Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

6 Months Ended

Jun. 30, 2019

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.