Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.19.2
Segment Information
6 Months Ended
Jun. 30, 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 and six months ended June 30, 2019 and 2018 was as follows:

Three Months Ended June 30, 2019
 
Independent
Advisory and Brokerage Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
301,832

 
$
17,433

 
$
43,606

 
$
709

 
$
363,580

Income (loss) before income taxes
 
17,834

 
2,112

 
1,011

 
(11,444
)
(1) 
9,513

EBITDA, as adjusted (3)
 
26,776

 
2,404

 
1,648

 
(4,136
)
 
26,692

Identifiable assets (2)
 
534,562

 
61,197

 
99,529

 
122,261

 
817,549

Depreciation and amortization
 
5,308

 
119

 
473

 
6

 
5,906

Interest
 
147

 
2

 
57

 
5,367

 
5,573

Capital expenditures
 
3,199

 

 
6

 
(301
)
 
2,904

Non-cash compensation
 
255

 
179

 

 
1,010

 
1,444

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 

 
 
 
 
 
 
 

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






Six Months Ended June 30, 2019
 
Independent
Advisory and Brokerage Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
584,820

 
$
33,244

 
$
79,775

 
$
1,196

 
$
699,035

Income (loss) before income taxes
 
32,096

 
3,333

 
535

 
(21,623
)
(1) 
14,341

EBITDA, as adjusted (3)
 
49,574

 
4,007

 
1,817

 
(8,313
)
 
47,085

Identifiable assets (2)
 
534,562

 
61,197

 
99,529

 
122,261

 
817,549

Depreciation and amortization
 
10,617

 
239

 
944

 
11

 
11,811

Interest
 
232

 
(11
)
 
119

 
10,282

 
10,622

Capital expenditures
 
6,208

 

 
33

 
(88
)
 
6,153

Non-cash compensation
 
514

 
358

 

 
2,066

 
2,938

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
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




(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 six months ended June 30, 2019 and 2018 to EBITDA, as adjusted.
 
 
Three Months Ended 
 June 30, 2019
 
Six Months Ended 
 June 30, 2019
 
 
 
2019
 
2018
 
2019
 
2018
 
Income before income taxes
 
$
9,513


$
13,884

 
$
14,341

 
$
21,520

 
Adjustments:
 
  

 
  

 
  

 
  

 
Interest income
 
(714
)
 
(508
)
 
(1,256
)
 
(878
)
 
Change in fair value of contingent consideration
 
85

 
50

 
197

 
111

 
Interest expense
 
5,573

 
2,154

 
10,622

 
4,020

 
Depreciation and amortization
 
5,906

 
5,762

 
11,811

 
11,571

 
Non-cash compensation expense
 
1,444

 
1,568

 
2,938

 
3,062

 
Amortization of retention and forgivable loans
 
109

 
107

 
252

 
183

 
Amortization of contract acquisition costs
 
2,874

 
2,361

 
5,651

 
4,571

 
Financial advisor recruiting expense
 
2

 
89

 
9

 
176

 
Acquisition-related expense
 
3

 

 
24

 
913

 
Income attributable to noncontrolling interest
 
(20
)
 
(8
)
 
(21
)
 
(9
)
 
Other (1) (2)
 
1,917

 
380

 
2,517

 
763

 
EBITDA, as adjusted
 
$
26,692

 
$
25,839

 
$
47,085

 
$
46,003

 
 
 
 
 
 
 
 
 
 
 
EBITDA, as adjusted
 
 
 
 
 
 
 
 
 
Independent Advisory and Brokerage Services
 
$
26,776

 
$
25,221

 
$
49,574

 
$
45,232

 
Ladenburg
 
2,404

 
2,268

 
4,007

 
6,919

 
Insurance Brokerage
 
1,648

 
1,413

 
1,817

 
1,854

 
Corporate
 
(4,136
)
 
(3,063
)
 
(8,313
)
 
(8,002
)
 
Total segments
 
$
26,692

 
$
25,839

 
$
47,085

 
$
46,003

 

(1) 
Includes severance costs of $1,099 and $1,109, excise and franchise tax expense of $134 and $282, compensation expense that may be paid in stock of $703 and $857 and non-recurring expenses related to a block repurchase of our common stock and other legal matters of $(19) and $269 for the three and six months ended June 30, 2019.
(2)
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.