Highlights:
- Second quarter 2019 revenues of $363.6 million, up 1.6%
compared to prior year period
- Six month 2019 revenues of $699.0 million, up 1.7% compared to
prior year period
- Second quarter 2019 net income of $7.5 million and EBITDA, as
adjusted, of $27 million
- Six month 2019 net income of $10.9 million and EBITDA, as
adjusted, of $47 million
- Record client assets of $177.7 billion at June 30, 2019,
including record advisory assets under management of $85.7
billion
- Recurring revenue of 77.1% for the trailing 12 months ended
June 30, 2019 in independent advisory and brokerage services
segment
- Shareholders’ equity of $246.6 million at June 30, 2019
Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS,
LTS PrA, LTSL, LTSF, LTSK, LTSH) today announced financial results
for the three and six months ended June 30, 2019.
Richard Lampen, Chairman, President and CEO of Ladenburg, said,
“We are pleased with our robust second quarter 2019 results,
including growth in client assets to a record $177.7 billion and
continued strong operating financial performance. Our independent
advisory and brokerage firms and capital markets business performed
well during the quarter. Our investment banking pipeline is solid,
and the increased levels of capital markets activity have continued
into the third quarter. Investment banking revenue has rebounded
since the temporary U.S. government shutdown during the first
quarter. We remain focused on continuing our growth and returning
capital to shareholders, as appropriate.”
Adam Malamed, Executive Vice President and Chief Operating
officer of Ladenburg, said: “We made solid progress on the
continued growth of our nationwide network of independent financial
advisors during the first half of 2019, reflecting our successful
recruiting efforts over the past three years. Our advisory assets
under management at June 30, 2019 were a record $85.7 billion, up
14.0% from $75.2 billion at June 30, 2018 and up 17.8% from $72.8
billion at December 31, 2018. As we look ahead to the remainder of
2019, we will continue to invest in opportunities to grow recurring
revenues, while continuing to manage expenses through shared
services and operational efficiencies. Our ultimate goal is to
further drive margin and profitability improvements across the
enterprise while making strategic investments to create value for
our employees, financial advisors and shareholders.”
For the Three and Six Months Ended June
30, 2019 (See Table 1)
Second quarter 2019 revenues were $363.6 million, a 1.6%
increase from revenues of $357.8 million in the second quarter of
2018. Commissions revenue for the second quarter of 2019 decreased
by 0.3% to $179.8 million from $180.4 million for the comparable
period in 2018, primarily due to a decrease in our independent
advisory and brokerage segment from decreased mutual funds and
variable annuity trailing commissions, partially offset by an
increase in our insurance brokerage segment due to the acquisition
of certain assets of Kestler Financial Group by Highland. Advisory
fee revenue for the three months ended June 30, 2019 increased by
2.7% to $126.0 million from $122.6 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 second quarter of 2019 decreased by 1.6% to $11.5 million
from $11.7 million for the comparable period in 2018, due to a
decrease in capital raising revenue, partially offset by an
increase in strategic advisory services revenue. Service fees
revenue for the second quarter of 2019 increased by 17.4% to $32.4
million from $27.6 million for the comparable period, primarily due
to increased revenues from our cash sweep programs.
Net income attributable to the Company for the second quarter of
2019 was $7.5 million, as compared to net income attributable to
the Company of $9.3 million in the second quarter of 2018,
primarily due to a decrease in other income at our corporate
segment related to the forgiveness of the NFS loan in May 2018 and
increased overall expenses. Net loss available to common
shareholders, after payment of preferred dividends, was $1.2
million or ($0.01) per basic and diluted common share for the
second quarter of 2019, as compared to net income available to
common shareholders of $0.8 million or $0.00 per basic and diluted
common share in the comparable 2018 period. The second quarter 2019
results included $2.0 million of income tax expense, $7.4 million
of non-cash charges for depreciation, amortization and
compensation, $0.1 million of amortization of retention and
forgivable loans, $2.9 million of amortization of contract
acquisition costs and $5.6 million of interest expense. The second
quarter 2018 results included $4.6 million of income tax expense,
$7.3 million of non-cash charges for depreciation, amortization and
compensation, $0.1 million of amortization of retention and
forgivable loans, $2.4 million of amortization of contract
acquisition costs and $2.2 million of interest expense.
For the six months ended June 30, 2019, the Company had revenues
of $699.0 million, a 1.7% increase from revenues of $687.1 million
for the comparable 2018 period. Net income attributable to the
Company for the six months ended June 30, 2019 was $10.9 million,
as compared to net income attributable to the Company of $14.8
million in the comparable 2018 period. Net loss available to common
shareholders, after payment of preferred dividends, was $6.4
million or ($0.04) per basic and diluted common share for the six
months ended June 30, 2019, as compared to net loss available to
common shareholders of $2.3 million or ($0.01) per basic and
diluted common share in the comparable 2018 period. The results for
the six months ended June 30, 2019 included $3.4 million of income
tax expense, $14.7 million of non-cash charges for depreciation,
amortization and compensation, $0.3 million of amortization of
retention and forgivable loans, $5.7 million of amortization of
contract acquisition costs and $10.6 million of interest expense.
The comparable 2018 results included $6.7 million of income tax
expense, $14.6 million of non-cash charges for depreciation,
amortization and compensation, $0.2 million of amortization of
retention and forgivable loans, $4.6 million of amortization of
contract acquisition costs and $4.0 million of interest
expense.
Recurring Revenues
For the trailing twelve months ended June 30, 2019, recurring
revenues, which consist of advisory fees, trailing commissions,
cash sweep revenues and certain other fees, represented
approximately 77.1% of revenues from the Company’s independent
advisory and brokerage services segment.
EBITDA, as adjusted (See Table
2)
EBITDA, as adjusted, for the second quarter of 2019 was $26.7
million, an increase of 3.3% from $25.8 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 six months ended June 30, 2019 was $47.1 million,
an increase of 2.4% from $46.0 million for the prior year period.
The increase in EBITDA, as adjusted, for the second quarter and the
six months of 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.
Client Assets
At June 30, 2019, total client assets under administration were
$177.7 billion, a 12.0% increase from $168.0 billion at June 30,
2018. At June 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 June 30, 2019,
the Company has repurchased 85,797,852 shares of its common stock
at a total cost of approximately $208.6 million, including
purchases outside its stock repurchase program, representing an
average price per share of $2.43. As of August 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 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.
TABLE 1 LADENBURG THALMANN FINANCIAL
SERVICES INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
%
June 30,
%
2019
2018
Change
2019
2018
Change
Revenues:
Commissions
$
179,752
$
180,381
(0.3)%
$
346,681
$
343,667
0.9%
Advisory fees
125,993
122,638
2.7%
239,901
237,021
1.2%
Investment banking
11,539
11,729
(1.6)%
21,368
28,219
(24.3)%
Principal transactions
601
233
157.9%
1,529
400
282.3%
Interest and dividends
1,328
1,080
23.0%
2,544
1,867
36.3%
Service fees
32,387
27,585
17.4%
64,590
52,487
23.1%
Other income
11,980
14,110
(15.1)%
22,422
23,479
(4.5)%
Total revenues
363,580
357,756
1.6%
699,035
687,140
1.7%
Expenses:
Commissions and fees
255,148
254,405
0.3%
489,450
485,716
0.8%
Compensation and benefits
51,904
48,573
6.9%
100,488
95,822
4.9%
Non-cash compensation
1,444
1,568
(7.9)%
2,938
3,062
(4.0)%
Brokerage, communication and clearance
fees
3,563
2,941
21.1%
7,564
8,260
(8.4)%
Rent and occupancy, net of sublease
revenue
2,644
2,387
10.8%
5,314
4,880
8.9%
Professional services
5,269
5,311
(0.8)%
9,704
10,329
(6.1)%
Interest
5,573
2,154
158.7%
10,622
4,020
164.2%
Depreciation and amortization
5,906
5,762
2.5%
11,811
11,571
2.1%
Acquisition-related expenses
3
—
nm
24
913
(97.4)%
Amortization of retention and forgivable
loans
109
107
1.9%
252
183
37.7%
Amortization of contract acquisition
costs
2,874
2,361
21.7%
5,651
4,571
23.6%
Other
19,545
18,253
7.1%
40,679
36,182
12.4%
Total expenses
353,982
343,822
3.0%
684,497
665,509
2.9%
Income before item shown below
9,598
13,934
(31.1)%
14,538
21,631
(32.8)%
Change in fair value of contingent
consideration
(85
)
(50
)
(70.0)%
(197
)
(111
)
(77.5)%
Income before income taxes
9,513
13,884
(31.5)%
14,341
21,520
(33.4)%
Income tax expense
2,005
4,574
(56.2)%
3,401
6,746
(49.6)%
Net income
7,508
9,310
(19.4)%
10,940
14,774
(26.0)%
Net income attributable to noncontrolling
interest
20
8
150.0%
21
9
133.3%
Net income attributable to the Company
$
7,488
$
9,302
(19.5)%
$
10,919
$
14,765
(26.0)%
Dividends declared on preferred stock
(8,695)
(8,508
)
(2.2)%
(17,285
)
(17,016
)
(1.6)%
Net (loss) income available to common
shareholders
$
(1,207
)
$
794
nm
$
(6,366
)
$
(2,251
)
(182.8)%
Net (loss) income per common share
available to common shareholders (basic)
$
(0.01
)
$
0.00
nm
$
(0.04
)
$
(0.01
)
(300.0)%
Net (loss) income per common share
available to common shareholders (diluted)
$
(0.01
)
$
0.00
nm
$
(0.04
)
$
(0.01
)
(300.0)%
Weighted average common shares used in
computation of per share data:
Basic
143,444,079
196,557,837
(27.0)%
143,377,919
196,230,136
(26.9)%
Diluted
143,444,079
209,855,936
(31.6)%
143,377,919
196,230,136
(26.9)%
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 six months ending June 30, 2019 and 2018:
Three months ended
Six months ended
June 30,
June 30,
(Unaudited; amounts in
thousands)
2019
2018
% Change
2019
2018
% Change
Total revenues
$
363,580
$
357,756
1.6%
$
699,035
$
687,140
1.7%
Total expenses
353,982
343,822
3.0%
684,497
665,509
2.9%
Income before income taxes
9,513
13,884
(31.5)%
14,341
21,520
(33.4)%
Net income attributable to the Company
7,488
9,302
(19.5)%
10,919
14,765
(26.0)%
Reconciliation of net income attributable
to the Company to EBITDA, as adjusted:
Net income attributable to the Company
$
7,488
$
9,302
(19.5)%
$
10,919
$
14,765
(26.0)%
Less:
Interest income
(714
)
(508
)
40.6%
(1,256
)
(878
)
43.1%
Change in fair value of contingent
consideration
85
50
70.0%
197
111
77.5%
Add:
Interest expense
5,573
2,154
158.7%
10,622
4,020
164.2%
Income tax expense
2,005
4,574
(56.2)%
3,401
6,746
(49.6)%
Depreciation and amortization
5,906
5,762
2.5%
11,811
11,571
2.1%
Non-cash compensation expense
1,444
1,568
(7.9)%
2,938
3,062
(4.0)%
Amortization of retention and forgivable
loans
109
107
1.9%
252
183
37.7%
Amortization of contract acquisition
costs
2,874
2,361
21.7%
5,651
4,571
23.6%
Financial advisor recruiting expense
2
89
(97.8)%
9
176
(94.9)%
Acquisition-related expense
3
—
nm
24
913
(97.4)%
Other (1) (2)
1,917
380
404.5%
2,517
763
229.9%
EBITDA, as adjusted
$
26,692
$
25,839
3.3%
$
47,085
$
46,003
2.4%
nm - not meaningful
1
Includes severance costs of $1,099 and $1,109, excise and franchise
tax expense of $134 and $282, compensation expense that may be paid
in stock of $703 and $857 and non-recurring expenses related to a
block repurchase of our common stock and other legal matters of
($19) and $269 for the three and six months ended June 30, 2019.
2
Includes severance costs of $86 and $174, excise and franchise tax
expense of $169 and $322 and compensation expense that may be paid
in stock of $125 and $267 for the three and six months ended June
30, 2018.
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version on businesswire.com: https://www.businesswire.com/news/home/20190808005153/en/
Emily Claffey / Benjamin Spicehandler Sard Verbinnen & Co
212-687-8080
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