OTC Markets Group Announces First Quarter 2013 Financial Results

 

NEW YORK, May 13, 2013 /PRNewswire/ --

First Quarter 2013 Highlights:

  • Unaudited first quarter 2013 GAAP diluted EPS of $0.11 and first quarter 2013 Adjusted diluted EPS of $0.23
  • First quarter operating profit margin of 21%
  • Quarterly dividend increased to $0.06 per share
  • SIX Financial Information included Real-Time Level 1 and Level 2 Pricing Data in its OTC equities coverage
  • OTCM ADR Index is up 1.5% during the first quarter of 2013 and up 8.9% since inception 

OTC Markets Group Inc. (OTCQX: OTCM) operator of Open, Transparent and Connected financial marketplaces for 10,000 U.S. and global securities, today announced its financial results for the first quarter ended March 31, 2013.

"During the first quarter of 2013, we continued building the employee and systems infrastructures that we believe are required to develop the scalability and functionality of our services. We expect that significant upgrades to our IT architecture and infrastructure, including an upgrade to our data center, will continue through 2013, and anticipate that the technology improvements we achieve from these projects will create a more reliable and scalable network that can expand to a wider range of securities," said R. Cromwell Coulson, President and Chief Executive Officer. "Slower revenue growth, lower trading revenues and investment in our infrastructure led to contraction in our operating profit margin during the first quarter of 2013."

"On a year over year basis, the modest increase in gross revenues was generated primarily from the increase in companies joining the OTCQX marketplace, although the rate at which new companies join the marketplace has slowed significantly over the last six months. As we focus on long-term scalability, the increase in headcount and costs associated with the new data center during the first quarter of 2013 contributed to the contraction of operating profit margin to 21%, as compared to 26% during the first quarter of 2012," said Wendy Fraulo, Chief Financial Officer.

First Quarter Results

Revenues

Gross revenues during the first quarter of 2013 totaled $8.6 million, an increase of $0.1 million, or 1%, as compared to the first quarter of 2012.  The moderate growth in OTCQX subscription revenue and Market Data Licensing subscription revenue was offset by decreases in OTC Link ATS subscription and quote revenue, and in website advertising revenue.  Issuer Services revenues increased $0.2 million, or 9%, to $2.2 million, primarily due to a $0.1 million, or 10%, increase OTCQX subscription revenue and a $0.1 million, or 9%, increase in OTC Disclosure and News Service subscription revenue.  Revenue from market data license subscriptions, which includes user licenses, end of day pricing services, and broker-dealer enterprise licenses, increased $0.1 million to $3.2 million during the first quarter of 2013, as compared to the similar period in 2012.  The moderate increase in market data license subscription revenue during the first quarter of 2013 was offset by a $0.1 million, or 29%, decrease in advertising revenue, as compared to the first quarter of 2012.  OTC Link ATS Trading Services revenue during the first quarter of 2013 decreased by $0.2 million, or 5%, to $2.9 million. The decrease was mainly attributable to a $0.1 million decrease in subscription revenue from OTC Dealer licenses, FIX connection fees and OTC Link subscriptions year over year.

Operating Expenses

Operating expenses for the first quarter of 2013 increased $0.5 million, or 8%, to $6.4 million as compared to the first quarter of 2012, primarily related to an increase in compensation and benefits costs.  On a year over year basis, our headcount increased by 12, to 78 employees, which directly increased salary expense. Other employee benefits costs that increased during the first quarter of 2013 as compared to the first quarter of 2012 include non-cash compensation expense from the vesting of equity awards, higher medical insurance costs and discretionary bonuses.  In addition, IT infrastructure and data communications costs increased $0.1 million during the first quarter of 2013, mostly attributable to costs related to continued work on an updated data center. These increases were offset by a $0.1 million decrease in marketing and advertising costs during the first quarter of 2013, primarily related to timing of marketing initiatives.  

Income from Operations and Net Income

Income from operations decreased $0.4 million, or 20%, to $1.7 million for the first quarter of 2013, as compared to the similar period in 2012, and operating profit margin contracted to 21% from 26% during the same time frame. The decrease in income from operations and operating profit margin is primarily attributable to the increase in compensation and benefits expenses, which was higher than the growth in revenues from services during the period. 

Net income for the first quarter of 2013 decreased $0.1 million, or 6%, to $1.2 million, as compared to $1.3 million during the first quarter of 2012.  Net income per weighted average diluted shares outstanding decreased to $0.11 for the first quarter of 2013, as compared to $0.12 in the first quarter of 2012.

Adjusted EBITDA

Adjusted EBITDA, which excludes non-cash stock based compensation expense, for the first quarter of 2013 decreased 12% to $2.4 million, compared to $2.8 million in the first quarter of 2012, primarily due to the company's effective tax rate decreasing to 30% for the first quarter of 2013 from 40% for the first quarter of 2012, which decreased the provision for income taxes. The $0.4 million decrease in income from operations also contributed to lower Adjusted EBITDA during the first quarter of 2013 as compared to the first quarter of 2012.

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 2013 Conference Call

The company will host a conference call on Tuesday, May 14, 2013 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); Call Confirmation Number 414303. Replay Dial-in Numbers (Available until May 28, 2013): 1-877-870-5176 (Domestic); 1-858-384-5517 (International); Replay PIN Number:  414303.

A live webcast and webcast replay of the call will also be available in the Investor Relations section of the corporate web site at http://www.otcmarkets.com/investor-relations/overview.

OTC Markets Group's Quarterly Report for the three month period ended March 31, 2013 is available publicly at www.otcmarkets.com

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates Open, Transparent and Connected financial marketplaces for 10,000 U.S. and global securities. Through our OTC Link® ATS, we directly link a diverse network of broker-dealers that provide liquidity and execution services for a wide spectrum of securities. We organize these securities into marketplaces to better inform investors of opportunities and risks – OTCQX®, The Best Marketplace with Qualified Companies; OTCQB®, The Venture Stage Marketplace with U.S. Reporting Companies; and OTC Pink®, The Open Marketplace with Variable Reporting Companies. Our data-driven platform enables investors to easily trade through the broker of their choice at the best possible price and empowers a broad range of companies to improve the quality and availability of information for their investors. To learn more about how we create better informed and more efficient financial marketplaces, visit www.otcmarkets.com.

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

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

 



 

OTC MARKETS GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Unaudited


 

 

 

 

 

Three Months Ended March 31,


 

2013


 

2012

OTC Link ATS Trading services

$ 2,850


 

$ 3,014

Market data licensing

3,567


 

3,523

Issuer services

2,208


 

2,031

Gross revenues

8,625


 

8,568

Redistribution fees and rebates

(475)


 

(484)

Net revenues

8,150


 

8,084

Operating expenses


 

 

 

Compensation and benefits

3,684


 

3,230

IT Infrastructure and data communications

914


 

797

Professional and consulting services

510


 

508

Marketing and advertising

342


 

469

Occupancy costs

341


 

353

Depreciation and amortization

430


 

409

General, administrative and other

217


 

186

Total operating expenses

6,438


 

5,952

Income from operations

1,712


 

2,132

Other income/(expense)


 

 

 

Interest income

-


 

7

Other expense

(4)


 

(2)

Income before provision for income taxes

1,708


 

2,137

Provision for income taxes

509


 

857

Net Income

$ 1,199


 

$ 1,280


 

 

 

 

Net income per share


 

 

 

Basic

$ 0.11


 

$ 0.12

Diluted

$ 0.11


 

$ 0.12


 

 

 

 

Basic weighted average shares outstanding

10,655,149


 

10,516,411

Diluted weighted average shares outstanding

10,696,206


 

10,553,616


 

 

 

 

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,


 

2013


 

2012

Net Income

$ 1,199


 

$ 1,280

Excluding:


 

 

 

Provision for income taxes

509


 

857

Interest income

-


 

(7)

Depreciation and amortization

430


 

409

Stock-based compensation expense

294


 

218

Adjusted EBITDA

$ 2,432


 

$ 2,757


 

 

 

 

Adjusted diluted earnings per share

$ 0.23


 

$ 0.26


 

 

 

 

 

OTC MARKETS GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except number of shares)

Unaudited


 

 

 

 

March 31,

December 31,


 

2013

2012

Assets


 

 

Current assets


 

 

Cash 

$                12,363

$                13,611

Accounts receivable, net of allowance for doubtful accounts of $237 and $221 

5,144

6,481

Prepaid income taxes

444

345

Prepaid expenses and other current assets

1,128

744

Deferred tax assets, net

211

203

Total current assets

19,290

21,384

Property and equipment, net 

4,822

5,066

Goodwill

251

251

Intangible assets, net

40

40

Security deposits

209

209

Total Assets

$                24,612

$                26,950


 

 

 

Liabilities and stockholders' equity


 

 

Current liabilities


 

 

Accounts payable

$                     609

$                     721

Accrued expenses and other current liabilities

1,427

2,868

Deferred revenue

6,111

7,670

Total current liabilities

8,147

11,259

Deferred rent

746

786

Deferred tax liabilities, net

-

113

Income tax reserve

302

277

Total Liabilities

9,195

12,435

Commitments and contingencies


 

 

Stockholders' equity


 

 

Common stock - par value $0.01 per share


 

 

Class A - 14,000,000 authorized, 10,979,896 issued, 10,865,321 outstanding at March 31, 2013;


 

 

10,814,622 issued, 10,700,047 outstanding at December 31, 2012

110

108

Class C - 130,838 shares authorized, issued and outstanding at March 31, 2013 and December 31, 2012

1

1

Additional paid-in capital 

6,403

6,050

Retained earnings

9,498

8,951

Treasury stock - 114,575 shares at March 31, 2013 and December 31, 2012 

(595)

(595)

Total Stockholders' Equity

15,417

14,515

Total Liabilities and Stockholders' Equity

$                24,612

$                26,950


 

 

 

 

SOURCE OTC Markets Group Inc.



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