OTC Markets Group Reports First Quarter 2023 Results Delivering Continued Revenue Growth

First Quarter 2023 Highlights:

• Gross revenues of $28.0 million for the quarter, up 8% versus the prior year period
• Operating income of $6.9 million for the quarter, down 20% versus the prior year period
• Operating profit margin of 25.4%, versus 34.4% for the prior year period
• Net income of $6.3 million, down 17% versus the prior year period, and quarterly diluted GAAP EPS of $0.52, down 16%
• Total cash returned to shareholders during the quarter of $5.5 million, comprised of dividends of $2.1 million and repurchases of common stock of $3.4 million
• Announcing second quarter 2023 dividend of $0.18 per share
• 593 OTCQX^® and 1,218 OTCQB^® companies at quarter end
• 10 graduates to a national securities exchange during the quarter
• 102 subscribers to OTC Link ECN as of March 31, 2023, up 4 versus March 31, 2022; approximately 35,000 average daily trades during the quarter versus approximately 39,000 during the prior year period
• Successful migration of the EDGAR^® Online platform to a cloud environment
• On May 5, 2023, FINRA granted our application to permit digital asset securities to be traded by broker-dealers on OTC Link ATS
  

NEW YORK, May 09, 2023 (GLOBE NEWSWIRE) -- OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for trading 12,000 U.S. and international securities, today announced its financial results for the first quarter of 2023.

“During the first quarter of 2023, our team completed the critical first step of the integration of EDGAR Online: the migration of the technology platform to our cloud environment. We achieved this goal while delivering uninterrupted service to our subscribers. We are excited about the possibilities the EDGAR Online data creates to enhance our compliance processes and product offerings,” said R. Cromwell Coulson, President and Chief Executive Officer. “We also recently received FINRA approval to permit digital asset securities to be traded by broker-dealers on OTC Link ATS. This approval furthers our mission of operating regulated markets for broker-dealers and issuers of securities. While it will be some time until the regulatory framework and infrastructure develop, we believe our markets are well-positioned to be part of new trading, data, and disclosure solutions for these securities.”

“OTC Markets Group delivered solid revenue growth during the first quarter of 2023, while deploying resources to integrate EDGAR Online,” said Antonia Georgieva, Chief Financial Officer. “Our Blue Sky Data Corp and EDGAR Online transactions contributed to the growth in our revenues, offsetting the impact of challenging economic conditions on our organic growth. Our overall costs increased, primarily due to the integration of EDGAR Online and investments in our business. We remain focused on enhancing our value proposition to subscribers and on retaining and growing our customer base.”

First Quarter 2023 compared to First Quarter 2022

Financial Highlights

		Three Months Ended March 31,
(in thousands, except shares and per share data)		2023				2022				% change			$ change
OTC Link		$	5,445			$	5,433			-			12
Market data licensing		10,842				8,583				26	%		2,259
Corporate services		11,740				11,933				(2	%)		(193	)
Gross revenues		28,027				25,949				8	%		2,078
Net revenues		27,231				25,161				8	%		2,070
Revenues less transaction-based expenses		25,446				23,646				8	%		1,800
Operating expenses		18,523				15,002				23	%		3,521
Income from operations		6,923				8,644				(20	%)		(1,721	)
Operating profit margin			25.4	%			34.4	%
Income before provision for income taxes		7,070				8,644				(18	%)		(1,574	)
Net income		$	6,319			$	7,614			(17	%)		(1,295	)
Diluted earnings per share		$	0.52			$	0.62			(16	%)
Adjusted diluted earnings per share		$	0.75			$	0.84			(11	%)
Weighted-average shares outstanding, diluted		11,866,646				11,926,344				(1	%)

• Gross revenues of $28.0 million, up 8% over the prior year quarter.   Revenues less transaction-based expenses up 8%.
• OTC Link revenues flat, relative to the prior year quarter. Transaction-based revenues from OTC Link ECN and OTC Link NQB up 12%, reflecting increases in certain fees that offset the impact of lower trading volumes on these platforms.   Reduced trading activity on OTC Link ATS resulted in messages revenue declining 20% and QAP One Statement fees declining 37%, which balanced out the increase in transaction-based revenues.
• Market Data Licensing revenues up 26%, largely due to the contribution of the acquisitions of Blue Sky Data Corp and EDGAR Online. Excluding the effect of the acquisitions, Market Data Licensing revenues increased 4%. Pro-user revenues were up 1%, in line with a 1% increase in the number of professional users quarter over quarter. Revenues from non-professional users were down 31%, driven by a 30% decrease in the number of non-professional users of our market data. Revenues from market data connectivity fees increased 57% due to price increases. Revenues from internal system licenses, delayed data licenses, and certain other data services increased 12% due to growth in subscribers and price increases for certain licenses.
• Corporate Services revenues down 2% quarter over quarter, with a 4% increase in revenues from our OTCQX market and a 1% increase in revenues from our OTCQB market, offset by a 12% decrease in revenues from our Disclosure & News Service^® (“DNS”) product.   A higher average number of companies subscribing to our OTCQX and OTCQB markets, as well as annual, incremental price increases effective at the beginning of 2023, contributed to the quarter over quarter growth in revenues from OTCQX and OTCQB, while a reduction in the average number of companies subscribing to DNS drove the offset.   Contributing to the decline in Corporate Services revenues was also lower revenue from our Virtual Investor Conferences^® product due to fewer events held during the quarter.
• Operating expenses increased 23% over the prior year quarter, primarily driven by a 17% increase in compensation and benefits costs, reflecting a higher headcount as a result of our acquisitions. The growth in operating expenses was further impacted by a 35% increase in IT infrastructure and information services costs and a 167% increase in general, administrative and other expenses, primarily as a result of the EDGAR Online acquisition. Operating expenses include approximately $900 thousand in one-time, non-recurring integration costs.
• Operating income and net income decreased 20% to $6.9 million and 17% to $6.3 million, respectively.
• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, decreased 11% to $9.2 million, or $0.75 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 22, 2023, to stockholders of record on June 8, 2023.   The ex-dividend date is June 7, 2023.

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 2023, the Company purchased 58,262 shares at an average price of $58.00 per share.

On March 6, 2023, 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 2023 Conference Call

The Company will host a conference call and webcast on Wednesday, May 10, 2023, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail. The call and webcast may be accessed as follows:

Webcast:
The conference webcast and management presentation can be accessed at the following link (replay available until May 9, 2024):
https://edge.media-server.com/mmc/p/urin54ns 

Live Call:
Participants intending to ask a question during the live call and Q&A session should also register in advance at:
https://register.vevent.com/register/BI31de25e52ceb481cbef511743e01f5cb  

Upon registration, participants will receive a dial-in number along with a unique PIN number that can be used to access the live call. Live call participants may also select a “Call Me” option.

The Quarterly Report, earnings release, transcript of the earnings call, and management 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

Media Contact:

OTC Markets Group Inc.
Phone: (212) 896-4428
Email: media@otcmarkets.com

OTC MARKETS GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share information)
	Three Months Ended March 31,
	2023					2022
OTC Link	$	5,445			$	5,433
Market data licensing		10,842				8,583
Corporate services		11,740				11,933
Gross revenues		28,027				25,949
Redistribution fees and rebates		(796	)			(788	)
Net revenues		27,231				25,161
Transaction-based expenses		(1,785	)			(1,515	)
Revenues less transaction-based expenses		25,446				23,646
Operating expenses
Compensation and benefits		11,914				10,223
IT Infrastructure and information services		2,651				1,958
Professional and consulting fees		1,635				1,217
Marketing and advertising		318				278
Occupancy costs		579				595
Depreciation and amortization		650				440
General, administrative and other		776				291
Total operating expenses		18,523				15,002
Income from operations		6,923				8,644
Other income
Interest income		141				-
Other income, net		6				-
Income before provision for income taxes		7,070				8,644
Provision for income taxes		751				1,030
Net income	$	6,319			$	7,614
Net income per share
Basic	$	0.53			$	0.64
Diluted	$	0.52			$	0.62
Basic weighted average shares outstanding		11,642,968				11,599,997
Diluted weighted average shares outstanding		11,866,646				11,926,344
Non-GAAP Reconciliation
	Three Months Ended March 31,
	2023					2022
Net Income	$	6,319			$	7,614
Excluding:
Interest Income		(141	)			-
Provision for income taxes		751				1,030
Depreciation and amortization		650				440
Stock-based compensation expense		1,574				1,195
Adjusted EBITDA	$	9,153			$	10,279
Adjusted diluted earnings per share	$	0.75			$	0.84
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)
	March 31,				December 31,
	2023				2022
Assets
Current assets
Cash	$	29,884			$	37,368
Accounts receivable, net of allowance for credit losses of $812 and $638	9,284				9,485
Prepaid income taxes	24				59
Prepaid expenses and other current assets	2,058				1,469
Total current assets	41,250				48,381
Property and equipment, net	8,717				8,637
Operating lease right-of-use assets	13,313				13,635
Deferred tax assets, net	5,962				4,853
Goodwill	3,984				3,984
Intangible assets, net	7,847				7,993
Long-term restricted cash	1,572				1,568
Other assets	597				567
Total Assets	$	83,242			$	89,618
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	1,097			$	1,684
Accrued expenses and other current liabilities	7,271				13,141
Income taxes payable	1,719				567
Deferred revenue	27,827				30,456
Total current liabilities	37,914				45,848
Income tax reserve	681				657
Operating lease liabilities	12,989				13,309
Total Liabilities	51,584				59,814
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,698,514 issued, 11,913,745 outstanding at
March 31, 2023; 12,601,270 issued, 11,874,763 outstanding at December 31, 2022	127				126
Additional paid-in capital	25,905				24,847
Retained earnings	25,420				21,246
Treasury stock - 784,769 shares at March 31, 2023 and 726,507 shares at December 31, 2022	(19,794		)		(16,415		)
Total Stockholders' Equity	31,658				29,804
Total Liabilities and Stockholders' Equity	$	83,242			$	89,618