LPL Financial (LPLA) said late Wednesday that its net income in the period ending March 31 fell about 3% year over year to $53.1 million, though net revenue jumped close to 12% to nearly $1.1 billion. Adjusted earnings, though, rose 4% to $71 million, or $0.69 per share. These results missed analysts’ estimates.
Higher costs and lower recruiting results in the period were cited as reasons for the recent performance, and the company’s executives are upbeat on results for 2014.
“After a slow start to recruiting to begin the year, our business development team saw improving conditions in March,” said Chairman and CEO Mark Casady. “As a result, we finished the quarter with 53 net new advisors and are seeing positive momentum in our pipeline heading into the second quarter.”
The independent broker-dealer’s core general and administrative expenses were $162 million, up 11% year over year (but down 3% sequentially), according to CFO Dan Arnold.
“Expenses were at the high-end of our guidance this quarter primarily due to elevated regulatory and legal related costs, which we have indicated in the past as a potential cause of variability in our results,” Arnold said during a call with equity analysts.
“Overall we continue to track to 4.5% core G&A growth for the year, within our target range of 4% to 6% …,” he explained. “If elevated legal and regulatory expenses emerge as a persistent feature of the operating environment, there’s a potential that our core expense growth could increase towards the upper half of the range for this year.”
Also during the quarter, the company’s payout ratio to advisors grew 38 basis points to 86.4%. About half of that jump was tied to its rising stock price and the “marking to market” of the expense of its equity program for advisors, the CFO says.
Advisory and brokerage assets rose to $447.1 billion, a 13.5% year-over-year increase, in the latest period. “Notably, much of this growth is driven by the momentum in our higher-margin fee-based business, which generated a record $4.4 billion in net new advisory assets this quarter,” Arnold said in a press release.
Likewise, the average assets managed by advisors jumped 13.5% to $33 million vs. $29.5 million a year ago.