OTC Markets Group Announces Fourth Quarter and Fiscal Year 2015 Financial Results

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Mar 02, 2016, 05:00 ET

NEW YORK, March 2, 2016 /PRNewswire/ --

Fourth Quarter and Fiscal Year 2015 Highlights:

Record revenues of $13.1 million for the quarter and $49.9 million for the year
Operating profit margin of 40% for the quarter and 35% for the full year (38% and 32%, respectively, for 2014)
Fourth quarter dividend of $0.14 per share and special dividend of $0.60 per share, for a total for 2015 of $1.08 per share
Announced first quarter 2016 dividend of $0.14 per share
60 graduates to a national securities exchange during 2015

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 fourth quarter and fiscal year 2015.

"Our record revenues in 2015 were the result of our focus on enhancing our innovative OTCQX Best and OTCQB Venture markets for public companies," said R. Cromwell Coulson, President and Chief Executive Officer. "Our strong results position us to continue to invest in our people and systems, focus on reliability and regulatory compliance, and deliver on our mission to create better informed and more efficient markets that directly connect broker-dealers and meet the needs of the next generation of U.S. and global companies and investors."

Mr. Coulson continued, "The future of financial markets is online, data-driven and social, and our broker-dealer network based markets are tailor made to become the markets of choice for secondary trading for innovative and entrepreneurial crowdfunded offerings. We were thrilled to announce on February 19 of this year that Elio Motors, the first company to successfully complete an IPO under Regulation A+, joined our OTCQX Best Market."

"Strong overall revenue performance during the fourth quarter and for the full year was primarily due to the growth of the OTCQB Venture Market, which drove significant increases in Corporate Services revenue," said Bea Ordonez, Chief Financial Officer. "We are pleased that we were able to continue to deliver substantial value to shareholders in 2015."

Fourth Quarter 2015 compared to Fourth Quarter 2014

	Quarter Ended December 31,
(in thousands, except shares and per share data)	2015	2014	% change	$ change
OTC Link ATS	$ 2,882	$ 3,199	(10%)	$ (317)
Market data licensing	5,121	5,105	-	16
Corporate services	5,052	2,903	74%	2,149
Gross revenues	13,055	11,207	16%	1,848
Net revenues	12,478	10,596	18%	1,882
Operating expenses	7,447	6,607	13%	840
Income from operations	5,031	3,989	26%	1,042
Operating profit margin	40%	38%
Net income	$ 2,926	$ 2,669	10%	$ 257

Diluted earnings per share	$ 0.25	$ 0.23	9%
Adjusted diluted earnings per share	$ 0.50	$ 0.41	22%
Weighted-average shares outstanding, diluted	11,292,049	11,225,568	1%

Highlights

Gross revenues increased $1.8 million, or 16%, to $13.1 million.
$2.1 million increase in Corporate Services revenues, largely driven by growth in OTCQB verified companies.
Decrease in revenues from OTC Link ATS of $0.3 million, or 10%, to $2.9 million, largely a result of the elimination of fees for the quoting of OTCQX and OTCQB companies.
Operating expenses increased $0.8 million, or 13%, to $7.4 million, primarily related to increases in compensation and benefits costs.
Income from operations increased $1.0 million, or 26%, to $5.0 million.
Net income increased $0.3 million, or 10%, to $2.9 million, primarily due to the increase in operating income, partially offset by an increase in the effective tax rate for the quarter.
Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased $1.1 million, or 23%, to $5.8 million, or $0.50 per adjusted diluted share, as compared to $4.7 million, or $0.41 per adjusted diluted share, during the same prior year period.

Fiscal Year 2015 Results compared to Fiscal Year 2014

	Year Ended December 31,
(in thousands, except shares and per share data)	2015	2014	% change	$ change
OTC Link ATS	$ 11,796	$ 12,019	(2%)	$ (223)
Market data licensing	20,609	20,334	1%	275
Corporate services	17,504	9,862	77%	7,642
Gross revenues	49,909	42,215	18%	7,694
Net revenues	47,530	39,827	19%	7,703
Operating expenses	30,664	26,925	14%	3,739
Income from operations	16,866	12,902	31%	3,964
Operating profit margin	35%	32%
Net income	$ 10,258	$ 7,890	30%	$ 2,368

Diluted earnings per share	$ 0.88	$ 0.69	28%
Adjusted diluted earnings per share	$ 1.73	$ 1.36	27%
Weighted-average shares outstanding, diluted	11,289,185	11,137,625	1%

Highlights

Gross revenues increased $7.7 million, or 18%, to $49.9 million, primarily a result of significant growth in our Corporate Services business.
OTC Link ATS revenues reflected a 2% decrease versus the prior year, primarily a result of the elimination of quote fees for subscribers quoting securities traded on our OTCQX and OTCQB markets.
Operating expenses for the 2015 fiscal year were $30.7 million, up 14% over 2014. Compensation and benefits costs increased by $3.1 million, or 20%, to $18.7 million and technology and infrastructure costs increased by 13%, to $4.9 million.
Income from operations for the fiscal year increased by $4.0 million, or 31%, to $16.9 million.
Net income increased 30% from $7.9 million in 2014 to $10.3 million in 2015.
Adjusted EBITDA increased $4.4 million, or 28%, to $20.1 million, or $1.73 per adjusted diluted share as compared to $15.7 million, or $1.36 per adjusted diluted share for fiscal year 2014.

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 March 29, 2016 to stockholders of record on March 15, 2016. The ex-dividend date is March 11, 2016.

Stock Buyback Program

On February 24, 2016, the Board of Directors refreshed the Company's stock repurchase program, giving the Company authorization to repurchase up to 300,000 shares of the Company's Class A Common Stock. The Company is authorized to purchase shares from time to time on the open market and through block trades, in compliance with applicable law.

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.

Fourth Quarter and Fiscal Year 2015 Conference Call

The Company will host a conference call on Thursday, March 3, 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: 1-877-407-0789 (Domestic); 1-201-689-8562 (International)

Replay Dial-in Numbers (Available until March 17, 2016): 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 2015 Annual 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 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:

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 December 31,		Year Ended December 31,
	2015	2014	2015	2014
OTC Link ATS	$ 2,882	$ 3,199	$ 11,796	$ 12,019
Market data licensing	5,121	5,105	20,609	20,334
Corporate services	5,052	2,903	17,504	9,862
Gross revenues	13,055	11,207	49,909	42,215
Redistribution fees and rebates	(577)	(611)	(2,379)	(2,388)
Net revenues	12,478	10,596	47,530	39,827
Operating expenses
Compensation and benefits	4,311	3,672	18,716	15,632
IT Infrastructure and information services	1,318	1,101	4,860	4,319
Professional and consulting fees	356	447	1,811	1,825
Marketing and advertising	386	401	1,291	1,330
Occupancy costs	382	361	1,484	1,465
Depreciation and amortization	433	392	1,692	1,543
General, administrative and other	261	233	810	811
Total operating expenses	7,447	6,607	30,664	26,925
Income from operations	5,031	3,989	16,866	12,902
Other income
Other income (expense)	(1)	-	27	9
Income before provision for income taxes	5,030	3,989	16,893	12,911
Provision for income taxes	2,104	1,320	6,635	5,021
Net Income	$ 2,926	$ 2,669	$ 10,258	$ 7,890

Net income per share
Basic	$ 0.26	$ 0.24	$ 0.91	$ 0.71
Diluted	$ 0.25	$ 0.23	$ 0.88	$ 0.69

Basic weighted average shares outstanding	11,010,111	10,879,819	11,008,095	10,833,874
Diluted weighted average shares outstanding	11,292,049	11,225,568	11,289,185	11,137,625


Non-GAAP Reconciliation
	Three Months Ended December 31,		Year Ended December 31,
	2015	2014	2015	2014
Net Income	$ 2,926	$ 2,669	$ 10,258	$ 7,890
Excluding:
Provision for income taxes	2,104	1,320	6,635	5,021
Depreciation and amortization	433	392	1,692	1,543
Stock-based compensation expense	344	344	1,552	1,241
Adjusted EBITDA	$ 5,807	$ 4,725	$ 20,137	$ 15,695

Adjusted diluted earnings per share	$ 0.50	$ 0.41	$ 1.73	$ 1.36

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)
	December 31,	December 31,
	2015	2014
Assets
Current assets
Cash	$ 23,925	$ 20,272
Accounts receivable, net of allowance for doubtful accounts of $147 and $130	6,082	5,674
Prepaid expenses and other current assets	22	1,395
Prepaid income taxes	1,520	523
Deferred tax assets	187	177
Total current assets	31,736	28,041
Property and equipment, net	3,507	4,357
Non-current deferred tax assets, net	470	277
Goodwill	251	251
Intangible assets, net	40	40
Security deposits	210	210
Total Assets	$ 36,214	$ 33,176

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$ 616	$ 562
Income taxes payable	92	-
Accrued expenses and other current liabilities	4,355	3,888
Deferred revenue	12,737	9,521
Total current liabilities	17,800	13,971
Deferred rent	139	391
Income tax reserve	728	563
Total Liabilities	18,667	14,925
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 11,438,928 issued, 11,192,885 outstanding at
December 31, 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 December 31, 2015
and December 31, 2014	1	1
Additional paid-in capital	10,786	8,838
Retained earnings	8,916	10,752
Treasury stock - 246,043 shares at December 31, 2015 and 187,823 shares at December 31, 2014	(2,270)	(1,453)
Total Stockholders' Equity	17,547	18,251
Total Liabilities and Stockholders' Equity	$ 36,214	$ 33,176