National Holdings Corporation Reports Financial Results for Fiscal Second Quarter 2017

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 cash354,000 354,000
Cash deposits with clearing organizations1,040,000 1,030,000
Securities owned, at fair value3,406,000 2,357,000
Receivables from broker-dealers and clearing organizations2,813,000 3,357,000
Forgivable loans receivable1,397,000 1,712,000
Other receivables, net6,120,000 5,430,000
Prepaid expenses2,059,000 1,910,000
Fixed assets, net1,331,000 1,164,000
Intangible assets, net5,317,000 5,704,000
Goodwill6,226,000 6,531,000
Deferred tax asset, net8,244,000 8,958,000
Other assets, principally refundable deposits350,000 345,000
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 payable11,613,000 11,940,000
Accounts payable and accrued expenses7,123,000 7,166,000
Deferred clearing and marketing credits891,000 995,000
Warrants issued in 2017 and issuable in 20168,190,000 14,055,000
Other217,000 319,000
Total Liabilities28,111,000 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, 2016248,000 248,000
Additional paid-in-capital66,536,000 66,353,000
Accumulated deficit(31,909,000) (40,843,000)
Total National Holdings Corporation Stockholders’ Equity34,875,000 25,758,000
Non-Controlling interest15,000 15,000
Total Stockholders’ Equity34,890,000 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 gains2,366,000 2,599,000 4,877,000 5,143,000
Investment banking16,183,000 6,069,000 25,909,000 12,186,000
Investment advisory3,490,000 3,316,000 6,875,000 6,976,000
Interest and dividends675,000 794,000 1,391,000 1,712,000
Transaction fees and clearing services1,687,000 1,549,000 4,185,000 3,921,000
Tax preparation and accounting3,144,000 3,936,000 4,000,000 4,836,000
Other346,000 93,000 717,000 209,000
Total Revenues51,884,000 42,032,000 96,453,000 81,654,000
Operating Expenses
Commissions, compensation and fees41,761,000 35,883,000 79,020,000 70,593,000
Clearing fees618,000 527,000 1,356,000 1,290,000
Communications682,000 812,000 1,404,000 1,641,000
Occupancy937,000 969,000 1,944,000 1,904,000
License and registration428,000 383,000 832,000 738,000
Professional fees991,000 1,484,000 2,254,000 2,570,000
Interest4,000 2,000 8,000 3,000
Depreciation and amortization286,000 296,000 582,000 596,000
Other administrative expenses2,475,000 1,061,000 3,705,000 2,348,000
Total Operating Expenses48,182,000 41,417,000 91,105,000 81,683,000
Income (Loss) before Other Income and Income Taxes3,702,000 615,000 5,348,000 (29,000)
Other Income
Gain on disposal of Gilman branches130,000 130,000
Change in fair value of warrants1,773,000 5,865,000
Other income5,000 5,000
Total Other Income1,908,000 6,000,000
Income (Loss) before Income Taxes5,610,000 615,000 11,348,000 (29,000)
Income tax expense1,736,000 245,000 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 - Basic12,437,916 12,440,035 12,437,916 12,459,940
Weighted average number of shares outstanding - Diluted12,461,882 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 $(82,000)
Interest expense4,000 2,000 8,000 3,000
Income taxes (benefit)1,736,000 245,000 2,414,000 53,000
Depreciation89,000 116,000 187,000 223,000
Amortization197,000 180,000 395,000 373,000
EBITDA5,900,000 913,000 11,938,000 570,000
Non-cash compensation expense183,000 62,000 183,000 99,000
Change in fair value of warrants(1,773,000) (5,865,000)
Forgivable loan amortization161,000 183,000 362,000 324,000
Gain on disposal of Gilman branches$(130,000) $ $(130,000) $
EBITDA, as adjusted$4,341,000 $1,158,000 $6,488,000 $993,000

Contacts: National Holdings Corporation: Michael Mullen, Chief Executive Officer Email: mm@nhldcorp.com Telephone: +1 212-417-8055 Investor Relations: Email: ir@nhldcorp.com Telephone: +1 212 554 4351

Source:National Holdings Corporation