OTC Markets Group Reports Third Quarter 2023 Results Delivering Revenue and Earnings Growth

Rhea-AI Summary

OTC Markets Group Inc. (OTCM) announced third quarter 2023 financial results, with gross revenues of $27.0 million, up 4% versus the prior year period. Operating income was $8.6 million, down 5% versus the prior year period. A special dividend of $1.50 per share and a fourth quarter 2023 dividend of $0.18 per share were declared. The company also reported 108 subscribers to OTC Link ECN as of September 30, 2023, up 3 versus September 30, 2022.

Positive

• Gross revenues increased by 4% over the prior year quarter.
• The company declared a special dividend of $1.50 per share and a fourth quarter 2023 dividend of $0.18 per share.
• Market Data Licensing revenues were up 22% due to the contribution of the November 2022 acquisition of EDGAR Online.
• Revenues from market data connectivity fees increased by 85%.

Negative

• Operating income decreased by 5% to $8.6 million.
• OTC Link revenues were down 10% relative to the prior year quarter.

Third Quarter 2023 Highlights:

• Gross revenues of $27.0 million for the quarter, up 4% versus the prior year period
• Operating income of $8.6 million for the quarter, down 5% versus the prior year period
• Operating profit margin of 32.7%, versus 35.9% for the prior year period
• Net income of $7.4 million, up 3% versus the prior year period, and quarterly diluted GAAP EPS of $0.61, up 2%
• Total cash returned to shareholders during the quarter of $2.1 million in the form of dividends
• Announcing special dividend of $1.50 per share and fourth quarter 2023 dividend of $0.18 per share
• 595 OTCQX^® and 1,166 OTCQB^® companies at quarter end
• 9 graduates to a national securities exchange during the quarter
• 108 subscribers to OTC Link ECN as of September 30, 2023, up 3 versus September 30, 2022
• Approximately 28,000 average daily trades during the quarter versus approximately 32,000 during the prior year period
• OTC market data feeds available on Nasdaq’s Data Link platform
  

NEW YORK, Nov. 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 third quarter of 2023.

“During the third quarter of 2023, we remained focused on operational improvements across our business lines,” said R. Cromwell Coulson, President and Chief Executive Officer. “We continued to integrate the EDGAR Online business, and invest in our technology platforms.”

“OTC Markets Group continued to deliver revenue and earnings growth despite greater economic uncertainty,” said Antonia Georgieva, Chief Financial Officer. “Our Market Data Licensing business drove the increase in gross revenues; however, our overall costs outpaced that increase, impacting our operating margin. We remain focused on delivering growth in the long-term.”

Third Quarter 2023 compared to Third Quarter 2022

Financial Highlights

		Three Months Ended September 30,
(in thousands, except shares and per share data)			2023				2022			% change			$ change
OTC Link		$	4,532			$	5,027			(10	%)		(495	)
Market data licensing			11,002				9,028			22	%		1,974
Corporate services			11,503				11,860			(3	%)		(357	)
Gross revenues			27,037				25,915			4	%		1,122
Net revenues			26,232				25,141			4	%		1,091
Revenues less transaction-based expenses			25,078				23,836			5	%		1,242
Operating expenses			16,505				14,799			12	%		1,706
Income from operations			8,573				9,037			(5	%)		(464	)
Operating profit margin			32.7	%			35.9	%
Income before provision for income taxes			8,806				9,038			(3	%)		(232	)
Net income		$	7,381			$	7,169			3	%		212
Diluted earnings per share		$	0.61			$	0.60			2	%
Adjusted diluted earnings per share		$	0.87			$	0.88			(1	%)
Weighted-average shares outstanding, diluted			11,865,856				11,866,903			-

• Gross revenues of $27.0 million, up 4% over the prior year quarter.   Revenues less transaction-based expenses up 5%.
• OTC Link revenues down 10%, relative to the prior year quarter. Transaction-based revenues from OTC Link ECN and OTC Link NQB down 12%, reflecting the impact of lower trading volumes on these platforms, which more than offset the effect of increases in certain fees.   Reduced trading activity on OTC Link ATS resulted in messages revenue declining 19% and QAP One Statement fees declining 30%, which further contributed to the overall decline in OTC Link revenues.
• Market Data Licensing revenues up 22%, due to the contribution of the November 2022 acquisition of EDGAR Online as well as subscriber growth and price increases for certain licenses. Pro-user revenues were up 9%, in line with an 11% increase in the number of professional users quarter over quarter. Revenues from non-pro users were down 24%, driven by a 22% decrease in the number of non-pro users of our market data. Revenues from market data connectivity fees increased 85% and revenues from internal system licenses, delayed data licenses, and certain other data services increased 9%, in each case due to growth in subscribers and price increases for certain licenses.
• Corporate Services revenues down 3% quarter over quarter, with a 1% increase in revenues from our OTCQX market, offset by a 6% decrease in revenues from the OTCQB market and a 5% decrease in revenues from our Disclosure & News Service^® (“DNS”) product.   A lower number of companies on our OTCQX and OTCQB markets as well as of companies subscribing to DNS impacted the revenues for these products, offsetting the annual, incremental price increases effective at the beginning of 2023.   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 and fewer participants per event.
• Operating expenses increased 12% over the prior year quarter, primarily driven by an 11% increase in compensation and benefits costs and a 35% increase in IT infrastructure and information services costs, reflecting a higher headcount and higher technology, data services, and data center costs, primarily related to our acquisitions.  
• Operating income decreased 5% to $8.6 million, while net income increased 3% to $7.4 million.
• Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, decreased 1% to $10.5 million, or $0.87 per adjusted diluted share.
  

Dividend Declaration – Quarterly 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 7, 2023 to stockholders of record on November 21, 2023. The ex-dividend date is November 20, 2023. The quarterly dividend is payable on December 21, 2023 to stockholders of record on December 7, 2023. The ex-dividend date is December 6, 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. The Company did not repurchase any shares during the third quarter of 2023.

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.

Third Quarter 2023 Conference Call

The Company will host a conference call and webcast on Thursday, November 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 (the replay will be available until November 8, 2024):
https://edge.media-server.com/mmc/p/2z23pq2e

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/BI23d31b19dcf34ef0a0dc6ed1d9ee694b   

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 OTC Markets Group 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 September 30,
		2023				2022
OTC Link	$	4,532			$	5,027
Market data licensing		11,002				9,028
Corporate services		11,503				11,860
Gross revenues		27,037				25,915
Redistribution fees and rebates		(805	)			(774	)
Net revenues		26,232				25,141
Transaction-based expenses		(1,154	)			(1,305	)
Revenues less transaction-based expenses		25,078				23,836
Operating expenses
Compensation and benefits		10,436				9,431
IT Infrastructure and information services		2,592				1,917
Professional and consulting fees		1,678				1,690
Marketing and advertising		292				294
Occupancy costs		599				584
Depreciation and amortization		572				556
General, administrative and other		336				327
Total operating expenses		16,505				14,799
Income from operations		8,573				9,037
Other income
Interest income		233				1
Other income, net		-				-
Income before provision for income taxes		8,806				9,038
Provision for income taxes		1,425				1,869
Net income	$	7,381			$	7,169
Net income per share
Basic	$	0.62			$	0.61
Diluted	$	0.61			$	0.60
Basic weighted average shares outstanding		11,664,344				11,597,871
Diluted weighted average shares outstanding		11,865,856				11,866,903
Non-GAAP Reconciliation
	Three Months Ended September 30,
		2023				2022
Net Income	$	7,381			$	7,169
Excluding:
Interest Income		(233	)			(1	)
Provision for income taxes		1,425				1,869
Depreciation and amortization		572				556
Stock-based compensation expense		1,397				1,066
Adjusted EBITDA	$	10,542			$	10,659
Adjusted diluted earnings per share	$	0.87			$	0.88
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 shares information)
	September 30,		December 31,
	2023		2022
Assets
Current assets
Cash and cash equivalents	$ 35,168		$ 37,368
Short-term investments	2,201		-
Accounts receivable, net of allowance for credit losses of $489 and $638	7,431		9,485
Prepaid income taxes	2,525		59
Prepaid expenses and other current assets	2,238		1,469
Total current assets	49,563		48,381
Property and equipment, net	8,745		8,637
Operating lease right-of-use assets	12,657		13,635
Deferred tax assets, net	6,844		4,853
Goodwill	3,984		3,984
Intangible assets, net	7,556		7,993
Long-term restricted cash	1,582		1,568
Other assets	559		567
Total Assets	$ 91,490		$ 89,618
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$ 923		$ 1,684
Accrued expenses and other current liabilities	12,973		13,141
Income taxes payable	54		567
Deferred revenue	20,560		30,456
Total current liabilities	34,510		45,848
Income tax reserve	718		657
Operating lease liabilities	12,267		13,309
Total Liabilities	47,495		59,814
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,711,772 issued, 11,927,003 outstanding at
September 30, 2023; 12,601,270 issued, 11,874,763 outstanding at December 31, 2022	127		126
Additional paid-in capital	28,193		24,847
Retained earnings	35,469		21,246
Treasury stock - 784,769 shares at September 30, 2023 and 726,507 shares at December 31, 2022	(19,794)		(16,415)
Total Stockholders' Equity	43,995		29,804
Total Liabilities and Stockholders' Equity	$ 91,490		$ 89,618

FAQ

What were OTC Markets Group's gross revenues for the third quarter of 2023?

OTC Markets Group's gross revenues for the third quarter of 2023 were $27.0 million, up 4% versus the prior year period.

What special dividend was declared by OTC Markets Group?

OTC Markets Group declared a special dividend of $1.50 per share and a fourth quarter 2023 dividend of $0.18 per share.

How did the acquisition of EDGAR Online impact OTC Markets Group's Market Data Licensing revenues?

The acquisition of EDGAR Online contributed to a 22% increase in Market Data Licensing revenues for OTC Markets Group.

What was the change in OTC Link revenues for OTC Markets Group compared to the prior year quarter?

OTC Link revenues were down 10% relative to the prior year quarter for OTC Markets Group.