Investors Capital Holdings Announces Third Quarter Net Income

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Investors Capital Holdings Announces Third Quarter Net Income

9.1% revenue growth paired with 26.9% decrease in compensation expenses results in three successive quarters of operating income and profits

LYNNFIELD, Mass.--(BUSINESS WIRE)-- Investors Capital Holdings, Ltd. (NYSE MKT: ICH, the "Company"), a financial services holding Company, today announced financial results for its third quarter ended December 31, 2012. Continued expense reductions coupled with revenue growth translated into successive operating and net income for the first three quarters of the fiscal year ending March 31, 2013.


Third Quarter Highlights:

  • Revenue for the third quarter of fiscal year ending March 31, 2013 increased 9.10% to $20.77 million, as compared to $19.0 million in the third quarter of the prior period.
  • Commissions revenue rose 7.7% to %15.5 million, compared to $14.40 million in the prior period.
  • Advisory fees increased by 9.6% to $4.2 million, compared to $3.8 million in the prior period, as asset values grew.
  • Operating income was $0.28 million compared to an operating loss of $0.01 million for the prior period. Specifically, total compensation and benefit expenses decreased by $0.55 million or 26.9% as the Company realigned expenses with top-line revenues and profit margins.
  • Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization and stock-based compensation) increased 67% to $0.40 million compared to $0.24 million the third quarter of the prior period. Adjusted EBITDA, a non-GAAP financial measure described below, is a key metric utilized by the Company in evaluating its financial performance.
  • Net income was $0.13 million for the quarter compared to a net income of $0.43 million for the prior period attributed to an income tax benefit of $0.44 million.
  • The Company's average revenue per representative, based on a rolling 12-month period, rose at the end of the third quarter to approximately $180,000, an increase of 5.1% compared to approximately $170,000 for the prior rolling 12-month period.

2012 Business Highlights:

  • In March 2012, ICC launched its proprietary technology platform, CapitalCONNECT. Since then, we see a greater adoption rate for new offerings as our advisors are more efficiently leveraging technology to increase productivity. The Company followed that launch with an internal campaign providing customized advisor trainings on how to utilize the ever-expanding suite of technological tools available on CapitalCONNECT.
  • Investors Capital practice management solutions expanded, and now includes Cannon Financial Institute's Certified Wealth Strategist® (CWS) designation, one of the fastest growing certifications in our industry. Topics covered include effective wealth advising and retaining and expanding client relationships.This and other marketing services are designed to increase advisor productivity.
  • ICC welcomed new advisors in many locations, including New England, Nevada and Texas, further strengthening and expanding our geographic footprint of advisors across the country.
  • ICC's Insurance Agency continues to expand its insurance contracting resources for Fixed and Indexed Annuity Sales, welcoming new IMO partners: Creative Marketing, DMI Marketing and Saybrus Partners.
  • In December 2012, the Company relocated its Home Office, to new office space, continuing to reside in the town of Lynnfield, Massachusetts. This new office space will further enhance the Company's business relationships and employee engagement.

"We continue to invest in the revenue-generating areas of our business, supplementing the success of our recruiting efforts with organic growth initiatives such as practice management, leveraging technology and value-added events and services," said Tim Murphy, President and CEO of Investors Capital Holdings, Ltd. "I believe that the strategic steps that we have taken thus far, along with our plans for the remainder of this fiscal year, make Investors Capital well-appointed to support productive growth from our current and new advisors." He added, "By continually focusing on the basics of our business and providing 5-Star Service to our advisors each day, I believe that we have paved the way for continued 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.

Investors Capital Holdings, Ltd., 6 Kimball Lane, Suite 150, Lynnfield, Massachusetts 01940

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the impact of the weakness in the U.S. and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the volatility of the market price of our common stock, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We expressly disclaim any obligation to update any forward-looking statement.

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
  December 31, 2012  March 31, 2012
Assets
Current Assets
Cash and cash equivalents$4,551,387$4,537,713
Deposit with clearing organization, restricted175,000175,000
Accounts receivable5,513,2204,525,157
Loans receivable from registered representatives (current), net of allowance753,451654,560
Prepaid income taxes156,596137,658
Securities owned at fair value237,068235,454
Prepaid expenses690,130 674,780 
12,076,85210,940,322
 
Property and equipment, net226,703340,007
 
Long Term Assets
Loans receivable from registered representatives945,5391,002,621
Non-qualified deferred compensation investment1,630,6761,327,806
Cash surrender value life insurance policies162,213 157,991 
2,738,4282,488,418
Other Assets
Deferred tax asset, net899,0951,550,010
Other asset22,392-
Capitalized software, net107,425 172,240 
1,028,9121,722,250
 
TOTAL ASSETS$16,070,895 $15,490,997 
 
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable$601,088$820,540
Accrued expenses1,426,0131,408,324
Commissions payable2,911,7122,787,467
Notes payable51,4371,605,688
Unearned revenues1,232,834146,198
Securities sold, not yet purchased, at fair value- 8,186 
6,223,0846,776,403
Long-Term Liabilities
Non-qualified deferred compensation plan1,762,177 1,458,169 
1,762,1771,458,169
 
Total liabilities7,985,261 8,234,572 
 
Stockholders' Equity:

Common stock, $.01 par value, 10,000,000 shares authorized;
6,681,748 issued and 6,677,863 outstanding at December 31, 2012
6,689,009 issued and 6,685,124 outstanding at March 31, 2012

66,81666,890
Additional paid-in capital12,579,37912,425,713
Accumulated deficit(4,530,426)(5,206,043)
Less: Treasury stock, 3,885 shares at cost(30,135)(30,135)
Total stockholders' equity8,085,6347,256,425
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$16,070,895 $15,490,997 
 
 

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)  THREE MONTHS ENDED
December 31,
2012  2011
Revenue:
Commissions$15,510,183$14,404,727
Advisory fees4,162,0823,797,760
Other fee income935,375567,444
Other revenue158,722265,766 
Total revenue20,766,36219,035,697 
 
Expenses:
Commissions and advisory fees16,125,98714,751,775
Compensation and benefits1,484,4162,031,820
Regulatory, legal and professional services1,378,066721,595
Brokerage, clearing and exchange fees385,100471,905
Technology and communications337,495330,989
Marketing and promotion188,808170,547
Occupancy and equipment170,539203,488
Other administrative409,092354,725
Interest3,58810,527
Total operating expenses20,483,09119,047,371 
 
Operating income (loss)283,271(11,674)
Provision (benefit) for income taxes149,555(440,160)
 
Net income$133,716$428,486 
 
Basic net income (loss) per share$0.02$0.07 
 
Diluted net income (loss) per share$0.02$0.06 
 
Weighted average shares used in basic per share calculations6,547,6236,553,824 
 
Weighted average shares used in diluted per share calculations6,547,6236,692,520 
 
 

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 December 31,
20122011
 
Adjusted EBITDA:$399,251$238,993
 
Adjustments to conform Adjusted EBITDA to
GAAP Net income:
Income tax provision(149,555)440,160
Interest expense(3,588)(10,527)
Depreciation and amortization(82,039)(86,464)
Non-cash compensation(30,353)(19,858)
Non-recurring professional fees -  (133,818)
 
Net income$133,716 $428,486 
 



Investors Capital Holdings, Ltd.
Robert Foney, 781-477-4814
Chief Marketing Officer
rfoney@investorscapital.com
www.investorscapital.com

KEYWORDS:   United States  North America  Massachusetts

INDUSTRY KEYWORDS:

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