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.
Timothy B. Murphy, President & CEO, Investors Capital Corporation and Investors Capital Holdings, Lt ...

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

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

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.

December 31, 2013 March 31, 2013
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
December 31,
2013 2012
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
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

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