NEW YORK, May 16, 2017 (GLOBE NEWSWIRE) -- National Holdings Corporation (NASDAQ:NHLD) (“National” or the “Company”), a leading full service independent brokerage, investment banking, trading and asset management firm providing diverse services including tax preparation, today announced its financial results for the fiscal second quarter ended March 31, 2017.
Second Quarter Fiscal 2017 Financial Highlights:
- Revenue of $51.9 million, versus $42.0 million for the second quarter of fiscal 2016.
- Investment banking revenue recorded its best quarter ever, generating $16.2 million of revenue, versus $6.1 million in the prior year quarter.
- Adjusted EBITDA increased exponentially, to $4.3 million from $1.2 million in the prior year quarter.
- Pre-tax earnings of $5.6 million.
- $1.8 million of pre-tax earnings was due to a non-operating, non-taxable income adjustment, due to a change in the fair value of the firm's warrant liability
- Adjusted pre-tax earnings (minus the warrant liability valuation change) were $3.8 million, versus earnings of $.6 million in the second quarter of 2016.
- Cash and cash equivalents of $30.6 million and no debt as of March 31, 2017 versus $27.4 million as of the fiscal year-end of 2016.
- Equity of $35.5 million as of March 31, 2017.
Management Commentary
Michael Mullen, Chief Executive Officer of National stated, “The second quarter of fiscal 2017 was extremely impactful for National, boasting a nearly 25% increase in revenue compared to Q2 fiscal 2016, and also showcasing the positive impact our management change has had on our business. By streamlining and focusing our attention on securing quality deals for our clients we were able to lead a number of capital raises already this year that generated great value.”
Mr. Mullen continued, “The team has been working tirelessly to optimize our business and I am extremely pleased with the success we have shown thus far. In the first 6 months of fiscal 2017, National was able to deliver an increase of approximately $15 million in revenue over the prior year to date period and this is just the beginning. National is truly on a path for great success and we look forward to continuing to provide long term value for our clients.”
Fiscal Second Quarter 2017 Financial Results
National reported fiscal second quarter revenue of $51.9 million, up $9.9 million or 23.4% over the second quarter of 2016. Total expenses increased $6.8 million or 16.3% to $48.2 million in the quarter.
Revenue
The increase in revenue was driven by investment banking, which increased to $16.2 million in fiscal 2017, up 167% on quality issuance and strong demand from our clients. Commissions and related revenue increased slightly to $24.0 million in fiscal 2017, up 1%. Investment advisory revenue also increased, to $3.5 million in fiscal 2017, up 5%. Transaction fees and clearing services revenue also increased, to $1.7 million in fiscal 2017, up 9%. Net dealer inventory gains declined slightly to $2.4 million. Tax revenue however decreased noticeably to $3.1 million in fiscal 2017, down 20% from $3.9 million in the prior year quarter. Several factors contributed to this decline including the continuing review and elimination of underperforming locations, as well as an increase in the number of extensions filed in the current tax season. Revenue associated with return extensions are recorded when completed.
Expenses
Total expenses increased to $48.2 million in the current quarter, up $6.8 million from the comparative quarter. $5.9 million of that was in the commissions, compensation and fees category. The increase in this category of expenses is largely due to the increase in investment banking and commission revenue, and directly associated compensation agreements.
Pre-tax Earnings
Pre-tax earnings were positively impacted by $1.8 million, due to the change in the fair value of the firms warrant liability, which decreased from the December 31, 2016 measurement date. This adjustment is a non-operating, non-taxable income adjustment and should be viewed as such.
Net Income
As a result of the positive operating and non-operating pre-tax results, net income increased to $3.9 million in the current quarter, versus net income of $.4 million in the comparative prior quarter. Earnings per share, basic and fully diluted, were $.31 and $.03 in the respective quarters.
Adjusted EBITDA increased to $4.3 million in the quarter from $1.2 million in the prior year quarter
Balance Sheet
As of March 31, 2017 National had $30.6 million of cash and cash equivalents, versus $27.4 million as of September 30, 2016. The Company's balance sheet remains debt free.
About National Holdings Corporation
National Holdings Corporation is a full-service investment banking and asset management firm that provides a range of services, including independent retail brokerage and advisory services, investment banking, institutional sales and trading and equity research, financial planning, market making, tax preparation, insurance and annuities, to corporations, institutional investors and high net-worth clients. With over 1,100 independent advisors, registered reps, traders, sales associates and corporate staff, the Company is a leading Independent Advisor and Broker services company. National operates through five subsidiaries: National Securities Corporation, vFinance Investments, Inc., National Insurance Corporation, National Asset Management, Inc. and Gilman Ciocia, Inc. The Company’s National Securities subsidiary was founded in 1947. National was organized in 1999 and is headquartered in New York and Florida. For more information, visit www.nhldcorp.com.
FORWARD-LOOKING STATEMENTS
This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management’s current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company’s control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in National’s filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and National undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
| NATIONAL HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |||||||
| March 31, 2017 (Unaudited) | September 30, 2016 | ||||||
| ASSETS | |||||||
| Cash | $ | 24,344,000 | $ | 21,694,000 | |||
| Restricted cash | 354,000 | 354,000 | |||||
| Cash deposits with clearing organizations | 1,040,000 | 1,030,000 | |||||
| Securities owned, at fair value | 3,406,000 | 2,357,000 | |||||
| Receivables from broker-dealers and clearing organizations | 2,813,000 | 3,357,000 | |||||
| Forgivable loans receivable | 1,397,000 | 1,712,000 | |||||
| Other receivables, net | 6,120,000 | 5,430,000 | |||||
| Prepaid expenses | 2,059,000 | 1,910,000 | |||||
| Fixed assets, net | 1,331,000 | 1,164,000 | |||||
| Intangible assets, net | 5,317,000 | 5,704,000 | |||||
| Goodwill | 6,226,000 | 6,531,000 | |||||
| Deferred tax asset, net | 8,244,000 | 8,958,000 | |||||
| Other assets, principally refundable deposits | 350,000 | 345,000 | |||||
| Total Assets | $ | 63,001,000 | $ | 60,546,000 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Liabilities | |||||||
| Securities sold, but not yet purchased, at fair value | $ | 77,000 | $ | 298,000 | |||
| Accrued commissions and payroll payable | 11,613,000 | 11,940,000 | |||||
| Accounts payable and accrued expenses | 7,123,000 | 7,166,000 | |||||
| Deferred clearing and marketing credits | 891,000 | 995,000 | |||||
| Warrants issued in 2017 and issuable in 2016 | 8,190,000 | 14,055,000 | |||||
| Other | 217,000 | 319,000 | |||||
| Total Liabilities | 28,111,000 | 34,773,000 | |||||
| Stockholders’ Equity | |||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized; none outstanding | — | — | |||||
| Common stock $0.02 par value, authorized 75,000,000 shares at March 31, 2017 and 150,000,000 shares at September 30, 2016; 12,437,916 shares issued and outstanding at March 31, 2017 and September 30, 2016 | 248,000 | 248,000 | |||||
| Additional paid-in-capital | 66,536,000 | 66,353,000 | |||||
| Accumulated deficit | (31,909,000 | ) | (40,843,000 | ) | |||
| Total National Holdings Corporation Stockholders’ Equity | 34,875,000 | 25,758,000 | |||||
| Non-Controlling interest | 15,000 | 15,000 | |||||
| Total Stockholders’ Equity | 34,890,000 | 25,773,000 | |||||
| Total Liabilities and Stockholders’ Equity | $ | 63,001,000 | $ | 60,546,000 | |||
| NATIONAL HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||||||||
| Three Month Period Ended March 31, | Six Month Period Ended March 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | |||||||||||||||
| Commissions | $ | 23,993,000 | $ | 23,676,000 | $ | 48,499,000 | $ | 46,671,000 | |||||||
| Net dealer inventory gains | 2,366,000 | 2,599,000 | 4,877,000 | 5,143,000 | |||||||||||
| Investment banking | 16,183,000 | 6,069,000 | 25,909,000 | 12,186,000 | |||||||||||
| Investment advisory | 3,490,000 | 3,316,000 | 6,875,000 | 6,976,000 | |||||||||||
| Interest and dividends | 675,000 | 794,000 | 1,391,000 | 1,712,000 | |||||||||||
| Transaction fees and clearing services | 1,687,000 | 1,549,000 | 4,185,000 | 3,921,000 | |||||||||||
| Tax preparation and accounting | 3,144,000 | 3,936,000 | 4,000,000 | 4,836,000 | |||||||||||
| Other | 346,000 | 93,000 | 717,000 | 209,000 | |||||||||||
| Total Revenues | 51,884,000 | 42,032,000 | 96,453,000 | 81,654,000 | |||||||||||
| Operating Expenses | |||||||||||||||
| Commissions, compensation and fees | 41,761,000 | 35,883,000 | 79,020,000 | 70,593,000 | |||||||||||
| Clearing fees | 618,000 | 527,000 | 1,356,000 | 1,290,000 | |||||||||||
| Communications | 682,000 | 812,000 | 1,404,000 | 1,641,000 | |||||||||||
| Occupancy | 937,000 | 969,000 | 1,944,000 | 1,904,000 | |||||||||||
| License and registration | 428,000 | 383,000 | 832,000 | 738,000 | |||||||||||
| Professional fees | 991,000 | 1,484,000 | 2,254,000 | 2,570,000 | |||||||||||
| Interest | 4,000 | 2,000 | 8,000 | 3,000 | |||||||||||
| Depreciation and amortization | 286,000 | 296,000 | 582,000 | 596,000 | |||||||||||
| Other administrative expenses | 2,475,000 | 1,061,000 | 3,705,000 | 2,348,000 | |||||||||||
| Total Operating Expenses | 48,182,000 | 41,417,000 | 91,105,000 | 81,683,000 | |||||||||||
| Income (Loss) before Other Income and Income Taxes | 3,702,000 | 615,000 | 5,348,000 | (29,000 | ) | ||||||||||
| Other Income | |||||||||||||||
| Gain on disposal of Gilman branches | 130,000 | — | 130,000 | — | |||||||||||
| Change in fair value of warrants | 1,773,000 | — | 5,865,000 | — | |||||||||||
| Other income | 5,000 | — | 5,000 | — | |||||||||||
| Total Other Income | 1,908,000 | — | 6,000,000 | — | |||||||||||
| Income (Loss) before Income Taxes | 5,610,000 | 615,000 | 11,348,000 | (29,000 | ) | ||||||||||
| Income tax expense | 1,736,000 | 245,000 | 2,414,000 | 53,000 | |||||||||||
| Net Income (Loss) | $ | 3,874,000 | $ | 370,000 | $ | 8,934,000 | $ | (82,000 | ) | ||||||
| Net income (loss) per share - Basic | $ | 0.31 | $ | 0.03 | $ | 0.72 | $ | (0.01 | ) | ||||||
| Net income (loss) per share - Diluted | $ | 0.31 | $ | 0.03 | $ | 0.72 | $ | (0.01 | ) | ||||||
| Weighted average number of shares outstanding - Basic | 12,437,916 | 12,440,035 | 12,437,916 | 12,459,940 | |||||||||||
| Weighted average number of shares outstanding - Diluted | 12,461,882 | 12,440,035 | 12,450,178 | 12,459,940 | |||||||||||
NON-G.A.A.P. Financial Measures
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income (loss), as reported | $ | 3,874,000 | $ | 370,000 | $ | 8,934,000 | $ | (82,000 | ) | ||||||
| Interest expense | 4,000 | 2,000 | 8,000 | 3,000 | |||||||||||
| Income taxes (benefit) | 1,736,000 | 245,000 | 2,414,000 | 53,000 | |||||||||||
| Depreciation | 89,000 | 116,000 | 187,000 | 223,000 | |||||||||||
| Amortization | 197,000 | 180,000 | 395,000 | 373,000 | |||||||||||
| EBITDA | 5,900,000 | 913,000 | 11,938,000 | 570,000 | |||||||||||
| Non-cash compensation expense | 183,000 | 62,000 | 183,000 | 99,000 | |||||||||||
| Change in fair value of warrants | (1,773,000 | ) | — | (5,865,000 | ) | — | |||||||||
| Forgivable loan amortization | 161,000 | 183,000 | 362,000 | 324,000 | |||||||||||
| Gain on disposal of Gilman branches | $ | (130,000 | ) | $ | — | $ | (130,000 | ) | $ | — | |||||
| EBITDA, as adjusted | $ | 4,341,000 | $ | 1,158,000 | $ | 6,488,000 | $ | 993,000 | |||||||