Second Quarter 2023 Highlights:
- Gross revenues of $27.2 million for the quarter, up 5% versus the prior year period
- Operating income of $8.3 million for the quarter, down 10% versus the prior year period
- Operating profit margin of 31.4%, versus 36.7% for the prior year period
- Net income of $7.0 million, down 6% versus the prior year period, and quarterly diluted GAAP EPS of $0.57, down 7%
- Total cash returned to shareholders during the quarter of $2.1 million in the form of dividends
- Announcing third quarter 2023 dividend of $0.18 per share
- 587 OTCQX® and 1,191 OTCQB® companies at quarter end
- 11 graduates to a national securities exchange during the quarter
- 104 subscribers to OTC Link ECN as of June 30, 2023, up 3 versus June 30, 2022; approximately 32,000 average daily trades during the quarter versus approximately 35,000 during the prior year period
NEW YORK, Aug. 02, 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 second quarter of 2023.
“We continued to demonstrate the strength of our business model during a time of slower market activity,” said R. Cromwell Coulson, President and Chief Executive Officer. “During the second quarter, we onboarded the Edgar Online technology platform and enterprise clients, while also optimizing our Blue Sky products. We remain focused on leveraging our vast data sets and distribution networks to serve our customers’ business, disclosure, and compliance needs. Our better informed and more efficient markets can create greater opportunities for regulated broker-dealers to lawfully trade a wide spectrum of securities, including digital asset securities. Our markets also allow issuers to be public, demonstrate compliance with securities laws and governance standards, and provide disclosure to the market.”
“OTC Markets Group delivered continued top line growth despite the challenging economic environment,” said Antonia Georgieva, Chief Financial Officer. “Our business benefited from our diversified revenue streams, our acquisitions, and our team’s focus on driving operational efficiencies. Overall costs outpaced the growth in our revenues, as we continued to make investments in our business and integrated EDGAR Online. We remain focused on servicing our clients and delivering on our long term objectives.”
Second Quarter 2023 compared to Second Quarter 2022
Financial Highlights
| Three Months Ended June 30, | ||||||||||||||
| (in thousands, except shares and per share data) | 2023 | 2022 | % change | $ change | ||||||||||
| OTC Link | $ | 4,821 | $ | 5,132 | (6 | %) | (311 | ) | ||||||
| Market data licensing | 10,643 | 8,901 | 20 | % | 1,742 | |||||||||
| Corporate services | 11,763 | 11,957 | (2 | %) | (194 | ) | ||||||||
| Gross revenues | 27,227 | 25,990 | 5 | % | 1,237 | |||||||||
| Net revenues | 26,424 | 25,209 | 5 | % | 1,215 | |||||||||
| Revenues less transaction-based expenses | 25,169 | 23,851 | 6 | % | 1,318 | |||||||||
| Operating expenses | 16,874 | 14,589 | 16 | % | 2,285 | |||||||||
| Income from operations | 8,295 | 9,262 | (10 | %) | (967 | ) | ||||||||
| Operating profit margin | 31.4 | % | 36.7 | % | ||||||||||
| Income before provision for income taxes | 8,556 | 9,253 | (8 | %) | (697 | ) | ||||||||
| Net income | $ | 6,960 | $ | 7,402 | (6 | %) | (442 | ) | ||||||
| Diluted earnings per share | $ | 0.57 | $ | 0.61 | (7 | %) | ||||||||
| Adjusted diluted earnings per share | $ | 0.86 | $ | 0.88 | (2 | %) | ||||||||
| Weighted-average shares outstanding, diluted | 11,854,762 | 11,873,711 | - | |||||||||||
- Gross revenues of $27.2 million, up 5% over the prior year quarter. Revenues less transaction-based expenses up 6%.
- OTC Link revenues down 6%, relative to the prior year quarter. Transaction-based revenues from OTC Link ECN and OTC Link NQB down 4%, 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 20% and QAP One Statement fees declining 34%, which further contributed to the overall decline in OTC Link revenues.
- Market Data Licensing revenues up 20%, 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 increased 4%. Pro-user revenues were up 2%, in line with a 3% increase in the number of professional users quarter over quarter. Revenues from non-professional users were down 29%, driven by a 26% decrease in the number of non-professional users of our market data. Revenues from market data connectivity fees increased 58% due to price increases. Revenues from internal system licenses, delayed data licenses, and certain other data services increased 11% due to growth in subscribers and price increases for certain licenses.
- Corporate Services revenues down 2% quarter over quarter, with a 5% increase in revenues from our OTCQX market, offset by a 3% decrease in revenues from the OTCQB market and a 7% decrease in revenues from our Disclosure & News Service® (“DNS”) product. A slightly higher average number of companies subscribing to our OTCQX market, as well as annual, incremental price increases effective at the beginning of 2023, contributed to the quarter over quarter growth in revenues from OTCQX, while a reduction in the average number of companies subscribing to OTCQB and DNS drove the offset. 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.
- Operating expenses increased 16% over the prior year quarter, primarily driven by an 18% increase in compensation and benefits costs, reflecting a higher headcount as a result of our acquisitions. The growth in operating expenses was further impacted by a 46% increase in IT infrastructure and information services costs and a 25% increase in depreciation and amortization, primarily as a result of our acquisitions, partially offset by lower spending on marketing and advertising and general, administrative and other expenses.
- Operating income and net income decreased 10% to $8.3 million and 6% to $7.0 million, respectively.
- Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, decreased 3% to $10.4 million, or $0.86 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 September 21, 2023, to stockholders of record on September 7, 2023. The ex-dividend date is September 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 second 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.
Second Quarter 2023 Conference Call
The Company will host a conference call and webcast on Thursday, August 3, 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 August 2, 2024):
https://edge.media-server.com/mmc/p/je9xhykh
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/BI3fa711d9baa24e7cb1fc2cd5dd163f4b
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 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 June 30, | ||||||||
| 2023 | 2022 | |||||||
| OTC Link | $ | 4,821 | $ | 5,132 | ||||
| Market data licensing | 10,643 | 8,901 | ||||||
| Corporate services | 11,763 | 11,957 | ||||||
| Gross revenues | 27,227 | 25,990 | ||||||
| Redistribution fees and rebates | (803 | ) | (781 | ) | ||||
| Net revenues | 26,424 | 25,209 | ||||||
| Transaction-based expenses | (1,255 | ) | (1,358 | ) | ||||
| Revenues less transaction-based expenses | 25,169 | 23,851 | ||||||
| Operating expenses | ||||||||
| Compensation and benefits | 10,657 | 9,045 | ||||||
| IT Infrastructure and information services | 2,771 | 1,894 | ||||||
| Professional and consulting fees | 1,656 | 1,738 | ||||||
| Marketing and advertising | 270 | 380 | ||||||
| Occupancy costs | 592 | 598 | ||||||
| Depreciation and amortization | 621 | 496 | ||||||
| General, administrative and other | 307 | 438 | ||||||
| Total operating expenses | 16,874 | 14,589 | ||||||
| Income from operations | 8,295 | 9,262 | ||||||
| Other income | ||||||||
| Interest income | 158 | - | ||||||
| Other income, net | 103 | (9 | ) | |||||
| Income before provision for income taxes | 8,556 | 9,253 | ||||||
| Provision for income taxes | 1,596 | 1,851 | ||||||
| Net income | $ | 6,960 | $ | 7,402 | ||||
| Net income per share | ||||||||
| Basic | $ | 0.58 | $ | 0.62 | ||||
| Diluted | $ | 0.57 | $ | 0.61 | ||||
| Basic weighted average shares outstanding | 11,657,736 | 11,593,227 | ||||||
| Diluted weighted average shares outstanding | 11,854,762 | 11,873,711 | ||||||
| Non-GAAP Reconciliation | ||||||||
| Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net Income | $ | 6,960 | $ | 7,402 | ||||
| Excluding: | ||||||||
| Interest Income | (158 | ) | - | |||||
| Provision for income taxes | 1,596 | 1,851 | ||||||
| Depreciation and amortization | 621 | 496 | ||||||
| Stock-based compensation expense | 1,393 | 980 | ||||||
| Adjusted EBITDA | $ | 10,412 | $ | 10,729 | ||||
| Adjusted diluted earnings per share | $ | 0.86 | $ | 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) | ||||||||
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 31,865 | $ | 37,368 | ||||
| Accounts receivable, net of allowance for credit losses of $503 and $638 | 7,505 | 9,485 | ||||||
| Prepaid income taxes | 863 | 59 | ||||||
| Prepaid expenses and other current assets | 2,018 | 1,469 | ||||||
| Total current assets | 42,251 | 48,381 | ||||||
| Property and equipment, net | 8,492 | 8,637 | ||||||
| Operating lease right-of-use assets | 12,987 | 13,635 | ||||||
| Deferred tax assets, net | 7,049 | 4,853 | ||||||
| Goodwill | 3,984 | 3,984 | ||||||
| Intangible assets, net | 7,702 | 7,993 | ||||||
| Long-term restricted cash | 1,577 | 1,568 | ||||||
| Other assets | 653 | 567 | ||||||
| Total Assets | $ | 84,695 | $ | 89,618 | ||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 515 | $ | 1,684 | ||||
| Accrued expenses and other current liabilities | 9,522 | 13,141 | ||||||
| Income taxes payable | 2 | 567 | ||||||
| Deferred revenue | 23,746 | 30,456 | ||||||
| Total current liabilities | 33,785 | 45,848 | ||||||
| Income tax reserve | 714 | 657 | ||||||
| Operating lease liabilities | 12,635 | 13,309 | ||||||
| Total Liabilities | 47,134 | 59,814 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity | ||||||||
| Common stock - par value $0.01 per share | ||||||||
| Class A - 17,000,000 authorized, 12,704,259 issued, 11,919,490 outstanding at | ||||||||
| June 30, 2023; 12,601,270 issued, 11,874,763 outstanding at December 31, 2022 | 127 | 126 | ||||||
| Additional paid-in capital | 26,993 | 24,847 | ||||||
| Retained earnings | 30,235 | 21,246 | ||||||
| Treasury stock - 784,769 shares at June 30, 2023 and 726,507 shares at December 31, 2022 | (19,794 | ) | (16,415 | ) | ||||
| Total Stockholders' Equity | 37,561 | 29,804 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 84,695 | $ | 89,618 | ||||
