Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

3 Months Ended

Mar. 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 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, 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 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, 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 months ended March 31, 2018 and 2017 was as follows:



Three Months Ended March 31, 2018	Independent Advisory and Brokerage Services		Ladenburg			Insurance Brokerage			Corporate				Total
Revenues	$	275,529	$	22,314		$	31,060		$	481			$	329,384
Income (loss) before income taxes	10,680		4,313			(131		)	(7,226		)	⁽¹⁾	7,636
EBITDA, as adjusted ⁽³⁾	20,011		4,651			441			(4,939		)		20,164
Identifiable assets ⁽²⁾	468,800		46,960			87,257			81,138				684,155
Depreciation and amortization	5,452		112			242			3				5,809
Interest	287		35			168			1,376				1,866
Capital expenditures	2,095		90			54			—				2,239
Non-cash compensation	310		176			57			951				1,494

Three Months Ended March 31, 2017
Revenues	$	265,841	$	11,865		$	12,301		$	284			$	290,291
Income (loss) before income taxes	3,594		(520		)	(2,515		)	(5,077		)	⁽¹⁾	(4,518		)
EBITDA, as adjusted ⁽³⁾	11,735		113			(443		)	(3,915		)		7,490
Identifiable assets ⁽²⁾	417,972		35,770			50,611			19,695				524,048
Depreciation and amortization	5,450		163			1,804			15				7,432
Interest	236		—			168			73				477
Capital expenditures	2,188		133			33			39				2,393
Non-cash compensation	268		158			62			941				1,429


⁽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 months ended March 31, 2018 and 2017 to EBITDA, as adjusted.



	Three Months Ended March 31,
	2018			2017
Income (loss) before income taxes	$	7,636		$	(4,518	)
Adjustments:
Interest income	(370		)	(102		)
Change in fair value of contingent consideration	61			(152		)
Interest expense	1,866			477
Depreciation and amortization	5,809			7,432
Non-cash compensation expense	1,494			1,429
Amortization of retention and forgivable loans	76			1,591
Amortization of contract acquisition costs	2,210			—
Financial advisor recruiting expense	87			868
Acquisition-related expense	913			176
Loss attributable to noncontrolling interest	(1		)	5
Other ⁽¹⁾	383			284
EBITDA, as adjusted	$	20,164		$	7,490

EBITDA, as adjusted
Independent Advisory and Brokerage Services	$	20,011		$	11,735
Ladenburg	4,651			113
Insurance Brokerage	441			(443		)
Corporate	(4,939		)	(3,915		)
Total segments	$	20,164		$	7,490


⁽¹⁾	Includes severance costs of $88, excise and franchise tax expense of $153 and compensation expense that may be paid in stock of $142 for the three months ended March 31, 2018. Includes excise and franchise tax expense of $141 and compensation expense that may be paid in stock of $143 for the three months ended March 31, 2017.