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LPL Financial Holdings Inc : LPL Financial Announces Fourth Quarter and 2012 Year-End Financial Results

02/06/2013 | 06:10am US/Eastern
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BOSTON, Feb. 6, 2013 /PRNewswire/ -- LPL Financial Holdings Inc. (NASDAQ: LPLA) (the "Company"), parent company of LPL Financial LLC ("LPL Financial"), today announced net revenue of $944.2 million for the fourth quarter of 2012, up 13.9% compared to fourth quarter 2011 net revenue of $828.7 million. Net revenue for the year ended December 31, 2012 was $3.7 billion, an increase of 5.2% over the comparable year of 2011.

                                     Three Months Ended December 31,                          Year Ended December 31,
                                     -------------------------------                          -----------------------
                                     2012           2011                  %                             2012       2011   %
                                                                       Change                                         Change
                                                                       ------                                            ------
    Financial Highlights (unaudited)                          (dollars in thousands, except per share data )
    GAAP Measures:
    Net Revenue                           $944,244                                 $828,653                   13.9%             $3,661,088 $3,479,375    5.2%
    Net Income                             $36,938                                  $39,448                  (6.4)%               $151,918   $170,382 (10.8)%
    Earnings Per Share - diluted             $0.34                                    $0.35                  (2.9)%                  $1.37      $1.50  (8.7)%
    Non-GAAP Measures:
    Adjusted Earnings                      $53,858                                  $48,838                   10.3%               $225,029   $218,585    2.9%
    Adjusted Earnings Per Share              $0.50                                    $0.44                   13.6%                  $2.03      $1.95    4.1%
    Adjusted EBITDA                       $109,948                                 $100,796                    9.1%               $454,482   $459,720  (1.1)%

____________________
A full reconciliation of GAAP measures to non-GAAP measures, along with an explanation of these metrics, follows later in this release.

"The uncertain economic and political environment in 2012 led individual investors to take a cautious approach to engaging in the markets. As a result advisor productivity levels remained flat for the year and we generated moderate revenue growth of 5%," stated Mark Casady, chairman and CEO of LPL Financial. "However, through our ongoing investment in our business we experienced strong growth in our fundamental business drivers in 2012 by leading the industry in attracting new advisors, producing excellent retention, and delivering additional capabilities to our advisors. In the fourth quarter, we experienced improved advisor activity, as LPL Financial advisors continued to build client relationships through increased financial planning sessions and the addition of new accounts and cash deposits. These activities are the seeds for future growth."

Mr. Casady continued: "We are excited to share our plan for the next phase of our Service Value Commitment, which will drive efficiencies in our operating model and ultimately enhance advisor productivity. We plan to reposition our labor force by transitioning select non-advisor-facing functions to a leading global services provider, enabling us to focus on our core strengths that make us distinctive. This effort is not simply a cost-reduction exercise, but an initiative to implement changes to our foundational technology, enhance the quality of our work and improve the speed of our delivery." Mr. Casady added: "Our Service Value Commitment will further our efforts to make more targeted investments in people and technology in areas that support our growth and create value for shareholders."

Dan Arnold, chief financial officer of LPL Financial noted: "Although we are focused on what lies ahead, we are proud of our accomplishments in 2012. We continued to deliver value to our shareholders by expanding upon our market-leading position and generating strong free cash flow. We remained flexible in allocating our capital resources, as we invested $55 million in capital expenditures, paid $249 million in total dividends, repurchased $199 million in stock, and reduced debt by $15 million in 2012." Mr. Arnold concluded: "Looking forward to 2013, we remain committed to balancing investment in our business with increasing our efficiency to position LPL Financial for long-term growth."

                           As of December 31,
                           ------------------
                             2012        2011          %
                                                     Change
                                                     ------
    Metric Highlights
     (unaudited)
    Advisors(1)            13,352             12,847               3.9%
    Advisory and Brokerage
     Assets (billions)(2)         $373.3                    $330.3      13.0%
    Advisory Assets Under
     Custody (billions)(3)        $122.1                    $101.6      20.2%

___________________

    (1)            Advisors are defined as those
                   independent financial advisors
                   and financial advisors at
                   financial institutions who are
                   licensed to do  business with
                   the Company's broker-dealer
                   subsidiary.
    (2)            Advisory and brokerage assets are
                   comprised of assets that are
                   custodied, networked, and non-
                   networked and reflect market
                   movement in addition to new
                   assets, inclusive of new
                   business development and net of
                   attrition.
    (3)            Advisory assets under custody are
                   components of advisory and
                   brokerage assets.

Financial Highlights

    --  Rising Advisory and Brokerage Assets. Total advisory and brokerage
        assets ended at $373.3 billion as of December 31, 2012, up 13.0%
        compared to $330.3 billion as of December 31, 2011. Key drivers of this
        trend include:
        --  Advisory assets in the Company's fee-based platforms were $122.1
            billion at December 31, 2012, up 20.2% from $101.6 billion at
            December 31, 2011.


        --  Net new advisory assets, which exclude market movement, were $2.7
            billion for the three months ended December 31, 2012. For the year,
            net new advisory assets were $10.9 billion, representing 8.9% annual
            growth. Growth in advisory assets was driven by strong new business
            development and a mix shift toward more advisory business.
    --  Expanding our Service Value Commitment. The Company expects to recognize
        total costs of approximately $70 million to $75 million through 2014
        related to this initiative. These costs will cover primarily labor
        repositioning, outsourcing and technology investments. By 2015, the
        Company expects annual pre-tax run-rate savings of approximately $30
        million to $35 million.


        --  The Company incurred $11 million of these costs in the second half
            of 2012. The Company anticipates recognizing $6 million to $8
            million in costs in the first quarter of 2013, and approximately $39
            million to $42 million for the entire year. In addition, for full
            year 2013 the Company expects to recognize $2 million to $3 million
            in savings in addition to the $3.5 million previously announced. For
            2014, the Company expects to incur $21 million to $23 million in
            costs and to generate $22 million to $26 million in savings.
    --  Modest Revenue Growth. Net revenue for the fourth quarter of 2012
        increased 13.9% to $944.2 million from $828.7 million in the prior year.
        Net revenue for the year increased 5.2% to $3.7 billion from $3.5
        billion in 2011. Key drivers of this growth include:
        --  Commission revenue increased 15.6% for the fourth quarter of 2012
            compared to the prior year period reflecting the addition of new
            advisors, increasing trail revenue, and improving commissions per
            advisor.  For 2012, commission revenue increased 3.8% compared to
            the prior year.
        --  Advisory revenue increased 9.9% for the fourth quarter of 2012
            compared to the prior year period, driven by strong net new advisory
            asset flows and overall improving market levels. For the year,
            advisory revenue increased 3.4% compared to the prior year.


        --  Recurring revenue, a statistical measure reflecting a level of
            stability in the Company's performance, represented 66.1% of net
            revenue for the fourth quarter of 2012 and 65.4% for the year.


    --  Growing Cash Sweep Balances. Revenue generated from the Company's cash
        sweep programs increased 4.8% to $35.2 million in the fourth quarter of
        2012 compared to $33.6 million in the prior year period as average cash
        balances grew from $22.4 billion to $23.2 billion.  An increase in the
        effective federal funds rate, which averaged 0.16% in the fourth quarter
        of 2012 compared to 0.07% in the prior year period, was offset by fee
        compression in the program. For 2012, revenue generated from the
        Company's cash sweep program increased 9.0% to $138.1 million compared
        to $126.7 million in the prior year. The assets in the Company's cash
        sweep programs averaged $22.3 billion for 2012 and $20.9 billion in the
        prior year.


    --  Accelerated Share Repurchases. The Company spent $88.7 million in the
        fourth quarter to buy back 3.2 million shares, at a weighted average
        price per share of $27.71, which reduced its weighted average share
        count for calculating diluted earnings per share to 108.6 million shares
        for the fourth quarter of 2012.
    --  Announcing 12.5% Increase to Quarterly Dividend.  The Company's board of
        directors has declared a cash dividend of $0.135 per share of the
        Company's common stock, payable on March 4, 2013 to all shareholders of
        record on February 18, 2013.  The declarations of future quarterly
        dividends, as well as the timing of record and payment dates, remain
        subject to approval by the Board.

Operational Highlights

    --  Industry Leading Net New Advisor Growth.  The Company added 182 net new
        advisors during the fourth quarter of 2012, resulting in 505 net new
        advisors joining LPL Financial in 2012.


    --  High Growth in RIA Platform Assets. Assets under custody on the LPL
        Financial Independent RIA platform, which provides integrated RIA firm
        advisory fee- and commission-based capabilities for independent
        advisors, grew 80.2% to $40.9 billion as of December 31, 2012,
        encompassing 191 RIA firms, compared to $22.7 billion and 146 RIA firms
        as of December 31, 2011.





    --  New Capabilities. In November, the Company introduced the eSignature
        solution to its platform to streamline document processing and enhance
        end-client experience. This new technology tool is expected to
        dramatically increase efficiency, reduce paperwork and improve both the
        client and advisor experience when signing and submitting LPL Financial
        forms. The Company also launched a new platform to help advisors harness
        the power of social networking on three levels: learning how to use
        social media to augment their marketing efforts, connecting with clients
        and prospects by sharing valuable content to grow their network and
        enhancing efforts by tracking activity and improving results.
    --  Industry Recognition. In the fourth quarter, Bank Investment Consultant
        Magazine, a leading financial services industry magazine, named 17 LPL
        Financial advisors on its list of Top 50 Bank Advisors of 2012; four
        additional advisors have also been recognized with honorable mention.
        LPL Financial and one other firm had the highest representation.

Conference Call and Additional Information
The Company will hold a conference call to discuss results at 8:00 a.m. EST on Wednesday, February 6, 2013. The conference call can be accessed by dialing either 877-677-9122 (domestic) or 708-290-1401 (international) and entering passcode 87453300. For additional information, please visit the Company's website to access the Q4 2012 Financial Supplement.

The conference call will also be webcast simultaneously on the Investor Relations section of the Company's website (www.lpl.com), where a replay of the call will also be available following the live webcast. A telephonic replay will be available two hours after the call and can be accessed by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering passcode 87453300. The telephonic replay will be available until 11:59 p.m. EDT on February 13, 2013.

                                                                                         LPL Financial Holdings Inc.
                                                                               Condensed Consolidated Statements of Operations
                                                                                (Dollars in thousands, except per share data)
                                                                                                 (Unaudited)

                                               Three Months Ended December 31,                                                   Year Ended December 31,
                                               -------------------------------                                                   -----------------------
                                          2012                2011               %                                  2012                 2011              %
                                                                                Change                                                                   Change
                                                                                                                                                          ------
    Revenues
    Commission                                 $467,492                                   $404,382                           15.6%                               $1,820,517           $1,754,435    3.8%
    Advisory                           275,983                        251,219                             9.9%                      1,062,490                     1,027,473      3.4%
    Asset-based                        103,018                         89,706                            14.8%                        403,067                       359,724     12.0%
    Transaction and other               83,362                         71,227                            17.0%                        321,558                       292,207     10.0%
    Other                               14,389                         12,119                            18.7%                         53,456                        45,536     17.4%
                                        ------                         ------                                                          ------                        ------
    Net revenues                       944,244                        828,653                            13.9%                      3,661,088                     3,479,375      5.2%
                                       -------                        -------                                                       ---------                     ---------
    Expenses
    Production                         661,691                        586,123                            12.9%                      2,548,837                     2,448,424      4.1%
    Compensation and benefits           89,350                         79,237                            12.8%                        362,705                       322,126     12.6%
    General and administrative          99,071                         58,553                            69.2%                        350,212                       263,228     33.0%
    Depreciation and amortization       18,786                         16,947                            10.9%                         71,796                        72,741    (1.3)%
    Restructuring charges                  635                          8,372                          (92.4)%                          5,597                        21,407   (73.9)%
                                           ---                          -----                                                           -----                        ------
    Total operating expenses           869,533                        749,232                            16.1%                      3,339,147                     3,127,926      6.8%
                                       -------                        -------                                                       ---------                     ---------
    Non-operating interest expense      12,529                         15,835                          (20.9)%                         54,826                        68,764   (20.3)%
    Loss on extinguishment of debt           -                              -                           *                  16,524                              -            *
                                           ---                            ---                                              ------                            ---
    Total expenses                     882,062                        765,067                            15.3%                      3,410,497                     3,196,690      6.7%
                                       -------                        -------                                                       ---------                     ---------
    Income before provision for income  62,182                         63,586                           (2.2)%                        250,591                       282,685   (11.4)%
      taxes
    Provision for income taxes          25,244                         24,138                             4.6%                         98,673                       112,303   (12.1)%
    Net income                                  $36,938                                    $39,448                          (6.4)%                                 $151,918             $170,382 (10.8)%
                                                =======                                    =======                                                                 ========             ========
    Earnings per share
    Basic                                         $0.34                                      $0.36                          (5.6)%                                    $1.39                $1.55 (10.3)%
    Diluted                                       $0.34                                      $0.35                          (2.9)%                                    $1.37                $1.50  (8.7)%

___________________
* Not Meaningful


The Company reports Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per share to eliminate the effects of items that it does not consider indicative of its core operating performance. Adjusted EBITDA, Adjusted Earnings, and Adjusted Earnings per share have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company's results as reported under GAAP. Some of these limitations are:

a. Adjusted EBITDA, Adjusted Earnings, and Adjusted Earnings per share do not reflect all cash expenditures, or contractual commitments; and do not reflect changes in, or cash requirements for, working capital needs; and
b. Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt.

The reconciliation from net income to Adjusted EBITDA, a non-GAAP measure, for the periods presented is as follows (in thousands):

                                                                  Three Months Ended                      Year Ended
                                                                      December 31,                       December 31,
                                                                      ------------                       ------------
                                                              2012               2011    2012          2011
                                                              ----               ----    ----          ----
                                                                           (unaudited)
    Net income                                                      $36,938                    $39,448                 $151,918 $170,382
    Interest expense                                        12,529                    15,835            54,826           68,764
    Income tax expense                                      25,244                    24,138            98,673          112,303
    Amortization of purchased intangible assets and          9,791                     9,849            39,542           38,981
       software(a)
    Depreciation and amortization of all other fixed assets  8,995                     7,098            32,254           33,760
                                                             -----                     -----            ------           ------
    EBITDA                                                  93,497                    96,368           377,213          424,190
                                                            ------                    ------           -------          -------
    EBITDA Adjustments:
    Employee share-based compensation expense(b)             3,769                     3,858            17,544           14,978
    Acquisition and integration related expenses(c)          3,032                    (8,020)           20,474           (3,815)
    Restructuring and conversion costs(d)                      755                     8,532             6,146           22,052
    Debt extinguishment costs(e)                                 -                         -            16,652                -
    Equity issuance and related offering costs(f)                -                         -             4,486            2,062
    Other(g)                                                 8,895                        58            11,967              253
                                                             -----                       ---            ------              ---
    Total EBITDA Adjustments                                16,451                     4,428            77,269           35,530
                                                            ------                     -----            ------           ------
    Adjusted EBITDA                                                $109,948                   $100,796                 $454,482 $459,720
                                                                   ========                   ========                 ======== ========

The reconciliation from net income to Adjusted Earnings, a non-GAAP measure, for the periods presented is as follows (in thousands, except per share data):

                                                          Three Months Ended                Year Ended
                                                                December 31,               December 31,
                                                                ------------               ------------
                                                            2012         2011     2012              2011
                                                            ----         ----     ----              ----
                                                                      (unaudited)
    Net income                                                      $36,938            $39,448             $151,918 $170,382
    After-Tax:
    EBITDA Adjustments(h)
    Employee share-based compensation expense(i)           2,831                2,961              13,161    11,472
    Acquisition and integration related expenses(j)        2,092               (4,948)             11,106    (2,354)
    Restructuring and conversion costs                       466                5,264               3,792    13,606
    Debt extinguishment costs                                  -                    -              10,274         -
    Equity issuance and related offering costs(k)              -                    -               4,262     1,272
    Other                                                  5,490                   36               7,384       156
                                                           -----                  ---               -----       ---
    Total EBITDA Adjustments                              10,879                3,313              49,979    24,152
                                                          ------                -----              ------    ------
    Amortization of purchased intangible assets and        6,041                6,077              24,397    24,051
             software(h)
    Acquisition related benefit for a net operating loss       -                    -              (1,265)        -
        carry-forward(l)

    Adjusted Earnings                                               $53,858            $48,838             $225,029 $218,585
                                                                    =======            =======             ======== ========
    Adjusted Earnings per share(m)                                    $0.50              $0.44                $2.03    $1.95
    Weighted average shares outstanding - diluted(n)     108,644              111,095             111,060   112,119

___________________

    (a)                Represents amortization of intangible
                       assets and software as a result of the
                       Company's purchase accounting
                       adjustments from its 2005 merger
                       transaction, as well as various
                       acquisitions.

    (b)                Represents share-based compensation for
                       equity awards granted to employees,
                       officers, and directors. Such awards
                       are measured based on the grant-date
                       fair value with share-based
                       compensation expense recognized over
                       the requisite service period of the
                       individual grants, which generally
                       equals the vesting period.

    (c)                Represents acquisition and integration
                       costs resulting from various
                       acquisitions, including changes in the
                       estimated fair value of future
                       payments, or contingent consideration,
                       required to be made to former
                       shareholders of certain acquired
                       entities. During the three and twelve
                       months ended December 31, 2012,
                       approximately $1.5 million and $11.4
                       million, respectively, was recognized
                       as a charge against earnings due to a
                       net increase in the estimated fair
                       value of contingent consideration.

    (d)                Represents organizational restructuring
                       charges and conversion and other
                       related costs incurred resulting from
                       the 2011 consolidation of UVEST
                       Financial Services Group, Inc.
                       ("UVEST") and the 2009 consolidation of
                       Associated Securities Corp., Inc.,
                       Mutual Service Corporation and
                       Waterstone Financial Group, Inc.
                       (together, the "Affiliated Entities").
                       As of December 31, 2012, approximately
                       89% and 98%, respectively, of costs
                       related to these two initiatives had
                       been recognized. The remaining costs
                       largely consist of the amortization of
                       transition payments that have been made
                       in connection with these two
                       conversions for the retention of
                       advisors and financial institutions
                       that are expected to be recognized into
                       earnings by December 2014.

    (e)                Represents expenses incurred for the
                       year ended December 31, 2012, resulting
                       from the early extinguishment and
                       repayment of amounts under the prior
                       senior secured credit facilities,
                       including the write-off of $16.5
                       million of unamortized debt issuance
                       costs that have no future economic
                       benefit, as well as various other
                       charges incurred in connection with the
                       repayment of the prior senior secured
                       credit facilities and the establishment
                       of the new senior secured credit
                       facilities.

    (f)                Represents equity issuance and offering
                       costs incurred in the twelve months
                       ended December 31, 2012 and 2011,
                       related to the closing of a secondary
                       offering in the second quarter of 2012,
                       and the closing of a secondary offering
                       in the second quarter of 2011. In
                       addition, results for the year ended
                       December 31, 2012 include a $3.9
                       million charge relating to the late
                       deposit of withholding taxes related to
                       the exercise of certain non-qualified
                       stock options in connection with the
                       Company's 2010 initial public offering.

    (g)                Results for the three and twelve months
                       ended December 31, 2012, include $4.7
                       million and $7.0 million, respectively,
                       for consulting services and technology
                       development aimed at enhancing the
                       Company's performance in support of its
                       advisors while creating operating
                       efficiencies. During the fourth quarter
                       of 2012, the Company recorded an asset
                       impairment charge of $4.0 million for
                       certain fixed assets related to
                       internally developed software that were
                       determined to have no estimated fair
                       value. Remaining costs relate to
                       certain excise and other taxes.

    (h)                EBITDA Adjustments and amortization of
                       purchased intangible assets and
                       software have been tax effected using a
                       federal rate of 35% and the applicable
                       effective state rate, which was 3.30%
                       for the three and twelve months ended
                       December 31, 2012 and 2011, net of the
                       federal tax benefit.

    (i)                Represents the after-tax expense of
                       non-qualified stock options for which
                       the Company receives a tax deduction
                       upon exercise, restricted stock awards
                       for which the Company receives a tax
                       deduction upon vesting, and the full
                       expense impact of incentive stock
                       options granted to employees that have
                       vested and qualify for preferential tax
                       treatment and conversely, for which the
                       Company does not receive a tax
                       deduction. Share-based compensation
                       for vesting of incentive stock options
                       was $1.3 million and $1.5 million,
                       respectively, for the three months
                       ended December 31, 2012 and 2011. For
                       the year ended December 31, 2012 and
                       2011, share-based compensation for
                       vesting of incentive stock options was
                       $6.1 million and $5.8 million,
                       respectively.

    (j)                Represents the after-tax expense of
                       acquisition and related costs for which
                       the Company receives a tax deduction.
                       The year ended December 31, 2012
                       included a $5.7 million reduction of
                       expense relating to the fair value of
                       contingent consideration for the stock
                       acquisition of Concord Wealth
                       Management ("Concord"), that is not
                       deductible for tax purposes and that
                       the Company does not consider to be
                       indicative of its core performance.

    (k)                Represents the after-tax expense of
                       equity issuance and offering costs
                       related to the closing of a secondary
                       offering that occurred in the second
                       quarter of 2012, and the closing of a
                       secondary offering that occurred in the
                       second quarter of 2011. Results for the
                       year ended December 31, 2012 include
                       the full expense impact of a $3.9
                       million charge relating to the late
                       deposit of withholding taxes related to
                       the exercise of certain non-qualified
                       stock options in connection with the
                       Company's 2010 initial public offering,
                       which is not deductible for tax
                       purposes.

    (l)                Represents the expected tax benefit
                       available to the Company from the
                       accumulated net operating losses of
                       Concord that arose prior to its
                       acquisition by the Company; such
                       benefits were recorded in the third
                       quarter of 2012.

    (m)                Represents Adjusted Earnings, a non-
                       GAAP measure, divided by weighted
                       average number of shares outstanding on
                       a fully diluted basis. Set forth is a
                       reconciliation of earnings per share on
                       a fully diluted basis as calculated in
                       accordance with GAAP to Adjusted
                       Earnings per share, a non-GAAP
                       measure:
                                                             For the Three       For the Year
                                                              Months Ended          Ended
                                                              December 31,       December 31,
                                                              ------------       ------------
                                                           2012       2011  2012              2011
                                                           ----       ----  ----              ----
                                                                 (unaudited)
    Earnings per share - diluted                                  $0.34           $0.35             $1.37 $1.50
    Adjustment for allocation of undistributed earnings to    -             0.01                 -   0.02
       stock units
    After-Tax:
    EBITDA Adjustments per share                           0.10             0.03              0.45   0.22
    Amortization of purchased intangible assets and        0.06             0.05              0.22   0.21
            software per share
    Acquisition related benefit for a net operating loss      -                -             (0.01)     -
           carry-forward per share

    Adjusted Earnings per share                                   $0.50           $0.44             $2.03 $1.95
                                                                  =====           =====             ===== =====

    (n)               Included within the weighted average
                      share count for the three and twelve
                      months ended December 31, 2012, is
                      approximately 850,000 shares
                      resulting from the distribution
                      pursuant to the 2008 Nonqualified
                      Deferred Compensation Plan that were
                      not included in the weighted average
                      share count for the three and twelve
                      months ended December 31, 2011.

Non-GAAP Financial Measures

Adjusted Earnings represent net income before: (a) employee share-based compensation expense, (b) amortization of intangible assets and software, a component of depreciation and amortization, resulting from previous acquisitions, (c) debt extinguishment costs, (d) restructuring and conversion costs and (e) equity issuance and related offering costs. Reconciling items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. Adjusted Earnings per share represents Adjusted Earnings divided by weighted average outstanding shares on a fully diluted basis. The Company prepared Adjusted Earnings and Adjusted Earnings per share to eliminate the effects of items that it does not consider indicative of its core operating performance. The Company believes this measure provides investors with greater transparency by helping illustrate the underlying financial and business trends relating to results of operations and financial condition and comparability between current and prior periods. Adjusted Earnings and Adjusted Earnings per share are not measures of the Company's financial performance under GAAP and should not be considered as an alternative to net income or earnings per share 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.

Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization), further adjusted to exclude certain non-cash charges and other adjustments set forth in the table above. The Company presents Adjusted EBITDA because the Company considers it a useful financial metric in assessing the Company's operating performance from period to period by excluding certain items that the Company believes are not representative of its core business, such as certain material non-cash items and other adjustments that are outside the control of management. Adjusted 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, Adjusted EBITDA can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments.

Forward-Looking Statements

Statements in this press release regarding the Company's future financial and operating results, growth, business strategy, projected costs, plans, liquidity, and ability and plans to repurchase shares and pay dividends in the future, including projected savings, anticipated productivity gains and anticipated improvements to the Company's operating model, services and technology as a result of the Service Value Commitment, as well as any other statements 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 February 6, 2013. The words "anticipates," "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 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 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. Important factors that could cause or contribute to such differences include: 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; changes in the number of the Company's financial advisors and institutions, and their ability to market effectively financial products and services; changes in interest rates and fees payable by banks participating in the Company's cash sweep program, including the Company's success in negotiating agreements with current or additional counterparties; the Company's success in integrating the operations of acquired businesses; execution of the Company's plans related to the Service Value Commitment, including the Company's ability to successfully transform and transition business processes to third party service providers; the Company's success in negotiating and developing commercial arrangements with third party service providers that will enable the Company to realize the service improvements and efficiencies expected to result from the Service Value Commitment; the performance of third party service providers to which business processes are transitioned from the Company; the Company's ability to control operating risks, information technology systems risks and sourcing risks; the effect of current, pending and future legislation, regulation and regulatory actions, including disciplinary actions imposed by self-regulatory organizations; and the other factors set forth in Part I, "Item 1A. Risk Factors" in the Company's 2012 Annual Report on Form 10-K. 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 earnings 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 this press release.

About LPL Financial

LPL Financial, a wholly owned subsidiary of LPL Financial Holdings Inc. (NASDAQ: LPLA), is the nation's largest independent broker-dealer (based on total revenues, Financial Planning magazine, June 1996-2012), a top RIA custodian, and a leading independent consultant to retirement plans. LPL Financial offers proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 13,300 financial advisors and approximately 700 financial institutions. In addition, LPL Financial supports over 4,500 financial advisors licensed with insurance companies by providing customized clearing, advisory platforms and technology solutions. LPL Financial and its affiliates have approximately 2,900 employees with primary offices in Boston, Charlotte, and San Diego. For more information, please visit www.lpl.com.

Securities offered through LPL Financial. Member FINRA/SIPC

LPLA-F

    Investor Relations                Media Relations
    Trap Kloman                       Betsy Weinberger
    LPL Financial                     LPL Financial
    Phone: (617) 897-4574             Phone: (858) 900-7122
    Email: investor.relations@lpl.com Email: betsy.weinberger@lpl.com

                                      Michael Herley
                                      Kekst and Company
                                      Phone: (212) 521-4897
                                      Email: michael-herley@kekst.com

SOURCE LPL Financial Holdings Inc.

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