April 30, 2012

LPL Profits Fall but Sales Rise, as Secondary Offering Is Announced

Its two private-equity investors are selling a combined 14% stake

LPL Financial (LPLA) said early Monday that its first-quarter net income was $41.2 million, or $0.37 per share, down $7.8 million compared with net income of $49.0 million, or $0.43 per share, from a year earlier. Earnings after adjustments, including a $16.5 million charge related to the refinancing of senior secured credit facilities, were $63.2 million, or $0.56 per share, vs. $59.4 million, or $0.52 per diluted share, in the first quarter of 2011.

The independent broker-dealer’s net revenue for the first quarter of 2012 increased 3.2% to $901.8 million, from $873.9 million in the prior year period. Equity analysts had expected earnings of $0.54 a share and sales of $890.5 million.

The company also said that the private-equity firms Hellman & Friedman and TPG Capital, which each own about 31% of LPL, are selling a total of 14.5 million shares. This secondary offering represents about 14% of LPL’s total shares and should reduce each of the two private-equity stakes to about 24%.

"We are pleased to announce a positive start to 2012 led by record revenue and adjusted earnings for the first quarter," said Mark Casady (right), LPL Financial chairman and CEO, in a press release. "This success was driven by the ongoing relationships our advisors maintain with clients. These relationships positioned our advisors for increased productivity as their clients re-engaged in the market,” Casady said.

Total advisory and brokerage assets (excluding assets in retirement plans and trusts) ended the period at $354.1 billion, a 7.3% increase from a year ago and a jump of 7.2% from the previous quarter.

Net new advisory assets for the first quarter were $2.5 billion vs. $3.7 billion in the year-ago period and $1 billion in the earlier quarter. Advisory assets under management totaled $110.8 billion at quarter-end compared with $99.7 billion in the first quarter of 2012 and $101.6 billion in the fourth quarter of 2011.

The total number of financial advisors stood at 12,962 as of March 31, reflecting the attrition of 146 advisors associated with the integration of UVEST, according to the company. A year ago, LPL had 12,554 affiliated reps, while in the fourth quarter of 2011 it had 12,847. In the most recent quarter, 115 reps joined LPL.

The company also says that assets under custody in the LPL Financial RIA platform grew 74.8% to $27.1 billion in the first quarter of 2012, encompassing 152 RIA firms, compared to $15.5 billion and 115 RIA firms a year ago.

The firm has also declared a special dividend and plans to initiate future payments of a regular quarterly dividend.

For the quarter, total advisory and brokerage assets ended at $354.1 billion, a 7.3% increase from $330.1 billion as of March 31, 2011. Compared to the previous quarter, total advisory and brokerage assets increased 7.2% from $330.3 billion as of December 31, 2011. Net new advisory assets of $2.5 billion during the quarter and positive market conditions resulted in total advisory assets under management of $110.8 billion at quarter-end.

“Driven by the increased advisor productivity, total revenue for the first quarter increased 3.2% year-over-year,” said CFO Robert Moore in a statement. “Same-store sales of our advisors displayed a recovery from the flat performance experienced in the fourth quarter last year.”

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