Ladenburg Thalmann Financial Services Inc. (NYSE American: 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:
We are pleased with Ladenburg’s robust financial and operational
performance throughout 2017, with revenues increasing 15% from the
prior year period to $1.27 billion. Ladenburg’s success last year
validates the strength of our long-term strategy, which envisions
continued growth as a leader in the independent retail financial
advice industry, complemented by the success of our capital markets
and investment banking business.
Beyond the favorable impact of strong market conditions and
rising interest rates on our industry, our 2017 performance was
driven by the realization of a series of strategic initiatives that
are demonstrating meaningful results.
Reflecting confidence in Ladenburg’s future and our commitment
to shareholder value, in 2017 we acquired more than two million
shares of our common stock at a cost of approximately $5.3 million,
and initiated a quarterly cash dividend. As major shareholders in
Ladenburg, the interests of our directors and senior leadership
team are directly aligned with those of investors. We remain laser
focused on building long-term value.
Below is a review of Ladenburg’s business developments and
financial highlights for 2017, as well as details on the company’s
strategic positioning for future success.
2017 Overview
- Revenues were $1.27 billion in fiscal
2017, an increase of 15% from the prior year.
- Advisory fee revenues increased 21%
year-over-year, while investment banking revenues increased
83%.
- Net income attributable to the Company
for fiscal 2017 was $7.7 million.
- 2017 EBITDA, as adjusted, was $56.0
million, a 57% increase from the prior year, primarily attributable
to increased advisory revenues in our independent advisory and
brokerage services business and higher investment banking revenues
in our Ladenburg segment.
- At year-end 2017, we had $164.7 billion
in client assets, an increase of 20% from $137.4 billion at
December 31, 2016.
- 2017 recurring revenues, consisting of
advisory fees, trailing commissions, interest income and service
fees, represented approximately 80% of revenues from our
independent advisory and brokerage services segment, up from
approximately 77% in 2016.
- Our investment banking group
participated in 81 underwritten offerings that raised approximately
$8.3 billion and placed 19 registered direct and PIPE offerings
that raised an aggregate of approximately $424 million, for clients
in healthcare, biotechnology, energy and other industries.
- Ladenburg’s internal wealth management
division, Ladenburg Thalmann Asset Management (LTAM), ended 2017
with approximately $2.5 billion of assets under management,
providing important investment support to our advisors and their
clients.
- We repurchased 2,088,460 shares of our
common stock at a cost of approximately $5.3 million, representing
an average price per share of $2.52, and initiated a dividend on
our common shares.
Ladenburg’s Independent Advisory and Brokerage (IAB)
Segment
In 2017, Ladenburg and its subsidiaries – including Securities
America, Triad Advisors, KMS Financial Services, Securities Service
Network (SSN) and Investacorp – continued to recruit successful
financial advisors, expand client assets and attract top executive
talent to reinforce our industry leadership position.
Revenues in this segment increased 14% compared to 2016, while
total client assets under administration grew to $163 billion in
2017, up 20% from 2016. Higher asset levels, combined with strong
market conditions, contributed to an increase in fee-based advisory
revenue, as advisory assets under management grew 25% to $71.0
billion.
Going beyond the numbers, our performance spotlights three of
Ladenburg’s distinctive strengths, and various strategic and
operational initiatives implemented in recent years that reinforce
these strengths. First, we integrate industry-leading intellectual
capital, financial capital, technology and other resources into
platforms and tools that directly support financial advisors
seeking to deliver a personalized, planning-based service
experience to clients across the country.
Second, we are an industry-leading innovator of the network
model, with a longstanding commitment to supporting the operational
autonomy as well as the advisor service model, brand and culture of
each of our subsidiaries. This enables us to appeal to the widest
possible range of advisor preferences and needs, while offering the
enterprise-level stability, security and business growth tools that
independent advisors increasingly demand.
Third, our network of approximately 4,300 independent financial
advisors emphasizes supporting one of the more underserved retail
investor segments in the country, individuals and households with
$100,000 to $1,500,000 in net investible assets. This “mass
affluent” segment encompasses members of the Millennial, Gen X and
Baby Boomer generations, many of whom increasingly see the value of
professional financial guidance to help meet their life goals.
In order to best capture the full breadth and depth of our
capabilities and strategy, we officially adopted the term
“independent advisory and brokerage (IAB)” firm to characterize
each of our subsidiaries in this segment, in preference to the more
limiting “independent broker-dealer (IBD)” term traditionally
favored by much of the industry.
The following financial and operational highlights over the past
15 months underscore the robust momentum we have generated for our
Independent Advisory and Brokerage segment:
- Ladenburg created new
enterprise-level platforms and functions, led by newly-recruited
executive talent, to deliver an augmented level of value to our
subsidiaries and their advisors. A prime example is the
creation of our new enterprise-level due diligence platform, which
enables subsidiaries to benefit from scalable due diligence
solutions to supplement their existing resources, and the hiring of
Thayer Gallison, a widely recognized due diligence expert, as the
head of this platform. Another example is the launch of our new
Enterprise Innovation initiative, led by innovation growth
strategist Dan Sachar, and encompassing the Ladenburg Innovation
Lab, to guide Ladenburg’s technology investments and align
transformative new tools and practices with our financial
advisors.
- We recruited top industry talent to
Ladenburg’s senior leadership team to augment key areas of our
business. In particular, in 2017 we completed the groundwork to
bring aboard two highly respected industry leaders at the top of
this year. John Blood, a fee-based advisory solutions expert,
joined Ladenburg in the newly-created role of Senior Vice President
of Advisory Services and Solutions, and Erinn Ford, one of the most
visible leaders in our industry, especially in the Pacific
Northwest region, was appointed to serve as President of our
Seattle-based KMS Financial Services.
- Our teams implemented multiple
enhancements to existing enterprise-level resources to accelerate
growth opportunities. In 2017, we made significant strides in
building out Ladenburg Practice Management, the enterprise-level
function that partners closely with our IAB subsidiaries and their
advisors to identify and roll out strategies, tools and platforms
that enable our advisors to more effectively operate their
businesses to distinguish their value proposition with clients. An
example of this is the launch of our new Behavioral Financial
Advice Training Program, which offers a highly structured
curriculum and formal behavioral finance credentialing to advisors
who seek to incorporate the best elements of this emerging field
into their businesses. At the same time, we also continued to
enhance our Ladenburg Advantage platform. Its differentiated set of
resources and services available through our various affiliated
companies focuses on delivering solutions that are strategically
adjacent to the work of our financial advisors. The Ladenburg
Advantage platform seamlessly enhances their ability to grow their
businesses by providing a deeper level of service to clients, with
access to Ladenburg’s proprietary research, investment banking and
capital markets services, fixed income trading and syndicate
products, Highland’s insurance solutions, Premier Trust’s services
and LTAM’s turnkey wealth management solutions.
- We continue to bring together
planning, platforms and expertise from across various areas of our
organization to launch new advisor-facing events that further
support the success of our subsidiaries and their advisors.
Last year, we organized and hosted our inaugural ELEVATE
conference, an event specifically designed to provide financial
advisors affiliated with Ladenburg's subsidiary firms with the
resources and expertise they need to grow their fee-based advisory
work on behalf of clients, especially within the context of
holistic financial planning services. We believe this first-ever
ELEVATE conference, where attendance significantly exceeded initial
expectations, provides us with a clear blueprint for organizing
other enterprise-level industry events to help our firms and
advisors grow.
As we move forward, we are confident that the unique advantages
we bring to the IAB industry will enable continued success in
recruiting financial advisors and increasing the business of our
existing advisors.
We will continue to be opportunistic in identifying potential
acquisitions of advisor communities that would fit well with our
existing subsidiaries, and businesses that offer a unique solution
set or service that can further position our Ladenburg Advantage
platform for success to support our IAB firms and their
advisors.
Ladenburg’s Investment Banking and Capital Markets
Business
In 2017, our investment banking revenue increased 83% to $46.5
million, compared to $25.5 million in 2016, primarily due to an
increase in equity capital raising and strategic financial advisory
services for middle-market companies. We are encouraged by the
improved market conditions and will continue to evaluate
opportunities to broaden the range of products and services
available to our clients.
Our dedicated investment bankers are focused on healthcare and
biotechnology companies, as well as the energy and technology
sectors. We also seek to capitalize on our distribution network by
focusing on yield-oriented equities, such as business development
companies (BDCs) and real estate investment trusts (REITs), which
have been attractive to both institutional and retail investors. In
2017, our investment banking group raised approximately $8.3
billion through 81 underwritten offerings, and placed 19 registered
direct and PIPE offerings that raised an aggregate of approximately
$424 million.
We continue to develop our research department, which offers
actionable ideas about industries and companies that are not widely
evaluated by other investment banks. Whereas other firms have
reduced investment research coverage and market making activities
for companies with market capitalizations below a certain
threshold, our middle-market emphasis enables us to commit both
research and sales and trading resources to smaller-capitalization
companies. We view this as a key differentiator.
Financial Details, Stock Repurchase Program and Quarterly
Cash Dividend
Full year 2017 revenues were $1.27 billion, a 15% increase from
revenues of $1.11 billion for the comparable 2016 period. Net
income attributable to the Company for fiscal 2017 was $7.7
million, compared to a net loss attributable to the Company of
$22.3 million in the comparable 2016 period. Net loss available to
common shareholders, after payment of preferred dividends, was
$24.8 million, or $0.13 per basic and diluted common share in 2017,
compared to a net loss available to common shareholders, after
payment of preferred dividends, of $52.7 million, or $0.29 per
basic and diluted common share in the comparable 2016 period. The
2017 results included approximately $6.5 million of income tax
benefit, $34.4 million of non-cash charges for depreciation,
amortization and compensation, $7.4 million of amortization of
retention and forgivable loans and $2.7 million of interest
expense. The comparable 2016 results included approximately $10.0
million of income tax expense, $33.6 million of non-cash charges
for depreciation, amortization and compensation, $5.5 million of
amortization of retention and forgivable loans and $4.3 million of
interest expense.
The independent advisory and brokerage services segment
continued to drive recurring revenues. Recurring revenues
represented approximately 80% of revenues from independent advisory
and brokerage services in 2017, compared to recurring revenues of
approximately 77% for 2016.
In 2017, we repurchased 2,088,460 shares of our common stock at
a cost of approximately $5.3 million, including 1,850,215 shares
repurchased under our stock repurchase program, representing an
average price per share of $2.53. Since the inception of our stock
repurchase program in March 2007, we have repurchased over 26.9
million shares of our common stock at a total cost of approximately
$57.1 million, including purchases outside our stock repurchase
program, representing an average price per share of $2.13. As of
December 31, 2017, we have the authority to repurchase an
additional 8,149,785 shares under our current repurchase plan.
During 2017, we initiated a quarterly cash dividend on our
common stock, reflecting our long-term commitment to delivering
value for our fellow shareholders while continuing to invest in our
business and maintaining our strong capital position. Our $0.01 per
share dividend paid shareholders $1.93 million in September 2017
and $1.95 million in December 2017.
Corporate Citizenship Initiatives
While creating long-term shareholder value through profitable
growth across our business segments is our top priority, we also
stress the importance of Ladenburg serving as a good corporate
citizen. We are passionate about helping to drive broader changes
that benefit both the financial advisor community, as well as
individuals and households across the country who want – and need,
more than ever – access to high quality, professional financial
guidance to meet their life goals.
Consistent with our company’s values, we established the
Ladenburg Institute of Women & Finance (LIWF) in 2012 and,
since then, we have actively supported its development each year,
to transform LIWF into a leading force supporting the entry and
success of female advisors into the independent retail financial
advice industry.
In 2017, we held our sixth annual Ladenburg Institute of Women
& Finance Symposium, an invitation-only event that brings
together top women advisors from Ladenburg's independent advisory
and brokerage firms to share insights on how female advisors in
particular can best position themselves for professional success
with respect to ongoing shifts in client expectations, demographics
and technology.
On a parallel path, the LIFT Mentoring Program of LIWF, now in
its fifth year, continues to play a role in helping younger female
advisors in the Ladenburg community. They benefit from the guidance
and insights of more experienced female advisors who have already
reached a level of significant success, and want to give back to
the next generation of women.
In terms of broader industry involvement, Ladenburg continues to
work closely with the Financial Services Institute (FSI), with Dick
Lampen having recently concluded his term as FSI’s Chairman of the
Board. We continue to work with the industry’s leading association
of independent firms and advisors to promote broad access to
competent and affordable financial advice, products and services,
and a healthier, more business-friendly regulatory environment for
independent financial services firms and their advisors.
2018 Outlook
We are confident that Ladenburg’s growth prospects for 2018 and
beyond are bright. Our disciplined approach in executing on
strategic initiatives reinforces our industry leadership, and
positions us well to benefit from the favorable financial
environment. As always, we remain committed to investing in our
core businesses to drive sustainable growth and generate strong
returns as we continue to explore opportunities to expand our
businesses.
On behalf of the Board of Directors and the management team, we
would like to thank all those who contribute to Ladenburg’s
success. We truly value your continued support and the confidence
you have placed in our company.
Sincerely,
Phillip Frost, M.D. Richard J. Lampen
Chairman of the Board President & Chief Executive Officer
About Ladenburg
Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS,
LTS PrA) 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, Inc., Triad Advisors, LLC, Securities Service
Network, LLC, 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, Ladenburg Thalmann Annuity Insurance
Services LLC, 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, future demand for financial services,
growth of our independent advisory and brokerage business, growth
of our investment banking and capital markets business, the amount
and timing of future quarterly dividends on the Company’s common
stock, future levels of recurring revenue, future acquisitions,
future synergies, future investments 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, 2017 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 & CoEmily
Claffey/Benjamin Spicehandler212-687-8080
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