LYNNFIELD, Mass., Nov. 15, 2011 (GLOBE NEWSWIRE) -- Investors Capital Holdings, Ltd. (NYSE Amex:ICH) (the "Company"), a financial services holding company, posted second quarter revenue of $20.17 million for the period ended September 30, 2011 (the "quarter"). Revenues were relatively flat, decreasing 1.3% compared to revenue of $20.43 million for the quarter ended September 30, 2010 ("prior period"). 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 decreased due primarily to a decline in commission revenue, which accounts for 77.6% of total revenue. Commission revenue fell 3.5% to $15.66 million, compared to $16.23 million in the prior period. The decrease was led by declining sales of variable annuities and direct participation programs relating to alternative investments. That decline was partially offset by an increase in mutual fund sales and equity commissions.
Advisory fees, which make up 20.2% of total revenue, rose 14.3% to $4.08 million, compared to $3.57 million in the prior period. Advisory fee revenue increased due to growth in asset values augmented by an increase in investment contributions.
Investors Capital continues to benefit from enhancing the overall quality of its representatives by helping them expand their skills and practices, recruiting established, high-quality representatives, and terminating lower-quality advisors. The firm's average revenue per representative, based on a rolling 12-month period, rose at quarter-end to $169,130, an increase of 20.4% over $140,440 for the prior rolling 12-month period.
Results of operations were materially impacted by professional fees and related investment banking fees incurred by the Company in connection with the registered sale by the former principal stockholder and related parties of shares of the Company's common stock held by them.
In July, Investors Capital Corporation and Company founder and former ICH chairman Theodore E. Charles retired from the firm, selling his family's 55% ownership stake primarily to Investors Capital advisors, their clients, and home office staff in a public offering. The successful sale made Investors Capital the only independent broker/dealer in the industry beneficially owned predominantly by its advisors, clients, and staff.
The completed offering also changed the stockholder structure from one controlled by a single shareholder to one with a more even distribution of shares amongst a greater number of stockholders.
The Company reported a $1.39 million operating loss as compared to a $0.62 million operating loss for the prior period. The Company's net loss totaled $0.88 million, or $0.13 net loss per basic and diluted share, compared to a net loss of $0.64 million, or $0.10 net loss per basic and diluted share, for the prior period.
Quarterly adjusted EBITDA was negative $0.37 million compared to negative $0.48 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.
"In the course of completing our secondary offering, there were both necessary and material one-time costs that greatly impacted our profitability," said Timothy B. Murphy, President and CEO of Investors Capital Holdings, Ltd. "However, I am pleased that the deal was successful, that our average advisor productivity and advisory revenue continue to climb, and that we continue to recruit quality advisors."
About Investors Capital Holdings, Ltd.:
Investors Capital Holdings, Ltd. (NYSE Amex: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 advisory programs, strategic practice management and marketing services, and 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, 2011 | March 31, 2011 | |
| Assets | ||
| Current Assets | ||
| Cash and cash equivalents | $ 3,844,370 | $ 4,587,195 |
| Deposit with clearing organization, restricted | 175,000 | 175,000 |
| Accounts receivable | 4,078,923 | 6,798,638 |
| Note receivable -- (current) | 7,071 | 108,169 |
| Loans receivable from registered representatives (current), net of allowance | 715,786 | 721,664 |
| Prepaid income taxes | 350,988 | 157,880 |
| Securities owned at fair value | 18,639 | 17,384 |
| Investments | 50,000 | 50,000 |
| Prepaid expenses | 554,447 | 1,073,969 |
| 9,795,224 | 13,689,899 | |
| Property and equipment, net | 491,991 | 597,735 |
| Long Term Investments | ||
| Loans receivable from registered representatives | 840,981 | 616,583 |
| Note receivable | 495,000 | 495,000 |
| Investments | 196,110 | 214,555 |
| Non-qualified deferred compensation investment | 1,048,480 | 1,089,572 |
| Cash surrender value life insurance policies | 109,688 | 680,429 |
| 2,690,259 | 3,096,139 | |
| Other Assets | ||
| Deferred tax asset, net | 1,102,459 | 1,218,773 |
| Capitalized software, net | 159,935 | 132,131 |
| Other assets | 15,308 | 15,808 |
| 1,277,702 | 1,366,712 | |
| TOTAL ASSETS | $ 14,255,176 | $ 18,750,485 |
| Liabilities and Stockholders' Equity | ||
| Current Liabilities | ||
| Accounts payable | $ 837,068 | $ 1,109,400 |
| Accrued expenses | 1,502,354 | 2,078,705 |
| Commissions payable | 2,533,677 | 3,246,898 |
| Notes payable | 587,582 | 1,527,969 |
| Unearned revenues | 214,557 | 113,486 |
| Securities sold, not yet purchased, at fair value | 21,400 | 0 |
| 5,696,638 | 8,076,458 | |
| Long-Term Liabilities | ||
| Non-qualified deferred compensation plan | 1,146,018 | 1,176,096 |
| 1,146,018 | 1,176,096 | |
| Total liabilities | 6,842,656 | 9,252,554 |
| Stockholders' Equity: | ||
| Common stock, $.01 par value, 10,000,000 shares authorized; | ||
| 6,617,400 issued and 6,613,515 outstanding at September 30, 2011; | ||
| 6,618,259 issued and 6,614,374 outstanding at March 31, 2011 | 66,174 | 66,183 |
| Additional paid-in capital | 12,347,317 | 12,279,380 |
| Accumulated deficit | (5,007,286) | (2,874,214) |
| Less: Treasury stock, 3,885 shares at cost | (30,135) | (30,135) |
| Accumulated other comprehensive income | 36,450 | 56,717 |
| Total stockholders' equity | 7,412,520 | 9,497,931 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 14,255,176 | $ 18,750,485 |
| INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED) | ||
| 2011 | 2010 | |
| Revenue: | ||
| Commissions | $ 15,658,586 | $ 16,234,403 |
| Advisory fees | 4,083,036 | 3,571,621 |
| Other fee income | 108,570 | 143,364 |
| Other revenue | 319,721 | 481,177 |
| Total revenue | 20,169,913 | 20,430,565 |
| Expenses: | ||
| Commissions and advisory fees | 16,231,516 | 16,098,685 |
| Compensation and benefits | 2,659,815 | 2,040,010 |
| Regulatory, legal and professional services | 1,009,451 | 1,315,436 |
| Brokerage, clearing and exchange fees | 519,511 | 497,837 |
| Technology and communications | 304,917 | 308,038 |
| Marketing and promotion | 336,371 | 302,805 |
| Occupancy and equipment | 222,829 | 227,547 |
| Other administrative | 266,875 | 256,052 |
| Interest | 8,997 | 4,241 |
| Total operating expenses | 21,560,282 | 21,050,651 |
| Operating loss | (1,390,369) | (620,086) |
| Provision (benefit) for income taxes | (513,007) | 23,595 |
| Net loss | $ (877,362) | $ (643,681) |
| Basic and diluted net loss per share | $ (0.13) | $ (0.10) |
| Shares used in basic and diluted per share calculations | 6,590,779 | 6,523,675 |
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 may be reconciled with net income as follows:
| Quarter Ended September 30, | ||
| 2011 | 2010 | |
| Adjusted EBITDA: | $ (374,883) | $ (484,499) |
| Adjustments to conform Adjusted EBITDA to | ||
| GAAP Net loss: | ||
| Income tax benefit | (150,028) | -- |
| Interest expense | (8,997) | (4,241) |
| Income tax expense | 663,035 | (23,594) |
| Depreciation and amortization | (97,995) | (89,360) |
| Non-recurring professional fees | (320,541) | -- |
| Transfer of beneficial interest to former Chairman | (568,095) | -- |
| Non-cash compensation | (19,858) | (41,987) |
| Net loss | $ (877,362) | $ (643,681) |