OTC Markets Group Announces First Quarter 2016 Financial Results

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May 04, 2016, 05:00 ET

NEW YORK, May 4, 2016 /PRNewswire/ --

First Quarter 2016 Highlights:

Revenues of $12.8 million for the quarter versus $11.5 million for prior year quarter
Operating profit margin of 31% for the quarter, up from 29% for the prior year quarter
Announces second quarter 2016 dividend of $0.14 per share
11 graduates to a national securities exchange during the first quarter

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for 10,000 U.S. and global securities, today announced its financial results for the first quarter 2016.

"During the first quarter, we continued to invest in our people and systems and to deliver on our mission to create better informed and more efficient markets," said R. Cromwell Coulson, President and Chief Executive Officer. Mr. Coulson continued, "We believe that our dealer based markets create a superior investor information and trading experience via online and institutional brokers. Our network model of competing broker-dealers and our data-driven listing standards provide the venues of choice for the innovative companies traded today on our OTCQX Best Market and OTCQB Venture Market. These markets are tailor-made for the next generation of entrepreneurial public companies that will be financed by online securities offerings under Regulation A+ and crowdfunding."

"We continue to deliver recurring revenue across our business lines as well as strong operating cash flows. This will allow us to continue to invest in our infrastructure, in products that deliver elegant, reliable and cost-effective market technology, and in data solutions that create unique value for our diverse subscriber base," said Bea Ordonez, Chief Financial Officer.

First Quarter 2016 compared to First Quarter 2015

	Quarter Ended March 31,
(in thousands, except shares and per share data)	2016	2015	% change	$ change
OTC Link ATS	$ 2,754	$ 3,044	(10%)	$ (290)
Market data licensing	5,325	5,233	2%	92
Corporate services	4,672	3,247	44%	1,425
Gross revenues	12,751	11,524	11%	1,227
Net revenues	12,158	10,924	11%	1,234
Operating expenses	8,361	7,769	8%	592
Income from operations	3,797	3,155	20%	642
Operating profit margin	31%	29%
Net income	$ 2,315	$ 1,856	25%	$ 459

Diluted earnings per share	$ 0.20	$ 0.16	25%
Adjusted diluted earnings per share	$ 0.40	$ 0.34	18%
Weighted-average shares outstanding, diluted	11,439,786	11,420,840	-

Highlights

Gross revenues increased $1.2 million, or 11%, to $12.8 million.
$1.4 million increase in Corporate Services revenues, largely driven by year-over-year growth in OTCQB verified companies.
Decrease in revenues from OTC Link® ATS of $0.3 million, or 10%, to $2.8 million, largely a result of a decrease in the number of OTC Dealer® users at our broker-dealer subscribers, reduced quote and trade message volumes and the elimination of fees for the quoting of OTCQX and OTCQB companies.
$0.1 million increase in Market Data Licensing revenues, up 2% over prior year quarter.
Operating expenses increased $0.6 million, or 8%, to $8.4 million, primarily due to increases in compensation costs and information technology costs.
Income from operations increased $0.6 million, or 20%, to $3.8 million.
Net income increased $0.5 million, or 25%, to $2.3 million, primarily due to the increase in operating income, as well as a decrease in the company's effective tax rate for the quarter from 41% to 39%.
Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased $0.7 million, or 18%, to $4.7 million, or $0.40 per adjusted diluted share, as compared to $4.0 million, or $0.34 per adjusted diluted share, during the same prior year period.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized a quarterly cash dividend of $0.14 on its Class A common stock. The quarterly cash dividend is payable on June 23, 2016, to stockholders of record on June 9, 2016. The ex-dividend date is June 7, 2016.

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 2016 Conference Call

The Company will host a conference call on Thursday, May 5, 2016, 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: 1-888-438-5453 (Domestic); 1-719-325-2428 (International); Conference ID: 146810

Replay Dial-in Numbers (Available until May 19, 2016): 1-888-203-1112 (Domestic); 1-719-457-0820 (International); Replay Pin Number: 146810

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 Quarterly Report for the period ended March 31, 2016 is available publicly at www.otcmarkets.com.

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 10,000 U.S. and global securities. Through OTC Link® ATS, 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 is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.

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Investor Contact:

Bea Ordonez
Chief Financial Officer
Phone: 212-220-2215
Email: [email protected]

OTC MARKETS GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share information)
(Unaudited)

	Three Months Ended March 31,
	2016	2015
Gross revenues	$ 12,751	$ 11,524
Redistribution fees and rebates	(593)	(600)
Net revenues	12,158	10,924
Operating expenses
Compensation and benefits	5,237	4,958
IT Infrastructure and information services	1,340	1,157
Professional and consulting fees	499	389
Marketing and advertising	280	266
Occupancy costs	405	361
Depreciation and amortization	417	406
General, administrative and other	183	232
Total operating expenses	8,361	7,769
Income from operations	3,797	3,155
Other (expense) income
Other (expense) income	(8)	16
Income before provision for income taxes	3,789	3,171
Provision for income taxes	1,474	1,315
Net income	$ 2,315	$ 1,856

Net income per share
Basic	$ 0.20	$ 0.16
Diluted	$ 0.20	$ 0.16

Basic weighted average shares outstanding	11,097,753	10,987,948
Diluted weighted average shares outstanding	11,439,786	11,420,840

Non-GAAP Reconciliation
	Three Months Ended March 31,
	2016	2015
Net Income	$ 2,315	$ 1,856
Excluding:
Provision for income taxes	1,474	1,315
Depreciation and amortization	417	406
Stock-based compensation expense	471	429
Adjusted EBITDA	$ 4,677	$ 4,006

Adjusted diluted earnings per share	$ 0.40	$ 0.34

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)

	March 31,	December 31,
	2016	2015
Assets
Current assets
Cash	$ 22,645	$ 23,925
Accounts receivable, net of allowance for doubtful accounts of $144 and $147	6,299	6,082
Prepaid expenses and other current assets	1,990	1,520
Prepaid income taxes	73	22
Deferred tax assets	187	187
Total current assets	31,093	31,736
Property and equipment, net	3,240	3,507
Non-current deferred tax assets, net	581	470
Goodwill	251	251
Intangible assets, net	40	40
Security deposits	210	210
Total Assets	$ 35,515	$ 36,214

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$ 512	$ 616
Accrued expenses and other current liabilities	1,841	4,355
Income taxes payable	838	92
Deferred revenue	12,942	12,737
Total current liabilities	16,133	17,800
Deferred rent	240	139
Income tax reserve	751	728
Total Liabilities	17,124	18,667
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 11,554,730 issued, 11,262,234 outstanding at
March 31, 2016; 11,438,928 issued, 11,192,885 outstanding at December 31, 2015	116	114
Class C - 130,838 shares authorized, issued and outstanding at March 31, 2016
and December 31, 2015	1	1
Additional paid-in capital	11,638	10,786
Retained earnings	9,654	8,916
Treasury stock - 292,496 shares at March 31, 2016 and 246,043 shares at December 31, 2015	(3,018)	(2,270)
Total Stockholders' Equity	18,391	17,547
Total Liabilities and Stockholders' Equity	$ 35,515	$ 36,214