Highlights:
- Fourth quarter and full year 2016
revenues were $297 million and $1.1 billion, respectively
- Client assets of approximately $137
billion at December 31, 2016, up 10% year-over-year, including
advisory assets under management of $58 billion and cash balances
of $4.8 billion
- Recurring revenue of 77% in independent
brokerage and advisory services business
- Shareholders’ equity of $363 million at
December 31, 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, 2016.
Dr. Phillip Frost, Chairman of Ladenburg, said, “Ladenburg’s
independent brokerage and advisory business finished 2016 with a
strong fourth quarter performance, with increases in revenue and
profitability over the prior year. Our total client assets under
administration increased last year to $137 billion, up over 10%
from 2015, positioning the company well for the year ahead. We’re
pleased to have increased our network of approximately 4,000
independent advisors, with a record year of recruiting at our
firms, including adding significant groups of advisors from
Foothill Securities and Wall Street Financial Group at our
Securities America subsidiary. Our independent advisory and
investment banking platforms continue to deliver high quality,
trustworthy services to meet the needs of our clients. We eagerly
look forward to a future of continued growth.”
Richard Lampen, President and Chief Executive Officer of
Ladenburg, said, “Ladenburg continues to maintain its position as a
leader in the independent brokerage and advisory business. We
believe this business remains one of the fastest growing segments
of the financial services industry, as the independent channel
plays an increasingly important role in providing independent
retail advice, financial planning and investment solutions to the
mass affluent segment of “Main Street America.” Our approximately
4,000 advisors continue to grow the fee based side of their
businesses with total advisory assets under management increasing
15% over the prior year to $57.8 billion. While regulatory and
market change has become a constant in our businesses, we look
forward to executing on our business plans in 2017 as a balanced
financial services firm focused on generating long-term returns for
shareholders.”
For the Fourth Quarter and Full Year Ended
December 31, 2016
Fourth quarter 2016 revenues were $297.1 million, a 0.9%
increase from revenues of $294.3 million in the fourth quarter of
2015. Advisory fee revenue for the three months ended December 31,
2016 increased by 6.8% to $121.9 million from $114.1 million for
the comparable period in 2015, mainly as a result of improved
market conditions and higher average advisory assets.
Net income attributable to the Company for the fourth quarter of
2016 was $0.6 million, as compared to net loss attributable to the
Company of $2.2 million in the fourth quarter of 2015. Net loss
available to common shareholders, after payment of preferred
dividends, was $7.3 million or ($0.04) per basic and diluted common
share for the fourth quarter of 2016, as compared to net loss
available to common shareholders, after payment of preferred
dividends, of $9.5 million or ($0.05) per basic and diluted common
share in the comparable 2015 period. The fourth quarter 2016
results included approximately $8.5 million of non-cash charges for
depreciation, amortization and compensation, $1.1 million of
amortization of retention and forgivable loans, $0.8 million of
interest expense and $2.0 million of income tax expense. 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.
Full year 2016 revenues were $1.1 billion, a 4% decrease from
revenues of $1.2 billion for full year 2015. Net loss attributable
to the Company for fiscal 2016 was $22.3 million, as compared to
net loss attributable to the Company of $11.2 million in fiscal
2015. Net loss available to common shareholders, after payment of
preferred dividends, was $52.7 million or ($0.29) per basic and
diluted common share in 2016, as compared to net loss available to
common shareholders, after payment of preferred dividends, of $39.3
million or ($0.21) per basic and diluted common share in 2015. The
2016 results included approximately $33.6 million of non-cash
charges for depreciation, amortization and compensation, $5.5
million of amortization of retention and forgivable loans, $4.3
million of interest expense and $10.0 million of income tax
expense. 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.
Recurring Revenues
For the full year ended December 31, 2016, recurring revenues,
which consist of advisory fees, trailing commissions, cash sweep
fees and certain other fees, represented approximately 77% of
revenues from the Company’s independent brokerage and advisory
services business. Recurring revenues for this business were
approximately 74% for full year 2015.
EBITDA, as adjusted
EBITDA, as adjusted, for the fourth quarter of 2016 was $14.6
million, a 12.8% increase from $13.0 million in the comparable 2015
period. EBITDA, as adjusted, for full year 2016 was $35.8 million,
a decrease of 19% from $44.0 million for the prior-year period.
Attached hereto as Table 2 is a reconciliation of net income (loss)
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 of 2016 was primarily attributable
to an increase in our independent brokerage and advisory services
business. The decline in EBITDA, as adjusted, for the full year
2016 was primarily attributable to a decrease in our Ladenburg
segment as a result of lower investment banking revenues.
Client Assets
At December 31, 2016, total client assets under administration
were approximately $137 billion, an increase of 10% from
approximately $125 billion at December 31, 2015. At December 31,
2016, client assets included cash balances of approximately $4.8
billion, same as prior year-end.
Stock Repurchases
During the quarter ended December 31, 2016, Ladenburg
repurchased 537,396 shares of its common stock at a cost of
approximately $1.2 million, representing an average price per share
of $2.22. During the period from January 1, 2016 through December
31, 2016, Ladenburg repurchased 6,132,124 shares of its common
stock at a cost of approximately $14.7 million, representing an
average price per share of $2.41. Since the inception of its stock
repurchase program in March 2007 through March 7, 2017, Ladenburg
has repurchased 25,000,000 shares at a total cost of approximately
$52.4 million, including purchases of 7,500,000 shares outside its
stock repurchase program. As of March 7, 2017, Ladenburg has the
authority to repurchase an additional 10,000,000 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, severance cost 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, 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 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 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 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, 2016 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 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, % 2016
2015 Change 2016 2015
Change Revenues: Commissions $ 130,068 $ 139,019
(6.4)% $ 512,001 $ 558,683 (8.4)% Advisory fees 121,853 114,103
6.8% 463,602 462,087 0.3% Investment banking 10,008 10,013 0.0%
25,453 35,145 (27.6)% Principal transactions 61 (155) 139.4% 747
602 24.1% Interest and dividends 3,058 1,419 115.5% 10,256 3,842
166.9% Service fees and other income 32,011 29,934 6.9% 94,894
91,759 3.4% Total revenues
297,059
294,333 0.9% 1,106,953 1,152,118 (3.9)%
Expenses:
Commissions and fees 212,119 210,808 0.6% 818,000 857,842 (4.6)%
Compensation and benefits 43,721 42,076 3.9% 152,592 149,786 1.9%
Non-cash compensation 1,315 2,833 (53.6)% 5,311 8,759 (39.4)%
Brokerage, communication and clearance fees 3,415 5,021 (32.0)%
15,719 20,727 (24.2)% Rent and occupancy, net of sublease revenue
2,652 2,423 9.5% 9,673 9,797 (1.3)% Professional services 4,397
4,093 7.4% 14,940 14,156 5.5% Interest 750 1,199 (37.4)% 4,262
5,169 (17.5)% Depreciation and amortization 7,204 6,997 3.0% 28,334
27,077 4.6% Acquisition-related expenses 354 271 30.6% 1,357 940
44.4% Loss on extinguishment of debt — — N/A — 252 (100.0)%
Amortization of retention and forgivable loans 1,091 1,407 (22.5)%
5,472 9,238 (40.8)% Other 17,417 17,650 (1.3)% 63,363 60,125
5.4% Total expenses 294,435 294,778 (0.1)% 1,119,023
1,163,868 (3.9)% Income (loss) before item shown below 2,624 (445)
689.7% (12,070 ) (11,750) (2.7)% Change in fair value of contingent
consideration (38) 24 (258.3)% (216 ) 55 (492.7)% Income (loss)
before income taxes 2,586 (421) 714.3% (12,286 ) (11,695) (5.1)%
Income tax expense (benefit) 1,965 1,806 8.8% 10,025 (482)
2,179.9% Net income (loss) 621 (2,227) 127.9% (22,311 ) (11,213)
(99.0)% Net loss attributable to noncontrolling interest (9 ) (23)
60.9% (42 ) (62) 32.3% Net income (loss) attributable to the
Company 630 (2,204) 128.6% (22,269 ) (11,151) (99.7)% Dividends
declared on preferred stock (7,924 ) (7,335) (8.0)% (30,438 )
(28,108) (8.3)% Net loss available to common shareholders $ (7,294
) $ (9,539) 23.5% $ (52,707 ) $ (39,259) (34.3)% Net loss
per share available to common shareholders (basic) $ (0.04 ) $
(0.05) 20.0% $ (0.29 ) $ (0.21) (38.1)% Net loss per share
available to common shareholders (diluted) $ (0.04 ) $ (0.05) 20.0%
$ (0.29 ) $ (0.21) (38.1)% Weighted average common shares
used in computation of per share data: Basic 188,837,490
181,423,440 4.0% 182,987,850 183,660,993 (0.4)% Diluted 188,837,490
181,423,440 3.5% 182,987,850 183,660,993 (0.4)%
TABLE 2
LADENBURG THALMANN FINANCIAL SERVICES
INC.
The following table presents a
reconciliation of net income (loss) attributable to the Company as
reported to EBITDA, as adjusted.
Three Months
Ended Twelve Months Ended December 31,
December 31, (Unaudited; dollars in thousands)
2016 2015 % Change 2016
2015 % Change Total revenues $ 297,059
$ 294,333 0.9 % $ 1,106,953 $ 1,152,118 (3.9 )% Total expenses
294,435 294,778 (0.1 )% 1,119,023 1,163,868 (3.9 )% Income (loss)
before income taxes 2,586 (421 ) 714.3 % (12,286 ) (11,695 ) (5.1
)% Net income (loss) attributable to the Company 630 (2,204 ) 128.6
% (22,269 ) (11,151 ) (99.7 )% Reconciliation of net income
(loss) attributable to the Company to EBITDA, as adjusted:
Net income (loss) attributable to the Company $ 630 $ (2,204 )
128.6 % $ (22,269 ) $ (11,151 ) (99.7 )% Less: Interest income (191
) (77 ) (148.1 )% (672 ) (254 ) (164.6 )% Change in fair value of
contingent consideration 38 (24 ) 258.3 % 216 (55 ) 492.7 % Add:
Loss on extinguishment of debt — — N/A — 252 (100.0 )% Interest
expense 750 1,199 (37.4 )% 4,262 5,169 (17.5 )% Income tax expense
(benefit) 1,965 1,806 8.8 % 10,025 (482 ) 2,179.9 % Depreciation
and amortization 7,204 6,997 3.0 % 28,334 27,077 4.6 % Non-cash
compensation expense 1,315 2,833 (53.6 )% 5,311 8,759 (39.4 )%
Amortization of retention and forgivable loans 1,091 1,407 (22.5 )%
5,472 9,238 (40.8 )% Financial advisor recruiting expense 691 717
(3.6 )% 1,882 2,387 (21.2 )% Acquisition-related expense (1) 354
271 30.6 % 1,357 940 44.4 % Other (2) 776 33 2,251.5
% 1,853 2,165 (14.4 )% EBITDA, as adjusted $ 14,623
$ 12,958 12.8 % $ 35,771 $ 44,045 (18.8
)%
(1) Includes $409 for acquisition-related expense that was
previously included in professional services expense and other
expense for the twelve months ended December 31, 2015.
(2) Includes loss on severance costs of $477 and $755, excise
and franchise tax expense of $164 and $508 and compensation expense
that may be paid in stock of $129 and $586, for the three and
twelve months ended December 31, 2016, respectively. Includes loss
on write-off of receivable from subtenant of $855, compensation
expense that may be paid in stock of $532, rent expense due to
default by subtenant of $468 and excise and franchise tax expense
of $310 for the twelve months ended December 31, 2015.
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Sard Verbinnen & CoEmily Claffey / Benjamin Spicehandler,
212-687-8080
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