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Investors Capital Holdings Reports Second Quarter Net Income

2012-11-14 10:27 ET - News Release

Modest revenue growth paired with 7% decrease in expenses results in consecutive quarters of operating income and profits

Company Website: http://www.joinicc.com
LYNNFIELD, Mass. -- (Business Wire)

Investors Capital Holdings, Ltd. (NYSE MKT: ICH, the “Company”), a financial services holding company, posted second quarter net income of $0.28 million on total revenue of $20.32 million for the period ended September 30, 2012 (the “quarter end”). Continued expense reduction initiatives coupled with slight revenue growth translated into consecutive operating and net income postings for the first two quarters of the fiscal year. Second-quarter expenses continued to decline in all major expense categories. Investors Capital Holdings, Ltd. operates primarily through its wholly-owned subsidiary, Investors Capital Corporation (“ICC”), a dually registered broker-dealer and investment advisory firm.

Total revenue increased 0.8% to $20.32 million compared to revenue of $20.17 million for the quarter ended September 30, 2011 (the “prior period”). The increase was due to a rise in commission revenue and other fee income, but offset by a decline in advisory fees. Commission revenue rose 0.8% to $15.78 million, compared to $15.66 million in the prior period. Advisory fees declined 2.5% to $3.98 million, compared to $4.08 million in the prior period.

Results of operations were positively impacted by reduced operating costs in all major categories. Total expenses decreased $1.67 million or 7.7%. Total compensation costs declined as the Company realigned operating expenses with top-line revenues and profit margins. The firm reported operating income of $0.43 million compared to an operating loss of $1.39 million for the prior period. Net income was $0.28 million for the quarter compared to a net loss of $0.88 million for the prior period.

Investors Capital continues to benefit from enhancing the overall quality of its representatives by providing broad practice management solutions to assist its advisors in growing their practices and recruiting established, high-performing representatives. The firm’s average revenue per representative, based on a rolling 12-month period, rose at the end of the second quarter to $169,373, an increase of 0.1% over $169,130 for the prior rolling 12-month period.

Adjusted EBITDA was $0.56 million compared to negative $0.37 million for the prior period. Adjusted EBITDA, a non-GAAP financial measure described below, is a key metric utilized by the firm in evaluating its financial performance.

“We continue to invest in the revenue-generating areas of our business, supplementing the success of our recruiting efforts with proven, organic growth initiatives such as practice management, advisory services, information technology, and value-added events,” said Tim Murphy, President and CEO of Investors Capital Holdings, Ltd. “By continually focusing on the basics of our business and being more committed than ever to providing 5-Star Service to our advisors, we look forward to turning our current earnings successes into sustainable long-term growth.”

About Investors Capital Holdings, Ltd.:

Investors Capital Holdings, Ltd. (NYSE MKT: ICH) of Lynnfield, Massachusetts is a financial services holding company that operates primarily through its broker/dealer and investment advisor subsidiary, Investors Capital Corporation. Our mission is to provide 5-Star Service and support to our valued registered representatives, including top notch advisory programs, strategic practice management and marketing services, and transformational technology, to help them grow their businesses and exceed their clients’ expectations. Business units include Investors Capital Corporation, ICC Insurance Agency, Inc., and Investors Capital Holdings Securities Corporation. For more information, please call (800) 949-1422 x4814 or visit www.investorscapital.com.

Certain statements contained in this press release that are not historical fact may be deemed to be forward-looking statements under federal securities laws. There are many factors that could cause our future actual results to differ materially from those suggested by or forecast in the forward-looking statements. Such factors include, but are not limited to, general economic conditions, interest rate fluctuations, regulatory changes affecting the financial services industry, competitive factors effecting demand for our services, availability of funding, and other risks including those identified in the Company’s Securities and Exchange Commission filings.

Investors Capital Holdings, Ltd., 230 Broadway, Lynnfield, Massachusetts 01940, Distributor.



September 30, 2012March 31, 2012
Current Assets
Cash and cash equivalents $ 4,482,284 $ 4,537,713
Deposit with clearing organization, restricted 175,000 175,000
Accounts receivable 4,928,839 4,525,157
Loans receivable from registered representatives (current), net of allowance 597,150 654,560
Prepaid income taxes 171,138 137,658
Securities owned at fair value 257,375 235,454
Prepaid expenses 801,595   674,780  
11,413,381 10,940,322
Property and equipment, net 223,091 340,007
Long Term Assets
Loans receivable from registered representatives 985,948 1,002,621
Non-qualified deferred compensation investment 1,565,853 1,327,806
Cash surrender value life insurance policies 159,510   157,991  
2,711,311 2,488,418
Other Assets
Deferred tax asset, net 1,104,770 1,550,010
Other asset 1,324 -
Capitalized software, net 129,823   172,240  
1,235,917 1,722,250
TOTAL ASSETS$15,583,700   $15,490,997  
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,006,260 $ 820,540
Accrued expenses 1,367,248 1,408,324
Commissions payable 2,830,750 2,787,467
Notes payable 307,296 1,605,688
Unearned revenues 452,561 146,198
Securities sold, not yet purchased, at fair value 17,996   8,186  
5,982,111 6,776,403
Long-Term Liabilities
Non-qualified deferred compensation plan 1,712,358   1,458,169  
1,712,358 1,458,169
Total liabilities 7,694,469   8,234,572  
Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
6,684,242 issued and 6,680,357 outstanding at September 30, 2012
6,689,009 issued and 6,685,124 outstanding at March 31, 2012 66,841 66,890
Additional paid-in capital 12,516,665 12,425,713
Accumulated deficit (4,664,140 ) (5,206,043 )
Less: Treasury stock, 3,885 shares at cost (30,135 ) (30,135 )
Total stockholders' equity 7,889,231 7,256,425
September 30,
Commissions $ 15,779,387 $ 15,658,586
Advisory fees 3,979,313 4,083,036
Other fee income 337,226 108,570
Other revenue 226,839 319,721  
Total revenue 20,322,765 20,169,913  
Commissions and advisory fees 16,126,655 16,231,516
Compensation and benefits 1,460,708 2,659,815
Regulatory, legal and professional services 977,627 1,009,451
Brokerage, clearing and exchange fees 364,697 519,511
Technology and communications 327,240 309,016
Marketing and promotion 231,424 337,053
Occupancy and equipment 178,191 218,048
Other administrative 221,748 266,875
Interest 4,835 8,997  
Total operating expenses 19,893,125 21,560,282  
Operating income (loss) 429,640 (1,390,369 )
Provision (benefit) for income taxes 149,420 (513,007 )
Net income (loss) $ 280,220 $ (877,362 )
Basic and diluted net income (loss) per share $ 0.04 $ (0.13 )
Weighted average shares used in basic per share calculations 6,529,786 6,590,779  
Weighted average shares used in diluted per share calculations 6,656,165 6,590,779  

Adjusted EBITDA

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted by eliminating items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions.

Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.

Adjusted EBITDA is reconciled with GAAP net income as follows:

Quarter Ended September 30,
Adjusted EBITDA: $ 563,387 $ (374,883 )
Adjustments to conform Adjusted EBITDA to
GAAP Net income (loss):
Income tax provision (149,420 ) 513,007
Interest expense (4,835 ) (8,997 )
Depreciation and amortization (80,996 ) (97,995 )
Non-cash compensation for transfer of
beneficial interest to former Chairman (568,095 )
Non-cash compensation (47,916 ) (19,858 )
Non-recurring professional fees   -     (320,541 )
Net income (loss) $ 280,220   $ (877,362 )


Investors Capital Holdings, Ltd.
Robert Foney, 781-477-4814
Chief Marketing Officer

Source: Investors Capital Holdings, Ltd.

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