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 | |||
