LPL Financial Holdings Inc.

Previous wording

The following discussion presents an analysis of our results of operations for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following discussion presents an analysis of our results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

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.

Current wording

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 six months ended June 30, 2026.

Previous wording

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.

Current wording

Advisory revenue increased during the three and six months ended June 30, 2026 as compared to the same periods in 2025 due primarily to an increase in advisory asset balances and the acquisition of Commonwealth.

Previous wording

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.

Current wording

The increase in sales-based commission revenue for the three and six months ended June 30, 2026 compared to 2025 was primarily driven by an increase in sales of annuities. The increase in trailing commission revenue for the three and six months ended June 30, 2026 compared to 2025 was primarily due to continued growth in trail earning assets held by customers and the acquisition of Commonwealth.

Previous wording

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.

Current wording

Asset-based revenue for the three and six months ended June 30, 2026 increased by $132.8 million and $258.4 million, respectively, compared to the same periods in 2025 due to increases in client cash and other asset-based revenue. Other asset-based revenue for the three and six months ended June 30, 2026 increased compared to 2025 primarily due to increases in billable assets, recordkeeping and sponsorship program revenue. Client cash revenue for the three and six months ended June 30, 2026 increased compared to 2025 due to higher average client cash balances during the three and six months ended June 30, 2026 as compared to 2025. For the three months ended June 30, 2026, our average client cash balances increased to $53.9 billion compared to $49.1 billion for the same period in 2025. For the six months ended June 30, 2026, our average client cash balances increased to $54.7 billion compared to $49.9 billion for the same period in 2025.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased compared to 2025, primarily due to the brokerage account fees assessed on retirement and non-retirement clients.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased compared to 2025, primarily due to increases in the number of transactions and transaction charges for managed assets.

Previous wording

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.

Current wording

Our payout rate for the three and six months ended June 30, 2026 increased compared to 2025, primarily due to changes in the mix of brokerage products and advisory platforms.

Previous wording

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.

Current wording

Compensation and benefits expense for the three and six months ended June 30, 2026 increased by $36.5 million and $99.7 million, respectively compared to 2025, primarily due to an increase in headcount.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $42.5 million and $105.2 million, respectively, compared to 2025, primarily due to increases in recruited assets and advisors that led to higher costs to support transition assistance, retention, training and education, as well as increased legal expenses.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $44.1 million and $85.4 million, respectively, compared to 2025, primarily due to increased expense related to software licenses and our technology portfolio.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $13.6 million and $27.0 million, respectively, 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.

Previous wording

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.

Current wording

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 June 30, 2026 decreased by $4.1 million as compared to 2025, primarily due to lower interest rates on our Term Loan A. Interest expense on borrowings increased by $10.3 million for the six months ended June 30, 2026 as 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.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $24.8 million and $48.5 million, respectively, compared to 2025, primarily due to additional intangible assets acquired in the past year. See Note 4 -Acquisitions, within the notes to the condensed consolidated financial statements for additional information.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $8.7 million and $20.1 million, respectively, compared to 2025, primarily due to an increase in clearing charges.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $9.7 million and $23.7 million, respectively, compared to 2025, primarily due to technology enhancement projects and acquisition-related support.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 increased by $0.4 million and $16.1 million, respectively, compared to 2025, primarily due to increases in licensing fees, travel and events.

Previous wording

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.

Current wording

Our effective income tax rate was 26.4% and 25.9% for the three months ended June 30, 2026 and 2025, respectively, and 26.4% and 24.7% for the six months ended June 30, 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 six months ended June 30, 2026 was primarily driven by lower share-based compensation tax benefits as compared to the prior year.

Previous wording

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.

Current wording

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 six months ended June 30, 2026 and 2025, LPL Financial paid dividends of $485.0 million and $150.0 million to the Parent, respectively.

Previous wording

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.

Current wording

Corporate Cash is monitored as part of our liquidity risk management strategy. Corporate Cash decreased by $39.7 million during the six months ended June 30, 2026 as we continue our normal course of operations and reinvestments into the business.

Previous wording

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.

Current wording

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. We repurchased 1.1 million shares for a total of $309.5 million during the six months ended June 30, 2026. As of June 30, 2026, we had $320.5 million remaining under our existing repurchase program. From July 1, 2026 through July 30, 2026, the Company has repurchased 420,464 outstanding shares for a total of $134.3 million. On July 23, 2026, the Board authorized a new repurchase program that increases the amount available for repurchases of the Company’s issued and outstanding common shares by $2.5 billion. 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 Part II, Item 2 -Unregistered Sales of Equity Securities and Use of Proceeds and Note 11 -Stockholders’ Equity, within the notes to the condensed consolidated financial statements for additional information regarding our share repurchases.

Previous wording

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, Netand 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.

Current wording

During the six months ended June 30, 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, Netand 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.