Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

6 Months Ended

Jun. 30, 2017

The Company has three operating segments. The independent advisory and brokerage services segment includes the broker-dealer and investment advisory services provided by the Company's independent broker-dealer subsidiaries to their independent contractor financial advisors and the wealth management services provided by Premier Trust. The Ladenburg segment includes the investment banking, sales and trading and asset management services and investment activities conducted by Ladenburg and LTAM. The insurance brokerage segment includes the wholesale insurance brokerage activities provided by Highland, which delivers life insurance, fixed and equity indexed annuities and long-term care solutions to investment and insurance providers, and LTAIS, which provides marketing strategies, product expertise, and back-office processing for fixed and equity-indexed annuities.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted for acquisition-related expense, amortization of retention and forgivable loans, change in fair value of contingent consideration related to acquisitions, non-cash compensation expense, financial advisor recruiting expense and other expense, which includes loss on write-off of receivable from subtenant, excise and franchise tax expense, severance costs and compensation expense that may be paid in stock, is the primary profit measure the Company's management uses in evaluating financial performance for its reportable segments. EBITDA, as adjusted, is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. The Company considers EBITDA, as adjusted, important in evaluating its financial performance on a consistent basis across various periods. Due to the significance of non-cash and non-recurring items, EBITDA, as adjusted, enables the Company's Board of Directors and management to monitor and evaluate the business on a consistent basis. The Company uses EBITDA, as adjusted, as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions regarding future operating investments and potential acquisitions. The Company believes that EBITDA, as adjusted, eliminates items that are not indicative of its core operating performance, such as amortization of retention and forgivable loans and financial advisor recruiting expenses, or do not involve a cash outlay, such as stock-related compensation, which is expected to remain a key element in our long-term incentive compensation program. EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, income (loss) before income taxes, net income (loss) and cash flows provided by (used in) operating activities.

Segment information for the three and six months ended June 30, 2017 and 2016 was as follows:



Three Months Ended June 30, 2017	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
Revenues	$	280,855	$	18,011		$	12,339		$	331			$	311,536
Income (loss) before income taxes	5,404		1,829			(1,604		)	(4,442		)	⁽¹⁾	1,187
EBITDA, as adjusted ⁽³⁾	13,722		2,219			517			(3,301		)		13,157
Identifiable assets ⁽²⁾	421,277		43,733			46,077			27,201				538,288
Depreciation and amortization	5,350		124			1,806			14				7,294
Interest	277		—			171			73				521
Capital expenditures	2,064		143			101			5				2,313
Non-cash compensation	241		157			60			920				1,378

Three Months Ended June 30, 2016
Revenues	$	243,640	$	12,511		$	13,418		$	206			$	269,775
Income (loss) before income taxes	3,431		(970		)	(618		)	(3,419		)	⁽¹⁾	(1,576		)
EBITDA, as adjusted ⁽³⁾	11,675		(460		)	1,488			(2,192		)		10,511
Identifiable assets ⁽²⁾	407,989		34,721			55,976			33,385				532,071
Depreciation and amortization	5,239		186			1,799			17				7,241
Interest	808		—			170			194				1,172
Capital expenditures	1,648		120			93			—				1,861
Non-cash compensation	252		135			61			893				1,341

Six Months Ended June 30, 2017	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
Revenues	$	546,696	$	29,876		$	24,640		$	615			$	601,827
Income (loss) before income taxes	8,998		1,309			(4,119		)	(9,519		)	⁽¹⁾	(3,331		)
EBITDA, as adjusted ⁽³⁾	25,457		2,332			74			(7,216		)		20,647
Identifiable assets ⁽²⁾	421,277		43,733			46,077			27,201				538,288
Depreciation and amortization	10,800		287			3,610			29				14,726
Interest	513		—			339			146				998
Capital expenditures	4,252		276			134			44				4,706
Non-cash compensation	509		315			122			1,861				2,807

Six Months Ended June 30, 2016
Revenues	$	487,384	$	23,033		$	24,742		$	412			$	535,571
Income (loss) before income taxes	6,684		(4,112		)	(3,352		)	(7,181		)	⁽¹⁾	(7,961		)
EBITDA, as adjusted ⁽³⁾	22,719		(3,258		)	832			(4,709		)		15,584
Identifiable assets ⁽²⁾	407,989		34,721			55,976			33,385				532,071
Depreciation and amortization	10,165		361			3,556			34				14,116
Interest	1,651		—			340			388				2,379
Capital expenditures	3,394		120			186			—				3,700
Non-cash compensation	503		271			122			1,800				2,696


⁽¹⁾	Includes interest expense, compensation, professional fees, and other general and administrative expenses.


⁽²⁾	Identifiable assets are presented as of the end of the period.


⁽³⁾	The following table reconciles income (loss) before income taxes for the three and six months ended June 30, 2017 and 2016 to EBITDA, as adjusted.



	Three Months Ended June 30						Six Months Ended June 30
	2017			2016			2017			2016
Income (loss) before income taxes	$	1,187		$	(1,576	)	$	(3,331	)	$	(7,961	)
Adjustments:
Interest income	(98		)	(161		)	(200		)	(295		)
Change in fair value of contingent consideration	63			49			(89		)	106
Interest expense	521			1,172			998			2,379
Depreciation and amortization	7,294			7,241			14,726			14,116
Non-cash compensation expense	1,378			1,341			2,807			2,696
Amortization of retention and forgivable loans	1,671			1,544			3,262			2,978
Financial advisor recruiting expense	564			356			1,432			677
Acquisition-related expense	89			31			265			67
Loss attributable to noncontrolling interest	3			14			8			32
Other ⁽¹⁾	485			500			769			789
EBITDA, as adjusted	$	13,157		$	10,511		$	20,647		$	15,584

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	13,722		$	11,675		$	25,457		$	22,719
Ladenburg	2,219			(460		)	2,332			(3,258		)
Insurance Brokerage	517			1,488			74			832
Corporate	(3,301		)	(2,192		)	(7,216		)	(4,709		)
Total segments	$	13,157		$	10,511		$	20,647		$	15,584

⁽¹⁾

Includes severance of $194 for the three and six months ended June 30, 2017, excise and franchise tax expense of $145 and $286 for the three and six months ended June 30, 2017 and compensation expense that may be paid in stock of $160 and $303 for the three and six months ended June 30, 2017, respectively. Includes severance of $233 for the three and six months ended June 30, 2016, excise and franchise tax expense of $99 and $234 for the three and six months ended June 30, 2016 and compensation expense that may be paid in stock of $168 and $323 for the three and six months ended June 30, 2016.