LYNNFIELD, Mass., Feb. 16, 2012 (GLOBE NEWSWIRE) -- Investors Capital Holdings, Ltd. (NYSE Amex:ICH) (the "Company"), a financial services holding company, posted third quarter revenue of $19.04 million for the period ended December 31, 2011 (the "quarter"). Revenue decreased 11.2% compared to revenue of $21.43 million for the quarter ended December 31, 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 75.7% of total revenue. Commission revenue fell 15.3% to $14.40 million, compared to $17.02 million in the prior period. The decline was mostly the result of a stagnant equity market impacted by economic uncertainty and the lingering effects of the U.S. recession.
Advisory fees, which now comprise 20.0% of total revenue, rose 2.1% to $3.78 million, compared to $3.72 million in the prior period. Advisory fee revenue increased slightly due to growth in asset values augmented by an increase in investment contributions.
Total expenses decreased $2.10 million or 9.8%, principally as a result of decreases in compensation and benefits, marketing and promotion, and commissions and advisor fees paid to representatives. The Company reported a nominal $0.01 million operating loss compared to operating income of $0.32 million for the prior period and posted net income of $0.43 million due to an income tax benefit compared to net income of $0.35 million for the prior period.
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 $170,627, an increase of 20.7% over $141,330 for the prior rolling 12-month period.
Quarterly adjusted EBITDA was $0.25 million compared to $0.45 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.
"Despite a tough market impacted by economic uncertainty, I am pleased that our average advisor productivity and advisory revenue continue to climb, and that we continue to recruit quality advisors," said Timothy B. Murphy, President and CEO of Investors Capital Holdings, Ltd.
About Investors Capital Holdings, Ltd.:
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.
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INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
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| December 31, 2011 | March 31, 2011 | |||
| Assets | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ 4,475,977 | $ 4,587,195 | ||
| Deposit with clearing organization, restricted | 175,000 | 175,000 | ||
| Accounts receivable | 3,568,177 | 6,798,638 | ||
| Note receivable -- (current) | 106,955 | 108,169 | ||
| Loans receivable from registered representatives (current), net of allowance | 731,206 | 721,664 | ||
| Prepaid income taxes | 136,313 | 157,880 | ||
| Securities owned at fair value | 240,550 | 17,384 | ||
| Investments | 50,000 | 50,000 | ||
| Prepaid expenses | 429,419 | 1,073,969 | ||
| 9,913,597 | 13,689,899 | |||
| Property and equipment, net | 422,809 | 597,735 | ||
| Long Term Investments | ||||
| Loans receivable from registered representatives | 807,307 | 616,583 | ||
| Note receivable | 395,000 | 495,000 | ||
| Investments | 0 | 214,555 | ||
| Non-qualified deferred compensation investment | 1,171,389 | 1,089,572 | ||
| Cash surrender value life insurance policies | 143,881 | 680,429 | ||
| 2,517,577 | 3,096,139 | |||
| Other Assets | ||||
| Deferred tax asset, net | 1,733,740 | 1,218,773 | ||
| Capitalized software, net | 181,875 | 132,131 | ||
| Other assets | 7,080 | 15,808 | ||
| 1,922,695 | 1,366,712 | |||
| TOTAL ASSETS | $ 14,776,678 | $ 18,750,485 | ||
| Liabilities and Stockholders' Equity | ||||
| Current Liabilities | ||||
| Accounts payable | $ 956,609 | $ 1,109,400 | ||
| Accrued expenses | 907,993 | 2,078,705 | ||
| Commissions payable | 2,593,851 | 3,246,898 | ||
| Notes payable | 123,457 | 1,527,969 | ||
| Unearned revenues | 1,105,931 | 113,486 | ||
| Securities sold, not yet purchased, at fair value | 2,050 | 0 | ||
| 5,689,891 | 8,076,458 | |||
| Long-Term Liabilities | ||||
| Non-qualified deferred compensation plan | 1,247,806 | 1,176,096 | ||
| Total liabilities | 6,937,697 | 9,252,554 | ||
| Stockholders' Equity: | ||||
| Common stock, $.01 par value, 10,000,000 shares authorized; | ||||
| 6,661,669 issued and 6,657,784 outstanding at December 31, 2011; | ||||
| 6,618,259 issued and 6,614,374 outstanding at March 31, 2011 | 66,617 | 66,183 | ||
| Additional paid-in capital | 12,381,302 | 12,279,380 | ||
| Accumulated deficit | (4,578,803) | (2,874,214) | ||
| Less: Treasury stock, 3,885 shares at cost | (30,135) | (30,135) | ||
| Accumulated other comprehensive income | 0 | 56,717 | ||
| Total stockholders' equity | 7,838,981 | 9,497,931 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 14,776,678 | $ 18,750,485 | ||
| See Notes to Condensed Consolidated Financial Statements. | ||||
| INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED) | ||
| 2011 | 2010 | |
| Revenue: | ||
| Commissions | $ 14,404,727 | $ 17,015,065 |
| Advisory fees | 3,797,760 | 3,721,341 |
| Other fee income | 567,444 | 528,451 |
| Other revenue | 265,766 | 161,400 |
| Total revenue | 19,035,697 | 21,426,257 |
| Expenses: | ||
| Commissions and advisory fees | 14,751,775 | 16,600,763 |
| Compensation and benefits | 2,031,820 | 2,157,884 |
| Regulatory, legal and professional services | 721,595 | 549,546 |
| Brokerage, clearing and exchange fees | 471,905 | 481,837 |
| Technology and communications | 326,890 | 311,178 |
| Marketing and promotion | 170,039 | 406,945 |
| Occupancy and equipment | 208,095 | 232,802 |
| Other administrative | 354,725 | 366,757 |
| Interest | 10,527 | 3,472 |
| Total operating expenses | 19,047,371 | 21,111,184 |
| Operating (loss) income | (11,674) | 315,073 |
| Provision (benefit) for income taxes | (440,160) | (30,601) |
| Net Income | $ 428,486 | $ 345,674 |
| Basic net income per share | $ 0.07 | $ 0.05 |
| Diluted net income per share | $ 0.06 | $ 0.05 |
| Shares used in basic per share calculations | 6,553,824 | 6,566,452 |
| Shares used in diluted per share calculations | 6,692,520 | 6,704,651 |
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 December 31, | ||
| 2011 | 2010 | |
| Adjusted EBITDA: | $ 250,524 | $ 449,892 |
| Adjustments to conform Adjusted EBITDA to GAAP Net income: | ||
| Income tax benefit | 656,705 | 384,448 |
| Interest expense | (10,527) | (3,472) |
| Income tax expense | (216,545) | (353,847) |
| Depreciation and amortization | (97,995) | (89,360) |
| Non-recurring professional fees | (133,818) | -- |
| Non-cash compensation | (19,858) | (41,987) |
| Net income | $ 428,486 | $ 345,674 |