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LPL Beats Earnings Estimates as Profits Fall 5%

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LPL Financial (LPLA) said its net income fell 5% year over year to roughly $48 million, or $0.53 per share, in the second quarter of 2016, from $50 million, or $0.52 per share, a year earlier.

Analysts had expected earnings to be $0.44 per share.

Revenue dropped about 7% year over year to $1.02 billion in the second quarter of 2016.

“We delivered another strong quarter driven by improving business fundamentals and disciplined expense management, despite the volatile market,” Mark Casady, chairman and chief executive officer, said in a statement. “We also had good growth in the quarter with assets and advisors both up.”

Total assets on the platform are $488 billion, up 2% sequentially. Net new assets in the second quarter were $2.8 billion.

The IBD says its affiliated-advisor count was 14,193, which is up 100 from the prior quarter.

According to Matt Audette, LPL’s chief financial officer, the independent broker-dealer’s business model is generating “strong earnings and cash flow.”

“Commissions and advisory fees, as well as sponsor revenues, were up sequentially, and we are staying disciplined on expenses,” he said in a statement. “Looking forward to the second half of the year, we are focused on maintaining balance sheet strength, delivering good results and creating value for shareholders. We are also tightening our 2016 Core G&A outlook range to $705 to $715 million. This is a reflection of our hard work on productivity and efficiency this year.”

Advisor commissions were $446 million, up 2% from the prior quarter. According to LPL, this increase was mostly driven by higher trailing commissions, though sales commissions also increased. Advisory fees were up by 1% from the prior quarter to $323 million. Asset-based fees were also up by 1% sequentially at $138 million. Transaction and fee revenues decreased about 1% from the prior quarter to $102 million, which LPL says is due to lower transaction volumes.

Average production per LPL advisor is $217,000, which is down 10% from a year ago but up 1% from the prior quarter.

Core general and administrative expenses were down $7 million sequentially to $168 million in the second quarter of 2016. According to LPL, this was driven by ongoing expense management efforts, which kept most costs flat, along with a seasonal decline in compensation-related expenses.

Regulatory expenses for the second quarter of 2016 were $6 million, which was up $4 million sequentially.

“The majority of the difference was due to recoveries from prior matters that provided a $3 million benefit in the first quarter which did not recur,” the company said in a statement. “First half 2016 regulatory expenses of $7 million are meaningfully below first half 2015 levels of $18 million.”

— Check out LPL Says Assets Up in May, Clarifies FSI Departure News on ThinkAdvisor.


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