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LPL Financial Holdings Inc. (LPLA)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 adjusted EPS was $4.51, up 16% YoY and down sequentially from $5.15; GAAP diluted EPS was $3.40. Adjusted EPS substantially beat S&P Global consensus of $3.49*; revenue of $3.84B modestly exceeded $3.78B*. Gross profit rose to $1.30B (+21% YoY).
  • Operating leverage improved: adjusted pre-tax margin ~38%, Core G&A of $426M came in below outlook; client cash revenue edged up with ICA yield at 342 bps (+5 bps q/q) even as balances fell with elevated net buying.
  • Guidance: 2025 Core G&A ex‑Commonwealth lowered to $1.72–$1.75B; adding Commonwealth costs lifts total to $1.88–$1.92B. Q3 color: payout ~87.6%, ICA yield roughly flat, Core G&A $495–$510M, tax ~27%.
  • Strategic updates: Atria conversion completed; First Horizon expected to onboard in Q3; Commonwealth closed Aug 1 with 90% retention target and run‑rate EBITDA path ($120M at start; ~$415M fully integrated).
  • Capital: corporate cash of $3.6B (pre-close), leverage 1.23x; Fitch assigned BBB rating. Post-Commonwealth leverage expected ~2.25x with a path to ~2.0x by end‑2026.

Note: Consensus figures marked with * are from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Industry-leading growth and execution: “another quarter of strong business performance and excellent financial results,” organic NNA $21B (~5% annualized) with asset retention ~98%. “We aspire to be the best firm in wealth management.”
    • Cost discipline gaining traction: Core G&A $426M below outlook; 2025 Core G&A ex‑Commonwealth lowered to $1.72–$1.75B; management cites “renewed focus on driving operating leverage” and long runway for efficiencies.
    • Cash economics stable: ICA yield 342 bps (+5 bps q/q) and expected roughly flat in Q3; client cash revenue up $5M q/q to $414M despite seasonal/market factors.

  • What Went Wrong

    • Sequential EPS decline: GAAP EPS fell to $3.40 from $4.24 and adjusted EPS to $4.51 from $5.15, reflecting higher interest expense (+$22M q/q) and acquisition-related costs.
    • Trading softness: Q2 transaction revenue $61M, down $7M q/q; Q3 implied recovery only modest (+$5M).
    • Independent RIA NNA soft: modest outflows cited; management points to regulatory ambiguity (potentially higher SEC registration threshold) driving flows toward corporate RIA.

Financial Results

Overall P&L (GAAP and key non‑GAAP)

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$3,512.4 $3,670.0 $3,835.0
GAAP Diluted EPS ($)$3.59 $4.24 $3.40
Adjusted EPS ($)$4.25 $5.15 $4.51
Gross Profit ($USD Millions)$1,227.6 $1,272.7 $1,304.3
Adjusted EBITDA ($USD Millions)$584.8 $682.4 $688.3
Payout Rate (%)87.79% 86.75% 87.33%
Core G&A ($USD Millions)$421.9 $413.1 $425.6

Revenue mix

Revenue Component ($USD Millions)Q4 2024Q1 2025Q2 2025
Advisory$1,595.8 $1,689.2 $1,717.7
Total Commission$965.5 $1,047.8 $1,038.1
Client Cash (asset‑based)$378.8 $392.0 $397.3
Other Asset‑based$291.0 $303.2 $305.0
Service & Fee$139.1 $145.2 $151.8
Interest Income, net$46.7 $43.9 $76.9
Transaction$61.5 $67.9 $60.5
Other$33.9 $(19.2) $87.5
Total Revenue$3,512.4 $3,670.0 $3,835.0

Key KPIs and balance drivers

KPIQ4 2024Q1 2025Q2 2025
Advisory & Brokerage Assets ($T)$1.741 $1.795 $1.919
Organic Net New Assets ($B)$68.0 $70.9 $20.5
Recruited Assets ($B)$79.0 $38.6 $18.4
Client Cash Balances ($B)$55.1 $53.1 $50.6
Insured Cash Account net yield (bps)335 337 342
Advisors (end period)28,888 29,493 29,353
AUM Retention (quarterly annualized)97.3% 98.2% 97.6%

Estimate comparisons (S&P Global vs actual)

MetricQ4 2024Q1 2025Q2 2025
Adjusted/Primary EPS – Consensus$3.60*$3.82*$3.49*
Adjusted EPS – Actual$4.25 $5.15 $4.51
Revenue – Consensus ($B)$3.333*$3.617*$3.779*
Revenue – Actual ($B)$3.512 $3.670 $3.835
EBITDA – Consensus ($M)$560.7*$598.9*$629.2*
Adjusted EBITDA – Actual ($M)$584.8 $682.4 $688.3

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core G&A (ex‑Commonwealth)FY 2025$1.73–$1.765B (incl. Prudential & Atria) $1.72–$1.75B Lowered
Core G&A (incl. Commonwealth)FY 2025n/a$1.88–$1.92B Raised (due to deal costs)
Core G&AQ3 2025n/a$495–$510M New color
Payout RateQ3 2025n/a~87.6% New color
ICA YieldQ3 2025n/aRoughly flat seq. Maintained
Service & Fee RevenueQ3 2025n/a+~$20M q/q New color
Transaction RevenueQ3 2025n/a+~$5M q/q New color
Depreciation & AmortizationQ3 2025n/a+~$5M q/q New color
Interest ExpenseQ3 2025n/a+~$5M q/q New color
Tax RateQ3 2025n/a~27% New color
Interest IncomeQ3 2025n/a~ $40M New color
Leverage RatioPost-close / 2026~2.25x post-close; ~2.0x by end‑2026 SameMaintained
DividendQ3 2025$0.30/sh (announced timing varies)$0.30/sh payable Aug 29, record Aug 15 Maintained
Debt RatingCurrentn/aFitch BBB (July 14) New rating

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current (Q2’25)Trend
M&A / IntegrationAtria closed; Prudential onboarding. Commonwealth acquisition announced; Atria conversion on track. Atria conversion completed; Commonwealth closed Aug 1; onboarding targeted Q4’26; 90% retention target; First Horizon onboarding in Q3. Scaling, integration milestones progressing
Client Cash & ICA YieldStable to rising yields, cash % assets 3.2% in Q4. ICA yield 342 bps (+5 bps q/q), balances down $2B q/q on net buying; flat outlook for Q3. Yields stable to slightly up; balances seasonally softer
Cost Efficiency / Core G&A2025 outlook $1.73–$1.78B; slowing growth. Ex‑Commonwealth lowered to $1.72–$1.75B; total $1.88–$1.92B with deal; long runway for efficiencies. Accelerating efficiency, operating leverage
Recruiting & NNARecord recruited assets; strong organic NNA. Recruited $18B; organic NNA $21B; industry advisor movement truncated (~5% vs 5.5–6%). Solid but decelerated industry activity
Regulatory / MacroAML charge in 2024; leverage refinancing. SEC RIA threshold ambiguity impacting independent RIA flows; Fitch BBB; tariffs/macro uncertainty noted. Manageable; rating improved, policy watch

Management Commentary

  • “We delivered another quarter of strong business performance and excellent financial results while continuing to advance key initiatives.” — CEO Rich Steinmeier
  • “We successfully onboarded Atria… expect to complete our acquisition of Commonwealth tomorrow morning.” — President & CFO Matt Audette (pre-close; deal closed Aug 1)
  • “Our disciplined execution continues to translate into strong business and financial results with our cost efficiency work pulling through to sustainable improvements in our margins.” — CFO
  • “ICA yield… was 342 basis points in Q2, up 5 basis points from Q1… we expect our ICA yield to be roughly flat sequentially.” — CFO
  • “We are lowering our 2025 Core G&A outlook to a range of $1.72–$1.75B… increasing by $160–$170M to include costs related to the acquisition of Commonwealth.” — CFO

Q&A Highlights

  • Commonwealth retention and economics: Management reiterated 90% retention target; initial run‑rate EBITDA ~$120M unchanged (AUM up, cash down slightly offset), with ~$415M once fully integrated by Q4’26.
  • Efficiency runway: Core G&A growth ex‑deals trending ~5%; many years of efficiencies ahead via automation and process redesign, improving both margins and advisor experience.
  • Independent RIA flows: Modest outflows tied partly to regulatory ambiguity around potential higher SEC registration thresholds; flows favor corporate RIA near term.
  • Recruiting backdrop: Industry-wide advisor movement truncated to ~5% amid macro uncertainty; LPL maintaining industry-leading capture rates.
  • Sweep cash dynamics: Q2 cash down in April on fees/taxes; June rebounded $1.4B; July seasonally down ~$1.8B from advisory fees; $20B planned misaligned OSJ offboarding ($13B through Q2, ~$7B to go).

Estimates Context

  • Adjusted/Primary EPS beat: Q2 actual $4.51 vs S&P consensus $3.49*, a ~$1.02 beat driven by higher gross profit, slightly higher cash yields, and Core G&A below outlook; adjusted pre‑tax margin ~38%.
  • Revenue beat: $3.84B vs $3.78B* (~$56M beat), with strength in advisory, client cash, and service/fee revenue; transaction revenue was softer q/q.
  • Adjusted EBITDA beat: $688M vs $629M* (~$59M beat), reflecting operating leverage and mix tailwinds.
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Earnings quality: Strong adjusted EPS/EBITDA beats and ~38% adjusted pre‑tax margin indicate improving operating leverage amid stable cash economics (ICA yield +5 bps q/q; flat outlook).
  • Cost story strengthening: 2025 Core G&A ex‑Commonwealth lowered to $1.72–$1.75B; management sees multi‑year efficiency runway; near‑term Q3 Core G&A $495–$510M.
  • Balance sheet/capital: Leverage 1.23x pre‑close with BBB at Fitch; post‑Commonwealth ~2.25x with path to ~2.0x by end‑2026; buybacks paused until deleveraging achieved.
  • Strategic catalysts: Atria conversion, First Horizon onboarding in Q3, and Commonwealth closing/onboarding through 2026 support medium‑term scale and EBITDA accretion.
  • Flows and activity: Organic NNA moderated to $21B amid slower industry movement and planned OSJ separations; expect choppiness near term but robust longer‑term pipeline.
  • Near‑term trading implications: Positive reaction likely anchored to sizable EPS/EBITDA beats and lower ex‑deal Core G&A outlook; watch Q3 Core G&A, payout seasonality, and sweep cash trends as next checkpoints.

Additional detail:

  • Q2 2025 reported net income $273M (GAAP), diluted EPS $3.40; adjusted pre‑tax income $489.8M; Core G&A $425.6M; corporate cash $3.62B; leverage 1.23x.
  • Advisory & brokerage assets reached $1.919T (+7% q/q, +28% y/y); client cash balances $50.6B (2.6% of assets).