Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

6 Months Ended

Jun. 30, 2018

The Company has three operating segments. The independent advisory and brokerage services segment includes the investment advisory and broker-dealer services provided by the Company's independent advisory and brokerage 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, amortization of contract acquisition costs, 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, amortization of contract acquisition costs 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 months and six months ended June 30, 2018 and 2017 was as follows:



Three Months Ended June 30, 2018	Independent Advisory and Brokerage Services		Ladenburg		Insurance Brokerage			Corporate				Total
Revenues	$	299,471	$	18,120	$	37,925		$	2,240			$	357,756
Income (loss) before income taxes	16,708		1,979		832			(5,635		)	⁽¹⁾	13,884
EBITDA, as adjusted ⁽³⁾	25,221		2,268		1,413			(3,063		)		25,839
Identifiable assets ⁽²⁾	496,331		56,592		87,056			107,911				747,890
Depreciation and amortization	5,423		111		223			5				5,762
Interest	263		13		171			1,707				2,154
Capital expenditures	4,160		166		15			24				4,365
Non-cash compensation	309		177		56			1,026				1,568

Three Months Ended June 30, 2017
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



Six Months Ended June 30, 2018	Independent Advisory and Brokerage and Services		Ladenburg		Insurance Brokerage			Corporate				Total
Revenues	$	575,000	$	40,434	$	68,985		$	2,721			$	687,140
Income (loss) before income taxes	27,388		6,292		701			(12,861		)	⁽¹⁾	21,520
EBITDA, as adjusted ⁽³⁾	45,232		6,919		1,854			(8,002		)		46,003
Identifiable assets⁽²⁾	496,331		56,592		87,056			107,911				747,890
Depreciation and amortization	10,875		223		465			8				11,571
Interest	550		48		339			3,083				4,020
Capital expenditures	6,257		256		68			24				6,605
Non-cash compensation	619		353		113			1,977				3,062

Six Months Ended June 30, 2017
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

⁽¹⁾ Includes interest expense, compensation, professional fees, and other general and administrative expenses related to the Corporate segment.


⁽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, 2018 and 2017 to EBITDA, as adjusted.



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Income (loss) before income taxes	$	13,884		$	1,187		$	21,520		$	(3,331	)
Adjustments:
Interest income	(508		)	(98		)	(878		)	(200		)
Change in fair value of contingent consideration	50			63			111			(89		)
Interest expense	2,154			521			4,020			998
Depreciation and amortization	5,762			7,294			11,571			14,726
Non-cash compensation expense	1,568			1,378			3,062			2,807
Amortization of retention and forgivable loans	107			1,671			183			3,262
Amortization of contract acquisition costs	2,361			—			4,571			—
Financial advisor recruiting expense	89			564			176			1,432
Acquisition-related expense	—			89			913			265
(Income) loss attributable to noncontrolling interest	(8		)	3			(9		)	8
Other ^{(1) (2)}	380			485			763			769
EBITDA, as adjusted	$	25,839		$	13,157		$	46,003		$	20,647

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	25,221		$	13,722		$	45,232		$	25,457
Ladenburg	2,268			2,219			6,919			2,332
Insurance Brokerage	1,413			517			1,854			74
Corporate	(3,063		)	(3,301		)	(8,002		)	(7,216		)
Total segments	$	25,839		$	13,157		$	46,003		$	20,647


⁽¹⁾	Includes severance costs of $86 and $174, excise and franchise tax expense of $169 and $322 and compensation expense that may be paid in stock of $125 and $267 for the three and six months ended June 30, 2018, respectively.


⁽²⁾	Includes severance costs of $194, excise and franchise tax expense of $145 and $286 and compensation expense that may be paid in stock of $160 and $303 for the three and six months ended June 30, 2017, respectively.