What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-21 · 410 added, 259 removed, 1234 unchanged (35% of the section changed)

25 unchanged sentences

Note 19 - Financial Instruments with Off-Balance Sheet Credit Risk and Concentrations of Credit Risk

Note 20 - Segment Information

Note 2 1 - Subsequent Events

7 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Fram ework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of Financial Resources Group Investment Services, LLC — Valuation of acquired definite-lived intangible assets and contingent consideration — Refer to Notes 4 and 5 to the financial statements

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Atria Wealth Solutions, Inc.

– Accounting for the provisional valuation of acquired definite-lived intangible assets— Refer to Note 4 to the financial statements

Critical Audit Matter Description

On January 31, 2023, the Company acquired the equity of Financial Resources Group Investment Services, LLC, a broker-dealer and independent branch office.

Total consideration for the transaction was $189.2 million, which included an initial cash payment of $143.8 million and a liability of $45.4 million for contingent consideration, which represents the acquisition date fair value of the additional cash consideration that may be transferred to the sellers if certain asset growth is achieved in the three years following the closing.

During the three months ended December 31, 2023, the Company recorded a $26.7 million fair value adjustment in other expense to increase the fair value of the contingent consideration liability as a result of asset and market growth during the quarter.

On October 1, 2024, the Company acquired 100% of the outstanding common shares of Atria Wealth Solutions, Inc., a wealth management solutions holding company.

Total consideration for the transaction was $888.4 million, which included an initial cash payment of $858.9 million and a liability of $29.5 million for contingent consideration, which represents the acquisition date fair value of the additional cash consideration that may be transferred to the sellers if certain asset conversion or retention and other milestones, including conversion of off-platform assets to the Company's platform, are achieved in the year following the closing.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

The purchase price is allocated across the estimated fair value of the definite-lived intangible and tangible assets acquired and liabilities assumed, with the excess purchase price allocated to goodwill.

The Company used the income approach to estimate the fair value of the intangible assets, which are comprised of $34.7 million of bank relationships and $18.8 million of advisor relationships.

The purchase price is provisionally allocated across the estimated fair value of the definite-lived intangible and tangible assets acquired and liabilities assumed, with the excess purchase price allocated to goodwill.

The Company used the income approach to estimate the fair value of the intangible assets, which provisionally comprised of $201.7 million of institutional relationships and $438.2 million of advisor relationships.

The fair value of the intangible assets required management to make significant estimates and assumptions related to future net cash flows and discount rates.

The Company determines the fair value for its contingent consideration obligations using a Monte-Carlo simulation model.

Contingent payments are estimated by applying significant unobservable inputs, including forecasted growth rates applied to project future revenue or asset growth and discount rates which are based on the cost of debt and equity.

Given the fair value determination of intangible assets and contingent consideration requires management to make significant estimates and assumptions related to the forecasts of future net cash flows and asset growth and the selection of the discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

Given the fair value determination of intangible assets requires management to make significant estimates and assumptions related to the forecasted net cash flows, as well as the selection of the discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of intangible assets and contingent consideration included the following, among others:

• We tested the design, implementation and operating effectiveness of internal controls over the valuation of the intangible assets and contingent consideration, including understanding management’s processes and controls over forecasts of future net cash flows and asset growth and the selection of the discount rates.

• We evaluated management’s policies and methodology for establishing the fair value of intangible assets, and contingent consideration used in the purchase price allocation and remeasured at December 31, 2023.

Our audit procedures related to the valuation of intangible assets included the following, among others:

• We obtained an understanding, evaluated the design, and tested operating effectiveness of internal controls.

For example, we tested controls over management’s valuation of intangible assets, including the review of forecasts of future net cash flows and the selection of the discount rate.

• We evaluated management’s policies and methodology for establishing the fair value of intangible assets used in the purchase price allocation, which was provisionally allocated as of December 31, 2024.

• We assessed the knowledge, skill, ability, and objectivity of management’s valuation specialist and evaluated the work performed.

• We evaluated the reasonableness of business assumptions related to future net cash flows for the intangible assets and projected future revenue or asset growth over the earnout periods for the contingent consideration, considering the past performance of the acquired company, the Company’s strategic plan going forward, previous acquisitions by the Company, and evidence obtained in other areas of the audit, and obtained audit support to substantiate the material assumptions therein.

• We evaluated the reasonableness of business assumptions related to future net cash flows for the intangible assets, considering the past performance of the acquired company, the Company’s strategic plan going forward, previous acquisitions by the Company, and evidence obtained in other areas of the audit, and obtained audit support to substantiate the material assumptions therein.

• We tested the completeness and accuracy of the underlying data supporting the forecasts of future net cash flows.

• With the assistance of our fair value specialists, we tested:

– the reasonableness of the income approach valuation methodology by challenging key valuation assumptions related to future net cash flows and discount rates and comparing them to industry benchmarks and data and testing the mathematical accuracy of the valuation of intangible assets by performing a recalculation.

– the reasonableness of the Monte-Carlo simulation model by independently running Monte-Carlo simulations to calculate independent estimates of the fair value of contingent consideration.

– the reasonableness of the discount rates by developing a range of independent estimates and comparing those to the discount rates selected by management.

• We performed sensitivity analyses of business assumptions related to future net cash flows to evaluate the changes in the fair value of the intangible assets that would result.

Valuation of contingent consideration as of December 31, 2024 — Refer to Notes 2 and 5 to the financial statements

Critical Audit Matter Description

Certain of the Company’s acquisitions include contingent consideration, which may result in the transfer of additional cash consideration to the sellers if certain milestones are achieved in the years following an acquisition.

For acquisitions accounted for under the acquisition method of accounting for business combinations, any such contingent consideration is recognized at its estimated fair value on the date of acquisition within other liabilities in the consolidated statements of financial condition.

This contingent consideration is remeasured at its fair value at each subsequent reporting date until the contingency is resolved.

Any changes in fair value are recognized in other expense in the consolidated statements of operations.

The Company determines the fair value for its contingent consideration obligations using probability weighted and Monte-Carlo simulation.

Contingent payments are estimated by applying significant unobservable inputs, including

forecasted growth rates applied to projected future revenue or asset growth, conversion or retention rates, and discount rates which are based on the cost of debt and equity.

These projections are measured against the performance targets specified in each respective acquisition agreement, which may include growth in assets under management, net new assets, asset conversion or retention, or revenue growth.

Significant increases or decreases in the Company’s forecasted growth rates over the measurement period or discount rates would result in a higher or lower fair value measurement.

The balance of contingent consideration recorded in other liabilities as of December 31, 2024, was $196.9 million.

Given the fair value determination of contingent consideration requires management to make significant estimates and assumptions related to asset growth, conversion or retention rates and the selection of the discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of contingent consideration included the following, among others:

• We obtained an understanding, evaluated the design, and tested operating effectiveness of internal controls over the valuation of contingent consideration.

For example, we tested controls over management’s valuation processes, including the review of asset growth, conversion or retention rate, and the selection of the discount rate.

• We evaluated management’s policies and methodology for establishing the fair value of contingent consideration used in the purchase price allocation and remeasurement at December 31, 2024.

• We assessed the knowledge, skill, ability, and objectivity of management’s valuation specialist and evaluated the work performed.

• We evaluated the reasonableness of business assumptions related to projected future revenue, asset growth or conversion or retention rates over the earnout periods for the contingent consideration, considering the past performance of the acquired company, the Company’s strategic plan going forward, previous acquisitions by the Company, and evidence obtained in other areas of the audit, and obtained audit support to substantiate the material assumptions therein.

• We tested the completeness and accuracy of the underlying data supporting the significant assumptions and fair value estimates.

• With the assistance of our fair value specialists, we tested:

– the reasonableness of the Monte-Carlo simulation model and Probability Weighted Expected Return Method by independently running Monte-Carlo Simulations and Probability Weighted Expected Return Method models to calculate independent estimates of the fair value of contingent consideration.

We compared the results of our estimates of fair value of the contingent consideration to the Company’s fair value estimates.

– the reasonableness of the discount rates by developing a range of independent estimates and comparing those to the discount rates selected by management.

• We performed sensitivity analyses of the key inputs to evaluate the changes in the fair value estimates of the contingent consideration that would result from changes in the key inputs.

/s/ Deloitte & Touche LLP

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Advisory $ 5,461,858 $ 4,135,681 $ 3,875,154

Trailing 1,299,840 1,292,358 1,404,628

Sales-based 1,763,232 1,252,783 1,033,806

Trailing 1,542,255 1,299,840 1,292,358

Total commission 3,305,487 2,552,623 2,326,164

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Promotional 589,339 459,233 339,994

Occupancy and equipment 248,620 219,798 185,531

Depreciation and amortization 308,527 246,994 199,817

Occupancy and equipment 281,210 248,620 219,798

Interest expense on borrowings 274,181 186,804 126,234

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Brokerage, clearing and exchange 127,941 105,984 86,063

Communications and data processing 75,717 67,687 60,296

Professional services 93,729 72,583 72,519

Loss on extinguishment of debt — — 24,400

Communications and data processing 75,838 75,717 67,687

Other 218,493 209,439 143,937

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Deferred (benefit) provision for income taxes ( 76,244 ) ( 68,454 ) ( 93,349 )

Loss on extinguishment of debt — — 24,400

Loan forgiveness 292,446 223,517 179,529

Unrealized loss (gain) on deferred compensation plans

66,456 1,164 ( 449 )

Change in estimated fair value of contingent consideration

41,721 26,852 330

Other ( 25,319 ) 11,156 14,902

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Purchases of other investments — ( 4,200 ) ( 7,410 )

Capitalized interest

( 9,611 ) — —

Net cash used in investing activities ( 1,592,132 ) ( 860,186 ) ( 376,400 )

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Repayments of revolving credit facilities ( 663,000 ) ( 1,438,000 ) ( 905,000 )

Proceeds from senior unsecured term loans

1,020,000 — —

Repayment of senior secured term loans

Repayment of senior unsecured notes — — ( 900,000 )

( 1,027,200 ) ( 10,700 ) ( 10,700 )

Proceeds from senior unsecured notes 998,325 749,468 —

Payment of debt issuance costs ( 17,905 ) ( 13,474 ) ( 1,872 )

Make-whole premium on redemption of senior unsecured notes — — ( 25,875 )

Payment of contingent consideration ( 50,063 ) — —

4 unchanged sentences

Principal payment of finance leases and obligations ( 342 ) ( 195 ) ( 408 )

Net cash (used in) provided by financing activities ( 208,532 ) ( 504,271 ) 278,837

NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS, CASH AND EQUIVALENTS SEGREGATED UNDER FEDERAL OR OTHER REGULATIONS AND RESTRICTED CASH

Net cash provided by (used in) financing activities

1,417,432 ( 208,532 ) ( 504,271 )

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS, CASH AND EQUIVALENTS SEGREGATED UNDER FEDERAL OR OTHER REGULATIONS AND RESTRICTED CASH

102,889 ( 556,107 ) 1,064,906

CASH AND EQUIVALENTS, CASH AND EQUIVALENTS SEGREGATED UNDER FEDERAL OR OTHER REGULATIONS AND RESTRICTED CASH — Beginning of year 2,581,163 3,137,270 2,072,364

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LPL Financial Holdings Inc.

( “ LPLFH ” ), a Delaware holding corporation, together with its consolidated subsidiaries (collectively, the “ Company ” ), provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at enterprises (collectively, “ advisors ” ) in the United States.

(“LPLFH”), a Delaware holding corporation, together with its consolidated subsidiaries (collectively, the “Company”), provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at institutions (collectively, “advisors”) in the United States.

Through its custody and clearing platform, using both proprietary and third-party technology, the Company provides access to diversified financial products and services, enabling its advisors to offer personalized financial advice and brokerage services to retail investors (their “clients”).

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Fort Mill, South Carolina;

Tempe, Arizona;

Boston, Massachusetts;

and Austin, Texas, is a clearing broker-dealer and an investment advisor that principally transacts business for its advisors and enterprises on behalf of their clients in a broad array of financial products and services.

and Austin, Texas, is a clearing broker-dealer and an investment advisor that principally transacts business for its advisors and institutions on behalf of their clients in a broad array of financial products and services.

LPL Financial is licensed to operate in all 50 states, Washington D.C., Puerto Rico and the U.S.

Virgin Islands.

• LPL Enterprise, LLC (“LPL Enterprise”) is a limited product shelf introducing broker-dealer and registered investment advisor that supports a portion of the Company’s institutional business, providing brokerage and investment advisory services to the clients of those institutional businesses.

• LPL Insurance Associates, Inc.

operates as an insurance brokerage general agency that offers life and disability insurance products and services for LPL Financial advisors.

• Atria Wealth Solutions, Inc.

(“Atria”) is a holding company for the registered broker-dealers and investment advisors that the Company acquired in connection with the acquisition of Atria.

Atria has seven introducing broker-dealer subsidiaries, which clear transactions through third-party clearing and carrying firms.

The Company expects to complete the conversion of assets from these acquired broker-dealers and investment advisors in 2025 and withdraw the related registrations of these entities thereafter.

• AW Subsidiary, Inc.

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PTC is chartered as a non-depository limited purpose national bank, providing a wide range of trust, investment management oversight, and custodial services for estates and families.

PTC, together with its affiliate Fiduciary Trust Company of New Hampshire, also provides Individual Retirement Account (“IRA”) custodial services for LPL Financial.

• LPL Employee Services, LLC and its subsidiary, Allen & Company of Florida, LLC, along with their affiliate Financial Resources Group Investment Services, LLC (“FRGIS”), provide primary support for the Company’s employee advisor affiliation model.

PTC also provides Individual Retirement Account (“IRA”) custodial services for LPL Financial.

• LPL Employee Services, LLC and its subsidiary, Allen & Company of Florida, LLC, along with their affiliate Financial Resources Group Investment Services, LLC, provide primary support for the Company’s employee advisor affiliation model.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ( “ GAAP ” ), which require the Company to make estimates and assumptions regarding the valuation of certain financial instruments, acquisitions, goodwill and other intangibles, allowance for credit losses on receivables, share-based compensation, accruals for liabilities, income taxes, revenue and expense accruals and other matters that affect the consolidated financial statements and related disclosures.

These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require the Company to make estimates and assumptions regarding the valuation of certain financial instruments, acquisitions, contingent consideration, goodwill and other intangibles, allowance for credit losses on receivables, share-based compensation, accruals for liabilities, income taxes, revenue and expense accruals and other matters that affect the consolidated financial statements and related disclosures.

Actual results could differ from those estimates under different assumptions or conditions and the differences may be material to the consolidated financial statements.

Consolidated Financial Statement Presentation Changes

Certain financial statement line items have been reclassified in the consolidated statement of financial

condition to better align with industry practice and the Company’s business.

The Company reclassified liabilities for contingent consideration, which were previously included in accounts payable and accrued liabilities, to other liabilities in the consolidated statement of financial condition as of December 31, 2023.

This reclassification has not been applied retroactively as the impact on the prior year was not material.

This change did not impact total

LPL FINANCIAL HOLDINGS INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

liabilities for the periods presented;

however, the consolidated statement of cash flows for the year ended December 31, 2023 has been updated to conform to the current presentation on the consolidated statement of financial condition.

Consolidation

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In the ordinary course of business, the Company enters into related party transactions with beneficial owners of more than five percent of the Company’s outstanding common stock.

Additionally, through its subsidiary LPL Financial, the Company provides services and charitable contributions to LPL Financial Charitable Foundation Inc., a charitable organization that provides volunteer and financial support within the Company’s local communities.

Additionally, through its subsidiary LPL Financial, the Company provides services and charitable contributions to the LPL Financial Charitable Foundation Inc., a charitable organization that provides volunteer and financial support within the Company’s local communities.

The Company recognized revenue for services provided to these related parties of $ 25.5 million, $ 19.7 million and $ 5.7 million during the years ended December 31, 2024, 2023 and 2022, respectively.

1 unchanged sentence

As of December 31, 2024, receivables from and payables to related parties were $ 6.3 million and $ 0.5 million, respectively.

As of December 31, 2022, receivables from and payables to related parties were not material.

As of December 31, 2023, receivables from and payables to related parties were $ 5.0 million and $ 0.4 million, respectively.

Reportable Segment

Management has determined that the Company operates in one segment, given the similarities in economic characteristics between its operations and the common nature of its products and services, production and distribution process and regulatory environment.

Management has determined that the Company operates in one segment, given the common nature of its operations, products and services, production and distribution process and regulatory environment.

For additional information, see Note 20 - Segment Information .

Revenue Recognition

5 unchanged sentences

Share-Based Compensation

Certain employees, officers, directors, advisors and enterprises participate in the Company’s various long-term incentive plans that provide for granting stock options, warrants, restricted stock awards, restricted stock units, deferred stock units and performance stock units.

Certain employees, officers, directors, advisors and institutions participate in the Company’s various long-term incentive plans that provide for granting stock options, warrants, restricted stock awards, restricted stock units, deferred stock units and performance stock units.

Stock options, warrants and restricted stock units generally vest in equal increments over a three-year period and expire on the tenth anniversary following the date of grant.

1 unchanged sentence

The Company recognizes share-based compensation for equity awards granted to employees, officers and directors as compensation and benefits expense on the consolidated statements of income.

The fair value of stock options is estimated using a Black-Scholes valuation model on the date of grant.

See Note 16 - Share-Based Compensation, Employee Incentives and Benefit Plans for additional information .

The fair value of restricted stock awards, restricted stock units and deferred stock units is equal to the closing price of the Company’s stock on the date of grant.

1 unchanged sentence

Share-based compensation is recognized over the requisite service period of the individual awards, which generally equals the vesting period.

The Company recognizes share-based compensation for equity awards granted to advisors and enterprises as advisory and commission expense on the consolidated statements of income.

The fair value of restricted stock units

The Company recognizes share-based compensation for equity awards granted to advisors and institutions as advisory and commission expense on the consolidated statements of income.

The fair value of restricted stock units is equal to the closing price of the Company’s stock on the date of grant.

Share-based compensation is recognized over the requisite service period of the individual awards, which generally equals the vesting period.

LPL FINANCIAL HOLDINGS INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

is equal to the closing price of the Company’s stock on the date of grant.

Share-based compensation is recognized over the requisite service period of the individual awards, which generally equals the vesting period.

The Company makes assumptions regarding the number of restricted stock awards, restricted stock units, deferred stock units and performance stock units that will be forfeited.

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Cash equivalents are highly liquid investments with an original maturity of 90 days or less that are not required to be segregated under federal or other regulations.

The Company’s cash equivalents are composed of U.S.

government obligations.

The Company’s cash equivalents are composed primarily of money market funds.

Cash and Equivalents Segregated Under Federal or Other Regulations

The Company’s broker-dealer subsidiary, LPL Financial, is required to maintain cash or qualified securities in a segregated reserve account for the exclusive benefit of its customers in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other regulations.

The Company’s broker-dealer subsidiaries are required to maintain cash or qualified securities in a segregated reserve account for the exclusive benefit of its customers in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other regulations.

At December 31, 2024, this line item included interest bearing deposits, U.S.

2 unchanged sentences

Discounts are accreted using a method that approximates the effective yield method over the term of the bill and are recorded to interest income, net as an adjustment to the investment yield.

Restricted Cash

Restricted cash primarily represents cash held and for use by the captive insurance subsidiary and is primarily composed of U.S.

government obligations and money market funds.

LPL FINANCIAL HOLDINGS INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

Restricted Cash

Restricted cash primarily represents cash held and for use by the captive insurance subsidiary and is primarily comprised of money market funds.

Receivables from Clients, Net and Client Payables

13 unchanged sentences

Advisor Loans, Net

Advisor loans, net include loans made to new and existing advisors and enterprises to facilitate their partnership with the Company, transition to the Company’s platform or fund business development activities.

The decision to extend credit to an advisor or enterprise is generally based on their credit history and ability to generate future revenue.

Loans made can be either repayable or forgivable over terms generally up to ten years provided that the advisor or enterprise remains licensed through LPL Financial.

Advisor loans, net include loans made to new and existing advisors and institutions to facilitate their partnership with the Company, transition to the Company’s platform or fund business development activities.

The decision to extend credit to an advisor or institution is generally based on their credit history and ability to generate future revenue.

Loans made can be either repayable or forgivable over terms generally up to ten years provided that the advisor or institution remains licensed through LPL Financial.

Forgivable loans are not repaid in cash and are amortized over the term of the loan.

If an advisor or enterprise terminates their arrangement with the Company prior to the loan maturity date, the remaining balance becomes repayable immediately.

If an advisor or institution terminates their arrangement with the Company prior to the loan maturity date, the remaining balance becomes repayable immediately.

An allowance for credit losses is recorded at the inception of a repayable loan or upon conversion to a repayable loan upon termination or change in agreed upon terms using estimates and assumptions based on historical lifetime loss experience and expectations of future loss rates based on current facts.

8 unchanged sentences

Ending balance — December 31 $ 17,901 $ 12,977 $ 15,144

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Other Receivables, Net

2 unchanged sentences

Management monitors the adequacy of these estimates through periodic evaluations against actual trends experienced.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table reflects a roll-forward of the allowance for credit losses on other receivables (in thousands):

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The Company uses prices obtained from independent third-party pricing services to measure the fair value of its trading securities.

Prices received from the pricing services are validated using various methods including comparison to prices received from additional pricing services, comparison to available quoted market prices and review of other relevant market data including implied yields of major categories of securities.

Prices received from the pricing services are validated when security prices move beyond a certain deviation threshold using various methods including comparison to prices received from additional pricing services, comparison to available quoted market prices and review of other relevant market data including implied yields of major categories of securities.

In general, these quoted prices are derived from active markets for identical assets or liabilities.

13 unchanged sentences

The Company does not capitalize pilot projects or projects for which it believes that the future economic benefits are less than probable.

Leasehold improvements are amortized over the lesser of their useful lives or the terms of the underlying

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Leasehold improvements are amortized over the lesser of their useful lives or the terms of the underlying leases.

Computers and software are depreciated over a period of 3 to 5 years.

3 unchanged sentences

No impairment occurred for the years ended December 31, 2024, 2023 or 2022.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Accounting for business combinations requires the Company to make significant estimates and assumptions with respect to intangible assets, liabilities assumed, pre-acquisition contingencies, useful lives and liabilities for contingent consideration, as applicable.

These assumptions include, but are not limited to, future expected cash flows, asset or revenue growth, discount rates, and market conditions and are based in part on historical experience, market data and information obtained from the management of the acquired companies.

These assumptions include, but are not limited to, future expected cash flows, asset or revenue growth, discount rates, conversion or retention rates, and market conditions and are based in part on historical experience, market data and information obtained from the management of the acquired companies.

When acquiring companies in business combinations, the Company recognizes separately from goodwill the assets acquired, liabilities assumed and any liabilities for contingent consideration, as applicable, at their acquisition date fair values.

Goodwill is recognized for business combinations as of the acquisition date and is measured as the excess of consideration transferred and the net of the acquisition date fair values of the assets acquired and the liabilities assumed or recorded.

Certain of the Company’s acquisitions include contingent consideration, which may result in the transfer of additional cash consideration to the sellers if certain asset or revenue growth is achieved in the years following an acquisition.

This contingent consideration is remeasured at its fair value at each subsequent reporting date until the contingency is resolved.

Any changes in fair value are recognized in other expense in the consolidated statements of operations.

While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement.

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The Company does not recognize a liability for contingent payments in acquisitions that are accounted for as asset acquisitions as the amounts to be paid will be uncertain until a future measurement date.

Contingent Consideration

Contingent payments are estimated by applying forecasted growth or conversion rates to project future revenue or asset growth and discount rates which are based on the cost of capital.

This contingent consideration is remeasured at its fair value at each subsequent reporting date until the contingency is resolved.

Any changes in fair value are recognized in other expense in the consolidated statements of operations.

Goodwill and Other Intangibles, Net

7 unchanged sentences

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value.

There was no impairment of

There was no impairment of definite-lived intangibles recognized for the years ended December 31, 2024, 2023 or 2022.

See Note 9 - Goodwill and Other Intangibles, Net , for additional information.

LPL FINANCIAL HOLDINGS INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

definite-lived intangibles recognized for the years ended December 31, 2023, 2022 or 2021.

See Note 9 - Goodwill and Other Intangibles, Net , for additional information.

Securities Borrowed

23 unchanged sentences

The Company also accrues for losses at its captive insurance subsidiary for those matters covered by self-insurance.

The captive insurance subsidiary records losses and loss reserve liabilities based on actuarially

The captive insurance subsidiary records losses and loss reserve liabilities based on actuarially determined estimates of losses incurred, but not yet reported to the Company as well as specific reserves for proceedings and matters that are probable and estimable.

The captive insurance subsidiary is funded by payments from LPL Financial and has cash reserves to cover losses, including $ 100.5 million in restricted cash.

Assessing the

LPL FINANCIAL HOLDINGS INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

determined estimates of losses incurred, but not yet reported to the Company as well as specific reserves for proceedings and matters that are probable and estimable.

The captive insurance subsidiary is funded by payments from LPL Financial and has cash reserves to cover losses, including $ 103.4 million in restricted cash.

Assessing the probability of a loss occurring and the timing and amount of any loss related to a legal proceeding or regulatory matter is inherently difficult and requires management to make significant judgments.

probability of a loss occurring and the timing and amount of any loss related to a legal proceeding or regulatory matter is inherently difficult and requires management to make significant judgments.

For additional information, see Note 14 - Commitments and Contingencies - “Legal and Regulatory Matters.”

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

In November 2024, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) :

Disaggregation of Income Statement Expenses , which requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements.

The ASU should be applied prospectively and is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact on the related disclosures;

however, it does not expect this update to have an impact on its financial condition or results of operations.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures to enhance the transparency of income tax disclosures relating to the rate reconciliation, disclosure of income taxes paid, and certain other disclosures.

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however, it does not expect this update to have an impact on its financial condition or results of operations.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

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The ASU should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact on the related disclosures;

however, it does not expect this update to have an impact on its financial condition or results of operations.

Recently Adopted Accounting Pronouncements

There were no new accounting pronouncements adopted during the year ended December 31, 2023 that materially impacted the Company’s consolidated financial statements and related disclosures.

The adoption did not have an impact on the Company’s financial condition or results of operations.

See Note 20 - Segment Information for related disclosures .

NOTE 3 - REVENUE

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The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred and discretion in establishing the price.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Advisory revenue represents fees charged to advisors’ clients’ advisory accounts on the Company’s corporate RIA advisory platform and is based on a percentage of the market value of the eligible assets in the clients’ advisory accounts.

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The majority of our 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 estimates of contributions and withdrawals to determine the amount billed, and accordingly, the revenue earned in the following three-month period.

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 the Company’s corporate advisory platform is proposed by the advisor and agreed to by the client and was approximately 1 % of the underlying assets for the year ended December 31, 2024.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company also supports independent RIA firms that conduct their business through separate registered investment advisor firms (“Independent RIAs”) through its Independent RIA advisory platform, which allows advisors to engage the Company for technology, clearing and custody services, as well as access the capabilities of the Company’s investment platforms.

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$ 3,305,487 $ 2,552,623 $ 2,326,164

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company generates two types of commission revenue:

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The revenue will not be recognized until it is probable that a significant reversal will not occur.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents sales-based and trailing commission revenue disaggregated by product category (in thousands):

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Client cash revenue is earned daily and is generated on advisors’ clients’ cash balances in insured bank sweep accounts and a money market account based on a rate applied, as a percentage, to the deposits placed.

The Company also receives fees based on account type and invested balances for administration and recordkeeping.

The Company also receives fees for certain account types for services provided, including administration and recordkeeping.

These fees are generally earned and recognized over time on a net basis as the Company acts as an agent in these arrangements.

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This includes revenue from omnibus processing in which the Company establishes and maintains sub-account records for its clients to reflect the purchase, exchange and redemption of mutual fund shares and consolidates clients’ trades within a mutual fund.

Omnibus processing fees are paid to the Company by the mutual fund product sponsors or their affiliates and are based on the value of

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

Omnibus processing fees are paid to the Company by the mutual fund product sponsors or their affiliates and are 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.

Recordkeeping also includes revenue from networking services.

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As recordkeeping fees are susceptible to unpredictable market changes that influence market value and fund positions, this revenue includes variable consideration and is constrained until the date that the fees are determinable.

LPL FINANCIAL HOLDINGS INC.

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Notes to Consolidated Financial Statements

Sponsorship Programs

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NOTE 4 - ACQUISITIONS

Acquisition of Financial Resources Group Investment Services, LLC

On January 31, 2023, the Company acquired the equity of Financial Resources Group Investment Services, LLC, a broker-dealer and independent branch office, in order to expand its addressable markets and complement organic growth.

Total consideration for the transaction was $ 189.2 million, which included an initial cash payment of $ 143.8 million and a liability of $ 45.4 million for contingent consideration, which represents the acquisition date fair value of the additional cash consideration that may be transferred to the sellers if certain asset growth is achieved in the three years following the closing.

The Company recognized $ 1.4 million of transaction costs as part of this acquisition.

During the three months ended December 31, 2023, the Company recorded a $ 26.7 million fair value adjustment in other expense to increase the fair value of the contingent consideration liability as a result of asset and market growth during the quarter.

The Company estimates that this contingent consideration may be settled for an amount up to $ 85.0 million in the years following the closing.

Acquisition of Atria Wealth Solutions, Inc.

On October 1, 2024 ("acquisition date"), the Company acquired 100 % of the outstanding common shares of Atria Wealth Solutions, Inc.

("Atria"), a wealth management solutions holding company headquartered in New York, in order to expand its addressable markets and complement organic growth.

As part of the acquisition, the Company acquired Atria's seven introducing broker-dealer subsidiaries and expects to transition the related brokerage and advisory assets to the Company's platform in 2025.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

The following table summarizes the total consideration for the transaction at the acquisition date (dollars in thousands):

Total Consideration October 1, 2024

Cash $ 858,857

Fair value of contingent consideration 29,511

Total consideration $ 888,368

LPL FINANCIAL HOLDINGS INC.

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Notes to Consolidated Financial Statements

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

At December 31, 2023, the Company had allocated $ 129.7 million of the purchase price to goodwill, $ 53.5 million to definite-lived intangible assets, $ 9.0 million to cash acquired, and the remainder to other assets acquired and liabilities assumed as part of the acquisition.

The goodwill primarily includes synergies expected to result from combining operations and is deductible for tax purposes.

The intangible assets are comprised of $ 34.7 million of bank relationships and $ 18.8 million of advisor relationships which were assigned useful lives of 15 years and 6 years respectively.

These intangible assets were valued using the income approach and are included in the Advisor and enterprise relationships line item in Note 9 - Goodwill and Other Intangibles, Net .

The fair value determination of bank and advisor relationships required the Company to make significant estimates and assumptions related to future net cash flows and discount rates.

The contingent consideration, which may be settled for amounts up to $ 330 million, represents the estimated fair value of the additional cash consideration that may be paid to the sellers if certain asset conversion, retention and other milestones are achieved in the year following the closing.

The Company determined the fair value for each of its contingent consideration obligations using probability weighted or Monte-Carlo simulation models.

These methods use significant unobservable inputs, including forecasted conversion rates and discount rates which are based on the cost of debt and equity.

See Note 5 - Fair Value Measurements for additional information.

The following table summarizes the Company's provisional purchase price allocation at the acquisition date (dollars in thousands):

Provisional Purchase Price Allocation

October 1, 2024

Fair value of consideration transferred

Cash and equivalents $ 76,259

Restricted cash 15,866

Receivables from brokers, dealers and clearing organizations 13,734

Other receivables 41,926

Other intangibles 639,900

Other assets 25,273

Total identifiable assets acquired $ 812,958

Accrued advisory and commission expenses payable

Accounts payable and accrued liabilities 52,521

Deferred tax liabilities

Other liabilities 26,349

Total liabilities assumed $ 223,525

Net assets acquired

Goodwill $ 298,935

The goodwill primarily includes synergies expected to result from combining operations.

Other intangible assets comprised $ 201.7 million of institutional relationships and $ 438.2 million of advisor relationships which were each assigned useful lives of 16 years.

These intangible assets were valued using the income approach and are included in the Advisor and institution relationships line item in Note 9 - Goodwill and Other Intangibles, Net .

The fair value determination of institutional and advisor relationships required the Company to make significant estimates and assumptions related to future net cash flows and discount rates.

Given the recent date of closing, the purchase accounting analysis is ongoing and may result in changes to the value of assets acquired and liabilities recorded, including other intangible assets and liabilities for contingent consideration.

Acquisition related costs incurred as part of the Atria acquisition during the year ended December 31, 2024 were $ 18.0 million and primarily comprised amounts related to professional services, which were classified as professional services expense in the Company's consolidated statements of income.

Atria's results were included in the Company's consolidated statements of income from October 1, 2024 through December 31, 2024.

For this period, total revenues attributable to Atria were approximately $ 194.0 million and net income was not material.

LPL FINANCIAL HOLDINGS INC.

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Notes to Consolidated Financial Statements

The following table presents unaudited pro forma results as if the acquisition of Atria had occurred on January 1, 2023 (dollars in thousands):

Years Ended December 31,

LPL Financial and Atria Pro Forma Combined Financial Information (unaudited) 2024 2023

Total revenue $ 12,998,942 $ 10,754,252

Net income $ 982,067 $ 975,921

The unaudited pro forma results above were prepared by combining the historical financial information of the Company and Atria and making certain adjustments.

Pro forma adjustments include the impact of amortization of intangible assets recognized as part of the acquisition, amortization of transition assistance loans made to advisors and institutions that will convert to the Company's platform in 2025, and the related interest impact of financing the transaction.

Pro forma results for the year ended December 31, 2023 also include the impact of $ 18.0 million of transaction costs incurred during the year ended December 31, 2024 as a result of the acquisition.

The unaudited pro forma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues or other factors, and, therefore, does not represent the actual results that would have occurred had the companies actually been combined as of January 1, 2023.

Other Acquisitions

During the year ended December 31, 2023, the Company completed a total of 19 acquisitions under the Liquidity & Succession solution, in which the Company buys advisor practices.

The Company also completed the acquisition of Boenning & Scattergood’s Private Client Group on January 31, 2023.

During the twelve months ended December 31, 2024, the Company completed 23 other acquisitions, 22 of which were completed under the Liquidity & Succession solution in which the Company buys advisor practices.

Certain of these acquisitions have been accounted for as business combinations and certain have been accounted for as asset acquisitions.

The Company recognized $ 6.0 million of transaction costs as part of these acquisitions.

Business Combinations

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As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to assets acquired, liabilities assumed, liabilities for contingent consideration, or goodwill as additional information becomes available.

The Com pany accounted for five Liquidity & Succession transactions under the acquisition method of accounting for business combinations.

Total consideration for these transactions was $ 190.2 million, which included initial consideration of $ 147.4 million, including $ 140.3 million of cash, and a liability of $ 42.7 million for contingent consideration, which represents the acquisition date fair value of the additional cash consideration that may be transferred to the sellers if certain asset growth is achieved in the three to five years following the closing.

The Company estimates that this contingent consideration may be settled for amounts up to $ 107.2 million in the years following the closing.

At December 31, 2023, the Company allocated $ 84.5 million of the purchase price to goodwill and $ 105.7 million to the definite-lived intangible assets acquired as part of these acquisitions.

The Company accounted for seven of these acquisitions under the acquisition method of accounting for business combinations.

Total consideration for these transactions was $ 113.2 million, which included $ 64.4 million of cash, and liabilities of $ 48.8 million for contingent consideration, which represents the acquisition date fair value of the additional cash consideration that may be transferred to the sellers if certain asset growth is achieved in the one to seven years following the closing.

This contingent consideration may be settled for amounts up to $ 190.3 million in the years following the closing.

The Company made purchase accounting adjustments during the twelve months ended December 31, 2024 related to acquisitions that were completed during the year and for which the Company’s purchase accounting analysis was ongoing.

These adjustments resulted in a $ 7.1 million decrease in customer relationships and liabilities for contingent consideration, respectively.

At December 31, 2024, the Company allocated $ 34.3 million of the purchase price to goodwill and $ 78.9 million to client relationships acquired as part of these acquisitions, which includes a provisional allocation of $ 3.8 million to goodwill and $ 11.3 million to client relationships for acquisitions completed in the fourth quarter for which purchase accounting is not yet complete.

The goodwill primarily includes synergies expected to result from combining operations and is deductible for tax purposes.

The intangible assets are comprised of $ 59.5 million of client relationships, $ 31.8 million of advisor relationships, and $ 14.4 million of technology which were valued using the income approach and assigned useful lives ranging from seven to 15 years.

The client relationships were valued using the income approach and assigned useful lives of 14 years.

See Note 9 – Goodwill and Other Intangibles, Net , for additional information.

The fair value determination of client relationships, advisor relationships and technology required the Company to make significant estimates and assumptions related to future net cash flows and discount rates.

Additionally, certain fair value determinations relate to acquisitions that were completed during the fourth quarter of 2023.

The Company has provisionally allocated $ 37.5 million to definite-lived intangible assets, $ 62.3 million to goodwill, and $ 22.7 million to liabilities for contingent consideration related to these acquisitions;

however, these allocations may change as the Company completes its purchase accounting analysis.

Asset Acquisitions

The Compan y accounted for fifteen other acquisitions as asset acquisitions.

These transactions included initial consideration of $ 180.4 million, including $ 142.3 million which was allocated to client relationships and $ 38.1 million which was allocated to advisor relationships.

The client and advisor relationship intangible assets were assigned useful lives of 14 years and 15 years, respectively.

These transactions include potential contingent payments of up to $ 73.1 million in the three years following the closing if certain asset growth is achieved.

The Company has not recognized a liability for these contingent payments as the amounts to be paid will be uncertain until a future measurement date.

See Note 9 - Goodwill and Other Intangibles, Net , for additional information.

The Company accounted for 16 other acquisitions as asset acquisitions.

These transactions included total initial consideration of $ 178.3 million, including $ 48.5 million which was allocated to advisor relationships and $ 129.8 million which was allocated to client relationships.

These relationships were assigned useful lives of 14 years to 15 years and the related transactions include potential contingent payments of up to $ 97.2 million in the years following the closing if certain asset growth is achieved.

The Company has not recognized a liability for these contingent

LPL FINANCIAL HOLDINGS INC.

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Notes to Consolidated Financial Statements

Acquisitions Completed in Prior Periods

During the year ended December 31, 2022, the Company acquired client relationship intangible assets of $ 54.1 million as a result of acquisitions under its Liquidity & Succession solution.

These acquisitions were accounted for as asset acquisitions with an assigned useful life of 9 years.

payments as the amounts to be paid will be uncertain until a future measurement date.

See Note 9 – Goodwill and Other Intangibles, Net , for additional information.

On April 30, 2021, the Company acquired the wealth management business of Waddell & Reed Financial, Inc.

for $ 300.0 million in order to expand its addressable markets and complement organic growth.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Acquisitions Completed in Prior Periods

Acquisition of Financial Resources Group Investment Services, LLC

On January 31, 2023, the Company acquired Financial Resources Group Investment Services, LLC, a broker-dealer and independent branch office, in order to expand its addressable markets and complement organic gro wth.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations, and total consideration for the transaction was $ 189.2 million, which included an initial cash payment of $ 143.8 million and a liability of $ 45.4 million for contingent consideration.

The Company allocated $ 129.7 million of the purchase price to goodwill, $ 53.5 million to definite-lived intangible assets, $ 9.0 million to cash acquired and the remainder to other assets acquired and liabilities assumed as part of the acquisition.

The goodwill primarily includes the synergies expected to result from combining operations and onboarding advisors and assets to the Company’s platform and is deductible for tax purposes.

The goodwill primarily includes synergies expected to result from combining operations and is deductible for tax purposes.

See Note 9 – Goodwill and Other Intangibles, Net , for additional information.

Other Prior Period Acquisitions

Business Combinations

The Company accounted for five Liquidity & Succession transactions under the acquisition method of accounting for business combinations during the year ended December 31, 2023.

Total consideration for these transactions was $ 190.2 million, which included initial consideration of $ 147.4 million, including $ 140.3 million of cash and a liability of $ 42.7 million for contingent consideration.

At December 31, 2023, the Company allocated $ 84.5 million of the purchase price to goodwill and $ 105.7 million to the definite-lived intangible assets acquired as part of these acquisitions.

The goodwill primarily includes synergies expected to result from combining operations and is deductible for tax purposes.

The Company recorded purchase accounting adjustments during the twelve months ended December 31, 2024 related to acquisitions which were completed during the fourth quarter of 2023 and for which the Company’s purchase accounting analysis was finalized in 2024.

These adjustments resulted in a $ 39.3 million increase in customer relationships, a $ 9.7 million increase in liabilities for contingent consideration, a $ 12.5 million decrease in technology, and a $ 17.1 million decrease in goodwill.

The intangible assets are composed primarily of client relationships which were assigned useful lives of 15 years.

See Note 9 – Goodwill and Other Intangibles, Net , for additional information.

Asset Acquisitions

The Compan y accounted for 15 other acquisitions as asset acquisitions during the year ended December 31, 2023.

These transactions included initial consideration of $ 180.4 million, including $ 142.3 million of which was allocated to client relationships and $ 38.1 million of which was allocated to advisor relationships.

These transactions include potential contingent payments of up to $ 73.1 million in the three years following the closing if certain asset growth is achieved.

The Company has not recognized a liability for these contingent payments as the amounts to be paid will be uncertain until a future measurement date.

See Note 9 - Goodwill and Other Intangibles, Net , for additional information.

NOTE 5 - FAIR VALUE MEASUREMENTS

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or other inputs that are observable or can be corroborated by observable market data.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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At December 31, 2024 and 2023, the Company had the following financial assets and liabilities that are measured at fair value on a recurring basis:

Cash Equivalents — The Company’s cash equivalents include money market funds and U.S.

government obligations, which are short term in nature with readily determinable values derived from active markets.

Cash Equivalents — The Company’s cash equivalents primarily include money market funds which are short term in nature with readily determinable values derived from active markets.

Cash Equivalents Segregated Under Federal or Other Regulations — The Company’s cash equivalents segregated under federal or other regulations include U.S.

treasury bills, which are short term in nature with readily determinable values derived from active markets.

Restricted Cash — The Company’s restricted cash is primarily composed of U.S.

government obligations and money market funds which are short term in nature with readily determinable values derived from active markets.

Trading Securities and Securities Sold, But Not Yet Purchased — The Company’s trading securities consist of house account model portfolios established and managed for the purpose of benchmarking the performance of its fee-based advisory platforms and temporary positions resulting from the processing of client transactions.

The Company uses prices obtained from independent third-party pricing services to measure the fair value of its trading securities.

In general, these quoted prices are derived from active markets for identical assets or liabilities.

When quoted prices in active markets for identical assets and liabilities are not available, the quoted prices are based on similar assets and liabilities or inputs other than the quoted prices that are observable, either directly or indirectly.

For negotiable certificates of deposit and treasury securities, the Company utilizes market-based inputs, including

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

observable market interest rates that correspond to the remaining maturities or the next interest reset dates.

For negotiable certificates of deposit and treasury securities, the Company utilizes market-based inputs, including observable market interest rates that correspond to the remaining maturities or the next interest reset dates.

At December 31, 2024 and 2023, the Company did not adjust prices received from the independent third-party pricing services.

Other Assets — The Company’s other assets include:

(1) deferred compensation plan assets that are invested in life insurance, money market and other mutual funds, which are actively traded and valued based on quoted market prices, and (2) certain non-traded real estate investment trusts and auction rate notes, which are valued using quoted prices for identical or similar securities and other inputs that are observable or can be corroborated by observable market data.

(1) deferred compensation plan assets that are invested in life insurance, money market and other mutual funds, which are actively traded and valued based on quoted market prices, and (2) certain non-traded real estate investment trusts, which are valued using quoted prices for identical or similar securities and other inputs that are observable or can be corroborated by observable market data.

Fractional Shares — The Company’s investment in fractional shares held by customers is reflected in other assets while the related purchase obligation for such shares is reflected in other liabilities.

The Company uses prices obtained from independent third-party pricing services to measure the fair value of its investment in fractional shares held by customers and the related repurchase obligation.

At December 31, 2024 and 2023, the Company did not adjust prices received from the independent third-party pricing services.

Contingent Consideration — The Company measures contingent consideration liabilities at fair value at the acquisition date, as applicable, and thereafter on a recurring basis using unobservable (Level 3) inputs.

These contingent consideration liabilities are reflected in other liabilities at December 31, 2023 and in accounts payable and accrued liabilities at December 31, 2022.

These contingent consideration liabilities are reflected in other liabilities.

See Note 2 - Summary of Significant Accounting Policies and Note 4 - Acquisitions for additional information.

LPL FINANCIAL HOLDINGS INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Level 3 Recurring Fair Value Measurements

The Company determines the fair value for its contingent consideration obligations using Monte-Carlo simulation and discounted cash flows models.

The Company determines the fair value for its contingent consideration obligations using probability weighted, Monte-Carlo simulation, and discounted cash flows models.

Contingent payments are estimated by applying significant unobservable inputs, including forecasted growth rates applied to project future revenue or asset growth, conversion or retention rates, and discount rates which are based on the cost of debt and equity.

Significant increases or decreases in the Company’s forecasted growth rates over the measurement period or discount rates would result in a higher or lower fair value measurement.

The following table summarizes inputs used in the measurement of contingent consideration using Monte-Carlo simulation models (dollars in thousands):

December 31, Quantitative Information About Level 3 Fair Value Measurements

2023 2022 Type

Valuation Techniques

Unobservable Inputs

$ 114,844 $ — Contingent Consideration Monte-Carlo Simulation Model

Forecasted Growth Rates 12.0 % - 29.5 %

The following tables summarize inputs used in the measurement of contingent consideration (dollars in thousands):

Quantitative Information About Level 3 Fair Value Measurements

December 31, 2024 Type Valuation Techniques Unobservable Inputs Range

$ 170,343 Contingent Consideration Monte-Carlo Simulation Model Forecasted Growth Rates 2.0 % - 29.5 %

Discount Rate 10.5 % - 18.0 %

The Company also had contingent consideration of $ 4.0 million and $ 3.9 million at December 31, 2023 and 2022, respectively, that was measured using a discounted cash flow model in which a discount rate is applied to an estimated payment based on an expectation of future transactions.

Equivalency Rate (1)

4.9 % - 5.8 %

26,555 Contingent Consideration Probability Weighted Expected Return Method

Equivalency Rate (1)

5.7 % - 5.7 %

Conversion Rate

— % - 100.0 %

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(1) Equivalency rate is defined as the prevailing market interest rate used to discount future payments.

Quantitative Information About Level 3 Fair Value Measurements

December 31, 2023 Type Valuation Techniques Unobservable Inputs Range

$ 114,844 Contingent Consideration Monte-Carlo Simulation Model Forecasted Growth Rates 12.0 % - 29.5 %

Discount Rate 13.6 % - 15.7 %

4,000 Contingent Consideration Discounted Cash Flow Model Discount Rate 9.3 % - 9.3 %

The following table summarizes the changes in fair value for the Company’s Level 3 liabilities during the periods presented (in thousands):

Year Ended December 31,

Balance - January 1

$ 118,844 $ 3,860

Additions 97,333 88,132

Payments ( 61,000 ) —

Fair value adjustments 41,721 26,852

Balance - December 31

$ 196,898 $ 118,844

LPL FINANCIAL HOLDINGS INC.

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Equity securities $ 151 $ — $ — $ 151

Mutual funds 55 — — 55

Debt securities

Total securities sold, but not yet purchased 151 18 — 169

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Cash equivalents segregated under federal or other regulations 720,077 — — 720,077

Restricted cash

103,226 — — 103,226

Investment securities - trading:

treasury obligations 24,402 — — 24,402

Mutual funds 50,518 — — 50,518

treasury obligations 25,388 — — 25,388

Money market funds 107 — — 107

Equity securities 43 — — 43

Debt securities — 32 — 32

Money market funds 112 — — 112

Total investment securities — trading 76,056 32 — 76,088

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Total assets at fair value $ 1,754,204 $ 3,992 $ — $ 1,758,196

Accounts payable and accrued liabilities — contingent consideration

$ — $ — $ 3,860 $ 3,860

Other liabilities:

Securities sold, but not yet purchased:

Debt securities — 61 — 61

Equity securities 487 — — 487

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177,131 — — 177,131

Contingent consideration

— — 118,844 118,844

Total other liabilities 177,673 — 118,844 296,517

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Other assets:

Securities borrowed 4,334 — 4,334 — 4,334

Deferred compensation plan (2)

8,742 8,742 — — 8,742

Securities borrowed 4,811 — 4,811 — 4,811

Other investments (3)

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Trading securities - at fair value:

Mutual funds $ 50,518 $ 10,679

treasury obligations $ 28,511 $ 25,388

Mutual funds 13,627 50,518

Money market funds 110 107

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NOTE 9 - GOODWILL AND OTHER INTANGIBLES, NET

During the year ended December 31, 2023, the Company completed various acquisitions, which were accounted for under the acquisition method of accounting for business combinations and as asset acquisitions.

During the year ended December 31, 2024, the Company completed various acquisitions, which were accounted for under the acquisition method of accounting for business combinations and as asset acquisitions, and recorded purchase accounting adjustments.

See Note 4 - Acquisitions , for additional information.

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Goodwill acquired

Purchase accounting adjustments

Balance at December 31, 2024 $ 2,172,873

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Definite-lived intangibles, net (1) :

Advisor and enterprise relationships 7.3 $ 935,478 $ ( 614,277 ) $ 321,201

Product sponsor relationships 2.2 234,086 ( 209,076 ) 25,010

Advisor and institution relationships

13.4 $ 1,626,281 $ ( 699,385 ) $ 926,896

Client relationships

12.7 581,519 ( 86,292 ) 495,227

Product sponsor relationships 1.3 234,086 ( 220,880 ) 13,206

Technology 7.6 20,930 ( 13,090 ) 7,840

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____________________

(1) During the year ended December 31, 2023, the Company completed various acquisitions which were accounted for under the acquisition method of accounting for business combinations and as asset acquisitions.

(1) During the year ended December 31, 2024, the Company completed various acquisitions.

See Note 4 - Acquisitions , for additional information .

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Definite-lived intangibles, net (1) :

Advisor and enterprise relationships 5.1 $ 809,872 $ ( 542,415 ) $ 267,457

Advisor and institution relationships

7.3 $ 935,478 $ ( 614,277 ) $ 321,201

Product sponsor relationships 2.2 234,086 ( 209,076 ) 25,010

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Total other intangibles, net $ 671,585

(1) During the year ended December 31, 2022, t he Company completed various acquisitions which were accounted for under the acquisition method of accounting for business combinations and as asset acquisitions.

(1) During the year ended December 31, 2023, t he Company completed various acquisitions.

See Note 4 - Acquisitions , for additional information .

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119,144 93,797

85,780 57,027

Debt issuance costs, net 14,154 9,065

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Taxes payable 134,815 24,522

Contingent consideration

196,898 118,844

Other 18,241 50,542

Total other liabilities $ 1,951,739 $ 1,440,373

_______________________________

(1) See Note 2 - Summary of Significant Accounting Policies for further information.

(2) See Note 13 - Income Taxes for further information.

(3) See Note 12 - Leases for further information.

(4) See Note 3 - Revenue for further information.

LPL FINANCIAL HOLDINGS INC.

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Margin Interest rate Maturity

Term Loan A (1)

$ 1,020,000 SOFR+147.5 bps

6.000 % $ — — % 12/5/2026

Term Loan B (1)

— SOFR+ 185 bps

7.206 % $ 1,037,900 LIBOR+ 175 bps

6.403 % 1,027,200 SOFR+ 185 bps

7.206 % 11/12/2026

2027 Senior Notes (1)

500,000 Fixed Rate

5.700 % — — — % 5/20/2027

2027 Senior Notes (1)

400,000 Fixed Rate 4.625 % 400,000 Fixed Rate 4.625 % 11/15/2027

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400,000 Fixed Rate 4.375 % 400,000 Fixed Rate 4.375 % 5/15/2031

2034 Senior Notes (1)

500,000 Fixed Rate 6.000 % — — — % 5/20/2034

Total Corporate Debt 4,470,000 3,477,200

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1,047,000 ABR+ 37.5 bps / SOFR+ 147.5 bps

6.966 % — LIBOR+125 bps

6.007 % 280,000 ABR+ 37.5 bps / SOFR+ 147.5 bps

6.966 % 5/20/2029

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(1) No leverage or interest coverage maintenance covenants.

(2) In March 2023, the Company amended its Credit Agreement to transition the Parent Revolving Credit Facility and Term Loan B from London Interbank Offered Rate (“LIBOR”)-based to Secured Overnight Financing Rate (“SOFR”)-based interest rates, which became effective in March and April 2023, respectively.

(3) The Parent’s outstanding balance at December 31, 2023 was comprised of an alternate base rate (“ABR”)-based balance of $ 18.0 million with the applicable margin of ABR + 37.5 bps ( 8.875 %) and a SOFR-based balance of $ 262.0 million with the applicable margin of SOFR + 147.5 bps ( 6.835 %).

The minimum calendar year payments and maturities of the corporate debt and other borrowings as of December 31, 2024 were as follows (in thousands):

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Description Borrower Maturity Date Outstanding Available

Senior secured, revolving credit facility LPL Holdings, Inc.

March 2026 $ 280 $ 1,720

Broker-dealer revolving credit facility LPL Financial LLC July 2024 $ — $ 1,000

Senior unsecured, revolving credit facility

LPL Holdings, Inc.

May 2029 $ 1,047 $ 1,203

Broker-dealer revolving credit facility LPL Financial LLC May 2025 $ — $ 1,000

Unsecured, uncommitted lines of credit LPL Financial LLC None

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Notes to Consolidated Financial Statements

Refinanced Existing Term Loan B Facility with Term Loan A Facility

On December 5, 2024, LPLH refinanced its existing $ 1.0 billion Term Loan B facility (the “Term Loan B”) with a new $ 1.0 billion Term Loan A facility (the “Term Loan A”).

Term Loan A will mature on December 5, 2026 and will bear interest at a floating rate equal to either (i) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus an applicable margin or (ii) the alternate base rate plus an applicable margin, in each case, with such applicable margin determined based on the Company’s senior unsecured debt rating issued by Moody’s Investors Service, Inc.

and Standard & Poor’s Ratings Services.

Term Loan A will bear interest at the Adjusted Term SOFR Rate (which includes a 10 basis points per annum credit spread adjustment) plus 137.5 basis points per annum, compared to the Adjusted Term SOFR Rate plus 175 basis points per annum under the Term Loan B.

The Adjusted Term SOFR Rate is subject to an interest rate floor of 0.0 %, and the alternative base rate is subject to an interest rate floor of 1.0 %.

Issuance of 2027 Senior Notes and 2034 Senior Notes

On May 20, 2024, LPLH issued $ 500.0 million in aggregate principal amount of 5.700 % senior notes due 2027 (“2027 Senior Notes”) and $ 500.0 million in aggregate principal amount of 6.000 % senior notes due 2034 (the “2034 Senior Notes” and, together with the 2027 Notes, the “Senior Notes”).

The Senior Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior unsecured basis by LPLFH.

The Company used a portion of the proceeds from the issuance to repay borrowings made under its senior unsecured revolving credit facility and to finance the Atria acquisition.

The 2027 Senior Notes will mature on May 20, 2027, and interest is payable semi-annually.

The Company may redeem all or part of the 2027 Senior Notes on or prior to April 20, 2027 at a redemption price that is equal to the greater of:

(i) the remaining scheduled payments of principal and interest discounted at the Treasury Rate (as defined in the Second Supplemental Indenture dated May 20, 2024) plus 20 basis points less interest accrued to the redemption date, and (ii) 100 % of the principal amount of the 2027 Senior Notes to be redeemed plus accrued interest.

On or after April 20, 2027, the Company may redeem the 2027 Senior Notes at 100 % of the principal amount of the notes to be redeemed plus accrued interest.

The 2034 Senior Notes will mature on May 20, 2034 and interest is payable semi-annually.

The Company may redeem all or part of the 2034 Senior Notes on or prior to February 20, 2034 at a redemption price that is equal to the greater of:

(i) the remaining scheduled payments of principal and interest discounted at the Treasury Rate (as defined in the Third Supplemental Indenture dated May 20, 2024) plus 25 basis points less interest accrued to the redemption date, and (ii) 100 % of the principal amount of the 2034 Senior Notes to be redeemed plus accrued interest.

On or after February 20, 2034, the Company may redeem the 2034 Senior Notes at 100 % of the principal amount of the notes to be redeemed plus accrued and unpaid interest.

In connection with the issuance of the Senior Notes, the Company incurred $ 7.1 million in costs, which were capitalized as debt issuance costs in the consolidated statements of financial condition.

Issuance of 2028 Senior Notes

LPLH issued $ 750.0 million in aggregate principal amount of 6.750 % senior notes on November 17, 2023 at 99.929 % (“2028 Senior Notes”).

The 2028 Senior Notes are unsecured obligations that will mature on November 17, 2028, and are fully and unconditionally guaranteed on a senior unsecured basis by the Company.

Interest on the 2028 Senior Notes is payable semi-annually.

The Company used the proceeds from the issuance to repay borrowings made under its senior secured revolving credit facility and for general corporate purposes.

The Company may redeem all or part of the 2028 Senior Notes at any time and from time to time prior to October 17, 2028 at a redemption price equal to the greater of:

the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the 2028 Senior Notes matured on October 17, 2028) on a semi-annual basis at the Treasury Rate (as defined in the First Supplemental Indenture dated November 17, 2023) plus 35 basis points less interest accrued to, but excluding, the redemption date, or 100% of the principal amount of the 2028 Senior Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date.

Thereafter, the Company may redeem all or part of the 2028 Senior Notes at any time and from time to time, at a redemption price equal to 100% of the principal amount of the 2028 Senior Notes being redeemed plus accrued and unpaid interest thereon.

The 2028 Senior Notes are unsecured obligations that will mature on November 17, 2028, and are fully and unconditionally guaranteed on a senior unsecured basis by LPLFH.

The Company used the proceeds from the issuance to repay borrowings made under its senior unsecured revolving credit facility and for general corporate purposes.

In connection with the issuance of the 2028 Senior Notes, the Company incurred $ 6.3 million in costs, which were capitalized as debt issuance costs in the consolidated statements of financial condition.

Credit Agreement

Credit Agreement and Parent Revolving Credit Facility

On March 13, 2023, LPLFH and LPLH entered into a sixth amendment agreement to the Company’s amended and restated credit agreement (the “Credit Agreement”), which, among other things, replaced LIBOR with SOFR.

On May 20, 2024, LPLH amended its revolving credit facility to, among other things, increase the maximum borrowing from $ 2.0 billion to $ 2.25 billion and extend the maturity of the revolving credit facility to May 2029.

In connection with the amendment of the credit facility, LPLH incurred $ 8.6 million in costs, which were capitalized as debt issuance costs in the consolidated statements of financial condition.

The Credit Agreement subjects the Company to certain financial and non-financial covenants.

As of December 31, 2024, the Company was in compliance with such covenants.

Parent Revolving Credit Facility

On July 18, 2023, LPLH amended its revolving credit facility to, among other things, increase the maximum borrowing from $ 1.0 billion to $ 2.0 billion.

Borrowings under the revolving credit facility bear interest at a rate per annum ranging from 112.5 to 187.5 basis points over SOFR plus 10 basis points or 12.5 to 87.5 basis points over the alternate base rate (the greatest of (i) the NYFRB Rate plus 1/2 of 1%, (ii) the Prime Rate and (iii) the Adjusted Term SOFR Rate for a one month Interest Period plus 1 %, each as defined in the Credit Agreement) depending on the Debt Ratings (as defined in the Credit Agreement).

In connection with the amendment of the credit facility, LPLH incurred $ 5.5 million in costs, which were capitalized as debt issuance costs in the consolidated statements of financial condition.

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Notes to Consolidated Financial Statements

Broker-Dealer Revolving Credit Facility

On July 18, 2023, LPL Financial, the Company’s broker-dealer subsidiary, renewed its committed senior unsecured revolving credit facility that matures on July 16, 2024 and allows for a maximum borrowing of up to $ 1.0 billion.

Borrowings under the credit facility bear interest at a rate per annum equal to 1.25 % per annum plus the greatest of (i) SOFR plus 0.10 %, (ii) the effective federal funds rate and (iii) the overnight bank funding rate, in each case, as such rate is administered or determined by the Federal Reserve Bank of New York from time to time.

On May 20, 2024, LPL Financial, the Company’s broker-dealer subsidiary, renewed its revolving credit facility to extend the maturity of the revolving credit facility to May 19, 2025.

The revolving credit facility allows for a maximum borrowing of up to $ 1.0 billion and borrowings under the credit facility bear interest at a rate per annum equal to 1.25 % per annum plus the greatest of (i) SOFR plus 0.10 %, (ii) the effective federal funds rate and (iii) the overnight bank funding rate, in each case, as such rate is administered or determined by the Federal Reserve Bank of New York from time to time.

In connection with the renewal of the credit facility, LPL Financial incurred $ 1.6 million in costs, which were capitalized as debt issuance costs in the consolidated statements of financial condition.

The broker-dealer credit agreement subjects LPL Financial to certain financial and non-financial covenants.

The bro ker-dealer credit agreement subjects LPL Financial to certain financial and non-financial covenants.

LPL Financial was in compliance with such covenants as of December 31, 2024.

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Two of the lines have unspecified limits, which are primarily dependent on LPL Financial’s ability to provide sufficient collateral.

The other three lines have a total limit of $ 200.0 million, which allow for uncollateralized borrowings.

The other three lines have a total limit of $ 200.0 million, of which $ 125.0 million is uncollateralized.

There were no balances outstanding under these lines at December 31, 2024 or December 31, 2023.

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Notes to Consolidated Financial Statements

NOTE 12 - LEASES

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Operating leases 6.55 % 6.80 %

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Notes to Consolidated Financial Statements

Maturities of lease liabilities as of December 31, 2024 were as follows (in thousands):

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Total $ 147,718 $ 105,123

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NOTE 13 - INCOME TAXES

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Non-deductible expenses

Research and development credits ( 0.6 ) ( 0.4 ) ( 0.4 )

Federal research and development credits

( 0.7 ) ( 0.6 ) ( 0.4 )

Share-based compensation ( 0.8 ) ( 0.2 ) ( 1.8 )

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Tax credit carryforwards

24,244 35,200

Finance lease liabilities 28,383 28,475

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valuation allowance

( 23,215 ) ( 33,922 )

Total deferred tax assets

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( 32,167 ) ( 25,488 )

( 20,011 ) ( 1,991 )

Total deferred tax liabilities

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Deferred tax assets, net $ 129,902 $ 167,450

_______________________________

(1) The deferred tax asset for deferred compensation as of December 31, 2022 has been reclassified from the accrued liabilities category, as previously reported for the period ending December 31, 2022.

(2) The deferred tax asset for capitalized research and development expenditures and the deferred tax liability for internally developed software as of December 31, 2022 has been reclassified from the deferred tax liability for depreciation of property and equipment category, as previously reported for the period ending December 31, 2022.

The increase in deferred tax assets, net as of December 31, 2023 compared to December 31, 2022 was primarily driven by accruals of deferred compensation that are deductible when paid.

Our $ 9.3 million of gross capital losses realized during 2023 can be carried back three years and carried forward five years.

The decrease in deferred tax assets, net as of December 31, 2024 compared to December 31, 2023 was primarily driven by the 2024 stock acquisition of Atria and the basis difference in net assets acquired.

At December 31, 2024, there were $ 23.2 million of tax credits that can be carried forward 15 years and will begin to expire during 2032, and $ 1.0 million of tax credits that can be carried forward 10 years and will begin to expire during 2032.

We believe that it is more likely than not that the tax credit carryforwards will not be realized and have recorded a valuation allowance of $ 23.2 million on the deferred tax assets related to these tax credit carryforwards.

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Notes to Consolidated Financial Statements

The following table reflects a reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits (in thousands):

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The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes within the consolidated statements of financial condition.

At December 31, 2023 and 2022, the liability for unrecognized tax benefits included accrued interest of $ 8.0 million and $ 4.6 million, respectively, and penalties of $ 5.5 million and $ 4.1 million, respectively.

The Company and its subsidiaries file federal and state income tax returns, which are subject to routine examinations by the respective taxing authorities.

The Company has concluded all federal and state income tax matters for years through 2011.

The tax years of 2012 to 2016 and 2020 to 2022 remain open to examination in the federal jurisdiction.

At December 31, 2024 and 2023, the liability for

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Notes to Consolidated Financial Statements

unrecognized tax benefits included accrued interest of $ 9.4 million and $ 8.0 million, respectively, and penalties of $ 4.1 million and $ 5.5 million, respectively.

The Company and its subsidiaries file federal, state and local income tax returns, which are subject to routine examinations by the respective taxing authorities.

The Company is not currently under exam for federal purposes.

The tax years of 2021 to 2023 remain open to examination in the federal jurisdiction.

The tax years of 2012 to 2023 remain open to examination in the state jurisdictions.

In the next 12 months it is reasonably possible that the Company m ay realize a reduction in unrecognized tax benefits of $ 23.0 million related to settleme nts and the statute of limitations expiration in federal and various state jurisdictions.

In the next 12 months it is reasonably possible that the Company may realize a reduction in unrecognized tax benefits of $ 14.2 million related to settlements and the statute of limitations expiration in federal and various state jurisdictions.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

2025 $ 120,073

Thereafter 7,710

Total $ 251,994

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Under these agreements, if a member becomes unable to satisfy its obligations to the clearing houses and exchanges, all other members would be required to meet any shortfall.

The Company’s liability under these arrangements is not quantifiable and could exceed the cash and securities it has posted as collateral.

However, the potential requirement for the Company to

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Notes to Consolidated Financial Statements

make payments under these agreements is remote.

T he Company’s liability under these arrangements is not quantifiable and could exceed the cash and securities it has posted as collateral.

However, the potential requirement for the Company to make payments under these agreements is remote.

Accordingly, no liability has been recognized for these transactions.

Loan Commitments

From time to time, LPL Financial makes loans to advisors and enterprises, primarily to newly recruited advisors and enterprises to assist in the transition process, which may be forgivable.

From time to time, LPL Financial makes loans to advisors and institutions, primarily to newly recruited advisors and institutions to assist in the transition process, which may be forgivable.

Due to timing differences, LPL Financial may make commitments to issue such loans prior to actually funding them.

These commitments are generally contingent upon certain events occurring, including but not limited to the advisor or enterprise joining LPL Financial.

These commitments are generally contingent upon certain events occurring, including the advisor or institution joining LPL Financial.

LPL Financial had no significant unfunded loan commitments at December 31, 2024 or 2023.

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From time to time, such engagements result in regulatory complaints or other matters, the resolution of which has in the past and may in the future include fines, customer restitution and other remediation.

Assessing the probability of a loss occurring and the timing and amount of any loss related to a legal proceeding or regulatory matter is inherently difficult.

Assessing the probability of a loss occurring and the timing and amount of any loss related to a legal proceeding or regulatory

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Notes to Consolidated Financial Statements

matter is inherently difficult.

While the Company exercises significant and complex judgments to make certain estimates presented in its consolidated financial statements, there are particular uncertainties and complexities involved when assessing the potential outcomes of legal proceedings and regulatory matters.

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The Company has established an accrual for those legal proceedings and regulatory matters for which a loss is both probable and the amount can be reasonably estimated.

In February 2023, the Company received a request for information from the SEC in connection with an investigation of certain elements of the Company’s Anti-Money Laundering compliance program.

In 2024, the SEC proposed a resolution under which the Company would pay an $ 18.0 million civil monetary penalty.

As a result, the Company recorded $ 18.0 million in other expense in the consolidated statements of income for the year ended December 31, 2024.

The Company reached a settlement with the staff of the SEC and paid the civil monetary penalty in January 2025.

In October 2022, the Company received a request for information from the SEC in connection with an investigation of the Company’s compliance with records preservation requirements for business-related electronic communications stored on personal devices or messaging platforms that have not been approved by the Company.

The staff of the SEC proposed a potential settlement with the Company to resolve its civil investigation.

Under the SEC’s proposed resolution, the Company would pay a $ 50.0 million civil monetary penalty.

As a result of the foregoing, the Company has recorded $ 40.0 million in other expense in the consolidated statements of income for the year ended December 31, 2023 to reflect the amount of the penalty that is not covered by the Company’s captive insurance subsidiary.

The Company has not yet reached a settlement in principle with the SEC, and any settlement agreement remains subject to the negotiation of the civil monetary penalty and definitive documentation.

In 2023, the SEC proposed a potential settlement, under which the Company would pay a $ 50.0 million civil monetary penalty.

As a result, the Company recorded $ 40.0 million in other expense in the consolidated statements of income for the year ended December 31, 2023 to reflect the amount of the penalty that is not covered by the Company’s captive insurance subsidiary.

The Company reached a settlement with the staff of the SEC to resolve its civil investigation and paid the civil monetary penalty of $ 50.0 million in August 2024.

In July 2024, putative class action lawsuits were filed against LPL Financial in federal district court alleging certain violations of law in connection with its cash sweep programs.

The Company intends to defend vigorously against the lawsuits.

In August 2024, the Company received a request for information from the SEC regarding certain elements of the Company’s cash management program for corporate advisory accounts.

The Company has been cooperating with the request.

Third-Party Insurance

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As of December 31, 2024, there were no restrictions that materially limited the Company’s ability to repledge, loan or sell the remaining $ 358.1 million of client collateral.

Investment securities on the consolidated statements of financial condition include $ 5.5 million and $ 4.5 million of trading securities pledged to the Options Clearing Corporation at December 31, 2023 and 2022, respectively, and $ 19.9 million of trading securities pledged to the National Securities Clearing Corporation at both December 31, 2023 and 2022.

Investment securities on the consolidated statements of financial condition include $ 8.5 million and $ 5.5 million of trading securities pledged to the Options Clearing Corporation at December 31, 2024 and 2023, respectively, and $ 20.0 million and $ 19.9 million of trading securities pledged to the National Securities Clearing Corporation at December 31, 2024 and 2023, respectively.

NOTE 15 - STOCKHOLDERS’ EQUITY

The payment, timing, and amount of any dividends are subject to approval by LPLFH’s Board of Directors as well as certain limits under the Credit Agreement.

The payment, timing, and amount of any dividends are subject to approval by LPLFH’s Board of Directors (the “Board”) as well as certain limits under the Credit Agreement.

Cash dividends per share of common stock and total cash dividends paid on a quarterly basis were as follows (in millions, except per share data):

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On September 21, 2022, the Board authorized a $ 2.1 billion increase to the amount available for repurchases of the Company’s issued and outstanding common shares.

During the year ended December 31, 2023 LPLFH repurchased 5,075,900 shares of common stock at a weighted-average price of $ 216.73 for a total of $ 1.1 billion.

The Company also recognized $ 9.9 million of excise tax in connection with these repurchases during the year ended December 31, 2023 .

As a result of the Company’s acquisition of Atria, the Company paused share repurchases during the first quarter of 2024.

The Company resumed share repurchases in the fourth quarter of 2024 and repurchased 605,361 shares of common stock at a weighted-average price of $ 280.84 for a total of $ 170.0 million during the year ended December 31, 2024.

As of December 31, 2024, the Company had $ 730.0 million remaining under the existing share repurchase program.

10 unchanged sentences

Stock Options and Warrants

The Company has not granted stock options or warrants since 2019.

The following table summarizes the Company’s stock option and warrant activity as of and for the year ended December 31, 2024:

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Forfeited and Expired

( 146,035 ) $ 58.73

Outstanding — December 31, 2024 135,510 $ 61.08 2.81 $ 35,969

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135,510 2.81 $ 61.08 135,510 $ 61.08

The Company recognized no share-based compensation expense related to the vesting of stock options awarded to employees and officers during the year ended December 31, 2023.

The Company recognized $ 0.2 million and $ 2.6 million of expense during the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2023, there was no unrecognized compensation cost related to non-vested stock options as the remaining share-based compensation expense was recognized during the three months ended March 31, 2022.

The Company has not granted stock options or warrants since 2019;

however, during the fourth quarter of 2024, certain previously vested and outstanding stock option awards granted to the Company’s former Chief Executive Officer (“CEO”) were clawed back and certain were modified in connection with his termination for “Cause” as defined in the Company’s Executive Severance Plan, the 2010 Plan, and the 2021 Plan.

The clawback of stock options resulted in $ 2.6 million of other income, which is recorded in other revenue in the consolidated statements of income for the year ended December 31, 2024.

The modification of certain of these previously vested options resulted in $ 12.0 million of share-based compensation expense, which is included in compensation and benefits in

LPL FINANCIAL HOLDINGS INC.

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Notes to Consolidated Financial Statements

the consolidated statements of income.

The modified options were exercised in December 2024, and are included as having been exercised in the table above.

Shares that were clawed back are reflected as having been forfeited in the table above.

The Company recognized no share-based compensation expense related to the vesting of stock options during the year ended December 31, 2023 and $ 0.2 million of share-based compensation expense relating to stock options during the year ended December 31, 2022, respectively.

As of December 31, 2024, there was no unrecognized compensation cost related to non-vested stock options as the remaining share-based compensation expense was recognized during the three months ended March 31, 2022.

Restricted Stock and Stock Units

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As of December 31, 2024, total unrecognized compensation cost for restricted stock awards and stock units was $ 73.3 million, which is expected to be recognized over a weighted-average remaining period of 1.90 years.

The Company also grants restricted stock units to its advisors and to enterprises.

The Company recognized $ 23.8 million of other income, with an offset to additional paid-in capital, during the three months ended December 31, 2024 relating to the clawback of restricted stock units of the Company’s former CEO’s in connection with his termination for “Cause” as defined in the Company’s Executive Severance Plan, the 2010 Plan, and the 2021 Plan.

The related shares have been reflected as having been forfeited in the table above.

The Company also grants restricted stock units to its advisors and to institutions.

The Company recognized share-based compensation expense of $ 2.8 million, $ 2.6 million and $ 2.6 million related to the vesting of these awards during the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2023, total unrecognized compensation cost for restricted stock units granted to advisors and enterprises was $ 5.4 million, which is expected to be recognized over a weighted-average remaining period of 2.13 years.

As of December 31, 2024, total unrecognized compensation cost for restricted stock units granted to advisors and institutions was $ 7.2 million, which is expected to be recognized over a weighted-average remaining period of 2.30 years.

Employee Incentives and Benefit Plan s

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The Company’s total cost related to the 401(k) plan was $ 35.8 million, $ 30.3 million and $ 24.7 million for the years ended December 31, 2024, 2023 and 2022, respectively, which is classified as compensation and benefits expense in the consolidated statements of income.

The Company established its Employee Stock Purchase Plan (the “ESPP”) as a benefit to enable eligible employees to purchase common stock of LPLFH at a discount from the market price through payroll deductions, subject to limitations.

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Notes to Consolidated Financial Statements

subject to limitations.

The ESPP provides for a 15 % discount on the market value of the stock at the lower of the grant date price (first day of the offering period) and the purchase date price (last day of the offering period).

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The liability for benefits accrued under the non-qualified deferred compensation plan totaled $ 817.5 million and $ 652.3 million at December 31, 2024 and 2023, respectively, which is included in other liabilities in the consolidated statements of financial condition.

The cash value of the related trust assets was $ 651.1 million and $ 475.6 million at

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Notes to Consolidated Financial Statements

December 31, 2023 and 2022, respectively, which is measured at fair value and included in other assets in the consolidated statements of financial condition.

The cash value of the related trust assets was $ 818.4 million and $ 651.1 million at December 31, 2024 and 2023, respectively, which is measured at fair value and included in other assets in the consolidated statements of financial condition.

Certain employees of the Company participate in a non-qualified deferred compensation plan that permits participants to defer portions of their compensation and may receive a return based on the allocation of notional investments offered under the plan.

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For the years ended December 31, 2024, 2023 and 2022, stock options, warrants and stock units representing common share equivalents of 42,918 shares, 55,298 shares and 9,770 shares, respectively, were anti-dilutive.

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NOTE 18 - NET CAPITAL AND REGULATORY REQUIREMENTS

3 unchanged sentences

Net capital and the related net capital requirement may fluctuate on a daily basis.

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Notes to Consolidated Financial Statements

The following table presents the net capital position of the Company’s primary broker-dealer subsidiary (in thousands):

6 unchanged sentences

Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on PTC’s operations.

As of December 31, 2023 and 2022, LPL Financial a nd PTC met all capital adequacy requirements to which they were subject.

As of December 31, 2024 and 2023, the Company’s regulated subsidiaries, including LPL Financial, LPL Enterprise, Atria’s seven introducing broker-dealer subsidiaries, and PTC, met all capital adequacy requirements to which they were subject.

NOTE 19 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK

LPL Financial may offer loans to new and existing advisors and enterprises to facilitate their relationship with LPL Financial, transition to LPL Financial’s platform or fund business development activities.

LPL Financial may incur losses if advisors or enterprises do not fulfill their obligations with respect to these loans.

To mitigate this risk, LPL Financial evaluates the performance and creditworthiness of the advisor or enterprise prior to offering repayable loans.

LPL Financial may offer loans to new and existing advisors and institutions to facilitate their relationship with LPL Financial, transition to LPL Financial’s platform or fund business development activities.

LPL Financial may incur losses if advisors or institutions do not fulfill their obligations with respect to these loans.

To mitigate this risk, LPL Financial evaluates the performance and creditworthiness of the advisor or institution prior to offering repayable loans.

LPL Financial’s client securities activities are transacted on either a cash or margin basis.

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LPL Financial is obligated to settle transactions with brokers and other financial institutions even if its advisors’ clients fail to meet their obligation to LPL Financial.

Clients are required to complete their transactions on the settlement date, generally two business days after the trade date.

Clients are required to complete their transactions on the settlement date, generally one business day after the trade date.

If clients do not fulfill their contractual obligations, LPL Financial may incur losses.

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While long inventory positions represent LPL Financial’s ownership of securities, short inventory positions represent obligations of LPL Financial to deliver specified securities at a contracted price, which may differ from market prices prevailing at the time of completion of the transaction.

Accordingly, both long and short inventory positions may result in losses or gains to LPL Financial as market values of securities fluctuate.

To mitigate the risk of losses, long and short positions are marked-to-market daily and are continuously monitored by LPL Financial.

Accordingly, both long and short inventory positions may result in losses or gains to LPL Financial

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Notes to Consolidated Financial Statements

as market values of securities fluctuate.

To mitigate the risk of losses, long and short positions are marked-to-market daily and are continuously monitored by LPL Financial.

NOTE 20 - SEGMENT INFORMATION

On October 1, 2024, the Company’s former CEO, Dan H.

Arnold, was terminated for “Cause,” and on October 21, 2024, the Board confirmed Rich Steinmeier as CEO and Matthew Audette as President and Chief Financial Officer (“CFO”).

The Company has concluded that its Chief Operating Decision Maker (“CODM”) is the group that includes the CEO and the President and CFO of the Company.

These changes did not impact the Company’s determination that it has one reportable segment, given the common nature of the Company’s operations, products and services, production and distribution process, and regulatory environment.

The Company provides an integrated platform of brokerage and investment advisory services to independent financial advisors and advisors at financial institutions from which the Company derives its revenues and incurs expenses.

For additional information see Note 3 - Revenue.

The CODM regularly reviews pre-tax net income as presented on the Company’s consolidated statements of income for purposes of assessing performance and making decisions about resource allocation.

Expenses regularly reviewed by the CODM include those line items reported on the Company’s consolidated statements of income, the most significant of which include advisory and commission, compensation and benefits, and promotional expenses.

See our consolidated financial statements in Part II, “ Item 8.

Financial Statements and Supplementary Data” and Note 2 - Summary of Significant Accounting Policies for additional information about these line items and the related accounting policies.

NOTE 21 - SUBSEQUENT EVENTS

The Company’s Board declared a cash dividend of $ 0.30 per share on the Company’s outstanding common stock to be paid on March 25, 2025 to all stockholders of record on March 11, 2025 .

On February 13, 2024, the Company announced that it had entered into a definitive purchase agreement to acquire Atria Wealth Solutions, Inc.

(“Atria”), a wealth management solutions holding company headquartered in New York.

As part of the agreement, Atria will transition its brokerage and advisory assets, currently custodied with its network of broker-dealers, to the Company’s platform.

The Company expects to close the transaction in the second half of 2024 with the conversion expected in mid-2025, subject to receipt of regulatory approval and other closing conditions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data