Segment Information |
Segment Information
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 nine months ended September 30, 2018 and 2017 was as follows:
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Three Months Ended September 30, 2018 |
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Independent
Advisory and Brokerage Services
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Ladenburg |
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Insurance Brokerage |
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Corporate |
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Total |
Revenues |
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$ |
300,015 |
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$ |
15,180 |
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$ |
32,960 |
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$ |
720 |
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$ |
348,875 |
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Income (loss) before income taxes |
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18,538 |
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|
821 |
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(145 |
) |
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(6,557 |
) |
(1) |
12,657 |
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EBITDA, as adjusted (3)
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27,224 |
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|
1,110 |
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|
239 |
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(3,264 |
) |
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25,309 |
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Identifiable assets (2)
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509,270 |
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49,841 |
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90,920 |
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150,560 |
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|
800,591 |
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Depreciation and amortization |
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5,457 |
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122 |
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261 |
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5 |
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5,845 |
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Interest |
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311 |
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2 |
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76 |
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2,817 |
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3,206 |
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Capital expenditures |
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3,780 |
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|
95 |
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31 |
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(8 |
) |
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3,898 |
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Non-cash compensation |
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317 |
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176 |
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— |
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|
887 |
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1,380 |
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Three Months Ended September 30, 2017 |
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Revenues |
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$ |
286,170 |
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$ |
19,454 |
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$ |
16,358 |
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$ |
327 |
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$ |
322,309 |
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Income (loss) before income taxes |
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8,411 |
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3,099 |
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(989 |
) |
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(5,864 |
) |
(1) |
4,657 |
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EBITDA, as adjusted (3)
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16,956 |
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3,479 |
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|
965 |
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(4,738 |
) |
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16,662 |
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Identifiable assets (2)
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424,155 |
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44,759 |
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46,157 |
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37,544 |
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552,615 |
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Depreciation and amortization |
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5,340 |
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|
105 |
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1,658 |
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1 |
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7,104 |
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Interest |
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352 |
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— |
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|
172 |
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|
77 |
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|
601 |
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Capital expenditures |
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2,208 |
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|
351 |
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33 |
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(40 |
) |
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2,552 |
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Non-cash compensation |
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263 |
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157 |
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5 |
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916 |
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1,341 |
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Nine Months Ended September 30, 2018 |
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Independent Advisory and Brokerage and Services |
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Ladenburg |
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Insurance Brokerage |
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Corporate |
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Total |
Revenues |
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$ |
875,015 |
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$ |
55,614 |
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$ |
101,945 |
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$ |
3,441 |
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$ |
1,036,015 |
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Income (loss) before income taxes |
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45,926 |
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|
7,113 |
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|
556 |
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(19,418 |
) |
(1) |
34,177 |
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EBITDA, as adjusted (3)
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72,456 |
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|
8,029 |
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|
2,093 |
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(11,266 |
) |
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71,312 |
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Identifiable assets(2)
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509,270 |
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49,841 |
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90,920 |
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150,560 |
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|
800,591 |
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Depreciation and amortization |
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16,332 |
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|
345 |
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|
726 |
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13 |
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17,416 |
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Interest |
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861 |
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50 |
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|
415 |
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|
5,900 |
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|
7,226 |
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Capital expenditures |
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10,037 |
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351 |
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|
99 |
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16 |
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10,503 |
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Non-cash compensation |
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936 |
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529 |
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113 |
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2,864 |
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4,442 |
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Nine Months Ended September 30, 2017 |
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Revenues |
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$ |
832,866 |
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$ |
49,330 |
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$ |
40,998 |
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$ |
942 |
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$ |
924,136 |
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Income (loss) before income taxes |
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17,409 |
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4,408 |
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(5,108 |
) |
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(15,383 |
) |
(1) |
1,326 |
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EBITDA, as adjusted (3)
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42,413 |
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|
5,811 |
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1,039 |
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(11,954 |
) |
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37,309 |
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Identifiable assets(2)
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424,155 |
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44,759 |
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46,157 |
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37,544 |
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|
552,615 |
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Depreciation and amortization |
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16,140 |
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|
392 |
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|
5,268 |
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30 |
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21,830 |
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Interest |
|
865 |
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— |
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|
511 |
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223 |
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1,599 |
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Capital expenditures |
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6,460 |
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|
627 |
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167 |
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4 |
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7,258 |
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Non-cash compensation |
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772 |
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|
472 |
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|
127 |
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2,777 |
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4,148 |
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(1) Includes interest expense, compensation, professional fees, and other general and administrative expenses related to the Corporate segment.
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(2) |
Identifiable assets are presented as of the end of the period. |
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(3) |
The following table reconciles income before income taxes for the three and nine months ended September 30, 2018 and 2017 to EBITDA, as adjusted. |
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2018 |
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2017 |
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2018 |
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2017 |
Income before income taxes |
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$ |
12,657 |
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$ |
4,657 |
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$ |
34,177 |
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$ |
1,326 |
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Adjustments: |
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Interest income |
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(810 |
) |
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(115 |
) |
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(1,688 |
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(315 |
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Change in fair value of contingent consideration |
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54 |
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3 |
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165 |
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(86 |
) |
Interest expense |
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3,206 |
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|
601 |
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7,226 |
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1,599 |
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Depreciation and amortization |
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5,845 |
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7,104 |
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17,416 |
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21,830 |
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Non-cash compensation expense |
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1,380 |
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1,341 |
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4,442 |
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4,148 |
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Amortization of retention and forgivable loans |
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97 |
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1,808 |
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|
280 |
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|
5,070 |
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Amortization of contract acquisition costs |
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2,488 |
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— |
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|
7,059 |
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— |
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Financial advisor recruiting expense |
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115 |
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|
744 |
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291 |
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|
2,176 |
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Acquisition-related expense |
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— |
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55 |
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|
913 |
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|
320 |
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(Income) loss attributable to noncontrolling interest |
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(13 |
) |
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(3 |
) |
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(22 |
) |
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5 |
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Other (1) (2)
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290 |
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|
467 |
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1,053 |
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1,236 |
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EBITDA, as adjusted |
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$ |
25,309 |
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$ |
16,662 |
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$ |
71,312 |
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$ |
37,309 |
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EBITDA, as adjusted |
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Independent Advisory and Brokerage Services |
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$ |
27,224 |
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$ |
16,956 |
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$ |
72,456 |
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$ |
42,413 |
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Ladenburg |
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1,110 |
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3,479 |
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|
8,029 |
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|
5,811 |
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Insurance Brokerage |
|
239 |
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|
965 |
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|
2,093 |
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|
1,039 |
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Corporate |
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(3,264 |
) |
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(4,738 |
) |
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(11,266 |
) |
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(11,954 |
) |
Total segments |
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$ |
25,309 |
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$ |
16,662 |
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$ |
71,312 |
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$ |
37,309 |
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(1) |
Includes severance costs of $0 and $174, excise and franchise tax expense of $164 and $486 and compensation expense that may be paid in stock of $126 and $393 for the three and nine months ended September 30, 2018, respectively.
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(2)
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Includes severance costs of $212 and $406, excise and franchise tax expense of $149 and $435 and compensation expense that may be paid in stock of $109 and $411 for the three and nine months ended September 30, 2017, respectively.
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