LPL Financial : Q1 2026 Earnings Prepared Remarks

Published: 2026-04-30 20:06:47 ET LPLA

Published on 04/30/2026 at 08:06 pm EDT

LPL Financial

Q1 2026 Earnings Prepared Remarks

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Notice to Investors: Safe Harbor Statement

Statements in this presentation regarding LPL Financial Holdings Inc.'s (together with its subsidiaries, the "Company") future financial and operating results, growth, plans, priorities, business strategies, capabilities, and outlook, including forecasts and statements relating to the Company's future financial and operating results, growth, plans, priorities and business strategies, including forecasts and statements related to the Company's ICA yield, service and fee revenue, transaction revenue, other revenue, Core G&A* expenses (including outlook for 2026), interest expense and income, share-based compensation expenses, promotional expenses, leverage ratio (including plans to reduce leverage), pricing and fees (including their effect on adjusted pre-tax margin), corporate cash, run-rate EBITDA, operating leverage, pre-tax margin, transition assistance loan amortization, organic growh, payout rate, tax rate and share repurchases, if any; the Company's retention of Commonwealth Financial Network's ("Commonwealth") assets, and Commonwealth's future financial and operating performance; run-rate EBITDA expectations in connection with the Company's acquisition Commonwealth; the amount and timing of the onboarding of acquired, recruited or transitioned brokerage and advisory assets, including from Commonwealth; the Company's plans to invest to drive growth and increase efficiency while scaling its business; and the Company's recruitment pipeline and expected organic growth, as well as any other statements that are not related to present facts or current conditions or that are not purely historical, constitute forward-looking statements. They reflect the Company's expectations and objectives as of April 30, 2026 and are not guarantees that the expectations or objectives expressed or implied will be achieved. The achievement of such expectations and objectives involves risks and uncertainties that may cause actual results, levels of activity or the timing of events to differ materially from those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include: difficulties and delays in onboarding the assets of acquired, recruited, or transitioned advisors, including the receipt and timing of regulatory approvals that may be required; disruptions in the businesses of the Company and Commonwealth that could make it more difficult to maintain relationships with advisors and their clients; the choice by clients of acquired or recruited advisors not to open brokerage and/or advisory accounts at the Company; changes in general economic and financial market conditions, including retail investor sentiment; changes in interest rates and fees payable by banks participating in the Company's client cash programs, including the Company's success in negotiating agreements with current or additional counterparties; the Company's strategy and success in managing client cash program fees; changes in the growth and profitability of the Company's fee-based offerings and asset-based revenues; fluctuations in the levels of advisory and brokerage assets, including net new assets, and the related impact on revenue; effects of competition in the financial services industry and the success of the Company in attracting and retaining financial advisors and institutions, and their ability to provide financial products and services effectively; whether the retail investors served by newly-recruited advisors choose to move their respective assets to new accounts at the Company; the effect of current, pending and future legislation, regulation and regulatory actions, including disciplinary actions imposed by federal and state regulators and self-regulatory organizations; the cost of defending, settling and remediating issues related to regulatory matters or legal proceedings, including civil monetary penalties or actual costs of reimbursing customers for losses in excess of our reserves or insurance; changes made to the Company's services and pricing, including in response to competitive developments and current, pending and future legislation, regulation and regulatory actions, and the effect that such changes may have on the Company's Gross Profit* streams and costs; execution of the Company's capital management plans, including its compliance with the terms of the Company's amended and restated credit agreement, the committed revolving credit facility and LPL Financial's committed revolving credit facility, and the indentures governing the Company's senior unsecured notes; strategic acquisitions and investments, including pursuant to the Company's liquidity and succession solution, and the effect that such acquisitions and investments may have on the Company's capital management plans and liquidity; the price, availability and trading volumes of shares of the Company's common stock, which will affect the timing and size of future share repurchases by the Company, if any; whether advisors affiliated with Commonwealth and First Horizon Bank will transition registration to the Company and whether assets reported as serviced by such financial advisors will translate into assets of the Company; the execution of the Company's plans and its success in realizing the synergies, expense savings, service improvements or efficiencies expected to result from its investments, initiatives and acquisitions, expense plans and technology initiatives; the performance of third-party service providers to which business processes have been transitioned; the Company's ability to control operating risks, information technology systems risks, cybersecurity risks and sourcing risks; and the other factors set forth in the Company's most recent Annual Report on Form 10-K, as may be amended or updated in the Company's Quarterly Reports on Form 10-Q or other filings with the Securities and Exchange Commission. Except as required by law, the Company specifically disclaims any obligation to update any forward-looking statements as a result of developments occurring after April 30, 2026 and you should not rely on statements contained herein as representing the Company's view as of any date subsequent to April 30, 2026.

Actual remarks made on the Company's earnings conference call could vary from the prepared remarks presented here. A webcast replay of the Company's earnings conference call will be available on the Investor Relations section of the Company's website, investor.lpl.com/events. Please refer to the Company's earnings release for additional information.

*Notice to Investors: Non-GAAP Financial Measures

The prepared remarks set forth herein include discussion of certain non-GAAP financial measures. At the time these remarks were made, listeners were referred to the Company's earnings release, which had been previously published on the Company's website at investor.lpl.com, and which contained reconciliations of such non-GAAP financial measures to comparable GAAP figures. Management believes that presenting certain non-GAAP financial measures by excluding or including certain items can be helpful to investors and analysts who may wish to use this information to analyze the Company's current performance, prospects and valuation. Management uses this non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods. Management believes that the non-GAAP financial measures and metrics discussed herein are appropriate for evaluating the performance of the Company. These non-GAAP financial measures include but are not limited to adjusted pre-tax margin, adjusted EPS, Gross Profit and Core G&A.

Rich Steinmeier, CEO

Thanks Operator, and thank you to everyone for joining our call. It's a pleasure to speak with you again.

It's been a strong start to the year for LPL. We delivered solid organic asset growth, and continued to progress and build our recruiting pipelines. We advanced the operational work and preparation to onboard Commonwealth Financial Network. And we made meaningful progress driving improved operating leverage. We accomplished all this against a backdrop of rising macroeconomic and geopolitical uncertainty, and an increasingly loud and often speculative narrative around the role of artificial intelligence in wealth management - whether enabler or disruptor. It's periods like this that serve as a reminder of the value of professional advice, the importance of our responsibility to support our advisors and institutions, and the strength and resiliency of our business model.

OK. Now let's turn to our Q1 results.

In the quarter, total assets decreased to $2.3T, as organic growth was more than offset by lower equity markets. We attracted organic net new assets of $21B, representing a 4% annualized growth rate.

Our first quarter business results led to strong financial performance with record adjusted EPS of $5.60. an increase of 9% from a year ago.

Next, let's turn to our strategic plan and how we are progressing against our organic and inorganic initiatives.

Our vision is clear: we aspire to be the best firm in wealth management. To do that, we remain focused on three key priorities: one, maintaining the client-centricity the firm was built upon; two, empowering our employees to deliver exceptionally for our advisors and their clients; and three, delivering improved operating leverage. Effectively executing on these focus areas will help us sustain our industry leading growth, while advancing the efficiency and effectiveness of our model.

With that as context, let's review a few highlights of our business growth. In Q1, Recruited Assets improved to $17B, a solid outcome in what is typically our slowest quarter of the year. Throughout Q1, we advanced opportunities into the later stages of our recruiting pipeline, while pushing the overall pipeline to record levels. We continue to expect the pull-through to improve over the course of the year, supporting improved organic growth.

In our traditional markets, we added approximately $15B in assets during Q1, as we improved on our already industry-leading capture rates of advisors in motion.

With respect to our expanded affiliation models, Strategic Wealth, Independent Employee, and our enhanced RIA offering, we delivered another solid quarter, recruiting roughly $2B in assets.

Turning to overall asset retention, it was 98% for Q1 and 97% over the last twelve months. This is a testament to our continued efforts to enhance the advisor experience, through the delivery of new capabilities and technology, and the evolution of our service and operations functions.

As for Commonwealth, the integration is progressing well. Advisors are completing their diligence, and as they do, we are pleased that many are deciding to stay with Commonwealth. In terms of asset retention, we are in the mid-80s today, and we continue to track towards our target of 90% retention.

At the same time, we are working closely with our Commonwealth partners, to jointly map the path forward to ensure we are bringing together the best of Commonwealth and LPL, with several foundational elements we are looking to embrace. For example, Commonwealth's indispensable approach to advisor satisfaction and their commitment to responsiveness is woven into the fabric of their culture and something that must be preserved. As a key step to enable this, we are developing a comprehensive case management solution to serve as a foundation for an evolved approach to how we route work and communicate progress to our advisors. The modernized platform will connect advisors' offices to critical systems, from relationship management, to service, to operations, to product experience functions - helping ensure greater continuity, consistency, and follow-through across every step of the advisor experience.

Beyond the work we're doing to prepare for the onboarding of Commonwealth advisors in Q4, we've continued to advance our capabilities to better meet the needs of high-net-worth individuals. We've expanded the inventory of alternative investment products available on the platform and are delivering more personalized investment solutions through enhanced direct indexing and tax loss harvesting capabilities.

In closing, the first quarter was a strong start to the year and we feel great about our position as a critical partner to our advisors and institutions. As we continue to improve the efficiency of our operations, we are creating capacity to reinvest in growth while driving stronger operating leverage. We believe this positions us to deliver sustained value for both our advisors and our shareholders.

With that, I'll turn the call over to Matt.

Matt Audette, President and CFO

Thanks, Rich. I'm glad to speak with everyone on today's call.

As we move into 2026, we continue to advance our key priorities, which include: driving solid organic growth, driving improved operating leverage, by enhancing efficiencies and better monetizing the value we deliver, providing a market-leading advisor experience through on-going investments in our platform, and advancing our M&A initiatives, as we continue our preparation to onboard Commonwealth, announced the acquisition of Mariner Advisor Network, and continued to execute on our Liquidity & Succession strategy. These efforts resulted in strong first quarter business and financial performance, and position us well for the year ahead.

Now turning to a few highlights from our Q1 business results. Total client assets were $2.3T, down slightly from Q4, as continued organic growth was more than offset by lower equity markets.

Total organic net new assets were $21B, an approximately 4% annualized growth rate.

As for our Q1 financial results, the combination of organic growth and expense discipline led to an adjusted pre-tax margin of approximately 38% and record adjusted EPS of $5.60.

Gross Profit was $1,593M, up $51M sequentially. As for the key drivers, commission and advisory fees net of payout were $487M, up $33M from Q4.

Our payout rate was 87.2%, down 80 basis points from Q4, largely due to the seasonal reset of the production bonus at the beginning of the year. Looking ahead, we expect our payout rate will increase approximately 50 basis points in Q2, driven by the typical seasonal build.

With respect to client cash revenue, it was $460M, up $4M as the growth in average cash balances more than offset the full quarter impact of short-term rates. Overall client cash balances ended the quarter at

$59B, down $2B, primarily driven by record net buying in Q1.

Within our ICA portfolio, the mix of fixed rate balances ended the quarter at roughly 60%, within our target range of 50% to 75%.

Looking more closely at our ICA yield, it was 336 basis points in Q1, down 5 basis points sequentially, driven by the full quarter impact from the Q4 rate cuts. As we look ahead to Q2, based on where client cash balances and interest rates are today, we expect our ICA yield to be roughly flat.

As for service and fee revenue, it was $211M in Q1, up $30M from Q4, as the benefits from our previously announced fee changes more than offset the seasonal decline in conference revenue. Looking ahead to Q2, we expect service and fee revenue to increase by approximately $5M, as the previously announced direct mutual fund fees go into effect.

Moving on to Q1 transaction revenue. It was $81M, up $6M from Q4, driven by record trading volumes. As we look ahead to Q2, we expect trading activity to normalize, and transaction revenue to decline by roughly $5M.

With respect to other revenue, it was $4M in Q1. Going forward, we expect this to be roughly $6M per quarter.

Now, turning to our acquisition of Commonwealth. As Rich mentioned, the transaction continues to progress well, and we remain on track to onboard in the fourth quarter. As for the financials, accounting for the market-driven decline in Q1 assets, we now estimate run-rate EBITDA of approximately $410M once fully integrated.

Next, let's move on to expenses, starting with Core G&A. It was $532M in Q1, below the low end of our outlook range, reflecting our continued progress in driving greater efficiency and reducing our cost to serve.

For the full year, given our progress to date, we are lowering the upper end of our outlook range by $20M. We now anticipate 2026 Core G&A to be in a range of $2,155-2,190M. To give you a sense of the near-term timing of this spend, we expect Q2 Core G&A to be in a range of $540-560M.

Turning to TA loan amortization, it was $136M in Q1, up $3M from Q4. As we look ahead to the second quarter, we expect TA loan amortization to increase by roughly $10M, driven by the strengthening of our recruiting activity.

As for promotional expense, it totaled $76M in the first quarter, roughly flat with Q4. Looking ahead to Q2, we expect promotional expense to increase $5M, driven by conference spend.

Moving on to share-based compensation expense, it was $22M in Q1, and we expect this to increase a few million sequentially as we head into Q2.

Turning to our tax rate, it was approximately 26.5% in Q1, and we expect a similar tax rate in Q2.

Regarding capital management, we ended Q1 with corporate cash of $567M, up $98M from Q4. As for our leverage ratio, it was 1.86x at the end of Q1, just under the midpoint of our target range.

Moving on to capital deployment. Our framework remains the same, focused on allocating capital aligned with the returns we generate: investing in organic growth first and foremost, pursuing M&A where appropriate, and returning excess capital to shareholders. In Q1, we continued to deploy capital in-line

with our priorities, investing primarily in organic growth and M&A, where we advanced the Commonwealth integration and continued to allocate capital to our Liquidity & Succession solution. Regarding share repurchases, a reminder that we paused buybacks following the announcement of the Commonwealth acquisition, with a plan to revisit following the onboarding. Given our progress to date, with leverage slightly below the midpoint of our target range, the operational work to onboard Commonwealth on track, and the dislocation in the price of our stock, we opportunistically resumed buybacks earlier this month, with roughly $125M dollars planned for Q2. We will continue to remain flexible and dynamic with our capital deployment as we advance through the year.

In closing, we delivered another quarter of strong business and financial results. As we look forward, we remain excited about the opportunities we have to continue to drive growth, deliver operating leverage, and create long-term shareholder value.

With that, Operator, please open the call for questions.

Disclaimer

LPL Financial Holdings Inc. published this content on April 30, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 30, 2026 at 23:46 UTC.