. XXX to to feel momentum our access we as QX first about fourth with to two about so The is advisors. to business everyone, COVID fundamental Certainly we all resonate expertise for quarter,

begin rightfully starting some subscription through is the prioritizing And to advisors who not first creates it's over terms the focus of and progress something clients their of shifted that that. use in in and pipeline one up and The headwind new. set supporting as they services, working serving were to to slowed potentially think short-term their sort I that those a of

typically We we also some as solutions. conferences forums that cancelled would for used business have sales

just of we we are we solutions but offer find which do, pieces solutions, types types of to how which ways QX. offer those sometimes those to of in have other So to those consistently centre

well. a that of So headwind has bit as a

time them from on the easier. that that really tech given these these solution help solutions in business was intense cash two home with in simpler weeks, the though we evaluations, the communications working the environment solutions the to with generation, or of testing a side quarter but first actually creative, where the really flow quarter, literally came magnified, using more within helping of within advisors of and I it, them are and cool them analysis solutions, lead the manage the up favorable stress making and was office complexity with CFO it a solutions helping just marketing advisors remote whether services, turnkey again, operating the the where and client helping their value think not

So to these it reinforce really solutions does value offered the the advisors.

about were we excited they long-term and opportunity again, the value create. So, set the

that to Matt, take the got just headwinds some part second to of we've You had it. through. work short-term want you

Matt Audette

balance most Bill having think a strong sheet pause, just look program our organic when mean, the is I of emphasize on the would proposition, we and and I critical thing repurchase Yeah, that. growth is supportive value I our at

through with downturn ratios So this, could it come a risks the needing while like space, bank on, I in with being to cash, a being generate and having have right. go bank loans. to to to able along capital to with compared not that others associated the low manage a and on leverage continuing losses support to being and

really, think really are those So things I important.

this, that balance to to look that So so have in everything you able really do share I continuing like when an able need, support sheet strong at being being balance think it's abundance of of environment an purchases that to against we out caution. we and

we'll more clarity where from the goes kind help macro think I on getting of front. here think that on I

think that's thing. the primary So I

think think I M&A, those and are when you I interesting. there look opportunities at

with our that. would The along. typically got is that And that'll a user given lot EBITDA the just price of combined not comes with discipline reminder on discipline described thing price the clarity there, the Dan only M&A, That's given well. I a come large our you're it's deals. add big think not of you've I that – EBITDA leverage talking large, unless

perspective. get our a you on little helps that color or hopefully perspective So

Dan Arnold

Thank you, Bill.

Operator

Thank you.

Our Jeffries. Gerry next with question from O'Hara comes

proceed with question. You your may

Gerry O'Hara

and managed this taking my centrally or this very Great, obviously thanks strong portfolios, growth questions continues. for a evening afternoon NNA potentially. The

growth still at it Just of and continuing it an going trying from is the on forward. to program of wholly of the sort to point? that's advisors it what sort sort might strong evolutionary go of around get a sense this of forward by drive this trending in stage or a adoption this you see basis. it adopted where kind advisors NNA Is Is

Dan Arnold

that. Now, let color little me a anything add behind you on that. Again, give you to if want Matt,

of of we earlier I give we innings part a platforms. the managed drive level, high the flexibility, advisors, in in will and the the centrally the support of the continued interfaces utilization nine capabilities, investment the the adoption all centrally improvement make help and user continued took optionality use So terms game at the I and look, you're the think think And solutions. if in managed I of

that add for those there add to those help to such out innovation solutions, work managed more got us on clients. terrific options there's and and centrally recognized you've value investment we think their I create that advisors to strategies and

appealing advisor to is of value a gives access way take in it interesting do kind and of highly a can on simplified, advisors. the to hands those the really off You package wheel digitized to that their

evolve capabilities managed centrally evolution we between our think to capabilities utilization and platforms. correlation the continue As a those the the of there's of there, we

can be they it? advisors that to their more recognize leverage either driving try as great look a for and more or as think costs it practice What's I lower overall and their and I point to this flexibility valuable that their concept and of they more can appealing type a activities, think practices. to a more their use create more more leverage time to becomes reallocate point

early why for evolve we want So long we points Their I only leverage look that's a solution. for we practice, which nice don't a add game. create you parts Matt, really think, that? to say a anything sustainable in know of grow they and need it's to more the will in appealing their drive is the combination trend, to if as

Matt Audette

well said. that No, was I think

Gerry O'Hara

coming kind this that specifically apologies to sort road current this if that promotional enable activities. guess know I else there's or read the a but of missed if perhaps somewhat statement? quarters, then through continue digitize virtual will sort you And impossible, of of if of with is two, equal intuitively you in, perhaps kind clear, certain and it backdrop. of I But you that this – That's will, don't thought can down was to have there is perhaps if promotional guess or confirm one current guess, about ways I the one, and I come if but you capabilities the I helpful assuming kind of would expenses Matt activity all I for in likely

Matt Audette

the come few, on I that mean, XX QX, in specific expenses have million. promotional we of Yeah, sure, of conferences, they'll about piece think Gerry, those the both so I conference by down if any very to

decline a definitely there's So there.

to question, of jump bit we have the financial the in. to move our I'll decided On that you want But conference, just then conference. already little largest and and your of virtual of if in the a is to QX part ends a conference give second Dan, year our national

are that. stages in of we the planning So

So answer question the to it's think possible. I definitely

spot And me. We obviously, that. in Dan's working give middle on on better some in color than of a to that are the

Dan Arnold

Yeah, given to X,XXX to There's and in to lot so digital conference. a so we same pulling together the X,XXX would content again, announced great July obviously, in a which doesn't of people are take platform. risk share more sound this backdrop A we working like shift technologies of concept. folks some that on virtual that a that and ways interesting to cool

quarter And on so about right, so think with I we doing with more that program, do overall exactly conference. associated part that. and how that that, third to of that, our we think we're would But being working to the a as Matt's largest through cost working come sponsors be

of you some big we expect shift or focus in As conference. see change other and would the on overall the our to side economics around that through get

Gerry O'Hara

questions Great, Okay. afternoon. thanks taking for my this

Operator

you. Thank

Devin comes JMP question Ryan with next from Our Securities.

proceed may your You question. with

Devin Ryan

Hey, guys. good great, evening,

you to markets further equity I of seen had benefit there's the here or recent upfront of With lower, as that organic will. seeing years strong would that just obviously abruptly kind which question have line, industry, was maybe of and kind quite maybe affect even scaling with economics attractive, make I you would about that interest supporting up you assuming it's you expect growth accelerate bit recruiting upfront also guys in how on would more those lower, the interest forward? to of your the contracts or think just some growth recruiting firms moving in spending move may things remains and which First the that hold the rates a are potentially And whether higher investment of appreciate probably guess packages? guys if what rates early. organic competition moving

Matt Audette

little the the environment we're could that mix but if they dependent what services put any really think will, in is change. each so into down We're couple sanguine changed, but to ago, things – as products a firm I years rule, I no we mean, the individually that but we approach never general use, there. those on the a a returns. to continuing on of adjusted change is way continue models a underwrite approach We've I bit, of underwrite buy that We you deal Devin, we'll view, our returns. so Yeah, and to on macro, returns, based those update and on just underwrite underwritten would we'll

Devin Ryan

and presentation updated all just the inputs think portfolio. helpful think on then you it, in to respect commentary just the the detail the up trying that, appreciate With ICA follow fee schedule. DCA And guys and customer to on the very piece, cash, might as some Got to whether road do trying room well that whether here. opportunity additional just of about there that the to piece kind of be to and do for to there's the more down kind the

Matt Audette

when Yeah, you I per to that think word mean, I fee it's account. one about product, think

balances So are economics. the – overall – the the in drive of kind there

clients made for that in there. think things. the right that adjustments that that the think are think based in if balances changes I So But that the is And I are. feel that the have a we've with made to impact could you and on I that where the like spot spot changes we over long-term referred investors those that product we competitive

Devin Ryan

Leave Thanks, great. there. it Okay, guys.

Dan Arnold

Thank you.

Operator

Thank you.

Ken Worthington next Morgan. JP question comes from with Our

may question. proceed You with your

Ken Worthington

you think curious good home advisors that wealth manage or something work the will the be there from of thoughts a COVID-XX or on management might in the Hi, their really evening. business, advisor business. longer either your changes hear way of relationships the that impact just to term I'm if else their efficiency

Dan Arnold

Yeah.

starts drove care and of opportunity. So embrace of environment with about our Ken, that and that to established we clients magnitude time this also us the their by how and I market earlier, across be firms we entered think the how the individual care the doubt think pull industry taking And at driven they some history – where there's advisors this And this employees. can think create through. protecting will we and safety they of probably tells so as principles with change take again want and likely our health that said I the of and same desire I change no the that structural some will change much

So making learning in tremendous a we significant one took opportunity place culture sits managing learning to through next of this a that this drive those and the those agile values. of principles decision went right, change to actually, to our drove there's given to that through applying this us and inside our was spectrums, way. learning our both thinking, that our and innovation of an across amount which values our in commitment And change, is

their you examples, would about one that a of and and business. people engage change, I or believe with those they brevity think where – on them we incredible so we like hit learn And what you real distributed advisors that to which creates said, apply climate how in engage to learning we or does in, in significant structural of that talked in opportunity in this, the be employees a as about you drive apply it workforce. to of even forward mean think XX,XXX this an X,XXX And would case going how in spirit support the And our we as differences how millions nearly how clients.

remotely think you there's and have There that things and a you will, experimentation, that never by how that on flexible estate think this you now so up have you about shapes a do do different creates of believe how be of an you talent things workforce, in you could manage it, jobs that the playing ripe and way to home otherwise. And if a that we which opportunity point real a possible even how real opens were of to different portfolio. opening managing view didn't think about field, that your may schedules, you all to doing do from sudden access done your

cost the one have I sits supply changed different AI structural inside by to just that be use digital changes the we We through. be employees way will how people's of and client. and a with ourselves pull sure things lean advisors tools learning opportunities, And a how whole your really right, that into you outsourcing to will changes position through forward, deliver may those desire engage they those thinking robotics, more, structure, and to all how that's this your if think we're looking chains around at reshape example, and it their different challenging the your forever to suggested. you to to experience going client make that reshape believe And pull to you

So that's way coming a the of our arms purposeful this. of cancer trying best kind the getting is out to much lot early. we We've an we're but spectrum will and opportunity It's of as got and be informed to as having isn't thoughtful more There be be emerge. forward. around view to see about that learn,

Ken Worthington

well, much. Great, thank you very

Operator

Thank you.

William Our Chris with Shutler Blair. comes from next question

You may proceed with your question.

Chris Shutler

the advisory How that pay given on do in follow the you're To lower Fed about the doing question structure environment all environment of you today, what to TA hopes underwriting guys, willing you Are from rate bounce well. when think funds Devin's the rates affect Hey, in earlier. assets? change it up you're or interest back? for much a kind hope does you rate

Matt Audette

Great, Yeah. Chris.

not earlier my word. think in macro I SAP on So I We're the answer. the use we – sanguine

underwrite returns. disciplined current So assume that And we undirected on deal based don't returns each say And to individually in I then on current underwritten. is the the means rate we environment interest again, in macro. mean, We any that, improvement environment.

Chris Shutler

million second a then the small in both impacted? you QX, expenses the since to will and this And you I remainder just from of enough. on conference anything you're year, conferences, fair Okay, reduction the can and revenue a expense $XX those be be say to how the going about just year virtually one, mentioned doing QX think question

Matt Audette

really based QX conferences, QX. Yeah, the primarily timing year I reduction which for planned QX just of the think are and is this on

I think sense is little revenues. typically in you X QX that in Dan that give about think virtual, million costs a where talked I around million we XX in earlier, or have X conference million and a our bit conference sponsor around just focus to going

virtual a how conference, evolve. through think we'll to moving approach think we as those think expenses I So I

make rights very the something down, we're the and digital capabilities compelling but right. have travel at be the that You'll expenses, any areas conference that's the of won't same conference, there that'll that cost on obvious like of for things it time, to helpful, we bring reasons do virtual investing focused in that

in So QX as sense so QX, estimate we're planning to as stages coming best in now. quarter the then. give have We'll a you update to an you what's in next our

Chris Shutler

Okay, thanks a lot.

Dan Arnold

everyone to again you Thank speaking And us to taking with quarter, for we join look stay you. next forward healthy. hey, the this and to afternoon time thanks

Operator

call. Thank you. you and participating. Thank Ladies gentlemen, concludes for this conference today's

You disconnect. may now

LPL Financial (LPLA) 1 May 202020 Q1 Earnings call transcript