LPL Financial Holdings Inc.
05/04/2026 | Press release | Distributed by Public on 05/04/2026 06:39
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
LPL serves the financial advisor-mediated marketplace as the nation's largest independent broker-dealer, a leading investment advisory firm and a top custodian. We support more than 32,000 financial advisors, and the wealth management practices of approximately 1,100 financial institutions, servicing and custodying approximately $2.3 trillion in brokerage and advisory assets. The firm provides a wide range of advisor affiliation models, investment solutions, fintech tools and practice management services, ensuring that advisors and institutions have the flexibility to choose the business model, services, and technology resources they need to run successful businesses.
We are steadfast in our commitment to the advisor-mediated model and the belief that investors deserve access to personalized guidance from a financial advisor. We believe advisors should have the freedom to choose the business model, services and technology they need and to manage their client relationships. We believe investors achieve better outcomes when working with a financial advisor, and we strive to make it easy for advisors to do what is best for their clients.
We believe that we are the only company that offers the unique combination of an integrated technology platform, comprehensive self-clearing services and access to a wide range of curated non-proprietary products all delivered in an environment unencumbered by conflicts from product manufacturing, underwriting and market-making.
Our Sources of Revenue
Our revenue is derived primarily from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors, as well as fees we receive from our advisors for the use of our technology, custody, clearing, trust and reporting platforms. We also generate asset-based revenue through our insured bank sweep vehicles, money market account balances and the access we provide to a variety of product providers with the following product lines:
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• Alternative Investments
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• Retirement Plan Products
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• Annuities
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• Separately Managed Accounts
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• Exchange Traded Products
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• Structured Products
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• Insurance Based Products
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• Unit Investment Trusts
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• Mutual Funds
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Under our self-clearing platform, we custody the majority of client assets invested in these financial products, for which we provide statements, transaction processing and ongoing account management. In return for these services, mutual funds, insurance companies, banks and other financial product sponsors pay us fees based on asset levels or number of accounts managed. We also earn interest from margin loans made to our advisors' clients, cash and equivalents segregated under federal or other regulations, advisor repayable loans and operating cash, which is included in interest income, net in the condensed consolidated statements of income. A portion of our revenue is not asset-based or correlated with the equity financial markets.
We regularly review various aspects of our operations and service offerings, including our policies, procedures and platforms, in response to marketplace developments. We seek to continuously improve and enhance aspects of our operations and service offerings in order to position our advisors for long-term growth and to align with competitive and regulatory developments. For example, we regularly review the structure and fees of our products and services, including related disclosures, in the context of the changing regulatory environment and competitive landscape for advisory and brokerage accounts.
Executive Summary
Financial Highlights
Results for the first quarter of 2026 included net income of $356.4 million, or $4.43 per diluted share, which compares to net income of $318.6 million, or $4.24 per diluted share, for the first quarter of 2025.
Asset Trends
Total advisory and brokerage assets served were $2.3 trillion at March 31, 2026, compared to $1.8 trillion at March 31, 2025. Total net new assets were $21.4 billion for the three months ended March 31, 2026, compared to $78.8 billion for the same period in 2025.
Net new advisory assets were $25.8 billion for the three months ended March 31, 2026, compared to $37.6 billion for the same period in 2025. Advisory assets were $1.4 trillion, or 59% of total advisory and brokerage assets served, at March 31, 2026, up 42% from $977.4 billion at March 31, 2025.
Net new brokerage assets were an outflow of $4.4 billion for the three months ended March 31, 2026, compared to an inflow of $41.2 billion for the same period in 2025. Brokerage assets were $945.9 billion at March 31, 2026, up 16% from $817.5 billion at March 31, 2025.
Gross Profit Trend
Gross profit, a non-GAAP financial measure, was $1.6 billion for the three months ended March 31, 2026, an increase of 25% from $1.3 billion for the three months ended March 31, 2025. See the "Key Performance Metrics" section for additional information on gross profit.
Common Stock Dividends
During the three months ended March 31, 2026, we paid stockholders cash dividends of $24.1 million.
Key Performance Metrics
We focus on several key metrics in evaluating the success of our business relationships and our resulting financial position and operating performance. Our key operating, business and financial metrics are as follows:
| As of and for the Three Months Ended | |||||||||||
| March 31, | December 31, | March 31, | |||||||||
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Operating Metrics (dollars in billions)(1)
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2026 | 2025 | 2025 | ||||||||
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Advisory and Brokerage Assets(2)
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| Advisory assets | $ | 1,390.4 | $ | 1,392.7 | $ | 977.4 | |||||
| Brokerage assets | 945.9 | 977.9 | 817.5 | ||||||||
| Total Advisory and Brokerage Assets | $ | 2,336.3 | $ | 2,370.5 | $ | 1,794.9 | |||||
| Advisory as a % of total Advisory and Brokerage Assets | 59.5% | 58.8% | 54.5% | ||||||||
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Net New Assets(3)
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| Net new advisory assets | $ | 25.8 | $ | 27.8 | $ | 37.6 | |||||
| Net new brokerage assets | (4.4) | (3.2) | 41.2 | ||||||||
| Total Net New Assets | $ | 21.4 | $ | 24.5 | $ | 78.8 | |||||
| Organic Net New Assets | |||||||||||
| Organic net new advisory assets | $ | 25.8 | $ | 27.8 | $ | 35.7 | |||||
| Organic net new brokerage assets | (4.4) | (5.2) | 35.2 | ||||||||
| Total Organic Net New Assets | $ | 21.4 | $ | 22.5 | $ | 70.9 | |||||
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Organic advisory net new assets annualized growth(4)
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7.4% | 8.2% | 14.9% | ||||||||
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Total organic net new assets annualized growth(4)
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3.6% | 3.9% | 16.3% | ||||||||
| Client Cash Balances | |||||||||||
| Insured cash account sweep | $ | 39.8 | $ | 41.0 | $ | 36.1 | |||||
| Deposit cash account sweep | 15.9 | 15.3 | 10.7 | ||||||||
| Total Bank Sweep | 55.7 | 56.3 | 46.8 | ||||||||
| Money market sweep | 1.5 | 2.5 | 4.3 | ||||||||
| Total Client Cash Sweep Held by Third Parties | 57.2 | 58.8 | 51.1 | ||||||||
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Client cash account
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2.0 | 2.2 | 1.9 | ||||||||
| Total Client Cash Balances | $ | 59.1 | $ | 61.0 | $ | 53.1 | |||||
| Client Cash Balances as a % of Total Assets | 2.5% | 2.6% | 3.0% | ||||||||
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Net buy (sell) activity(5)
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$ | 43.2 | $ | 40.5 | $ | 42.0 | |||||
| As of and for the Three Months Ended | |||||||||||
| March 31, | December 31, | March 31, | |||||||||
| Business and Financial Metrics (dollars in millions) | 2026 | 2025 | 2025 | ||||||||
| Advisors | 32,144 | 32,178 | 29,493 | ||||||||
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Average total assets per advisor(6)
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$ | 72.7 | $ | 73.7 | $ | 60.9 | |||||
| Share repurchases | $ | - | $ | - | $ | 100.0 | |||||
| Dividends | $ | 24.1 | $ | 24.0 | $ | 22.4 | |||||
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Leverage ratio(7)
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1.86 | 1.95 | 1.82 | ||||||||
| Three Months Ended March 31, | ||||||||
| Financial Metrics (dollars in millions, except per share data) | 2026 | 2025 | ||||||
| Total revenue | $ | 4,938.4 | $ | 3,670.0 | ||||
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Net income
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$ | 356.4 | $ | 318.6 | ||||
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Earnings per share ("EPS"), diluted
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$ | 4.43 | $ | 4.24 | ||||
| Non-GAAP Financial Metrics (dollars in millions, except per share data) | ||||||||
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Adjusted EPS(8)
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$ | 5.60 | $ | 5.15 | ||||
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Gross profit(9)
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$ | 1,592.7 | $ | 1,272.7 | ||||
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Adjusted EBITDA(10)
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$ | 819.1 | $ | 682.4 | ||||
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Core G&A(11)
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$ | 532.0 | $ | 413.1 | ||||
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(1)Totals may not foot due to rounding.
(2)Consists of total advisory and brokerage assets under custody at the Company's primary broker-dealer subsidiary, LPL Financial LLC ("LPL Financial"), as well as assets under custody of a third-party custodian related to Commonwealth Equity Services, LLC ("CES") and Atria Wealth Solutions, Inc.'s ("Atria") introducing broker-dealer subsidiaries. Please consult the "Results of Operations" section for a tabular presentation of advisory and brokerage assets.
(3)Consists of total client deposits into advisory or brokerage accounts less total client withdrawals from advisory or brokerage accounts, plus dividends, plus interest, minus advisory fees. We consider conversions from and to brokerage or advisory accounts as deposits and withdrawals, respectively.
(4)Calculated as annualized current period organic net new assets divided by preceding period assets in their respective categories of advisory assets or total advisory and brokerage assets.
(5)Represents the amount of securities purchased less the amount of securities sold in client accounts custodied with LPL Financial.
(6)Calculated based on the end of period total advisory and brokerage assets divided by the end of period advisor count.
(7)The leverage ratio is a financial metric from our Credit Agreement and is calculated by dividing Credit Agreement net debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA. Credit Agreement EBITDA, a non-GAAP financial measure, is defined in the Credit Agreement as "Consolidated EBITDA," which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions. Please consult the "Debt and Related Covenants" section for more information. Below are reconciliations of corporate debt and other borrowings to Credit Agreement net debt as of the dates below and net income to EBITDA and Credit Agreement EBITDA for the trailing twelve-month periods presented (in millions):
| March 31, | December 31, | March 31, | |||||||||
| Credit Agreement Net Debt Reconciliation | 2026 | 2025 | 2025 | ||||||||
| Corporate debt and other borrowings | $ | 7,220.0 | $ | 7,299.0 | $ | 5,720.0 | |||||
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Corporate Cash(12)
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(567.3) | (469.7) | (620.6) | ||||||||
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Credit Agreement Net Debt(†)
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$ | 6,652.7 | $ | 6,829.3 | $ | 5,099.4 | |||||
| March 31, | December 31, | March 31, | |||||||||
| EBITDA and Credit Agreement EBITDA Reconciliation | 2026 | 2025 | 2025 | ||||||||
| Net income | $ | 900.9 | $ | 863.0 | $ | 1,088.4 | |||||
| Interest expense on borrowings | 417.8 | 403.4 | 300.0 | ||||||||
| Provision for income taxes | 316.0 | 286.5 | 347.5 | ||||||||
| Depreciation and amortization | 406.8 | 393.4 | 333.7 | ||||||||
| Amortization of other intangibles | 260.3 | 236.6 | 149.2 | ||||||||
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EBITDA(†)
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$ | 2,301.8 | $ | 2,182.9 | $ | 2,218.8 | |||||
| Credit Agreement Adjustments: | |||||||||||
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Acquisition costs and other(13)
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$ | 796.4 | $ | 777.3 | $ | 249.9 | |||||
| Employee share-based compensation | 79.8 | 76.0 | 84.7 | ||||||||
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M&A accretion(14)
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394.6 | 462.6 | 237.2 | ||||||||
| Advisor share-based compensation | 3.0 | 3.1 | 2.7 | ||||||||
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Loss on extinguishment of debt
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- | - | 4.0 | ||||||||
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Credit Agreement EBITDA(†)
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$ | 3,575.6 | $ | 3,501.8 | $ | 2,797.3 | |||||
| March 31, | December 31, | March 31, | |||||||||
| 2026 | 2025 | 2025 | |||||||||
| Leverage Ratio | 1.86 | 1.95 | 1.82 | ||||||||
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(†) Totals may not foot due to rounding.
(8)Adjusted EPS is a non-GAAP financial measure defined as adjusted net income, a non-GAAP financial measure defined as net income plus the after-tax impact of amortization of other intangibles and acquisition costs, divided by the weighted average number of diluted shares outstanding for the applicable period. The Company presents adjusted net income and adjusted EPS because management believes that these metrics can provide investors with useful insight into the Company's core operating performance by excluding non-cash items and acquisition costs that management does not believe impact the Company's ongoing operations. Adjusted net income and adjusted EPS are not measures of the Company's financial performance under GAAP and should not be considered as alternatives to net income, earnings per diluted share or any other performance measure derived in accordance with GAAP. Below is a reconciliation of net income and earnings per diluted share to adjusted net income and adjusted EPS for the periods presented (in millions, except per share data):
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Adjusted Net Income / Adjusted EPS Reconciliation | Amount | Per Share | Amount | Per Share | ||||||||||
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Net income / earnings per diluted share
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$ | 356.4 | $ | 4.43 | $ | 318.6 | $ | 4.24 | ||||||
| Amortization of other intangibles | 67.2 | 0.84 | 43.5 | 0.58 | ||||||||||
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Acquisition costs(15)
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61.2 | 0.76 | 48.5 | 0.65 | ||||||||||
| Tax benefit | (34.0) | (0.42) | (23.9) | (0.32) | ||||||||||
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Adjusted Net Income / Adjusted EPS(†)
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$ | 450.8 | $ | 5.60 | $ | 386.7 | $ | 5.15 | ||||||
| Weighted-average shares outstanding, diluted | 80.4 | 75.1 | ||||||||||||
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(†) Totals may not foot due to rounding.
(9)Gross profit is a non-GAAP financial measure defined as total revenue less advisory and commission expense; brokerage, clearing and exchange expense; and market fluctuations on employee deferred compensation. All other expense categories, including depreciation and amortization of property and equipment and amortization of other intangibles, are considered by management to be general and administrative in nature. Because our gross profit amounts do not include any depreciation and amortization expense, we consider our gross profit amounts to be non-GAAP financial measures that may not be comparable to those of others in our industry. We believe that gross profit amounts can provide investors with useful insight into our core operating performance before indirect costs that are general and administrative in nature. Below is a calculation of gross profit for the periods presented (in millions):
| Three Months Ended March 31, | ||||||||
| Gross Profit | 2026 | 2025 | ||||||
| Total revenue | $ | 4,938.4 | $ | 3,670.0 | ||||
| Advisory and commission expense | 3,291.2 | 2,353.9 | ||||||
| Brokerage, clearing and exchange expense | 55.5 | 44.1 | ||||||
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Employee deferred compensation
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(1.0) | (0.7) | ||||||
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Gross Profit(†)
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$ | 1,592.7 | $ | 1,272.7 | ||||
_______________________________
(†) Totals may not foot due to rounding.
(10)EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles. Adjusted EBITDA is defined as EBITDA plus acquisition costs excluding interest. The Company presents EBITDA and adjusted EBITDA because management believes that they can be useful financial metrics in understanding the Company's earnings from operations. EBITDA and adjusted EBITDA are not measures of the Company's financial performance under GAAP and should not be considered as alternatives to net income or any other performance measure derived in accordance with GAAP. Below is a reconciliation of net income to EBITDA and adjusted EBITDA for the periods presented (in millions):
| Three Months Ended March 31, | ||||||||
| EBITDA Reconciliation | 2026 | 2025 | ||||||
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Net income
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$ | 356.4 | $ | 318.6 | ||||
| Interest expense on borrowings | 100.3 | 85.9 | ||||||
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Provision for income taxes
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128.2 | 98.7 | ||||||
| Depreciation and amortization | 105.8 | 92.4 | ||||||
| Amortization of other intangibles | 67.2 | 43.5 | ||||||
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EBITDA(†)
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$ | 757.9 | $ | 639.0 | ||||
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Acquisition costs excluding interest(15)
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61.2 | 43.4 | ||||||
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Adjusted EBITDA(†)
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$ | 819.1 | $ | 682.4 | ||||
_______________________________
(†) Totals may not foot due to rounding.
(11)Core G&A is a non-GAAP financial measure defined as total expense less the following expenses: advisory and commission; depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange; amortization of other intangibles; market fluctuations on employee deferred compensation; promotional (ongoing); transition assistance loan amortization; acquisition costs excluding interest; employee share-based compensation; and regulatory charges. Management presents core G&A because it believes core G&A reflects the corporate expense categories over which management can generally exercise a measure of control, compared with expense items over which management either cannot exercise control, such as advisory and commission expense, or which management views as promotional expense necessary to support advisor growth and retention, including conferences and transition assistance. Core G&A is not a measure of the Company's total expense as calculated in accordance with GAAP. Below is a reconciliation of the Company's total expense to core G&A for the periods presented (in millions):
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| Three Months Ended March 31, | ||||||||
| Core G&A Reconciliation | 2026 | 2025 | ||||||
| Total expense | $ | 4,453.9 | $ | 3,252.8 | ||||
| Advisory and commission | (3,291.2) | (2,353.9) | ||||||
| Depreciation and amortization | (105.8) | (92.4) | ||||||
| Interest expense on borrowings | (100.3) | (85.9) | ||||||
| Brokerage, clearing and exchange | (55.5) | (44.1) | ||||||
| Amortization of other intangibles | (67.2) | (43.5) | ||||||
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Employee deferred compensation
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1.0 | 0.7 | ||||||
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Total G&A(†)
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834.9 | 633.7 | ||||||
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Promotional (ongoing)(16)
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(75.9) | (70.1) | ||||||
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Transition assistance loan amortization(17)
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(136.0) | (81.8) | ||||||
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Acquisition costs excluding interest(15)
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(61.2) | (43.4) | ||||||
| Employee share-based compensation | (22.2) | (18.4) | ||||||
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Regulatory charges
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(7.5) | (6.9) | ||||||
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Core G&A(†)
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$ | 532.0 | $ | 413.1 | ||||
(†) Totals may not foot due to rounding.
(12)See the "Liquidity and Capital Resources" section for additional information about Corporate Cash. Corporate Cash at March 31, 2025 also includes certain of Atria's introducing broker-dealer subsidiaries.
(13)Acquisition costs and other for the twelve months ending March 31, 2026 and December 31, 2025 primarily include costs related to acquisitions and the integration of the strategic relationship with Prudential Financial, Inc. Acquisition costs and other for the twelve months ending March 31, 2025 includes a $26.4 million reduction related to the departure of the Company's former Chief Executive Officer, and an $18.0 million regulatory charge related to a penalty proposed by the SEC as part of its civil investigation of the Company's compliance with certain elements of the Company's anti-money laundering compliance program.
(14)M&A accretion is an adjustment to reflect the annualized expected run rate EBITDA of an acquisition as permitted by the Credit Agreement for up to eight fiscal quarters following the close of such acquisition. The increase in M&A accretion for the twelve months ending March 31, 2026 and December 31, 2025 as compared to the twelve months ending March 31, 2025 was primarily related to the impact of acquisitions.
(15)Acquisition costs include the costs to setup, onboard and integrate acquired entities and other costs that were incurred as a result of acquisitions. The below table summarizes the primary components of acquisition costs for the periods presented (in millions):
| Three Months Ended March 31, | ||||||||
| Acquisition costs | 2026 | 2025 | ||||||
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Compensation and benefits
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$ | 22.5 | $ | 17.4 | ||||
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Promotional(16)
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13.4 | 8.5 | ||||||
| Professional services | 11.6 | 6.1 | ||||||
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Change in fair value of contingent consideration
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7.5 | 6.6 | ||||||
| Other | 6.2 | 4.7 | ||||||
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Acquisition costs excluding interest(†)
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$ | 61.2 | $ | 43.4 | ||||
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Interest
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- | 5.1 | ||||||
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Acquisition costs(†)
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$ | 61.2 | $ | 48.5 | ||||
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(†) Totals may not foot due to rounding.
(16)Promotional (ongoing) for the three months ended March 31, 2026 and 2025 includes $16.9 million and $14.8 million, respectively, of support costs related to full-time employees that are classified within compensation and benefits expense in the condensed consolidated statements of income. Promotional (ongoing) excludes costs that have been incurred as part of acquisitions, which are included in the Acquisition costs line item.
(17)During the fourth quarter of 2025, the Company updated its definition of Promotional (ongoing) to exclude transition assistance loan amortization. As a result, transition assistance loan amortization is now disclosed as a separate line in Core G&A. Prior period disclosures have been updated to reflect these changes as applicable.
Legal and Regulatory Matters
The financial services industry is subject to extensive regulation by U.S. federal and state government agencies as well as various self-regulatory organizations. Compliance with all applicable laws and regulations involves a significant investment in time and resources, and we continue to invest in our compliance functions to monitor our adherence to the numerous legal and regulatory requirements applicable to our business. Any new laws or regulations applicable to our business, any changes to existing laws or regulations, or any changes to the interpretations or enforcement of those laws or regulations may affect our operations and/or financial condition. We seek to participate in the development of significant rules and regulations that govern our industry.
As a regulated entity, we are subject to regulatory oversight and inquiries related to, among other items, our compliance and supervisory systems and procedures and other controls, as well as our disclosures, supervision and reporting. Additional regulation and enhanced regulatory enforcement has resulted, and may result in the future, in changes to our service offerings and additional operational and compliance costs, as well as increased costs in the form of penalties and fines, investigatory and settlement costs, customer restitution and remediation related to regulatory matters. In the ordinary course of business, we periodically identify or become aware of purported inadequacies, deficiencies and other issues. It is our policy to evaluate these matters for potential legal or regulatory violations and other potential compliance issues. It is also our policy to self-report known violations and issues as required by applicable law and regulation. When deemed probable that matters may result in financial losses, we accrue for those losses based on an estimate of possible fines, customer restitution and losses related to the repurchase of sold securities and other losses, as applicable. Certain regulatory and other legal claims and losses may be covered through our wholly-owned captive insurance subsidiary, which is chartered with the insurance commissioner in the state of Tennessee.
Assessing the probability of a loss occurring and the timing and amount of any loss related to a regulatory matter or legal proceeding, whether or not covered by our captive insurance subsidiary, is inherently difficult and requires judgments based on a variety of factors and assumptions. There are particular uncertainties and complexities involved when assessing the adequacy of loss reserves for potential liabilities that are self-insured by our captive insurance subsidiary, which depends in part on historical claims experience, including the actual timing and costs of resolving matters that begin in one policy period and are resolved in a subsequent period.
Our accruals, including those established through our captive insurance subsidiary at March 31, 2026, include estimated costs for significant regulatory matters or legal proceedings, generally relating to the adequacy of our compliance and supervisory systems and procedures and other controls, for which we believe losses are both probable and reasonably estimable.
The outcome of regulatory or legal proceedings could result in legal liability, regulatory fines or monetary penalties in excess of our accruals and insurance, which could have a material adverse effect on our business, results of operations, cash flows or financial condition. For more information on management's loss contingency policies, see Note 10 - Commitments and Contingencies, within the notes to the condensed consolidated financial statements.
Economic Overview and Impact of Financial Market Events
Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the financial markets in the United States. The equity markets fell during the first quarter of 2026, with the S&P 500 small cap index falling 4.3% and Russell 2000 remaining relatively flat.
Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Federal Reserve ("Fed") policy. During the first quarter of 2026, Fed policymakers maintained the target federal funds rate with a range of 3.50% to 3.75%. To the extent they pursue faster easing in monetary policy, the Federal Open Market Committee members will continue to take into account the evolving economic outlook and balance of risks.
Please consult the "Risks Related to Our Business and Industry" section within Part I, "Item 1A. Risk Factors" in our 2025 Annual Report on Form 10-K for more information about the risks associated with significant interest rate changes and the potential related effects on our profitability and financial condition.
Results of Operations
The following discussion presents an analysis of our results of operations for the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 |
% Change
|
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| REVENUE | |||||||||||
| Advisory | $ | 2,615,047 | $ | 1,689,245 | 55 | % | |||||
| Commission: | |||||||||||
| Sales-based | 705,415 | 610,038 | 16 | % | |||||||
| Trailing | 486,619 | 437,719 | 11 | % | |||||||
| Total commission | 1,192,034 | 1,047,757 | 14 | % | |||||||
| Asset-based: | |||||||||||
| Client cash | 445,325 | 392,031 | 14 | % | |||||||
| Other asset-based | 375,480 | 303,210 | 24 | % | |||||||
| Total asset-based | 820,805 | 695,241 | 18 | % | |||||||
| Service and fee | 210,984 | 145,199 | 45 | % | |||||||
| Transaction | 80,542 | 67,864 | 19 | % | |||||||
| Interest income, net | 45,180 | 43,851 | 3 | % | |||||||
| Other | (26,158) | (19,150) | 37 | % | |||||||
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Total revenue
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4,938,434 | 3,670,007 | 35 | % | |||||||
| EXPENSE | |||||||||||
| Advisory and commission | 3,291,209 | 2,353,925 | 40 | % | |||||||
| Compensation and benefits | 368,740 | 305,546 | 21 | % | |||||||
| Promotional | 208,400 | 145,645 | 43 | % | |||||||
| Occupancy and equipment | 118,523 | 77,240 | 53 | % | |||||||
| Depreciation and amortization | 105,751 | 92,356 | 15 | % | |||||||
| Interest expense on borrowings | 100,292 | 85,862 | 17 | % | |||||||
| Amortization of other intangibles | 67,230 | 43,521 | 54 | % | |||||||
| Brokerage, clearing and exchange | 55,475 | 44,138 | 26 | % | |||||||
| Professional services | 50,381 | 36,326 | 39 | % | |||||||
| Communications and data processing | 23,467 | 19,506 | 20 | % | |||||||
| Other | 64,382 | 48,689 | 32 | % | |||||||
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Total expense
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4,453,850 | 3,252,754 | 37 | % | |||||||
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INCOME BEFORE PROVISION FOR INCOME TAXES
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484,584 | 417,253 | 16 | % | |||||||
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PROVISION FOR INCOME TAXES
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128,180 | 98,680 | 30 | % | |||||||
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NET INCOME
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$ | 356,404 | $ | 318,573 | 12 | % | |||||
Revenue
Advisory
Advisory revenue represents fees charged to advisors' clients' advisory accounts on our corporate registered investment adviser ("RIA") advisory platform and is based on a percentage of the market value of the eligible assets in the clients' advisory accounts. We provide ongoing investment advice and act as a custodian, providing brokerage and execution services on transactions, and perform administrative services for these accounts. Advisory fees are primarily billed to clients on a quarterly basis in advance, and are recognized as revenue ratably during the quarter. The performance obligation for advisory fees is considered a series of distinct services that are substantially the same and are satisfied daily. As the value of the eligible assets in an advisory account is susceptible to changes due to customer activity, this revenue includes variable consideration and is constrained until the date that the fees are determinable. The majority of these client accounts are on a calendar quarter and are billed using values as of the last business day of the preceding quarter. The value of the eligible assets in an advisory account on the billing date is adjusted for contributions and withdrawals during the period to determine the amount of revenue earned in the period. Advisory revenue collected on our corporate RIA advisory platform is proposed by the advisor and agreed to by the client and was approximately 1% of the underlying assets for the three months ended March 31, 2026.
We also support independent RIA firms that conduct their business through our separate registered investment adviser firms ("Independent RIAs") advisory platform, which allows advisors to engage us for technology, clearing and custody services, as well as access the capabilities of our investment platforms. The assets held under an Independent RIA's investment advisory accounts custodied with LPL Financial are included in total advisory assets and net new advisory assets. However, the advisory revenue generated by an Independent RIA is not included in our advisory revenue. We charge separate fees to Independent RIAs for technology, clearing, administrative, oversight and custody services, which may vary and are included in our service and fee revenue in our condensed consolidated statements of income.
The following table summarizes the composition of advisory assets for the periods presented (in billions):
| March 31, | ||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||
| Corporate advisory assets | $ | 1,063.4 | $ | 699.1 | $ | 364.3 | 52 | % | ||||||
| Independent RIA advisory assets | 327.0 | 278.3 | 48.7 | 17 | % | |||||||||
| Total advisory assets | $ | 1,390.4 | $ | 977.4 | $ | 413.0 | 42 | % | ||||||
Net new advisory assets are generated throughout the quarter, therefore, the full impact of net new advisory assets to advisory revenue is not realized in the same period. The following table summarizes activity impacting advisory assets for the periods presented (in billions):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Balance - Beginning of period | $ | 1,392.7 | $ | 957.0 | ||||
|
Net new advisory assets(1)
|
25.8 | 37.6 | ||||||
|
Market impact(2)
|
(28.1) | (17.2) | ||||||
| Balance - End of period | $ | 1,390.4 | $ | 977.4 | ||||
_______________________________
(1)Net new advisory assets consist of total client deposits into custodied advisory accounts less total client withdrawals from custodied advisory accounts, plus dividends, plus interest, minus advisory fees. We consider conversions from and to brokerage accounts as deposits and withdrawals, respectively.
(2)Market impact is the difference between the beginning and ending asset balance less the net new asset amounts, representing the implied growth or decline in asset balances due to market changes over the same period of time.
Advisory revenue increased during the three months ended March 31, 2026 as compared to the same period in 2025 due primarily to an increase in advisory asset balances and related revenue from the acquisition of Commonwealth.
Commission
We generate two types of commission revenue: (1) sales-based commissions that are recognized at the point of sale on the trade date and are based on a percentage of an investment product's current market value at the time of purchase and (2) trailing commissions that are recognized over time as earned and are generally based on the market value of investment holdings in trail-eligible assets. Sales-based commission revenue, which occurs when clients trade securities or purchase various types of investment products, primarily represents gross commissions generated by our advisors and can vary from period to period based on the overall economic environment, number of trading days in the reporting period and investment activity of our advisors' clients. We earn trailing commission revenue primarily on mutual funds and variable annuities held by clients of our advisors. See Note 3 - Revenue, within the notes to the condensed consolidated financial statements for further detail regarding our commission revenue by product category.
The following table sets forth the components of our commission revenue for the periods presented (in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||
| Sales-based | $ | 705,415 | $ | 610,038 | $ | 95,377 | 16 | % | ||||||
| Trailing | 486,619 | 437,719 | 48,900 | 11 | % | |||||||||
|
Total commission revenue
|
$ | 1,192,034 | $ | 1,047,757 | $ | 144,277 | 14 | % | ||||||
The increase in sales-based commission revenue for the three months ended March 31, 2026 compared to 2025 was primarily driven by an increase in sales of annuities. The increase in trailing commission revenue for the three months ended March 31, 2026 compared to 2025 was primarily due to continued growth in trail earning assets held by customers.
The following table summarizes activity impacting brokerage assets for the periods presented (in billions):
_______________________________
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Balance - Beginning of period | $ | 977.9 | $ | 783.7 | ||||
|
Net new brokerage assets(1)
|
(4.4) | 41.2 | ||||||
|
Market impact(2)
|
(27.6) | (7.4) | ||||||
| Balance - End of period | $ | 945.9 | $ | 817.5 | ||||
(1) Net new brokerage assets consist of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts, plus dividends, plus interest. We consider conversions from and to advisory accounts as deposits and withdrawals, respectively.
(2) Market impact is the difference between the beginning and ending asset balance less the net new asset amounts, representing the implied growth or decline in asset balances due to market changes over the same period of time.
Asset-Based
Asset-based revenue consists of fees from our client cash programs, fees from our sponsorship programs with financial product manufacturers and fees from omnibus processing and networking services (collectively referred to as "recordkeeping"). Client cash revenue is generated on advisors' clients' cash balances in insured bank sweep accounts and money market accounts. We also receive fees from certain financial product manufacturers in connection with sponsorship programs that support our marketing and sales force education and training efforts. Compensation for these performance obligations is either a fixed fee, a percentage of the average annual amount of product sponsor assets held in advisors' clients' accounts, a percentage of new sales or a combination. Omnibus processing revenue is paid to us by mutual fund product sponsors or their affiliates and is based on the value of mutual fund assets in accounts for which the Company provides omnibus processing services and the number of accounts in which the related mutual fund positions are held. Networking revenue on brokerage assets is correlated to the number of positions we administer and is paid to us by mutual fund product sponsors and annuity product manufacturers.
Asset-based revenue for the three months ended March 31, 2026 increased by $125.6 million compared to the same period in 2025 due to increases in client cash and other asset-based revenue. Other asset-based revenue for the three months ended March 31, 2026 increased compared to 2025 primarily due to increases in recordkeeping and sponsorship program revenue. Client cash revenue for the three months ended March 31, 2026 increased compared to 2025 due to higher average client cash balances. For the three months ended March 31, 2026, our average client cash balances increased to $55.5 billion compared to $50.4 billion for the same period in 2025.
Service and Fee
Service and fee revenue is generated from advisor and retail investor services, including technology, insurance, conferences, licensing, business services and planning and advice services, Individual Retirement Account ("IRA") custodian and other client account fees. We charge separate fees to RIAs on our Independent RIA advisory platform for technology, clearing, administrative, oversight and custody services, which may vary. We also host certain advisor conferences that serve as training, education, sales and marketing events for which we charge sponsors a fee. Service and fee revenue for the three months ended March 31, 2026 increased compared to 2025, primarily due to increases in brokerage account fees.
Transaction
Transaction revenue includes transaction charges generated in both advisory and brokerage accounts from mutual funds, exchange-traded funds and fixed income products. Transaction revenue for the three months ended March 31, 2026 increased compared to 2025, primarily due to increases in the number of transactions and transaction charges for managed assets.
Expense
Advisory and Commission
Advisory and commission expense consists of the following: payout amounts that are earned by and paid out to advisors and institutions based on advisory and commission revenue earned on each client's account, production-based bonuses earned by advisors and institutions based on the levels of advisory and commission revenue they produce, compensation and benefits paid to employee advisors, share-based compensation expense from equity awards granted to advisors and institutions based on the fair value of the awards at grant date and the deferred advisory and commission fee expense associated with mark-to-market gains or losses on the non-qualified deferred compensation plan offered to our advisors.
The following table sets forth our payout rate, which is a statistical or operating measure, for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | Change | |||||||||
| Payout rate | 87.22% | 86.75% | 47 bps | ||||||||
Our payout rate for the three months ended March 31, 2026 increased compared to 2025, primarily due to changes in the mix of brokerage products and advisory platforms.
Compensation and Benefits
Compensation and benefits expense includes salaries, wages, benefits, share-based compensation and related taxes for our employees, as well as compensation for temporary workers and contractors. The following table sets forth the number of employees for the periods presented:
| March 31, | |||||||||||
| 2026 | 2025 | Change | |||||||||
| Number of employees | 9,901 | 9,097 | 9% | ||||||||
Compensation and benefits expense for the three months ended March 31, 2026 increased by $63.2 million compared to 2025, primarily due to an increase in headcount.
Promotional
Promotional expense includes business development costs related to advisor recruitment and retention, costs related to hosting certain advisory conferences that serve as training, sales and marketing events, and other costs that support advisor business growth. Promotional expense for the three months ended March 31, 2026 increased by $62.8 million compared to 2025, primarily due to increases in recruited assets and advisors that led to higher costs to support transition assistance and retention as well as training and education.
Occupancy and Equipment
Occupancy and equipment expense includes the costs of leasing and maintaining our office spaces, software licensing and maintenance costs, and maintenance expense on computer hardware and other equipment. Occupancy and equipment expense for the three months ended March 31, 2026 increased by $41.3 million compared to 2025, primarily due to increased expense related to software licenses and our technology portfolio.
Depreciation and Amortization
Depreciation and amortization expense relates to the use of property and equipment, which includes internally developed software, hardware, leasehold improvements and other equipment. Depreciation and amortization expense for the three months ended March 31, 2026 increased by $13.4 million compared to 2025, primarily due to our continued investment in technology to support integrations, enhance our advisor platform and experience, and support onboarding of institutions.
Interest Expense on Borrowings
Interest expense on borrowings includes the interest associated with the Company's senior notes, Term Loan A ("Term Loan A") and revolving credit facilities; amortization of debt issuance costs; and fees associated with the Company's revolving lines of credit. Interest expense on borrowings for the three months ended March 31, 2026 increased by $14.4 million compared to 2025, primarily as a result of the issuance of $1.25 billion and $1.5 billion of senior unsecured notes in February 2025 and April 2025, respectively. See Note 9 - Corporate Debt and Other Borrowings, Net, within the notes to the condensed consolidated financial statements for additional information.
Amortization of Other Intangibles
Amortization of other intangibles represents the benefits received for the use of long-lived intangible assets established through our acquisitions. Amortization of other intangibles for the three months ended March 31, 2026 increased by $23.7 million compared to 2025, primarily due to additional intangible assets acquired during the period.
Brokerage, Clearing and Exchange
Brokerage, clearing and exchange expense includes expenses originating from trading or clearing operations as well as any exchange membership fees. These fees fluctuate largely in line with the volume of sales and trading activity. Brokerage, clearing and exchange expense for the three months ended March 31, 2026 increased by $11.3 million compared to 2025, primarily due to an increase in clearing charges.
Professional Services
Professional services expense includes costs paid to outside firms for assistance with legal, accounting, technology, regulatory, marketing, and general corporate matters, as well as non-capitalized costs related to service and technology enhancements. Professional services expense for the three months ended March 31, 2026 increased by $14.1 million compared to 2025, primarily due to technology enhancement projects and acquisition-related support.
Other Expense
Other expense includes licensing fees, insurance, broker-dealer regulatory fees, travel-related expenses, fair value adjustments to contingent consideration liabilities, the costs of the investigation, settlement and resolution of regulatory matters (including customer restitution and remediation), and other miscellaneous expenses. Other expense for the three months ended March 31, 2026 increased by $15.7 million compared to 2025, primarily due to increases in licensing fees, travel and events.
Provision for Income Taxes
Our effective income tax rate was 26.5% and 23.6% for the three months ended March 31, 2026 and 2025, respectively. The Company's effective income tax rate differs from the federal corporate tax rate of 21.0%, primarily as a result of state taxes, reserves for uncertain tax positions and non-deductible expenses. Our effective income tax rate is reduced by tax benefits received from income tax credits as well as share-based compensation vesting and exercises. The increase in our effective tax rate for the three months ended March 31, 2026 was primarily driven by lower share-based compensation tax benefits as compared to the prior year.
Liquidity and Capital Resources
We have established liquidity and capital policies intended to support the execution of strategic initiatives, while meeting regulatory capital requirements and maintaining ongoing and sufficient liquidity. We believe liquidity is of critical importance to the Company and, in particular, to LPL Financial, our primary broker-dealer subsidiary. The objective of our policies is to ensure that we can meet our strategic, operational and regulatory liquidity and capital requirements under both normal operating conditions and under periods of stress in the financial markets.
Liquidity
Our liquidity needs are primarily driven by capital requirements at LPL Financial, interest due on our corporate debt and other capital returns to stockholders. Our liquidity needs at LPL Financial are driven primarily by the level and volatility of our client activity. Management maintains a set of liquidity sources and monitors certain business trends and market metrics closely in an effort to ensure we have sufficient liquidity. We believe that based on current levels of cash flows from operations and anticipated growth, together with available cash balances and external liquidity sources, including continued access to the equity and investment-grade debt markets, we have adequate liquidity to satisfy our short-term and long-term working capital needs, meet all of our obligations, and fund anticipated capital expenditures. The Company maintains ongoing access to the debt markets supported by our investment-grade credit profile, and we also have meaningful liquidity available at the parent level, which can be utilized to support funding needs across the organization as required.
Parent Company Liquidity
LPL Holdings, Inc. (the "Parent"), the direct holding company of our operating subsidiaries, considers its primary sources of liquidity to be dividends from and excess capital generated by LPL Financial, as well as capacity for additional borrowing under its $2.25 billion unsecured revolving credit facility, which it has the ability to borrow against for working capital and general corporate purposes.
Dividends from and excess capital generated by LPL Financial are primarily generated through our cash flow from operations. Subject to regulatory approval or notification, capital generated by regulated subsidiaries can be distributed to the Parent to the extent the capital levels exceed regulatory requirements, Credit Agreement requirements and internal capital thresholds. During the three months ended March 31, 2026 and 2025, LPL Financial paid dividends of $210.0 million and $150.0 million to the Parent, respectively.
We believe Corporate Cash, a component of cash and equivalents, is a useful measure of the Parent's liquidity as it represents the capital available for use in excess of the amount we are required to maintain pursuant to the Credit Agreement. Corporate Cash is the sum of cash and equivalents from the following: (1) cash and equivalents held at the Parent, (2) cash and equivalents held at regulated subsidiaries as defined by the Credit Agreement, which include LPL Financial, LPL Enterprise, The Private Trust Company, N.A. ("PTC"), and CES, in excess of the capital requirements of the Credit Agreement and (3) cash and equivalents held at non-regulated subsidiaries.
The following table presents the components of Corporate Cash (in thousands):
| March 31, 2026 | December 31, 2025 | |||||||
| Cash and equivalents | $ | 1,024,459 | $ | 1,037,378 | ||||
| Cash at regulated subsidiaries | (873,123) | (925,356) | ||||||
| Excess cash at regulated subsidiaries per the Credit Agreement | 416,002 | 357,693 | ||||||
| Corporate Cash | $ | 567,338 | $ | 469,715 | ||||
| Corporate Cash | ||||||||
| Cash at the Parent | $ | 24,107 | $ | 19,368 | ||||
| Excess cash at regulated subsidiaries per the Credit Agreement | 416,002 | 357,693 | ||||||
| Cash at non-regulated subsidiaries | 127,229 | 92,654 | ||||||
| Corporate Cash | $ | 567,338 | $ | 469,715 | ||||
Corporate Cash is monitored as part of our liquidity risk management strategy. Corporate Cash increased by $97.6 million during the three months ended March 31, 2026 as we continue our normal course of operations and reinvestments into the business.
We actively monitor changes to our liquidity needs caused by general business volumes and price volatility, including higher margin requirements of clearing corporations and exchanges, and stress scenarios involving a sustained market downturn and the persistence of current interest rates. We believe that based on current levels of operations and anticipated growth, our cash flow from operations, together with other available sources of funds, which include five uncommitted lines of credit, the revolving credit facility established through our Credit Agreement and the committed revolving credit facility of LPL Financial, will provide us with adequate liquidity to satisfy our short-term and long-term working capital needs, the payment of all of our obligations and the funding of anticipated capital expenditures.
We regularly evaluate our existing indebtedness, including potential issuances and refinancing opportunities, based on a number of factors, including our capital requirements, future prospects, contractual restrictions, the availability
of refinancing on attractive terms and general market conditions. As of March 31, 2026, the earliest principal maturity date for our corporate debt with outstanding balances is in 2027 and our revolving credit facilities and uncommitted lines of credit mature between 2026 and 2029.
Share Repurchases
We engage in a share repurchase program that was approved by our Board, pursuant to which we may repurchase our issued and outstanding shares of common stock from time to time. Purchases may be effected in open market or privately negotiated transactions. Our current capital deployment framework remains focused on investing in organic growth first, pursuing acquisitions where appropriate and returning excess capital to stockholders. As of March 31, 2026, the Company had $630.0 million remaining under our existing repurchase program. We had previously paused share repurchases in anticipation of the Commonwealth acquisition; however, have resumed share repurchases in April 2026. We estimate that we will complete share repurchases of approximately $125 million during the second quarter of 2026 and have repurchased 214,652 of our outstanding shares for a total of $67.7 million between April 1, 2026 and May 1, 2026. The timing and amount of share repurchases, if any, is determined at our discretion within the constraints of our Credit Agreement, applicable laws and consideration of our general liquidity needs. See Note 11 - Stockholders' Equity, within the notes to the condensed consolidated financial statements for additional information regarding our share repurchases.
Common Stock Dividends
The payment, timing and amount of any dividends are subject to approval by LPLFH's Board, as well as certain limits under our Credit Agreement. See Note 11 - Stockholders' Equity, within the notes to the condensed consolidated financial statements for additional information regarding our dividends.
LPL Financial Liquidity
LPL Financial relies primarily on client payables to fund margin lending. LPL Financial maintains additional liquidity through external lines of credit totaling $1.2 billion at March 31, 2026, as well as two additional lines of credit with unspecified limits. LPL Financial also maintains a line of credit with the Parent.
External Liquidity Sources
The following table presents amounts outstanding and available under our external lines of credit at March 31, 2026 (in millions):
| Description | Borrower | Maturity Date | Outstanding | Available | ||||||||||
|
Senior unsecured, revolving credit facility
|
LPL Holdings, Inc. | May 2029 | $ | - | $ | 2,249 | ||||||||
|
Broker-dealer revolving credit facility
|
LPL Financial LLC | May 2026 | $ | - | $ | 1,000 | ||||||||
| Unsecured, uncommitted lines of credit | LPL Financial LLC |
None
|
$ | - | $ | 75 | ||||||||
| Unsecured, uncommitted lines of credit | LPL Financial LLC | September 2026 | $ | - | $ | 50 | ||||||||
| Secured, uncommitted lines of credit | LPL Financial LLC | March 2028 | $ | - | $ | 75 | ||||||||
| Secured, uncommitted lines of credit | LPL Financial LLC | None | $ | - | unspecified | |||||||||
| Secured, uncommitted lines of credit | LPL Financial LLC | None | $ | - | unspecified | |||||||||
Capital Resources
The Company seeks to manage capital levels in support of its business strategy of generating and effectively deploying capital for the benefit of our stockholders.
Our primary requirement for working capital relates to funds we loan to our advisors' clients for trading conducted on margin and funds we are required to maintain for regulatory capital and reserves based on the requirements of our regulators and clearing organizations, which also consider client balances and trading activities. We have several sources of funds that enable us to meet increases in working capital requirements that relate to increases in client margin activities and balances. These sources include cash and equivalents on hand, the committed revolving credit facility of LPL Financial and proceeds from repledging or selling client securities in margin accounts. When an advisor's client purchases securities on margin or uses securities as collateral to borrow from us on margin, we are permitted, pursuant to the applicable securities industry regulations, to repledge, loan or sell securities, up to 140% of the client's margin loan balance, that collateralize those margin accounts.
Our other working capital needs are primarily related to loans we are making to advisors and timing associated with receivables and payables, which we have satisfied in the past from internally generated cash flows.
We may sometimes be required to fund capital requirements necessary to effect client transactions in securities markets and cash sweep balances held at third-party banks that arise from the delayed receipt of client funds. These capital requirements are funded either with internally generated cash flows or, if needed, with funds drawn on our uncommitted lines of credit at LPL Financial or one of our revolving credit facilities.
Our broker-dealer subsidiaries are subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1 under the Exchange Act), which requires the maintenance of minimum net capital. LPL Financial, our primary broker-dealer subsidiary, computes net capital requirements under the alternative method, which requires firms to maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from client transactions.
The following table presents the net capital position of the Company's primary broker-dealer subsidiary (in thousands):
| March 31, 2026 | |||||
| LPL Financial LLC | |||||
| Net capital | $ | 373,953 | |||
| Less: required net capital | 24,013 | ||||
| Excess net capital | $ | 349,940 | |||
Payment by our broker-dealer subsidiaries of dividends greater than 10% of their respective excess net capital during any 35-day rolling period requires approval from FINRA. In addition, each broker-dealer subsidiary's ability to pay dividends would be restricted if its net capital would be less than 5% of aggregate customer debit balances.
LPL Financial also acts as an introducing broker-dealer for commodities and futures. Accordingly, its trading activities are subject to the National Futures Association's ("NFA") financial requirements and it is required to maintain net capital that is in excess of or equal to the greatest of NFA's minimum financial requirements. The NFA was designated by the Commodity Futures Trading Commission as LPL Financial's primary regulator for such activities. Currently, the highest NFA requirement is the minimum net capital calculated and required pursuant to the SEC's Uniform Net Capital Rule.
Our other regulated subsidiaries, including LPL Enterprise, Commonwealth's introducing broker-dealer subsidiary, and PTC, are also subject to various regulatory capital requirements. Failure to meet the respective minimum capital requirements can result in certain mandatory and discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on these subsidiaries' operations. As of March 31, 2026, the Company's other regulated subsidiaries met all capital adequacy requirements to which they were subject.
Supplemental Guarantor Financial Information
LPL Holdings, Inc. (the "Issuer"), a wholly owned subsidiary of LPL Financial Holdings Inc. ("LPLFH" and together with the Issuer, the "Obligor Group"), has in the past, and may in the future, issue, among other things, non-convertible debt securities that include full and unconditional guarantees by LPLFH. The debt securities issued by the Issuer may be fully and unconditionally guaranteed by LPLFH. LPLFH is a Delaware holding corporation that manages substantially all of its operations through investments in subsidiaries. See Note 1 - Organization and Description of the Company and Note 9 - Corporate Debt and Other Borrowings, Net, within the notes to the condensed consolidated financial statements for additional information.
Pursuant to Rule 3-10 of Regulation S-X under the Securities Act of 1933, as amended, the following tables present unaudited summarized financial information for the Obligor Group on a combined basis. Balances and transactions between the Obligor Group have been eliminated. Financial information for non-guarantor subsidiaries, which includes all other subsidiaries of the Issuer, has been excluded and intercompany balances and transactions between the Obligor Group and non-guarantor subsidiaries are presented on separate lines. The summarized financial information below should be read in conjunction with the Company's condensed consolidated financial statements contained herein as the summarized financial information for the Obligor Group may not be indicative of results of operations or financial position of the Issuer or LPLFH had they operated as independent entities.
The following tables present the summarized financial information for the periods presented (in thousands):
|
LPL Holdings, Inc. & LPL Financial Holdings Inc.
|
|||||
| Three Months Ended March 31, | |||||
|
Combined Summarized Statements of Income
|
2026 | ||||
|
Revenues(1)
|
$ | (30,240) | |||
|
Revenues from non-guarantor subsidiaries
|
4,661 | ||||
|
Advisory and commission expense(1)
|
(25,410) | ||||
|
Interest expense on borrowings
|
99,420 | ||||
|
Expenses from non-guarantor subsidiaries
|
4,955 | ||||
|
Loss before provision for income taxes
|
(130,198) | ||||
|
Net loss
|
(95,999) | ||||
(1)Revenues primarily include unrealized gains and losses on assets held in the non-qualified deferred compensation plan offered to advisors and employees, while advisory and commission expense includes the deferred advisory and commission fee expense associated with mark-to-market gains or losses on the non-qualified deferred compensation plan offered to advisors.
|
LPL Holdings, Inc. & LPL Financial Holdings Inc.
|
||||||||
|
Combined Summarized Statements of Financial Condition
|
March 31, 2026 | December 31, 2025 | ||||||
| Cash and equivalents | $ | 24,107 | $ | 19,368 | ||||
|
Other receivables, net
|
4,434 | 3,090 | ||||||
|
Property and equipment, net
|
180,074 | 177,136 | ||||||
|
Goodwill
|
1,265,793 | 1,251,908 | ||||||
|
Other intangibles, net
|
44,084 | 39,819 | ||||||
|
Receivables from non-guarantor subsidiaries
|
89,480 | 105,657 | ||||||
|
Other assets
|
1,495,624 | 1,525,640 | ||||||
|
Corporate debt and other borrowings, net
|
7,182,102 | 7,258,694 | ||||||
|
Accounts payable and accrued liabilities
|
112,790 | 83,637 | ||||||
|
Payables to non-guarantor subsidiaries
|
99,623 | 85,228 | ||||||
|
Other liabilities
|
1,571,152 | 1,568,879 | ||||||
Debt and Related Covenants
The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to:
•create liens;
•sell assets;
•engage in certain transactions with affiliates; and
•consolidate, merge or transfer all or substantially all of our assets.
In addition, our revolving credit facility requires us to be in compliance with certain financial covenants as of the last day of each fiscal quarter. The financial covenants require the calculation of Credit Agreement EBITDA, as defined in, and calculated by management in accordance with, the Credit Agreement. The Credit Agreement defines Credit Agreement EBITDA as "Consolidated EBITDA," which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions.
As of March 31, 2026, we were in compliance with our Credit Agreement financial covenants, which include a maximum Consolidated Total Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) or "Leverage Ratio" and a minimum Consolidated EBITDA to Consolidated Interest Expense Ratio (as defined in the Credit Agreement) or "Interest Coverage." The breach of these financial covenants would be subject to certain equity cure rights. The required ratios under our financial covenants and actual ratios were as follows:
| March 31, 2026 | ||||||||
| Financial Ratio | Covenant Requirement | Actual Ratio | ||||||
|
Leverage Ratio (Maximum)
|
4.0 | 1.86 | ||||||
| Interest Coverage (Minimum) | 3.0 | 8.88 | ||||||
Certain restrictive covenants under certain of our Indentures are currently suspended. However, a credit rating downgrade to a below investment grade rating could cause currently suspended restrictive covenants under certain of our Indentures to be automatically reinstated.
See Note 9 - Corporate Debt and Other Borrowings, Net, within the notes to the condensed consolidated financial statements for additional information regarding the Credit Agreement.
Contractual Obligations
During the three months ended March 31, 2026, there were no material changes in our contractual obligations, other than in the ordinary course of business, from those disclosed in our 2025 Annual Report on Form 10-K. See Note 4 - Acquisitions, Note 9 - Corporate Debt and Other Borrowings, Net and Note 10 - Commitments and Contingencies, within the notes to the condensed consolidated financial statements, as well as the Contractual Obligations section within Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Annual Report on Form 10-K, for further detail.
Risk Management
Risk is an inherent part of our business activities. To manage risk, we have implemented an enterprise risk management ("ERM") framework that supports a resilient and adaptive risk-focused organization, designed to enable us to navigate uncertainties, make informed and consistent decisions, and seize growth opportunities. This framework facilitates the incorporation of risk assessment into decision-making processes, enables execution of our business strategy, and protects the Company and our franchise.
Our Company-wide risk appetite statement is a crucial component of our risk governance framework. It defines the overall level and types of risk we are prepared to accept in order to achieve our strategic objectives and business plan. This statement categorizes risks into strategic, technology, regulatory compliance, operational, liquidity, reputational, credit, interest rate, and market risks.
Additionally, this framework aims to ensure policies and procedures are in place and appropriately designed to identify and manage risk at appropriate levels throughout the Company and within various departments. We have established advisor-facing and internal written policies and procedures that govern the conduct of our advisors and employees. Our advisor-facing policies are specifically designed to provide guidelines and procedures that ensure advisors adhere to regulatory requirements and maintain ethical standards in their professional conduct while our internal policies cover a wide range of topics designed to promote compliance, consistency, risk management, and culture and values across the Company. Please consult the "Risks Related to Our Technology" and the "Risks Related to Our Business and Industry" sections within Part I, "Item 1A. Risk Factors" and the "Risk Management" section within Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Annual Report on Form 10-K for more information about our risks, our risk management policies and procedures, the potential related effects on our operations, and our ERM framework.
Operational Risk
Operational risk refers to the risk of loss resulting from inadequate or failed processes and/or systems as a result of external events and is inherent in all Company activities. Please consult the "Risk Management" section within Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Annual Report on Form 10-K for more information about the operational risks that we face.
Regulatory and Compliance Risk
The regulatory environment in which we operate is discussed in detail within Part I, "Item 1. Business" in our 2025 Annual Report on Form 10-K. In recent years, and during the periods presented in this Quarterly Report on Form 10-Q, we have observed the SEC, FINRA, the U.S. Department of Labor and state regulators broaden the scope, frequency and depth of their examinations and inquiries to include greater emphasis on the quality, consistency and oversight of our compliance systems and programs. Please consult the "Risks Related to Our Regulatory Environment" and the "Risks Related to Our Business and Industry" sections within Part I, "Item 1A. Risk Factors" in our 2025 Annual Report on Form 10-K for more information about the risks associated with operating within our regulatory environment, pending regulatory matters and the potential related effects on our operations.
Critical Accounting Policies and Estimates
In the notes to our consolidated financial statements and in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Annual Report on Form 10-K, we have disclosed those accounting policies that we consider to be most significant in determining our results of operations and financial condition and involve a higher degree of judgment and complexity. There have been no changes to those policies that we consider to be material since the filing of our 2025 Annual Report on Form 10-K. The accounting principles used in preparing our condensed consolidated financial statements conform in all material respects to GAAP.
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