LPL Financial Holdings Inc Q4 2024 Earnings Call Transcript

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

Question: Steven Chubak - Wolfe Research - Analyst : Thanks so much. Rich Matt, good afternoon and hope you're both. Well, Rich, I wanted to start off with a question on organic growth. In '24, you achieved a 10% NNA in a backdrop where many of your peers actually saw a pretty marked deceleration in organic flows. Just given the further widening of the NNA gap between you and your peers, as we look ahead to 2025, how do your backlogs compare today versus year ago levels? And is the 7% to 13% M&A target still achievable just given a much larger asset base today?

Question: Steven Chubak - Wolfe Research - Analyst : No, it was extremely helpful. And that's it for me, unless no one asks about January cash levels, in which case, I'll certainly get back in the queue. Thanks so much.

Question: Steven Chubak - Wolfe Research - Analyst : Thanks, Matt.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Hey, good afternoon guys. Thank you for the question as well. Another one for you around organic growth, but maybe more from an organic revenue side of things. One of the sort of pillars of your growth algorithm has been to improve kind of revenues on assets over time. And part of that has been growth in the centrally managed accounts, centrally managed assets. If we look at the results this quarter, obviously, a very meaningful step up. It's likely due to Pru, but I was hoping you could unpack what the organic growth has been in that part of the business, where you're seeing the most uptake, and when you zoom out a little bit more. What are some of the most needle-moving areas where you see improving return on client assets over the next couple of years?

Question: Steven Chubak - Wolfe Research - Analyst : Great. Awesome. Thanks very much guys.

Question: Devin Ryan - JMP Securities - Analyst : Thanks so much. Hi, Rich, hi Matt. Want to ask a question on Prudential. Clearly, early days of the integration, but it sounds like it's going really well. And so, with that said, just it would be great to hear about more of the capabilities that you kind of integrated there that are resonating the most? And then how you expect those advisors to grow their books of business relative to the average LPL advisor. And then just more broadly, how Prudential is perhaps a catalyst for more conversations in either insurance or enterprise more broadly, assuming it has been. Thanks.

Question: Devin Ryan - JMP Securities - Analyst : That was Fantastic. Thanks Rich and appreciate you answering my three questions in one.Thanks so much.

Question: Bill Katz - TD Cowen - Analyst : Great. Thank you very much. Just thinking through the sort of modest shift of interest rate expectations -- how are you thinking about, if any, kind of refinement to your sort of management of the fixed versus floating? Very good disclosure in your supplements around your reinvestment rates and sort of the pickup from what you pick up, variable versus fixed. But just given the potential for higher for longer backdrop, how do you think about maybe that range? Does that shift a little bit? Does duration shift a little bit in your mind? Just trying to think about that over the longer term. And secondarily, thank you for the tighter opening remarks, not lost on me. Thank you.

Question: Brennan Hawken - UBS Securities LLC - Analyst : Good afternoon. Thanks for taking my questions. I'm curious a little bit on D&A. There's been some really strong growth there. I know that you guys have been investing in the tech platform, and I'm guessing that, that has had something to do with some of that, but also some of the capabilities on the enterprise side. When we're thinking about a more normal potential growth rate, though, it seems like we're back to that few million per quarter sequential that you referenced. And so -- is that the right way to think about as we progress through 2025? And is the X factor for the progression if you guys continue to have wins in enterprise and adding capabilities and that could put some upward pressure there. Is that the right way to think about it? Or would you adjust me?

Question: Brennan Hawken - UBS Securities LLC - Analyst : Great, thanks for that clarity.

Question: Michael Cho - JP Morgan - Analyst : Hi, good afternoon guys. Thanks for thanks for taking my question here. I just wanted to touch on expenses and the efficiencies. I mean, Matt, you talked through kind of slowing Core G&A growth kind of given the efficiencies that you're experiencing, and I think you touched on a few areas in the prepared remarks. I was hoping you can unpack kind of operationally where you've actually been able to extract a lot of these efficiencies and where might there be more ahead? And just more broadly, on this journey for outside or more operating leverage in the years ahead. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, LPLA.OQ - Q4 2024 LPL Financial Holdings Inc Earnings Call I mean how would you characterize maybe the 2025 expense profile and margin profile on this journey to drive more leverage ahead? Thanks.

Question: Michael Cho - JP Morgan - Analyst : Wonderful, thanks guys.

Question: Daniel Fannon - Jefferies - Analyst : Thanks, good evening. Wanted to follow up on just the cash discussion. And December, obviously, a very nice build, some of that's seasonal. Curious if there's anything underneath that in terms of behavior outside of the onboarding of some of the transactions. And then maybe, as we mentioned earlier, just update us on kind of the January trends, both, I guess, maybe on cash or anything on NNA that's worth highlighting.

Question: Daniel Fannon - Jefferies - Analyst : Great. Thank you.

Question: Christopher Allen - Citigroup - Analyst : Yeah, evening everyone. Thanks for taking the question. I wanted to talk a little bit about the high net worth channel, increasing area of focus and the alts platform. Maybe you could talk about where you are in terms of currently expanding your selling agreements on the alts platform. And any color just around how you think about the revenue monetization opportunity longer term there?

Question: Kyle Voigt - Keefe, Bruyette & Woods - Analyst : Hi, good evening everyone. Maybe just a question on the pacing of Atria synergy realization as we move through '25 and towards that $150 million EBITDA run rate. What should we expect as the rough split between revenue and cost driving those synergies? And on the cost side, how much REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, LPLA.OQ - Q4 2024 LPL Financial Holdings Inc Earnings Call synergy realization is baked into that $170 million to $180 million of core G&A, just so we can think about the trajectory of that part of the core G&A base as we move into 2026.

Question: Michael Cyprys - Morgan Stanley & Co. LLC - Analyst : Hey, good evening. Thanks for taking the question. Wanted to circle back to your comments around enhanced monetization of assets. you spoke at length about the alts opportunity. I was hoping maybe you could double-click on banking, lending and other asset management opportunities there. Maybe you could elaborate on that. What we might see from LPL here in '25. How meaningful could this be over time? And maybe you could talk about your aspirations here.

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

Question: Jeff Schmitt - William Blair & Co LLC - Analyst : Hi, Rich Matt. One more question on Core G&A and just following up on Matt's answer earlier, but you kind of pointed to growth being below your organic growth target next year. I guess my question is, should we expect that to be the new norm going forward or at least over the medium term to keep that lower than organic? And are there any cuts to get to the bottom end of that range? Or is that all efficiency-driven?

Question: Jeff Schmitt - William Blair & Co LLC - Analyst : Okay, great. Thanks.

Question: Steven Chubak - Wolfe Research - Analyst : Ready hearing rumblings, Yes, I know you already talked about January. But Matt, what wasn't touched on, and it's come up in -- at least I've read a number of press reports is the changes that you've implemented to pay out at pricing across the platform in recent months, whether it's a DCA, something out to production bonuses I was hoping you could just speak to your philosophy around how you're implementing these pricing changes and how we should think about the financial benefits as we look out to '25 and beyond.

Question: Steven Chubak - Wolfe Research - Analyst : Well said and thanks so much for accommodating the follow up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, LPLA.OQ - Q4 2024 LPL Financial Holdings Inc Earnings Call