Lynnfield, MA. (November 15, 2013)— 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.”
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.
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