OTC Markets Group Announces First Quarter 2012 Financial Results

Announces Quarterly Cash Dividend

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May 14, 2012, 07:00 ET

NEW YORK, May 14, 2012 /PRNewswire/ --

First Quarter 2012 Highlights

Gross revenues increased 11% to $8.6 million
Operating profit margin expanded to 26%, up from 22% year over year
Diluted earnings per share increased 33% to $0.12
OTCQX® marketplace grew by 144 companies, or over 75%, since March 31, 2011
OTC Link LLC subsidiary granted FINRA membership on March 5, 2012, filed Form ATS with the SEC on April 27, 2012
Announces quarterly dividend, marking 14th consecutive quarter

OTC Markets Group Inc. (OTCQX: OTCM) operator of the world's largest Open, Transparent and Connected marketplace platform, delivering price transparency in OTC equity securities and directly linking its network of broker-dealer subscribers, today announced its financial results for the first quarter ended March 31, 2012, noting continued revenue growth, an improved operating margin, increased net income and earnings per share.

(Logo: http://photos.prnewswire.com/prnh/20110118/MM31963LOGO )

"The evolution of our open, transparent and connected marketplace platform is reflected in our strong revenue growth in the first quarter of 2012," said R. Cromwell Coulson, President and Chief Executive Officer. "We continue to execute on our core mission to directly link broker-dealers and deliver information for investors to trade smarter."

"Our OTC Link LLC subsidiary has been approved as a broker-dealer by FINRA, and has made the necessary SEC filings to allow it to begin operating as an Alternative Trading System in the second quarter," continued Coulson. "We look forward to our interdealer quotation system operating as a FINRA and SEC regulated Alternative Trading System for our broker-dealer subscribers."

"Our revenue growth during the first quarter of 2012 has sustained the momentum built during fiscal year 2011, as demonstrated by the increases in the number of companies on our OTCQX marketplace, professionals subscribing to our market data, and revenue from the QAP One Statement service," said Wendy Fraulo, Chief Financial Officer.

First Quarter Results

Revenues

Gross revenues during the first quarter of 2012 increased $0.8 million, or 11%, to $8.6 million, from $7.8 million during the first quarter of 2011. Revenue from the Company's Trading Service business line was flat, as revenue generated from the new QAP One Statement service, introduced in December 2011, was offset by lower revenue from messages on the Company's OTC Link^® trading system, which is consistent with the decrease in the overall trading volume in the OTC market. The increase in OTCQX companies continues to be a significant driver of the Company's revenue growth, contributing $0.4 million, or 50%, of the increase in total gross revenue during the first quarter of 2012. In addition, the increase in professional licenses receiving OTC Markets Group's level 2 market data contributed $0.1 million of the total gross revenue growth during the first quarter of 2012.

Operating Expenses

Operating expenses for the first quarter of 2012 increased $0.4 million, or 7%, to $6.0 million, from $5.6 million during the first quarter of 2011, primarily due to the following:

Marketing and advertising expenses increased $0.2 million, or 55%, primarily attributable to fees paid to an outside advertising agency with a contract that ended in March 2012, and increased marketing expenses related to attendance at and sponsorship of industry events.
Compensation and benefits expenses increased $0.1 million, or 5%, primarily due to the costs of providing competitive compensation plans to qualified employees, including stock-based compensation expense, discretionary bonuses and sales commission.

Net Income and Income from Operations

Income from operations increased $0.5 million, or 35%, to $2.1 million in the first quarter of 2012, as compared to $1.6 million in the first quarter of 2011. The operating profit margin improved to 26%, from 22% during the same period in 2011. The growth in income from operations and margin expansion was primarily driven by continued revenue growth due to enhancements to products and services and improved operating efficiency.

Net income for the first quarter of 2012 increased $0.3 million, or 30%, to $1.3 million, as compared to $1.0 million in the first quarter of 2011. Net income per weighted average diluted shares outstanding increased by $0.03, or 33%, to $0.12 for the first quarter of 2012, as compared to $0.09 in the first quarter of 2011.

Adjusted EBITDA

On a year over year basis, Adjusted EBITDA grew 40%. Based on the Company's strategy of investing in its people and its platform, significant non-cash expenses, such as depreciation and stock based compensation expense, have grown as a percentage of total operating expenses, which has improved Adjusted EBITDA over time.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group also announced today that its Board of Directors authorized a quarterly cash dividend on its Class A Common Stock of $0.05 per share. The dividend is payable on July 5, 2012 to stockholders of record on June 19, 2012. The ex-dividend date is June 15, 2012. This dividend marks the Company's 14th consecutive quarter of dividend payments.

"The Board of Directors believes it is in the best interest of our shareholders to pay an attractive dividend," stated Coulson. "In recognition of our continued growth, strong cash position and debt-free balance sheet, the Board is pleased to provide a return to our stockholders by continuing our $0.05 quarterly dividend."

OTC Markets Group's Quarterly Report for the quarter ended March 31, 2012 is available publicly at www.otcmarkets.com.

First Quarter 2012 Conference Call

The Company will host a conference call on Tuesday, May 15, 2012 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: 1-877-407-0789 (Domestic); 1-201-689-8562 (International). Replay Dial-in Numbers (Available until May 29, 2012): 1-877-870-5176 (Domestic); 1-858-384-5517 (International); Replay Pin Number: 394045.

A live webcast and webcast replay of the call will also be available in the Investor Relations section of the corporate web site at www.otcmarkets.com.

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates the world's largest Open, Transparent and Connected marketplace platform, delivering price transparency in over 10,000 OTC securities. Our OTC Link trading system directly links broker-dealers that provide liquidity and execution services. We organize the wide spectrum of OTC-traded equity securities into three marketplaces to inform investors of opportunities and risks – OTCQX^® - The Intelligent Marketplace for the Best OTC Companies; OTCQB^® - The Venture Marketplace; and OTC Pink^® - The Open Marketplace. Our information-driven platform provides the information to intelligently trade through any broker at the best possible price, and empowers companies to build the best markets for their investors. To learn more about our Open, Transparent and Connected marketplaces, visit www.otcmarkets.com.

OTC MARKETS GROUP INC. (formerly Pink OTC Markets Inc.)
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)

	Three Months Ended March 31,
	2012	2011
Trading services	$ 3,014	$ 3,001
Market data licensing	3,345	3,087
Issuer Services	2,209	1,661
Gross revenues	8,568	7,749
Redistribution fees and rebates	( 484 )	( 608 )
Net revenues	8,084	7,141
Operating expenses
Compensation and benefits	3,230	3,090
Computer operations and data communications	797	872
Professional and consulting services	508	542
Marketing and advertising	469	303
Occupancy costs	353	341
Depreciation and amortization	409	266
General, administrative and other	186	153
Total operating expenses	5,952	5,567
Income from operations	2,132	1,574
Other income/(expense)
Interest income	7	9
Miscellaneous expense	( 2 )	-
Income before provision for income taxes	2,137	1,583
Provision for income taxes	857	593
Net Income	$ 1,280	$ 990

Net income per share
Basic	$ 0.12	$ 0.09
Diluted	$ 0.12	$ 0.09

Basic weighted average shares outstanding	10,516,411	10,457,880
Diluted weighted average shares outstanding	10,553,616	10,527,862

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 our current financial performance and our prospects for the future.

Non-GAAP Reconciliation

	Three Months Ended March 31,
	2012	2011
Net Income	$ 1,280	$ 990
Excluding:
Provision for income taxes	857	593
Interest, net	7	9
Depreciation and amortization	409	266
Stock-based compensation expense	218	125
Adjusted EBITDA	$ 2,771	$ 1,983

Adjusted diluted earnings per share	$ 0.26	$ 0.19



OTC MARKETS GROUP INC. (formerly Pink OTC Markets Inc.)
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares)
(Unaudited)

	March 31,	December 31,
	2012	2011
Assets
Current Assets
Cash and cash equivalents	$ 11,725	$ 10,170
Short-term investments	920	1,297
Accounts receivable, net of allowance for doubtful accounts of $283 and $268	5,669	7,194
Prepaid income taxes	471	307
Prepaid expenses and other current assets	771	417
Deferred tax assets	293	293
Total current assets	19,849	19,678
Property and equipment, net	4,790	5,143
Goodwill	251	251
Intangible assets, net	40	40
Security deposits	209	209
Total Assets	$ 25,139	$ 25,321

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$ 591	$ 629
Accrued expenses and other	1,691	3,066
Dividend payable	532	419
Income tax payable	1,003	-
Income tax reserve	109	109
Deferred revenue	6,015	6,628
Total current liabilities	9,941	10,851
Deferred rent	895	926
Deferred tax liabilities, net	328	475
Income tax reserve	197	197
Total Liabilities	11,361	12,449

Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 10,746,578 issued, 10,632,003 outstanding at March 31, 2012;
10,589,170 issued, 10,484,595 outstanding at December 31, 2011	107	106
Class C - 130,838 shares authorized, issued and outstanding at March 31, 2012 and December 31, 2011	1	1
Additional paid-in capital	5,246	5,027
Retained earnings	9,024	8,276
Treasury stock - 114,575 shares at March 31, 2012 and 104,575 shares at December 31, 2011	( 595 )	( 532 )
Accumulated other comprehensive loss	( 5 )	( 6 )
Total Stockholders' Equity	13,778	12,872
Total Liabilities and Stockholders' Equity	$ 25,139	$ 25,321