OTC Markets Group Reports First Quarter 2022 Results Delivering Earnings Growth and Margin Expansion


First Quarter 2022 Highlights:

  • Gross revenues of $25.9 million for the quarter, flat versus the prior year period
  • Operating income of $8.6 million for the quarter, up 3% versus the prior year period
  • Operating profit margin of 34.4%, versus 33.2% for the prior year period
  • Net income of $7.6 million, up 11% versus the prior year period, and quarterly diluted GAAP EPS of $0.62, up 9%
  • Total cash returned to shareholders during the quarter of $4.9 million, comprised of dividends of $2.1 million and repurchases of common stock of $2.8 million
  • Announcing second quarter 2022 dividend of $0.18 per share
  • 571 OTCQX® and 1,224 OTCQB® companies at quarter end
  • 101% increase in the number of companies subscribing to our Disclosure & News Service® (DNS) products
  • 24 graduates to a national securities exchange during the quarter
  • 98 subscribers to OTC Link ECN at March 31, 2022, up 16 versus March 31, 2021; approximately 39,000 average daily trades during the quarter, down 46% from the prior year period due to year-over-year decline in industry-wide trading volumes
  • Announced the acquisition of substantially all of the assets of Blue Sky Data Corp, a leading provider of equity and debt compliance data regarding state Blue Sky securities rules and regulations. The transaction closed on May 2, 2022

NEW YORK, May 11, 2022 (GLOBE NEWSWIRE) -- OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for 12,000 U.S. and international securities, today announced its financial results for the first quarter of 2022.

“We continue to execute on our strategic priorities to increase the value of our mission-critical markets for public companies and broker-dealers,” said R. Cromwell Coulson, President and Chief Executive Officer. “Our recently closed acquisition of the Blue Sky Data Corp business allows us to offer a comprehensive data set of Blue Sky qualifications for over 100,000 OTC equity and debt securities. We leverage our automated processes to enhance the data set and automate broker-dealer trading. Wider distribution and a larger subscriber base will increase Blue Sky understanding and compliance.”

“We delivered solid results during the first quarter of 2022 with growth in net income and diluted earnings per share and expansion in our operating margin,” said Antonia Georgieva, Chief Financial Officer. “OTC Markets Group continued to benefit from the strong customer demand for our Corporate Services products and Market Data Licensing offerings, while experiencing a significant moderation of trading activity in our OTC Link business related to reduced retail participation in the U.S. equity markets.”

First Quarter 2022 compared to First Quarter 2021

Financial Highlights

  Three Months Ended March 31,    
(in thousands, except shares and per share data)  2022   2021  % change $ change
OTC Link $5,433  $10,282  (47%) (4,849)
Market data licensing  8,583   7,899  9% 684 
Corporate services  11,933   7,895  51% 4,038 
Gross revenues  25,949   26,076  -  (127)
Net revenues  25,161   25,335  (1%) (174)
Revenues less transaction-based expenses  23,646   21,796  8% 1,850 
Operating expenses  15,002   13,377  12% 1,625 
Income from operations  8,644   8,419  3% 225 
Operating profit margin  34.4%  33.2%    
Income before provision for income taxes  8,644   8,424  3% 220 
Net income $7,614  $6,838  11% 776 
         
Diluted earnings per share $0.62  $0.57  9%  
Adjusted diluted earnings per share $0.84  $0.82  2%  
Weighted-average shares outstanding, diluted  11,926,344   11,710,262  2%  
  • Gross revenues were $25.9 million for the quarter, flat as compared to the prior year quarter, while revenues less transaction-based expenses increased 8%.
  • OTC Link revenues decreased 47%, driven by a decline in OTC Link ECN’s transaction-based revenues as trading volumes on our markets moderated from the record levels in the prior year quarter, consistent with industry-wide trends.
  • Market Data Licensing revenues grew 9%, with a 10% growth in the number of professional subscribers driving a 12% increase in related revenues. Revenues from internal system licenses, delayed data licenses and certain other data services increased 19%, as a result of new subscribers to our data products. The increase in Market Data Licensing revenues was partially offset by a 26% decline in revenue from non-professional users.
  • Corporate Services delivered 51% growth, with revenues from our OTCQX market up 26% and revenues from our OTCQB market up 52%. The strong sales during 2021 and the 96% retention rate we achieved for OTCQX during the 2022 annual renewal cycle contributed to the growth. DNS revenues increased 120%, driven by a higher number of companies subscribing to DNS in connection with the enhanced current information requirements under Rule 15c2-11.
  • Operating expenses increased $1.6 million, or 12%, to $15.0 million, primarily as a result of a 14% increase in compensation costs, reflecting higher headcount, the impact of annual salary increases, and increases in incentive compensation.
  • Net income increased 11% to $7.6 million, driven by a 3% increase in operating income and a decrease in the company’s effective tax rate from 18.8% in the prior year quarter to 11.9% in the first quarter of 2022, primarily as a result of an increase in the amount of excess tax benefit on stock-based compensation.
  • Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, increased 4%, to $10.3 million, or $0.84 per adjusted diluted share.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized and approved a quarterly cash dividend of $0.18 per share of Class A Common Stock. The quarterly cash dividend is payable on June 23, 2022, to stockholders of record on June 9, 2022. The ex-dividend date is June 8, 2022.

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. During the first quarter of 2022, the Company purchased 45,140 shares at an average price of $61.50 per share.

On March 7, 2022, 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.

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.

First Quarter 2022 Conference Call

The Company will host a conference call and webcast on Thursday, May 12, 2022, 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: 5661648

Call Replay Dial-in Numbers (available until May 26, 2022): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 5661648

Participants can access the conference via webcast at the following link (replay available until May 11, 2023):

https://edge.media-server.com/mmc/p/79nsje2q

OTC Markets Group’s Quarterly Report for the quarter ended March 31, 2022, the earnings release, transcript of the earnings call and presentation will also be available in the Investor Relations section of the corporate website at www.otcmarkets.com/investor-relations/overview.

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates regulated markets for trading 12,000 U.S. and international securities. Our data-driven disclosure standards form the foundation of our three public markets: OTCQX® Best Market, OTCQB® Venture Market and Pink® Open Market.

Our OTC Link® Alternative Trading Systems (ATSs) provide critical market infrastructure that broker-dealers rely on to facilitate trading. Our innovative model offers companies more efficient access to the U.S. financial markets.

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 markets, visit www.otcmarkets.com.

Investor Contact:

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

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/2d030069-81ff-4261-8f00-9012eb583051



OTC MARKETS GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
    
 Three Months Ended March 31,
  2022   2021 
OTC Link$5,433  $10,282 
Market data licensing 8,583   7,899 
Corporate services 11,933   7,895 
Gross revenues 25,949   26,076 
Redistribution fees and rebates (788)  (741)
Net revenues 25,161   25,335 
Transaction-based expenses (1,515)  (3,539)
Revenues less transaction-based expenses 23,646 - 21,796 
Operating expenses   
Compensation and benefits 10,223   8,946 
IT Infrastructure and information services 1,958   1,638 
Professional and consulting fees 1,217   1,242 
Marketing and advertising 278   205 
Occupancy costs 595   613 
Depreciation and amortization 440   444 
General, administrative and other 291   289 
Total operating expenses 15,002   13,377 
Income from operations 8,644   8,419 
Other income   
Other income, net -   5 
Income before provision for income taxes 8,644   8,424 
Provision for income taxes 1,030   1,586 
Net income $7,614  $6,838 
    
Net income per share   
Basic$0.64  $0.58 
Diluted$0.62  $0.57 
    
Basic weighted average shares outstanding 11,599,997   11,506,875 
Diluted weighted average shares outstanding 11,926,344   11,710,262 
    
Non-GAAP Reconciliation   
 Three Months Ended March 31,
  2022   2021 
Net Income$7,614  $6,838 
Excluding:   
Interest Income -   - 
Provision for income taxes 1,030   1,586 
Depreciation and amortization 440   444 
Stock-based compensation expense 1,195   1,002 
Adjusted EBITDA$10,279  $9,870 
    
Adjusted diluted earnings per share$0.84  $0.82 
    
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 number of shares)
(Unaudited)
      
 March 31,  December 31, 
 2022  2021 
Assets     
Current assets     
Cash$ 45,339  $ 50,394 
Accounts receivable, net of allowance for credit losses of $232 and $2447,631  7,404 
Prepaid income taxes1,432  790 
Prepaid expenses and other current assets1,639  1,363 
Total current assets56,041  59,951 
Property and equipment, net4,718  5,049 
Operating lease right-of-use assets14,581  14,889 
Deferred tax assets, net461  387 
Goodwill251  251 
Intangible assets, net40  40 
Long-term restricted cash1,564  1,564 
Other assets104  124 
Total Assets$ 77,760  $ 82,255 
      
Liabilities and stockholders' equity     
Current liabilities     
Accounts payable$ 1,059  $ 962 
Accrued expenses and other current liabilities6,629  12,357 
Income taxes payable170  13 
Deferred revenue26,378  28,432  
Total current liabilities34,236  41,764 
Income tax reserve880  989 
Operating lease liabilities14,244  14,548 
Total Liabilities49,360  57,301 
Commitments and contingencies     
Stockholders' equity     
Common stock - par value $0.01 per share     
Class A - 17,000,000 authorized, 12,576,843 issued, 11,850,336 outstanding at     
March 31, 2022; 12,483,128 issued, 11,801,761 outstanding at December 31, 2021126  125 
Additional paid-in capital22,421  21,681 
Retained earnings22,268  16,787 
Treasury stock - 726,507 shares at March 31, 2022 and 681,367 shares at December 31, 2021(16,415) (13,639)
Total Stockholders' Equity28,400  24,954 
Total Liabilities and Stockholders' Equity$ 77,760  $ 82,255 

 



 

 


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