OTC Markets Group Reports Fourth Quarter and Full Year 2021 Results

Rhea-AI Summary

OTC Markets Group reported strong financial results for FY 2021, with gross revenues of $102.9 million, a 45% increase from 2020. Operating income rose 77% to $38.0 million, while net income soared 67% to $30.5 million, resulting in a 65% increase in GAAP diluted EPS to $2.52. In Q4, gross revenues reached $26.2 million, up 32% year-over-year. The company returned $27.0 million to shareholders, marking a 49% growth in cash distributions. A quarterly cash dividend of $0.18 per share was announced for March 31, 2022.

Positive

• Gross revenues of $102.9 million for FY 2021, up 45% from 2020.
• Operating income increased 77% to $38.0 million for FY 2021.
• Net income rose 67% to $30.5 million in FY 2021.
• GAAP diluted EPS increased by 65% to $2.52.
• Cash returned to shareholders totaled $27.0 million, up 49%.
• Fourth quarter gross revenues of $26.2 million, up 32% year-over-year.

Negative

• Operating expenses increased 20% to $52.6 million in FY 2021.
• Effective tax rate rose from 14.6% in 2020 to 19.7% in 2021.

Delivers Continued Strong Revenue and Earnings Growth

Fourth Quarter and Full Year 2021 Highlights:

• Gross revenues of $102.9 million for the year, up 45% versus 2020
• Operating income of $38.0 million for the year, up 77% versus 2020
• Operating profit margin of 38.0% for the year versus 31.3% for 2020
• Net income of $30.5 million for the year, up 67% versus 2020, driving a 65% increase in GAAP diluted EPS to $2.52
• Total cash returned to shareholders during 2021 of $27.0 million, comprised of dividends of $25.5 million and repurchases of common shares of $1.5 million, up 49% versus 2020
• 212 new OTCQX companies added and 451 new OTCQB companies added during 2021 to end the year with 570 and 1,150 OTCQX and OTCQB companies, respectively
• 111% increase in the number of companies subscribing to our Disclosure & News Service^® products
• 155 graduates to a national securities exchange during 2021
• 93 subscribers to OTC Link ECN as of year-end 2021, up 20 versus 2020; approximately 48,000 average daily trades during 2021, versus approximately 11,500 during 2020
• Launch of our third Alternative Trading System, OTC Link^® NQB, offering a fully attributable matching engine model with ability to distribute depth-of-book market data
• 32 Virtual Investor Conferences^® events during 2021, with 626 companies participating
• Implemented amendments to Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system
• Fourth quarter gross revenues of $26.2 million, up 32% versus the prior year quarter
• Fourth quarter operating income of $10.8 million, up 61% versus the prior year quarter, resulting in an operating profit margin of 42.4% as compared to 35.0% for the fourth quarter of 2020
• Announcing first quarter 2022 dividend of $0.18 per share
  

NEW YORK, March 09, 2022 (GLOBE NEWSWIRE) -- OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for trading 12,000 U.S. and international securities, today released its financial results for the fourth quarter and fiscal year 2021.

“2021 marked an important milestone in our evolution as a regulated market operator. Our gross revenues surpassed one hundred million dollars for the first time, and we delivered record financial results across all our businesses,” said R. Cromwell Coulson, President and Chief Executive Officer. “Our cornerstone project last year was the implementation of the SEC’s amendments to Rule 15c2-11 to efficiently support the compliance of our clients and effectively meet our new responsibilities as a Qualified Interdealer Quotation System. As we build on this momentum in 2022, we remain focused on our strategic initiatives to maximize the potential of our enhanced regulatory role for public companies, support the success of our broker-dealer subscribers and deliver sustainable growth for our stockholders.”

“We are pleased to report on a remarkable year of growth, seamless implementation of critical regulatory changes, and continued reliable service for our clients,” said Antonia Georgieva, Chief Financial Officer. “2021 marked our fifth year of consecutive revenue growth. Strong customer demand led to record growth in revenues and earnings per share and a robust operating margin expansion. The strong free cash flows that our business generated allowed us to deliver 49% growth in cash returned to our stockholders. We remain focused on growing our business and creating sustainable long-term value.”

Fourth Quarter 2021 compared to Fourth Quarter 2020

		Quarter Ended December 31,
(in thousands, except shares and per share data)			2021				2020			% change		$ change
OTC Link		$	5,591			$	5,095			10%		496
Market data licensing			8,777				7,358			19%		1,419
Corporate services			11,819				7,325			61%		4,494
Gross Revenues			26,187				19,778			32%		6,409
Net revenues			25,397				19,064			33%		6,333
Revenues less transaction-based expenses			23,819				17,702			35%		6,117
Operating expenses			13,041				11,021			18%		2,020
Income from operations			10,778				6,681			61%		4,097
Operating profit margin			42.4%				35.0%
Income before provision for income taxes			10,710				6,662			61%		4,048
Net income		$	9,054			$	5,728			58%		3,326
Diluted earnings per share		$	0.74			$	0.48			54%
Adjusted diluted earnings per share		$	0.98			$	0.66			48%
Weighted-average shares outstanding, diluted			11,900,839				11,661,096			2%

Fourth Quarter 2021 Financial Highlights

• Gross revenues of $26.2 million, up 32% over the prior year quarter.
• OTC Link revenues up 10%, with sustained elevated trading volumes and the impact of additional subscribers driving a 16% increase in transaction-based revenues on our OTC Link ECN.
• Market Data Licensing revenues up 19%, with a 13% quarter over quarter increase in pro-users driving a 16% increase in related revenues. The number of non-professional users of our market data increased 36%, reflective of an increased retail participation in the U.S. equities markets and helped drive a 36% increase in related revenues.
• Corporate Services delivered 61% growth in revenues quarter over quarter, driven by a 44% increase in revenues from our OTCQX market, a 56% increase in revenues from our OTCQB market, and a 134% increase in revenues from our Disclosure & News Service product. Robust growth in the number of companies subscribing to our offerings as well as price increases introduced at the beginning of 2021 contributed to the growth in Corporate Services revenues.
• Operating expenses increased 18% over the prior year quarter, primarily driven by a 17% increase in compensation and benefits costs, reflecting higher incentive compensation and higher sales commissions. The increase was further impacted by a 20% increase in IT infrastructure and information services costs and a 30% increase in professional and consulting fees.
• Net income increased 58% to $9.1 million for the quarter, reflecting the increase in operating income, partially offset by a quarter over quarter increase in our effective tax rate.
• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 52% to $12.0 million, or $0.98 per adjusted diluted share.
  

Fiscal Year 2021 Results compared to Fiscal Year 2020

		Year Ended December 31,
(in thousands, except shares and per share data)			2021				2020			% change		$ change
OTC Link		$	29,665			$	15,890			87%		13,775
Market data licensing			33,751				28,133			20%		5,618
Corporate services			39,516				27,206			45%		12,310
Gross Revenues			102,932				71,229			45%		31,703
Net revenues			99,911				68,419			46%		31,492
Revenues less transaction-based expenses			90,638				65,397			39%		25,241
Operating expenses			52,622				43,963			20%		8,659
Income from operations			38,016				21,434			77%		16,582
Operating profit margin			38.0%				31.3%
Income before provision for income taxes			37,965				21,407			77%		16,558
Net income		$	30,476			$	18,274			67%		12,202
Diluted earnings per share		$	2.52			$	1.53			65%
Adjusted diluted earnings per share		$	3.56			$	2.20			62%
Weighted-average shares outstanding, diluted			11,811,320				11,630,685			2%

Fiscal Year 2021 Financial Highlights

• Gross revenues of $102.9 million, up 45%.
• OTC Link revenues up 87%, with revenues contributed by our OTC Link ECN as the primary driver. OTC Link ECN benefited from elevated trading volumes, which surged to unprecedented levels early in 2021 before moderating later in the year.
• Market Data Licensing revenues up 20%, mainly due to growth in professional and non-professional user licenses.
• Corporate Services revenues up 45% for the year, primarily driven by an increased demand for our OTCQX, OTCQB, and Disclosure & News Service offerings with price increases also contributing. Our premium OTCQX and OTCQB markets and our Disclosure & News Service product allow issuers to meet their current public disclosure requirements under federal and state securities laws.
• Operating expenses up $8.7 million, or 20%.  
• Compensation and benefits costs increased 5.2 million, or 18%, primarily due to an increase in cash bonus awards, resulting from improved earnings performance and higher sales commission driven by strong OTCQX and OTCQB sales.
• Net income increased 67% to $30.5 million due to a 77% increase in income from operations, partially offset by an increase in the Company’s effective tax rate, from 14.6% in 2020 to 19.7% in 2021.
• Adjusted EBITDA increased 64% to $43.1 million, or $3.56 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 March 31, 2022, to stockholders of record on March 23, 2022. The ex-dividend date is March 22, 2022.

Stock Buyback Program

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. 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 2021 Conference Call

The Company will host a conference call and webcast on Thursday, March 10, 2022, 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: 2748035

Call Replay Dial-in Numbers (available until March 24, 2022): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 2748035

Participants can access the conference via webcast at the following link (replay available until March 9, 2023):

https://edge.media-server.com/mmc/p/6qc8u2ry 

OTC Markets Group’s 2021 Annual Report, the earnings release, transcript of the earnings call and presentation will also be available in the Investor Relations section of its 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

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,
		2021				2020				2021				2020
OTC Link	$	5,591			$	5,095			$	29,665			$	15,890
Market data licensing		8,777				7,358				33,751				28,133
Corporate services		11,819				7,325				39,516				27,206
Gross revenues		26,187				19,778				102,932				71,229
Redistribution fees and rebates		(790)				(714)				(3,021)				(2,810)
Net revenues		25,397				19,064				99,911				68,419
Transaction-based expenses		(1,578)				(1,362)				(9,273)				(3,022)
Revenues less transaction-based expenses		23,819				17,702				90,638				65,397
Operating expenses
Compensation and benefits		8,135				6,977				34,049				28,896
IT Infrastructure and information services		2,057				1,717				7,633				6,452
Professional and consulting fees		1,170				903				4,495				2,704
Marketing and advertising		326				259				1,028				807
Occupancy costs		595				335				2,348				2,303
Depreciation and amortization		465				490				1,796				1,761
General, administrative and other		293				340				1,273				1,040
Total operating expenses		13,041				11,021				52,622				43,963
Income from operations		10,778				6,681				38,016				21,434
Other income
Other income		(68)				(19)				(51)				(27)
Income before provision for income taxes		10,710				6,662				37,965				21,407
Provision for income taxes		1,656				934				7,489				3,133
Net Income	$	9,054			$	5,728			$	30,476			$	18,274
Earnings per share
Basic	$	0.77			$	0.49			$	2.59			$	1.56
Diluted	$	0.74			$	0.48			$	2.52			$	1.53
Basic weighted average shares outstanding		11,519,180				11,418,394				11,506,294				11,402,703
Diluted weighted average shares outstanding		11,900,839				11,661,096				11,811,320				11,630,685
Non-GAAP Reconciliation
	Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
Net Income	$	9,054			$	5,728			$	30,476			$	18,274
Excluding:
Interest Income		-				-				(1)				(19)
Provision for income taxes		1,656				934				7,489				3,133
Depreciation and amortization		465				490				1,796				1,761
Stock-based compensation expense		786				716				3,332				3,059
Adjusted EBITDA	$	11,961			$	7,868			$	43,092			$	26,208
Adjusted diluted earnings per share	$	0.98			$	0.66			$	3.56			$	2.20
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.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
	December 31,
	2021			2020
Assets
Current assets
Cash and cash equivalents	$	50,394		$	33,733
Short-term restricted cash	-			32
Accounts receivable, net of allowance for credit losses of $244 and $194	7,404			6,609
Prepaid income taxes	790			356
Prepaid expenses and other current assets	1,363			1,375
Total current assets	59,951			42,105
Property and equipment, net	5,049			5,367
Operating lease right-of-use assets	14,889			14,844
Deferred tax assets, net	387			343
Goodwill	251			251
Intangible assets, net	40			40
Long-term restricted cash	1,564			1,532
Other assets	124			328
Total Assets	$	82,255		$	64,810
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	962		$	1,251
Income taxes payable	13			16
Accrued expenses and other current liabilities	12,357			9,965
Deferred revenue	28,432			18,765
Total current liabilities	41,764			29,997
Income tax reserve	989			801
Operating lease liabilities	14,548			14,466
Total Liabilities	57,301			45,264
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,483,128 issued, 11,801,761 outstanding at
December 31, 2021; 12,346,491 issued, 11,709,857 outstanding at December 31, 2020	125			123
Additional paid-in capital	21,681			19,770
Retained earnings	16,787			11,770
Treasury stock - 681,367 shares at December 31, 2021 and 636,634 shares at December 31, 2020	(13,639)			(12,117)
Total Stockholders' Equity	24,954			19,546
Total Liabilities and Stockholders' Equity	$	82,255		$	64,810

FAQ

What were OTC Markets Group's revenues for FY 2021?

OTC Markets Group reported gross revenues of $102.9 million for FY 2021, marking a 45% increase from 2020.

How much did net income increase for OTC Markets Group in 2021?

Net income increased by 67% to $30.5 million for the fiscal year 2021.

What is the GAAP diluted EPS for OTC Markets Group for FY 2021?

The GAAP diluted EPS for OTC Markets Group for FY 2021 is $2.52, a 65% increase from the previous year.

What dividend did OTC Markets Group announce for Q1 2022?

OTC Markets Group announced a quarterly cash dividend of $0.18 per share, payable on March 31, 2022.

How much cash was returned to shareholders by OTC Markets Group in 2021?

OTC Markets Group returned $27.0 million to shareholders in 2021, which is a 49% increase compared to the previous year.