Quarterly report pursuant to Section 13 or 15(d)

Revenue from Contracts with Customers (Tables)

Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

In the following table, revenue is disaggregated by service line and segment:



For the Three Months Ended June 30, 2018	Independent Advisory and Brokerage Services			Ladenburg		Insurance Brokerage		Corporate			Total
Commissions	$	140,360		$	2,936	$	37,085	$	—		$	180,381
Advisory fees	120,690			1,892		—		56			122,638
Investment banking	313			12,085		—		(669		)	11,729
Principal transactions	(4		)	229		—		8			233
Interest and dividends	620			160		—		300			1,080
Service fees	26,772			619		—		194			27,585
Other income	10,720			199		840		2,351			14,110
Total revenues	$	299,471		$	18,120	$	37,925	$	2,240		$	357,756



For the Six Months Ended June 30, 2018	Independent Advisory and Brokerage Services		Ladenburg		Insurance Brokerage		Corporate			Total
Commissions	$	270,105	$	6,149	$	67,413	$	—		$	343,667
Advisory fees	233,203		3,708		—		110			237,021
Investment banking	429		28,459		—		(669		)	28,219
Principal transactions	7		385		—		8			400
Interest and dividends	1,154		235		—		478			1,867
Service fees	50,912		1,187		—		388			52,487
Other income	19,190		311		1,572		2,406			23,479
Total revenues	$	575,000	$	40,434	$	68,985	$	2,721		$	687,140

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers. Estimated trailing commissions are included in other receivables, net while estimated expenses on trailing commissions are included in commissions and fees payable on the condensed consolidated statement of financial condition:



	As of June 30, 2018		As of January 1, 2018 (Adoption Date)
Contract assets - Insurance trailing commissions	$	61,025	$	58,786
Contract liabilities - Insurance trailing commissions	30,358		29,395

Impacts on Financial Statements

The following table summarizes the impacts of ASC 606 adoption on the Company’s condensed consolidated statement of financial condition as of January 1, 2018.

The Company adjusted notes receivable from financial advisors, net by reclassifying all of its forgivable loans to contract acquisition costs, net in the condensed consolidated statements of financial position. Previously, forgivable loans were amortized based on their legal terms, typically forgiven over periods ranging from 3 to 7 years as long as the associated independent financial advisor remained in compliance with the terms of the forgivable loan. Under ASC 606, the acquisition costs, net are amortized over the expected useful lives of the independent financial advisors’ relationship period with the Company.

The Company adjusted intangible assets, net by eliminating a portion of net intangible asset that was created through the Company’s acquisition of Highland in 2014. ASC 606 requires that, at the time of the initial sale of a policy, the Company must estimate the variable consideration (future renewal commissions) and determine the transaction price as the unconstrained net present value of expected future renewal commissions. As such, the Company accelerated the revenues recognized under its insurance policies and recorded an increase to other receivables, net that was offset by the partial elimination of the net intangible asset and an increase to commissions and fees payable.



Condensed Consolidated Statement of Financial Condition

	As Reported			Adjustments									Adjusted
	December 31, 2017			Investment Banking			Insurance Renewals			Costs to obtain or fulfill a contract			January 1, 2018
ASSETS	(Audited)

Cash and cash equivalents	$	172,103		—			—			—			$	172,103
Securities owned, at fair value	3,881			—			—			—			3,881
Receivables from clearing brokers	48,543			—			—			—			48,543
Receivables from other broker-dealers	2,822			—			—			—			2,822
Notes receivable from financial advisors, net	47,369			—			—			$	(40,566	)	6,803
Other receivables, net	60,707			$	(137	)	$	58,786		—			119,356
Fixed assets, net	23,621			—			—			—			23,621
Restricted assets	760			—			—			—			760
Intangible assets, net	103,611			—			(23,645		)	—			79,966
Goodwill	124,210			—			—			—			124,210
Contract acquisition costs, net	—			—			—			61,340			61,340
Cash surrender value of life insurance	12,711			—			—			—			12,711
Other assets	31,687			25			—			—			31,712

Total assets	$	632,025		$	(112	)	$	35,141		$	20,774		$	687,828

LIABILITIES AND SHAREHOLDERS' EQUITY

Securities sold, but not yet purchased, at fair value	$	231		—			—			—			$	231
Accrued compensation	33,343			(110		)	—			—			33,233
Commissions and fees payable	67,221			—			29,395			—			96,616
Accounts payable and accrued liabilities	40,478			(104		)	—			(1,133		)	39,241
Deferred rent	2,151			—			—			—			2,151
Deferred income taxes	2,968			28			1,489			2,118			6,603
Deferred compensation liability	18,161			—			—			—			18,161
Accrued interest	232			—			—			—			232
Notes payable	96,849			—			—			—			96,849
Total liabilities	$	261,634		$	(186	)	$	30,884		$	985		$	293,317

Commitments and contingencies
Shareholders' equity:
Preferred stock	2			—			—			—			2
Common stock	20			—			—			—			20
Additional paid-in capital	520,135			—			—			—			520,135
Accumulated deficit	(149,778		)	74			4,257			19,778			(125,669		)

Total shareholders' equity of the Company	370,379			74			4,257			19,778			394,488

Noncontrolling interest	12			—			—			11			23

Total shareholders' equity	370,391			74			4,257			19,789			394,511

Total liabilities and shareholders' equity	$	632,025		$	(112	)	$	35,141		$	20,774		$	687,828

The following tables compare the reported condensed consolidated statement of financial condition and statements of operations as of and for the three and six months ending June 30, 2018, to the pro-forma amounts had the previous accounting standards been in effect.

During the three and six months ended June 30, 2018, the Company's net income as reported is greater than the net income amounts without the adoption of ASC 606 due to the following: 1) the timing of revenue recognized for commissions on future renewals of insurance policies sold is accelerated, as these future commissions represent variable consideration and are required to be estimated, 2) certain costs to obtain a contract with a customer are now capitalized and have historically been recorded as a period expense, and 3) forgivable loans to independent financial advisors are now amortized over the expected useful lives of their relationship period with the Company's subsidiaries; previously these loans were amortized based on their legal terms.



Condensed Consolidated Statement of Financial Condition

	As of June 30, 2018
	As Reported			Balances without the adoption of ASC 606			Effects of Change Higher/(Lower)
ASSETS

Cash and cash equivalents	$	204,847		$	204,847		$	—
Securities owned, at fair value	6,548			6,548			—
Receivables from clearing brokers	45,013			45,013			—
Receivables from other broker-dealers	2,520			2,520			—
Notes receivable from financial advisors, net	5,893			58,579			(52,686		)
Other receivables, net	129,182			68,414			60,768
Fixed assets, net	26,307			26,307			—
Restricted assets	6,589			6,589			—
Intangible assets, net	72,296			93,314			(21,018		)
Goodwill	124,210			124,210			—
Contract acquisition costs, net	76,972			—			76,972
Cash surrender value of life insurance	12,907			12,907			—
Other assets	34,606			34,150			456
Total assets	$	747,890		$	683,398		$	64,492

LIABILITIES AND SHAREHOLDERS' EQUITY

Securities sold, but not yet purchased, at market value	$	4,920		$	4,920		$	—
Accrued compensation	27,418			27,446			(28		)
Commissions and fees payable	105,194			74,836			30,358
Accounts payable and accrued liabilities	54,169			53,996			173
Deferred rent	2,772			2,772			—
Deferred income taxes	6,558			2,363			4,195
Deferred compensation liability	19,999			19,999			—
Accrued interest	191			191			—
Notes payable	136,171			136,171			—
Total liabilities	$	357,392		$	322,694		$	34,698

Commitments and contingencies
Shareholders' equity:
Preferred stock	2			2			—
Common stock	20			20			—
Additional paid-in capital	501,348			501,348			—
Accumulated deficit	(110,904		)	(140,687		)	29,783

Total shareholders' equity of the Company	390,466			360,683			29,783

Noncontrolling interest	32			21			11

Total shareholders' equity	390,498			360,704			29,794

Total liabilities and shareholders' equity	$	747,890		$	683,398		$	64,492



Condensed Consolidated Statement of Operations

	Three Months Ended June 30, 2018
	As Reported			Amounts without the adoption of ASC 606			Effects of Change Higher/(Lower)
Revenues:
Commissions	$	180,381		$	157,576		$	22,805
Advisory fees	122,638			173,888			(51,250		)
Investment banking	11,729			10,479			1,250
Principal transactions	233			290			(57		)
Interest and dividends	1,080			1,080			—
Service fees	27,585			27,585			—
Other income	14,110			14,110			—
Total revenues	357,756			385,008			(27,252		)
Expenses:
Commissions and fees	254,405			283,915			(29,510		)
Compensation and benefits	48,573			48,901			(328		)
Non-cash compensation	1,568			1,568			—
Brokerage, communication and clearance fees	2,941			2,818			123
Rent and occupancy, net of sublease revenue	2,387			2,387			—
Professional services	5,311			4,659			652
Interest	2,154			2,141			13
Depreciation and amortization	5,762			7,076			(1,314		)
Acquisition-related expenses	—			—			—
Amortization of retention and forgivable loans	107			3,444			(3,337		)
Amortization of contract acquisition costs	2,361			—			2,361
Other	18,253			18,246			7
Total expenses	343,822			375,155			(31,333		)
Income before item shown below	13,934			9,853			4,081
Change in fair value of contingent consideration	(50		)	(50		)	—
Income before income taxes	13,884			9,803			4,081
Income tax expense	4,574			4,439			135
Net income	9,310			5,364			3,946
Net income attributable to noncontrolling interest	8			8			—
Net income attributable to the Company	$	9,302		$	5,356		$	3,946
Dividends declared on preferred stock	(8,508		)	(8,508		)	—
Net income (loss) available to common shareholders	$	794		$	(3,152	)	$	3,946

Net income (loss) per common share available to common shareholders (basic)	$	0.00		$	(0.02	)	$	0.02
Net income (loss) per common share available to common shareholders (diluted)	$	0.00		$	(0.02	)	$	0.02
Weighted average common shares used in computation of per share data:
Basic	196,557,837			196,557,837			—
Diluted	209,855,936			196,557,837			13,298.099



Condensed Consolidated Statement of Operations

	Six Months Ended June 30, 2018
	As Reported			Amounts without the adoption of ASC 606			Effects of Change Higher/(Lower)
Revenues:
Commissions	$	343,667		$	303,614		$	40,053
Advisory fees	237,021			337,815			(100,794		)
Investment banking	28,219			25,625			2,594
Principal transactions	400			483			(83		)
Interest and dividends	1,867			1,860			7
Service fees	52,487			52,487			—
Other income	23,479			23,573			(94		)
Total revenues	687,140			745,457			(58,317		)
Expenses:
Commissions and fees	485,716			547,736			(62,020		)
Compensation and benefits	95,822			96,387			(565		)
Non-cash compensation	3,062			3,062			—
Brokerage, communication and clearance fees	8,260			7,889			371
Rent and occupancy, net of sublease revenue	4,880			4,880			—
Professional services	10,329			9,296			1,033
Interest	4,020			4,007			13
Depreciation and amortization	11,571			14,198			(2,627		)
Acquisition-related expenses	913			913			—
Amortization of retention and forgivable loans	183			6,600			(6,417		)
Amortization of contract acquisition costs	4,571			—			4,571
Other	36,182			36,316			(134		)
Total expenses	665,509			731,284			(65,775		)
Income before item shown below	21,631			14,173			7,458
Change in fair value of contingent consideration	(111		)	(111		)	—
Income before income taxes	21,520			14,062			7,458
Income tax expense	6,746			4,960			1,786
Net income	14,774			9,102			5,672
Net income attributable to noncontrolling interest	9			9			—
Net income attributable to the Company	$	14,765		$	9,093		$	5,672
Dividends declared on preferred stock	(17,016		)	(17,016		)	—
Net loss available to common shareholders	$	(2,251	)	$	(7,923	)	$	5,672

Net loss per common share available to common shareholders (basic)	$	(0.01	)	$	(0.04	)	$	0.03
Net loss per common share available to common shareholders (diluted)	$	(0.01	)	$	(0.04	)	$	0.03
Weighted average common shares used in computation of per share data:
Basic	196,230,136			196,230,136			—
Diluted	196,230,136			196,230,136			—