Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.10.0.1
Segment Information
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
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:

Three Months Ended September 30, 2018
 
Independent
Advisory and Brokerage Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
300,015

 
$
15,180

 
$
32,960

 
$
720

 
$
348,875

Income (loss) before income taxes
 
18,538

 
821

 
(145
)
 
(6,557
)
(1) 
12,657

EBITDA, as adjusted (3)
 
27,224

 
1,110

 
239

 
(3,264
)
 
25,309

Identifiable assets (2)
 
509,270

 
49,841

 
90,920

 
150,560

 
800,591

Depreciation and amortization
 
5,457

 
122

 
261

 
5

 
5,845

Interest
 
311

 
2

 
76

 
2,817

 
3,206

Capital expenditures
 
3,780

 
95

 
31

 
(8
)
 
3,898

Non-cash compensation
 
317

 
176

 

 
887

 
1,380

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 

 
 
 
 
 
 
 

Revenues
 
$
286,170

 
$
19,454

 
$
16,358

 
$
327

 
$
322,309

Income (loss) before income taxes
 
8,411

 
3,099

 
(989
)
 
(5,864
)
(1) 
4,657

EBITDA, as adjusted (3)
 
16,956

 
3,479

 
965

 
(4,738
)
 
16,662

Identifiable assets (2)
 
424,155

 
44,759

 
46,157

 
37,544

 
552,615

Depreciation and amortization
 
5,340

 
105

 
1,658

 
1

 
7,104

Interest
 
352

 

 
172

 
77

 
601

Capital expenditures
 
2,208

 
351

 
33

 
(40
)
 
2,552

Non-cash compensation
 
263

 
157

 
5

 
916

 
1,341

Nine Months Ended September 30, 2018
 
Independent
Advisory and Brokerage and
Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
875,015

 
$
55,614

 
$
101,945

 
$
3,441

 
$
1,036,015

Income (loss) before income taxes
 
45,926

 
7,113

 
556

 
(19,418
)
(1) 
34,177

EBITDA, as adjusted (3)
 
72,456

 
8,029

 
2,093

 
(11,266
)
 
71,312

Identifiable assets(2)
 
509,270

 
49,841

 
90,920

 
150,560

 
800,591

Depreciation and amortization
 
16,332

 
345

 
726

 
13

 
17,416

Interest
 
861

 
50

 
415

 
5,900

 
7,226

Capital expenditures
 
10,037

 
351

 
99

 
16

 
10,503

Non-cash compensation
 
936

 
529

 
113

 
2,864

 
4,442


 


 


 


 


 


Nine Months Ended September 30, 2017
 

 

 

 

 

Revenues
 
$
832,866

 
$
49,330

 
$
40,998

 
$
942

 
$
924,136

Income (loss) before income taxes
 
17,409

 
4,408

 
(5,108
)
 
(15,383
)
(1) 
1,326

EBITDA, as adjusted (3)
 
42,413

 
5,811

 
1,039

 
(11,954
)
 
37,309

Identifiable assets(2)
 
424,155

 
44,759

 
46,157

 
37,544

 
552,615

Depreciation and amortization
 
16,140

 
392

 
5,268

 
30

 
21,830

Interest
 
865

 

 
511

 
223

 
1,599

Capital expenditures
 
6,460

 
627

 
167

 
4

 
7,258

Non-cash compensation
 
772

 
472

 
127

 
2,777

 
4,148



(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 before income taxes for the three and nine months ended September 30, 2018 and 2017 to EBITDA, as adjusted.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Income before income taxes
 
$
12,657

 
$
4,657

 
$
34,177

 
$
1,326

Adjustments:
 
  

 
  

 
  

 
  

Interest income
 
(810
)
 
(115
)
 
(1,688
)
 
(315
)
Change in fair value of contingent consideration
 
54

 
3

 
165

 
(86
)
Interest expense
 
3,206

 
601

 
7,226

 
1,599

Depreciation and amortization
 
5,845

 
7,104

 
17,416

 
21,830

Non-cash compensation expense
 
1,380

 
1,341

 
4,442

 
4,148

Amortization of retention and forgivable loans
 
97

 
1,808

 
280

 
5,070

Amortization of contract acquisition costs
 
2,488

 

 
7,059

 

Financial advisor recruiting expense
 
115

 
744

 
291

 
2,176

Acquisition-related expense
 

 
55

 
913

 
320

(Income) loss attributable to noncontrolling interest
 
(13
)
 
(3
)
 
(22
)
 
5

Other (1) (2)
 
290

 
467

 
1,053

 
1,236

EBITDA, as adjusted
 
$
25,309

 
$
16,662

 
$
71,312

 
$
37,309

 
 
 
 
 
 
 
 
 
EBITDA, as adjusted
 
 
 
 
 
 
 
 
Independent Advisory and Brokerage Services
 
$
27,224

 
$
16,956

 
$
72,456

 
$
42,413

Ladenburg
 
1,110

 
3,479

 
8,029

 
5,811

Insurance Brokerage
 
239

 
965

 
2,093

 
1,039

Corporate
 
(3,264
)
 
(4,738
)
 
(11,266
)
 
(11,954
)
Total segments
 
$
25,309

 
$
16,662

 
$
71,312

 
$
37,309


(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.
(2)
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.