Highlights:
- Third quarter 2019 revenues of $374.5 million, up 7.4% compared
to prior year period
- Nine month 2019 revenues of $1.074 billion, up 3.6% compared to
prior year period
- Third quarter 2019 net income of $11.3 million and EBITDA, as
adjusted, of $31.1 million
- Nine month 2019 net income of $22.2 million and EBITDA, as
adjusted, of $78.2 million
- Record client assets of $181.1 billion at September 30, 2019,
including record advisory assets under management of $90.4
billion
- Recurring revenue of 77.0% for the trailing 12 months ended
September 30, 2019 in independent advisory and brokerage services
segment
- Shareholders’ equity of $248.8 million at September 30,
2019
Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS,
LTS PrA, LTSL, LTSF, LTSK, LTSH) today announced financial results
for the three and nine months ended September 30, 2019.
Richard Lampen, Chairman, President and CEO of Ladenburg, said,
“We are very pleased to report another quarter with continued
robust growth in client assets as well as revenues and
profitability. During the third quarter 2019, solid execution by
our management team, together with stable equity markets,
contributed to our strong performance. We remain focused on
continuing our consistent growth with the support of our $248.8
million of shareholders’ equity and over $250 million of cash and
cash equivalents and creating value for all our employees,
financial advisors and shareholders.”
Adam Malamed, Executive Vice President and Chief Operating
Officer of Ladenburg, said, “All segments of our businesses
continued to perform well in the third quarter, with revenues of
$374.5 million, a 7.4% increase from the prior year period, and a
22.8% increase in adjusted EBITDA, to $31.1 million. The continued
growth of our nationwide network of approximately 4,400 independent
financial advisors reflects our successful recruiting efforts of
talented advisors over the past three years. Total client assets
grew to a record $181.1 billion and advisory assets under
management increased to a record $90.4 billion, up 3.2% and 12.9%,
respectively, on a year-over-year basis. Our strong performance
validates the strengths of our ongoing strategic initiatives to add
significant value to the businesses of financial advisors,
especially with respect to aligning the intellectual capital,
technology and growth platforms that are crucial to supporting the
productivity and professional growth of financial advisors.”
For the Three and Nine Months Ended
September 30, 2019 (See Table 1)
Third quarter 2019 revenues were $374.5 million, a 7.4% increase
from revenues of $348.9 million in the third quarter of 2018.
Commissions revenue for the third quarter of 2019 increased by 4.8%
to $180.4 million from $172.1 million for the comparable period in
2018, primarily due to an increase in our insurance brokerage
segment due to the acquisition of certain assets of Kestler
Financial Group by Highland, partially offset by a decrease in our
independent advisory and brokerage services segment due to a
decrease in mutual fund trailing commissions, fewer equity trades
and decreased sales of alternative investments. Advisory fee
revenue for the three months ended September 30, 2019 increased by
6.6% to $132.8 million from $124.6 million for the comparable
period in 2018, primarily due to higher advisory asset balances as
a result of improved market conditions. Investment banking revenue
for the third quarter of 2019 increased by 87.3% to $18.7 million
from $10.0 million for the comparable period in 2018, due to an
increase in capital raising revenue, partially offset by a decrease
in strategic advisory services revenue. Service fees revenue for
the third quarter of 2019 increased by 8.5% to $31.1 million from
$28.7 million for the comparable period, primarily due to increased
revenues from our cash sweep programs.
Net income attributable to the Company for the third quarter of
2019 was $11.4 million, as compared to net income attributable to
the Company of $9.4 million in the third quarter of 2018, primarily
due to an increase in revenues, partially offset by increased
overall expenses. Net income available to common shareholders,
after payment of preferred dividends, was $2.7 million or $0.02 per
basic and diluted common share for the third quarter of 2019, as
compared to net income available to common shareholders of $0.9
million or $0.00 per basic and diluted common share in the
comparable 2018 period. The third quarter 2019 results included
$4.0 million of income tax expense, $6.8 million of non-cash
charges for depreciation, amortization and compensation, $0.1
million of amortization of retention and forgivable loans, $3.0
million of amortization of contract acquisition costs and $6.2
million of interest expense. The third quarter 2018 results
included $3.2 million of income tax expense, $7.2 million of
non-cash charges for depreciation, amortization and compensation,
$0.1 million of amortization of retention and forgivable loans,
$2.5 million of amortization of contract acquisition costs and $3.2
million of interest expense.
For the nine months ended September 30, 2019, the Company had
revenues of $1.074 billion, a 3.6% increase from revenues of $1.036
billion for the comparable 2018 period. Net income attributable to
the Company for the nine months ended September 30, 2019 was $22.3
million, as compared to net income attributable to the Company of
$24.2 million in the comparable 2018 period. Net loss available to
common shareholders, after payment of preferred dividends, was $3.7
million or ($0.03) per basic and diluted common share for the nine
months ended September 30, 2019, as compared to net loss available
to common shareholders of $1.3 million or ($0.01) per basic and
diluted common share in the comparable 2018 period. The results for
the nine months ended September 30, 2019 included $7.4 million of
income tax expense, $21.5 million of non-cash charges for
depreciation, amortization and compensation, $0.4 million of
amortization of retention and forgivable loans, $8.6 million of
amortization of contract acquisition costs and $16.8 million of
interest expense. The comparable 2018 results included $10.0
million of income tax expense, $21.9 million of non-cash charges
for depreciation, amortization and compensation, $0.3 million of
amortization of retention and forgivable loans, $7.1 million of
amortization of contract acquisition costs and $7.2 million of
interest expense.
Recurring Revenues
For the trailing twelve months ended September 30, 2019,
recurring revenues, which consist of advisory fees, trailing
commissions, cash sweep revenues and certain other fees,
represented approximately 77.0% of revenues from the Company’s
independent advisory and brokerage services segment.
EBITDA, as adjusted (See Table
2)
EBITDA, as adjusted, for the third quarter of 2019 was $31.1
million, an increase of 22.8% from $25.3 million in the comparable
2018 period. Attached hereto as Table 2 is a reconciliation of net
income attributable to the Company as reported (see “Non-GAAP
Financial Measures” below) to EBITDA, as adjusted. EBITDA, as
adjusted, for the nine months ended September 30, 2019 was $78.2
million, an increase of 9.6% from $71.3 million for the prior year
period. The increase in EBITDA, as adjusted, for the third quarter
of 2019 was primarily attributable to increased capital markets
activity in our Ladenburg segment, an increase in our insurance
brokerage segment due to the acquisition of certain assets of
Kestler Financial Group by Highland, and an increase in our
independent advisory and brokerage services segment as a result of
increased revenue from our cash sweep programs. The increase in
EBITDA, as adjusted, for the nine months ended September 30, 2019
was primarily attributable to increases in our independent advisory
and brokerage services segment as a result of increased revenue
from our cash sweep programs and our insurance brokerage segment
due to the acquisition of certain assets of Kestler Financial Group
by Highland.
Client Assets
At September 30, 2019, total client assets under administration
were $181.1 billion, a 3.2% increase from $175.5 billion at
September 30, 2018. Advisory assets under management were $90.4
billion at September 30, 2019, a 12.9% increase from $80.1 billion
at September 30, 2018. At September 30, 2019, client assets
included cash balances of approximately $4.3 billion, including
approximately $3.9 billion participating in our cash sweep
programs.
Stock Repurchases
In April 2019, our board of directors authorized the repurchase
of up to an additional 10,000,000 shares of our common stock from
time to time on the open market or in privately negotiated
transactions depending on market conditions. From the inception of
its stock repurchase program in March 2007 through September 30,
2019, the Company has repurchased 85,953,423 shares of its common
stock at a total cost of approximately $209.1 million, including
purchases outside its stock repurchase program, representing an
average price per share of $2.43. As of November 7, 2019, the
Company has the authority to repurchase an additional 10,273,937
shares under its current repurchase plan.
Non-GAAP Financial Measures
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 costs
and compensation expense that may be paid in stock, 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, 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.
About Ladenburg
Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS,
LTS PrA, LTSL, LTSF, LTSK, LTSH) is a publicly-traded diversified
financial services company based in Miami, Florida. Ladenburg’s
subsidiaries include industry-leading independent advisory and
brokerage (IAB) firms Securities America, Triad Advisors,
Securities Service Network, Investacorp, and KMS Financial
Services, as well as Premier Trust, Ladenburg Thalmann Asset
Management, Highland Capital Brokerage, a leading independent life
insurance brokerage company and a full-service annuity processing
and marketing company, and Ladenburg Thalmann & Co. Inc., an
investment bank which has been a member of the New York Stock
Exchange for over 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 our independent advisory and
brokerage business, growth of our investment banking business,
future levels of recurring revenue, future synergies, recruitment
of financial advisors, future investments, future dividends and
future repurchases of common stock. 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, including the SEC’s proposed rules and interpretations
concerning the standards of conduct for broker dealers and
investment advisers when dealing with retail investors, future cash
flows, a change in the Company’s dividend policy by the Company’s
Board of Directors (which has the ability in its sole discretion to
increase, decrease or eliminate entirely the Company’s dividend at
any time) 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, 2018 and
other factors detailed from time to time in its other 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, except as required by law.
TABLE 1 LADENBURG THALMANN FINANCIAL
SERVICES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in
thousands, except share and per share amounts) (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
%
September 30,
%
2019
2018
Change
2019
2018
Change
Revenues:
Commissions
$
180,395
$
172,108
4.8%
$
527,076
$
515,775
2.2%
Advisory fees
132,763
124,550
6.6%
372,664
361,571
3.1%
Investment banking
18,692
9,982
87.3%
40,060
38,201
4.9%
Principal transactions
(258)
45
nm
1,271
445
185.6%
Interest and dividends
1,474
1,434
2.8%
4,018
3,301
21.7%
Service fees
31,137
28,702
8.5%
95,727
81,189
17.9%
Other income
10,329
12,054
(14.3)%
32,751
35,533
(7.8)%
Total revenues
374,532
348,875
7.4%
1,073,567
1,036,015
3.6%
Expenses:
Commissions and fees
260,072
249,672
4.2%
749,522
735,388
1.9%
Compensation and benefits
54,026
44,905
20.3%
154,514
140,727
9.8%
Non-cash compensation
1,536
1,380
11.3%
4,474
4,442
0.7%
Brokerage, communication and clearance
fees
3,392
3,734
(9.2)%
10,956
11,994
(8.7)%
Rent and occupancy, net of sublease
revenue
2,648
2,566
3.2%
7,962
7,446
6.9%
Professional services
4,810
4,531
6.2%
14,514
14,860
(2.3)%
Interest
6,218
3,206
93.9%
16,840
7,226
133.0%
Depreciation and amortization
5,246
5,845
(10.2)%
17,057
17,416
(2.1)%
Acquisition-related expenses
—
—
0.0%
24
913
(97.4)%
Amortization of retention and forgivable
loans
139
97
43.3%
391
280
39.6%
Amortization of contract acquisition
costs
2,988
2,488
20.1%
8,639
7,059
22.4%
Other
18,067
17,740
1.8%
58,746
53,922
8.9%
Total expenses
359,142
336,164
6.8%
1,043,639
1,001,673
4.2%
Income before item shown below
15,390
12,711
21.1%
29,928
34,342
(12.9)%
Change in fair value of contingent
consideration
(93)
(54)
(72.2)%
(290)
(165)
(75.8)%
Income before income taxes
15,297
12,657
20.9%
29,638
34,177
(13.3)%
Income tax expense
4,020
3,207
25.4%
7,421
9,953
(25.4)%
Net income
11,277
9,450
19.3%
22,217
24,224
(8.3)%
Net (loss) income attributable to
noncontrolling interest
(79)
13
nm
(58)
22
nm
Net income attributable to the Company
$
11,356
$
9,437
20.3%
$
22,275
$
24,202
(8.0)%
Dividends declared on preferred stock
(8,702)
(8,507)
2.3%
(25,987)
(25,523)
1.8%
Net income (loss) available to common
shareholders
$
2,654
$
930
185.4%
$
(3,712)
$
(1,321)
(181.0)%
Net income (loss) per common share
available to common shareholders (basic)
$
0.02
$
0.00
nm
$
(0.03)
$
(0.01)
(200.0)%
Net income (loss) per common share
available to common shareholders (diluted)
$
0.02
$
0.00
nm
$
(0.03)
$
(0.01)
(200.0)%
Weighted average common shares used in
computation of per share data:
Basic
143,092,912
196,381,910
(27.1)%
143,281,873
196,281,283
(27.0)%
Diluted
147,960,009
208,387,236
(29.0)%
143,281,873
196,281,283
(27.0)%
nm - not meaningful
TABLE 2 LADENBURG THALMANN FINANCIAL
SERVICES INC.
The following table presents a reconciliation of net income
attributable to the Company as reported to EBITDA, as adjusted for
the three and nine months ending September 30, 2019 and 2018:
Three months ended
Nine Months Ended
September 30,
%
September 30,
%
(Unaudited; amounts in
thousands)
2019
2018
Change
2019
2018
Change
Total revenues
$
374,532
$
348,875
7.4%
$
1,073,567
$
1,036,015
3.6%
Total expenses
359,142
336,164
6.8%
1,043,639
1,001,673
4.2%
Income before income taxes
15,297
12,657
20.9%
29,638
34,177
(13.3)%
Net income attributable to the Company
11,356
9,437
20.3%
22,275
24,202
(8.0)%
Reconciliation of net income attributable
to the Company to EBITDA, as adjusted:
Net income attributable to the Company
$
11,356
$
9,437
20.3%
$
22,275
$
24,202
(8.0)%
Less:
Interest income
(882
)
(810
)
8.9%
(2,138
)
(1,688
)
26.7%
Change in fair value of contingent
consideration
93
54
72.2%
290
165
75.8%
Add:
Interest expense
6,218
3,206
93.9%
16,840
7,226
133.0%
Income tax expense
4,020
3,207
25.4%
7,421
9,953
(25.4)%
Depreciation and amortization
5,246
5,845
(10.2)%
17,057
17,416
(2.1)%
Non-cash compensation expense
1,536
1,380
11.3%
4,474
4,442
0.7%
Amortization of retention and forgivable
loans
139
97
43.3%
391
280
39.6%
Amortization of contract acquisition
costs
2,988
2,488
20.1%
8,639
7,059
22.4%
Financial advisor recruiting expense
9
115
(92.2)%
18
291
(93.8)%
Acquisition-related expense
—
—
0.0%
24
913
(97.4)%
Other (1) (2)
363
290
25.2%
2,880
1,053
173.5%
EBITDA, as adjusted
$
31,086
$
25,309
22.8%
$
78,171
$
71,312
9.6%
(1)
Includes severance costs of $160 and
$1,269, excise and franchise tax expense of $134 and $416,
compensation expense that may be paid in stock of $399 and $1,256,
non-recurring expenses related to a block repurchase of our common
stock and other legal matters of $(55) and $214 and reversal of a
write-off for a sublease commitment of $(275) for the three and
nine months ended September 30, 2019.
(2)
Includes severance costs of $0 and $174,
excise and franchise tax expense of $164 and $486 and compensation
expense that may be paid in stock of $126 and $393 for the three
and nine months ended September 30, 2018.
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version on businesswire.com: https://www.businesswire.com/news/home/20191108005155/en/
Emily Claffey / Benjamin Spicehandler Sard Verbinnen & Co
212-687-8080
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