News Press Releases

OTC Markets Group Reports Second Quarter 2021 Results

OTCM | August 4, 2021

NEW YORK, Aug. 4, 2021 /PRNewswire/ --

Second Quarter 2021 Highlights:

Gross revenues of $25.5 million for the quarter, up 49% versus the prior year period
Operating income of $9.1 million for the quarter, up 91% versus the prior year period
Operating profit margin of 37.0% versus 29.2% during the prior year period
Net income of $7.1 million, up 67% versus the prior year period, and quarterly diluted GAAP EPS of $0.59, up 64%
Total cash returned to shareholders during the quarter of $1.8 million in the form of dividends
Announcing a 20% increase in the quarterly dividend to $0.18 per share
46 graduates to a national securities exchange during the quarter
OTCQX and OTCQB reaching key milestones during the quarter surpassing 500 and 1,000 companies, respectively, and finishing the quarter with 530 and 1,020 companies
84 subscribers to OTC Link® ECN at June 30, 2021, up 20 versus June 30, 2020; approximately 46,000 average daily trades during the quarter, compared to less than 9,000 during the same prior year period
Virtual Investor Conferences® business hosted 10 events during the quarter, with 171 companies participating
Ongoing implementation of Amended Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system (QIDQS)

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for over 11,000 U.S. and global securities, today announced its financial results for the second quarter of 2021.

"With the compliance date of Amended Rule 15c2-11 fast approaching, we remain keenly focused on successful implementation of the Rule and supporting regulatory compliance for our OTC Link ATS qualified interdealer quotation system, our broker-dealer clients and public companies," said R. Cromwell Coulson, President and Chief Executive Officer. "The continuing growth in the number of companies joining our OTCQX and OTCQB markets and utilizing our disclosure services to disseminate current public information is a testament to our team's hard work in building a well-regulated platform for companies to be public and a mission-critical market infrastructure for broker-dealers."

"We are pleased to report continuing strong performance with revenue growth, operating margin expansion and increased earnings per share marking our 18th consecutive quarter of revenue growth," said Antonia Georgieva, Chief Financial Officer. "All three of our businesses delivered strong results. Our Corporate Services business experienced substantial growth in issuers joining our markets and subscribing to our services. OTC Link maintained a robust level of trading activity, albeit moderating since the first quarter of 2021, and our Market Data Licensing business continued to benefit from growth in subscribers."

Second Quarter 2021 compared to Second Quarter 2020

Financial Highlights



	Three Months Ended June 30,
(in thousands, except shares and per share data)	2021	2020	% change	$ change
OTC Link	$ 7,682	$ 3,659	110%	4,023
Market data licensing	8,586	6,858	25%	1,728
Corporate services	9,182	6,582	40%	2,600
Gross revenues	25,450	17,099	49%	8,351
Net revenues	24,704	16,393	51%	8,311
Revenues less transaction-based expenses	22,217	15,786	41%	6,431
Operating expenses	13,074	10,994	19%	2,080
Income from operations	9,143	4,792	91%	4,351
Operating profit margin	37.0%	29.2%
Income before provision for income taxes	9,143	4,802	90%	4,341
Net income	$ 7,072	$ 4,231	67%	2,841

Diluted earnings per share	$ 0.59	$ 0.36	64%
Adjusted diluted earnings per share	$ 0.86	$ 0.50	72%
Weighted-average shares outstanding, diluted	11,778,886	11,587,268	2%

Gross revenues increased $8.4 million, or 49%, to $25.5 million.
OTC Link revenues increased 110%, benefiting from elevated trading volumes on our OTC Link ECN and message volumes on our OTC Link ATS.
Market Data Licensing revenues grew 25%, with growth in professional subscribers driving a 14% increase in related revenues. The number of non-professional users of our market data increased 75%, reflecting the increased retail participation in the U.S. equities markets, and helped drive a 96% increase in related revenues.
Corporate Services delivered 40% growth, with revenues from our OTCQX market up 51% and revenues from our OTCQB market up 31%. We saw 70 new companies join our OTCQX market and 112 join our OTCQB market during the quarter. We also saw a substantial increase in the number of companies applying for our Disclosure & News Service®, driving related revenues up 34%. The Corporate Services growth resulted from strong sales and issuers seeking to comply with Amended Rule 15c2-11 in advance of the rule's upcoming compliance date.
Operating expenses increased $2.1 million, or 19%, to $13.1 million, primarily as a result of a 15% increase in compensation costs, reflecting higher incentive compensation as well as higher sales commissions, a 48% increase in professional and consulting fees, driven by higher ECN related clearing and regulatory costs, and a 20% increase in IT infrastructure and information services.
Operating income and net income increased 91% and 67%, respectively, compared to the prior year period.
Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, increased 74% to $10.3 million, or $0.86 per adjusted diluted share.

OTCQX Market Exceeds 500 Companies and OTCQB Market Reaches 1,000 Companies

In May 2021, the OTCQX Best Market reached the 500-company milestone. Growing from ten founding members at inception in 2007 to its current breadth, the OTCQX market represents a diverse range of small, mid-size, and large companies spanning geographies, industries, and sectors. As a global gateway for international companies, the OTCQX market streamlines requirements that remove trading restrictions and duplicative exchange listing requirements, helping companies to achieve greater visibility and a fair valuation in the U.S. public market. OTCQX has also continued to attract investor-focused, established U.S. community banks and reached the 100-bank issuer milestone at the end of June 2021. Also in June 2021, the OTCQB Venture Market surpassed 1,000 issuers.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized a quarterly cash dividend of $0.18 on its Class A Common Stock. The quarterly cash dividend is payable on September 22, 2021, to stockholders of record on September 8, 2021. The ex-dividend date is September 7, 2021.

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 2021.

On March 12, 2021, 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 of June 30, 2021, there are 300,000 shares remaining to be purchased under the Company's 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.

Second Quarter 2021 Conference Call

The Company will host a conference call and webcast on Thursday, August 5, 2021, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail. The call and a replay of the conference call and webcast may be accessed as follows:

Dial-in Numbers: 1-877-665-5564 (Domestic); 1-470-495-9522 (International); Conference ID: 4186055

Call Replay Dial-in Numbers (available until August 19, 2021): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 4186055

Participants can access the conference via webcast at the following link (replay available until August 4, 2022):

https://edge.media-server.com/mmc/p/29urzcz9

OTC Markets Group's Quarterly Report for the quarter ended June 30, 2021, the earnings release, transcript to 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.

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 over 11,000 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 www.otcmarkets.com.

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

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Investor Contact:

Antonia Georgieva
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 June 30,
	2021	2020
OTC Link	$ 7,682	$ 3,659
Market data licensing	8,586	6,858
Corporate services	9,182	6,582
Gross revenues	25,450	17,099
Redistribution fees and rebates	(746)	(706)
Net revenues	24,704	16,393
Transaction-based expenses	(2,487)	(607)
Revenues less transaction-based expenses	22,217	15,786
Operating expenses
Compensation and benefits	8,497	7,380
IT Infrastructure and information services	1,876	1,560
Professional and consulting fees	1,076	725
Marketing and advertising	280	167
Occupancy costs	619	534
Depreciation and amortization	441	415
General, administrative and other	285	213
Total operating expenses	13,074	10,994
Income from operations	9,143	4,792
Other income
Interest income	-	2
Other income, net	-	8
Income before provision for income taxes	9,143	4,802
Provision for income taxes	2,071	571
Net income	$ 7,072	$ 4,231

Net income per share
Basic	$ 0.60	$ 0.36
Diluted	$ 0.59	$ 0.36

Basic weighted average shares outstanding	11,497,856	11,386,717
Diluted weighted average shares outstanding	11,778,886	11,587,268

Non-GAAP Reconciliation
	Three Months Ended June 30,
	2021	2020
Net Income	$ 7,072	$ 4,231
Excluding:
Interest Income	-	(2)
Provision for income taxes	2,071	571
Depreciation and amortization	441	415
Stock-based compensation expense	764	718
Adjusted EBITDA	$ 10,348	$ 5,933

Adjusted diluted earnings per share	$ 0.86	$ 0.50

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)
(Unaudited)

	June 30,	December 31,
	2021	2020
Assets
Current assets
Cash	$ 42,998	$ 33,733
Short-term restricted cash	-	32
Accounts receivable, net of allowance for doubtful accounts of $208 and $194	7,743	6,609
Prepaid income taxes	801	356
Prepaid expenses and other current assets	1,078	1,375
Total current assets	52,620	42,105
Property and equipment, net	5,184	5,367
Operating lease right-of-use assets	15,497	14,844
Deferred tax assets, net	494	343
Goodwill	251	251
Intangible assets, net	40	40
Long-term restricted cash	1,564	1,532
Other assets	253	328
Total Assets	$ 75,903	$ 64,810

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$ 1,290	$ 1,251
Accrued expenses and other current liabilities	8,678	9,965
Income taxes payable	16	16
Deferred revenue	20,069	18,765
Total current liabilities	30,053	29,997
Income tax reserve	892	801
Operating lease liabilities	15,163	14,466
Total Liabilities	46,108	45,264
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 12,450,580 issued, 11,769,213 outstanding at
June 30, 2021; 12,346,491 issued, 11,709,857 outstanding at December 31, 2020	125	123
Additional paid-in capital	21,160	19,770
Retained earnings	22,149	11,770
Treasury stock - 681,367 shares at June 30, 2021 and 636,634 shares at December 31, 2020	(13,639)	(12,117)
Total Stockholders' Equity	29,795	19,546
Total Liabilities and Stockholders' Equity	$ 75,903	$ 64,810