LYNNFIELD, Mass.--(BUSINESS WIRE)--Investors Capital Holdings, Ltd. (NYSE MKT: ICH, the “Company”), a financial services holding company, posted historic third quarter total revenue of $24.85 million for the period ended December 31, 2013 (the “quarter”). The firm posted a net loss of $0.29 million for the quarter. Investors Capital Holdings, Ltd. operates primarily through its wholly-owned subsidiary, Investors Capital Corporation (“ICC”), a dually registered independent broker-dealer and investment advisory firm.
Total revenue increased 19.7% to $24.85 million compared to total revenue of $20.77 million for the quarter ended December 31, 2012 (the “prior period”). This represents the firm’s highest quarterly revenue result since its founding in 1992. The increase was due primarily to top-line growth of both commissions and advisory fees organically through targeted practice management initiatives, attracting and recruiting new financial advisors, and improved financial market conditions. Total revenue also increased fiscal year to date. For the nine-month period ending December 31, 2013, total revenue rose 13.4% to $70.21 million compared with $61.89 million for the nine-month fiscal year period ending December 31, 2012.
Commission revenue climbed 19.8% to $18.58 million, compared to $15.51 million in the prior period. The increase was primarily due to additional direct business, reflecting an increase in investments from our registered representatives’ clients. Improving financial markets and increased assets under management benefitted advisory fee revenue, which increased 18.1% to $4.92 million, compared to $4.16 million in the prior period.
Expenses increased by $4.8 million, or 23.3%, principally as a result of increases in commissions and advisory fees compensated to our registered representatives on increased sales volume, advertising and marketing costs for practice management and recruiting, and an increase in professional fees and legal and settlement costs. Regulatory, legal, and professional expenses rose primarily due to legal and professional costs related to the Merger Agreement between RCAP and ICH.
The firm posted an operating loss of $0.40 million compared to operating income of $0.28 million for the prior period and a net loss of $0.29 million for the quarter compared to net income of $0.13 million for the prior period.
The firm’s average revenue per representative, based on a rolling 12-month period, rose at the end of the third quarter to a new high of $207,530, an increase of 15.7% over $179,389 for the prior rolling 12-month period. The continued growth in per-capita, representative-generated revenue is a direct result of attracting and recruiting new, higher-producing advisors, favorable market conditions, and the firm’s enhanced practice management program.
Adjusted EBITDA was $0.51 million compared to $0.41 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.
The Company signed a definitive merger agreement (‘the Merger Agreement’) with RCS Capital Corporation, (“RCAP”) on October 27, 2013. The Company believes, with the Merger Agreement with RCAP, it could increase revenues and gain market share with the shared resources and economic benefits of a larger entity. The synergies obtained as a result of the proposed merger could have a significant impact on the combined operating results through increased revenues, combined management expertise, technology, and efficiencies.
“We achieved our largest quarterly revenue result in company history, our practice management initiatives continue to have a tangible effect on increasing advisor production, recruiting is robust, and advisor retention by delivering 5-Star Service every day remains high,” said Timothy B. Murphy, President and CEO of Investors Capital Holdings, Ltd. “Though the firm posted a net loss, I am encouraged by the fact that our operating loss was largely attributed to the Merger Agreement between RCAP and ICH, a positive development that I believe will tremendously benefit all stakeholders involved upon completion.”
“Through the hard work of our valuable advisors and home office staff, we were able to achieve some very laudable results this quarter,” Mr. Murphy continued. “It goes without saying that I am extremely excited about what the future holds for Investors Capital.”
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 independent 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., Investors Capital Holdings Securities Corporation, and Advisor Direct, Inc. 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.
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INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES |
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| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||||||||
| December 31, 2013 | March 31, 2013 | ||||||||||||
| Assets | |||||||||||||
| Current Assets | |||||||||||||
| Cash and cash equivalents | $ | 6,366,036 | $ 6,589,698 | ||||||||||
| Deposit with clearing organization, restricted | 175,000 | 175,000 | |||||||||||
| Accounts receivable and other receivables | 5,733,003 | 7,160,553 | |||||||||||
| Loans receivable from registered representatives (current), net of allowance | 725,518 | 593,730 | |||||||||||
| Prepaid income taxes | 209,069 | 136,972 | |||||||||||
| Securities owned at fair value | 300,255 | 258,903 | |||||||||||
| Prepaid expenses | 456,937 | 722,427 | |||||||||||
| 13,965,818 | 15,637,283 | ||||||||||||
| Property and equipment, net | 73,777 | 194,446 | |||||||||||
| Long Term Assets | |||||||||||||
| Loans receivable from registered representatives | 1,055,541 | 893,703 | |||||||||||
| Non-qualified deferred compensation investment | 2,406,202 | 1,771,044 | |||||||||||
| Cash surrender value life insurance policies | 225,525 | 176,402 | |||||||||||
| 3,687,268 | 2,841,149 | ||||||||||||
| Other Assets | |||||||||||||
| Deferred tax asset, net | 1,584,213 | 1,059,480 | |||||||||||
| Capitalized software, net | 69,101 | 107,590 | |||||||||||
| Other asset | 56,704 | 56,704 | |||||||||||
| 1,710,018 | 1,223,774 | ||||||||||||
| TOTAL ASSETS | $ | 19,436,881 | $ 19,896,652 | ||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||
| Current Liabilities | |||||||||||||
| Accounts payable | $ | 1,532,097 | $ 1,327,691 | ||||||||||
| Accrued expenses | 1,272,311 | 1,818,379 | |||||||||||
| Commissions payable | 3,981,906 | 3,279,921 | |||||||||||
| Notes payable | 92,718 | 1,488,876 | |||||||||||
| Unearned revenue | 1,210,812 | 188,651 | |||||||||||
| Securities sold, not yet purchased, at fair value | 28,946 | ||||||||||||
| 8,089,844 | 8,132,464 | ||||||||||||
| Long-Term Liabilities | |||||||||||||
| Non-qualified deferred compensation plan | 2,673,015 | 1,968,691 | |||||||||||
| Subordinated borrowings | 2,000,000 | 2,000,000 | |||||||||||
| 4,673,015 | 3,968,691 | ||||||||||||
| Total liabilities | 12,762,859 | 12,101,155 | |||||||||||
| Stockholders' Equity: | |||||||||||||
| Common stock, $.01 par value, 10,000,000 shares authorized; | 71,004 | 71,013 | |||||||||||
| 7,100,608 issued and 7,096,723 outstanding at December 31, 2013 | |||||||||||||
| 7,101,427 issued and 7,097,542 outstanding at March 31, 2013 | |||||||||||||
| Additional paid-in capital | 12,899,697 | 12,594,370 | |||||||||||
| Accumulated deficit | (6,266,544) | (4,839,751) | |||||||||||
| Less: Treasury stock, 3,885 shares at cost | (30,135) | (30,135) | |||||||||||
| Total stockholders' equity | 6,674,022 | 7,795,497 | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 19,436,881 | $ 19,896,652 | ||||||||||
| INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
| (UNAUDITED) | THREE MONTHS ENDED | ||||||||||||
| December 31, | |||||||||||||
| 2013 | 2012 | ||||||||||||
| Revenue: | |||||||||||||
| Commissions | $ | 18,583,079 | $ | 15,510,183 | |||||||||
| Advisory fees | 4,917,295 | 4,162,082 | |||||||||||
| Other fee income | 904,314 | 935,375 | |||||||||||
| Other revenue | 444,071 | 158,722 | |||||||||||
| Total revenue | 24,848,759 | 20,766,362 | |||||||||||
| Expenses: | |||||||||||||
| Commissions and advisory fees | 19,591,094 | 16,125,987 | |||||||||||
| Compensation and benefits | 1,664,710 | 1,484,416 | |||||||||||
| Regulatory, legal and professional services | 2,371,820 | 1,378,066 | |||||||||||
| Brokerage, clearing and exchange fees | 425,632 | 385,100 | |||||||||||
| Technology and communications | 265,261 | 337,495 | |||||||||||
| Advertising, marketing and promotion | 576,439 | 188,808 | |||||||||||
| Occupancy and equipment | 116,092 | 170,539 | |||||||||||
| Other administrative | 238,046 | 409,092 | |||||||||||
| Interest | 2,986 | 3,588 | |||||||||||
| Total operating expenses | 25,252,080 | 20,483,091 | |||||||||||
| Operating (loss) income | (403,321) | 283,271 | |||||||||||
| (Benefit) provision for income taxes | (117,627) | 149,555 | |||||||||||
| Net (loss) income | $ | (285,694) | $ | 133,716 | |||||||||
| Basic net (loss) income per share | $ | (0.04) | $ | 0.02 | |||||||||
| Diluted net (loss) income per share | $ | (0.04) | $ | 0.02 | |||||||||
| Weighted average shares used in basic per share calculations | 6,729,264 | 6,647,700 | |||||||||||
| Weighted average shares used in diluted per share calculations | 6,729,264 | 6,647,700 | |||||||||||
Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates 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 multiple time periods. We also use adjusted EBITDA as an important measure, among others, to analyze and evaluate financial and strategic planning decisions.
Adjusted EBITDA is considered a non-US GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act. Adjusted EBITDA should be considered in conjunction with, rather than as a substitute for, important US 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 (loss) as follows:
| Quarter Ended December 31, | ||||||||||
| 2013 | 2012 | |||||||||
| Adjusted EBITDA: | $ 509,235 | $ 406,491 | ||||||||
| Adjustments to conform adjusted EBITDA to | ||||||||||
| GAAP Net income (loss): | ||||||||||
| Benefit (provision) for income taxes | 117,627 | (149,555) | ||||||||
| Interest expense | (2,986) | (3,588) | ||||||||
| Depreciation and amortization | (47,382) | (82,039) | ||||||||
| Non-recurring professional fees | (758,342) | - | ||||||||
| Forgivable loans charged to commission | (10,750) | (7,240) | ||||||||
| Non-cash compensation | (93,096) | (30,353) | ||||||||
| Net income (loss) | $ (285,694) | $ 133,716 | ||||||||
