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Investors Capital Holdings Posts 3Q Revenue

February 19, 2014

Investors Capital Holdings, a financial services holding company, posted third quarter total revenue of $24.85 million for the period ended Dec. 31, 2013.

In a release on Feb. 14, the Company said that the firm posted a net loss of $0.29 million for the quarter. Investors Capital Holdings operates primarily through its subsidiary, Investors Capital Corp., a dually registered independent broker-dealer and investment advisory firm.

Total revenue increased 19.7 percent to $24.85 million compared to total revenue of $20.77 million for the quarter ended Dec. 31, 2012. 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 Dec. 31, 2013, total revenue rose 13.4 percent to $70.21 million compared with $61.89 million for the nine- month fiscal year period ending Dec. 31, 2012.

Commission revenue climbed 19.8 percent 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 percent to $4.92 million, compared to $4.16 million in the prior period.

Expenses increased by $4.8 million, or 23.3 percent, 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 percent 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 with RCS Capital Corp. on Oct. 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 Murphy, President and CEO of Investors Capital Holdings. "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. It goes without saying that I am extremely excited about what the future holds for Investors Capital."

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Source: Professional Services Close - Up

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