Investors Capital Holdings, Ltd. (NYSE Amex: ICH, “the Company”), a financial services holding company, posted second quarter total revenue of $20.43 million for the period ended September 30, 2010 (“the quarter”) compared to total revenue of $18.94 million for the quarter ended September 30, 2009 (“prior period”). The Company operates primarily through its wholly-owned subsidiary, Investors Capital Corporation (“ICC”), a dually registered broker-dealer and investment advisory firm.
Timothy B. Murphy, President & CEO, Investors Capital Holdings, Ltd. (Photo: Business Wire)

Timothy B. Murphy, President & CEO, Investors Capital Holdings, Ltd. (Photo: Business Wire)

Total revenue for the quarter grew by $1.49 million, or 7.9%, compared to the prior period. The increase is due primarily to a rise in commissionable revenues as markets continue to rebound from the recent recession. Commission revenue, which accounts for 81.8% of total revenue, increased 8.8% to $16.72 million. Advisory fees, which account for 15.1% of total revenue, grew 7.6% to $3.09 million. The rise in advisory revenue reflects growth in market asset values, as well as new investment contributions.

“We are pleased to see continued growth in revenues generated by our registered representatives, particularly in our advisory platforms,” said Timothy B. Murphy, the Company’s President and CEO. “Ours is a service business, and by keeping the delivery of 5-star service every day to our advisors forefront in all that we do, our revenue, profitability, and recruiting goals become achievable.”

At quarter end, the firm’s net capital position remained stable at $2.72 million for the quarter (an excess of $2.22 million) with a net capital ratio of 2.78:1. The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that Investors Capital maintain net capital of $100,000 and a ratio of specified aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to 1.

Investors Capital continues to benefit from improving the overall quality of its representatives, a key component of the Company’s strategy for achieving growth in revenues and net income. The firm seeks to continually improve the quality of its representatives by helping them improve their skills and practices, recruiting established, high-quality representatives, and terminating low-quality advisors. The firm’s average revenue per representative, based on a rolling 12-month period, rose again in the second quarter to $140,440, an increase of 24.8% over $112,519 for the prior period.

Total expenses increased by $2.54 million, or 13.7%, principally as a result of increases in commissions and advisory fees paid to representatives; compensation; and regulatory, legal, and professional fees. Increases in reserves for estimated legal and regulatory settlements, including recent estimated settlements with the Massachusetts Securities Division, were a significant factor in the Company posting a net loss of $0.64 million for the quarter compared to net income of $0.21 million for the prior period.

“We settled a regulatory matter with the State that greatly impacted our earnings this quarter,” said Murphy. “We are pleased to have this issue resolved; and we look forward to pursuing profitability going forward.”

Adjusted EBITDA was $0.48 million loss for the quarter compared to $0.59 million for the prior period, due primarily to increased operating expenses. Adjusted EBITDA, a non-GAAP financial measure described below, is a key metric utilized by the firm in evaluating its financial performance.

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 independent broker/dealer and investment advisor subsidiary, Investors Capital Corporation. Our mission is to provide premier 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

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.
September 30, 2010 March 31, 2010
Current Assets
Cash and cash equivalents $ 6,242,404 $ 5,812,865
Deposit with clearing organization, restricted 175,000 175,000
Accounts receivable 4,858,612 6,042,188
Note receivable - (current) 34,299 140,598
Loans receivable from registered representatives (current), net of allowance 725,070 769,263
Prepaid income taxes - 559,007
Securities owned at fair value 25,711 57,933
Investments 50,000 50,000
Prepaid expenses   975,571     957,674  
13,086,667 14,564,528
Property and equipment, net 624,402 774,182
Long Term Investments
Accounts Receivable 330,000 -
Loans receivable from registered representatives 298,263 292,884
Note receivable 595,000 595,000
Investments 191,078 184,319
Non-qualified deferred compensation investment 921,607 929,897
Cash surrender value life insurance policies   586,116     551,398  
2,922,064 2,553,498
Other Assets
Other assets 13,728 25,069
Deferred tax asset, net 1,312,540 838,773
Capitalized software, net   122,277     138,497  
1,448,545 1,002,339
TOTAL ASSETS $ 18,081,678   $ 18,894,547  
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,192,538 $ 817,761
Accrued expenses 2,439,284 2,358,656
Notes payable 341,626 1,130,922
Commissions payable 3,298,135 3,488,415
Income Taxes Payable 20,187 -
Unearned revenues 199,947 101,931
Securities sold, not yet purchased, at fair value   855     5,693  
7,492,572 7,903,378
Long-Term Liabilities
Non-qualified deferred compensation plan   951,806     793,735  
951,806 793,735
Total liabilities   8,444,378     8,697,113  
Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
6,625,016 issued and 6,621,131 outstanding at September 30, 2010;
6,570,177 issued and 6,566,292 outstanding at March 31, 2009 66,250 65,958
Additional paid-in capital 12,183,944 12,095,862
Accumulated deficit (2,618,555 ) (1,964,084 )
Less: Treasury stock, 3,885 shares at cost (30,135 ) (30,135 )

Accumulated other comprehensive income



Total stockholders' equity




$ 18,081,678

$ 18,894,547
2010 2009
Commissions $ 16,715,609 $ 15,357,927
Advisory fees 3,090,414 2,871,553
Other fee income 143,364 106,661
Other revenue   481,177     599,658
Total revenue   20,430,564     18,935,799
Commissions and advisory fees 16,098,685 14,348,474
Compensation and benefits 2,040,010 1,817,574
Regulatory, legal and professional services 1,315,436 511,359
Brokerage, clearing and exchange fees 497,837 673,784
Technology and communications 322,141 294,069
Marketing and promotion 302,805 275,900
Occupancy and equipment 213,444 210,591
Other administrative 256,052 369,114
Interest   4,241     6,034
Total operating expenses   21,050,651     18,506,899
Operating (loss) income (620,087 ) 428,900
Provision for income taxes   23,594     222,202
Net (loss) income $ (643,681 ) $ 206,698
Basic and diluted net (loss) income per share $ (0.10 ) $ 0.03
Basic dividends per common share $ -   $ -
Shares used in basic and diluted per share calculations   6,523,675     6,499,394

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 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 (loss) as follows:
Quarters Ended September 30,
2010   2009
Adjusted EBITDA: $ (484,499 ) $ 590,964
Adjustments to GAAP Net income (loss):
Income tax benefit - 80,337
Interest expense (4,241 ) (6,034 )
Income tax expense (23,594 ) (302,539 )
Depreciation and amortization (89,360 ) (87,858 )
Non-cash compensation   (41,987 )   (68,174 )
Net (loss) income $ (643,681 )   $ 206,696  

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