Investors Capital Holdings’ Annual Revenues Decline Due to Markets and Economy

Revenues remained steady throughout the first six months of the fiscal year before declining in the third and fourth quarters due to a deepening economic downturn and weakened financial market conditions that caused a decline in financial asset values, a shift in investor assets toward less volatile investments, and a reduction in the firm’s commissionable trading activity and advisory assets under management.

Commission revenues decreased 12.0% to $68.22 million in FY 2009 from $77.55 million in FY 2008. Advisory revenues rose 5.6% in fiscal year 2009 to $11.09 million from $10.50 million for the prior period. This is largely due to the repeal of the “Merrill Lynch” rule, requiring all brokerage advisory accounts to be reclassified as investment advisory accounts. Otherwise, advisory revenues remained relatively stable.

“Despite the decline in revenue, which was primarily brought on by economic factors affecting the entire financial services industry and, therefore, beyond the firm’s control, I believe Investors Capital remains extremely well positioned for robust growth in the future,” said Timothy B. Murphy, President and CEO of Investors Capital Holdings, Ltd.

F-MAP, the in-house Fund Managed Advisory Program of Investors Capital Advisory Services (ICA), increased revenues $0.25 million due to new investment, a testament to the strength of the management of the program by the ICA team. F-MAP gross margins increased 23.2% over the previous fiscal year. ICA is the registered investment advisor of Investors Capital Corporation (ICC), the firm’s independent broker/dealer subsidiary.

Branding and recruiting are both components of the firm’s corporate growth strategy. Advisors that joined ICC in the FY 2009 had an average trailing 12-month gross production of $247,742 compared to $217,717 for the prior fiscal year. Branding metrics are at an all-time high as well. Industry wide brand recall, brand recognition, brand attribute recall, and brand preference/consideration measures are at their highest levels since the firm’s inception.

ICC’s Net Promoter Score (NPS), a key measure of advisor satisfaction that measures the percentage of customer promoters over detractors, was 66% in Q4 fiscal year 2009 compared to 49% for the fourth quarter of the prior year. The NPS for a typical company lies between 5% and 10%. The score is measured via an online survey administered to advisors at the end each quarter.

“When you consider that the average NPS for an American company is only 11 percent, a score of 66 is outstanding,” said Robert Foney, Chief Marketing Officer for Investors Capital Corporation. “The fact that we improved upon an already good score of 49 shows that Investors Capital is determined to fulfill its mission of providing its advisors with 5-star service and support regardless of the market conditions.”

Investors Capital Corporation’s net capital position was $1.94 million this fiscal year (an excess of $1.41 million) versus $1.28 million (an excess of $0.80 million) for the prior year. Net capital ratio, accordingly, was 4.10 to 1 this fiscal year compared to 5.70 to 1 for the prior year.

The firm decreased total operating expenses 0.3% for the fiscal year, led by a 16.8% decrease in advertising and marketing expenses, a 14.0% decrease in compensation and benefits expenses, and an 11.2% decrease in occupancy expenses. Reductions in advertising, staff, and benefits, as well as consolidating from two home office locations to one achieved the goal of preserving operating cash flow.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a key metric utilized by the firm in evaluating its financial performance as it eliminates non-recurring items believed not to be part of our core operations. For FY 2009, adjusted EBITDA was net loss of $0.26 million compared to net income of $0.86 million in FY 2008.

Although the firm posted a net loss of $1.83 million for the fiscal year 2009 versus a net loss of $0.66 million in FY 2008, the company remains focused on achieving its overarching goals of operational excellence and profitability. Executive leadership along with the company’s management team implemented cost-cutting initiatives in addition to automation strategies during the current fiscal period and will continue to follow that path.

About Investors Capital Holdings, Ltd.:

Investors Capital Holdings, Ltd. (NYSE AMEX: ICH) of Lynnfield, Massachusetts is a diversified financial services holding company that operates primarily through its independent broker/dealer and investment advisor subsidiary, Investors Capital Corporation. Our mission is to provide premier, concierge-level service and support to our valued registered representatives, including advisory programs, strategic practice management and marketing services, and technology, to help them grow their businesses and exceed their clients’ expectations. Business units include Investors Capital Corporation, ICC Insurance Agency, Inc., and Investors Capital Holdings Securities Corporation. For more information, please call (800) 949-1422 x4814 or visit www.investorscapital.com.

Investors Capital Holdings, Ltd.
Robert Foney, 781-477-4814
Chief Marketing Officer
rfoney@investorscapital.com
www.investorscapital.com