Investors Capital Holdings, Ltd. (NYSE MKT: ICH, the “Company”), a financial services holding company, posted second quarter total revenue of $22.28 million for the period ended September 30, 2013 (the “quarter”). The firm posted a net loss of $0.78 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 9.6% to $22.28 million compared to total revenue of $20.32 million for the quarter ended September 30, 2012 (the “prior period”). The increase was due primarily to top-line growth of both commissions and advisory fees organically through the firm’s practice management initiatives, attracting and recruiting new financial advisors, and improved financial market conditions. Total revenue also increased fiscal year to date. For the six-month period ending September 30, 2013, total revenue rose 10.3% to $45.36 million compared with $41.13 million for the six-month fiscal year period ending September 30, 2012.

Commission revenue climbed 7.8% to $17.02 million, compared to $15.78 million in the prior period, due to an increase in direct business from improved market conditions as well as new business from new advisors. Improving financial markets also benefitted advisory fee revenue, which increased 14.0% to $4.54 million, compared to $3.98 million in the prior period.

Total expenses increased $3.30 million or 16.6% to $23.19 million, principally as a result of increases in commissions and advisory fees compensated to our independent representatives and in regulatory, legal, and professional costs. Regulatory, legal and professional expenses more than doubled, driven principally by related legal costs incurred to litigate and strategically resolve claims concerning investment products sold by our representatives prior to the recent recession.

The firm posted an operating loss of $0.91 million compared to operating income of $0.43 million for the prior period and a net loss of $0.78 million for the quarter compared to net income of $0.28 million for the prior period.

Investors Capital continues to benefit from enhancing the overall quality of its representatives by providing broad practice management solutions, 5-Star Service, and business-building technology to its advisors to assist them in growing their practices, as well as attracting and 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 second quarter to new all-time high of $196,689, an increase of 16.1% over $169,373 for the prior rolling 12-month period.

Adjusted EBITDA was negative $0.58 million compared to income of $0.56 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.

“I’m pleased to see our revenue momentum from the first quarter carry forward into the second,” said Timothy B. Murphy, President and CEO of Investors Capital Holdings, Ltd. “Organic growth from our practice management initiatives, recruitment of successful advisors, and a tailwind from improved market and economic conditions have all combined to achieve commendable second quarter revenue results. However, we are still hindered by the costs of product litigation and settlements, which continue to impact our operating results.”

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 are excited at the opportunities afforded to ICH by this partnership,” said Mr. Murphy. “The combined capabilities of ICH and RCAP position us strategically to pursue our vision of becoming the best independent broker/dealer in the industry.”

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

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.

September 30, 2013 March 31, 2013
Current Assets
Cash and cash equivalents $ 6,233,331 $ 6,589,698
Deposit with clearing organization, restricted 175,000 175,000
Accounts receivable and other receivables 5,875,628 7,160,553

Loans receivable from registered representatives (current), net of allowance
710,949 593,730
Prepaid income taxes 186,050 136,972
Securities owned at fair value 277,031 258,903
Prepaid expenses 422,721   722,427  
13,880,710 15,637,283
Property and equipment, net 108,330 194,446
Long Term Assets
Loans receivable from registered representatives 1,039,744 893,703
Non-qualified deferred compensation investment 2,148,276 1,771,044
Cash surrender value life insurance policies 204,731   176,402  
3,392,751 2,841,149
Other Assets
Deferred tax asset, net 1,507,116 1,059,480
Capitalized software, net 81,931 107,590
Other asset 56,704   56,704  
1,645,751 1,223,774
TOTAL ASSETS $ 19,027,542   $ 19,896,652  
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 748,983 $ 1,327,691
Accrued expenses 2,643,550 1,818,379
Commissions payable 3,359,332 3,279,921
Notes payable 431,690 1,488,876
Unearned revenue 522,608 188,651
Securities sold, not yet purchased, at fair value 44,698   28,946  
7,750,861 8,132,464
Long-Term Liabilities
Non-qualified deferred compensation plan 2,383,870 1,968,691
Subordinated borrowings 2,000,000   2,000,000  
4,383,870 3,968,691
Total liabilities 12,134,731   12,101,155  
Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
7,100,608 issued and 7,096,723 outstanding at September 30, 2013
7,101,427 issued and 7,097,542 outstanding at March 31, 2013 70,957 71,013
Additional paid-in capital 12,832,838 12,594,370
Accumulated deficit (5,980,849 ) (4,839,751 )
Less: Treasury stock, 3,885 shares at cost (30,135 ) (30,135 )
Total stockholders' equity 6,892,811   7,795,497  
September 30,
2013   2012
Commissions $ 17,016,527 $ 15,779,387
Advisory fees 4,535,767 3,979,313
Other fee income 313,906 337,226
Other revenue 411,604   226,839
Total revenue 22,277,804   20,322,765
Commissions and advisory fees 17,871,474 16,126,655
Compensation and benefits 1,613,175 1,460,708
Regulatory, legal and professional services 2,066,087 977,627
Brokerage, clearing and exchange fees 355,223 364,697
Technology and communications 373,909 327,240
Advertising, marketing and promotion 427,118 231,424
Occupancy and equipment 136,240 178,191
Other administrative 261,462 221,748
Interest 87,459   4,835
Total operating expenses 23,192,147   19,893,125
Operating (loss) income (914,343 ) 429,640
(Benefit) provision for income taxes (132,825 ) 149,420
Net (loss) income $ (781,518 ) $ 280,220
Basic net (loss) income per share $ (0.12 ) $ 0.04
Diluted net (loss) income per share $ (0.12 ) $ 0.04
Weighted average shares used in basic per share calculations 6,707,905   6,529,786
Weighted average shares used in diluted per share calculations 6,707,905   6,656,165

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 as follows:
Quarter Ended September 30,
  2013     2012  
Adjusted EBITDA: $ (578,494 ) $ 563,387

Adjustments to conform adjusted EBITDA to GAAP Net income (loss):
Benefit (provision) for income taxes 132,825 (149,420 )
Interest expense (87,459 ) (4,835 )
Depreciation and amortization (60,482 ) (80,996 )
Non-recurring professional fees (88,081 ) -
Non-cash compensation   (99,827 )   (47,916 )
Net income (loss) $ (781,518 ) $ 280,220  

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