OTC Markets Group Reports Third Quarter 2021 Results

Rhea-AI Summary

OTC Markets Group reported third quarter 2021 gross revenues of $25.2 million, marking a 42% increase from the previous year. Operating income rose 77% to $9.7 million, and net income increased 68% to $7.5 million, leading to a quarterly diluted GAAP EPS of $0.62. The company declared a special dividend of $1.50 per share and a quarterly dividend of $0.18. Significant growth was noted in OTCQX and OTCQB market issuers, with total cash returned to shareholders at $2.1 million.

Positive

• Gross revenues increased by 42% year-over-year to $25.2 million.
• Operating income up 77% to $9.7 million, improving profit margin to 39.5%.
• Net income rose 68% to $7.5 million, resulting in diluted EPS of $0.62.
• Declared a special dividend of $1.50 and quarterly dividend of $0.18.
• Significant growth in issuers on OTC markets with 561 on OTCQX and 1,067 on OTCQB.

Negative

• Operating expenses increased by 20%, primarily due to higher compensation and consulting fees.

NEW YORK, Nov. 10, 2021 /PRNewswire/ --

Third Quarter 2021 Highlights:

• Gross revenues of $25.2 million for the quarter, up 42% versus the prior year quarter
• Operating income of $9.7 million for the quarter, up 77% versus the prior year quarter
• Operating profit margin of 39.5% versus 32.1% during the prior year quarter
• Net income of $7.5 million, up 68% versus the prior year quarter, driving a 68% increase in the quarterly diluted GAAP EPS of $0.62
• Announcing special dividend of $1.50 per share, and fourth quarter dividend of $0.18 per share
• Total cash returned to shareholders during the quarter of $2.1 million in the form of dividends
• 45 graduates to a national securities exchange during the quarter
• Significant growth in issuers subscribing to our OTCQX and OTCQB markets as well as Disclosure & News Service^®, with 561 and 1,067 companies on OTCQX and OTCQB, respectively at the end of the quarter
• Launch of our third Alternative Trading System, OTC Link^® NQB, offering a fully attributable matching engine model
• 90 subscribers to OTC Link ECN at September 30, 2021, up 21 versus September 30, 2020; approximately 39,000 average daily trades during the quarter, compared to approximately 10,000 during the same prior year quarter
• Virtual Investor Conferences^® business hosted 6 events during the quarter, with 118 companies participating 
• Implemented amendments to Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX^® Best Market, the OTCQB^® Venture Market and the Pink^® Open Market for over 11,000 U.S. and global securities, today announced its financial results for the third quarter of 2021.

"On September 28, the SEC's amendments to Rule 15c2-11 went into effect and marked the beginning of our role as a Qualified Interdealer Quotation System," said R. Cromwell Coulson, President and Chief Executive Officer.  "With a modernized regulatory framework, we are better able to serve our customers while enhancing regulatory compliance and increasing the availability of information for investors.  The technology foundation we have established around Rule 15c2-11 improves the value of our regulated markets for public companies, brings efficiencies to broker-dealer trading processes, and digitizes useful data for investors."

"We are pleased that our customers continue to see the distinct value proposition of our regulated markets and our suite of corporate services and market data products," said Antonia Georgieva, Chief Financial Officer.  "As a result of the strong customer engagement across our business lines, we delivered robust growth in revenues and income from operations. We were also pleased with our operating margin expansion and earnings per share growth as well as our continued ability to generate strong free cash flows and return value to our shareholders in the form of dividends."

Third Quarter 2021 compared to Third Quarter 2020 Financial Highlights
		Three Months Ended September 30,
(in thousands, except shares and per share data)		2021		2020		% change		$ change
OTC Link		$                 6,110		$                 3,816		60%		2,294
Market data licensing		8,489		7,172		18%		1,317
Corporate services		10,621		6,759		57%		3,862
Gross revenues		25,220		17,747		42%		7,473
Net revenues		24,476		17,058		43%		7,418
Revenues less transaction-based expenses		22,808		16,444		39%		6,364
Operating expenses		13,132		10,966		20%		2,166
Income from operations		9,676		5,478		77%		4,198
Operating profit margin		39.5%		32.1%
Income before provision for income taxes		9,688		5,443		78%		4,245
Net income		$                 7,512		$                 4,459		68%		3,053
Diluted earnings per share		$                   0.62		$                   0.37		68%
Adjusted diluted earnings per share		$                   0.90		$                   0.55		64%
Weighted-average shares outstanding, diluted		11,812,910		11,620,153		2%

• Gross revenues increased $7.5 million, or 42%, to $25.2 million.
• OTC Link revenues increased 60%, benefiting from elevated trading volumes on our OTC Link ECN and message volumes on our OTC Link ATS as well as growth in our QAP One Statement fees.
• Market Data Licensing revenues grew 18%, with growth in professional and non-professional subscribers driving a 12% and 39% increase in related revenues, respectively. The number of non-professional users of our market data increased 45%, reflecting the increased retail participation in the U.S. equities markets. Also contributing to the growth were revenues from internal system licenses, which increased 48%.
• Corporate Services delivered 57% growth in revenues, primarily driven by strong sales and a high number of issuers using our services to comply with current public disclosure requirements under Rule 15c2-11 in advance of the Rule's September compliance date. Our OTCQX market saw 55 new companies joining and revenues increasing 54%. Our OTCQB market welcomed 115 new issuers and delivered a 48% increase in revenues. We also saw a substantial increase in the number of companies subscribing to our Disclosure & News Service^®, driving related revenues up 101%.
• Operating expenses increased $2.2 million, or 20%, to $13.1 million, primarily as a result of a 20% increase in compensation costs, reflecting incremental headcount and higher incentive compensation as well as higher sales commissions. Contributing to the increase in operating expenses was also a 72% increase in professional and consulting fees, primarily driven by higher ECN related clearing and regulatory costs, and a 26% increase in IT infrastructure and information services, partially offset by lower occupancy costs.
• Operating income and net income increased 77% and 68%, respectively.
• Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, increased 65% to $10.9 million, or $0.90 per adjusted diluted share.

Dividend Declaration – Quarterly and Special Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized and approved a special cash dividend of $1.50 per share of Class A Common Stock and a quarterly cash dividend of $0.18 per share of Class A Common Stock.  The special dividend is payable on December 9, 2021 to stockholders of record on November 24, 2021. The ex-dividend date is November 23, 2021.  The quarterly dividend is payable on December 23, 2021 to stockholders of record on December 9, 2021.  The ex-dividend date is December 8, 2021.

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.  The Company did not repurchase any shares during the third quarter of 2021.

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.  As of September 30, 2021, there are 300,000 shares remaining to be purchased under the Company's 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 2021 Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, November 11, 2021, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail.  The call and a replay of the conference call and webcast may be accessed as follows:

Dial-in Numbers: 1-877-665-5564 (Domestic); 1-470-495-9522 (International); Conference ID: 3375993

Call Replay Dial-in Numbers (available until November 25, 2021): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 3375993

Participants can access the conference via webcast at the following link (replay available until November 10, 2022):

https://edge.media-server.com/mmc/p/fuwtdp2a

OTC Markets Group's Quarterly Report for the quarter ended September 30, 2021, the earnings release, transcript of the earnings call and 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 the OTCQX^® Best Market, the OTCQB^® Venture Market and the Pink^® Open Market for over 11,000 U.S. and global securities.  Through our regulated OTC Link^® Alternative Trading Systems, the Company connects 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 their investors.

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 financial markets, visit www.otcmarkets.com.

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)
(Unaudited)
	Three Months Ended September 30,
	2021		2020
OTC Link	$                 6,110		$                 3,816
Market data licensing	8,489		7,172
Corporate services	10,621		6,759
Gross revenues	25,220		17,747
Redistribution fees and rebates	(744)		(689)
Net revenues	24,476		17,058
Transaction-based expenses	(1,668)		(614)
Revenues less transaction-based expenses	22,808		16,444
Operating expenses
Compensation and benefits	8,471		7,052
IT Infrastructure and information services	2,062		1,642
Professional and consulting fees	1,008		586
Marketing and advertising	218		138
Occupancy costs	521		877
Depreciation and amortization	446		441
General, administrative and other	406		230
Total operating expenses	13,132		10,966
Income from operations	9,676		5,478
Other income (expense)
Other income (expense), net	12		(35)
Income before provision for income taxes	9,688		5,443
Provision for income taxes	2,176		984
Net income	$                 7,512		$                 4,459
Net income per share
Basic	$                   0.64		$                   0.38
Diluted	$                   0.62		$                   0.37
Basic weighted average shares outstanding	11,501,186		11,390,479
Diluted weighted average shares outstanding	11,812,910		11,620,153
Non-GAAP Reconciliation
	Three Months Ended September 30,
	2021		2020
Net Income	$                 7,512		$                 4,459
Excluding:
Interest Income	-		-
Provision for income taxes	2,176		984
Depreciation and amortization	446		441
Stock-based compensation expense	782		717
Adjusted EBITDA	$               10,916		$                 6,601
Adjusted diluted earnings per share	$                   0.90		$                   0.55

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)
(Unaudited)
	September 30,		December 31,
	2021		2020
Assets
Current assets
Cash	$               49,985		$               33,733
Short-term restricted cash	-		32
Accounts receivable, net of allowance for credit losses of $325 and $194	7,601		6,609
Prepaid income taxes	894		356
Prepaid expenses and other current assets	1,450		1,375
Total current assets	59,930		42,105
Property and equipment, net	5,208		5,367
Operating lease right-of-use assets	15,194		14,844
Deferred tax assets, net	385		343
Goodwill	251		251
Intangible assets, net	40		40
Long-term restricted cash	1,564		1,532
Other assets	194		328
Total Assets	$               82,766		$               64,810
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$                    726		$                 1,251
Accrued expenses and other current liabilities	10,792		9,965
Income taxes payable	54		16
Deferred revenue	19,521		18,765
Total current liabilities	31,093		29,997
Income tax reserve	937		801
Operating lease liabilities	14,849		14,466
Total Liabilities	46,879		45,264
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 12,456,835 issued, 11,775,468 outstanding at September 30, 2021; 12,346,491 issued, 11,709,857 outstanding at December 31, 2020
	125		123
Additional paid-in capital	21,860		19,770
Retained earnings	27,541		11,770
Treasury stock - 681,367 shares at September 30, 2021 and 636,634 shares at December 31, 2020	(13,639)		(12,117)
Total Stockholders' Equity	35,887		19,546
Total Liabilities and Stockholders' Equity	$               82,766		$               64,810

 

 

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SOURCE OTC Markets Group Inc.

FAQ

What were OTC Markets Group's third quarter revenues for 2021?

OTC Markets Group reported third quarter revenues of $25.2 million, a 42% increase compared to the prior year.

What was the net income for OTC Markets Group in Q3 2021?

The net income for OTC Markets Group in Q3 2021 was $7.5 million, up 68% from the previous year.

What dividends did OTC Markets Group announce in November 2021?

OTC Markets Group announced a special dividend of $1.50 per share and a quarterly dividend of $0.18 per share.

How did OTC Markets Group's operating income change in Q3 2021?

Operating income for OTC Markets Group increased by 77% to $9.7 million in Q3 2021.

What is the significance of Rule 15c2-11 for OTC Markets Group?

The amendments to Rule 15c2-11 enhance OTC Markets Group's role as a Qualified Interdealer Quotation System, improving regulatory compliance and investor information accessibility.