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:
We are pleased with Ladenburg’s 2016 performance in the face of
difficult market conditions, as our diversified financial services
platform continued to deliver high quality, trustworthy services to
meet the varied needs of our clients. With solid performance from
our five Independent Brokerage and Advisory Services (IBD) firms
that constitute more than 90% of our total revenues, our strategy
delivered value for clients and for shareholders.
Over the last year, we continued to grow our IBD business, with
Ladenburg’s total client assets under administration increasing
over 10% from 2015 to $137.4 billion. We had another successful
year of recruiting new advisors to our firms, including adding
large groups of advisors from Foothill Securities and Wall Street
Financial Group to our Securities America subsidiary, giving us an
impressive network of approximately 4,000 independent advisors. Our
position as a leader in the IBD space is clear in what we believe
is one of the fastest growing and most attractive segments of the
financial services industry. While we are certainly cognizant of
the impact that regulatory and market change will continue to have
on Ladenburg and the industry, including the ongoing uncertainty
over the Department of Labor’s fiduciary rule, we are confident in
Ladenburg’s future prospects and look forward to executing on our
business plans in 2017 and beyond.
To that end, the company acquired 6,132,124 shares of our common
stock in open market purchases in 2016 at a cost of approximately
$14.7 million, representing an average price per share of $2.41.
Ladenburg’s directors, senior leadership team and their affiliates
are major shareholders in our company, beneficially owning
approximately 46.75% of our shares at year-end 2016, and are fully
aligned with other investors in building long-term shareholder
value.
Following is a review of Ladenburg’s business developments and
financial highlights for 2016, and additional detail on the
company’s strategic positioning for future success.
2016 Overview
- Revenues were $1.1 billion in fiscal
2016, a decrease of 3.9% from the prior year.
- Advisory fee revenues increased 0.3%
year-over-year, while investment banking revenues decreased
28%.
- Shareholders’ equity at year-end was
$363 million, and we retired approximately $28.4 million of debt
during 2016.
- In 2016, we repurchased 6,132,124
shares of our common stock at a cost of approximately $14.7
million, representing an average price per share of $2.41.
- By the end of 2016, we had $137.4
billion in client assets – an increase of over 10% from $124.6
billion at December 31, 2015.
- 2016 recurring revenues, consisting of
advisory fees, trailing commissions, cash sweep fees and other
fees, represented approximately 77% of the revenues from our IBD
business, up from approximately 74% in 2015.
- Our investment banking group
participated in 61 underwritten offerings that raised approximately
$5.7 billion, and placed 11 registered direct and PIPE offerings
that raised an aggregate of approximately $276 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
12,000 client accounts at year-end.
Ladenburg’s Independent Brokerage and Advisory Services (IBD)
Business
In 2016, we enhanced our position as a leader in this rapidly
growing sector of the financial services industry. Our Securities
America and Triad Advisors subsidiaries achieved impressive success
in recruiting new advisors to our firms, including the addition of
the two large groups of advisors from Foothill Securities and Wall
Street Financial Group at Securities America. Ladenburg has been
growing market share in the independent channel since entering this
business in 2007, and this trend continued in 2016. Client assets
under administration increased over 10% to $137.4 billion, while
our advisors continued to grow the advisory side of their
businesses with total advisory assets under management increasing
15% over the prior year to $57.8 billion.
During the past decade, IBDs have played an increasingly
important role in providing independent retail advice, financial
planning and investment solutions to the mass affluent segment of
“Main Street America”. We are immensely proud of the work our
approximately 4,000 independent advisors do each and every day for
what they do matters greatly to our society and to our country.
Millions of Americans put their trust in them and in other
independent advisors to help them with among the most important
issues a family faces – the educating of their children, care for a
disabled or elderly family member, or providing for a financially
secure retirement.
We believe our IBD business is focused on just the right spot –
the mass affluent investor. Recent industry data show that
households with $100,000 to $2 million of investible assets
represent around 25% of American households, but well over 40% of
retail wealth. Many of our advisors generally work with households
with less than $1,000,000 to $1,500,000 or so in investible assets,
and no one services this important part of our society, Main Street
America, better than independent financial advisors like ours. The
wirehouse and the regional firms may have some passing interest at
the higher asset levels but this is not their focus – they live in
a world where at the extreme clients with less than $250,000 in
assets are sent to a call center without any further connection to
their advisor. It is why what our advisors do in providing
independent financial advice to these mass affluent households
matters so much. Their need for independent, unbiased financial
advice has never been greater, and we believe we are well
positioned to capitalize on their needs by providing them with
world class advisory and financial planning services and innovative
wealth management solutions.
We are committed to our network model of firms and will continue
to seek to scale our IBD business through aggressive recruiting and
by opportunistically acquiring other independent brokerage firms
and complementary businesses. Securities America has developed
strong expertise in transitioning large groups of financial
advisors as part of a transaction where it acquires certain assets
of small broker-dealer firms. Securities America has completed 10
such deals since 2008, including the two in 2016, and has developed
detailed processes, led by a cross-departmental team of 25 people,
to transition such groups effectively. We anticipate there will
continue to be similar opportunities to acquire groups of advisors
in this manner as increasing compliance costs disproportionately
impact small broker-dealers and the level of services and resources
they can provide to their advisors.
The scale we have created over the last several years has
resulted in increased revenue and expense synergies but very
significant opportunities remain. Under the leadership of Adam
Malamed, our Executive Vice President and Chief Operating Officer,
working closely with Jim Nagengast, Securities America’s CEO, and
Pat Farrell, Investacorp’s CEO, among others, we have undertaken
numerous firmwide growth and operational initiatives and
collaborative programs. We will continue to focus on building
shared services in areas such as technology, insurance, conference
planning, procurement and other administrative functions to drive
margin expansion, as well as in areas such as legal and regulatory
matters, product due diligence, branding and marketing. In recent
months we have announced several key appointments. Various
executives at our IBD firms have taken on additional
enterprise-wide responsibilities as we seek to provide across our
entire platform the full reach of the resources and tools we make
available to our advisors, including our wealth management program
and retirement and advisory services. We thank Doreen Griffith,
Securities America’s Chief Information Officer (CIO), who was
appointed Senior Vice President and CIO at our parent company at
year-end, for her oversight of the process of consolidating
Ladenburg’s IBD firms onto a unified technology platform.
As our industry continues to evolve and innovate, we believe it
is crucial that we provide our financial advisors with access to
industry-leading and differentiated tools and services that are
keenly focused on the growing demands of their clients. By
connecting our trusted advisors with all the resources of our
sister firms, we provide them with a competitive edge in the
marketplace. This Ladenburg Advantage includes trust services
through Premier Trust, expert wealth management advice from
Ladenburg Thalmann Asset Management, insurance solutions from
Highland Capital, investment banking and capital market products,
including a dedicated fixed income trading desk, from Ladenburg
Thalmann & Co. Inc., and extensive practice management, growth
and succession planning tools. As investor demands continue to
evolve, the Ladenburg Advantage will seek strategic opportunities
to benefit our affiliated advisors and their clients.
We also recognize that our success in future years will rely
largely on the energy and dedication of our approximately 1,300
employees and 4,000 financial advisors, and remain committed to
investing in their future while managing costs. Our advisors share
our respect for the value of quality advice and innovative products
and solutions and constantly strive to find the best solutions
available for our clients.
Ladenburg’s Investment Banking and Capital Markets
Business
The broad market volatility that characterized 2015 carried over
into 2016, which when combined with the uncertainty around the 2016
presidential election, resulted in a challenging year for our
investment banking and capital markets businesses. Together,
renewed concerns over global economic growth and the Fed’s first
rate hike since the Great Recession contributed to a highly
volatile market to start the year. Equity capital raising for small
and mid-cap public companies experienced significant decline in
2016 as compared to 2015. Business results improved in the fourth
quarter, and we remain encouraged by our pipeline for 2017 and
continue to believe we are well positioned to capitalize on
opportunities once the market rebounds.
We continue to invest in and broaden our capabilities and
expertise across key industries such as healthcare, biotechnology,
technology, energy and others. In 2016, our investment banking
group participated in 61 underwritten offerings that raised
approximately $5.7 billion and placed 11 registered direct and PIPE
offerings that raised an aggregate of approximately $276
million.
Financial Details and Stock Repurchase Program
2016 revenues were $1.1 billion, a 3.9% decrease from revenues
of $1.2 billion for 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.
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
77% of revenues from our IBD business in 2016, compared to
recurring revenues of approximately 74% for 2015.
Ladenburg repurchased 6,132,124 shares of its common stock in
2016 at a cost of approximately $14.7 million, representing an
average price per share of $2.41. Since the inception of our stock
repurchase program in March 2007, Ladenburg has repurchased
25,174,554 shares at a total cost of approximately $52.8 million,
including purchases of 7,500,000 shares outside its stock
repurchase program.
Accelerating Business Growth for Female Advisors
In October 2016, we were pleased to host our fifth annual
Ladenburg Institute of Women & Finance (LIWF) symposium in Salt
Lake City, Utah. LIWF grew out of our commitment to support and
invest in the future of female advisors. Our commitment to this
mission has resulted in increased recruiting and retention of
female advisors across the Ladenburg organization. According to
Financial Planning Magazine, three of Ladenburg's broker-dealer
affiliates are among the industry leaders in percentage of female
advisors: Triad Advisors with 30.5% female advisors, Securities
America with 29.4% and KMS Financial Services with 27.7%.
Through the LIWF event, we unite top women advisors from
Ladenburg's IBD firms with one goal in mind: to develop and
accelerate the success of female financial advisors. The symposium
covers practice-building strategies and key issues within the
financial advisory industry, while providing a supportive and
collaborative forum for women to learn, connect and grow. We are
proud of the great work by our sponsors, speakers and network of
advisors, and the role they have played in making it easier for
female advisors to excel and grow their businesses. We congratulate
Jaime Desmond, the COO of Ladenburg Thalmann Asset Management, who
was named one of the “50 Most Influential Women in Private Wealth”
by Private Asset Management magazine, for her valuable work since
2012 on our LIWF initiatives and the related LIFT mentoring
program, now in its fourth year, which pairs seasoned women
advisors from Ladenburg’s network with rising women advisors and
career changers to offer them guidance and direction throughout the
year.
Thought Leadership and Industry Involvement
Ladenburg continues to work closely with the Financial Services
Institute (FSI), the only organization advocating solely on behalf
of independent financial advisors and independent financial
services firms. As the 2017 Chairman of the FSI Board, Dick Lampen
oversees a group of industry leaders providing insight on
industry-wide developments and working to ensure that all
individuals have access to competent and affordable financial
advice, products and services. Ladenburg looks forward to
supporting this expansive network of financial advisors and
broker-dealers committed to creating a healthier, more
business-friendly regulatory environment for independent financial
services firms and their advisors.
Ladenburg continues to be recognized as a top player in the
independent brokerage and advisory business, and we believe we are
positioned for long-term success and are confident in our ability
to generate sustainable shareholder value.
As always, we thank our fellow shareholders and our
approximately 5,300 financial advisors and employees, who have all
helped us establish Ladenburg as an industry leader and continue to
support the firm. We look forward to a strong 2017.
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 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 brokerage and advisory business, growth
of our investment banking and capital markets business, future
levels of recurring revenue, future acquisitions, future synergies
and future service offerings. 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, 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.
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