Highlights:
- Third quarter 2015 revenues of $282.2
million, up 26% year-over-year
- Third quarter 2015 EBITDA, as adjusted,
of $8.4 million
- Client assets of approximately $123
billion at September 30, 2015, up 33% year-over-year
- Trailing twelve month recurring revenue
was 74% in independent brokerage and advisory services
business
- Shareholders’ equity of $385 million at
September 30, 2015
Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS, LTS
PrA) today announced financial results for the three and nine
months ended September 30, 2015.
Dr. Phillip Frost, Chairman of Ladenburg, said, “Ladenburg’s
independent brokerage and advisory services business continued to
grow in the third quarter, with revenue up nearly 30% compared to
the year-ago period driven by the acquisitions of KMS and SSN,
successful recruitment of additional advisors and increased
advisory assets under management. We believe we are well positioned
to benefit from secular trends driving continued growth in the
independent broker-dealer space and, on the investment banking
side, from a rebound in capital markets activity.”
Richard Lampen, President and Chief Executive Officer of
Ladenburg, said, “We continue to execute on our strategy of adding
resources to, and building scale in, our independent broker-dealer
business, which now has client assets of approximately $123
billion, and are pleased with the pace of new business development,
recruiting and our high level of recurring revenues.
Notwithstanding the impact of lower levels of equity capital
offerings for small and mid-cap public companies in the third
quarter, we remain confident in our talented investment banking
team and our specialized offerings, as well as in Ladenburg’s
ability to generate sustainable value for shareholders from both
parts of our business.”
For the Three and Nine Months Ended
September 30, 2015
Third quarter 2015 revenues were $282.2 million, a 26% increase
from revenues of $223.7 million in the third quarter of 2014, in
part due to the acquisitions of Highland Capital Brokerage, Inc.
(“Highland”), KMS Financial Services, Inc. (“KMS”) and Securities
Service Network, Inc. (“SSN”). For the trailing twelve months ended
September 30, 2015, revenues were $1.1 billion. Advisory fee
revenue for the three months ended September 30, 2015 increased by
37% to $118.1 million from $86.3 million for the comparable period
in 2014, mainly as a result of the KMS and SSN acquisitions and
strong new business development.
Net loss attributable to the Company for the third quarter of
2015 was $2.9 million, as compared to net income attributable to
the Company of $12.8 million in the third quarter of 2014. Net loss
available to common shareholders, after payment of preferred
dividends, was $10.2 million or ($0.06) per basic and diluted
common share for the third quarter of 2015, as compared to net
income available to common shareholders of $8.0 million or $0.04
per basic and diluted common share in the comparable 2014 period.
The third quarter 2015 results included approximately $7.0 million
of non-cash charges for depreciation, amortization and
compensation, $2.2 million of amortization of retention and
forgivable loans, $1.3 million of interest expense and $0.2 million
of income tax benefit. The third quarter 2014 results included
approximately $8.6 million of non-cash charges for depreciation,
amortization and compensation, $2.5 million of amortization of
retention and forgivable loans, $1.7 million of interest expense
and $13.4 million of income tax benefit.
For the nine months ended September 30, 2015, the Company had
revenues of $857.8 million, a 31% increase over revenues of $656.3
million for the comparable 2014 period. Net loss attributable to
the Company for the nine months ended September 30, 2015 was $8.9
million, as compared to net income attributable to the Company of
$20.0 million in the comparable 2014 period. Net loss available to
common shareholders, after payment of preferred dividends, was
$29.7 million or ($0.16) per basic and diluted common share for the
nine months ended September 30, 2015, as compared to net income
available to common shareholders, after payment of preferred
dividends, of $8.2 million or $0.05 per basic and $0.04 per diluted
common share in the comparable 2014 period. The results for the
nine months ended September 30, 2015 included approximately $26.0
million of non-cash charges for depreciation, amortization and
compensation, $7.8 million of amortization of retention and
forgivable loans, $4.0 million of interest expense, $0.3 million of
loss on extinguishment of debt and $2.3 million of income tax
benefit. The comparable 2014 results included approximately $20.2
million of non-cash charges for depreciation, amortization and
compensation, $8.1 million of amortization of retention and
forgivable loans, $5.2 million of interest expense, $0.3 million of
loss on early extinguishment of debt and $12.0 million of income
tax benefit.
Recurring Revenues
For the three and nine months ended September 30, 2015,
recurring revenues, which consist of advisory fees, trailing
commissions, cash sweep fees and certain other fees, represented
approximately 76% and 74%, respectively, of revenues from the
Company’s independent brokerage and advisory services business.
Recurring revenues for this business were 74% for the trailing
twelve months ended September 30, 2015.
EBITDA, as adjusted
EBITDA, as adjusted, for the third quarter of 2015 was $8.4
million, a 37% decrease from $13.3 million in the comparable 2014
period. EBITDA, as adjusted, for the nine months ended September
30, 2015 was $30.7 million, a decrease of 30% from $43.9 million
for the prior-year period. For the trailing twelve months ended
September 30, 2015, EBITDA, as adjusted, was $48.0 million.
Attached hereto as Table 2 is a reconciliation of EBITDA, as
adjusted, to net (loss) income attributable to the Company as
reported (see “Non-GAAP Financial Measures” below).
Client Assets
At September 30, 2015, total client assets under administration
were approximately $123 billion, an increase of 33% from
approximately $93 billion at September 30, 2014. At September 30,
2015, client assets included cash balances of approximately $5.9
billion.
Stock Repurchases
During the quarter ended September 30, 2015, Ladenburg
repurchased 2,586,427 shares of its common stock at a cost of
approximately $6.4 million, representing an average price per share
of $2.47. During the period from January 1, 2015 through September
30, 2015, Ladenburg repurchased 4,066,669 shares of its common
stock at a cost of approximately $11.8 million, representing an
average price per share of $2.91. Since the inception of its stock
repurchase program in March 2007, Ladenburg has repurchased
18,162,821 shares at a total cost of approximately $35.2 million,
including purchases of 7,500,000 shares outside its stock
repurchase program. Ladenburg has the authority to repurchase an
additional 6,837,179 shares under its current repurchase plan.
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 fair value of
contingent consideration related to acquisitions, loss on
extinguishment of debt, 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 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
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, (loss) income before income taxes,
net (loss) income and cash flows provided by (used in) 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 our independent brokerage and
advisory business, growth of our investment banking business and
future levels of recurring revenue. 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 Department of Labor’s proposed rule and
exemptions pertaining to the fiduciary status of investment advice
providers to 401(k) plan, plan sponsors, plan participants and the
holders of individual retirement or health savings accounts, 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 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.
TABLE 1LADENBURG THALMANN
FINANCIAL SERVICES INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Dollars in thousands, except share and per share
amounts)(Unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
% % 2015 2014
Change 2015 2014 Change
Revenues: Commissions $ 136,919 $ 109,575 25.0% $ 419,664 $
316,520 32.6% Advisory fees 118,050 86,333 36.7% 347,984 245,265
41.9% Investment banking 7,318 10,916 (33.0)% 25,132 38,306 (34.4)%
Principal transactions (250) 433 (157.7)% 757 1,699 (55.4)%
Interest and dividends 1,076 1,760 (38.9)% 2,423 5,132 (52.8)%
Service fees and other income 19,101 14,715 29.8% 61,825 49,381
25.2% Total revenues 282,214 223,732 26.1% 857,785 656,303 30.7%
Expenses: Commissions and fees 214,659 163,393 31.4% 647,034
477,133 35.6% Compensation and benefits 35,911 28,410 26.4% 107,710
81,391 32.3% Non-cash compensation 242 3,679 (93.4)% 5,926 7,689
(22.9)% Brokerage, communication and clearance fees 5,170 4,349
18.9% 15,706 13,003 20.8% Rent and occupancy, net of sublease
revenue 2,412 1,905 26.6% 7,374 4,955 48.8% Professional services
3,628 3,127 16.0% 10,472 8,091 29.4% Interest 1,255 1,701 (26.2)%
3,970 5,193 (23.6)% Depreciation and amortization 6,798 4,902 38.7%
20,080 12,527 60.3% Acquisition-related expense 139 850 (83.6)% 257
1,308 (80.4)% Loss on extinguishment of debt — — N/A 252 314
(19.7)% Amortization of retention and forgivable loans 2,223 2,471
(10.0)% 7,831 8,144 (3.8)% Other 12,926 9,516 35.8% 42,478 28,591
48.6% Total expenses 285,363 224,303 27.2% 869,090 648,339 34.0%
(Loss) income before item shown below (3,149) (571) 451.5% (11,305)
7,964 (242.0)% Change in fair value of contingent consideration — —
N/A 31 12
158.3% (Loss) income before income taxes (3,149) (571) 451.5%
(11,274) 7,976 (241.3)% Income tax benefit (212) (13,354) (98.4)%
(2,288) (11,994) (80.9)% Net (loss) income (2,937) 12,783 (123.0)%
(8,986) 19,970 (145.0)% Less: Net loss attributable to
noncontrolling interest (11) (20) (45.0)% (39) (62) (37.1)% Net
(loss) income attributable to the Company (2,926) 12,803 (122.9)%
(8,947) 20,032 (144.7)% Dividend declared on preferred stock
(7,289) (4,848) 50.4% (20,773) (11,783) 76.3% Net (loss) income
available to common shareholders $ (10,215) $ 7,955 (228.4)% $
(29,720) $ 8,249 (460.3)%
Net (loss) income per common share
availableto common shareholders (basic)
$ (0.06) $ 0.04 (250.0)% $ (0.16) $ 0.05 (420.0)%
Net (loss) income per common share
availableto common shareholders (diluted)
$ (0.06) $ 0.04 (250.0)% $ (0.16) $ 0.04 (500.0)%
Weighted average common shares used
incomputation of per share data:
Basic 183,519,768 182,988,516 0.3% 184,415,040 182,082,141 1.3%
Diluted 183,519,768 210,535,372 (12.8)% 184,415,040 205,243,355
(10.1)%
TABLE 2LADENBURG THALMANN
FINANCIAL SERVICES INC.
The following table presents a
reconciliation of EBITDA, as adjusted, to net (loss) income
attributable to the Company as reported.
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
Trailing TwelveMonths
EndedSeptember 30,
(Unaudited; dollars in thousands) 2015
2014
%Change
2015 2014
%Change
2015 Total revenues $ 282,214 $ 223,732 26.1% $ 857,785 $
656,303 30.7% $ 1,122,735 Total expenses 285,363 224,303 27.2%
869,090 648,339 34.0% 1,132,010 (Loss) income before income taxes
(3,149) (571) 451.5% (11,274) 7,976 (241.3)% (9,244) Net (loss)
income attributable to the Company (2,926) 12,803 (122.9)% (8,947)
20,032 (144.7)% 4,454
Reconciliation of EBITDA, asadjusted, to
net (loss) incomeattributable to the Company:
EBITDA, as adjusted (1) $ 8,360 $ 13,347 (37.4)% $ 30,678 $
43,895 (30.1)% $ 47,961 Add: Interest income 69 59 16.9% 178 195
(8.7)% 228 Change in fair value of contingent consideration — — —
31 12 158.3% 31 Less: Loss on extinguishment of debt — — — (252)
(314) (19.7)% (486) Interest expense (1,255) (1,701) (26.2)%
(3,970) (5,193) (23.6)% (5,767) Income tax benefit 212 13,354
(98.4)% 2,288 11,994 (80.9)% 13,640 Depreciation and amortization
(6,798) (4,902) 38.7% (20,080) (12,527) 60.3% (25,950) Non-cash
compensation expense (242) (3,679) (93.4)% (5,926) (7,689) (22.9)%
(8,778) Acquisition-related expense (139) (850) (83.6)% (257)
(1,308) (80.4)% (1,291) Amortization of retention and forgivable
loans (2,223) (2,471) (10.0)% (7,831) (8,144) (3.8)% (10,728)
Financial advisor recruiting expense (764) (354) 115.8% (1,670)
(889) 87.9% (2,270) Other (2) (146) — * (2,136) — * (2,136) Net
(loss) income attributable to the Company $ (2,926) $ 12,803
(122.9)% $ (8,947) $ 20,032 (144.7)% $ 4,454
* Not Meaningful
(1) Includes increases of $1,287 and $3,925 for the three
and nine months ended September 30, 2014, respectively, related to
amortization of forgivable loans and financial advisor recruiting
expenses to conform to the 2015 presentation. (2) Includes loss on
write-off of receivable from subtenant of $855 for the nine months
ended September 30, 2015, rent expense due to default by subtenant
of $468 for nine months ended September 30, 2015, and excise and
franchise tax expense of $263 for the nine months ended September
30, 2015.
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Sard Verbinnen & CoPaul Caminiti, 212-687-8080orEmily
Deissler, 212-687-8080
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