Quarterly report pursuant to Section 13 or 15(d)

Revenue from Contracts with Customers (Tables)

Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

In the following table, revenue is disaggregated by service line and segment:



For the Three Months Ended September 30, 2018	Independent Advisory and Brokerage Services			Ladenburg		Insurance Brokerage		Corporate			Total
Commissions	$	137,054		$	2,590	$	32,464	$	—		$	172,108
Advisory fees	122,848			1,644		—		58			124,550
Investment banking	129			10,038		—		(185		)	9,982
Principal transactions	(2		)	48		—		(1		)	45
Interest and dividends	700			185		—		549			1,434
Service fees	27,868			635		—		199			28,702
Other income	11,418			40		496		100			12,054
Total revenues	$	300,015		$	15,180	$	32,960	$	720		$	348,875



For the Nine Months Ended September 30, 2018	Independent Advisory and Brokerage Services		Ladenburg		Insurance Brokerage		Corporate			Total
Commissions	$	407,159	$	8,739	$	99,877	$	—		$	515,775
Advisory fees	356,051		5,352		—		168			361,571
Investment banking	558		38,497		—		(854		)	38,201
Principal transactions	5		433		—		7			445
Interest and dividends	1,854		420		—		1,027			3,301
Service fees	78,780		1,822		—		587			81,189
Other income	30,608		351		2,068		2,506			35,533
Total revenues	$	875,015	$	55,614	$	101,945	$	3,441		$	1,036,015

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers. Estimated trailing commissions are included in other receivables, net while estimated expenses on trailing commissions are included in commissions and fees payable on the condensed consolidated statement of financial condition:



	As of September 30, 2018		As of January 1, 2018 (Adoption Date)
Contract assets - Insurance trailing commissions	$	61,641	$	58,786
Contract liabilities - Insurance trailing commissions	30,612		29,395

Impacts on Financial Statements

The following tables compare the reported condensed consolidated statement of financial condition and statements of operations as of and for the three and nine months ending September 30, 2018, to the pro-forma amounts had the previous accounting standards been in effect.

During the three and nine months ended September 30, 2018, the Company's net income as reported is greater than the net income amounts without the adoption of ASC 606 due to the following: 1) the timing of revenue recognized for commissions on future renewals of insurance policies sold is accelerated, as these future commissions represent variable consideration and are required to be estimated, 2) certain costs to obtain a contract with a customer are now capitalized and have historically been recorded as a period expense, and 3) forgivable loans to independent financial advisors are now amortized over the expected useful lives of their relationship period with the Company's subsidiaries; previously these loans were amortized based on their legal terms.



Condensed Consolidated Statement of Financial Condition

	As of September 30, 2018
	As Reported			Balances without the adoption of ASC 606			Effects of Change Higher/(Lower)
ASSETS

Cash and cash equivalents	$	262,834		$	262,834		$	—
Securities owned, at fair value	5,451			5,451			—
Receivables from clearing brokers	26,650			26,650			—
Receivables from other broker-dealers	1,472			1,472			—
Notes receivable from financial advisors, net	6,520			57,983			(51,463		)
Other receivables, net	130,507			69,161			61,346
Fixed assets, net	28,590			28,590			—
Restricted assets	6,589			6,589			—
Intangible assets, net	74,233			93,937			(19,704		)
Goodwill	125,966			125,966			—
Contract acquisition costs, net	77,803			—			77,803
Cash surrender value of life insurance	13,478			13,478			—
Other assets	40,498			39,976			522
Total assets	$	800,591		$	732,087		$	68,504

LIABILITIES AND SHAREHOLDERS' EQUITY

Securities sold, but not yet purchased, at market value	$	66		$	66		$	—
Accrued compensation	32,013			32,115			(102		)
Commissions and fees payable	109,247			78,635			30,612
Accounts payable and accrued liabilities	50,122			50,536			(414		)
Deferred rent	2,970			2,970			—
Deferred income taxes	12,659			6,549			6,110
Deferred compensation liability	21,963			21,963			—
Accrued interest	—			—			—
Notes payable	185,199			185,199			—
Total liabilities	$	414,239		$	378,033		$	36,206

Commitments and contingencies
Shareholders' equity:
Preferred stock	2			2			—
Common stock	20			20			—
Additional paid-in capital	487,752			487,752			—
Accumulated deficit	(101,467		)	(133,754		)	32,287

Total shareholders' equity of the Company	386,307			354,020			32,287

Noncontrolling interest	45			34			11

Total shareholders' equity	386,352			354,054			32,298

Total liabilities and shareholders' equity	$	800,591		$	732,087		$	68,504



Condensed Consolidated Statement of Operations

	Three Months Ended September 30, 2018
	As Reported			Amounts without the adoption of ASC 606			Effects of Change Higher/(Lower)
Revenues:
Commissions	$	172,108		$	152,795		$	19,313
Advisory fees	124,550			176,889			(52,339		)
Investment banking	9,982			9,374			608
Principal transactions	45			(145		)	190
Interest and dividends	1,434			1,434			—
Service fees	28,702			28,702			—
Other income	12,054			12,054			—
Total revenues	348,875			381,103			(32,228		)
Expenses:
Commissions and fees	249,672			283,056			(33,384		)
Compensation and benefits	44,905			45,348			(443		)
Non-cash compensation	1,380			1,380			—
Brokerage, communication and clearance fees	3,734			3,646			88
Rent and occupancy, net of sublease revenue	2,566			2,566			—
Professional services	4,531			4,045			486
Interest	3,206			3,204			2
Depreciation and amortization	5,845			7,159			(1,314		)
Acquisition-related expenses	—			—			—
Amortization of retention and forgivable loans	97			3,595			(3,498		)
Amortization of contract acquisition costs	2,488			—			2,488
Other	17,740			17,769			(29		)
Total expenses	336,164			371,768			(35,604		)
Income before item shown below	12,711			9,335			3,376
Change in fair value of contingent consideration	(54		)	(54		)	—
Income before income taxes	12,657			9,281			3,376
Income tax expense	3,207			2,335			872
Net income	9,450			6,946			2,504
Net income attributable to noncontrolling interest	13			13			—
Net income attributable to the Company	$	9,437		$	6,933		$	2,504
Dividends declared on preferred stock	(8,507		)	(8,507		)	—
Net income (loss) available to common shareholders	$	930		$	(1,574	)	$	2,504

Net income (loss) per common share available to common shareholders (basic)	$	0.00		$	(0.01	)	$	0.01
Net income (loss) per common share available to common shareholders (diluted)	$	0.00		$	(0.01	)	$	0.01
Weighted average common shares used in computation of per share data:
Basic	196,381,910			196,381,910			—
Diluted	208,387,236			196,381,910			12,005,326



Condensed Consolidated Statement of Operations

	Nine Months Ended September 30, 2018
	As Reported			Amounts without the adoption of ASC 606			Effects of Change Higher/(Lower)
Revenues:
Commissions	$	515,775		$	456,409		$	59,366
Advisory fees	361,571			514,704			(153,133		)
Investment banking	38,201			34,999			3,202
Principal transactions	445			337			108
Interest and dividends	3,301			3,295			6
Service fees	81,189			81,189			—
Other income	35,533			35,627			(94		)
Total revenues	1,036,015			1,126,560			(90,545		)
Expenses:
Commissions and fees	735,388			830,792			(95,404		)
Compensation and benefits	140,727			141,735			(1,008		)
Non-cash compensation	4,442			4,442			—
Brokerage, communication and clearance fees	11,994			11,535			459
Rent and occupancy, net of sublease revenue	7,446			7,446			—
Professional services	14,860			13,341			1,519
Interest	7,226			7,212			14
Depreciation and amortization	17,416			21,357			(3,941		)
Acquisition-related expenses	913			913			—
Amortization of retention and forgivable loans	280			10,195			(9,915		)
Amortization of contract acquisition costs	7,059			—			7,059
Other	53,922			54,084			(162		)
Total expenses	1,001,673			1,103,052			(101,379		)
Income before item shown below	34,342			23,508			10,834
Change in fair value of contingent consideration	(165		)	(165		)	—
Income before income taxes	34,177			23,343			10,834
Income tax expense	9,953			7,295			2,658
Net income	24,224			16,048			8,176
Net income attributable to noncontrolling interest	22			22			—
Net income attributable to the Company	$	24,202		$	16,026		$	8,176
Dividends declared on preferred stock	(25,523		)	(25,523		)	—
Net loss available to common shareholders	$	(1,321	)	$	(9,497	)	$	8,176

Net loss per common share available to common shareholders (basic)	$	(0.01	)	$	(0.05	)	$	0.04
Net loss per common share available to common shareholders (diluted)	$	(0.01	)	$	(0.05	)	$	0.04
Weighted average common shares used in computation of per share data:
Basic	196,281,283			196,281,283			—
Diluted	196,281,283			196,281,283			—

The following table summarizes the impacts of ASC 606 adoption on the Company’s condensed consolidated statement of financial condition as of January 1, 2018.

The Company adjusted notes receivable from financial advisors, net by reclassifying all of its forgivable loans to contract acquisition costs, net in the condensed consolidated statements of financial position. Previously, forgivable loans were amortized based on their legal terms, typically forgiven over periods ranging from 3 to 7 years as long as the associated independent financial advisor remained in compliance with the terms of the forgivable loan. Under ASC 606, the acquisition costs, net are amortized over the expected useful lives of the independent financial advisors’ relationship period with the Company.

The Company adjusted intangible assets, net by eliminating a portion of net intangible asset that was created through the Company’s acquisition of Highland in 2014. ASC 606 requires that, at the time of the initial sale of a policy, the Company must estimate the variable consideration (future renewal commissions) and determine the transaction price as the unconstrained net present value of expected future renewal commissions. As such, the Company accelerated the revenues recognized under its insurance policies and recorded an increase to other receivables, net that was offset by the partial elimination of the net intangible asset and an increase to commissions and fees payable.



Condensed Consolidated Statement of Financial Condition

	As Reported			Adjustments									Adjusted
	December 31, 2017			Investment Banking			Insurance Renewals			Costs to obtain or fulfill a contract			January 1, 2018
ASSETS	(Audited)

Cash and cash equivalents	$	172,103		$	—		$	—		$	—		$	172,103
Securities owned, at fair value	3,881			—			—			—			3,881
Receivables from clearing brokers	48,543			—			—			—			48,543
Receivables from other broker-dealers	2,822			—			—			—			2,822
Notes receivable from financial advisors, net	47,369			—			—			(40,566		)	6,803
Other receivables, net	60,707			(137		)	58,786			—			119,356
Fixed assets, net	23,621			—			—			—			23,621
Restricted assets	760			—			—			—			760
Intangible assets, net	103,611			—			(23,645		)	—			79,966
Goodwill	124,210			—			—			—			124,210
Contract acquisition costs, net	—			—			—			61,340			61,340
Cash surrender value of life insurance	12,711			—			—			—			12,711
Other assets	31,687			25			—			—			31,712

Total assets	$	632,025		$	(112	)	$	35,141		$	20,774		$	687,828

LIABILITIES AND SHAREHOLDERS' EQUITY

Securities sold, but not yet purchased, at fair value	$	231		$	—		$	—		$	—		$	231
Accrued compensation	33,343			(110		)	—			—			33,233
Commissions and fees payable	67,221			—			29,395			—			96,616
Accounts payable and accrued liabilities	40,478			(104		)	—			(1,133		)	39,241
Deferred rent	2,151			—			—			—			2,151
Deferred income taxes	2,968			28			1,489			2,118			6,603
Deferred compensation liability	18,161			—			—			—			18,161
Accrued interest	232			—			—			—			232
Notes payable	96,849			—			—			—			96,849
Total liabilities	$	261,634		$	(186	)	$	30,884		$	985		$	293,317

Commitments and contingencies
Shareholders' equity:
Preferred stock	2			—			—			—			2
Common stock	20			—			—			—			20
Additional paid-in capital	520,135			—			—			—			520,135
Accumulated deficit	(149,778		)	74			4,257			19,778			(125,669		)

Total shareholders' equity of the Company	370,379			74			4,257			19,778			394,488

Noncontrolling interest	12			—			—			11			23

Total shareholders' equity	370,391			74			4,257			19,789			394,511

Total liabilities and shareholders' equity	$	632,025		$	(112	)	$	35,141		$	20,774		$	687,828