LYNNFIELD, Mass.--(BUSINESS WIRE)--Investors Capital Holdings, Ltd. (NYSE MKT: ICH, the “Company”), a financial services holding company, posted net income of $0.37 million on total revenue of $84.89 million for the fiscal year ended March 31, 2013 (the “year end”). 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 4.7% to $84.89 million compared to total revenue of $81.04 million for the fiscal year ended March 31, 2012 (the “prior period”). The recruitment of higher-producing registered representatives, improved financial markets, rising recurring revenues, and an increase in other fee income all combined to create a profitable year.
Commission revenue rose 3.4% to $65.58 million, compared to $63.44 million in the prior period. Increased sales of mutual funds, variable annuities, and other investment products pushed commission revenue higher. Advisory fees also rose, increasing 2.8% to $16.41 million, compared to $15.96 million in the prior period. Asset value growth, increases in investment contributions as well as more advisors conducting advisory business led to the increase in advisory fee revenue.
Total expenses increased slightly: increases in commissions and advisory fees paid to registered representatives and regulatory, legal, and professional fees were offset by decreases in compensation and benefits, brokerage and commissions, and occupancy and equipment. Expenses rose 0.7% to $84.30 million compared to $83.70 million for the prior period.
The company reported operating income of $0.59 million compared to an operating loss of $2.66 million for the prior period. Net income was $0.37 million for the fiscal year compared to a net loss of $2.33 million for the prior period. The firm’s profitability was due to an increase in other fee income as well as rebounding financial markets.
Investors Capital continues to benefit from enhancing the overall quality of its representatives by providing broad practice management, marketing, and technology solutions to assist its advisors in growing their practices as well as 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 fiscal year to $190,201, an increase of 8.1% over $175,877 for the prior rolling 12-month period.
The firm made several strategic moves and introduced numerous corporate initiatives designed to enhance organic revenue growth by helping its registered representatives increase their individual production:
- Investors Capital awarded advisors who achieved year-over-year growth from 2011 to 2012 a growth rebate of some or all of their monthly CapitalCONNECT Core bundle technology fees. CapitalCONNECT, the firm’s suite of technology tools designed to help advisors increase their efficiency, productivity and, ultimately, revenue, growth, and profitability. The suite includes data aggregation and performance reporting software, marketing tools, industry research and product analysis tools, ICC’s proprietary workflow software, Transparency, CRM, and more.
- The Brand It Symposium is a 2-day marketing and branding symposium held three times per year to assist representatives with properly marketing and branding their businesses.
- Investors Capital added staff to its Practice Management department to provide representatives with one-on-one coaching and consulting, robust online self-serve tools, high-end marketing collateral, and other business growth resources.
Adjusted EBITDA was $1.11 million compared to negative $0.78 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.
“By continually focusing on the retention of and respect for our existing representatives, implementing new practice management and technology initiatives, providing 5-Star Service every day, and recruiting quality, high-producing, successful representatives, we can attain the organic and new growth necessary to achieve our goal of doubling the size of the firm in four years,” said Tim Murphy, President and CEO of Investors Capital Holdings, Ltd.
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 (ICC). 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, exceed their clients’ expectations, and achieve success. 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., Six Kimball Lane, Lynnfield, Massachusetts 01940, Distributor.
| INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| March 31, 2013 | March 31, 2012 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 6,589,698 | $ | 4,537,713 | ||||
| Deposit with clearing organization, restricted | 175,000 | 175,000 | ||||||
| Accounts receivable | 7,160,553 | 4,525,157 | ||||||
| Loans receivable from registered representatives (current), net of allowance | 593,730 | 654,560 | ||||||
| Prepaid income taxes | 136,972 | 137,658 | ||||||
| Securities owned at fair value | 258,903 | 235,454 | ||||||
| Prepaid expenses | 722,427 | 674,780 | ||||||
| 15,637,283 | 10,940,322 | |||||||
| Property and equipment, net | 194,446 | 340,007 | ||||||
| Long Term Investments | ||||||||
| Loans receivable from registered representatives | 893,703 | 1,002,621 | ||||||
| Non-qualified deferred compensation investment | 1,771,044 | 1,327,806 | ||||||
| Cash surrender value life insurance policies | 176,402 | 157,991 | ||||||
| 2,841,149 | 2,488,418 | |||||||
| Other Assets | ||||||||
| Deferred tax asset, net | 1,059,480 | 1,550,010 | ||||||
| Capitalized software, net | 107,590 | 172,240 | ||||||
| Other assets | 56,704 | - | ||||||
| 1,223,774 | 1,722,250 | |||||||
| TOTAL ASSETS | $ | 19,896,652 | $ | 15,490,997 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 1,327,691 | $ | 820,540 | ||||
| Accrued expenses | 1,818,379 | 1,408,324 | ||||||
| Commissions payable | 3,279,921 | 2,787,467 | ||||||
| Notes payable | 1,488,876 | 1,605,688 | ||||||
| Unearned revenues | 188,651 | 146,198 | ||||||
| Securities sold, not yet purchased, at fair value | 28,946 | 8,186 | ||||||
| 8,132,464 | 6,776,403 | |||||||
| Long-Term Liabilities | ||||||||
| Non-qualified deferred compensation plan | 1,968,691 | 1,458,169 | ||||||
| Subordinated borrowings | 2,000,000 | - | ||||||
| 3,968,691 | 1,458,169 | |||||||
| Total liabilities | 12,101,155 | 8,234,572 | ||||||
| Commitments and contingencies (Note 16) | ||||||||
| Stockholders' Equity: | ||||||||
| Common stock, $.01 par value, 10,000,000 shares authorized; | ||||||||
| 7,101,427 issued and 7,097,542 outstanding at March 31, 2013 | ||||||||
| 6,689,009 issued and 6,685,124 outstanding at March 31, 2012 | 71,013 | 66,890 | ||||||
| Additional paid-in capital | 12,594,370 | 12,425,713 | ||||||
| Accumulated deficit | (4,839,751 | ) | (5,206,043 | ) | ||||
| Less: Treasury stock, 3,885 shares at cost | (30,135 | ) | (30,135 | ) | ||||
| Total stockholders' equity | 7,795,497 | 7,256,425 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 19,896,652 | $ | 15,490,997 | ||||
| INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | |||||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND |
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|
COMPREHENSIVE INCOME (LOSS) |
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|
YEARS ENDED | ||||||
| March 31, | |||||||
| 2013 | 2012 | ||||||
| Revenue: | |||||||
| Commissions | $ | 65,577,806 | $ | 63,444,938 | |||
| Advisory fees | 16,409,330 | 15,958,497 | |||||
| Other fee income | 1,701,482 | 620,595 | |||||
| Other revenue | 1,196,772 | 1,016,732 | |||||
| Total revenue | 84,885,390 | 81,040,762 | |||||
| Expenses: | |||||||
| Commissions and advisory fees | 67,378,564 | 64,775,584 | |||||
| Compensation and benefits | 6,535,007 | 8,744,917 | |||||
| Regulatory, legal and professional services | 4,833,915 | 3,979,808 | |||||
| Brokerage, clearing and exchange fees | 1,404,075 | 1,790,263 | |||||
| Technology and communications | 1,300,652 | 1,335,373 | |||||
| Advertising, marketing and promotion | 917,181 | 956,234 | |||||
| Occupancy and equipment | 694,326 | 864,431 | |||||
| Other administrative | 1,204,994 | 1,219,856 | |||||
| Interest | 30,668 | 37,361 | |||||
| Total operating expenses | 84,299,382 | 83,703,827 | |||||
| Operating income (loss) | 586,008 | (2,663,065 | ) | ||||
| Provision (benefit) for income taxes | 219,716 | (331,236 | ) | ||||
| Net income (loss) | $ | 366,292 | $ | (2,331,829 | ) | ||
| Other comprehensive income (loss): | |||||||
| Unrealized gains (losses) on securities | |||||||
| Unrealized holding loss arising during period on investment securities | - | (3,824 | ) | ||||
| Less: Reclassification adjustment for gains included in net loss | - | (52,893 | ) | ||||
| Other Comprehensive income (loss) | $ | - | $ | (56,717 | ) | ||
| Comprehensive income | 366,292 | (2,388,546 | ) | ||||
| Basic net income (loss) per share | $ | 0.06 | $ | (0.36 | ) | ||
| Diluted net income (loss) per share | $ | 0.06 | $ | (0.36 | ) | ||
| Shares used in basic per share calculations | 6,219,022 | 6,520,025 | |||||
| Shares used in diluted per share calculations | 6,522,764 | 6,520,025 | |||||
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:
| Year Ended March 31, | ||||||||
| 2013 | 2012 | |||||||
| Adjusted EBITDA: | $ | 1,110,687 | $ | (776,780 | ) | |||
| Adjustments to conform Adjusted EBITDA to | ||||||||
| GAAP Net income (loss): | ||||||||
| Income tax provision | (219,716 | ) | 331,236 | |||||
| Interest expense | (30,668 | ) | (37,361 | ) | ||||
| Depreciation and amortization | (321,231 | ) | (380,139 | ) | ||||
| Non-cash compensation for transfer of | ||||||||
| beneficial interest to former Chairman |
- |
(568,095 | ) | |||||
| Non-cash compensation | (172,780 | ) | (147,040 | ) | ||||
| Non-recurring professional fees |
- |
(753,650 | ) | |||||
| Net income (loss) | $ | 366,292 | $ | (2,331,829 | ) | |||
