Annual report pursuant to Section 13 and 15(d)

Segment Information

Segment Information

12 Months Ended

Dec. 31, 2017

The Company has three operating segments. The independent advisory and brokerage services segment includes the investment advisory and brokerage 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 LTAIS, 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, change in fair value of contingent consideration related to acquisitions, loss on extinguishment of debt, non-cash compensation expense, financial advisor recruiting expense and other expense, which includes loss on write-off of receivable from subtenant, 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 and financial advisor recruiting expenses or do not involve a cash outlay, such as stock-related compensation. 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, 2017, 2016 and 2015 is as follows:



	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
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

2016
Revenues	$	1,003,282	$	49,425		$	50,483		$	3,763			$	1,106,953
Income (loss) before income taxes	15,071		(3,674		)	(6,074		)	(17,609		)	(1)	(12,286		)
EBITDA, as adjusted ⁽²⁾	47,977		(1,676		)	2,255			(12,785		)		35,771
Identifiable assets	423,288		38,665			54,166			29,884				546,003
Depreciation and amortization	20,406		703			7,161			64				28,334
Interest	2,828		4			682			748				4,262
Capital expenditures	6,784		139			209			—				7,132
Non-cash compensation	1,010		537			245			3,519				5,311

2015
Revenues	$	1,035,365	$	61,841		$	49,573		$	5,339			$	1,152,118
Income (loss) before income taxes	7,735		3,095			(6,701		)	(15,824		)	(1)	(11,695		)
EBITDA, as adjusted ⁽²⁾	46,462		6,052			1,170			(9,639		)		44,045
Identifiable assets	417,367		44,050			61,689			50,999				574,105
Depreciation and amortization	19,373		703			6,949			52				27,077
Interest	3,532		7			683			947				5,169
Capital expenditures	7,341		87			783			87				8,298
Non-cash compensation	3,836		638			239			4,046				8,759


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


(2)	The following table reconciles income (loss) before income taxes to EBITDA, as adjusted, for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
	2017				2016				2015
Income (loss) before income taxes	$	1,180			$	(12,286	)		$	(11,695	)
Adjustments:
Interest income	(506		)		(672		)		(254		)
Change in fair value of contingent consideration	(19		)		216				(55		)
Loss on extinguishment of debt	—				—				252
Interest expense	2,710				4,262				5,169
Depreciation and amortization	28,835				28,334				27,077
Non-cash compensation expense	5,539				5,311				8,759
Amortization of retention and forgivable loans	7,396				5,472				9,238
Financial advisor recruiting expense	5,721				1,882				2,387
Acquisition-related expense	3,469				1,357				940			(6)
Loss attributable to noncontrolling interest	15				42				62
Other	1,661			(3)	1,853			(4)	2,165			(5)
EBITDA, as adjusted	$	56,001			$	35,771			$	44,045

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	59,756			$	47,977			$	46,462
Ladenburg	8,115				(1,676		)		6,052
Insurance Brokerage	2,698				2,255				1,170
Corporate	(14,568		)		(12,785		)		(9,639		)
Total segments	$	56,001			$	35,771			$	44,045

(3) 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.

(4) Includes loss on severance costs of $755, excise and franchise tax expense of $508 and compensation expense that may be paid in stock of $586.

(5) Includes loss on write-off of receivable from subtenant of $855, compensation expense that may be paid in stock of $532, rent expense due to default by subtenant of $468 and excise and franchise tax expense of $310.


(6)	Includes $409 for acquisition-related expense that was previously included in professional services expense and other expense.