Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.19.1
Segment Information
3 Months Ended
Mar. 31, 2019
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, 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 an affiliate of Highland, 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 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 acquisition-related expense, 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 ended March 31, 2019 and 2018 was as follows:

Three Months Ended March 31, 2019
 
Independent
Advisory and Brokerage Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
282,988

 
$
15,811

 
$
36,169

 
$
487

 
$
335,455

Income (loss) before income taxes
 
14,262

 
1,221

 
(476
)
 
(10,179
)
(1) 
4,828

EBITDA, as adjusted (3)
 
22,798

 
1,603

 
169

 
(4,177
)
 
20,393

Identifiable assets (2)
 
528,795

 
57,963

 
96,738

 
77,787

 
761,283

Depreciation and amortization
 
5,309

 
120

 
471

 
5

 
5,905

Interest
 
85

 
(13
)
 
62

 
4,915

 
5,049

Capital expenditures
 
3,009

 

 
27

 
213

 
3,249

Non-cash compensation
 
259

 
179

 

 
1,056

 
1,494

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 

 
 
 
 
 
 
 

Revenues
 
$
275,529

 
$
22,314

 
$
31,060

 
$
481

 
$
329,384

Income (loss) before income taxes
 
10,680

 
4,313

 
(131
)
 
(7,226
)
(1) 
7,636

EBITDA, as adjusted (3)
 
20,011

 
4,651

 
441

 
(4,939
)
 
20,164

Identifiable assets (2)
 
468,800

 
46,960

 
87,257

 
81,138

 
684,155

Depreciation and amortization
 
5,452

 
112

 
242

 
3

 
5,809

Interest
 
287

 
35

 
168

 
1,376

 
1,866

Capital expenditures
 
2,095

 
90

 
54

 

 
2,239

Non-cash compensation
 
310

 
176

 
57

 
951

 
1,494



(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 months ended March 31, 2019 and 2018 to EBITDA, as adjusted.
 
 
Three Months Ended March 31,
 
 
 
2019
 
2018
 
Income before income taxes
 
$
4,828

 
$
7,636

 
Adjustments:
 
  

 
  

 
Interest income
 
(542
)
 
(370
)
 
Change in fair value of contingent consideration
 
112

 
61

 
Interest expense
 
5,049

 
1,866

 
Depreciation and amortization
 
5,905

 
5,809

 
Non-cash compensation expense
 
1,494

 
1,494

 
Amortization of retention and forgivable loans
 
143

 
76

 
Amortization of contract acquisition costs
 
2,777

 
2,210

 
Financial advisor recruiting expense
 
7

 
87

 
Acquisition-related expense
 
21

 
913

 
Income attributable to noncontrolling interest
 
(1
)
 
(1
)
 
Other (1) (2)
 
600

 
383

 
EBITDA, as adjusted
 
$
20,393

 
$
20,164

 
 
 
 
 
 
 
EBITDA, as adjusted
 
 
 
 
 
Independent Advisory and Brokerage Services
 
$
22,798

 
$
20,011

 
Ladenburg
 
1,603

 
4,651

 
Insurance Brokerage
 
169

 
441

 
Corporate
 
(4,177
)
 
(4,939
)
 
Total segments
 
$
20,393

 
$
20,164

 

(1) 
Includes severance costs of $10, excise and franchise tax expense of $148, compensation expense that may be paid in stock of $154 and non-recurring expenses related to a block repurchase of our common stock and other legal matters of $288 for the three months ended March 31, 2019.
(2)
Includes severance costs of $88, excise and franchise tax expense of $153 and compensation expense that may be paid in stock of $142 for the three months ended March 31, 2018.