OTC Markets Group Inc. (OTCM: OTCQX U.S. Premier) | OTC Markets Group Announces Third Quarter 2016 Financial Results

OTC

NEW YORK, Nov. 2, 2016 /PRNewswire/ —

Third Quarter 2016 Highlights:

  • Gross revenues of $12.6 million for the quarter versus $12.9 million for the prior year quarter
  • Operating profit margin of 36% for the quarter, versus 37% for the prior year quarter
  • Launch of OTC Markets’ Transfer Agent Verified Shares Program, an initiative to improve the timeliness and reliability of OTC Company Share Information
  • OTCQX and OTCQB Markets receive state Blue Sky recognition from 7 additional states, bringing the total to 12 that recognize OTCQX and 10 that recognize OTCQB
  • Launch of OTC Markets’ Research Marketplace in collaboration with ACF Equity Research, Edison and Sidoti Company
  • Announcing special dividend of $0.60 per share and fourth quarter 2016 dividend of $0.14 per share
  • 8 graduates to a national securities exchange

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for 10,000 U.S. and global securities, today announced its financial results for the third quarter 2016.

“Our goal is to operate world-class securities markets for a future that is online, data-driven and social.  The launch of Q Score liquidity metrics, our Research Marketplace and the Transfer Agent Verified Shares Program continue our drive to make more trusted and timely data available,” said R. Cromwell Coulson, President and Chief Executive Officer. “We will continue to improve our markets by delivering a better informational and trading experience for brokers and investors, while making it less time consuming, painful and costly to be public.”

“While this quarter’s revenues showed a small year-over-year decline, our strong financial results in the third quarter demonstrate the resilience of our subscription-based revenue model, the complementary nature of our three business lines, and our ability to continue to generate strong earnings even in the context of less than favorable market conditions.  We continue to generate strong, recurring cash flows and are well positioned to invest in our future growth while remaining focused on delivering solid returns for our shareholders,” said Bea Ordonez, Chief Financial Officer.

Third Quarter 2016 Compared to Third Quarter 2015

 

Financial Highlights

  • Gross revenues decreased $0.3 million, or 2%, to $12.6 million.
  • OTC Link ATS revenues decreased $0.4 million, or 14%, to $2.5 million. The decrease was primarily due a decrease in the number of market participants and declines in quote and message volumes.
  • Corporate Services revenues decreased $0.1 million, or 1%, to $4.8 million, primarily a result of a decline in OTCQB subscribers from 959 at September 30, 2015 to 869 at September 30, 2016.
  • Market Data Licensing revenues increased $0.2 million, or 4%, to $5.3 million, primarily due to the introduction of an indirect access fee in January 2016 for subscribers consuming our data through a third-party portal.
  • Operating expenses remained flat at $7.7 million as higher IT infrastructure and information services fees were offset by lower marketing and advertising and professional fees.
  • Income from operations decreased $0.2 million, or 4%, to $4.4 million.
  • Net income decreased $0.1 million, or 3%, to $3.0 million, primarily due to the decline in operating income, partially offset by a decrease in the Company’s effective tax rate resulting from changes related to state and local apportionment rates.
  • Adjusted EBITDA, which excludes non-cash stock-based compensation expense, decreased $0.1 million, or 3%, to $5.3 million, or $0.45 per adjusted diluted share.

Business Developments and News

  • As of November 2, 2016, another seven states – Alaska, Colorado, Georgia, Kansas (OTCQX only), Mississippi, Nebraska, and New Mexico recognize our OTCQX and OTCQB markets as securities manuals for purposes of each state’s ‘Blue Sky Manual Exemption.’
  • Launched the Research Marketplace, a new online resource for OTCQX and OTCQB companies seeking third-party research analyses and investment tools in collaboration with institutional and global equity research firms ACF Equity Research, Edison, and Sidoti Company, LLC.
  • Launched the Transfer Agent Verified Shares Program, a first-of-its-kind initiative to provide investors with current and reliable share data on OTCQX, OTCQB and Pink securities in a timely manner.
  • Launched enhancements to OTC Link ATS, including Q Score, which are valuable metrics designed to enhance the trading experience for consumers and producers of liquidity on our network.

Dividend Declaration – Quarterly Cash Dividend, Special Dividend

OTC Markets Group announced today that its Board of Directors authorized two dividends on its Class A Common Stock: a special cash dividend of $0.60 per share and a quarterly cash dividend of $0.14 per share.  The special dividend is payable on December 6, 2016 to stockholders of record on November 22, 2016.  The ex-dividend date is November 18, 2016.  The quarterly cash dividend is payable on December 21, 2016 to stockholders of record on December 7, 2016. The ex-dividend date is December 5, 2016.

Stock Buyback Program

During the third quarter, OTC Markets Group repurchased 46,637 shares for $0.8 million at an average price of $17.51. As of September 30, 2016, there were 250,193 shares remaining under the previously announced board authorized share repurchase program.

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 2016 Conference Call

The Company will host a conference call on Thursday, November 3, 2016 at 8:00 a.m. Eastern Time, during which management will discuss the financial results in further detail.  The conference call and replay of the conference call may be accessed as follows:

Dial-in numbers: 1-800-231-9012 (Domestic); 1-719-457-2552 (International); Conference ID: 3159021

Replay Dial-in Numbers (Available until November 17, 2016): 1-844-512-2921 (Domestic); 1-412-317-6671 (International); Replay Pin Number:  3159021

The earnings release and transcript to the earnings call 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 the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for 10,000 U.S. and global securities.  Through OTC Link® ATS, we connect 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 investors.

To learn more about how we create better informed and more efficient markets, visit www.otcmarkets.com.

OTC Link ATS is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.
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Investor Contact:

Bea Ordonez
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,

2016

2015

Gross revenues

$               12,613

$               12,900

 Redistribution fees and rebates

(557)

(602)

  Net revenues

12,056

12,298

Operating expenses

 Compensation and benefits

4,665

4,684

 IT Infrastructure and information services

1,378

1,239

 Professional and consulting fees

439

520

 Marketing and advertising

175

298

 Occupancy costs

442

397

 Depreciation and amortization

387

434

 General, administrative and other

171

135

  Total operating expenses

7,657

7,707

  Income from operations

4,399

4,591

Other income

 Interest income

1

 Other income

10

6

  Income before provision for income taxes

4,410

4,597

 Provision for income taxes

1,404

1,512

  Net income 

$                 3,006

$                 3,085

Net income per share 

Basic

$                   0.26

$                   0.27

Diluted

$                   0.26

$                   0.26

Basic weighted average shares outstanding

11,087,328

10,989,747

Diluted weighted average shares outstanding

11,428,716

11,367,709

Non-GAAP Reconciliation

Three Months Ended September 30,

2016

2015

Net Income

$                 3,006

$                 3,085

 Excluding:

  Provision for income taxes

1,404

1,512

  Depreciation and amortization

387

434

  Stock-based compensation expense

458

383

Adjusted EBITDA

$                 5,255

$                 5,414

Adjusted diluted earnings per share 

$                   0.45

$                   0.46

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.

 

 

 

 

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SOURCE OTC Markets Group Inc.

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