NPH serves approximately 3,200 advisors and $120
billion of client assets(1)Estimated run-rate GAAP EPS accretion of
$0.25-0.40 by the end of 2018; $0.40-0.55 prior to
amortization of intangible assets* Estimated run-rate EBITDA*
accretion of $75-100M by the end of 2018Transaction simultaneously
signed and closed on August 15th, 2017 Conference call with
management tomorrow, August 16th, at 8:00 a.m. EST
Leading retail investment advisory firm and independent
broker/dealer
LPL Financial LLC, a wholly owned
subsidiary of LPL Financial Holdings Inc. (NASDAQ:LPLA)
(“Company”), today announced it has acquired the independent
broker-dealer network of National Planning Holdings, Inc.
(“NPH”). The transaction is structured as an asset purchase
with an initial purchase price of $325 million. The Company
will also make a contingent payment between $0 and $123 million in
the first half of 2018, which will be based on the level of NPH’s
business that onboards onto LPL’s platform.
“The demand for financial advice continues to grow, and the
independent model is the fastest growing part of the industry,”
said Dan Arnold, LPL Financial president and CEO. “We are
committed to being a leader in our core markets, so we are excited
to announce our purchase of NPH which brings us together with one
of the largest U.S. independent broker/dealer networks(2).
This transaction adds to our scale, which we can leverage to
provide LPL and NPH advisors with the capabilities they need, and
the service they expect, at a compelling price.”
“NPH advisors share our passion for independence and serving
American investors,” Arnold continued. “At LPL, NPH advisors and
their clients will benefit from our scale, strength, and breadth of
services, including the advantages of our self-clearing
platform.”
The transaction was signed and closed on August 15, 2017
following receipt of regulatory approval. Under the
transaction structure, LPL will onboard NPH advisors and client
assets onto its platform rather than integrating NPH’s operations,
although NPH will maintain its operations during the onboarding
period. LPL plans to onboard NPH advisors in two waves that
it anticipates completing by the end of the first quarter of
2018. After the onboarding waves are complete, the Company
will make a contingent payment between $0 and $123 million.
The contingent payment will be based on the portion of NPH’s
business that is onboarded to LPL’s platform. No contingent
payment would be due if less than 72% of NPH production is
onboarded, and the amount of the contingent payment increases on an
interpolated basis for onboarded production in the range of 72% to
93.5%.
Scott Romine, president and chief executive officer of NPH,
added, “Given the similarities in LPL’s independent model to the
NPH model, we believe LPL is the ideal acquirer to ensure
continuity of the quality service and support for our clients and
their financial advisors.”
The Company estimates the transaction can generate $75-100M of
run-rate EBITDA* accretion by the end of 2018. These
estimates are primarily dependent on the level of onboarding of NPH
client assets, and they also include amortization expense from
onboarding assistance loans to NPH advisors. Corresponding
with those run-rate EBITDA* estimates, the Company estimates
run-rate EPS accretion of $0.40-0.55 prior to amortization of
intangible assets*. The Company also assumes that it will
record a portion of the combined amount of the initial purchase
price and contingent payment as intangible assets and that it will
record the remaining amount as goodwill which does not
amortize. After applying the amortization associated with
these intangible assets, the Company estimates run-rate GAAP EPS
accretion of $0.25-0.40 by the end of 2018.
The Company expects onboarding costs of $40-60 million,
including staffing to onboard NPH advisors and clients, account
closure and transfer fees, and technology capacity investments,
that will be mostly complete by mid-2018.
The Company funded the initial purchase price with cash
available for corporate use from its balance sheet. The
Company may raise additional debt and/or refinance its existing
debt in conjunction with funding other transaction-related
costs.
Investor PresentationThe Company posted an
investor presentation with an overview of the transaction on its
Investor Relations page on LPL.com.
Conference CallThe Company will hold a
conference call for shareholders, analysts, and media tomorrow,
August 16, 2017 at 8 a.m. EST. The call will feature comments
from Dan Arnold, LPL Financial president and CEO, and Matt Audette,
LPL Financial CFO. The conference call can be accessed by
dialing either 877-677-9122 (domestic) or 708-290-1401
(international) and entering passcode 71559986.
The conference call will also be webcast simultaneously on the
Investor Relations section of the Company's website
(investor.lpl.com), where a replay of the call will also be
available following the live webcast. A telephonic replay
will be available approximately two hours after the call and can be
accessed by dialing 855-859-2056 (domestic) or 404-537-3406
(international) and entering passcode 71559986. The telephonic
replay will be available until 11:59 p.m. EST on August 23, 2017,
and the webcast replay will be available until September 6,
2017.
(1) |
Advisors affiliated
with NPH’s broker-dealer subsidiaries served approximately $120
billion of client brokerage and advisory assets, as of June 30th,
2017. Asset numbers were reported by NPH based on prior business
and have not been independently and fully verified by LPL
Financial |
(2) |
Based on total
revenues, Financial Planning magazine, June 1996-2017 |
About LPL Financial
LPL Financial LLC, a wholly owned subsidiary of LPL Financial
Holdings Inc. (NASDAQ:LPLA), is a leader in the retail financial
advice market and served approximately $542 billion in brokerage
and advisory assets as of June 30, 2017. LPL is one of the fastest
growing RIA custodians and the nation's largest independent
broker/dealer (based on total revenues, Financial Planning magazine
June 1996-2017), and the firm and its financial advisors were
ranked No. 1 in net customer loyalty in a 2016 Cogent Reports™
study. The Company provides proprietary technology, comprehensive
clearing and compliance services, practice management programs and
training, and independent research to more than 14,000 financial
advisors and over 700 financial institutions, enabling them to
provide a range of financial services including wealth management,
retirement planning, financial planning and other investment
services to help their clients turn life's aspirations into
financial realities. As of June 30, 2017, financial advisors
associated with LPL served more than 4 million client accounts
across the U.S. as well as an estimated 46,000 retirement plans
with an estimated $138 billion in retirement plan assets.
Additionally, LPL supports approximately 3,700 financial advisors
licensed and affiliated with insurance companies with customized
clearing, advisory platforms, and technology solutions. LPL
Financial and its affiliates have more than 3,400 employees with
primary offices in Boston, Charlotte, and San Diego. For more
information, visit www.lpl.com.
Securities and Advisory Services offered through LPL Financial.
A Registered Investment Advisor, Member FINRA/SIPC.
About National Planning Holdings, Inc.
National Planning Holdings, Inc. (NPH) is a broker-dealer
holding company and an affiliate of Lansing, Mich.-based Jackson
National Life Insurance Company® (Jackson®). NPH serves as the
holding company for the independent broker-dealers INVEST Financial
Corporation®, Investment Centers of America, Inc., National
Planning Corporation® and SII Investments, Inc. ® As of June 30,
2017, the member firms of the NPH network supported approximately
3,200 advisors across the country with over 1.5 million customer
accounts and approximately $120 billion in assets under management.
NPH and Jackson are wholly owned by Prudential plc (NYSE:PUK), a
company incorporated in England and Wales. Prudential plc is not
affiliated in any manner with Prudential Financial, Inc., a company
whose principal place of business is in the United States of
America.
Forward-Looking Statements
Statements in this press release regarding the Company’s
potential future levels of assets serviced, advisor headcount,
growth, additional run-rate EBITDA and EPS accretion, future
payments, onboarding costs, business strategy, and plans, 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. These forward-looking statements are
based on the Company's historical performance and its plans,
estimates and expectations as of August 15, 2017. The words
“potential,” "anticipates," "intends," "believes," "expects,"
"may," "plans," "predicts," "will" and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words.
Forward-looking statements are not guarantees that the future
levels of assets serviced, results, plans, intentions or
expectations expressed or implied by the Company will be achieved.
Matters subject to forward-looking statements involve known and
unknown risks and uncertainties, including economic, legislative,
regulatory, competitive and other factors, which may cause levels
of assets serviced, actual financial or operating results, levels
of activity, or the timing of events, to be materially different
than those expressed or implied by forward-looking statements. In
particular, the Company can provide no assurance that the assets
reported as serviced by NPH’s financial advisors will translate
into assets serviced at LPL Financial, or that NPH’s advisors will
join LPL Financial. Important factors that could cause or
contribute to such differences include: difficulties and delays in
recruiting NPH’s advisors and/or onboarding the clients or
businesses of NPH’s advisors; the inability by the Company to
sustain revenue and earnings growth or to fully realize revenue or
expense synergies or the other expected benefits of the transaction
which depend in part on the Company’s success in onboarding assets
currently served by NPH’s advisors; disruptions of the Company’s
business due to transaction-related uncertainty or other factors
making it more difficult to maintain relationships with its
financial advisors and their clients, employees, other business
partners or governmental entities; the inability to implement
onboarding plans and other consequences associated with
acquisitions; the choice by clients of NPH’s advisors not to open
brokerage and/or advisory accounts at LPL Financial and/or move
their respective assets from NPH to a new account at LPL Financial;
changes in general economic and financial market conditions,
including retail investor sentiment; fluctuations in the value of
assets under custody; effects of competition in the financial
services industry, including competitors’ success in recruiting
NPH’s advisors; and the other factors set forth in Part I, "Item
1A. Risk Factors" in the Company's 2016 Annual Report on Form 10-K
and any subsequent SEC filing. Except as required by law, the
Company specifically disclaims any obligation to update any
forward-looking statements as a result of developments occurring
after the date of this press release, even if its estimates change,
and you should not rely on those statements as representing the
Company's views as of any date subsequent to the date of August 15,
2017. Annualized, projected and estimated numbers are used
for illustrative purpose only, are not forecasts and may not
reflect actual results.
*Non-GAAP Financial MeasuresManagement believes
that presenting certain non-GAAP measures by excluding or including
certain items can be helpful to investors and analysts who may wish
to use some or all of 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 measures and metrics discussed below are
appropriate for evaluating the performance of the Company.
Run-rate EBITDA is defined as net income plus interest expense,
income tax expense, depreciation, and amortization. The Company
presents EBITDA because management believes that it can be a useful
financial metric in understanding the Company’s earnings from
operations. Run-rate EBITDA is not a measure of the Company's
financial performance under GAAP and should not be considered as an
alternative to net income or any other performance measure derived
in accordance with GAAP, or as an alternative to cash flows from
operating activities as a measure of profitability or liquidity. In
addition, the Company’s Run-rate EBITDA can differ significantly
from EBITDA calculated by other companies, depending on long-term
strategic decisions regarding capital structure, the tax
jurisdictions in which companies operate, and capital
investments. The Company does not provide an outlook for
Run-rate EBITDA because it contains certain components, such as
taxes, over which the Company cannot exercise control.
Because an outlook for Run-rate EBITDA cannot be made available
without unreasonable effort by the Company, a reconciliation of the
Company’s outlook for Run-rate EBITDA against its outlook for net
income also cannot be made available without unreasonable
effort.
Run-Rate EPS prior to amortization of intangible assets is a
non-GAAP measure. The Company presents an outlook of expected
accretion of Run-Rate EPS prior to amortization of intangible
assets with respect to the transaction discussed in this press
release because management believes it can be a useful financial
metric in understanding the Company’s expectations for the cash
flow generation of this transaction. Run-Rate EPS prior to
amortization of intangible assets is not a measure of the Company's
financial performance under GAAP and should not be considered as an
alternative to GAAP EPS or any other performance measure derived in
accordance with GAAP. The Company does not provide an outlook
for GAAP EPS because it contains certain components, such as the
effect of interest rates, over which the Company cannot exercise
control. Because an outlook for GAAP EPS cannot be made
available without unreasonable effort by the Company, a
reconciliation of the Company’s outlook for Run-Rate EPS prior to
amortization of intangible assets against an outlook for GAAP EPS
cannot be made.
Investor Relations:
Chris Koegel
617-897-4574
Chris.Koegel@lpl.com
Media Relations:
Jeffrey Mochal
704-733-3589
Jeff.Mochal@lpl.com
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