OTC Markets Group Announces Third Quarter 2015 Financial Results

Nov 11, 2015, 17:00 ET from OTC Markets Group

NEW YORK, Nov. 11, 2015 /PRNewswire/ --

Third Quarter 2015 Highlights:

  • Unaudited third quarter 2015 GAAP diluted EPS of $0.26 and adjusted diluted EPS of $0.46
  • Revenues grew 19% to $12.9 million from the prior year quarter
  • Operating profit margin of 37%
  • Special dividend of $0.60 per share
  • Quarterly dividend of $0.14 per share
  • 20 graduates to a national securities exchange

OTC Markets Group Inc. (OTCQX: OTCM), operator of Open, Transparent and Connected financial markets for 10,000 U.S. and global securities, today announced its financial results for the third quarter 2015.

"During the third quarter, we continued to execute our strategy of delivering elegant, reliable and cost-effective public trading markets and information services that provide unique value for broker-dealers, market data users and corporate clients," said R. Cromwell Coulson, President and Chief Executive Officer.  "The OTCQB Venture Market has completed the initial phase of its transformation into a better regulated, more transparent, world-leading venture market for developing companies. We also recently proposed amended OTCQX Rules that will strengthen financial standards, enhance our current rules that prohibit penny stocks from qualifying for OTCQX by adding a continuing penny stock prohibition, and introduce corporate governance standards for U.S. companies based on common sense, best practices that we believe are already followed by the majority of OTCQX U.S. companies.  These amendments will allow investors, regulators and market participants to more easily identify our strongest and most investor focused companies and further differentiate the OTCQX Best Market." 

"Our OTCQX Best Market and OTCQB Venture Market now provide public trading, transparency and trust to a critical mass of U.S. and global companies, without the cost and complexity of a national securities exchange listing," Mr. Coulson continued.  "We are building America's venture market by giving companies the public market they need today so they can grow for tomorrow."

Third Quarter 2015 compared to Third Quarter 2014

Revenues

Gross revenues increased $2.1 million, or 19%, to $12.9 million.  This increase was primarily driven by the growth in verified companies on the OTCQB Venture Market, which contributed $2.2 million of the increase in gross revenues.  OTCQX subscription revenue increased $0.2 million, or 15%, primarily due to an increase in new OTCQX companies and an improvement in the 2015 annual OTCQX subscription renewal retention rate over 2014.  OTC Link ATS revenues decreased $0.2 million, or 7%, to $2.9 million, primarily related to a 23% decrease in fees from subscribers using FIX connections and a 12% decrease in license fees to quote and message due to the continued decline in active market participants.  Market Data Licensing revenues were flat at $5.1 million, as increases in sales of compliance data files were offset by a decrease in advertising revenue and reported non-professional user licenses.

Operating Expenses

Operating expenses increased $0.9 million, or 14%, to $7.7 million, primarily related to increases in compensation and benefits costs.  Compensation and benefits costs increased $0.8 million, or 20%, primarily due to annual compensation increases, higher salaries of new employees, a higher bonus accrual based on anticipated revenue growth, and an increase in other employee benefits related to severance payments.

Income from Operations and Net Income

Income from operations increased $1.1 million, or 33%, to $4.6 million, and operating profit margin expanded to 37% from 34% during the same prior year period. The increase in Corporate Services revenue was the primary driver of the increase in operating income and margin.

Net income increased $1.1 million, or 59%, to $3.1 million, primarily due to the increase in operating income and a decrease in the effective tax rate.  The effective tax rate decreased due to favorable provision-to-return adjustments for the federal and state tax returns filed in the quarter, which resulted from changes in estimates related to state and local apportionment rates.  Net income per diluted share increased 53%, to $0.26, as compared to $0.17 during the same prior year period.

Adjusted EBITDA

Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased $1.2 million, or 29%, to $5.4 million, or $0.46 per adjusted diluted share, during the third quarter of 2015, as compared to $4.2 million, or $0.36 per adjusted diluted share, during the same prior year period, primarily due to the increase in income from operations.

Dividend Declarations – Quarterly Cash Dividend, Special Dividend

OTC Markets Group also announced today that its Board of Directors authorized two dividends on its Class A Common Stock: a special cash dividend of $0.60 per share and a quarterly cash dividend of $0.14 per share.  The special dividend is payable on December 7, 2015 to stockholders of record on November 23, 2015.  The ex-dividend date is November 19, 2015.  The quarterly cash dividend is payable on December 22, 2015 to stockholders of record on December 8, 2015. The ex-dividend date is December 4, 2015.

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.

Third Quarter 2015 Conference Call

The Company will host a conference call on Thursday, November 12, 2015 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 November 26, 2015): 1-877-870-5176 (Domestic); 1-858-384-5517 (International); Replay PIN Number: 13624184

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

OTC Markets Group's Third Quarter Report is available publicly at www.otcmarkets.com.

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates Open, Transparent and Connected financial markets 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 markets to inform investors of opportunities and risks: the OTCQX® Best Market; the OTCQB® Venture Market; and the OTC Pink® Open Market.  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 markets, visit www.otcmarkets.com.

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

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Investor Contact: 
Daniel Zinn
General Counsel
Phone: 212-896-4400
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 September 30,


Nine Months Ended September 30,


2015


2014


2015


2014

OTC Link ATS

$               2,939


$              3,146


$              8,913


$              8,820

Market data licensing

5,087


5,123


15,489


15,229

Corporate services

4,874


2,530


12,452


6,959

Gross revenues

12,900


10,799


36,854


31,008

Redistribution fees and rebates

(602)


(593)


(1,802)


(1,777)

Net revenues

12,298


10,206


35,052


29,231

Operating expenses








Compensation and benefits

4,684


3,909


14,405


11,960

IT Infrastructure and information services

1,239


1,123


3,542


3,218

Professional and consulting fees

520


446


1,455


1,379

Marketing and advertising 

298


284


905


954

Occupancy costs

397


389


1,101


1,104

Depreciation and amortization

434


408


1,259


1,151

General, administrative and other

135


200


550


552

  Total operating expenses

7,707


6,759


23,217


20,318

  Income from operations

4,591


3,447


11,835


8,913

Other income








Other income

6


1


28


9

Income before provision for income taxes

4,597


3,448


11,863


8,922

Provision for income taxes

1,512


1,511


4,531


3,701

Net Income 

$               3,085


$              1,937


$              7,332


$              5,221









Net income per share 








Basic

$                 0.27


$                0.17


$                0.65


$                0.47

Diluted

$                 0.26


$                0.17


$                0.62


$                0.46









Basic weighted average shares outstanding

10,989,747


10,852,255


10,994,685


10,818,390

Diluted weighted average shares outstanding

11,367,709


11,188,086


11,405,141


11,101,530






















Non-GAAP Reconciliation









Three Months Ended September 30,


Nine Months Ended September 30,


2015


2014


2015


2014

Net Income

$               3,085


$              1,937


$              7,332


$              5,221

Excluding:








   Provision for income taxes

1,512


1,511


4,531


3,701

   Depreciation and amortization

434


408


1,259


1,151

   Stock-based compensation expense

383


336


1,208


896

Adjusted EBITDA

$               5,414


$              4,192


$            14,330


$            10,969









Adjusted diluted earnings per share

$                0.46


$                0.36


$                1.22


$                0.96









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 share information)

(Unaudited)



September 30,


December 31,


2015


2014

Assets




Current assets




Cash

$             24,376


$             20,272

Accounts receivable, net of allowance for doubtful accounts of $132 and $138

5,661


5,674

Prepaid expenses and other current assets

1,745


1,395

Prepaid income taxes

278


523

Deferred tax assets

177


177

  Total current assets

32,237


28,041

Property and equipment, net 

3,873


4,357

Non-current deferred tax assets, net

558


277

Goodwill

251


251

Intangible assets, net

40


40

Security deposits

210


210

  Total Assets

$             37,169


$             33,176





Liabilities and stockholders' equity




Current liabilities




Accounts payable

$                  780


$                  562

Accrued expenses and other current liabilities

3,839


3,888

Income taxes payable

60


-

Deferred revenue

8,860


9,521

  Total current liabilities

13,539


13,971

Deferred rent

208


391

Income tax reserve

695


563

  Total Liabilities

14,442


14,925

Commitments and contingencies




Stockholders' equity




Common stock - par value $0.01 per share




  Class A - 14,000,000 authorized, 11,427,543 issued, 11,194,894 outstanding at




  September 30, 2015; 11,310,364 issued, 11,122,541 outstanding at December 31, 2014

114


113

  Class C - 130,838 shares authorized, issued and outstanding at September 30, 2015




  and December 31, 2014

1


1

Additional paid-in capital 

10,420


8,838

Retained earnings

14,274


10,752

Treasury stock - 232,649 shares at September 30, 2015 and 187,823 shares at December 31, 2014

(2,082)


(1,453)

  Total Stockholders' Equity

22,727


18,251

  Total Liabilities and Stockholders' Equity

$             37,169


$             33,176

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SOURCE OTC Markets Group



RELATED LINKS

http://www.otcmarkets.com