Analyst Note
| Michael Wong, CFA, CPA |LPL Financial reported another quarter of record client assets due to strong organic growth and onboarding some assets related to a partnership with BMO Harris Bank. Assets should continue their strong growth over the next several quarters as the company onboards assets from M&T Bank and Waddell & Reed. LPL reported net income of $130 million, or $1.59 per diluted share, on $579 million of gross profit. Gross profit increased 8.5% sequentially but was flat from a year ago. Record client assets of $958 billion, up 6% sequentially and 43% from a year ago, have produced growth in asset-based fees and commission revenue, but revenues from client cash remain a drag. Client cash-related revenue comes with high operating margins for wealth management firms, and it declined $8 million sequentially and $54 million from a year ago. We don’t anticipate making a material change to our $134 fair value estimate for narrow-moat LPL Financial.