OTC Markets Group Reports Fourth Quarter and Full Year 2022 Results, Delivering Continued Revenue Growth

Rhea-AI Summary

OTC Markets Group reported a 2% increase in gross revenues for 2022, totaling $105.1 million. Operating income fell 3% to $36.8 million, with a profit margin of 36.1%, down from 38.0% in 2021. Net income for 2022 was $30.8 million, a 1% rise, leading to a GAAP diluted EPS of $2.53. The fourth quarter showed gross revenues of $27.3 million, up 4% year-over-year, but operating income dropped 8% to $9.9 million. Shareholder returns included $29.1 million in dividends and buybacks, an 8% increase compared to 2021. A quarterly dividend of $0.18 per share was announced for Q1 2023.

Positive

• Gross revenues increased by 2% in 2022, totaling $105.1 million.
• Net income rose by 1% to $30.8 million.
• Total cash returned to shareholders was $29.1 million, up 8% from 2021.
• Fourth quarter gross revenues of $27.3 million were up 4% year-over-year.
• Launched a new data product focusing on fixed-income securities.

Negative

• Operating income decreased by 3% to $36.8 million.
• Fourth quarter operating income fell by 8% to $9.9 million.
• OTC Link revenues dropped 29% year-over-year.
• Operating expenses rose by 15%, driven by higher personnel costs.

Fourth Quarter and Full Year 2022 Highlights:

• Gross revenues of $105.1 million for the year, up 2% versus 2021
• Operating income of $36.8 million for the year, down 3% versus 2021
• Operating profit margin of 36.1% for the year, versus 38.0% for 2021
• Net income of $30.8 million for 2022, up 1% versus 2021, and GAAP diluted EPS of $2.53 versus $2.52 for 2021
• Total cash returned to shareholders during 2022 of $29.1 million, comprised of dividends of $26.4 million and repurchases of common shares of $2.8 million, up 8% versus 2021
• Announcing first quarter 2023 dividend of $0.18 per share
• 615 OTCQX^® and 1,239 OTCQB^® companies at year end, each up 8% versus the prior year end
• 74 graduates to a national securities exchange during 2022
• 102 subscribers to OTC Link ECN as of year-end 2022, up 9 versus 2021; approximately 36,000 average daily trades during 2022 versus approximately 48,000 during 2021
• Fourth quarter gross revenues of $27.3 million, up 4% versus the prior year quarter
• Fourth quarter operating income of $9.9 million, down 8% versus the prior year quarter, resulting in an operating profit margin of 37.2% as compared to 42.4% for the fourth quarter of 2021
• Continued progress in achieving state Blue Sky recognition for our OTCQX and OTCQB markets, with exemptions in 38 states and one U.S. territory as of March 1, 2023
• Launched fixed income 15c2-11 data product, a premium offering that applies our expertise on Rule 15c2-11 compliance to TRACE-eligible corporate debt securities
• On May 2, 2022, closed the acquisition of Blue Sky Data Corp, a provider of equity and debt compliance data regarding state Blue Sky securities rules and regulations
• On November 9, 2022, closed the acquisition of EDGAR^® Online, a supplier of real-time SEC regulatory data and financial analytics, from Donnelley Financial, LLC
  

NEW YORK, March 08, 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 fourth quarter and full year 2022.

“Throughout 2022, we extended our long-term track record of revenue growth and sharpened our focus to execute on our strategic initiatives structured around serving our clients and shareholders,” said R. Cromwell Coulson, President and Chief Executive Officer. “We expanded our data offering, strengthened compliance solutions, and brought vital processes in-house with the Blue Sky Data and EDGAR Online acquisitions. We gained additional regulatory recognition for our markets and continue to pursue new opportunities to commercialize our enhanced regulatory status. As we turn to 2023, we seek to further strengthen our operational capabilities, deliver unique solutions for our clients, and create long-term value for our shareholders.”

“OTC Markets Group concluded another year of consecutive revenue growth. We benefited from our diversified product offering and revenue streams, and our strategic transactions expanded our customer base and product suite,” said Antonia Georgieva, Chief Financial Officer. “Our business saw continued organic growth from our Corporate Services business and our Market Data Licensing business, offsetting the decline in our OTC Link business that resulted from reduced trading activity on our markets. In addition, during 2022, we benefited from revenue contribution from our Blue Sky Data Corp and EDGAR Online acquisitions. We also incurred higher expenses as we integrated our acquisitions, added personnel, and continued to invest in our platform to support our strategic objectives.”

Fourth Quarter 2022 compared to Fourth Quarter 2021

		Quarter Ended December 31,
(in thousands, except shares and per share data)		2022				2021				% change			$ change
OTC Link		$	5,346			$	5,591			(4	%)		(245	)
Market data licensing		9,895				8,777				13	%		1,118
Corporate services		12,054				11,819				2	%		235
Gross Revenues		27,295				26,187				4	%		1,108
Net revenues		26,537				25,397				4	%		1,140
Revenues less transaction-based expenses		24,867				23,819				4	%		1,048
Operating expenses		14,990				13,041				15	%		1,949
Income from operations		9,877				10,778				(8	%)		(901	)
Operating profit margin		37.2		%		42.4		%
Income before provision for income taxes		10,031				10,710				(6	%)		(679	)
Net income		$	8,630			$	9,054			(5	%)		(424	)
Diluted earnings per share		$	0.70			$	0.74			(6	%)
Adjusted diluted earnings per share		$	0.95			$	0.98			(3	%)
Weighted-average shares outstanding, diluted		11,895,058				11,900,839				-

Fourth Quarter 2022 Financial Highlights

• Gross revenues of $27.3 million, up 4% over the prior year quarter.   Revenues less transaction-based expenses up 4%.
• OTC Link revenues were down 4%. Transaction-based revenues from OTC Link ECN and OTC Link NQB increased 2%, reflecting normalized trading volumes in both the current and prior year quarters. This increase was offset by a 22% decline in revenues from OTC Link ATS messages and a 56% decline in QAP One Statement fees.
• Market Data Licensing revenues were up 13%, 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 decreased 1%. Pro-user revenues declined 1%, while the number of professional users increased 1% quarter over quarter. Revenues from non-professional users declined 48%, driven by a 51% decrease in the number of non-professional users of our market data. Offsetting these declines were a 14% increase in revenues from broker-dealer enterprise licenses and a 13% increase in revenues from internal system licenses, delayed data licenses and certain other data services due to growth in subscribers.
• Corporate Services revenues were up 2% quarter over quarter, driven by a 5% increase in revenues from our OTCQX market and a 7% increase in revenues from our OTCQB market, partially offset by a 12% decrease in revenues from our Disclosure & News Service^® product.   Growth in the number of companies subscribing to our OTCQX and OTCQB markets, a result of new sales and strong retention, as well as annual, incremental price increases effective at the beginning of 2022, contributed to the quarter over quarter growth in Corporate Services revenues.
• Operating expenses increased 15% over the prior year quarter, primarily driven by a 9% increase in compensation and benefits costs, reflecting a higher headcount. The increase was further impacted by a 13% increase in IT infrastructure and information services costs, primarily as a result of the EDGAR Online acquisition and a 55% increase in professional and consulting fees, primarily related to higher spending on external consulting services to support our web-based applications, databases and security initiatives.
• Operating income and net income decreased 8% to $9.9 million and 5% to $8.6 million, respectively.
• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, decreased 3% to $11.6 million, or $0.95 per adjusted diluted share.
  

Fiscal Year 2022 Results compared to Fiscal Year 2021

		Year Ended December 31,
(in thousands, except shares and per share data)		2022				2021				% change			$ change
OTC Link		$	20,937			$	29,665			(29	%)		(8,728	)
Market data licensing		36,407				33,751				8	%		2,656
Corporate services		47,805				39,516				21	%		8,289
Gross Revenues		105,149				102,932				2	%		2,217
Net revenues		102,048				99,911				2	%		2,137
Revenues less transaction-based expenses		96,201				90,638				6	%		5,563
Operating expenses		59,380				52,622				13	%		6,758
Income from operations		36,821				38,016				(3	%)		(1,195	)
Operating profit margin		36.1		%		38.0		%
Income before provision for income taxes		36,966				37,965				(3	%)		(999	)
Net income		$	30,814			$	30,476			1	%		338
Diluted earnings per share		$	2.53			$	2.52			-
Adjusted diluted earnings per share		$	3.56			$	3.56			-
Weighted-average shares outstanding, diluted		11,887,868				11,811,320				1	%

Fiscal Year 2022 Financial Highlights

• Gross revenues of $105.1 million, up 2%.   Revenues less transaction-based expenses up 6%.
• OTC Link revenues were down 29%, primarily as a result of a reduction in revenues from OTC Link ECN and OTC Link NQB, which in aggregate declined 43%, and a decline in revenues from OTC Link ATS messages of 21% and QAP One Statement fees of 70%, consistent with a decline in trading volumes on our markets, when compared to the levels of market activity experienced in 2021. The decline was partially offset by growth in our subscription-based connectivity services and CAT reporting service.
• Market Data Licensing revenues were up 8%, inclusive of the impact of the acquisitions of Blue Sky Data Corp and EDGAR Online. Excluding the impact of the acquisitions, Market Data Licensing revenues grew 2%, due to 4% growth in revenues from professional user licenses, 16% growth in revenues from broker-dealer enterprise licenses, and 17% growth in internal system licenses, delayed data licenses and certain other data services, offsetting a 40% decline in revenues from non-professional users.
• Corporate Services revenues were up 21% for the year, primarily driven by a greater average number of companies subscribing to our OTCQX, OTCQB, and Disclosure & News Service offerings with price increases also contributing. Revenues from our premium OTCQX and OTCQB markets grew 10% and 26%, respectively, while revenues from our Disclosure & News Service product increased 33%.
• Operating expenses were up $6.8 million, or 13%, reflecting a 10% increase in compensation and benefits as a result of higher headcount and a 44% increase in professional and consulting fees.  
• Operating income decreased 3% to $36.8 million while net income increased 1% to $30.8 million due to a decrease in the Company’s effective tax rate, from 19.7% in 2021 to 16.6% in 2022.
• Adjusted EBITDA was approximately flat at $43.2 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 30, 2023, to stockholders of record on March 23, 2023.   The ex-dividend date is March 22, 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.

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.

Fourth Quarter and Full Year 2022 Conference Call

The Company will host a conference call and webcast on Thursday, March 9, 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 March 8, 2024):
https://edge.media-server.com/mmc/p/fiea593w       

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/BId41294182b3040bbb37ad3f3b8196ea6  

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.

OTC Markets Group’s Annual Report, earnings release, transcript of the earnings call, and management presentation will also be available in the Investor Relations section of our 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 December 31,								Year Ended December 31,
	2022				2021				2022				2021
OTC Link	$	5,346			$	5,591			$	20,937			$	29,665
Market data licensing	9,895				8,777				36,407				33,751
Corporate services	12,054				11,819				47,805				39,516
Gross revenues	27,295				26,187				105,149				102,932
Redistribution fees and rebates	(758		)		(790		)		(3,101		)		(3,021		)
Net revenues	26,537				25,397				102,048				99,911
Transaction-based expenses	(1,670		)		(1,578		)		(5,847		)		(9,273		)
Revenues less transaction-based expenses	24,867				23,819				96,201				90,638
Operating expenses
Compensation and benefits	8,887				8,135				37,585				34,049
IT Infrastructure and information services	2,323				2,057				8,091				7,633
Professional and consulting fees	1,817				1,170				6,464				4,495
Marketing and advertising	351				326				1,303				1,028
Occupancy costs	481				595				2,257				2,348
Depreciation and amortization	600				465				2,092				1,796
General, administrative and other	531				293				1,588				1,273
Total operating expenses	14,990				13,041				59,380				52,622
Income from operations	9,877				10,778				36,821				38,016
Other income
Other income	154				(68		)		145				(51		)
Income before provision for income taxes	10,031				10,710				36,966				37,965
Provision for income taxes	1,401				1,656				6,152				7,489
Net Income	$	8,630			$	9,054			$	30,814			$	30,476
Earnings per share
Basic	$	0.73			$	0.77			$	2.60			$	2.59
Diluted	$	0.70			$	0.74			$	2.53			$	2.52
Basic weighted average shares outstanding	11,609,318				11,519,180				11,600,122				11,506,294
Diluted weighted average shares outstanding	11,895,058				11,900,839				11,887,868				11,811,320
Non-GAAP Reconciliation
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
Net Income	$	8,630			$	9,054			$	30,814			$	30,476
Excluding:
Interest Income	(154		)		-				(155		)		(1		)
Provision for income taxes	1,401				1,656				6,152				7,489
Depreciation and amortization	600				465				2,092				1,796
Stock-based compensation expense	1,106				786				4,345				3,332
Adjusted EBITDA	$	11,583			$	11,961			$	43,248			$	43,092
Adjusted diluted earnings per share	$	0.95			$	0.98			$	3.56			$	3.56
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,
	2022				2021
Assets
Current assets
Cash and cash equivalents	$	37,368			$	50,394
Accounts receivable, net of allowance for credit losses of $638 and $244	9,485				7,404
Prepaid income taxes	59				790
Prepaid expenses and other current assets	1,469				1,363
Total current assets	48,381				59,951
Property and equipment, net	8,637				5,049
Operating lease right-of-use assets	13,635				14,889
Deferred tax assets, net	4,853				387
Goodwill	3,984				251
Intangible assets, net	7,993				40
Long-term restricted cash	1,568				1,564
Other assets	567				124
Total Assets	$	89,618			$	82,255
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	1,684			$	962
Income taxes payable	567				13
Accrued expenses and other current liabilities	13,141				12,357
Deferred revenue	30,456				28,432
Total current liabilities	45,848				41,764
Income tax reserve	657				989
Operating lease liabilities	13,309				14,548
Total Liabilities	59,814				57,301
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,601,270 issued, 11,874,763 outstanding at
December 31, 2022; 12,483,128 issued, 11,801,761 outstanding at December 31, 2021	126				125
Additional paid-in capital	24,847				21,681
Retained earnings	21,246				16,787
Treasury stock - 726,507 shares at December 31, 2022 and 681,367 shares at December 31, 2021	(16,415		)		(13,639		)
Total Stockholders' Equity	29,804				24,954
Total Liabilities and Stockholders' Equity	$	89,618			$	82,255

FAQ

What were the 2022 financial results for OTCM?

In 2022, OTC Markets Group reported gross revenues of $105.1 million, a 2% increase from 2021.

What is the quarterly dividend announced by OTC Markets Group?

OTC Markets Group announced a quarterly dividend of $0.18 per share for the first quarter of 2023.

How did the operating income change in 2022 for OTCM?

Operating income for OTC Markets Group decreased by 3% to $36.8 million in 2022.

What was the net income for OTCM in 2022?

The net income for OTC Markets Group in 2022 was $30.8 million, a 1% increase from 2021.

What were the significant acquisitions made by OTC Markets Group?

OTC Markets Group acquired Blue Sky Data Corp and EDGAR Online, enhancing their data offerings and compliance solutions.