Earnings call transcript Q2 2023

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Operator

Good afternoon, and thank you for joining the Second Quarter 2023 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 and Head of Business Operations, Matt Audette. Dan and Matt will offer introductory remarks, and then the call will be open for questions. [Operator Instructions]

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

expressed Such forward-looking of and subject forward-looking materially events and that to to beliefs results statements. actual those risks are may unknown differ statements cause current or and or or such management's uncertainties reflect implied estimates in known the from timing

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

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

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

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

Dan Arnold

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

the help of remained our to take financial important journey so help we quarter, that the their our life on of on care guidance clients of clients. with to personalized support Over advisors achieve and their provide dreams. our work, goals taking To can their care focused mission, them continued advisors past they

industry-leading scale our combination platform. to This the robust quarter, of we to continued and and stability to invest of and our of commitment our the and into platform, see grow due our the model back appeal feature-rich capacity the model

across leader progress we vision result, becoming our the the market. a to advisor-mediated make toward As continue of

we remain plan. thereby the another make on better solve quarter to strategic solid the appealing serve we while than our respect performance, focused anyone results of delivered in helping on In execution enterprises capitalize of and continuing advisors opportunities With our player on challenges also as progress most to else the industry. and that and spirit,

organic our with equity In these assets by areas, $X.X quarter, I'll total to both second was starting increased the solid results. higher quarter review of growth continued complemented business as markets. trillion

organic contributed assets representing second approximately of This adjusted to tax assets X.X% seasonal organic payment. or new respect for the an net growth, X% representing past organic In With over large XX which rate. $XX a to were when net annualized were billion, quarter billion quarterly organic recruited growth growth new when enterprises. record, $XX periods approximately months assets excluding XX% represents X% QX, billion, on-boarding

by enhancements market. as our driven was expanded outcome ongoing addressable to the model This as our well

focused and same-store our experience. on remain clients Looking differentiated serving delivering at the advisors sales, a

As a result, in our advisors new that are solid sales drove share clients and existing combination wallet same-store both winning expanding with QX.

of the respect through as we service evolution enhance continue and to With retention, our delivery as the to functions. the experience of new technology well operations and capabilities adviser

retention result, second a and the last asset was As over XX%. quarter the approximately for XX months

quarter led to outcomes second from results a XX% ago. adjusted business EPS, of an Our of $X.XX increase year solid financial

now on Let's the progress strategic made to we our plan. turn

the being a the to which to means enterprises business. deliver advice is advisors to leader become and great center across clients adviser for at be best vision market, long-term the us of operators to empowering great Our and their

and market be their technology-enabled at business. deliver life, help us extraordinary share. vision solutions and and the gives this expertise, that we organic And leadership their providing growth personalized the adviser to solutions across are clients. time, we're to experiences same this bring capabilities well advisors planning to sustainable path human-driven To supporting advice efforts advisors the experience, to Doing and in a industry through

on we providing so, categories: solve enterprises create focus adviser-mediated look the where of for expansion, advisors the needs in in broader advisors can such spectrum compete we our a XXX,XXX around value. all capabilities where work And on horizontal primary to differentiated adviser and that our affiliate ways can execute organized Now expand doing for strategy, to that we two durable, we integration, market. and vertical that

With This involves the enterprises are by for and our the start evolution advisors expansion. around of themselves the work context, for our where affiliation so they that they horizontal meeting flexibility efforts client. let's practice as business perfect model, the can creating design in in with and

of expanding growth solid contribute a markets, our As our also addressable new our to result, component market while our traditional affiliation. this helps in through strategy

saw we high approximately market, independent quarter, a the traditional over our $XX reaching of new in in strong quarterly Now billion recruiting assets.

well of also of expanding win efficacy our At appeal and respect With our our the employee strategic we assets business date, model our new and recruiting delivered QX. $X time, we our the and billion pipeline. the our team, depth offering, breadth due development RIA the maintained industry-leading same to quarter in to models, strongest roughly affiliation while rates in to enhanced our of

expanding of to them experience our contribution organic for pipeline each which models, continue for position and In these increased growing demand growth. we

carry we ahead, to new our for and Looking traditional this affiliation. momentum into our recruiting market QX independent both expect

to Ground year. capabilities, and firm service. also next XXX We approximately advisors with access Now early a planned to recently and $X.X Capital, give Ground look Capital's forward technology our advisors organic to This them our the growth, will client onboarding California-based as we complement transaction billion announced a differentiating acquisition assets. of

the With and onboarded Bank respect on Bank West we August. onboard enterprises, of to recently track Commerce large in are to

our growing broader ahead, across traditional our strong we and loans. in enterprise the and credit by momentum pipeline bank encouraged are including market, Looking

Now to integration vertical shifting efforts. our

launched Hub. their marketplace adviser's them extend so new end-to-end absolute we This and and optimization Here, called performance thriving for value-added relative all capability win we differentiate in and in comprehensive understand In performance business. an a quarter, purpose and delivering the across Practice helping technology basis. the this run delivers data of spirit, on are focused business, that on advisors a solution that capabilities, better format, can structured an services

additional solutions we to further months, the functionality order to personalized in will we coming services, the insights it and expand enabling help overall advisors by over of performance technology the practice. offer enhance the And around generate

our tenet experience, for innovation growth power operate innings, advisors. in Hub of business. to that opportunities still Over early the artificial and a an help this as how will we're advisors time, our co-pilot the leverage we we're to adviser see a about excited And intelligence additional as unlocks while serve Practice key leveraging becoming it thriving of run point

vertical our the strategy, of business. separate in of role our seasoning enhance continue play to and value by Now expand our evolving a this integration and are services and encouraged the proposition within we appeal

QX, to increase. with services continued We X,XXX a number in XX% of As the active quarter demand ended our the result advisors up approximately roughly of users, utilizing group year-over-year.

new enable and with As planning further we planning services, value is helps to the of advice new continuing advice advisors to part This deliver such help our broader material of work also as and proposition. services. solution, solution differentiate utilization we're suite adviser's tax can comprehensive our that increase tax which to services, of create clients intelligent existing savings

service receiving unlocking interesting feedback demand in market early services This our positive in synergies existing the is with portfolio. while also

adviser to address portfolio, our the continue our needs our base. Now broader we approach structured evolve leveraging to in to innovation are services order as of we

digital may to products. that progressing help which these who marketing In payroll, less through streamlined complex our have existing are are CFOs of spirit, of and of solutions solutions pipeline. we innovation advisors Examples essentials, all creating versions include

we on our and forward, and growth. to we enterprises expanding As focused support and better drive move remain our portfolio enhancing services to advisors

and our In advisors their for summary, increasing firms in driving while continued and the market in to growth quarter, invest we second value proposition leadership.

further As we remain on we strategy marketplace win result, advisors as value. the we've look to got our executing help ahead, and differentiate our focused long-term a shareholder in to

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

Matthew Audette

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

and focused continue in business we new our momentum build and remained quarter, advisors, shareholder on second and organic delivering offering. our This our our strong focus markets, the and we both succession in growth led serving to liquidity In value. to growing traditional

business Bank this month accomplished earlier quarter. this Crown Capital, to In proposition. addition, to the the continuing value of into We industry-leading preparing onboard Management an Commerce all acquire in of agreement we of entered our onboarded later West Bank invest Wealth are and this while to

by help win the to in ahead, as be we excited we So opportunities look we advisors and have differentiate the marketplace. our to continue

Now complemented rate. by was business $X.X Total were results. up billion assets and organic net quarter Total equity annualized second continued growth a to trillion, let's brokerage markets. growth advisory as higher or organic our X% were turn X.X% from $XX assets QX new

was Our prior which large a new $XX billion, to assets billion a included enterprises record. affiliation models, from our This of assets new record. new is recruited $X QX also recruited were which

recruiting. another and QX, Looking are we continues, our quarter ahead on strong to of pace to deliver momentum

discipline expense adjusted led QX rates of our organic of combination for interest financial $X.XX. As rising and growth, the EPS results, to

sequentially. $XX Looking X% was $XXX at million million, gross it profit, down or

for from QX, payout components, by payout In to fees million typical net were primarily million, up and our advisory. from $X commission about seasonality. XX.X%, and rate driven the XX QX, organic higher As growth was points basis QX advisory due of up $XXX

West. cash our by $XX the typical With Bank client well driven to decline the million to revenue, increase driven ahead as and anticipate seasonality QX, down a respect QX, cash by of we XX.X%, in Looking will sequential million, was rate payout as balances. $XXX it Bank onboarding to Commerce from of

decrease from the down balances, April typical hit. was quarter billion seasonality fees primary the of at billion, the ended Looking overall QX. majority client they quarterly cash payments of tax The and at advisory driver $XX when $X

of April, beyond declines moderated and move May both pace we June. the As in

portfolio, of to XX%. to rate range ICA the our our XX% XX% mix increased balances fixed within Within target of roughly

floating in increase rates ICA from up basis rate yielding as points partially by higher averaged offset was X in Our yield balances. decline the points short-term QX a XXX basis quarter, in the

based partially short-term As as our for points rates yield mix basis today, interest benefit higher balances expect ICA impact decline client by cash floating rate a offset interest balances, the QX, and rates. by we of on the lower of is few are to where

from strong up driven organic growth. As for service revenue, QX, it by $X QX, and $XXX was primarily million million in fee

million Adviser by by expect driven Conference. to QX, our ahead to a fee revenue sequentially, from Looking revenues National we service and increase few

to due on QX transaction down sequentially to It volume. $X Moving million, million $XX trading limit. decreased was

we QX. As be with expect transaction relatively to ahead to flat we look revenue QX,

starting to $XXX turn G&A. It in million expenses let's core QX. Now was with

with associated the core XXXX increasing G&A costs the levels by supporting Looking and lower our of million. that of growth ahead, organic our $XX end are strong range we growth, variable given

to give sequentially. the core to We To by in million now $XX expect QX, expect G&A be of the our of spend we X,XXX,XXX,XXX our to range million of in G&A $X X,XXX,XXX,XXX. you sense timing a a XXXX to increase near-term

It resulting large by increased recruiting driven promotional primarily million expense. Moving assistance enterprise $XXX on to and was onboard. transition sequentially, strong up $X QX million from

$XXX West, approximately large host of driven to to Bank In increase the onboarding spend our as adviser well $XXX largest million, conference million week we primarily as Commercebank. enterprises, promotional next of two QX, the year of will we expect expense to by as conference the

Looking with sequentially. flat expect at million share-based compensation QX, to expense from expense $X down QX. roughly million share-based In compensation QX, be we in $XX

depreciation a was and given in it million a quarter. to $X It Turning amortization. deployment sequentially up modest million $XX low QX, was

QX, ahead our plans spend changed. to technology Looking for have not

the in deployments more quarter. expect We

result, expect and million. to a $XX amortization As we be depreciation roughly

Regarding management. capital

$XXX balance strong. million with corporate of ended from sheet million, QX. Our QX up remains $XX We cash

power. X.Xx, of both growth earnings higher a from by combination of a down QX X.Xx which Our was environment, improved leverage and driven in have rate continued our meaningfully interest our ratio

we revolver I would billion note the parent $X billion. to size also month, this $X earlier of that from increased our

positioned growth to our X.X of enables of recent on us added X.Xx within and operate capitalize years, the growth business well opportunities. target to our capacity leaves in significant comfortably the us range Given to

and capital As foremost, generate, the to focused deployment, capital on shareholders. pursuing we investing framework remains returning in growth for first where capital appropriate M&A our returns organic allocating aligned excess with and

In allocated our across entire capital frame. QX, we

we offering, We a and support invest we To approximately drive liquidity we deals continue continue have is our million solid With and as date, QX. regards XX $XXX $XXX closed to in in growth. to deals to increased million, to pipeline. to Specific for momentum organic succession capital building, and our price. $XX share of the repurchases pullback QX return, took for including to advantage around in our four we share million

are our our plan execute to through strong authorization plan two with over million consistent to our we look we capital drive balance billion well on of As summarize, our $XXX sheet To allocation to ahead years. QX, our we $X positioned to is and framework. repurchase shares, value

In business delivered closing, quarter we another results. and strong of financial

create serve we we we As business investing about look long-term grow to to and continue our excited the shareholder value. forward, our remain opportunities advisors, see

With that, for operator, please open questions. the call

Operator

first Alex [Operator of Instructions] will Sachs. from Goldman question And our come Blostein

open. is line Your

Alex Blostein

discussion question. kind over Dan, for from of billion. growth. recruited Hi. of in everyone. the seen we $XX We've you steady XQ start a with assets quarters organic Thanks last afternoon, obviously improvement north broader of why don't very few Good the guys the around

kind I think of the that of you've outside was enterprise done. recruitment larger a record that

little that And this a terms of improvement? new are are on the rest seeing the for the options ground bit maybe expectations So net on does year? what in growth affiliation how asset of inform various this you your driving color of

Dan Arnold

Yes. Thanks, Alex.

with we we look, week you enterprises. impact go doubled a tax the off also think that top, get of quarters, to you closer excluding where back [ph] quarter. large saw build So jumping remainder said, saw prior last growth the look, momentum X% the growth payments, as And year. think And is nearly about as if the during to preceding the has probably I seasonal point, of over the you to the X%

said as momentum strong of outcomes. you results like and model new proactively, or QX So in and models. traditional Drivers really affiliation then our that independent

the at that talked to by then consistent of XX% think X% past three rate versus strong as that a and complemented for look look we really solid And at quarters. attrition rates the going the inside the [ph] pension about. I got and you over recruiting core delivery that's outcome or

building the throughout term think quarter, across good we then again, the saw as models. momentum and you affiliation into out look quarter QX solid I into models sort the go of you if additional short next

see in then that by onboarded expect complemented pull that we then certainly larger third enterprises to QX. momentum So, are into And is the being quarter. that

we low what up solid as well recruiting It's sets rates. is by and the a driven that growth. really order So both think interesting as retention of

sales, moving up, box we've that batter's the especially also on buys from in capital, marketplace net advisers for [ph] see we're sales. a rates are contribution getting then in seeing same-store steady higher And from had where equity markets and you as for our

think look year. of we the that to so, And well sets we the as forward rest up

Alex Blostein

Hi, And you dynamics. Matt, around got a for cash just Thanks. you. follow-up

that ICA at I the portfolio well coming are guys are been balances. of you out portion range, about a think, outflows So fixed sort currently, of inside XX% of but variable long-term that's the your largely of function

into curve it, over rate, look XX here range So so floating and at Thanks. quick some to just of is be maybe stay as kind ladder you balance the balances your will where July allocation maturity the update XX% line to months or the reinvest on the of then at next, fixed and that, in the then assuming within these your rates appetite of call lower XX% a with well? as forward what to is maybe

Matthew Audette

we'll I think follow-ups, for you. hit them that was Two, two We'll Alex. them. hit

standpoint. range I environments of range we range, range from interest we target of range to a trying know the a focused curve reiterate, in the a think be and to did setting spots this that we stability moments XX%. with rate an to primarily we're work well, to be right of of on we is so middle and that clear the think interest which of the when good comfortable think invest going I are, just in in lot you on but and target earnings picking is on think on not good feel rate I where And

So we're where really like positioned.

that intend range. specific the we the point, would those as of your of balances to maintain think middle I mature,

when yes, question would being that that you would in But right that about things I today. extent perspective with being the be move. of really mature, redeploy would But it's and - comfortable we the to think don't be that So, our was middle them, need your to spot. range

in the rebalances cash to too, fixed has placing highlight, I'd from continued rate those for improve. environment a

are whatever see on demand above rate pricing on term The floating where side. We a has you the similar the So is improved, spread meaning the thing the curve. there.

where is to like a But fixed are extent we to got environment place so. on we've those to want So, the headline do we good rate. we deposits that the

the been investor As far engagement you as see would things quarter. the broad July, say the in consistent is seeing seasonality of we've I'd headline and are a as the in well typically going with month how as adviser one

those in balances, July. of the So hit specifically of reduce will advisory on cash we cash fees have primarily billion, the are in month quarter, that first those the $X.X month so about

at if we seen, mean the with buying that QX we've levels strong buying beyond there, in again, net continued And continued QX. in I'd of investor peaked activity. levels look you I then pace that, our on elevated of consistent say really engagement, trends

is saw that in just QX. the continue like think the looking declines cash moderate from lower And saw July pace to than in more So, balance coming themselves we I that the we earlier year.

we're we've And far, pace of about being the in decline that above decline saw when And to fees seen the just context, May. advisory the would a July, the you be of put April. the so billion. the It's moderation, pace starting decline January of look which in maybe earlier in X/Xth in that year earlier million since to year, in it's I think $X.X about $XXX at we

much So, lower is we're that pace. still down Balance moderation. but slightly, much, seeing coming a much,

the in how And And the talking to that give the I'll ask, is building momentum, month a just first organic into comments, continues quarter. standpoint, ask answer is Dan's from in especially we know growth kind recruiting didn't while an we're I you to, you and July. of second fourth you question the going saw it, on didn't July of about which

X% that for which organic to we're was X% low the the year, last to range. X.X% to which prior growth bringing July of July, growth Bank tracking compare West, of -- the on in So in zone

the So When will in organic And add it's of under July. assets a for XX% growth improvement come nice $X for just looking month. of you we're the billion Bank on at there. then of West around that,

QX saw is step we described July a we a positive taking in just back, real the So momentum in just way. continuing

Alexander Blostein

you that. Perfect. And for thank all

Matthew Audette

You bet.

Operator

JMP our question. Ryan Devin be for coming moment from our question And of next One next will Securities.

open, Your is Devin. line

Devin Ryan

so much. Thanks

now partners now you Just large to there. enterprise wins Obviously, built partners on to a show the potential want validating of with can LPL number future. channel. Data that's start here has in the that

I'd where has you the talk prop. explicitly to seems value really operate and just enterprises is a can so, them the narrative scale, changed like just at which about And bar to time, the regulatory and with And how only for enterprises through higher higher love it show the same moving broker-dealer. around

just out pipeline for a there? that anything to I what means if love Thanks. then hash maybe it and bit your So, little

Dan Arnold

as so to going client have Devin, right, model where suggested. first start have are, you out obviously, has sure foremost, real clients the going enhance the you - is your a hypothesis one and economics. natural and the think as with in The who they're hypothetically, seasoned we enhance They're and capabilities the evolution of make the business of you experienced and that results, dialogue experience. right? I And is sort streamline to

tracking as ultimately space and expansion pull for capabilities make advisers through you to and you can focus can the go time more They're and then on And model them I well is. of a as business white more that going think how the better to creates advisers. and do to sure that the as the then do that, create that opening and activity those through practices then help been results more - competitive we've you maintaining even a scalable one and

and rhythm their And enhanced we're of you results working risk positive organically I within finding that of outcomes management, and to in we're grow intentional efficiency very produce operational where that help platform. now economics. And of wealth their that's think enhanced the management sort those programs stage them ultimate

we've do onboarding programs to the the and I effort bring platform. able completely other change is transform thing onto to that been management think is the or reimagined seasonal these

And through accessible we make And work to obstacle can of I an any part then of somewhat with as lower, think experience only appealing, record I is the always to streamline of think, able easier value more but sort time the hurdle. the that the proposition. being outcomes, That's more make helping, not beaches of also right. it expire make model that's certainly

there. that's [ph] hurdle we So

of to we able the that's traditionally so, And that being but to those dialogue marketplace. expanding have larger outcomes are with enterprise broader in the enterprises also outside banks value just that is dialogue by a where banks, use proposition

And And that contributor cycle, go pipeline that, we longer as really the forward confident this a as do we is we to organic. feel but continues it's so grow. to growth sales a that

Devin Ryan

We thanks. now. appreciate and the Okay color

technology Just on of some the a follow-up initiatives.

So multiples growing million you this $XXX your again I have the really many and to be that's think last majority clearly year, vast technology. guys going of year, peers. of spent on That's

those maybe technology digging deeper. Dan, bit so prepared there. at you and think And this of AI, you're application for just a touched And I'd importance love just the kind LPL little of remarks to the on frame can And and differentiation degree that if you peers. building you

that costs So improve help of to interplay how about over AI also firm the kind applications and the advisers more at time? Thanks. maybe just and broadly for reduce thinking you're experience just with

Dan Arnold

absolutely. Yes,

the that organic you, think think that we if is capability important about of we of think the you set, described of one the concept growth. do creating we vertical that elements So, the most and quality integration to driving that model

think priority. strategy capabilities vertical we that is in with to in investing enhance as and So reinvesting that context that significant or platform integration a

over you we you a I the of relevant so should invest One be plan bit a elements. I appropriately capital to on to framework where would allocate that experience. give of about there. kind end six gave And it to we think -

to advice enrich advisers, the helping being art financial So a holistic adviser the X key to that's the elements of the them a of all of with continue advice.

advice. been that's feed needs Third for management the they one their next wealth the how on of platform clients is solve

operate advising three are them more and in elements about other business. And helping successful the then

flexibility the that about where business building -- get practice you That's So that's in also models, the it the operating get investment That's perfect talking service for to the affiliation been about get you where where you we've now. them. also in it. investment think services portfolio

the we then think sure make to And got platform, practice want enhancement I in. a capital our efficient spin ultimately, are about favorable overall commercial them in investing needs We I clients create context that for service those that that technology, we've these for purposes all which and an in of categories six and of categories technology both advisers call the or we're of our then - think services. also non-technology

And run more it creates ultimately to technology these this successful advisers. continue if better think platform help create services we formula better outcomes drives businesses to advisers we're creating and platform, a integrated more that's to winning create that wrapped workflows appealing a and around driving for advisers that that

to learning our scale, operating of to feasible and terms our as with your of in efficacy a platform operating where terms already respect aspects, efforts about and that With question think platform. we're of both the analytics associated our itself within model, along using and operating We're management AI around using we within predictable investment robotics, and of our terms service that AI risk enhancing in action the in processes. way AI machine determining sprinkle data

the creative AI, where get AI the I model activities, into service and AI you that an generative think capabilities that. investor both to digital new XX% to a has interesting digital with Uber the help And chance personalization. for a we created much adviser opportunity experience now taking folks as incorporates enhance into and with traditionally of into continue as better are to see our to the volume using experience on XX% We've come that more

see again we service jobs, where also engineers opportunity begin scalability our it think about operations, take the them and of those take model. the an really as models and you own think in efficiency in enhancing marketing, create to think baked I about to you creative

investment allocating we're of explore AI. we kind how little that to reason the it a flare you we're for how and invest then So and gives beginning utilize

if with We've of but opens been this innings practice, hope is AI using solve a cool We're that initiative additional Imagine possibilities. for a years, team it and early highly imagine. helps. in every just like and I a scale of up or that's an for AI could which We the think team AI it being to interesting as couple challenge some ourselves. member of I the we to create ask through. single degenerative efficient pretty

Devin Ryan

no it's much. it. you so Yes, very helpful. Thank Appreciate

Operator

And one for question. our next moment

Our come will question next of Chubak from Wolfe Steven Research.

Unidentified Analyst

is see the independent quarter. the end competitive larger I the of ask planning to the going want to This for maybe start through ramp the on on there afternoon. A did this to start I player I am and rather going good Hi, Steven. is want dynamics. did is undergo to growth back off nice Michael to a Certainly substantial organic effort. side. restructuring

a like this a help to sustainable your some source year-to-date. you how been resulting of Can us size And how that's attrition recruiting the tailwind significant of been? of growth? relatively is has looks It contributor organic significant

Dan Arnold

Yes.

know. do think marketplace, the we at at through turnover and the I think the the and traditional of set, well there's in lower been second at seeing in movement pretty norms, you market a has sizing marketplace, independent quarter how movement if getting right, around really for more level you're look, is the what opportunity up So flat X% if has That shift look at that adviser about movement look as a least positive mix largely movement positive you from turnover, a than we're said, but or last the of sort wireless. slowdown year, there is historical you which been at remained

affiliation different of should opportunity greater make at capitalized some well models of our in restructurings, more doing, increase whether through sort in we in marketplace integrations, things can create emerge. that we occur look think forward capitalize marketplace. that can it to of we're all turnover And more sure and and out we well is across look that cetera. we that be positioned, positioned opportunity As will that churn or the what of much more Those are share turnover and et the competition

trying structurally that we different market strategy. So opportunity, structural also think but about opportunities our the do emerge for within may we're to position

Unidentified Analyst

then It cuts the to about expenses. XXXX think just Understanding switching as bit to helpful. And Very thinking pike be strong organic growth coming the you're over and about early it's rate a we down be maybe should how but building about the be incremental growth thinking investment to core should G&A anticipating? to we 'XX. run X% beyond we first X% business, is much like seeing, the how block sounds

Matthew Audette

imagine, I how -- in 'XX could as as But later I planning on for and your growth. our we investments Yes. we're a and midst normally do, question you the little of is, we're we'll maybe right first I focusing the approaching do. year really we as on organic of we're it think thinking mean typically think to in highlight share it, support which and drive just the to is bit now,

the and sure by us think And operating that, that at investments have we're provided those really otherwise delivering at to look time, an things. leverage opportunity And making the And X the opportunity XX%, appropriate would beyond. that driven accelerate for represented. macro macro I we that 'XX balancing done was you in environment same and when compelling and that

all depend So when we're like. it 'XX, planning will what that macro looks think I for outlook on

course, Of described could rates to come down. there's you that scenario a start as

growth. the history and environment. they're I think invest got, - confidence we've based flexibility I also in certainly to will to the demonstrates confidence in, that - got we've where going we have And to that adjust that think, the we've on factor things got drive So we our

our And remain So the call. at more to we'll are we'll typically our things. year-end would our those plans earnings as and those the we approach focus headline going But principles share do be on on color same. balancing

Unidentified Analyst

I Tax outlook squeeze X the here. if could what And be quarter. tax, Great. you elevated quick go-forward a could during just if for update housekeeping an in provide would helpful. was the that drove that? And on What rate

Matthew Audette

Yes.

running that. benefits moved from a - why kind tax been as to about just XX%. I to come employee that sales stock that up back the core closer from normalized fewer primarily that rate rate normalized were while, of think in just I And quarter. that have in zone. XX% there XX% the and kind tax XX%, to from We've And tax deductions below for a of a that's

going So for I a think for all if else looking placeholder you're equal, forward.

best XX% way to to is XX% think think. the I

Unidentified Analyst

much. so Thanks

Operator

from And next of And next our one coming be moment questions. will Jefferies. question our for Dan Fannon

line Your is open

Dan Fannon

Good afternoon. taking Thanks for questions. my

been In the on also strong inorganic growth, you've active addition to side. organic

remainder of So about we year pipeline should kind the could out growth how current hoping there. the uses and of and what's just think of for about about think backdrop of and or this was -- we as talk the inorganic conversations you

Dan Arnold

Yes.

go as use So we forward, organic we'll to as to our complement M&A continue growth. a

our on we I there that, on in to the assessing well that as focused add the of scale. for think, you are So capitalize first we consistently where we're opportunity, no can look, suggested. marketplace And categories and order in transactions change leadership and our as the typically to markets market execute or and do on landscape grow X

across those value and In broker-dealers that upward. the [indiscernible] practices of of and smaller to our look transition landscape think from most course, Examples from and those bidding -- we're create of platform. [indiscernible], they the able is capital. when RIAs And I'll we onto about for anywhere cases, advisers

we and So those the again, think to ongoing we remain think we be opportunities. explore positioned remain focused I consolidation, there on marketplace do will

help efficiency complement their ultimately I them right, we drive that, enhance create value also look to think add where into could transactions to growth. places or practices for and capabilities a or we can that advisers

back Any course, or lens of partner about think and world [indiscernible] as value the really build, continue of think opportunity. transaction, at time and and and we about investing how those unintended of evolve advisory capabilities buy capabilities to through we it when create we transactions of ultimately include those they look type we'll, that how that like in so we we [indiscernible], places type originate

solving are of this is in gives the in And that to as and the pathway important with platform a our out and in type well to or and with help a part advisers just And internally on There thresholds meets capital us are advisers exploration return that we've external question continued the platform a to got for against as then that we're opportunity put how the with work our differentiated need. already And liquidity a certainly, finally, needs that third capital deploying market. disciplined the really helping succession on way. advisers. rather beginning question unique we see respect that marketplace

that's framework. So the

kind marketplace the where we've to of remain. That's got those our and assess focus, opportunities we for continue

Dan Fannon

with of then with as as economics separate the customers? spend Can you Matt, out cited a you kind And larger the just of that which onboarding we helpful. That's the guide, promotional on some well onboarding get associated the associated these sense follow-up step-up, the of conference. so a enterprise

Matthew Audette

guide factors. is Yes. timing it's mean, Well, at large enterprises when the third three of look organic and think is growth. really directionally. second really I X driven the biggest Conference on-boarding for you the I QX, supporting by

at first think is bucket, I is when spend, conference that that driver. So biggest that you the look --

happens year. attendees which reminder, us, a We've new and every engagement record in and guests the clients in which us. their being our just we're for As excited our person it's is It largest coming, X,XXX conference. from QX got about, a with over is

So largest conference that at it's has largest conference and the our been.

So sequential the biggest of that's change. component the

look recruiting are the large West the strength onboarding to that is assistance So quarters driver. into first conferences bucket had Bank you QX and that the Now then in a related transition also that at right? But strong do of last piece be that the hit of And both X be that and would just elevated, would is -- would two I have QX the our come Commerce. enterprises the broadly, going that. pipeline typically we the momentum. in When and thing quarter of coming we from be largest we overall would quarter,

Dan Fannon

you. Thank Great.

Operator

moment one will Cyprys from And Stanley. for our our of Morgan And come next next questions. question Michael

is open. line Your

Michael Cyprys

you the next others XX growth to to months, enhancements from RIA only had you with the offering make how to model. in marketplace as that you your differs look of XX model. what You that and could pricing was out early there, here? be I further the about sort to able RIA-only might positioning from offering accelerate over some guys newer your talk success your competitive hoping have on

Dan Arnold

the enhanced model. happy and Michael, provide RIA to for question, some on Thanks Yes. color

know, is, presents large opportunities. is headline So strategic fast growing, interesting the which look, as and RIA you market,

we created well, So outsized gains to it's position about share investing for marketplace. differentiated ourselves those have in investments, a and there. been the offering first And think how allocating we foremost,

income marketplace. and And to alternative of we improving the same that awareness a the credible competitive the more time, are while our in at

enhancing long as I we right this, and positions do to that color, the both a you go So more bit forward, continues give we we win term our ask be in of as us think we handle in on to model Certainly, a sort the flexibility about our on complemented more way proposition. integrated the our that's then platform how value strategy. Certainly, in advantage. to all to little and increase, term. If believe near as well you integration the by an continues vertical assets the

wealth also down about technology platforms, We're management services on able you the clearing business last just but to that X think ecosystem, platforms, years. been innovating level operating respect value into custody the at to the traditional way the all if with the we've not provide within

most are that play think so an out And differentiation for the there. makes end-to-end RAAs that it's we value interesting

add in efficient So can they do stuff a operated and expected don't an that have they in if way one that we more inefficient have have or or to it value, build way. that doesn't

from marketplace. seen I position good take think the appealing results, progress by continue We and finally, the greater grow us And over for the We And then both as angle X.X then in that. think drive that's solutions, presence marketplace. encouraged the We're things to in our awareness the success the to think we've more well growth those here. to last an we years.

Michael Cyprys

just managed a the business the grow question assets holding essentially line Great. of continues to it on in of advisory that follow-up XX% steady, like. assets, about with the And rest looks

could how So about or about expanding set assets talk as think thinking penetration initiatives the here year there, out building of next the of two? some hoping you product look you managed centrally you about you out the as over are

Dan Arnold

Yes, it's a question. really interesting

model cost of there's feel and I the greater opportunities, enhance reduce we in said, think, drives you As some greater both that and to combination pull continue that utilization. the think, to ultimately,

that the value creates our models-based for with models-based up of partnering that That sponsors even is for sponsors sets where cool it is integrate to practice ability marketplace going evolution that our within for will us. economic also our adds our that then to enhance with really for capabilities platform some and advisers, So innovation opportunities and continued efficient model's then work on. practices, our their value not only

investor think I tax for value the we fuel look do second indexing advice creates the efficient just centrally adviser the and those to value and clients, year. for individual continued but think the what that managed their is at of platform and/or deploying I in the that capabilities the that as sense in end way let and greater the or model. we're adviser further highly providing integrated can to half you also it the strengthen think some overlay. call an I self-indexing of of might And this

really of available then year. the this content finally, expansion investment there, expanded And just we've the SMAs our

of in year. side, equity adding the half this we're second income On the SMAs

UMA, a And so true will drive ultimately, further which it that turns utilization. into only

the drive think model the those yields. thus of ways ways the capabilities about that we appeal some So the to to and of the are of enhancing continue greater

Michael Cyprys

Great. Thank you.

Operator

moment for one next And your question.

will Voigt be Kyle question next KBW. Our from coming of

line Your is open.

Kyle Voigt

think can about few kind If incremental good guess at help XXXX, margins? you XX%. today not the do about had as much longer-term is how gain Maybe in scale my you Matt, EBITDA of model we those about there's of think margins. coming for kind question continuing Hi a about so, the from where left growth evening. to longer-term more I over half sit XX%. still and you me. of but of record the at year think a follow-ups margins operating LPLA if years, question first significant drive you in And quantify the leverage you And

Matthew Audette

looked recent near But going is but us, our history think I are in our it's running are I think rates course, well. margins in about somewhat range, I environment. a interest with high, we're getting think and -- inform when I as good interest periods think which you're you're with And in general. interest And like the XX%, and lows, you're just look you're the you if to those. those in we, above, just only XX% up here well their seen at bookends past, environment, margins XX% good helpful I think of rate running environment, the very to the of Yes. I like now, course, in that not you think mean environment when macro running when level at when when where to that is an you've industry, in have historically, in -- our and doing rates in

get across can think as in value to to it's connected what far in a affiliation continue deliver think, grow those the we to models I each our going ability our as be deliver to expand compelling future, we and clients, I to as our areas. of ability proposition ultimately, to scale

earnings and that to balancing line much of to able always way the an that doing for bottom us We're experience in efficient to reinvest also those to clients, drive then further only from here. balance how growth not but deliver to it allows a delivering great

our macro operating leverage. So if made balance I about all calls environment the think that drive the think certainly we'll the in proposition to think successful. drive indexing expand the But how that to much of there to opportunity, more those that most And reinvest to I for make. we're is growth successful I judgment ultimately, is point further further areas judgment and value and I opportunity as

Kyle Voigt

the follow-up just on then a And discussion. Understood. cash

I previously slowing level that behavior to cash as fee you're to from wanted would it different around X% of defining view you're quarters level on percentage declines, But billings. that over a lead assets, at just level floor July to months that X% like changed around has now terms of of those an cash adviser reconfirm that whether a excluding you past at it cash floor below or in that standpoint seems, date. You've sounds continuing being to as all as in see anything a slightly the said X%. noted

Matthew Audette

typically keep think to our balances out rebalancing, of customer around in X manage fees, we cash nature bottom look the in any see at think that it's I mind, month quarter, typically is back cash maybe experience typically No. we natural for a have just take X%. balance throws. small clients we the mean, market, paying deployed And step as those are required fully for largely meant at I the But typically these of when decline. operational, and you a levels accounts facilitating I does when account. the think cash And a into I that

in I look And at time, a quite we strengthened when you've got some that especially engaged now, fair we've advisers say -- income clients the equity that's for been we're think fixed when with market. strong and their a I market getting in are now it's think to coupled market that

buying roughly And are and double levels. levels that's net that to leading historical activity

the at So nature X% and looking at here, think transactional changed. end focus of I'd the dynamics as our of we where I think the quarter, least at is I the which of roughly hasn't cash AUM, sit

moving getting natural close levels I think we're kind what resistance lower. much and be would we a on think pretty would to full of reaching point of of deployment

in don't it see our substantial it Now think by could I we go would think a course. on based go But below X we below amount. X%, of what analysis,

Kyle Voigt

you. Thank Understood.

Operator

And next one questions. for our moment

come from Hawken will question of Brennan last UBS. Our

Brennan Hawken

announced can from just upcoming Mine deals how an rate. deals, the pipe one have had have coming I we provide Any the got know about deals? could you the way coming impact. in and the sometimes, down the guidance been that you've impact or the answered. of payout for have deals upcoming some thinking I and past, left. asked Anything these

Matthew Audette

Bank onboarding the West in - commerce? talked And Brennan, you're about the enterprise Yes. you large of

Brennan Hawken

Exactly.

Matthew Audette

Yes. Yes.

general think a rate. I a larger have point, enterprises those payout higher as

in scale side. advantage an AUM lower on from We the them a an from -- standpoint, standpoint cost we've serving got have a

compelling compelling So or on are margins always operating those.

up. all But yes, the payout equal rate go would else --

by build for give So have if production and next did than handful things, the average. higher bonus a on I quarter large we but general, bringing in the little also but that rate would driven be XX.X%, payout a the on at that, seasonal primarily a of color payout enterprises -- those

Brennan Hawken

Okay.

of the fully So bake two deals? would in the XX.X% impact those

Matthew Audette

be enterprises, buy the up quarter when they're No, they'll us point because not to a dramatically. bit, to large it's quarter, little on we pay bring during a but the as it going out typically just would following headline be joining

Brennan Hawken

Thanks it. Got lot. a

Operator

call At closing questions. back And I time, like turn to no further Arnold I'm remarks. the this Dan would to for showing

Dan Arnold

us quarter. to We Thanks the time look for this next taking you forward to afternoon. join speaking everyone to with again

Operator

This concludes for conference participating. Thank call. today's you

disconnect. may You now

LPL Financial (LPLA) 27 Jul 232023 Q2 Earnings call transcript