Highlights:
- Revenues increased by 16% to record
$921 million in fiscal 2014
- Fiscal 2014 net income of $33.4
million
- Fiscal 2014 EBITDA, as adjusted, of
$61.2 million
- Recurring revenue of 71% in independent
brokerage and advisory services business
- Shareholders’ equity of $336 million at
December 31, 2014
- Completed previously announced purchase
of certain assets of Sunset Financial Services, Inc. in the fourth
quarter of 2014, adding over 200 advisors
- Completed previously announced
acquisition of Securities Service Network, Inc. on January 2, 2015,
adding approximately 450 financial advisors, registered
representatives and insurance agents and approximately $13 billion
in client assets
- Ladenburg’s independent brokerage and
advisory services business now has approximately 4,000 financial
advisors with approximately $125 billion in client assets and
Ladenburg has an annual revenue run rate of approximately $1.1
billion
- Additional 10,000,000 share repurchase
plan authorized in the fourth quarter of 2014
Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS, LTS
PrA) today announced financial results for the fourth quarter and
full year ended December 31, 2014.
Dr. Phillip Frost, Chairman of Ladenburg, said, “We are pleased
with Ladenburg’s performance in 2014, a year of record revenues,
net income and EBITDA, as adjusted. The combination of strong
operating results and continued additions to our diversified
financial services offerings position us to improve shareholder
value for years to come. With the Company’s previously announced
strategic acquisitions of Securities Service Network, KMS Financial
Services and Highland Capital Brokerage, and the acquisition of
certain assets of Sunset Financial Services in the fourth quarter,
our leading independent advisor platform now has approximately
4,000 financial advisors and we have an annual revenue run rate of
approximately $1.1 billion. Our capital markets business also
delivered robust results in 2014, and we look forward building on
the success of these complementary and profitable business lines in
2015.”
Richard Lampen, President and Chief Executive Officer of
Ladenburg, said, “Ladenburg delivered significant growth on both
sides of our business in 2014, with year-over-year revenue
increases of 25% in advisory fees and 12% in our investment banking
and capital markets business helping fuel substantial earnings
growth. We continue to view the independent broker-dealer sector as
one of the most vibrant growth areas in the financial services
industry. Our independent brokerage and advisory services business
enjoyed strong recurring revenue of 71% in 2014. Furthermore, we
were better positioned to capitalize on improved financial markets
with key additions to capabilities in our technology and healthcare
practices. We had a meaningful uptick in our investment banking
this past year and are hopeful that the trend will continue. We
were proud to reflect back on our history with our 135th
anniversary of NYSE membership last year, but we are squarely
focused on the future and are enthusiastic about Ladenburg’s
prospects for ongoing success.”
For the Fourth Quarter and Full Year Ended
December 31, 2014
Fourth quarter 2014 revenues were $265.0 million, a 25% increase
from revenues of $211.5 million in the fourth quarter of 2013, in
part due to the acquisitions of Highland Capital Brokerage, Inc.
(“Highland”) and KMS Financial Services, Inc. (“KMS”). The strong
growth in advisory fees revenue continued to be driven by rising
net new advisory assets, successful recruitment of additional
advisors and market appreciation. Commissions and investment
banking revenues remained strong as a result of high levels of
client activity.
Net income attributable to the Company for the fourth quarter of
2014 was $10.4 million, as compared to net income attributable to
the Company of $2.5 million in the fourth quarter of 2013. Net
income available to common shareholders, after payment of preferred
dividends, was $5.0 million or $0.03 per basic common share and
$0.02 per diluted common share, respectively, for the fourth
quarter of 2014, as compared to net loss available to common
shareholders of $0.5 million or $(0.00) per basic and diluted
common share in the comparable 2013 period. The fourth quarter 2014
results included an income tax benefit of $8.4 million resulting
from the KMS acquisition and the reversal of the Company’s deferred
tax asset valuation allowance, approximately $8.7 million of
non-cash charges for depreciation, amortization and compensation,
$2.9 million of amortization of retention and forgivable loans,
$1.8 million of interest expense and $0.2 million of loss on
extinguishment of debt, while the fourth quarter 2013 results
included approximately $6.1 million of non-cash charges for
depreciation, amortization and compensation, $2.8 million of
amortization of retention and forgivable loans, $2.0 million of
interest expense, $0.3 million of loss on extinguishment of debt
and an income tax expense of $1.2 million.
Full year 2014 revenues were $921.3 million, a 16% increase from
revenues of $793.1 million in 2013. The acquisitions of Highland
and KMS added $26.2 million and $19.8 million, respectively, in
revenues during 2014. Net income attributable to the Company for
fiscal 2014 was $33.4 million, as compared to net loss attributable
to the Company of $0.5 million in 2013. Net income available to
common shareholders, after payment of preferred dividends, was
$16.2 million or $0.09 per basic common share and $0.08 per diluted
common share in 2014, as compared to a net loss available to common
shareholders, after payment of preferred dividends, of $7.4 million
or $(0.04) per basic and diluted common share in 2013. The 2014
results included an income tax benefit of $23.3 million primarily
resulting from the Highland and KMS acquisitions and the reversal
of the Company’s deferred tax asset valuation allowance,
approximately $28.9 million of non-cash charges for depreciation,
amortization and compensation, $11.0 million of amortization of
retention and forgivable loans, $7.0 million of interest expense
and $0.5 million of loss on extinguishment of debt. The 2013
results included approximately $22.1 million of non-cash charges
for depreciation, amortization and compensation, $11.5 million of
amortization of retention and forgivable loans, $15.4 million of
interest expense, $4.5 million of loss on early extinguishment of
debt, $2.9 million of income tax expense and a loss of $0.1 million
from a change in fair value of contingent consideration.
Recurring Revenues
For the full year ended December 31, 2014, recurring revenues,
which consist of advisory fees, trailing commissions, cash sweep
fees and certain other fees, represented approximately 71% of
revenues from the Company’s independent brokerage and advisory
services business. Recurring revenues for this business were
approximately 66% for full year 2013.
EBITDA, as adjusted
EBITDA, as adjusted, for the fourth quarter of 2014 was $17.3
million, a 12% increase from $15.4 million in the 2013 period.
EBITDA, as adjusted, for full year 2014 was $61.2 million, an
increase of 7% from $57.2 million for the prior-year period.
Attached hereto as Table 2 is a reconciliation of EBITDA, as
adjusted, to net income (loss) attributable to the Company as
reported (see “Non-GAAP Financial Measures” below).
Stock Repurchases
During 2014, Ladenburg repurchased 2,846,395 shares of its
common stock at a cost of approximately $9.5 million, representing
an average price per share of $3.35. Since the inception of its
stock repurchase program in March 2007, Ladenburg has repurchased
14,096,152 shares at a total cost of approximately $23.3 million,
including purchases of 7,500,000 shares outside its stock
repurchase program. During the fourth quarter of 2014, Ladenburg’s
board of directors authorized the repurchase of up to an additional
10,000,000 shares of common stock under its current repurchase
program. Ladenburg has the authority to repurchase approximately
10,700,000 shares under the program.
Non-GAAP Financial Measures
Earnings before interest, taxes, depreciation and amortization,
or EBITDA, adjusted for acquisition-related expense, amortization
of retention and forgivable loans, change in the fair value of
contingent consideration related to acquisitions, loss on
extinguishment of debt, non-cash compensation expense and financial
advisor acquisition expense, is a key metric the Company uses in
evaluating its financial performance. 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 acquisition 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
before income taxes, net income and cash flows from operating
activities.
About Ladenburg
Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS, LTS
PrA) is a publicly-traded diversified financial services company
based in Miami, Florida. Ladenburg’s subsidiaries include
industry-leading independent broker-dealer firms Securities
America, Inc., Triad Advisors, Inc., Securities Service Network,
Inc., Investacorp, Inc. and KMS Financial Services, Inc. as well as
Premier Trust, Inc., Ladenburg Thalmann Asset Management Inc.,
Highland Capital Brokerage, Inc., a leading independent life
insurance brokerage company, and Ladenburg Thalmann & Co. Inc.,
an investment bank which has been a member of the New York Stock
Exchange for 135 years. The company is committed to investing in
the growth of its subsidiaries while respecting and maintaining
their individual business identities, cultures, and leadership. For
more information, please visit www.ladenburg.com.
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding future financial
performance, future growth, growth of the independent brokerage and
advisory area, growth of our investment banking business,
recruitment of financial advisors and future investments. These
statements are based on management’s current expectations or
beliefs and are subject to uncertainty and changes in
circumstances. Actual results may vary materially from those
expressed or implied by the statements herein due to changes in
economic, business, competitive and/or regulatory factors, and
other risks and uncertainties affecting the operation of the
Company’s business. These risks, uncertainties and contingencies
include those set forth in the Company’s annual report on Form 10-K
for the fiscal year ended December 31, 2014 and other factors
detailed from time to time in its subsequent filings with the
Securities and Exchange Commission. The information set forth
herein should be read in light of such risks. Further, investors
should keep in mind that the Company’s quarterly revenue and
profits can fluctuate materially depending on many factors,
including the number, size and timing of completed offerings and
other transactions. Accordingly, the Company’s revenue and profits
in any particular quarter may not be indicative of future results.
The Company is under no obligation to, and expressly disclaims any
obligation to, update or alter its forward-looking statements,
whether as a result of new information, future events, changes in
assumptions or otherwise.
TABLE 1
LADENBURG THALMANN FINANCIAL SERVICES
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Dollars in thousands, except share and
per share amounts)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2014 2013
% Change 2014
2013 % Change
(Unaudited)
Revenues: Commissions $129,214 $100,907
28.1 % $445,734 $394,414 13.0 % Advisory fees 97,948 73,125 33.9 %
343,212 274,018 25.3 % Investment banking 8,692 10,720 (18.9 %)
46,998 41,991 11.9 % Principal transactions 239 977 (75.5 %) 1,938
2,667 (27.3 %) Interest and dividends 1,077 1,674 (35.7 %) 6,209
6,813 (8.9 %) Service fees and other income 27,780
24,050 15.5 % 77,162 73,213 5.4 % Total
revenues 264,950 211,453 25.3 % 921,253
793,116 16.2 %
Expenses:
Commissions and fees 185,045 148,679 24.5 % 662,178 573,621 15.4 %
Compensation and benefits 38,840 26,030 49.2 % 120,231 95,346 26.1
% Non-cash compensation 2,852 2,327 22.6 % 10,541 6,766 55.8 %
Brokerage, communication and clearance fees 4,897 3,529 38.8 %
17,900 11,614 54.1 % Rent and occupancy, net of sublease revenue
2,085 1,688 23.5 % 7,040 6,289 11.9 % Professional services 2,949
2,761 6.8 % 11,040 9,162 20.5 % Interest 1,795 2,043 (12.1 %) 6,990
15,438 (54.7 %) Depreciation and amortization 5,870 3,762 56.0 %
18,397 15,315 20.1 % Acquisition-related expense 1,034 - * 2,342 -
* Amortization of retention and forgivable loans 2,897 2,802 (3.4
%) 11,041 11,544 (4.4 %) Loss on extinguishment of debt 234 347
(32.6 %) 548 4,547 (87.9 %) Other 14,422 13,765
4.8 % 43,011 40,949 5.0 % Total
expenses 262,920 207,733 26.6 % 911,259 790,591 15.3 % Income
before item shown below 2,030 3,720 (45.4 %) 9,994 2,525 295.8 %
Change in fair value of contingent consideration - -
- 12 (121 ) 109.9 % Income before income taxes
2,030 3,720 (45.4 %) 10,006 2,404 316.2 % Income tax (benefit)
expense (8,397 ) 1,208 (795.1 %) (23,346 )
2,926 (897.9 %) Net income (loss) 10,427 2,512 315.1 %
33,352 (522 ) 6489.3 % Net loss attributable to noncontrolling
interest (19 ) (19 ) 0.0 % (81 ) (68 ) 19.1 % Net
income (loss) attributable to the Company $10,446 $2,531 312.7 %
$33,433 $(454 ) 7464.1 % Dividends declared on preferred stock
(5,461 ) (3,004 ) 81.8 % (17,244 ) (6,911 ) 149.5 %
Net income (loss) available to common shareholders $4,985
$(473 ) 1153.9 % $16,189 $(7,365 ) 319.8 %
Net income (loss) per share available to common shareholders
(basic)
$ 0.03
$ (0.00
)
1127.3 %
$ 0.09
$ (0.04
)
319.2 % Net income (loss) per share available to common
shareholders (diluted)
$ 0.02
$ (0.00
)
1002.7 %
$ 0.08
$( 0.04
)
294.0 %
Weighted average common shares used in
computation of per share data:
Basic
184,805,171 180,513,628 2.4 % 182,768,494
182,295,476 0.3 %
Diluted
210,297,301 180,513,628
16.5
%
206,512,437 182,295,476
13.3
%
TABLE 2
LADENBURG THALMANN FINANCIAL SERVICES
INC.
The following table presents a
reconciliation of EBITDA, as adjusted, to net income (loss)
attributable to the Company as reported.
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
(dollars in thousands)
2014
2013 % Change
2014 2013
% Change Total revenues $264,950
$211,453 25.3 % $921,253 $793,116 16.2 % Total expenses 262,920
207,733 26.6 % 911,259 790,591 15.3 % Income before income taxes
(1) 2,030 3,720 45.4 % 10,006 2,404 316.2 % Net income (loss)
attributable to the Company
10,446
2,531
312.7
%
33,433
(454
)
7464.1
%
Reconciliation of EBITDA, as adjusted, to net income (loss)
attributable to the Company: EBITDA, as adjusted (1)(2)
$17,283 $15,380 12.4 % $61,178 $57,203 6.9 % Add: Interest income
50 49 2.0 % 245 194 26.3 % Change in fair value of contingent
consideration - - - 12 (121 ) 109.9 % Less: Loss on extinguishment
of debt (234 ) (347 ) (32.6 %) (548 ) (4,547 ) (87.9 %) Interest
expense (1,795 ) (2,043 ) (12.1 %) (6,990 ) (15,438 ) (54.7 %)
Income tax benefit (expense) 8,397 (1,208 ) (795.1 %) 23,346 (2,926
) (897.9 %) Depreciation and amortization (5,870 ) (3,762 ) 56.0 %
(18,397 ) (15,315 ) 20.1 % Non-cash compensation expense (2,852 )
(2,327 ) 22.6 % (10,541 ) (6,766 ) 55.8 % Acquisition-related
expense (1,034 ) -
*
(2,342 ) -
*
Amortization of retention and forgivable loans
(2,897
)
(2,802
)
3.4
%
(11,041 )
(11,544
)
(4.4
%)
Financial advisor acquisition expense (602 ) (409 )
46.9 % (1,489 ) (1,194 ) 24.7 % Net income (loss)
attributable to the Company
$ 10,446
$2,531
312.7
%
$ 33,433
$(454
)
7464.1
%
* Not Meaningful
(1)
2013 results included the elimination of
$2,545, consisting of $5,148 of revenue net of employee brokerage
commission expenses of $2,603 related to sale of the Company’s
Series A Preferred Stock.
(2)
Results for the twelve months ended
December 31, 2013 have been restated to include adjustments for
financial advisor acquisition expense of $1,194 and amortization of
forgivable loans of $4,384 to conform to the 2014 presentation.
Results for the three months ended December 31, 2013 have been
restated to include adjustments for financial advisor acquisition
expense of $409 and amortization of forgivable loans of $981 to
conform to the 2014 presentation.
Sard Verbinnen & CoPaul Caminiti/Emily
Deissler212-687-8080
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