LPL Investment Holdings' CEO Discusses Q1 2012 Results - Earnings Call Transcript

LPL Investment Holdings, Inc (LPLA)

Q1 2012 Earnings Conference Call

April 30, 2012 08:00 am ET

Executives

Mark Casady – Chairman and Chief Executive Officer

Robert Moore – Chief Financial Officer

Trap Kloman – SVP, Investor Relations

Analysts

Kenneth Worthington – JPMorgan

Christopher Shutler - William Blair & Company, LLC

Christopher Harris - Wells Fargo Securities

Devin Ryan - Sandler O'Neill

William Katz - Citigroup Inc

Presentation

Operator

Good day ladies and gentlemen and welcome to the LPL Investment Holdings First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today’s conference call is being recorded.

I’d now like to turn the conference over to your host, Mr. Trap Kloman, Senior Vice President of Investor Relations. Please go ahead.

Trap Kloman

Thank you, Ally. Good morning and welcome to the LPL Financial first quarter earnings conference call. On the call today is Mark Casady, our Chairman and Chief Executive Officer, who will be providing his perspective on our performance during the quarter. Following his remarks, Robert Moore, our Chief Financial Officer, will highlight drivers of our financial results. We will then open the call for questions.

Please note that we have posted a financial supplement on the events section of the Investor Relations page on lpl.com. Before turning the call over to Mark, I’d like to note that comments made during this conference call may incorporate certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

This may include statements concerning such topics as earnings growth targets, operational plans, and other opportunities we perceive. Underpinning these forward-looking statements are certain risks and uncertainties. We refer our listeners to the Safe Harbor disclosures contained in the earnings release and our latest SEC filings to appreciate those factors that may cause results to differ from those contemplated in such forward-looking statements.

In addition, comments during this call will include certain non-GAAP financial measures governed by SEC Regulation G. For a reconciliation of these measures, please refer to our earnings press release.

With that, I will turn the call over to Mark Casady.

Mark Casady

Thanks, Trap, and thank you for joining today’s call. I’m pleased to report the first quarter of 2012 was a positive quarter for us and our advisors. The quarter was highlighted by record revenues and adjusted earnings as well as the achievement of a number of key milestones.

Our differentiated model explains our successful advisors, which creates long-term growth and value to shareholders. We delivered adjusted earnings per share of $0.56 which represents 7.7% growth over the first quarter of 2011. This begins with a positive growth we experienced across our business which was reflected by a 3.2% year-over-year growth in our top line revenue of $902 million.

As always our financial performance was driven by the drive of our advisors and our dedication to consistently and productively engaging with their clients. This was evident when our management team have the opportunity this quarter to sit down with many of our leading advisors at our annual conference for top producers.

These advisors are not just the top producing advisors at LPL, but also leaders in the industry with diverse practices and unique background. The conference provided a dynamic educational setting for our advisors to share ideas for driving continued growth and managing the increasing complexity of their practices, while utilizing LPL’s unique offerings and technology enhancements.

These conferences provide the opportunity for us to take the pulse of our advisors and build upon current successes to sustain future growth. Overall, advisor sentiment was very positive. Clients continue to value independent advice and are engaging with their advisors on planning for the future to help them achieve their financial goal.

First quarter growth also benefited from particularly strong activity by advisors who joined LPL in 2011, exceeding our expectations. The growth of our new and existing advisors reflects the improvement in market conditions and investors’ desire to reengage in the market. An important driver of growth is derived from continual innovation and a recent broad based initiative we’ve just launched just to unlock further opportunities from our retirement acquisition in 2011. This includes facilitated in plan advice, capturing IRA rollovers, and increasing automation.

We are proud to continue to expand one of the strongest and most effective offerings for advisors in the retirement plan arena, while we see an increasing growth opportunity. We remained distinctive in the industry because of our ability to invest in our integrated technology and services. We are a provider of choice for advisors seeking independence, and enabling business partner to help them establish and grow their practices, especially in the 401(k) space.

In addition to the conference, we began 2012 for the number of key milestones which position the Company for long-term growth and stability. We announced our intends to acquire Fortigent, a leading provider of high-net-worth solutions and consulting services to RIAs, and I’m pleased to share that we closed on this acquisition last week.

We also extended our custody and clearing agreement with a leading global insurance company providing brokerage, clearing, and custody services to over 4,000 of their advisors. We renegotiated certain contracts in our third-party cash sweep program, extending the duration while maintaining the upside of future interest rate movements.

We will experience a minor decline in our spread over Fed funds beginning in the second quarter, but the impact on revenue and earnings will be immaterial. We remained well positioned for this program to support our advisors.

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