Annual report pursuant to Section 13 and 15(d)

Segment Information

Segment Information

12 Months Ended

Dec. 31, 2018

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, 2018, 2017 and 2016 is as follows:



	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
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

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


(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, 2018, 2017 and 2016:



	Year Ended December 31,
	2018				2017				2016
Income (loss) before income taxes	$	47,165			$	1,180			$	(12,286	)
Adjustments:
Interest income	(2,504		)		(506		)		(672		)
Change in fair value of contingent consideration	238				(19		)		216
Loss on extinguishment of debt	—				—				—
Interest expense	10,796				2,710				4,262
Depreciation and amortization	24,039				28,835				28,334
Non-cash compensation expense	5,882				5,539				5,311
Amortization of retention and forgivable loans	417				7,396				5,472
Amortization of contract acquisition costs (6)	9,671				—				—
Financial advisor recruiting expense	370				5,721				1,882
Acquisition-related expense	1,010				3,469				1,357
Loss attributable to noncontrolling interest	(28		)		15				42
Other	3,392			(3)	1,661			(4)	1,853			(5)
EBITDA, as adjusted	$	100,448			$	56,001			$	35,771

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	98,411			$	59,756			$	47,977
Ladenburg	12,966				8,115				(1,676		)
Insurance Brokerage	4,166				2,698				2,255
Corporate	(15,095		)		(14,568		)		(12,785		)
Total segments	$	100,448			$	56,001			$	35,771

(3) 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.

(4) 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.

(5) 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.

(6) See Note 4 for further information.