News Press Releases

OTC Markets Group Reports First Quarter 2018 Results

OTCM | May 8, 2018

Delivers Strong Revenue and Earnings Growth

PR Newswire

NEW YORK, May 8, 2018

NEW YORK, May 8, 2018 /PRNewswire/ --

First Quarter 2018 Highlights:

Gross revenues of $14.3 million for the quarter, up 7% versus the prior period
Operating income of $4.6 million for the quarter, an increase of 7% over the prior period
Net income of $3.7 million, up 23% over the prior period, driving a 19% increase in GAAP diluted EPS to $0.31
Announcing second quarter 2018 dividend of $0.14 per share
21 graduates to a national securities exchange during the quarter
Continued progress in achieving State Blue Sky recognition for our OTCQX and OTCQB markets, with OTCQX reaching 30 states
18 Transfer Agents participating in the Transfer Agent Verified Shares Program, further enhancing the timeliness and reliability of OTC company share information
Launched new Stock Promotion flag, Promotion File and Shell Risk flag, providing increased market transparency and data-driven disclosure

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 first quarter of 2018.

"During the first quarter of 2018, we continued to focus on our core mission of creating efficient public markets that serve the needs of a diverse range of companies and broker-dealers, while providing a better informational experience and greater transparency to investors," said R. Cromwell Coulson, President and Chief Executive Officer. "Our data initiatives around stock promotion and shell risk, and continued progress towards greater visibility into stock issuance, all demonstrate our continuing commitment to market surveillance and other programs that encourage better disclosure and an informed market pricing process."

"We achieved strong top line revenue growth in the first quarter of 2018, with all of our three business lines producing quarter over quarter gains. We continue to focus on delivering organic growth by better serving our clients while deploying our capital and resources to further develop and enhance our markets and product suite," said Bea Ordonez, Chief Financial Officer.

First Quarter 2018 compared to First Quarter 2017

	Three Months Ended March 31,
(in thousands, except shares and per share data)	2018	2017	% change	$ change
OTC Link	$ 2,651	$ 2,618	1%	$ 33
Market data licensing	5,842	5,450	7%	392
Corporate services	5,849	5,308	10%	541
Gross revenues	14,342	13,376	7%	966
Net revenues	13,713	12,752	8%	961
Operating expenses	9,163	8,514	8%	649
Income from operations	4,550	4,238	7%	312
Operating profit margin	33%	33%
Income before provision for income taxes	4,567	4,252	7%	315
Net income	$ 3,747	$ 3,050	23%	$ 697

Diluted earnings per share	$ 0.31	$ 0.26	19%	$ 0.05
Adjusted diluted earnings per share	$ 0.46	$ 0.44	5%	$ 0.02
Weighted-average shares outstanding, diluted	11,609,635	11,519,624	1%

Financial Highlights

Gross revenues increased $1.0 million, or 7%, to $14.3 million.
Corporate Services delivered 10% growth in revenues, driven by reduced churn as well as price increases for existing subscribers on our OTCQB market, and an uptick in new companies joining our OTCQX market.
Market Data Licensing revenues saw a 7% increase over the prior period, with price increases and increased usage of our data file products, including our compliance data products, contributing to the increase.
OTC Link revenues increased 1% over the prior year quarter, with higher U.S. trading volumes driving an increase in revenues from messages and revenues from our OTC Link ECN, offsetting continued attrition in our OTC Link ATS subscriber base.
Operating expenses increased 8%, to $9.2 million, primarily due to an 11% increase in compensation and benefit costs.
Net income increased 23%, to $3.7 million, driven by the increase in operating income and a decrease in the company's effective tax rate for the quarter from 28% to 18%, a result of the newly enacted Tax Cuts and Jobs Act.
In recognition of the reduced rate of corporate tax payable, the Company awarded all employees a 3% increase in their 2018 base salary, in addition to our customary annual raises.
Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 5%, to $5.5 million, or $0.46 per adjusted diluted share.

Business Developments and News

In April 2018, launched our new Promotion Data File and enhanced our Compliance Analytics File, to provide broker-dealers and investment managers with efficient tools to track promotion activity in the OTC market.
In March 2018, released our new Stock Promotion Flag, a new data point designed to enable investors to identify securities that are the subject of current promotional activity, and our new Shell Risk flag, each reinforcing our commitment to market surveillance programs that encourage better disclosure.
In February 2018, welcomed the first Canadian-listed Regulation A+ company to our OTCQB market.
In February 2018, launched our initiative with Issuer Direct Corporation, providing our corporate clients with access to a range of communications and compliance services via our OTCIQ platform.
In February 2018, launched our new www.otcmarkets.com website featuring enhanced functionality and navigation, new compliance data elements and a mobile-friendly interface.
In January 2018, added BMO InvestorLine, a leading broker in Canada, as a new distributor of OTC Markets' real-time Level 1+ Quotes.
As of May 1, 2018, our OTCQX market is exempt from state Blue Sky laws regarding secondary trading in thirty states and our OTCQB market is exempt in twenty-seven states.
The Transfer Agent Verified Shares Program, launched in October 2016, provides investors with current and reliable share data on OTCQX, OTCQB and Pink securities. As of May 1, 2018, 18 transfer agents have joined the program, providing timely data on approximately 64% of the U.S. companies on the OTC market.
Since its launch, our OTC Link ECN has added 6 new broker-dealer subscribers and enabled 22 existing OTC Link ATS subscribers for access to the OTC Link ECN.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized a quarterly cash dividend of $0.14 on its Class A common stock. The quarterly cash dividend is payable on June 28, 2018, to stockholders of record on June 14, 2018. The ex-dividend date is June 13, 2018.

Stock Buyback Program

The Company is authorized to purchase shares from time to time on the open market and through block trades, in compliance with applicable law. During the first quarter of 2018, the Company purchased 40,325 shares at an average price of $25.99 per share.

On March 6, 2018, 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 at March 31, 2018, there are 300,000 shares remaining to be purchased under our 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.

First Quarter 2018 Conference Call

The Company will host a conference call on Wednesday, May 9, 2018, at 8:30 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: 1-877-407-9124 (Domestic); 1-201-689-8584 (International);

Replay Dial-in Numbers (Available until June 9, 2018): 1-877-481-4010 (Domestic); 1-919-882-2331 (International); Replay PIN Number: 29080

Participants can access the conference via Internet webcast at the following link: http://www.investorcalendar.com/event/29080

The earnings release, transcript of the earnings call and presentation will also be available in the Investor Relations section of the corporate website at www.otcmarkets.com/investor-relations/overview.

OTC Markets Group's Quarterly Report for the period ended March 31, 2018, is available publicly at www.otcmarkets.com.

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 and OTC Link ECN, 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 financial markets, visit https://www.otcmarkets.com/stock/OTCM/disclosure .

OTC Link ATS and OTC Link ECN are operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.

Subscribe to the OTC Markets RSS Feed

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 per share data)
(Unaudited)

	Three Months Ended March 31,
	2018	2017
Gross revenues	$ 14,342	$ 13,376
Redistribution fees and rebates	(629)	(624)
Net revenues	13,713	12,752
Operating expenses
Compensation and benefits	6,194	5,566
IT Infrastructure and information services	1,347	1,404
Professional and consulting fees	406	350
Marketing and advertising	313	242
Occupancy costs	469	395
Depreciation and amortization	252	395
General, administrative and other	182	162
Total operating expenses	9,163	8,514
Income from operations	4,550	4,238
Other income
Interest income	7	3
Other income, net	10	11
Income before provision for income taxes	4,567	4,252
Provision for income taxes	820	1,202
Net income	$ 3,747	$ 3,050

Net income per share
Basic	$ 0.33	$ 0.27
Diluted	$ 0.31	$ 0.26

Basic weighted average shares outstanding	11,234,150	11,155,667
Diluted weighted average shares outstanding	11,609,635	11,519,624

Non-GAAP Reconciliation
	Three Months Ended March 31,
	2018	2017
Net Income	$ 3,747	$ 3,050
Excluding:
Interest Income	(7)	(3)
Provision for income taxes	820	1,202
Depreciation and amortization	252	395
Stock-based compensation expense	654	551
Adjusted EBITDA	$ 5,466	$ 5,195

Adjusted diluted earnings per share	$ 0.46	$ 0.44
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 number of shares)
(Unaudited)

	March 31,	December 31,
	2018	2017
Assets
Current assets
Cash	$ 22,740	$ 23,683
Accounts receivable, net of allowance for doubtful accounts of $145 and $146	6,266	6,450
Prepaid expenses and other current assets	1,661	1,013
Prepaid income taxes	262	1,303
Total current assets	30,929	32,449
Property and equipment, net	1,873	2,018
Deferred tax assets, net	801	796
Goodwill	251	251
Intangible assets, net	99	111
Long-term restricted cash	500	500
Security deposits	192	192
Total Assets	$ 34,645	$ 36,317

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$ 782	$ 786
Accrued expenses and other current liabilities	1,994	4,858
Income taxes payable	11	-
Deferred revenue	15,033	15,531
Total current liabilities	17,820	21,175
Deferred rent	218	246
Income tax reserve	1,160	1,105
Total Liabilities	19,198	22,526
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 11,993,733 issued, 11,506,948 outstanding at
March 31, 2018; 11,891,366 issued, 11,444,706 outstanding at December 31, 2017	120	119
Additional paid-in capital	14,716	14,150
Retained earnings	7,818	5,682
Treasury stock - 486,785 shares at March 31, 2018 and 446,660 shares at December 31, 2017	(7,207)	(6,160)
Total Stockholders' Equity	15,447	13,791
Total Liabilities and Stockholders' Equity	$ 34,645	$ 36,317