Annual report pursuant to Section 13 and 15(d)

Segment Information

Segment Information

12 Months Ended

Dec. 31, 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 cost 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 years ended December 31, 2019, 2018 and 2017 is as follows:



	Independent Advisory and Brokerage Services		Ladenburg		Insurance Brokerage			Corporate				Total
2019
Revenues	$	1,204,326	$	75,523	$	186,211		$	3,242			$	1,469,302
Income (loss) before income taxes	65,517		10,501		4,745			(50,756		)	(1)	30,007
EBITDA, as adjusted ⁽²⁾	99,408		11,498		7,645			(17,320		)		101,231
Identifiable assets	542,138		55,006		113,031			119,761				829,936
Depreciation and amortization	19,901		485		1,886			22				22,294
Interest	478		13		235			22,393				23,119
Capital expenditures	12,836		249		37			(78		)		13,044
Non-cash compensation	1,016		715		—			4,375				6,106

2018
Revenues	$	1,161,043	$	78,094	$	147,127		$	4,872			$	1,391,136
Income (loss) before income taxes	62,748		11,464		1,983			(29,030		)	(1)	47,165
EBITDA, as adjusted ⁽²⁾	98,411		12,966		4,166			(15,095		)		100,448
Identifiable assets	515,720		59,798		97,708			67,678				740,904
Depreciation and amortization	22,403		471		1,146			19				24,039
Interest	905		62		472			9,357				10,796
Capital expenditures	13,787		351		244			120				14,502
Non-cash compensation	1,220		705		113			3,844				5,882

2017
Revenues	$	1,140,380	$	66,680	$	57,132		$	3,960			$	1,268,152
Income (loss) before income taxes	19,858		6,346		(5,338		)	(19,686		)	(1)	1,180
EBITDA, as adjusted ⁽²⁾	59,756		8,115		2,698			(14,568		)		56,001
Identifiable assets	443,670		43,148		47,166			98,041				632,025
Depreciation and amortization	21,455		505		6,841			34				28,835
Interest	1,157		—		683			870				2,710
Capital expenditures	8,923		753		216			4				9,896
Non-cash compensation	1,035		629		183			3,692				5,539


(1)	Includes interest on revolving credit and forgivable loan notes, compensation, professional fees and other general and administrative expenses related to the Corporate segment.


(2)	The following table reconciles income (loss) before income taxes to EBITDA, as adjusted, for the years ended December 31, 2019, 2018 and 2017:



	Year Ended December 31,
	2019				2018				2017
Income before income taxes	$	30,007			$	47,165			$	1,180
Adjustments:
Interest income	(2,906		)		(2,504		)		(506		)
Change in fair value of contingent consideration	664				238				(19		)
Interest expense	23,119				10,796				2,710
Depreciation and amortization	22,294				24,039				28,835
Non-cash compensation expense	6,106				5,882				5,539
Amortization of retention and forgivable loans	549				417				7,396
Amortization of contract acquisition costs (6)	11,759				9,671				—
Financial advisor recruiting expense	55				370				5,721
Acquisition-related expense	5,887				1,010				3,469
Income (loss) attributable to noncontrolling interest	42				(28		)		15
Other	3,655			(3)	3,392			(4)	1,661			(5)
EBITDA, as adjusted	$	101,231			$	100,448			$	56,001

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	99,408			$	98,411			$	59,756
Ladenburg	11,498				12,966				8,115
Insurance Brokerage	7,645				4,166				2,698
Corporate	(17,320		)		(15,095		)		(14,568		)
Total segments	$	101,231			$	100,448			$	56,001

(3) Includes loss on severance costs of $1,697, excise and franchise tax expense of $548, compensation expense that may be paid in stock of $1,470, other legal matters of $215 and reversal of a write-off for a sublease commitment of $(275).

(4) Includes loss on severance costs of $481, excise and franchise tax expense of $629, compensation expense that may be paid in stock of $535 and non-recurring expenses related to a block repurchase of our common stock and other legal matters of $1,747.

(5) Includes loss on severance costs of $525, excise and franchise tax expense of $594 and compensation expense that may be paid in stock of $559.

(6) See Note 4 for further information.