OTC Markets Group Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

OTC Markets Group reported a strong financial performance for Q4 and full year 2020, despite the COVID-19 pandemic. Gross revenues for the year reached $71.2 million, up 13% year-over-year, with operating income at $21.4 million (+20%) and net income of $18.3 million (+22%). In Q4 alone, revenues grew 23% to $19.8 million, with net income increasing 50% to $5.7 million. A dividend of $0.15 per share was announced for Q1 2021, alongside a refreshed stock buyback program allowing the purchase of up to 300,000 shares.

Positive

• Gross revenues of $71.2 million for 2020, up 13% year-over-year.
• Operating income increased by 20% to $21.4 million.
• Net income rose by 22% to $18.3 million, driving GAAP diluted EPS up 22% to $1.53.
• Fourth quarter gross revenues of $19.8 million, marking a 23% increase from the prior year.
• Dividend of $0.15 per share declared for Q1 2021.
• Total cash returned to shareholders reached $18.1 million, up 14% year-over-year.

Negative

• Operating expenses increased by 5% year-over-year, impacting profit margins.

NEW YORK, March 17, 2021 /PRNewswire/ --

Fourth Quarter and Full Year 2020 Highlights:

• The COVID-19 pandemic did not adversely affect our financial results during 2020, and each of our three business lines grew revenue
• Gross revenues of $71.2 million for the year, up 13% versus 2019
• Operating income of $21.4 million for the year, up 20% versus 2019
• Net income of $18.3 million for the year, up 22% versus 2019, driving a 22% increase in GAAP diluted EPS to $1.53
• Fourth quarter gross revenues of $19.8 million, up 23% versus the prior year quarter, and operating income of $6.7 million, up 42% versus the prior year quarter
• Operating profit margin of 31.3% for the year and 35.0% for the quarter (versus 29.6% and 30.5%, respectively, for 2019)
• Total cash returned to shareholders during 2020 of $18.1 million, comprised of dividends of $14.6 million and repurchases of common shares of $3.5 million, up 14% versus 2019
• Announcing first quarter 2021 dividend of $0.15 per share
• 66 graduates to a national securities exchange during 2020
• 73 subscribers to OTC Link ECN as of year-end 2020, up 20 versus 2019; approximately 11,500 average daily trades during 2020, versus approximately 3,400 during 2019
• Virtual Investor Conferences^® business hosted 27 events during 2020, with 387 companies participating and reaching more than 21 thousand investors
• Publication of final rule amending Securities Exchange Act Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system (QIDQS)

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX^® Best Market, the OTCQB^® Venture Market, and the Pink^® Open Market for 11,000 U.S. and global securities, today released its financial results for the fourth quarter and fiscal year 2020.

"We exited 2020, an unprecedented year, with strong results. Our ability to thrive in a time of global uncertainty leaves us well-positioned to serve clients, grow organically and seize new business opportunities," said R. Cromwell Coulson, President and Chief Executive Officer. "As we progress throughout 2021, we are guided by our strategic initiatives, including successful implementation of amended Rule 15c2-11, delivering reliable and efficient trading systems and supporting the diverse array of issuers on our public markets."

"Our business delivered strong results despite the challenging macroeconomic conditions.  We are pleased to report strong overall year-over-year growth of 13% in top line revenues and 20% in operating income," said Antonia Georgieva, Chief Financial Officer. "Our OTC Link business benefited from an active equities market environment and growth in its subscriber base.  In our Market Data Licensing business, the impact of price increases combined with a significant increase in the number of users, drove robust growth.  Our Corporate Services business experienced a strong rebound in sales in the second half of the year and delivered year-over-year revenue growth despite facing significant headwinds in the early part of 2020."

Fourth Quarter 2020 compared to Fourth Quarter 2019

		Quarter Ended December 31,
(in thousands, except shares and per share data)		2020		2019		% change		$ change
OTC Link		$                5,095		$                2,946		73%		2,149
Market data licensing		7,358		6,214		18%		1,144
Corporate services		7,325		6,898		6%		427
Gross Revenues		19,778		16,058		23%		3,720
Net revenues		19,064		15,433		24%		3,631
Revenues less transaction-based expenses		17,702		15,219		16%		2,483
Operating expenses		11,021		10,510		5%		511
Income from operations		6,681		4,709		42%		1,972
Operating profit margin		35.0%		30.5%
Income before provision for income taxes		6,662		4,726		41%		1,936
Net income		$                5,728		$                3,808		50%		1,920
Diluted earnings per share		$                  0.48		$                  0.32		51%
Adjusted diluted earnings per share		$                  0.66		$                  0.48		37%
Weighted-average shares outstanding, diluted		11,661,096		11,725,557		(1%)

Fourth Quarter 2020 Financial Highlights

• Gross revenues of $19.8 million, up 23% over the prior year quarter.
• OTC Link revenues up 73%, with increased trading volumes across U.S. equity markets and the impact of additional subscribers driving a 429% increase in transactional revenues on our OTC Link ECN.
• Market Data Licensing revenues up 18%, with price increases introduced at the beginning of 2020, combined with a 5% quarter over quarter increase in pro-users driving an 18% increase in related revenues. The number of non-professional users of our market data increased 60%, reflective of the increased retail participation in the U.S. equities markets and helped drive a 73% increase in related revenues.
• Corporate Services delivered 6% growth in revenues quarter over quarter, driven primarily by a 14% increase in revenues from our Disclosure & News Service^® product and a 372% increase in revenue from our Virtual Investor Conferences business.
• Operating expenses increased 5% over the prior year quarter, the result of a 4% increase in compensation costs, an 8% increase in information technology costs and a 62% increase in professional and consulting fees, partially offset by a 30% decline in marketing fees.
• Net income increased 50% to $5.7 million for the quarter, reflecting the increase in operating income and a quarter over quarter decrease in our effective tax rate ("ETR") from 19.4% to 14.0%, primarily due to the recognition of an excess stock-based compensation tax windfall.
• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 36% to $7.9 million, or $0.66 per adjusted diluted share.

Fiscal Year 2020 Results compared to Fiscal Year 2019

		Year Ended December 31,
(in thousands, except shares and per share data)		2020		2019		% change		$ change
OTC Link		$              15,890		$              11,676		36%		4,214
Market data licensing		28,133		24,447		15%		3,686
Corporate services		27,206		26,716		2%		490
Gross Revenues		71,229		62,839		13%		8,390
Net revenues		68,419		60,350		13%		8,069
Revenues less transaction-based expenses		65,397		59,604		10%		5,793
Operating expenses		43,963		41,722		5%		2,241
Income from operations		21,434		17,882		20%		3,552
Operating profit margin		31.3%		29.6%
Income before provision for income taxes		21,407		17,985		19%		3,422
Net income		$              18,274		$              14,942		22%		3,332
Diluted earnings per share		$                  1.53		$                  1.25		22%
Adjusted diluted earnings per share		$                  2.20		$                  1.84		20%
Weighted-average shares outstanding, diluted		11,630,685		11,702,863		(1%)

Fiscal Year 2020 Financial Highlights

• Gross revenues of $71.2 million, up 13%.
• OTC Link revenues up 36%, with revenues contributed by our OTC Link ECN the primary driver.
• Market Data Licensing revenues up 15%, largely a result of growth in users and fee increases.
• Corporate Services revenues up 2% for the year, primarily driven by an increased demand for virtual investor events and a price increase for our Disclosure & News Service.
• Operating expenses up $2.2 million, or 5%.
• Compensation costs increased $1.9 million, or 7%, with year-over-year growth in headcount and the impact of annual salary increases for 2020 driving a 4% increase in base salaries. Additionally, cash and stock-based incentive awards for 2020 increased by 13% and 14%, respectively.
• Net income increased 22% to $18.3 million, a result of the 20% increase in income from operations, combined with a decrease in the Company's ETR, from 16.9% in 2019 to 14.6% in 2020.
• The Company's 2020 ETR was lower than the prior year, primarily as a result of the reversal of previously recorded uncertain state tax expenses. These reversals were premised on the Company being accepted into the Voluntary Disclosure Agreement programs of certain U.S. states.
• Adjusted EBITDA increased 19% to $26.2 million, or $2.20 per adjusted diluted share.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized a quarterly cash dividend of $0.15 on its Class A Common Stock.  The quarterly cash dividend is payable on March 31, 2021 to stockholders of record on March 23, 2021.  The ex-dividend date is March 22, 2021.

Stock Buyback Program

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.  The Company is authorized to purchase shares from time to time on the open market and through block trades, in compliance with applicable law.

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.

Fourth Quarter and Full Year 2020 Conference Call

The Company will host a conference call and webcast on Thursday, March 18, 2021, 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: 1-877-665-5564 (Domestic); 1-470-495-9522 (International); Conference ID: 3583593

Call Replay Dial-in Numbers (available until April 1, 2021): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 3583593

Participants can access the conference via webcast at the following link (replay available until March 17, 2022):

https://edge.media-server.com/mmc/p/b6t66qrz

OTC Markets Group's 2020 Annual Report, the earnings release, transcript to 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 the OTCQX^® Best Market, the OTCQB^® Venture Market and the Pink^® Open Market for 11,000 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 markets, visit www.otcmarkets.com.

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:

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)
	Three Months Ended December 31,				Year Ended December 31,
	2020		2019		2020		2019
OTC Link	$                 5,095		$                 2,946		$               15,890		$               11,676
Market data licensing	7,358		6,214		28,133		24,447
Corporate services	7,325		6,898		27,206		26,716
Gross revenues	19,778		16,058		71,229		62,839
Redistribution fees and rebates	(714)		(625)		(2,810)		(2,489)
Net revenues	19,064		15,433		68,419		60,350
Transaction-based expenses	(1,362)		(214)		(3,022)		(746)
Revenues less transaction-based expenses	17,702		15,219		65,397		59,604
Operating expenses
Compensation and benefits	6,977		6,711		28,896		26,994
IT Infrastructure and information services	1,717		1,591		6,452		6,383
Professional and consulting fees	903		559		2,704		1,982
Marketing and advertising	259		368		807		1,117
Occupancy costs	335		541		2,303		2,548
Depreciation and amortization	490		448		1,761		1,492
General, administrative and other	340		292		1,040		1,206
Total operating expenses	11,021		10,510		43,963		41,722
Income from operations	6,681		4,709		21,434		17,882
Other income
Other income	(19)		17		(27)		103
Income before provision for income taxes	6,662		4,726		21,407		17,985
Provision for income taxes	934		918		3,133		3,043
Net Income	$                 5,728		$                 3,808		$               18,274		$               14,942
Earnings per share
Basic	$                   0.49		$                   0.33		$                   1.56		$                   1.28
Diluted	$                   0.48		$                   0.32		$                   1.53		$                   1.25
Basic weighted average shares outstanding	11,418,394		11,380,397		11,402,703		11,364,217
Diluted weighted average shares outstanding	11,661,096		11,725,557		11,630,685		11,702,863
Non-GAAP Reconciliation
	Three Months Ended December 31,				Year Ended December 31,
	2020		2019		2020		2019
Net Income	$                 5,728		$                 3,808		$               18,274		$               14,942
Excluding:
Interest Income	-		(24)		(19)		(109)
Provision for income taxes	934		918		3,133		3,043
Depreciation and amortization	490		448		1,761		1,492
Stock-based compensation expense	716		641		3,059		2,703
Adjusted EBITDA	$                 7,868		$                 5,791		$               26,208		$               22,071
Adjusted diluted earnings per share	$                   0.66		$                   0.48		$                   2.20		$                   1.84
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)
	December 31,
	2020		2019
Assets
Current assets
Cash and cash equivalents	$               33,733		$               28,217
Short-term restricted cash	32		-
Accounts receivable, net of allowance for credit losses of $194 and $168	6,609		5,157
Prepaid income taxes	356		318
Prepaid expenses and other current assets	1,375		1,338
Total current assets	42,105		35,030
Property and equipment, net	5,367		6,418
Operating lease right-of-use assets	14,844		16,018
Deferred tax assets, net	343		771
Goodwill	251		251
Intangible assets, net	40		40
Long-term restricted cash	1,532		1,561
Other assets	328		266
Total Assets	$               64,810		$               60,355
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$                 1,251		$                    321
Income taxes payable	16		99
Accrued expenses and other current liabilities	9,965		9,154
Deferred revenue	18,765		15,815
Total current liabilities	29,997		25,389
Income tax reserve	801		1,764
Operating lease liabilities	14,466		15,529
Total Liabilities	45,264		42,682
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 12,346,491 issued, 11,709,857 outstanding at
December 31, 2020; 12,189,022 issued, 11,655,326 outstanding at December 31, 2019	123		122
Additional paid-in capital	19,770		18,042
Retained earnings	11,770		8,106
Treasury stock - 636,634 shares at December 31, 2020 and 533,696 shares at December 31, 2019	(12,117)		(8,597)
Total Stockholders' Equity	19,546		17,673
Total Liabilities and Stockholders' Equity	$               64,810		$               60,355

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/otc-markets-group-reports-fourth-quarter-and-full-year-2020-results-301249627.html

SOURCE OTC Markets Group Inc.

FAQ

What were the key financial highlights for OTC Markets Group in 2020?

OTC Markets Group reported gross revenues of $71.2 million in 2020, up 13% from 2019, with net income of $18.3 million, a 22% increase.

How did OTC Markets Group perform in the fourth quarter of 2020?

In Q4 2020, OTC Markets Group achieved gross revenues of $19.8 million, a 23% increase year-over-year, and net income of $5.7 million, up 50%.

What dividend was announced for the first quarter of 2021 for OTC Markets Group?

OTC Markets Group declared a quarterly cash dividend of $0.15 per share, payable on March 31, 2021.

What is the stock symbol for OTC Markets Group?

OTC Markets Group trades under the stock symbol OTCM.

What was the total cash returned to shareholders in 2020?

The company returned a total of $18.1 million to shareholders in 2020, comprised of dividends and share repurchases.