OTC Markets Group Announces Second Quarter 2012 Financial Results

NEW YORK, Aug. 13, 2012 /PRNewswire/ --

Second Quarter 2012 Highlights:

• Gross revenues increased 8% to $8.8 million as compared to second quarter 2011
• Operating profit margin expanded to 29%, up from 24%
• OTCQX® marketplace grew to 381 companies as of June 30, 2012
• OTC Link® ATS began operation on June 1, 2012
• Announces quarterly dividend, marking 15^th consecutive quarter

OTC Markets Group Inc. (OTCQX: OTCM) operator of Open, Transparent and Connected financial marketplaces for investors to easily trade almost 10,000 equity and debt securities through the broker of their choice, today announced its financial results for the three and six months ended June 30, 2012, noting continued revenue growth, an improved operating margin, increased net income and earnings per share.

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"Our strong revenue growth in the second quarter of 2012 reflects the continued evolution of our open, transparent and connected financial marketplace platform," said R. Cromwell Coulson, President and Chief Executive Officer.  "We continue to strive to offer the marketplaces of choice for broker-dealers and companies as we execute on our core mission to create smarter financial marketplaces."

"Our OTC Link LLC subsidiary has become a FINRA member-broker dealer and SEC regulated Alternative Trading System," continued Coulson.  "The OTC Link ATS began operation on June 1, allowing us to better serve our broker-dealer subscribers as a FINRA and SEC regulated ATS." 

"Many of the trends that we noted during the first quarter of 2012 continued through the second quarter, including sustained steady growth in our gross revenue. The revenue mix among our business lines continues to shift as new products are introduced, enhancements to existing products are rolled out and we grow the number of companies that are providing high-quality information for their investors to analyze, value and trade their securities on our OTCQX marketplace.  Profitability continues to improve, with second quarter operating margins expanding to 29% compared to 24% in the comparable period in 2011," said Wendy Fraulo, Chief Financial Officer.

Second Quarter Results

Revenues

Gross revenues during the second quarter of 2012 increased $0.6 million, or 8%, to $8.8 million from $8.2 million during the second quarter of 2011.  Revenue from the Company's OTC Link ATS Trading Services business line was flat, as revenue generated from the new QAP One Statement service, introduced in December 2011, offset lower revenue related to a reduction in OTC Dealer licenses and a slowdown of messages on OTC Link ATS correlating with lower trading volumes throughout the industry. The increase in OTCQX companies continues to be a significant driver of the Company's revenue growth, contributing $0.5 million of the increase in total gross revenue during the second quarter of 2012.  Fueled by OTCQX, the Issuer Services business line had the largest growth from the second quarter of 2011 to the second quarter of 2012, although revenues from products not related to OTCQX decreased $0.1 million during the comparable periods due to high turnover rates.  Revenue from the Market Data Licensing business line increased $0.2 million from the second quarter of 2011 to the second quarter of 2012, largely driven by increases in professional licenses and broker-dealer enterprise license subscriptions.

Operating Expenses

Operating expenses for the second quarter of 2012 increased $0.2 million, or 3%, to $6.0 million from $5.8 million during the second quarter of 2011, largely driven by an increase in compensation and benefits expenses of $0.3 million, or 9% as headcount increased by 8 employees to 72 at June 30, 2012.  This was offset by a $0.3 million decrease in marketing and advertising expenses, primarily attributable to fees paid to an outside advertising agency with a contract that ended in March 2012. Depreciation and amortization, which is non-cash in nature, increased $0.1 million, or 41%, during the second quarter of 2012.

Income from Operations and Net Income

Income from operations increased $0.7 million, or 37%, to $2.5 million in the second quarter of 2012, as compared to $1.8 million in the second quarter of 2011.  The operating profit margin improved to 29%, from 24% during the same period in 2011. The growth in income from operations and margin expansion was primarily driven by continued revenue growth related to enhancements to products and services and improved operating efficiency. 

Net income for the second quarter of 2012 increased $0.2 million, or 18%, to $1.5 million, as compared to $1.3 million during the second quarter of 2011.  Net income per weighted average diluted shares outstanding increased to $0.14 for the second quarter of 2012, as compared to $0.12 in the second quarter of 2011.

Adjusted EBITDA

Adjusted EBITDA for the second quarter of 2012 increased 40% to $3.1 million, compared to $2.2 million in the prior year period as significant non-cash expenses, such as depreciation and stock based compensation expense, grew as a percentage of total operating expenses.

Year to Date Results

Revenues

Gross revenues during the six month period ended June 30, 2012 increased $1.5 million, or 9%, to $17.4 million from $15.9 million during the same period in 2011. The OTC Link ATS Trading Services and Issuer Services business lines experienced revenue growth from the QAP One Statement service and OTCQX, respectively, that was offset by declines in OTC Dealer licenses, OTC Link ATS messaging volume, and non-OTCQX Issuer Services product subscriptions.  While OTC Link ATS Trading Services remained flat, Issuer Services contributed a net positive, adding $0.9 million of the total growth during the six month period ended June 30, 2012 versus the same period in 2011, driven by the increase in OTCQX companies.  Market Data Licensing products generated $0.5 million, or 8% revenue growth, during the six month period ended June 30, 2012 versus the comparable period in 2011.

Operating Expenses

Operating expenses during the six month period ended June 30, 2012 increased $0.6 million, or 5%, to $11.9 million from $11.3 million during the same period in 2011, primarily due to an increase in compensation and benefits expenses of $0.4 million, or 7%, driven by the increase in headcount and related direct costs. Depreciation and amortization, which is non-cash in nature, increased $0.3 million, or 47%, during the six month period ended June 30, 2012 as compared to the same period in 2011.

Income from Operations and Net Income

Income from operations increased $1.2 million, or 36%, to $4.6 million as compared to $3.4 million during the six month periods ended June 30, 2012 and 2011, respectively, and operating profit margin improved to 28% from 23% during the same periods.

Net income increased $0.5 million, or 23%, to $2.7 million, as compared to $2.2 million during the six month periods ended June 30, 2012 and 2011, respectively, and net income per weighted average diluted shares outstanding increased to $0.25 from $0.21 during the same periods.

Adjusted EBITDA

Adjusted EBITDA for the six months ended June 30, 2012 grew 40% to $5.9 million, compared to $4.2 million for the comparable period in 2011 as significant non-cash expenses, such as depreciation and stock based compensation expense, grew as a percentage of total operating expenses.

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 October 4, 2012 to stockholders of record on September 18, 2012.  The ex-dividend date is September 14, 2012.  This dividend marks the Company's 15^th consecutive quarter of dividend payments. 

"With continued growth, a strong cash position and debt-free balance sheet, our financial position remains very strong," stated Coulson.  "As such, the Board of Directors is pleased to provide a return to our stockholders by continuing our $0.05 quarterly dividend."

OTC Markets Group's Quarterly Report for the three and six month periods ended Jun 30, 2012 is available publicly at www.otcmarkets.com.  

Second Quarter 2012 Conference Call

The Company will host a conference call on Tuesday, August 14, 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: 1-800-447-0521 (Domestic); 1-847-413-3238 (International); Call Confirmation Number 3305-4795. Replay Dial-in Numbers (Available until August 28, 2012): 1-888-843-7419 (Domestic); 1-630-652-3042 (International); Replay Passcode:  3305-4795#

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.

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates Open, Transparent and Connected financial marketplaces for investors to easily trade almost 10,000 equity and debt securities through the broker of their choice. Our OTC Link^® ATS directly links a diverse network of broker-dealers that provide liquidity and execution services for a wide spectrum of securities.  We organize these securities into tiered 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 data-driven platform enables efficient trading through any broker 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 smarter financial marketplaces, visit www.otcmarkets.com.

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

SOURCE OTC Markets Group Inc.