Ladenburg Thalmann Financial Services Inc. (NYSE MKT:LTS; LTS
PrA) today announced that the Company sent the following annual
letter to its shareholders from the Chairman of the Board, Dr.
Phillip Frost, and the Company’s President and Chief Executive
Officer, Richard J. Lampen:
Dear Fellow Shareholder:
Ladenburg drove significant growth in 2015, increasing revenues
25% compared to the prior year, including strong recurring revenue
of 74% in our Independent Brokerage and Advisory Services (IBD)
business. Our strategy has been to develop a profitable IBD and
wealth management business along with our more volatile, but
potentially lucrative, investment banking and capital markets
business. Our strategy has been successful and Ladenburg has
experienced substantial growth. We now have $1.15 billion in annual
revenues, approximately 4,000 financial advisors and $125 billion
of client assets. 2015 results were fueled by IBD acquisitions and
solid growth in advisory fees. While the market for equity capital
raises for small and mid-cap public companies has been challenging
recently for our investment bank, we continue to see opportunities
to build market share in 2016 across all our businesses.
We have never been more positive about Ladenburg’s direction. In
fact, during 2015, the Company acquired 5.7 million shares of its
common stock in open market purchases. The Board of Directors and
senior leadership team, major shareholders in the company, are
aligned with other investors in building long-term shareholder
value. Below we provide a review of Ladenburg’s business
developments and financial highlights for 2015 and discuss our
strategic positioning for future success.
2015 Overview
- Revenues increased 25% to a record $1.2
billion in fiscal 2015.
- Advisory fee revenues increased 34.6%
year-over-year, while investment banking revenues decreased
25.2%.
- 2015 EBITDA, as adjusted, was $43.6
million, a decrease of 29% from the prior-year period, primarily
attributable to our investment banking and insurance brokerage
businesses.
- Shareholders’ equity grew to $376
million at year end.
- In 2015, we repurchased 5,673,415
shares of our common stock at a cost of approximately $16.4
million, representing an average price per share of $2.88.
- By the end of 2015, we had
approximately $125 billion in client assets – an increase
of 15% from approximately $108 billion at December 31, 2014.
- 2015 recurring revenues, consisting of
advisory fees, trailing commissions, cash sweep fees and other
fees, represented approximately 74% of revenues from our IBD
business, up from approximately 71% in 2014.
- Our investment banking group
participated in 70 underwritten offerings that raised approximately
$9.1 billion, and placed 18 registered direct and PIPE offerings
that raised an aggregate of approximately $310 million, for clients
in healthcare, biotechnology, energy and other industries.
- Ladenburg’s internal wealth management
division, Ladenburg Thalmann Asset Management (LTAM), had
approximately $2.1 billion of assets under management and more than
15,000 client accounts at year end.
Ladenburg’s Independent Brokerage and Advisory Services (IBD)
Business
Revenues in Ladenburg’s core IBD business increased 26.8%
compared to 2014. During 2015, we worked to integrate three new
additions to the Ladenburg family – two independent
broker-dealer firms, Seattle-based KMS Financial Services, and
Knoxville-based Securities Service Network, as well as Highland
Capital Brokerage, a leader in the wholesale distribution of life
insurance products headquartered in Birmingham,
Alabama – bolstering our position in, and our commitment
to, rapidly growing sectors of the financial services industry.
Since entering the IBD business in 2007, Ladenburg has become an
innovator in the network model. We operate each of our IBD firms
under its own talented management team, which reflects our
recognition that each has a unique culture and particular
strengths. With our network of approximately 4,000 independent
financial advisors, which we are committed to operate in an ethical
and socially responsible manner, we are well positioned to meet the
demands of over a million American families. As trusted advisors,
we offer leading financial services to clients across the nation.
We have experienced continued growth in this sector fueled by the
differentiated set of tools that we provide to our advisors, access
to the resources of our sister firms, including Premier Trust,
Ladenburg Thalmann Asset Management, our investment bank, Ladenburg
Thalmann & Co. Inc., and now Highland Capital. Together, this
is what we refer to as the “Ladenburg Wealth Management Advantage”.
Total retirement assets in the U.S. are projected to grow 6.5% per
year through 2017, with growth anticipated to be ongoing. We
believe we are well positioned to capitalize on the growth of the
population requiring investment advice by providing exemplary
advisory services.
While we remain firmly committed to our network model,
management has worked hard over the past several years to take
advantage of the scale we have created. This is occurring both
through sharing intellectual capital and best practices across the
firms as well as achieving revenue and expense synergies. We
believe that these synergies will contribute meaningfully to
improving our operating margins through focus on building shared
services in areas not directly visible to our advisors such as
technology, accounting, insurance, revenue sharing, procurement and
other back office functions. We continue to invest in adding key
talent at the corporate and subsidiary levels, and made several
important hires in 2015, to support these efforts and allow us to
remain competitive as industry leaders.
In the spirit of evolving our suite of products for our advisors
to complement our more traditional wealth management services, we
recently announced the launch of $ymbilSM – a self
service digital investment platform that matches clients of
Ladenburg-affiliated advisors to a diversified portfolio consistent
with their personal risk tolerance. $ymbil allows clients to fund
their accounts and start investing in minutes with a minimum
investment of $500. Through this program, we are helping advisors
meet the growing demand for services that incorporate the best of
both worlds – automation and human
insight – enabling access to efficient client
registration and account administration. We are committed to
ensuring Ladenburg’s place at the forefront of innovation, and we
will continue to provide solutions such as $ymbil to empower our
advisors to broaden their client relationships and sharpen their
competitive edge.
There are tens of millions of Americans that rely on independent
financial advisors, and it is critically important that our
industry stands up to guard their best interests. That is why we
publicly stated our concerns over the impact that the Department of
Labor’s proposed new fiduciary rule would have on access to
quality, affordable financial advice. Now that the final DOL rule
has been issued, we are hard at work within our firms together with
industry organizations and partners to achieve the best
outcome.
Ladenburg’s Investment Banking and Capital Markets
Business
2015 proved to be a challenging year for our investment banking
and capital markets businesses. Continued volatile market
conditions resulted in a decline of equity capital raises for small
and mid-cap public companies compared to 2014. This pattern
continued in the first quarter of 2016, but we are hopeful that the
market will stabilize as the year progresses. We will continue to
try to strategically broaden the scope of products and services
available to our clients, and we remain positive about our pipeline
for 2016, and beyond.
Across key industries such as healthcare, biotechnology, energy
and others, in 2015, our 17 investment bankers participated in 70
underwritten offerings that raised approximately $9.1 billion and
placed 18 registered direct and PIPE offerings that raised an
aggregate of approximately $310 million.
We’ve made strategic additions to our team in focus areas such
as research and institutional sales and trading personnel, enabling
us to provide our clients with the right resources to reach their
full potential. Additionally, we are pleased to have broadened our
research coverage universe to include more than 250 companies.
Financial Details and Stock Repurchase Program
Net loss attributable to the Company for 2015 was $11.2 million,
compared to net income attributable to the Company of $33.4 million
in 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, 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.
2015 EBITDA, as adjusted, was $43.6 million, compared to $61.2
million in 2014.
The IBD sector continued to drive high recurring revenues, which
consist of advisory fees, trailing commissions, cash sweep fees and
certain other fees. Recurring revenues represented approximately
74% of revenues from our IBD business in 2015, compared to
recurring revenues of approximately 71% for 2014.
During 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 our
stock repurchase program in March 2007, Ladenburg has repurchased
over 20,870,000 shares at a total cost of approximately $42.3
million, including purchases of 7,500,000 shares outside its stock
repurchase program.
Empowering Women in Finance
This year we hosted our fourth annual Ladenburg Institute of
Women & Finance (LIWF) symposium in Chicago. This event has
proven to be an excellent resource for educational opportunities
and networking support to advisors affiliated with our independent
broker-dealers. We’re thrilled to host this event that truly
advances the agenda for women in finance. The conference brings
together top women financial advisors from across Ladenburg's
independent brokerage and advisory firms to empower them with new
strategies for promoting business growth and personal achievement.
As we have in previous years, LIWF also introduced new mentors and
mentees through the “LIFT” Mentoring Program, whereby younger
advisors and career changers are given the opportunity to learn and
benefit from the experience of more seasoned advisors throughout
the year, setting their own agendas to speak and meet
regularly.
Industry Involvement and Extraordinary Public Service
Over the last several years, Ladenburg has worked closely with
the Financial Services Institute (FSI) and its expansive network to
advocate for industry best practices and advance its important
mission. This year we had the honor of announcing that Dick Lampen
was elected as FSI’s 2016 Vice Chair and 2017 Chair. Through Dick’s
leadership role, we look forward to supporting FSI in ensuring that
all individuals have access to competent and affordable financial
advice, products and services.
As we look ahead, we’re pleased with Ladenburg’s position as an
industry leader and are confident in our ability to generate
sustainable shareholder value. We will continue to
opportunistically explore all avenues to support and grow our
businesses.
We’d like to thank all of those who play an integral part in
making Ladenburg the firm it is today. Our success is due in large
part to your continued commitment and dedication to the company,
and we truly value our relationship with you all.
Sincerely,
Phillip Frost, M.D. Richard J. Lampen
Chairman of the Board President & Chief Executive Officer
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, future demand for financial services,
growth of retirement assets, growth of our independent brokerage
and advisory business, growth of our investment banking and capital
markets business, future acquisitions, future synergies, future
products and future services. 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 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.
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For Ladenburg Thalmann:Sard Verbinnen & CoPaul
Caminiti/Emily Deissler212-687-8080
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