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.
INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
|CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)|
|September 30, 2012||March 31, 2012|
|Cash and cash equivalents||$||4,482,284||$||4,537,713|
|Deposit with clearing organization, restricted||175,000||175,000|
|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|
|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|
|Deferred tax asset, net||1,104,770||1,550,010|
|Capitalized software, net||129,823||172,240|
|Liabilities and Stockholders' Equity|
|Securities sold, not yet purchased, at fair value||17,996||8,186|
|Non-qualified deferred compensation plan||1,712,358||1,458,169|
|Common stock, $.01 par value, 10,000,000 shares authorized;|
|6,684,242 issued and 6,680,357 outstanding at September 30, 2012|
|6,689,009 issued and 6,685,124 outstanding at March 31, 2012||66,841||66,890|
|Additional paid-in capital||12,516,665||12,425,713|
|Less: Treasury stock, 3,885 shares at cost||(30,135||)||(30,135||)|
|Total stockholders' equity||7,889,231||7,256,425|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||15,583,700||$||15,490,997|
|INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(UNAUDITED)||THREE MONTHS ENDED|
|Other fee income||337,226||108,570|
|Commissions and advisory fees||16,126,655||16,231,516|
|Compensation and benefits||1,460,708||2,659,815|
|Regulatory, legal and professional services||977,627||1,009,451|
|Brokerage, clearing and exchange fees||364,697||519,511|
|Technology and communications||327,240||309,016|
|Marketing and promotion||231,424||337,053|
|Occupancy and equipment||178,191||218,048|
|Total operating expenses||19,893,125||21,560,282|
|Operating income (loss)||429,640||(1,390,369||)|
|Provision (benefit) for income taxes||149,420||(513,007||)|
|Net income (loss)||$||280,220||$||(877,362||)|
|Basic and diluted net income (loss) per share||$||0.04||$||(0.13||)|
|Weighted average shares used in basic per share calculations||6,529,786||6,590,779|
|Weighted average shares used in diluted per share calculations||6,656,165||6,590,779|
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted by eliminating items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions.
Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.
Adjusted EBITDA is reconciled with GAAP net income as follows:
|Quarter Ended September 30,|
|Adjustments to conform Adjusted EBITDA to|
|GAAP Net income (loss):|
|Income tax provision||(149,420||)||513,007|
|Depreciation and amortization||(80,996||)||(97,995||)|
|Non-cash compensation for transfer of|
|beneficial interest to former Chairman||(568,095||)|
|Non-recurring professional fees||-||(320,541||)|
|Net income (loss)||$||280,220||$||(877,362||)|