News Column

Ladenburg Thalmann Reports Second Quarter 2014 Financial Results

August 11, 2014

Quarterly Financial Highlights:

  • Record revenues of $220.8 million, up 14% year-over-year
  • Adjusted EBITDA increased to $13.3 million, up 22% year-over-year
  • Record client assets of approximately $93 billion, up 20% year-over year
  • Strong recruiting activity at independent broker-dealers
  • Record shareholders’ equity of $243 million

    MIAMI--(BUSINESS WIRE)-- Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS, LTS PrA) today announced financial results for the three and six months ended June 30, 2014.

    Dr. Phillip Frost, Chairman of Ladenburg, said, “We’re pleased with another quarter of strong performance on both sides of Ladenburg's business resulting in significant growth in revenue and adjusted EBITDA. Our recent acquisition of Highland Capital is another step in building a strong, diversified financial services organization, and we believe our entrance into the wholesale life insurance marketplace represents a compelling opportunity to create value through a higher-margin, attractive wholesale distribution channel. Ladenburg is well positioned to continue to excel with the combination of more stable and recurring revenue and cash flows from our independent brokerage and advisory services business with our more volatile, but potentially highly profitable capital markets and investment banking business.”

    Richard Lampen, President and Chief Executive Officer of Ladenburg, said, “The first half of 2014 saw a continuation of the significant increase in revenue and operating cash flows we have experienced in recent years. The leadership team is focused in 2014 on investing in our business to provide the right infrastructure and reinforce our corporate culture to continue this success. Through accelerated investments in technology, risk management, compliance, internal audit, and professional development for our employees and advisors, we’ve further strengthened our platform and positioned the company for strong and sustainable growth going forward. As we enter into the second half of the year, we look forward to building on our recent acquisition activity, our momentum in recruiting activity at our independent broker-dealers and the strength of our investment banking business to drive future results.”

    For the Three and Six Months Ended June 30, 2014

    Second quarter 2014 revenues were $220.8 million, a 14% increase from revenues of $193.9 million in the second quarter of 2013. For the trailing twelve months ended June 30, 2014, revenues were $844.5 million. The strong growth in advisory fees revenue was largely driven by an increase in net new advisory assets, successful recruitment of additional advisors and market appreciation. Commissions and investment banking revenues also remained very strong due to increased levels of client activity.

    Net income attributable to the Company for the second quarter of 2014 was $2.9 million, as compared to net loss attributable to the Company of $5.5 million in the second quarter of 2013. Net loss available to common shareholders, after payment of preferred dividends, was $0.8 million or $(0.00) per basic and diluted common share for the second quarter of 2014, as compared to net loss available to common shareholders of $6.6 million or $(0.04) per basic and diluted common share in the comparable 2013 period. The second quarter 2014 results included approximately $5.9 million of non-cash charges for depreciation, amortization and compensation, $1.8 million of amortization of retention loans related to the Securities America acquisition and $1.6 million of interest expense, while the second quarter 2013 results included approximately $5.2 million of non-cash charges for depreciation, amortization and compensation, $1.8 million of amortization of retention loans related to the Securities America acquisition, $4.9 million of interest expense and $3.8 million of loss on extinguishment of debt.

    For the six months ended June 30, 2014, the Company had revenues of $432.6 million, a 13% increase over revenues of $381.2 million for the comparable 2013 period. Net income attributable to the Company for the six months ended June 30, 2014 was $7.2 million, as compared to net loss attributable to the Company of $5.4 million in the comparable 2013 period. Net income available to common shareholders, after payment of preferred dividends, was $0.3 million or $0.00 per basic and diluted common share for the six months ended June 30, 2014, as compared to a net loss available to common shareholders, after payment of preferred dividends, of $6.4 million or $(0.03) per basic and diluted common share in the comparable 2013 period. The results for the six months ended June 30, 2014 included approximately $11.6 million of non-cash charges for depreciation, amortization and compensation, $3.6 million of amortization of retention loans related to the Securities America acquisition, $3.5 million of interest expense and $0.3 million of loss on extinguishment of debt. The comparable 2013 results included approximately $10.6 million of non-cash charges for depreciation, amortization and compensation, $3.6 million of amortization of retention loans related to the Securities America acquisition, $11.1 million of interest expense and $3.8 million of loss on early extinguishment of debt.

    Recurring Revenues

    For the six months ended June 30, 2014, recurring revenues, which consist of advisory fees, trailing commissions, cash sweep fees and certain other fees, represented approximately 68% of revenues from the Company’s independent brokerage and advisory services business. Recurring revenues for this business were 67% for the trailing twelve months ended June 30, 2014.

    EBITDA, as adjusted

    EBITDA, as adjusted, for the second quarter of 2014 was $13.3 million, a 22% increase from $10.9 million in the 2013 period. EBITDA, as adjusted, for the six months ended June 30, 2014 was $27.9 million, an increase of 12% from $24.9 million for the prior-year period. For the trailing twelve months ended June 30, 2014, EBITDA, as adjusted, was $54.7 million. Attached hereto as Table 2 is a reconciliation of EBITDA, as adjusted, to net income (loss) attributable to the Company as reported (see “Non-GAAP Financial Measures” below).

    Stock Repurchases

    For the quarter ended June 30, 2014, Ladenburg repurchased 871,481 shares of its common stock at a cost of approximately $2.5 million, representing an average price per share of $2.88. During the period from January 1, 2014 through June 30, 2014, Ladenburg repurchased 1,164,090 shares of its common stock at a cost of approximately $3.4 million, representing an average price per share of $2.93. Since the inception of its stock repurchase program in March 2007, Ladenburg has repurchased 12,413,847 shares at a total cost of approximately $17.2 million, including purchases of 7,500,000 shares outside its stock repurchase program. Ladenburg has the authority to repurchase an additional 2,586,153 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 loans, change in the fair value of contingent consideration related to acquisitions, loss on extinguishment of debt, interest income and non-cash compensation expense, 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 loans for the Securities America acquisition and other acquisition-related 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, pre-tax income, net income and cash flows from 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. and Investacorp, Inc. as well as Premier Trust, Inc., Ladenburg Thalmann Asset Management, 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 the independent brokerage and advisory area, growth of our investment banking business, future margins, recruitment of financial advisors and future investments.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, 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, 2013 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)
    (Unaudited)
     
     

    Three Months Ended

     

    Six Months Ended

    June 30,

    June 30,

    2014

     

    2013

     

    % Change

    2014

     

    2013

     

    % Change

     
    Revenues:
     
    Commissions $106,346$98,971 7.5% $206,945$192,038 7.8%
    Advisory fees 82,053 67,663 21.3% 158,932 131,000 21.3%
    Investment banking 11,391 8,112 40.4% 27,390 21,181 29.3%
    Principal transactions 484 429 12.8% 1,266 849 49.1%
    Interest and dividends 1,669 1,702 (1.9%) 3,372 3,313 1.8%
    Service fees and other income 18,81016,992 10.7% 34,66632,793 5.7%
    Total revenues 220,753193,869 13.9% 432,571381,174 13.5%
     
    Expenses:
     
    Commissions and fees 162,001 143,568 12.8% 313,740 278,036 12.8%
    Compensation and benefits 25,091 21,821 15.0% 52,981 45,456 16.6%
    Non-cash compensation 2,083 1,379 51.1% 4,010 2,792 43.6%
    Brokerage, communication and clearance fees 4,247 2,736 55.2% 8,654 5,324 62.5%
    Rent and occupancy, net of sublease revenue 1,517 1,471 3.1% 3,050 2,970 2.7%
    Professional services 2,816 2,066 36.3% 4,964 4,154 19.5%
    Interest 1,599 4,876 (67.2%) 3,492 11,112 (68.6%)
    Depreciation and amortization 3,787 3,870 (2.1%) 7,625 7,777 (2.0%)
    Acquisition-related expense 458 - * 458 - *
    Amortization of retention loans 1,782 1,841 (3.2%) 3,570 3,649 (2.2%)
    Loss on extinguishment of debt - 3,754 (100%) 314 3,754 (91.6%)
    Other 11,68211,263 3.7% 21,17820,303 4.3%
    Total expenses 217,063198,645 9.3% 424,036385,327 10.0%
    Income (loss) before item shown below 3,690 (4,776) 177.3% 8,535 (4,153) 305.5%
    Change in fair value of contingent consideration -(144) 100.0% 12(121) 109.9%
    Income (loss) before income taxes 3,690 (4,920) 175.0% 8,547 (4,274) 300.0%
    Income tax expense 767616 24.5% 1,3601,139 19.4%
    Net income (loss) 2,923 (5,536) 152.8% 7,187 (5,413) 232.8%
    Net loss attributable to noncontrolling interest (21) (13) 61.5% (42) (26) 61.5%
    Net income (loss) attributable to the Company $2,944$(5,523) 153.3% $7,229$(5,387) 234.2%
    Dividends declared on preferred stock (3,710) (1,028) 260.9% (6,935) (1,028) 574.6%
    Net income (loss) available to common shareholders $(766)$(6,551) 88.3% $294$(6,415) 104.6%
     
    Net income (loss) per share available to common shareholders (basic and diluted)

    $ (0.00)

    $ (0.04)

    100.0%

    $ 0.00

    $ (0.03)

    100.0%

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

     

    Basic

    181,739,505183,488,108 (1.0%) 181,621,442183,473,696 (1.0%)

     

    Diluted

    181,739,505183,488,108 (1.0%) 202,727,441183,473,696 10.5%
     
           
    TABLE 2
     
    LADENBURG THALMANN FINANCIAL SERVICES INC.
     

    The following table presents a reconciliation of EBITDA, as adjusted, to net income (loss) attributable to the Company as reported.

     

    Three Months Ended

    Six Months Ended

     

    Trailing Twelve

    Months Ended

    June 30,

    June 30,

    June 30,

    (Unaudited; dollars in thousands)

    2014

     

    2013

    % Change

     

    2014

    2013

    % Change

    2014

     
    Total revenues $220,753$193,869 13.9% $432,571$381,174 13.5% $844,513
    Total expenses 217,063 198,645 9.3% 424,036 385,327 10.0% 829,300
    Pre-tax income (loss) (1) 3,690 (4,920) 175.0% 8,547 (4,274) 300.0% 15,225
    Net income (loss) attributable to the Company

    2,944

    (5,523)

    153.3%

    7,229

    (5,387)

    234.2%

    12,162

     
    Reconciliation of EBITDA, as adjusted, to net income (loss) attributable to the Company:
     
    EBITDA, as adjusted (1) $13,337$10,907 22.3% $27,910$24,867 12.2% $54,668
    Add:
    Interest income 83 50 66.0% 136 90 51.1% 240
    Change in fair value of contingent consideration - (144) (100.0%) 12 (121) 109.9% 12
    Less:
    Loss on extinguishment of debt - (3,754) (100.0%) (314) (3,754) (91.6%) (1,107)
    Interest expense (1,599) (4,876) (67.2%) (3,492) (11,112) (68.6%) (7,818)
    Income tax expense (767) (616) 24.5% (1,360) (1,139) 19.4% (3,147)
    Depreciation and amortization (3,787) (3,870) (2.1%) (7,625) (7,777) (2.0%) (15,163)
    Non-cash compensation (2,083) (1,379) 51.1% (4,010) (2,792) 43.6% (7,984)
    Acquisition-related expense (458) - * (458) - * (458)
    Amortization of retention loans (1,782) (1,841)(3.2%)(3,570) (3,649) (2.2%)(7,081)
    Net income (loss) attributable to the Company

    $ 2,944

    $(5,523)

    153.3%

    $ 7,229

    $(5,387)

    234.2%

    $ 12,162

    * Not Meaningful
    (1)   2013 results included the elimination of $2,545, consisting of $5,148 of revenue net of employee brokerage commission expenses of $2,603 related to sale of the Company’s Series A Preferred Stock.
     





    Sard Verbinnen & Co

    Paul Caminiti/Emily Deissler

    212-687-8080

    Source: Ladenburg Thalmann Financial Services Inc.


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