OTC Markets Group Reports Third Quarter 2021 Results

Delivering Continued Strong Revenue and Earnings Growth

NEW YORK, Nov. 10, 2021 /PRNewswire/ --

Third Quarter 2021 Highlights:

  • Gross revenues of $25.2 million for the quarter, up 42% versus the prior year quarter
  • Operating income of $9.7 million for the quarter, up 77% versus the prior year quarter
  • Operating profit margin of 39.5% versus 32.1% during the prior year quarter
  • Net income of $7.5 million, up 68% versus the prior year quarter, driving a 68% increase in the quarterly diluted GAAP EPS of $0.62
  • Announcing special dividend of $1.50 per share, and fourth quarter dividend of $0.18 per share
  • Total cash returned to shareholders during the quarter of $2.1 million in the form of dividends
  • 45 graduates to a national securities exchange during the quarter
  • Significant growth in issuers subscribing to our OTCQX and OTCQB markets as well as Disclosure & News Service®, with 561 and 1,067 companies on OTCQX and OTCQB, respectively at the end of the quarter
  • Launch of our third Alternative Trading System, OTC Link® NQB, offering a fully attributable matching engine model
  • 90 subscribers to OTC Link ECN at September 30, 2021, up 21 versus September 30, 2020; approximately 39,000 average daily trades during the quarter, compared to approximately 10,000 during the same prior year quarter
  • Virtual Investor Conferences® business hosted 6 events during the quarter, with 118 companies participating 
  • Implemented amendments to Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for over 11,000 U.S. and global securities, today announced its financial results for the third quarter of 2021.

"On September 28, the SEC's amendments to Rule 15c2-11 went into effect and marked the beginning of our role as a Qualified Interdealer Quotation System," said R. Cromwell Coulson, President and Chief Executive Officer.  "With a modernized regulatory framework, we are better able to serve our customers while enhancing regulatory compliance and increasing the availability of information for investors.  The technology foundation we have established around Rule 15c2-11 improves the value of our regulated markets for public companies, brings efficiencies to broker-dealer trading processes, and digitizes useful data for investors."

"We are pleased that our customers continue to see the distinct value proposition of our regulated markets and our suite of corporate services and market data products," said Antonia Georgieva, Chief Financial Officer.  "As a result of the strong customer engagement across our business lines, we delivered robust growth in revenues and income from operations. We were also pleased with our operating margin expansion and earnings per share growth as well as our continued ability to generate strong free cash flows and return value to our shareholders in the form of dividends."

Third Quarter 2021 compared to Third Quarter 2020

Financial Highlights




Three Months Ended September 30,





(in thousands, except shares and per share data)


2021


2020


% change


$ change

OTC Link


$                 6,110


$                 3,816


60%


2,294

Market data licensing


8,489


7,172


18%


1,317

Corporate services


10,621


6,759


57%


3,862

Gross revenues


25,220


17,747


42%


7,473

Net revenues


24,476


17,058


43%


7,418

Revenues less transaction-based expenses


22,808


16,444


39%


6,364

Operating expenses


13,132


10,966


20%


2,166

Income from operations


9,676


5,478


77%


4,198

Operating profit margin


39.5%


32.1%





Income before provision for income taxes


9,688


5,443


78%


4,245

Net income 


$                 7,512


$                 4,459


68%


3,053










Diluted earnings per share


$                   0.62


$                   0.37


68%



Adjusted diluted earnings per share


$                   0.90


$                   0.55


64%



Weighted-average shares outstanding, diluted


11,812,910


11,620,153


2%



  • Gross revenues increased $7.5 million, or 42%, to $25.2 million.
  • OTC Link revenues increased 60%, benefiting from elevated trading volumes on our OTC Link ECN and message volumes on our OTC Link ATS as well as growth in our QAP One Statement fees.
  • Market Data Licensing revenues grew 18%, with growth in professional and non-professional subscribers driving a 12% and 39% increase in related revenues, respectively. The number of non-professional users of our market data increased 45%, reflecting the increased retail participation in the U.S. equities markets. Also contributing to the growth were revenues from internal system licenses, which increased 48%.
  • Corporate Services delivered 57% growth in revenues, primarily driven by strong sales and a high number of issuers using our services to comply with current public disclosure requirements under Rule 15c2-11 in advance of the Rule's September compliance date. Our OTCQX market saw 55 new companies joining and revenues increasing 54%. Our OTCQB market welcomed 115 new issuers and delivered a 48% increase in revenues. We also saw a substantial increase in the number of companies subscribing to our Disclosure & News Service®, driving related revenues up 101%.
  • Operating expenses increased $2.2 million, or 20%, to $13.1 million, primarily as a result of a 20% increase in compensation costs, reflecting incremental headcount and higher incentive compensation as well as higher sales commissions. Contributing to the increase in operating expenses was also a 72% increase in professional and consulting fees, primarily driven by higher ECN related clearing and regulatory costs, and a 26% increase in IT infrastructure and information services, partially offset by lower occupancy costs.
  • Operating income and net income increased 77% and 68%, respectively.
  • Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, increased 65% to $10.9 million, or $0.90 per adjusted diluted share.

Dividend Declaration – Quarterly and Special Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized and approved a special cash dividend of $1.50 per share of Class A Common Stock and a quarterly cash dividend of $0.18 per share of Class A Common Stock.  The special dividend is payable on December 9, 2021 to stockholders of record on November 24, 2021. The ex-dividend date is November 23, 2021.  The quarterly dividend is payable on December 23, 2021 to stockholders of record on December 9, 2021.  The ex-dividend date is December 8, 2021.

Stock Buyback Program

The Company is authorized to purchase shares from time to time on the open market, from employees and through block trades, in compliance with applicable law.  The Company did not repurchase any shares during the third quarter of 2021.

On March 12, 2021, the Board of Directors refreshed the Company's stock repurchase program, giving the Company authorization to repurchase up to 300,000 shares of the Company's Class A Common Stock.  As of September 30, 2021, there are 300,000 shares remaining to be purchased under the Company's plan.

Non-GAAP Financial Measures

In addition to disclosing results prepared in accordance with GAAP, the Company also discloses certain non-GAAP results of operations, including adjusted EBITDA and adjusted diluted earnings per share that either exclude or include amounts that are described in the reconciliation table of GAAP to non-GAAP information provided at the end of this release.  Non-GAAP financial measures do not replace and are not superior to the presentation of GAAP financial results but are provided to improve overall understanding of the Company's current financial performance.  Management believes that this non-GAAP information is useful to both management and investors regarding certain additional financial and business trends related to the operating results.  Management uses this non-GAAP information, along with GAAP information, in evaluating its historical operating performance.

Third Quarter 2021 Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, November 11, 2021, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail.  The call and a replay of the conference call and webcast may be accessed as follows:

Dial-in Numbers: 1-877-665-5564 (Domestic); 1-470-495-9522 (International); Conference ID: 3375993

Call Replay Dial-in Numbers (available until November 25, 2021): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 3375993

Participants can access the conference via webcast at the following link (replay available until November 10, 2022):

https://edge.media-server.com/mmc/p/fuwtdp2a

OTC Markets Group's Quarterly Report for the quarter ended September 30, 2021, the earnings release, transcript of the earnings call and presentation will also be available in the Investor Relations section of our corporate website at www.otcmarkets.com/investor-relations/overview.  

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for over 11,000 U.S. and global securities.  Through our regulated OTC Link® Alternative Trading Systems, the Company connects a diverse network of broker-dealers that provide liquidity and execution services.  We enable investors to easily trade through the broker of their choice and empower companies to improve the quality of information available for their investors.

OTC Link ATS, OTC Link ECN and OTC Link NQB are each an SEC regulated ATS, operated by OTC Link LLC, a FINRA and SEC registered broker-dealer, member SIPC.

To learn more about how we create better informed and more efficient financial markets, visit www.otcmarkets.com.

Subscribe to the OTC Markets RSS Feed

Investor Contact:

Antonia Georgieva
Chief Financial Officer
Phone: 212-220-2215
Email: ir@otcmarkets.com

 

OTC MARKETS GROUP INC. 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share information)

(Unaudited)






Three Months Ended September 30,


2021


2020

OTC Link

$                 6,110


$                 3,816

Market data licensing

8,489


7,172

Corporate services

10,621


6,759

Gross revenues

25,220


17,747

Redistribution fees and rebates

(744)


(689)

Net revenues

24,476


17,058

Transaction-based expenses

(1,668)


(614)

Revenues less transaction-based expenses

22,808


16,444

Operating expenses




Compensation and benefits

8,471


7,052

IT Infrastructure and information services

2,062


1,642

Professional and consulting fees

1,008


586

Marketing and advertising

218


138

Occupancy costs

521


877

Depreciation and amortization

446


441

General, administrative and other

406


230

Total operating expenses

13,132


10,966

Income from operations

9,676


5,478

Other income (expense)




Other income (expense), net 

12


(35)

Income before provision for income taxes

9,688


5,443

Provision for income taxes

2,176


984

Net income 

$                 7,512


$                 4,459





Net income per share 




Basic

$                   0.64


$                   0.38

Diluted

$                   0.62


$                   0.37





Basic weighted average shares outstanding

11,501,186


11,390,479

Diluted weighted average shares outstanding

11,812,910


11,620,153





Non-GAAP Reconciliation





Three Months Ended September 30,


2021


2020

Net Income

$                 7,512


$                 4,459

Excluding:




Interest Income

-


-

Provision for income taxes

2,176


984

Depreciation and amortization

446


441

Stock-based compensation expense

782


717

Adjusted EBITDA

$               10,916


$                 6,601





Adjusted diluted earnings per share

$                   0.90


$                   0.55






Note: We use non-GAAP financial measures of operating performance. Non-GAAP measures do not replace and are not superior to the presentation of our GAAP financial results, but are provided to improve overall understanding of the Company's current financial performance.

 

OTC MARKETS GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

(Unaudited)






September 30,


December 31,


2021


2020

Assets




Current assets




Cash

$               49,985


$               33,733

Short-term restricted cash

-


32

Accounts receivable, net of allowance for credit losses of $325 and $194

7,601


6,609

Prepaid income taxes

894


356

Prepaid expenses and other current assets

1,450


1,375

Total current assets

59,930


42,105

Property and equipment, net 

5,208


5,367

Operating lease right-of-use assets

15,194


14,844

Deferred tax assets, net

385


343

Goodwill

251


251

Intangible assets, net

40


40

Long-term restricted cash

1,564


1,532

Other assets

194


328

Total Assets

$               82,766


$               64,810





Liabilities and stockholders' equity




Current liabilities




Accounts payable

$                    726


$                 1,251

Accrued expenses and other current liabilities

10,792


9,965

Income taxes payable

54


16

Deferred revenue

19,521


18,765

Total current liabilities

31,093


29,997

Income tax reserve

937


801

Operating lease liabilities

14,849


14,466

Total Liabilities

46,879


45,264

Commitments and contingencies




Stockholders' equity




Common stock - par value $0.01 per share




Class A - 14,000,000 authorized, 12,456,835 issued, 11,775,468 outstanding at September 30, 2021; 12,346,491 issued, 11,709,857 outstanding at December 31, 2020




125


123

Additional paid-in capital 

21,860


19,770

Retained earnings

27,541


11,770

Treasury stock - 681,367 shares at September 30, 2021 and 636,634 shares at December 31, 2020

(13,639)


(12,117)

Total Stockholders' Equity

35,887


19,546

Total Liabilities and Stockholders' Equity

$               82,766


$               64,810

 

(PRNewsfoto/OTC Markets Group Inc.)

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/otc-markets-group-reports-third-quarter-2021-results-301421560.html

SOURCE OTC Markets Group Inc.

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