Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

9 Months Ended

Sep. 30, 2017

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 and 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, 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 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 amortization of retention and forgivable loans 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 nine months ended September 30, 2017 and 2016 was as follows:



Three Months Ended September 30, 2017	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
Revenues	$	286,170	$	19,454		$	16,358		$	327			$	322,309
Income (loss) before income taxes	8,411		3,099			(989		)	(5,864		)	⁽¹⁾	4,657
EBITDA, as adjusted ⁽³⁾	16,956		3,479			965			(4,738		)		16,662
Identifiable assets ⁽²⁾	424,155		44,759			46,157			37,544				552,615
Depreciation and amortization	5,340		105			1,658			1				7,104
Interest	352		—			172			77				601
Capital expenditures	2,208		351			33			(40		)		2,552
Non-cash compensation	263		157			5			916				1,341

Three Months Ended September 30, 2016
Revenues	$	251,045	$	10,424		$	12,680		$	174			$	274,323
Income (loss) before income taxes	607		(1,959		)	(1,611		)	(3,948		)	⁽¹⁾	(6,911		)
EBITDA, as adjusted ⁽³⁾	9,503		(1,604		)	462			(2,797		)		5,564
Identifiable assets ⁽²⁾	411,577		33,046			54,301			44,832				543,756
Depreciation and amortization	5,008		185			1,804			17				7,014
Interest	795		4			170			164				1,133
Capital expenditures	1,267		19			12			—				1,298
Non-cash compensation	253		135			61			851				1,300

Nine Months Ended September 30, 2017	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
Revenues	$	832,866	$	49,330		$	40,998		$	942			$	924,136
Income (loss) before income taxes	17,409		4,408			(5,108		)	(15,383		)	⁽¹⁾	1,326
EBITDA, as adjusted ⁽³⁾	42,413		5,811			1,039			(11,954		)		37,309
Identifiable assets ⁽²⁾	424,155		44,759			46,157			37,544				552,615
Depreciation and amortization	16,140		392			5,268			30				21,830
Interest	865		—			511			223				1,599
Capital expenditures	6,460		627			167			4				7,258
Non-cash compensation	772		472			127			2,777				4,148

Nine Months Ended September 30, 2016
Revenues	$	738,429	$	33,457		$	37,422		$	586			$	809,894
Income (loss) before income taxes	7,291		(6,071		)	(4,963		)	(11,129		)	⁽¹⁾	(14,872		)
EBITDA, as adjusted ⁽³⁾	32,222		(4,862		)	1,294			(7,505		)		21,149
Identifiable assets ⁽²⁾	411,577		33,046			54,301			44,832				543,756
Depreciation and amortization	15,173		546			5,360			51				21,130
Interest	2,446		4			510			552				3,512
Capital expenditures	4,661		139			198			—				4,998
Non-cash compensation	756		406			183			2,651				3,996


⁽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 (loss) before income taxes for the three and nine months ended September 30, 2017 and 2016 to EBITDA, as adjusted.



	Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016
Income (loss) before income taxes	$	4,657		$	(6,911	)	$	1,326		$	(14,872	)
Adjustments:
Interest income	(115		)	(184		)	(315		)	(479		)
Change in fair value of contingent consideration	3			72			(86		)	178
Interest expense	601			1,133			1,599			3,512
Depreciation and amortization	7,104			7,014			21,830			21,130
Non-cash compensation expense	1,341			1,300			4,148			3,996
Amortization of retention and forgivable loans	1,808			1,403			5,070			4,381
Financial advisor recruiting expense	744			514			2,176			1,191
Acquisition-related expense	55			936			320			1,003
Loss attributable to noncontrolling interest	(3		)	1			5			33
Other ⁽¹⁾	467			286			1,236			1,076
EBITDA, as adjusted	$	16,662		$	5,564		$	37,309		$	21,149

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	16,956		$	9,503		$	42,413		$	32,222
Ladenburg	3,479			(1,604		)	5,811			(4,862		)
Insurance Brokerage	965			462			1,039			1,294
Corporate	(4,738		)	(2,797		)	(11,954		)	(7,505		)
Total segments	$	16,662		$	5,564		$	37,309		$	21,149

⁽¹⁾

Includes severance of $212 and $406, excise and franchise tax expense of $149 and $435 and compensation expense that may be paid in stock of $109 and $411 for the three and nine months ended September 30, 2017, respectively. Includes severance of $44 and $277, excise and franchise tax expense of $109 and $343 and compensation expense that may be paid in stock of $133 and $456 for the three and nine months ended September 30, 2016.