NEW YORK, Nov. 7, 2018 /PRNewswire/ --

Third Quarter 2018 Highlights:

  • Gross revenues of $14.8 million for the quarter, up 8% versus the prior year quarter
  • Operating income of $5.3 million for the quarter, an increase of 15% over the prior year quarter
  • Net income of $4.4 million for the quarter, up 26% over the prior period, driving a 28% increase in GAAP diluted EPS to $0.37
  • Announcing special dividend of $0.65 per share, an increase of $0.05 per share, and fourth quarter dividend of $0.15 per share
  • 16 graduates to a national securities exchange during the quarter
  • Continued progress in achieving state Blue Sky recognition for our OTCQX and OTCQB markets, with OTCQX reaching 33 states
  • 30 Transfer Agents participating in the Transfer Agent Verified Shares Program, further enhancing the timeliness and reliability of company share information on our markets
  • Launched new Small Cap Listed Compliance Product to allow firms to enhance their risk controls across the listed and OTC small cap equity market
  • Named to Crain's 2018 List of the Best Places to Work in New York City

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for 10,000 U.S. and global securities, today announced its financial results for the third quarter of 2018.

"We are pleased to report another quarter of strong revenue and earnings growth, as we continue to deliver on our strategic priorities – providing broker-dealers with reliable, cost effective technology solutions, enhancing the quality and availability of our data to better inform investors and gaining regulatory recognition for our OTCQX and OTCQB markets," said R. Cromwell Coulson, President and Chief Executive Officer.  "We are proud to be named to Crain's list of Best Places to Work in New York City.  We strive to create a culture that promotes personal growth and provides opportunities for our team as they focus on meeting the needs of our clients, our community and our shareholders."

"With our OTC ECN gaining traction and strong sales in our Corporate Services and Market Data businesses, we have continued to drive revenue growth across all three of our business lines while containing our expense base.  This has driven strong quarter over quarter earnings growth and, in that context, we are pleased to announce a special dividend of sixty five cents per share in addition to a quarterly dividend of fifteen cents per share," said Bea Ordonez, Chief Financial Officer.

Third Quarter 2018 compared to Third Quarter 2017



Three Months Ended September 30,





(in thousands, except shares and per share data)


2018


2017


% change


$ change

OTC Link


$                 2,807


$                 2,413


16%


$             394

Market data licensing


5,763


5,505


5%


258

Corporate services


6,195


5,704


9%


491

Gross revenues


14,765


13,622


8%


1,143

Net revenues


14,037


13,038


8%


999

Operating expenses


8,745


8,448


4%


297

Income from operations


5,292


4,590


15%


702

Operating profit margin


38%


35%





Income before provision for income taxes


5,343


4,595


16%


748

Net income 


$                 4,385


$                 3,488


26%


$             897










Diluted earnings per share


$                   0.37


$                   0.29


28%



Adjusted diluted earnings per share


$                   0.51


$                   0.45


13%



Weighted-average shares outstanding, diluted


11,632,363


11,593,890


-



Financial Highlights

  • Gross revenues increased $1.1 million, or 8%, to $14.8 million.
  • Corporate Services delivered 9% growth in revenues, driven by continuing strong sales and reduced churn on our OTCQB market, as well as price increases for existing subscribers. The OTCQX market also saw an uptick in new companies joining and a reduction in compliance related downgrades.
  • Market Data Licensing revenues experienced a 5% increase over the prior year period, due to price increases affecting certain data licence products and end of day pricing data, and increased usage of our data file products, including our compliance data products.
  • OTC Link revenues increased 16% over the prior year quarter. The increase was driven by higher U.S. trading volumes that contributed to an increase in revenues from messages, and growing revenues from our OTC Link ECN, which were offset by continued contraction in combined subscription based revenues from OTC Dealer licences and FIX connections.
  • Operating expenses increased 4%, to $8.7 million, primarily due to an 8% increase in compensation and benefit costs, partially offset by a decrease in information technology expenses.
  • Net income increased 26%, to $4.4 million, driven by the increase in operating income and a decrease in the company's effective tax rate for the quarter, from 24% to 18%, primarily as a result of the enactment of the Tax Cuts and Jobs Act.
  • Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 14%, to $6.1 million, or $0.51 per adjusted diluted share.

Business Developments and News

  • As of November 1, 2018, our OTCQX market is exempt from state Blue Sky laws regarding secondary trading in thirty-three states and our OTCQB market is exempt in thirty states.
  • As of November 1, 2018, 30 transfer agents have joined the Transfer Agent Verified Shares Program, covering approximately 96% of the U.S. companies on the OTCQX and OTCQB markets. The continued expansion of the program further enhances the availability and reliability of company share information in the OTC space.
  • In September 2018, we published for comment a proposed amendment to the OTCQX Rules for U.S. Companies and OTCQX Rules for U.S. Banks requiring that companies provide verified share data through theTransfer Agent Verified Shares Program. The amendment becomes effective on January 1, 2019.
  • In September 2018, we launched our Small Cap Listed Compliance Product to provide broker dealers and investment managers with a standardized framework to analyze securities and assess risk across the listed and OTC small cap equity market.
  • In October 2018, we announced our inclusion in Crain's List of the 100 Best Places to Work in New York City. The annual list recognizes companies with the highest levels of employee satisfaction and engagement based on an employee survey and feedback on the company's culture, benefits, philosophy and workplace environment.
  • Since its launch in December 2017, our OTC Link ECN has added 7 new broker-dealer subscribers and enabled 29 existing OTC Link ATS subscribers for access to the OTC Link ECN. When compared to the second quarter of 2018, our OTC Link ECN has delivered growth in average daily volume traded during the quarter of 279%.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized and approved a special cash dividend of $0.65 per share of Class A common stock and a quarterly cash dividend of $0.15 per share of Class A common stock.  The special dividend is payable on December 5, 2018 to stockholders of record on November 21, 2018. The ex-divided date is November 20, 2018. The quarterly cash dividend is payable on December 20, 2018 to stockholders of record on December 6, 2018.  The ex-dividend date is December 5, 2018.

Stock Buyback Program

The Company is authorized to purchase shares from time to time on the open market and through block trades, in compliance with applicable law.  The Company did not repurchase any shares during the third quarter of 2018.

On March 6, 2018, 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 at September 30, 2018, there are 300,000 shares remaining to be purchased under our 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 2018 Conference Call

The Company will host a conference call on Thursday, November 8, 2018, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail.  The conference call and replay of the conference call may be accessed as follows:

Dial-in Numbers: (877) 407-9124 (Domestic); (201) 689-8584 (International);

Replay Dial-in Numbers (Available until December 8, 2018): 877-481-4010 (Domestic); 919-882-2331 (International); Replay PIN Number: 39395

Participants can access the conference via Internet webcast at the following link:

http://www.investorcalendar.com/event/39395

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.

OTC Markets Group's Quarterly Report for the period ended September 30, 2018 is available publicly at www.otcmarkets.com.

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 10,000 U.S. and global securities.  Through OTC Link® ATS and OTC Link ECN, we connect 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 investors.

To learn more about how we create better informed and more efficient financial markets, visit https://www.otcmarkets.com/stock/OTCM/disclosure.

OTC Link ATS and OTC Link ECN are SEC regulated ATSs, operated by OTC Link LLC, member FINRA/SIPC.

Subscribe to the OTC Markets RSS Feed

Investor Contact:

Bea Ordonez
Chief Financial Officer
Phone: 212-220-2215
Email: ir@otcmarkets.com

 

OTC MARKETS GROUP INC. 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)






Three Months Ended September 30,


2018


2017

Gross revenues

$               14,765


$               13,622

Redistribution fees and rebates

(728)


(584)

Net revenues

14,037


13,038

Operating expenses




Compensation and benefits

5,672


5,250

IT Infrastructure and information services

1,377


1,499

Professional and consulting fees

590


560

Marketing and advertising

164


190

Occupancy costs

436


469

Depreciation and amortization

259


300

General, administrative and other

247


180

Total operating expenses

8,745


8,448

Income from operations

5,292


4,590

Other income




Interest income

22


6

Other income, net 

29


(1)

Income before provision for income taxes

5,343


4,595

Provision for income taxes

958


1,107

Net income 

$                 4,385


$                 3,488





Net income per share 




Basic

$                   0.37


$                   0.31

Diluted

$                   0.37


$                   0.29





Basic weighted average shares outstanding

11,260,143


11,123,225

Diluted weighted average shares outstanding

11,632,363


11,593,890





Non-GAAP Reconciliation





Three Months Ended September 30,


2018


2017

Net Income

$                 4,385


$                 3,488

Excluding:




Interest Income

(22)


(4)

Provision for income taxes

958


1,107

Depreciation and amortization

259


300

Stock-based compensation expense

523


452

Adjusted EBITDA

$                 6,103


$                 5,343





Adjusted diluted earnings per share 

$                   0.51


$                   0.45


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)






September 30,


December 31,


2018


2017

Assets




Current assets




Cash

$               26,092


$               23,683

Short-term restricted cash

160


-

Accounts receivable, net of allowance for doubtful accounts of $191 and $146

6,233


6,450

Prepaid expenses and other current assets

1,515


1,303

Prepaid income taxes

887


1,013

Total current assets

34,887


32,449

Property and equipment, net 

1,596


2,018

Deferred tax assets, net

755


796

Goodwill

251


251

Intangible assets, net

73


111

Long-term restricted cash

500


500

Security deposits

1,058


192

Total Assets

$               39,120


$               36,317





Liabilities and stockholders' equity




Current liabilities




Accounts payable

$                    581


$                    786

Accrued expenses and other current liabilities

4,473


4,858

Income taxes payable

86


-

Deferred revenue

11,413


15,531

Total current liabilities

16,553


21,175

Deferred rent

47


246

Income tax reserve

1,416


1,105

Total Liabilities

18,016


22,526

Commitments and contingencies




Stockholders' equity




Common stock - par value $0.01 per share




Class A - 14,000,000 authorized, 12,028,421 issued, 11,541,436 outstanding at




September 30, 2018; 11,891,366 issued, 11,444,706 outstanding at December 31, 2017

120


119

Additional paid-in capital 

15,347


14,150

Retained earnings

12,844


5,682

Treasury stock - 486,985 shares at September 30, 2018 and 446,660 shares at December 31, 2017

(7,207)


(6,160)

Total Stockholders' Equity

21,104


13,791

Total Liabilities and Stockholders' Equity

$               39,120


$               36,317





 

 

 

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SOURCE OTC Markets Group Inc.


Source: OTC Markets Group Inc.