UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 16, 2016

Ladenburg Thalmann Financial Services Inc.
(Exact name of registrant as specified in its charter)
 
Florida
 
001-15799
 
650701248
(State or other jurisdiction
 of incorporation)
 
(Commission File
 Number)
 
(IRS Employer
 Identification No.)

4400 Biscayne Boulevard, 12th Floor, Miami, Florida
 
33137
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code:     (305) 572-4100

Not Applicable
(Former Name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02.   Results of Operations and Financial Condition.

On March 16, 2016, Ladenburg Thalmann Financial Services Inc. issued a press release announcing financial results for the quarter and year ended December 31, 2015. A copy of the press release is attached hereto as Exhibit 99.1.

The information included herein and in Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.   Financial Statements and Exhibits.

(d) Exhibits.
Exhibit No.
Description
99.1
Press release dated March 16, 2016.
 






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Ladenburg Thalmann Financial Services Inc.
 
 
 
Date:  March 16, 2016
By:  
/s/ Brett H. Kaufman    
 
 
Name:  
Brett H. Kaufman
 
 
Title:  
Senior Vice President and Chief Financial Officer






Exhibit Index
Exhibit No.
Description
99.1
Press release dated March 16, 2016.
 


















FOR IMMEDIATE RELEASE
    

LADENBURG THALMANN REPORTS
FOURTH QUARTER AND FULL YEAR 2015 FINANCIAL RESULTS


Highlights:

•
Revenues increased by 25% to record $1.2 billion in fiscal 2015
•
Fiscal 2015 EBITDA, as adjusted, of $43.6 million
•
Client assets of approximately $125 billion at December 31, 2015, up 15% year-over-year
•
Recurring revenue of 74% in independent brokerage and advisory services business
•
Shareholders’ equity of $376 million at December 31, 2015


MIAMI, FL, March 16, 2016 -- Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS, LTS PrA) today announced financial results for the fourth quarter and full year ended December 31, 2015.
Dr. Phillip Frost, Chairman of Ladenburg, said, “Ladenburg’s revenues grew significantly in 2015 fueled by acquisitions in our independent brokerage and advisory services businesses and solid growth in our advisory fees, demonstrating the ongoing strength of the independent broker-dealer area. Despite a challenging market environment in the capital markets and investment banking business, we believe we are well positioned as a balanced financial services firm and remain confident that Ladenburg will generate long-term value for our shareholders in the year ahead.”
Richard Lampen, President and Chief Executive Officer of Ladenburg, said, “Continued volatile market conditions in 2015, including the fourth quarter, impacted our capital markets and investment banking businesses, resulting in a decline of equity capital raises for small and mid-cap public companies compared to the prior year.  At the same time, our independent brokerage and advisory services businesses continued to grow, with strong recurring revenue of 74% in 2015, and we now have total advisory assets under management of $50 billion.  We view this sector as one of the most vibrant growth areas in the


financial services industry and see ample opportunity to build market share in 2016 through recruiting, strategic acquisitions and internal growth.”

For the Fourth Quarter and Full Year Ended December 31, 2015
Fourth quarter 2015 revenues were $294.3 million, an 11% increase from revenues of $265.0 million in the fourth quarter of 2014, in part due to the acquisition of Securities Service Network, Inc. (“SSN”). Advisory fee revenue for the three months ended December 31, 2015 increased by 17% to $114.1 million from $97.9 million for the comparable period in 2014, mainly as a result of new business development and the acquisition of SSN, which added over $5 billion in advisory assets.
Net loss attributable to the Company for the fourth quarter of 2015 was $2.2 million, as compared to net income attributable to the Company of $10.4 million in the fourth quarter of 2014. Net loss available to common shareholders, after payment of preferred dividends, was $9.5 million or ($0.05) per basic and diluted common share for the fourth quarter of 2015, as compared to net income available to common shareholders of $5.0 million or $0.03 per basic common share and $0.02 per diluted common share, respectively, in the comparable 2014 period. The fourth quarter 2015 results included approximately $9.8 million of non-cash charges for depreciation, amortization and compensation, $1.4 million of amortization of retention and forgivable loans, $1.2 million of interest expense and $1.8 million of income tax expense. The fourth quarter 2014 results included 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, $0.2 million of loss on extinguishment of debt and $8.4 million of income tax benefit resulting from the KMS acquisition and the reversal of the Company's deferred tax asset valuation allowance.
Full year 2015 revenues were $1.2 billion, a 25% increase from revenues of $921.3 million for full year 2014. Net loss attributable to the Company for fiscal 2015 was $11.2 million, as compared to net income attributable to the Company of $33.4 million in fiscal 2014. Net loss available to common shareholders, after payment of preferred dividends, was $39.3 million or ($0.21) per basic and diluted common share in 2015, as compared to net income available to common shareholders, after payment of preferred dividends, of $16.2 million or $0.09 per basic and $0.08 per diluted common share in 2014. The 2015 results included approximately $35.8 million of non-cash charges for depreciation, amortization and compensation, $9.2 million of amortization of retention and forgivable loans, $5.2 million of interest expense, $0.3 million of loss on extinguishment of debt and $0.5 million of income tax benefit. The 2014 results included 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, $0.5 million of loss on early extinguishment of debt and $23.3 million of income tax benefit


primarily resulting from the Highland and KMS acquisitions and the reversal of the Company's deferred tax asset valuation allowance.
Recurring Revenues
For the quarter and full year ended December 31, 2015, recurring revenues, which consist of advisory fees, trailing commissions, cash sweep fees and certain other fees, represented approximately 73% and 74%, respectively, of revenues from the Company’s independent brokerage and advisory services business. Recurring revenues for this business were approximately 71% for full year 2014.
EBITDA, as adjusted
EBITDA, as adjusted, for the fourth quarter of 2015 was $13.0 million, a 25% decrease from $17.3 million in the comparable 2014 period. EBITDA, as adjusted, for full year 2015 was $43.6 million, a decrease of 29% from $61.2 million for the prior-year period. 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). The decline in EBITDA, as adjusted, for the full year 2015 was primarily attributable to an $11.3 million decrease in EBITDA, as adjusted, in our investment banking and insurance brokerage businesses.
Client Assets
At December 31, 2015, total client assets under administration were approximately $125 billion, an increase of 15% from approximately $108 billion at December 31, 2014. At December 31, 2015, client assets included cash balances of approximately $4.8 billion, an increase of 19% from approximately $4.0 billion at prior year-end.
Stock Repurchases
During the quarter ended December 31, 2015, Ladenburg repurchased 1,606,746 shares of its common stock at a cost of approximately $4.5 million, representing an average price per share of $2.81. During the period from January 1, 2015 through December 31, 2015, Ladenburg repurchased 5,673,415 shares of its common stock at a cost of approximately $16.4 million, representing an average price per share of $2.88. Since the inception of its stock repurchase program in March 2007 through March 7, 2016, Ladenburg has repurchased 20,870,044 shares at a total cost of approximately $42.3 million, including purchases of 7,500,000 shares outside its stock repurchase program. As of March 7, 2016, Ladenburg has the authority to repurchase an additional 4,129,956 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.

Contact:    Paul Caminiti/Emily Deissler
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 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, 2015 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.

[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
 
 
 
 
December 31,
 
%
 
December 31,
 
%
 
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Commissions
 
$
139,019

 
$
129,214

 
7.6%
 
$
558,683

 
$
445,734

 
25.3%
Advisory fees
 
114,103

 
97,948

 
16.5%
 
462,087

 
343,212

 
34.6%
Investment banking
 
10,013

 
8,692

 
15.2%
 
35,145

 
46,998

 
(25.2)%
Principal transactions
 
(155
)
 
239

 
(164.9)%
 
602

 
1,938

 
(68.9)%
Interest and dividends
 
1,419

 
1,077

 
31.8%
 
3,842

 
6,209

 
(38.1)%
Service fees and other income
 
29,934

 
27,780

 
7.8%
 
91,759

 
77,162

 
18.9%
Total revenues
 
294,333

 
264,950

 
11.1%
 
1,152,118

 
921,253

 
25.1%
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
 
210,808

 
185,045

 
13.9%
 
857,842

 
662,178

 
29.5%
Compensation and benefits
 
42,076

 
38,840

 
8.3%
 
149,786

 
120,231

 
24.6%
Non-cash compensation
 
2,833

 
2,852

 
(0.7)%
 
8,759

 
10,541

 
(16.9)%
Brokerage, communication and clearance fees
 
5,021

 
4,897

 
2.5%
 
20,727

 
17,900

 
15.8%
Rent and occupancy, net of sublease revenue
 
2,423

 
2,085

 
16.2%
 
9,797

 
7,040

 
39.2%
Professional services
 
4,093

 
2,949

 
38.8%
 
14,565

 
11,040

 
31.9%
Interest
 
1,199

 
1,795

 
(33.2)%
 
5,169

 
6,990

 
(26.1)%
Depreciation and amortization
 
6,997

 
5,870

 
19.2%
 
27,077

 
18,397

 
47.2%
Acquisition-related expense
 
271

 
1,034

 
(73.8)%
 
528

 
2,342

 
(77.5)%
Loss on extinguishment of debt
 
—

 
234

 
(100.0)%
 
252

 
548

 
(54.0)%
Amortization of retention and forgivable loans
 
1,407

 
2,897

 
(51.4)%
 
9,238

 
11,041

 
(16.3)%
Other
 
17,650

 
14,422

 
22.4%
 
60,128

 
43,011

 
39.8%
Total expenses
 
294,778

 
262,920

 
12.1%
 
1,163,868

 
911,259

 
27.7%
(Loss) income before item shown below
 
(445
)
 
2,030

 
(121.9)%
 
(11,750
)
 
9,994

 
(217.6)%
Change in fair value of contingent consideration
 
24

 
—

 
N/A
 
55

 
12

 
358.3%
(Loss) income before income taxes
 
(421
)
 
2,030

 
(120.7)%
 
(11,695
)
 
10,006

 
(216.9)%
Income tax expense (benefit)
 
1,806

 
(8,397
)
 
121.5%
 
(482
)
 
(23,346
)
 
97.9%
Net (loss) income
 
(2,227
)
 
10,427

 
(121.4)%
 
(11,213
)
 
33,352

 
(133.6)%
Net loss attributable to noncontrolling interest
 
(23
)
 
(19
)
 
(21.1)%
 
(62
)
 
(81
)
 
23.5%
Net (loss) income attributable to the Company
 
(2,204
)
 
10,446

 
(121.1)%
 
(11,151
)
 
33,433

 
(133.4)%
Dividends declared on preferred stock
 
(7,335
)
 
(5,461
)
 
(34.3)%
 
(28,108
)
 
(17,244
)
 
(63.0)%
Net (loss) income available to common shareholders
 
$
(9,539
)
 
$
4,985

 
(291.4)%
 
$
(39,259
)
 
$
16,189

 
(342.5)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income per share available to common shareholders (basic)
 
$
(0.05
)
 
$
0.03

 
(266.7)%
 
$
(0.21
)
 
$
0.09

 
(333.3)%
Net (loss) income per share available to common shareholders (diluted)
 
$
(0.05
)
 
$
0.02

 
(350.0)%
 
$
(0.21
)
 
$
0.08

 
(362.5)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares used in computation of per share data:
 
 
 
 
 
 
 
 
 
 
 
 
       Basic
 
181,423,440

 
184,805,171

 
(1.8)%
 
183,660,993

 
182,768,494

 
0.5%
       Diluted
 
181,423,440

 
210,297,301

 
(13.7)%
 
183,660,993

 
206,512,437

 
(11.1)%
 
 
 
 
 
 
 
 
 
 
 
 
 




TABLE 2
LADENBURG 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 Ended
 
 
 
Twelve Months Ended
 
 
 
 
December 31,
 
 
 
December 31,
 
 
(Unaudited; dollars in thousands)
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
Total revenues
 
$
294,333

 
$
264,950

 
11
 %
 
$
1,152,118

 
$
921,253

 
25
 %
Total expenses
 
294,778

 
262,920

 
12
 %
 
1,163,868

 
911,259

 
28
 %
(Loss) income before income taxes
 
(421
)
 
2,030

 
(121
)%
 
(11,695
)
 
10,006

 
(217
)%
Net (loss) income attributable to the Company
 
(2,204
)
 
10,446

 
(121
)%
 
(11,151
)
 
33,433

 
(133
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of EBITDA, as adjusted, to net (loss) income attributable to the Company:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA, as adjusted
 
$
12,958

 
$
17,283

 
(25
)%
 
$
43,636

 
$
61,178

 
(29
)%
Add:
 


 
 
 
 
 
 
 
 
 
 
Interest income
 
77

 
50

 
54
 %
 
254

 
245

 
4
 %
Change in fair value of contingent consideration
 
24

 
—

 
*

 
55

 
12

 
358
 %
Less:
 


 
 
 
 
 
 
 
 
 
 
Loss on extinguishment of debt
 
—

 
(234
)
 
(100
)%
 
(252
)
 
(548
)
 
(54
)%
Interest expense
 
(1,199
)
 
(1,795
)
 
(33
)%
 
(5,169
)
 
(6,990
)
 
(26
)%
Income tax (expense) benefit
 
(1,806
)
 
8,397

 
(122
)%
 
482

 
23,346

 
(98
)%
Depreciation and amortization
 
(6,997
)
 
(5,870
)
 
19
 %
 
(27,077
)
 
(18,397
)
 
47
 %
Non-cash compensation expense
 
(2,833
)
 
(2,852
)
 
(1
)%
 
(8,759
)
 
(10,541
)
 
(17
)%
Amortization of retention and forgivable loans
 
(1,408
)
 
(2,897
)
 
(51
)%
 
(9,238
)
 
(11,041
)
 
(16
)%
Financial advisor recruiting expense
 
(717
)
 
(602
)
 
19
 %
 
(2,387
)
 
(1,489
)
 
60
 %
Acquisition-related expense
 
(271
)
 
(1,034
)
 
(74
)%
 
(528
)
 
(2,342
)
 
(77
)%
Other
 
(32
)
 
—

 
*

 
(2,168
)
(1
)
—

 
*

Net (loss) income attributable to the Company
 
$
(2,204
)
 
$
10,446

 
(121
)%
 
$
(11,151
)
 
$
33,433

 
(133
)%

* Not Meaningful

(1)
Includes loss on write-off of receivable from subtenant of $855, deferred compensation obligation of $532, rent expense due to default by subtenant of $468 and excise and franchise tax expense of $313 for the twelve months ended December 31, 2015.


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