Ladenburg Thalmann Financial Services: Fourth Quarter And Fiscal Year 2018 Financial Results Highlights:

The following excerpt is from the company's SEC filing.

Fourth quarter 2018 revenues of

$355.1 million

compared to prior year period

Fiscal year 2018 revenues of

$1.4 billion

Fourth quarter 2018 net income of

$9.6 million

, and EBITDA, as adjusted, of

$29.1 million

Fiscal year 2018 net income of

$33.8 million

$100.4 million

Client assets of $158.6 billion at December 31, 2018, including advisory assets under management of $72.8 billion

Client assets of $166.4 billion at January 31, 2019, including advisory assets under management of $76.7 billion

Recurring revenue of 77.3% for fiscal year 2018 in independent advisory and brokerage services segment

Shareholders’ equity of

$253.1 million

MIAMI, FL, March 15, 2019

-- Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS, LTS PrA, LTSL, LTSF, LTSK) today announced financial results for the fourth quarter and fiscal year ended December 31, 2018.

Richard Lampen, Chairman, President and CEO of Ladenburg, said, “Fiscal year 2018 was a period of significant accomplishment for Ladenburg and its approximately 6,000 employees and financial advisors, as the steps taken in prior years laid the groundwork for the exciting opportunities we see ahead. We are very pleased to report for the year record levels of revenue, net income and EBITDA, as adjusted. Notwithstanding the challenging market environment during the fourth quarter, solid execution by our management team, together with the increasing interest rate environment, contributed to our strong performance. We remain focused on continuing our consistent growth with the support of our $253.1 million of shareholders’ equity and $182.7 million of cash and cash equivalents and, as appropriate,

returning capital to our shareholders. During the year we increased the cash dividend on our common stock and accelerated our share repurchase program.”

           Adam Malamed, Executive Vice President and Chief Operating Officer of Ladenburg, said, “All segments of our businesses continued to perform well in fiscal year 2018, with revenues of $1.4 billion, a 9.7% increase from the prior year, net income increasing by over 300% to $33.8 million and a 79.4% increase in EBITDA, as adjusted, to $100.4 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 were $158.6 billion at December 31, 2018, with $72.8 billion of advisory assets under management. During 2019, we will continue to invest for both near and long-term opportunities that focus on growing our recurring revenues, increasing our operational efficiencies and executing successfully on our strategic initiatives in order to drive value for our employees, financial advisors and shareholders.”

Adoption of ASC 606 Accounting Standard

(See Tables 3 and 4)

On January 1, 2018, the Company adopted FASB Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” and all related amendments ("ASC 606"). The Company believes it is important to include a presentation of its financial results on the most comparable basis practical. The Company's adoption of the new revenue standard has an impact on the timing of when revenues and related costs are recognized and impacts the gross vs. net reporting presentation of advisory and commissions revenues. The Company adopted this standard under the modified retrospective method, which does not require a restatement of prior period results. To make the presentation of these financial results more comparable, the Company has included an adjustment to the results of 2018 to exclude the impact of the adoption of the new revenue standard so that such results are presented on the same revenue recognition methodology used by the Company prior to the adoption of the new revenue standard (see Tables 3 and 4).  For the three months ended December 31, 2018, the impact of the new revenue standard was a decrease in total revenues of

$38.3 million

, a decrease in total expenses of

$43.9 million

, an increase in net income attributable to the Company of

$0.6 million

, and an increase in net income per basic and diluted common share of

. For the year ended December 31, 2018, the impact of the new revenue standard was a decrease in total revenues of

$128.9 million

$145.3 million

$8.7 million

, and a decrease in net loss per basic and diluted common share of

During the three and twelve months ended December 31, 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.

For the Fourth Quarter and Fiscal Year Ended December 31, 2018

(See Table 1)

Fourth quarter 2018 revenues were

increase from revenues of

$344.0 million

in the fourth quarter of 2017. Commissions revenue for the fourth quarter of 2018 increased by

$180.6 million

$141.5 million

for the comparable period in 2017, primarily due to the impact of the adoption of ASC 606 and increased sales of variable annuity, mutual fund, fixed annuity, insurance and fixed income products. Advisory fee revenue for the fourth quarter of 2018 decreased by

$112.9 million

$152.6 million

for the comparable period in 2017 due to the adoption of ASC 606. Investment banking revenue for the fourth quarter of 2018 increased by

$18.1 million

$12.3 million

for the comparable period in 2017 due to an increase in capital raising revenue and strategic advisory services. Also, service fees revenue for the fourth quarter of 2018 increased by

$38.2 million

$27.2 million

, primarily due to increased revenues from our cash sweep programs.

Net income attributable to the Company for the fourth quarter of 2018 was

, as compared to net income attributable to the Company of

$6.6 million

in the fourth quarter of 2017. Net income available to common shareholders, after payment of preferred dividends, was

$1.0 million

per basic and diluted common share for the fourth quarter of 2018, as compared to net loss available to common shareholders of

$1.8 million

) per basic and diluted common share in the comparable 2017 period. The fourth quarter 2018 results included

$3.4 million

of income tax expense,

$8.1 million

of non-cash charges for depreciation, amortization and compensation,

$0.1 million

of amortization of retention and forgivable loans,

$2.6 million

of amortization of contract acquisition costs and

$3.6 million

of interest expense. The fourth quarter 2017 results included

$6.8 million

of income tax benefit,

$8.4 million

$2.3 million

of amortization of retention and forgivable loans and

$1.1 million

Fiscal year 2018 revenues were

$1.3 billion

for the comparable 2017 period. Net income attributable to the Company for fiscal 2018 was

$7.7 million

in the comparable 2017 period. Net loss available to common shareholders, after payment of preferred dividends, was

$0.3 million

) per basic and diluted common share in 2018, as compared to net loss available to common shareholders, after payment of preferred dividends, of

$24.8 million

) in the comparable 2017 period. The 2018 results included approximately

$13.4 million

$29.9 million

$0.4 million

$9.7 million

$10.8 million

of interest expense. The comparable 2017 results included approximately

$6.5 million

$34.4 million

$7.4 million

$2.7 million

Recurring Revenues

For the fiscal year ended December 31, 2018, recurring revenues, which consist of advisory fees, trailing commissions, cash sweep revenues and certain other fees, represented approximately

of revenues from the Company’s independent advisory and brokerage services segment compared to approximately 79.6% for fiscal year 2017.

(See Table 2)

EBITDA, as adjusted, for the fourth quarter of 2018 was

, an increase of

$18.7 million

in the comparable 2017 period. EBITDA, as adjusted, for fiscal year 2018 was

$56.0 million

for the prior year. 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. The increase in EBITDA, as adjusted, for the fourth quarter and fiscal year 2018 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 increased commissions revenue from mutual funds and variable annuities.

Client Assets

At December 31, 2018, total client assets under administration were $158.6 billion, a 3.7% decrease from $164.7 billion at December 31, 2017, primarily due to the volatile equity markets during the fourth quarter of 2018. At December 31, 2018, client assets included cash balances of approximately $5.2 billion, including approximately $4.8 billion participating in our cash sweep programs.

Stock Repurchases

During the quarter ended December 31, 2018, Ladenburg repurchased 54,726,972 shares of its common stock, including shares purchased in a private transaction, at a cost of approximately $131.1 million, representing an average price per share of $2.51. During the fiscal year ended December 31, 2018, Ladenburg repurchased

57,475,374

shares of its common stock at a cost of approximately

$139.8 million

5,833,890

shares repurchased under its stock repurchase program, representing an average price per share of

. Since the inception of its stock repurchase program in March 2007, Ladenburg has repurchased over

83,784,105

shares of its common stock at a total cost of approximately

$201.6 million

, including purchases outside its stock repurchase program, representing an average price per share of

. As of December 31, 2018, Ladenburg has the authority to repurchase an additional

2,315,895

shares under its current repurchase plan.

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 acquisition-related expense, 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) is a publicly-traded diversified financial services company based in Miami, Florida. Ladenburg’s subsidiaries include industry-leading independent advisory and broker-dealer 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.

Contact:    Emily Claffey / Benjamin Spicehandler

Sard Verbinnen & Co

212-687-8080    

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, future levels of recurring revenue, future synergies, changes in interest rates, recruitment of financial advisors, future margins, 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.

[Financial Tables Follow]

TABLE 1

LADENBURG THALMANN FINANCIAL SERVICES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share and per share amounts)

Three Months Ended

Twelve Months Ended

Change

Revenues:

180,556

141,536

696,331

536,028

Advisory fees

112,852

152,608

(26.1)%

474,423

560,930

(15.4)%

18,055

12,332

56,256

46,453

Principal transactions

Interest and dividends

165.5%

Service fees

38,241

27,161

119,430

85,330

Other income

(52.8)%

40,053

36,004

Total revenues

355,121

344,016

1,391,136

1,268,152

Expenses:

Commissions and fees

241,208

248,587

(3.0)%

976,596

928,430

Compensation and benefits

53,318

46,213

194,045

171,344

Non-cash compensation

Brokerage, communication and clearance fees

(8.6)%

16,088

18,124

(11.2)%

Rent and occupancy, net of sublease revenue

Professional services

21,927

19,588

221.3%

10,796

298.4%

Depreciation and amortization

(5.5)%

24,039

28,835

(16.6)%

Acquisition-related expenses

(96.9)%

(70.9)%

Amortization of retention and forgivable loans

(94.1)%

(94.4)%

 Amortization of contract acquisition costs

19,363

20,666

(6.3)%

73,285

72,200

Total expenses

342,060

344,095

(0.6)%

1,343,733

1,266,991

Income (loss) before item shown below

13,061

47,403

3,982.9%

Change in fair value of contingent consideration

(9.0)%

Income (loss) before income taxes

12,988

47,165

3,897.0%

Income tax expense (benefit)

(6,780

13,379

(6,502

33,786

339.8%

Net income (loss) attributable to noncontrolling interest

33,758

338.6%

Dividends declared on preferred stock

(8,508)

(8,456

(34,031)

(32,482

(4.8)%

Net income (loss) available to common shareholders

(1,812

(24,785

Net income (loss) per common share available to common shareholders (basic)

100.0%

Net income (loss) per common share available to common shareholders (diluted)

Weighted average common shares used in computation of per share data:

189,463,849

194,749,001

(2.7)%

194,562,916

193,064,550

Diluted

198,743,096

nm - not meaningful

TABLE 2

The following table presents a reconciliation of net income attributable to the Company as reported to EBITDA, as adjusted for the periods ending December 31, 2018 and 2017:

Three months ended

Twelve months ended

( dollars in thousands)

% Change

Reconciliation of net income attributable to the Company to EBITDA, as adjusted:

Interest income

(327.2)%

(2,504

(394.9)%

Interest expense

Non-cash compensation expense

Financial advisor recruiting expense

(97.8)%

(93.5)%

450.4%

104.2%

29,136

18,692

100,448

56,001

nm - not meaningful

Includes severance of

, excise and franchise tax expense of

, compensation expense that may be paid in stock of

, and non-recurring expenses related to a block repurchase of our common stock and other legal matters of

$1,747

for the three and twelve months ended December 31, 2018, respectively. Includes severance of

and compensation expense that may be paid in stock of

for the three and twelve months ended December 31, 2017.

TABLE 3

CONSOLIDATED STATEMENT OF OPERATIONS

(Amount in thousands, except share and per share amounts)

Three Months Ended December 31, 2018

As Reported

Amounts without the adoption of ASC 606

Effect of Change Higher/(Lower)

152,991

27,565

180,390

(67,538

16,336

393,464

(38,343

282,597

(41,389

53,698

(1,314

(3,558

19,721

385,931

(43,871

Income before item shown below

Income before income taxes

(1,550

Net income attributable to noncontrolling interest

Net income per share available to common shareholders (basic)

Net income per share available to common shareholders (diluted)

       Basic

       Diluted

TABLE 4

Twelve Months Ended December 31, 2018

Effects of Change Higher/(Lower)

609,400

86,931

695,094

(220,671

51,335

40,147

1,520,024

(128,888

1,113,389

(136,793

195,433

(1,388

15,525

20,022

10,756

29,294

(5,255

13,890

(13,473

73,805

1,488,983

(145,250

31,041

16,362

30,803

25,058

25,030

(9,001

Net loss per share available to common shareholders (basic)

Net loss per share available to common shareholders (diluted)

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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