LPL Financial Holdings Inc.

Joining the call today are our Chief Executive Officer Rich Steinmeier and President and Chief Financial Officer Matt Audit. Rich and Matt will offer introductory remarks and then the call will be open for questions. The company would appreciate if analysts would limit themselves to only one question. To ask a follow-up please re-enter the queue. The company has posted its earnings press release and supplementary information on the investor relations section of the company's website .lpl.com. Today's call will include forward-looking statements including statements about LPL financials future financial and operating results, outlook, business strategies, and plans as well as other opportunities and potential risks that management foresees. Such forward-looking statements reflect management's current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward-looking statements. For more information about such risks and uncertainties the company refers listeners to the disclosure set forth under the caption forward-looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission. During the call the company will also discuss certain non-GAAP financial measures. For a reconciliation of such non-GAAP financial measures to the comparable GAAP figures please refer to the company's earnings release which can be found at .lpl.com. With that I will now turn the call over to Mr. Steinmeier.

Thanks operator and thank you to everyone for joining our call. It's a pleasure to speak with you again. After an outstanding start to the year we delivered another quarter of strong business performance and excellent financial results while continuing to advance key initiatives. We entered the second quarter against a backdrop of elevated macroeconomic uncertainty and market weakness. While markets rebounded sharply as the quarter progressed questions remain regarding the resiliency of the equity markets. In this rapidly evolving operating environment our advisors continued to serve at the steady hand helping to guide their clients and reinforcing our commitment to support them. Okay now let's turn to our Q2 results. In the quarter total assets increased to a record 1.9 trillion dollars. A solid organic growth was complemented by higher equity markets. We attracted organic net new assets of 21 billion dollars representing a five percent annualized growth rate. Our second quarter business results led to strong financial performance with the adjusted EPS of four dollars and fifty one cents. An increase of 16% from a year ago. Next let's turn to our strategic plan and progress across our organic and inorganic initiatives. Our vision is clear. We aspire to be the best firm in wealth management. To do that we are focused on three key priorities. One pursuing novel and differentiated strategies that enable the firm's sustained success. Two creating an extraordinary employee experience so employees in turn deliver an unparalleled client experience. And three leading the firm with operational excellence through increased intentionality and rigor. Effectively executing on these focus areas will help us sustain our industry leading growth while delivering improved operating leverage. With that as context let's review a few highlights of our business growth. In the second quarter recruited assets were 18 billion dollars bringing our total for the trailing 12 months to 161 billion dollars. In our traditional independent market we added approximately 15 billion dollars in assets during Q2. Where despite a broader slowdown of industry-wide advisor movement we maintained our industry leading capture rates of advisors in motion while also expanding the breadth and depth of our baseline. With respect to our expanded affiliation models, strategic wealth, independent employee and our enhanced RIA offering we delivered another solid quarter recruiting roughly three billion dollars in assets. And as we look ahead we expect that the increasing awareness of these models in the marketplace and the ongoing enhancements to our capabilities will drive sustainable growth. Next we added approximately one billion dollars of assets in the traditional bank and credit union market. We also continue to make progress with large institutions where we announced that First Horizon would transition its wealth management business to our institutional services platform. As a reminder First Horizon supports approximately 120 financial advisors managing roughly 17 billion dollars in client assets which we expect to onboard later in Q3. Turning to overall asset retention it remains industry leading at This is a testament to our continued efforts to enhance the advisor experience through the delivery of new capabilities and technology and the evolution of our service and operations functions. As a complement to our organic growth in July we completed the conversion of Atria wealth solutions. This is no small feat when you consider that Atria had seven distinct broker dealers that used This is a testament to our experienced team and the diligent investments we've made in recent years and it highlights our differentiated transition capabilities relative to the rest of industry. As for retention we're still finalizing results but anticipate asset retention landing at approximately 82% ahead of our initial target of 80%. Now as for our pending acquisition of Commonwealth Financial Network our leadership team has had the pleasure of spending focused time with Commonwealth advisors and leadership over the last four months. This has been time well spent helping to foster increasingly constructive conversations. Today we have a better understanding of what's important to them preserving and fostering the Commonwealth community and culture. Plus we've had the opportunity to showcase the resources and capabilities at LPL. The combination creates a firm with the scale, the experience, and the permanent capital needed to serve and support their growth for decades to come. As a result we've made steady progress with advisor commitments and remain on track to achieve our retention target. We expect to close the transaction tomorrow morning and are excited to hit the ground running as we prepare to onboard this community of advisors. To summarize we are pleased with the second quarter results and we feel great about our position as a critical partner to our shareholders. With that I'll turn the call over to Matt.

Thanks Rich. I'm glad to speak with everyone on today's call. To Rich's point it's been an active quarter with the team delivering tremendous results at a radical pace. To reiterate some of those highlights we delivered another quarter of industry-leading organic growth, launched our first ever national marketing campaign, continued to make progress in the institutional channel as we prepared to onboard first crisis, successfully onboarded Atria, and completed all pre-closed work for acquisition of commonwealth. Our discipline execution continues to translate into strong business and financial results with our cost efficiency work pulling through to sustainable improvements in our margin. Now turning to a few highlights from our Q2 business results. Total advisory and brokerage assets were 1.9 trillion, up 7% from Q1. This continued organic growth was complemented by higher equity. Total organic net new assets were 21 billion and approximately 5% annualized growth. A strong result both on an absolute and relative basis. On the recruiting front Q2 recruited assets were 18 billion contributing to 161 billion over the trailing 12 months. With respect to large onboardings during the quarter we successfully completed the conversion of Atria's seven broker dealers, continued to prepare for first horizon which we expect to onboard and queue through, and we're progressing towards closing Commonwealth as planned. As Rich mentioned we expect to close the transaction tomorrow and convert Commonwealth assets to our platform in the fourth quarter of 2026 which has moved out slightly from our original timeframe as we begun to scope the tech and operational work required to ensure advisors have an exceptional experience. At close we continue to expect run rate EBITDA to be roughly 120 million and approximately 415 million once fully integrated which is underpinned by our 90% retention target. With that as context and given the timing of the close we'll include Commonwealth in our guidance items today. I would just note Given we have not yet closed the deal there could be some variability in the line item geography. Looking at Q2 financial results the combination of organic growth and expense discipline led to an adjusted pre-tax margin approximately 38% an adjusted EPS of $4.51. First profit was 1 billion 304 million up 32 million sequentially. As for the key drivers, Commission and Advisory fees net of payout were 349 million down 14 million from Q1. Our payout rate was .3% up approximately 60 basis points from Q1 largely due to typical seasonality. Looking ahead to Q3 we anticipate our payout rate will increase to approximately .6% driven by the typical seasonal build in the production bonus as well as our

acquisition With respect to client cash revenue it was 414

million

up

5 million from Q1. Overall client cash balances end of the quarter at 51 billion down 2 billion sequentially primarily driven by continued elevated levels of net buying activity. Within our ITA portfolio the mix of fixed rate balances end of the quarter at roughly 65% slightly above the midpoint of our target range of 50 to be 5%. Looking more closely at ITA yields it was 342 basis points in Q2 up 5 basis points from Q1. It's higher renewal rates on our fixed rate contracts offset lower average cash balance. As we look ahead to Q3 based on where client cash balances and interest rates are today as well as the Commonwealth related cash we expect our ITA yield to be roughly flat sequentially. As for service and fee revenue it was 152 million in Q2 up 7 million from Q1 primarily driven by strong organic growth. Looking ahead to Q3 we expect service and fee revenue to increase by approximately 20 million sequentially driven by revenues from our annual focus as well as our pending acquisition of commons. Moving on to Q2 we expect transaction it was 61 million down 7 million sequentially due to lower trading as we look ahead to Q3 we expect transaction revenue to increase by approximately 5 million sequentially primarily driven by commons. Now let's turn to expenses starting with core G in it was 426 million in Q2 below our outlook range for the quarter as we continue to make progress on our renewed focus on driving operating leverage in the business. For the full year 2025 given our cost initiatives are tracking ahead of schedule we are lowering our 2025 outlook to a range of 1 billion 720 million to 1 billion 750 million which includes 170 to 180 million of expense related to prudential and atrium. Additionally given the expected close of Commonwealth tomorrow we factor these expenses into our overall core G&A outlook and expect an incremental 160 to 170 million. As a result our new core G&A outlook range is 1 billion 880 million to 1 billion 920 million. To give you a sense of the near-term timing of the spend in Q3 we expect core G&A to be in a range of 495 to 510 million including commons. Moving on to Q2 promotional expense it was 164 million up 12 million from Q1 primarily driven by conference spend and transition assistance resulting from our strong recruiting. Looking ahead to Q3 we expect promotional expense to increase by approximately 35 million driven by conference spend as we will host our annual focus conference next month as well as transition assistance related to commons. Turning to depreciation and amortization it was 96 million in Q2 up 4 million sequentially. Looking ahead to Q3 we expect depreciation and amortization to increase by roughly 5. As for interest expense it was 102 million in Q2 up 22 million sequentially driven by our April debt issues. Looking ahead to Q3 given revolver balances following the close of the Commonwealth transaction we expect interest expense to increase by approximately 5 million from Q2. Moving on to our tax rate it was approximately 26% in Q2. Looking ahead we expect Q3 to be around 27% as we anticipate recording a reserve on a couple of tax returns. Turning to capital management as a reminder we funded Commonwealth through a combination of corporate cash debt and We ended Q2 with corporate cash at 3.6 billion up 3 billion from Q1 which included proceeds from our capital rates. Following the close we expect corporate cash to come back down closer to our management target range of roughly 200 million and as such we expect Q3 interest income to be approximately 40. As for our leverage ratio it was 1.23 times at the end of Q2. In line with the shared previously we expect our leverage ratio to be approximately 2.25 times following the close with a path to be leveraged to approximately two times by the end of 2026. Moving on to capital deployment our framework remains focused on allocating capital aligned with the returns we generate investing in organic growth first and foremost pursuing M&A where appropriate and returning excess capital to shareholders. In Q2 the majority of our capital deployment was focused on supporting organic growth and M&A where we continue to allocate capital to our liquidity and succession solution. To uphold our commitment to maintaining a strong and flexible capital position we pause share a purchase which we will revisit once we onboard Commonwealth. In closing we delivered another quarter of strong business and financial results. As we move forward we remain excited about the opportunities we have to continue to drive growth deliver operating leverage and create long-term shareholder value. With that operator please open the call for questions.

Thank you. At this time I would like to remind everyone in order to ask a question please press star 1 1 on your telephone keypad and wait for your name to be announced. To withdraw your question please press star 1 1 again. As a reminder please limit yourself to one question. To ask a follow-up please re-enter the queue. Our first question comes from the line of Alex Blosing from Goldman Sachs.

Hey guys good evening not good morning long day. I was hoping we could start with a question around Commonwealth obviously it's a big focus for investors. Congrats on the deal I guess closing here tomorrow but which maybe to start with how the conversations with the team are evolving. You guys are clearly sticking with a 90% retention expectation so a little bit of color on what gives you confidence and being able to achieve that. And then financially Matt I was hoping you maybe could hit on reasons behind keeping EBITDA run rate at 120 to start off despite the fact that you know the asset levels are a decent amount higher from the time you announced the deal. Thanks.

Thanks Alex it's Rich I'll start out and then hand that second part over to Matt. So on Commonwealth I think we've had four months of fever-pitched engagement with them where we have gotten to know the advisors the leadership team and more broadly the employees better and better and what we thought before we got into this partnership is been completely reinforced which is that the Commonwealth team has built something truly special. They set the mark for what it means to preserve independent advisors. Hopefully you've seen just a few weeks ago Commonwealth received their 12th consecutive number one ranking from JD Power for independent advisor satisfaction and as we've stated continually we are committed to preserving that unique culture the advisor experience the brand and in fact we will only enhance what they already receive with the combination of the LPL capabilities with that Commonwealth experience. Beyond that we'll actually transfer so much of those learnings of exceptional delivery of the client experience, reception of advisor feedback, ingestation of that disposition and changing capabilities to the broader LPL base. We feel you know really great about that moving over there as well. As we've gotten closer to the close of the transaction which we announced this tomorrow we anticipate tomorrow and we've also begun the cross-pollination of our cultures. We've connected with advisors, employees, leadership, better understand the secret sauce behind their success. Just recently 27 Commonwealth employees attended the LPL summer bash in our Fort Mill campus. We sent emissaries from LPL up to Commonwealth annual wing eating contest and cornhole tournament. We are in just over a week we'll have 70 Commonwealth advisors and home office staff are scheduled to join our annual focus conference and as of tomorrow I'm really excited to announce that Commonwealth CEO Wayne Bloom will join the LPL management committee upon the close of the transaction. As for the transaction itself I feel like we're progressing things according to plan. From an operational standpoint the teams have been working closely to complete the pre-closing work and we're on track to close that deal tomorrow. With respect to integration planning we're early in the journey but we've scoped the work to ensure we're preserving the experience for Commonwealth advisors on the other side of the conversion. We expect that to take place Q4 of next year. With respect to the advisor retention Alex which you asked specifically about at this stage I feel good. We've engaged with so many advisors and for those Commonwealth advisors who are prioritizing the Commonwealth experience, their community, the technology, service, ongoing economics and really staying at their forever home for their business and their clients, staying with Commonwealth is their only option. But like as with any transaction or competitive recruiting event some advisors will prioritize differently. That exact dynamic is contemplated in our retention target. So then we continue to feel confident about our ability to capture 90% which does mean we understand that 10% of the advisors will make a different choice and go somewhere else. All that being said there's nothing that's been surprising in terms of competitive response or advisor decisioning. Maybe it's been a little bit noisier in the trades than we had expected but that's of little consequence. So to summarize we remain extremely excited about the partnership and the deal is progressing according to plan. I'll turn it to Matt.

Yeah Alex so on the on the run rate EBITDA AUM is definitely up but cash balances are down a little bit so they kind of roughly offset. So the mix of that of that run rate EBITDA you could say has improved a little bit but that's the

reason it hasn't changed.

Thank you. One moment for our next question. Our next question comes from the line of Stephen Chubok from Wolf Research.

Hi good afternoon Rich and Matt. Thanks for taking my question. Matt it's a question on the expense optimization and specifically the updated guidance for GNA growth of 5% ex deals certainly suggest that your efforts to bend the cost curve are clearly bearing fruit. Given you continue to surprise positively versus the original guidance, I was hoping you could speak to whether you see room to drive further efficiency gains from here as we think about the longer term expense journey and do you see 5% or better GNA growth as a sustainable long-term target given some of those efficiency efforts?

Yes Stephen I mean I think the broad point just to underscore what I said in their prepared remarks here is I think we've got really good momentum on the efficiency work and I think the thing that is really exciting and I think the thing that has this team collectively working hard together on it is its efficiencies that not only drive operating operating margin but the drive and improvement of client experience and maybe to just take the obvious it's easy for everyone to get really motivated really focused around that. So things are moving faster than we expected. We're just you know there's things like just automating manual processes in our operations group. There are things where it's reducing friction with advisors so it's improving that experience as well as reducing our need to answer calls related to those things and to get to your specific part of your I think this is not a one-year thing. I think we have got a long runway here to continue to drive efficiencies before we even get to you know really starting to deploy the newer technologies that are coming out. So I think we'll have to see each year you know from a guidance standpoint what that looks like but I think from a broad strategic standpoint I think we have many many years where we can drive improvements here not only to op leverage but also to the experience that we're able to deliver which dovetails back to this being just the best place for advisors to be and ultimately can be a catalyst for driving organic growth as well.

Thank you. One moment for our next question. Our next question comes from the line of Craig Segan-Thaler from Bank of America. Craig from Bank of America your line is now open.

Thank you. Good afternoon everyone. I have a question on net new assets in the independent RE channel. Which of the modest outflows this quarter and can you provide us an update on the long-term growth trajectory in this channel?

Hey Craig can you repeat that middle part about the modest I didn't hear the

The independent RE channel I think had modest negative net new assets this past quarter so I was just I had a question on what drove that and then maybe you could just refresh us on the long-term growth trajectory this channel.

Yeah Craig there's nothing I would highlight there I think when you look at those the growth there I mean you can see quarter after quarter after quarter the growth is really on the corporate channel. We do have a little bit of the baseline OSJs that we talked about the last couple quarters that would impact but there's nothing that would highlight in particular in the quarter. You can see on those charts that it's the corporate RIA NNA that really is the key driver of that area. Rich anything you wanted to add more on the strategy in the area?

I think the thing I would say is that we continue to strengthen our offering Craig in supporting RIAs. One of the questions I think that you'll see arise is you've seen less flows to the RIA segment we see more flowing into our corporate RIA mostly that has to do with ambiguity around the current regulatory environment. I think the SEC is currently evaluating whether or not they're going to raise a threshold for SEC level love registration of an RIA versus state registration. So when you see that potentially moving from a hundred million dollars up to a billion dollar threshold I think you're going to see more folks that are pausing and actually flowing into our corporate shared ADV model. So I think you got to look at those things in tandem to take a look at where do you see overall flows moving into the firm and there will be times when you'll see flows move in to our corporate RIA versus independent RIAs and I would say this is maybe that moment in time where you're seeing a little slowdown of the movement into independent RIAs because of the ambiguity in the regulatory environment. That probably contributes to some of those outcomes.

Thank you. One moment for our next question. Our next question comes from the line of Devin Ryan from Citizens.

Great. Hi Rich. I'm Matt. How are you?

Good. Boom well Devin. Thank you.

Great. Another one here on Commonwealth. So first off great to confirm the retention target there and congrats on closing that here tomorrow. Several industry news wires in recent weeks have talked about how some of these Commonwealth advisors are setting up their own RIAs or looking into doing the same thing and maybe that's actually connected to the last answer you made but Rich would love to get some thoughts on what this means for LPL in the context of the deal. Do you lose those advisors? Are they in that 10% or is there an opportunity to continue to work with them? And so just trying to think about kind of the implications of this more broadly.

Thanks. Yeah. Hey thanks Devin. So I think you have seen a little bit more of conversations about options for the advisors and look this is the time of enhanced due diligence for Commonwealth advisors. You have to keep in mind those advisors were likely not doing diligence before the announcement of the sale of Commonwealth and so as they've gone through their evaluation process which we've been really supportive of they've explored all kinds of different options. One of those options would be forming their own RIA and it shouldn't be too surprising given the makeup of the Commonwealth advisors where they skew more towards advisory and many of them were moving down the pathway to already dropping their licenses. Keeping in mind as you go through that evaluation on your own you can either drop your own licenses to become an IFA inside of a shared ADV model or you can go set up your own RIA. What you're referring to Devin is that kind of conversations and thought about setting up their own RIAs. Usually it's under this premise of there'll be better economics enhanced autonomy by setting up your own RIA. And I would say as we've begun you know doing one -on-one conversations webinars etc. what we've begun to help them realize and many have realized is it may have underestimated the operational lift and the regulatory complexity that comes with running your own RIA. You know as an RIA they're responsible for their own regulatory compliance and risk management in addition to running the responsibilities of small business like tech and HR. And I just alluded to in the previous answer one of the things that I think is adding ambiguity into whether you set up your own RIA or move under a shared ADV model is that ambiguity in the regulatory environment relative to the threshold for SEC regulation which is quite a bit easier to work with one regulatory body than working with multiple states if you even serve at the minimum number of advisors inside sorry of clients inside the state you have to register with that state itself. And so that's a lot of what you see is advisors weighing those options about does it make sense to do that on my own. Now specifically to your question we support independent RIAs. We also support advisors who drop their licenses their FINRA licenses on our shared ADV corporate RIA. And as we've gotten deeper and deeper into these conversations what the advisors have realized is to keep the Commonwealth experience community culture service environment brand etc. that they've come to love they can still do that either inside of an RIA construct with LPL or if they want to be an IFA inside of that shared ADV model with LPL as well. So when you hear the evaluation of setting up your own RIA it doesn't mean that they're going to move. Now one of the things I think they've also considered is if they choose to set up their own RIA with another custodian they're going to have to go through a repapering event. It means they're going to have to engage their clients they're going to have to repaper all of their accounts and they're going to find some loss efficiency and spending some time actually working through that transition whereas with us they're not going to have to go through that event as well. So yes there's a lot for them to consider and weigh but what on balance we've seen Devon is that advisors are seeing that we can support them they keep their community they keep their support model they keep that leadership team that they love they can do that inside of an RIA or on our shared ADV at LPL and I think on balance what we're seeing is we're having very productive conversations there. Again I would tell you even at 90% what you are going to see is announcements of folks that are going to leave but on balance we think that center of gravity sits around 10% in spite of the fact that really it seems like each and every one of those stories is being amplified by the traits.

Thank you. One moment for our next question. Our next question comes from the line of Dan Fannin from Jeffreys.

Thanks. Good evening. I wanted to just talk about the recruiting backdrop and your outlook for NNA here as you think about the second half of the year and maybe also just throw in you know advisor movement more broadly for the industry and how that compares maybe what you thought earlier in the year to where we sit today.

Yeah, thanks Dan. Look I think you've probably keyed into one of the things that we're seeing as well is that with the macroeconomic uncertainty that exhibited itself in the second quarter we saw a truncation of some of the advisor movement and so historically we think of that advisor turn movement sitting around five and a half to six percent. It has been truncated over the first half of this year. We see the center of gravity sitting around five percent and so you see a reduction in the overall movement. A lot of times when advisors are faced with enhanced volatility in the markets they're going to usually defer a move. The reason they don't want to be out of the market for their clients and so that doesn't mean you're going to see overall movement down over the long term. You'll just see a pushing out until we get to a more stable environment. I think we still sit with slightly elevated ambiguity as to what the macroeconomic looks like as we still sit on the tailwinds on the back end of some of that uncertainty around tariffs etc. So we still see into the beginnings of this quarter a more truncated movement environment but I would highlight that inside of that we still have industry leading win rates of the advisors in motion and for us I'm really proud of the results we had in the quarter because we recruited $18 billion in Q2 worth of advisors assets but in addition to that we have deployed a subset of our recruiting team against retaining the 3,000 Commonwealth advisors and as I mentioned that's progressing pretty well. So you take that together and we feel really good about the results that we've had when you put both of those together which says that the effectiveness of our certainly of our business development team has been really high. We have heard the commentary from some of the competitors talking about changes in the transition assistance and more competitive TA environments and we're really attuned to that. We recruit more advisors than any other firm in the marketplace and so we're in more conversations than anyone else. We're aware of the movement in TA and I would reiterate that TA for us is not the driver of the selection of advisors as to what firm they choose to join. The number one thing that they look for are capabilities, technology, service, the value exchange that comes with the firm and then second to that are the ongoing economics. On both of those we feel we're without peer in the industry and third in that evaluation of changing firms is the TA rate which we have seen become more competitive during the course of the first half of the year. So we remain confident that the ongoing appeal of our model positions us well to maintain our industry leading

capture of advisors in motion.

Thank you. One moment for our next question. Our next question comes from the line of Benjamin Budish from Barclays.

Hi, good evening and thank you for taking my question. I was wondering if you could kind of comment at a high level about your overall gross profit ROA. You know it's been declining for a few years now and I'm sure some of that is mixed. Some of that is you onboard larger enterprises, kind of move up market with larger financial institutions, and just curious how do you think about how the next couple of years should look especially you know ex-cash, you know how much of this is sort of due to that you know kind of rapid growth M&A, how much of this trend can be bucked, you know how should we think about that sort of you know medium-term outlook for that KPI? Thank you.

Yeah, you bet. I mean I think broadly that as we've grown and as our revenue is diversified that's not necessarily the best metric to look at especially in a market where AUM is rising in a rapid pace and not all of our gross profit is AUM driven. So I think that's a little bit to your point on seeing gross profit ROA decline. You see that being driven by cash balances, you see that happening in line items like service and fees where those are fees that are primarily driven by advisor levels and account levels not AUM levels. When you start to look at the line items that are AUM driven like advisory fees, commissions is a little bit more transactional, you can see a lot more stability there. So a long way of saying I think the decline there I think is more driven by not every metric or item in that metric is driven by basis points in AUM. So let me take a step back and look at where and how we're driving revenue. I think we feel very good about our gross profit growth overall especially when you couple that with the efficiency measures and you start to look at EBITDA ROA and how that's you know grew for the first time this quarter in it in quite some time when you couple those two things together. So overall I think we feel really good. I think you just get a little bit of noise in that metric because not everything is really AUM driven.

Thank you. One moment for our next question. Our next question comes from the line of Michael Cypress from Morgan Stanley.

Hey, good afternoon. Thanks for the question. Just wanted to ask about capital allocation with the deal closing tomorrow. Just how are you thinking about that in the quarters ahead? And then related to that on liquidity succession, I was hoping you could update us on the progress there, how that's contributing to results and how you anticipate the pace of deals and capital allocation to that going forward from here. Thank you.

Yeah, Michael. I think when you look at capital allocation, I think we just reiterate what we've talked about a bit on the close, you know, once we follow the close of Commonwealth. Keeping our plans and intentions about our leverage ratio are key for us, right? So we expect to be at a leverage ratio of 2.25 times close to close. We have a plan to be leveraged down to the midpoint of our range at two times by the end of 2026 as we integrate. So I think that is going to really guide our capital allocation, perhaps specific or not overtly asked in your question, but specific to share purchases. I think we'll reassess those once we've gotten back down to that leverage ratio. Within that, though, I think we can continue to drive and allocate capital to organic growth, which typically is our capability development and technology as well as the TA behind recruiting. And on the M&A front, which is the second part of your question in L&S, I think that continues to go quite well. We've ended up putting about 10 deals the last couple quarters in a row. Those are relatively small from a capital standpoint in the 10 to 20 million dollar range each, but they drive a lot of good earnings generation for us. But I think more importantly, there's just a great capability to help advisors transition their practices to the next generation. So overall, it continues to go well. The pace has picked up to about 10 per quarter and it's a good use of our capital that continues to be in our plans while still landing our leverage ratio or deleveraging down to two times.

Thank you. One moment for our next question. Our next question comes from the line of Jeff Schmidt from William Blair.

Hi, good evening. So for Commonwealth, you're adding 160 or 170 million of core G&A for the deal, and that's around five or six basis points of AUM versus I think LPL is running at nine basis points. I guess one, is that the right way to look at it? And two, is what would be

the right way to look at it? Yeah, Jeff, I mean, I think that I wouldn't get too focused on the initial EBITDA and the initial expense guidance, because remember that is the existing Commonwealth business. We haven't integrated that, which we will through the end of 2026. So I think really as we start to do that work and as we start to get to the run rate EBITDA of $415 million, I think broadly you're going to see a business that from a gross profit standpoint is similar to our business and from a margin standpoint is going to be in the same zone. So I wouldn't get too hung up on the initial run rate numbers.

Thank you. One moment for our next question. Our next question comes from the line of Kyle Voigt from KBW.

Hi, good evening everyone. Thanks for my question. So it's been a volatile quarter for sweep cash. Obviously there was a focus on the level of decline in the May cash number. So it's good to see the rebound in June. Just wondering if you could hit on some of the bigger factors that drove the volatility in cash in the quarter, particularly over the past two months. And it would be great to hear if there's been any change in field seeking behavior or whether it's been driven by different factors. And then Matt, maybe you could also update us on July sweep cash as well.

Yeah, you bet. I mean I think when you look at the quarter it really is just driven by two factors. One, in April, which is the primary driver of the decline, is your typical seasonal items. The advisory fees coming out and tax payments. And as you noted as you got deeper into the quarter we saw some growth in June growing by 1.4 billion. I think overall it's kind of an expected trend that you would see in the balances. But the primary driver, about two thirds of that, if you look at the cash as a percent of AUM coming down, is just the denominator growing. We've got a strong equity market. If you look at our AUM overall it's growing almost a hundred billion on average for the last several quarters in a row. So you just have the denominator growing. Cash balances themselves have been pretty stable around 5,000 per account for quite some time, several quarters in a row. So I think it's maybe to hit home the point, that percent decline is really just driven by tax payments as well as the denominator growing. Now bridging into what we've seen so far in July, sitting here almost into the month. Again, first month of a quarter it's as expected with that seasonality and specifically advisory fees hitting in that first month of the quarter. For July that's around 1.8 billion of a decline. Outside of that cash balances reflect other than that in fees. And then just to add on to that from an organic growth standpoint, very similar driver there, advisory fees reducing that in the first month of the quarter. And then to Rich's point earlier, that slowdown in industry-wide advisor movement in the recruiting side, you'll see that carry over into NNA into the third quarter. We're seeing that in July. If you put that together we'd expect organic growth in July to be in the 4% zone, which for month one of a quarter I think is what you would expect. And I just highlight that is prior to any additional attrition that we'll have from the misaligned OSJs that are leaving. And just a reminder there, that was an overall 20 billion that we expected to depart. 13 has already departed through Q2. So there's 7 billion more to go. And that's primarily direct business at this point, which is a little harder to see and predict when that's going to leave, which is why it isn't included in the estimate. But again, no changes in the expected total there of 20 billion. So

I hope that helps.

Thank you. One moment for our next question. Our next question comes from the line of Bill Katz from TD Cowan.

Great. Thank you very much. Maybe a couple of embedded questions. Inside of the AUM for commonwealth, I was wondering if you could update us on the split between cash and rest of the business. And then secondly, the broader question, just on the quit and succession, what we continue to hear is that private equity firms continue to be quite aggressive in terms of scaling wealth management platforms. I'm wondering, is that having any impact on the deal multiple in terms as you deploy that capital, whether it be internally or externally? Thank you.

Yeah, Bill, I can take both of those. The cash is a percent of AUM at commonwealth, a little bit below ours. You know, call it one and a half, two percent zone. It's a little bit smaller balances there than we have. On the L&S side, the short answer is no. I mean, I think when you look at the multiples that we're paying, they've been consistent. I think the value prop that we have, for a host of reasons, including staying at LPL, staying on our system, the overall support that the team brings when they go into that model, I mean, I could go on and on and on. I think the price has not changed. The value prop is really what's driving that. And anything that, from a private equity standpoint or the things that you had referenced has really not changed the multiples that we're paying at all.

Thank you. At this time, I would now like to turn the conference back over to Rich Steinmeier for closing remarks.

Thank you all for joining us. We look forward to speaking with you all again in October. Have a good night and go chase down the rest of those MLB trade deadline rumors. So long.

This concludes today's conference call. Thank you for participating. You may now disconnect.