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Investors Capital Holdings Posts Record Third Quarter Revenue Growth

2/14/2013 by Robert Foney

Growth Highest quarterly revenue result in firm history; average revenue per representative surpasses $200,000 GDC.

Lynnfield, MA. (February 14, 2013)— 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.”

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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