LPL Financial Holdings Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Hey. Good afternoon, everyone. Rich, Matt, congrats to both of you on new and expanded roles. That's good stuff. Rich, I was hoping we could start with you, given this is your first opportunity to speak with a broader kind of investor and analyst group in your new role, obviously, the CEO of the firm. Maybe spend a couple of minutes on the key priorities for the business over the next one to two years. What are the key areas of focus likely for you to be? And is there going to be sort of any strategic change in direction for the business?

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Great. Thank you for that perspective. Very helpful. Matt, I guess since you dressed up as Johnny Cash, let's talk about cash. You guys and the industry broadly put up really nice growth in cash balances for the first time in a while. Obviously, much, much welcome development for you guys in the space. Maybe unpack a little bit what have been sort of the sources of growth, and totally understand the hesitation of sort of calling the bottom on cash balances. We've tried to do that before, and that hasn't played out yet. But are you starting to see a more durable kind of outlook just based on where recruited assets are and the outlook for growth on cash balances starting to grow over time from these levels?

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Great. All right. Thank you both. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, LPLA.OQ - Q3 2024 LPL Financial Holdings Inc Earnings Call

Question: Steven Chubak - Wolfe Research - Analyst : Hi. Good afternoon, Matt, and welcome, Rich. I guess echoing Alex's remarks, congrats to both of you on the new and expanded roles. Rich, maybe just starting with you, since you've been the primary architect of the growth strategy these last six years, I thought it might be helpful if you could lay out your either strategic vision or growth priorities, specifically for the institutional and private wealth channels, just given those are much larger TAMs. You're increasing your share, but the penetration is still quite low. What does that success just look like for you over the next five years across both of those channels?

Question: Steven Chubak - Wolfe Research - Analyst : Really helpful insights, Rich. Thanks for all the color. Just a follow-up for Matt, over the past year, we've seen a pretty meaningful decoupling between the share price and NNA. Your stock currently trading at a pretty steep discount to wealth peers, despite generating much stronger NNA and in a consistent fashion, mind you. It clearly suggests the market is just not willing to capitalize that stronger organic flow momentum. I wanted to get your perspective just on what you believe the market's underappreciating first. And second, why not consider leaning more aggressively into buyback, just to take advantage of this valuation disconnect that exists today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, LPLA.OQ - Q3 2024 LPL Financial Holdings Inc Earnings Call

Question: Steven Chubak - Wolfe Research - Analyst : No. Well said, Matt. Thanks so much for taking my questions.

Question: Michael Cyprys - Morgan Stanley & Co. LLC - Analyst : Great. Thanks, Rich, Matt. Good afternoon, and congratulations on the well-deserved expanded roles. Maybe just one on liquidity and succession for you. Great to see your first off-platform deal. Maybe you could just update us on the traction you're seeing. Remind us how much capital you're putting into this and anticipate deploying into this over the next 12 months relative to, say, the last 12 months. And more broadly, strategically, how you're thinking about the opportunities that are unfolding as you look out over the next couple of years.

Question: Michael Cyprys - Morgan Stanley & Co. LLC - Analyst : Great. Thanks so much. And just a follow-up question, coming back to one of your strategic priorities was to drive operating leverage. I was hoping you could elaborate on some of the steps you might take to drive operating leverage in the business, what we might see there, what sort of magnitude do you think is achievable over the next couple of years, and what success might look like there?

Question: Michael Cyprys - Morgan Stanley & Co. LLC - Analyst : Great. Thanks so much.

Question: Craig Siegenthaler - BofA Global Research - Analyst : Rich, Matt, first, just want to offer you both a congrats on the expanded roles. My question is on free cash flow conversion, and I'm looking at page 15 of the release. We saw positive sequential growth and year-over-year growth in corporate cash balances, although the growth was smaller after backing out the excess cash at the regulated subs. Given the return of the buyback, how should we think about your cash and liquidity objectives at the company and the whole co, and really, what metrics are you focused on?

Question: Craig Siegenthaler - BofA Global Research - Analyst : Thank you, Matt. My follow-up is on your alternative investment offering. I was wondering if you could remind us what the offering looks like today between both private market strategies and drawdown funds and also semi-liquid vehicles. And do you have plans to expand this offering further, which could enhance your recruiting effort?

Question: Craig Siegenthaler - BofA Global Research - Analyst : Thank you, Rich.

Question: Mike Brown - Wells Fargo - Analyst : Great. Thank you for taking my questions. I appreciate all the background, Rich, on the institutional side of the business and the momentum is clearly very strong there. Can you just speak to the constraints in growing in that channel? What is the kind of annual pace that you could tackle REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, LPLA.OQ - Q3 2024 LPL Financial Holdings Inc Earnings Call there when you're considering that $1.5 trillion opportunity? And as you onboard some of these bigger complex clients like Prudential, can that speed of onboarding begin to pick up?

Question: Mike Brown - Wells Fargo - Analyst : There's still time. I can congratulate you.

Question: Mike Brown - Wells Fargo - Analyst : Yes. Yeah, very helpful. And then just for a follow-up, as you -- to build on the operating leverage comment, just hoping to maybe get a little sneak peek on to 2025. The annual core G&A growth for 2024 was 7.5% to 8.5% prior to Pru and Atria. I'm just trying to think through, is that perhaps the right range to consider for 2025? Or what's the puts and takes there, Matt?

Question: Mike Brown - Wells Fargo - Analyst : Okay. Great. Thank you, and congrats to both of you.