OTC Markets Group Announces Results for the Three and Nine Months Ended September 30, 2011

Announces Quarterly Cash Dividend

Nov 14, 2011, 17:00 ET from OTC Markets Group Inc.

NEW YORK, Nov. 14, 2011 /PRNewswire/ -- OTC Markets Group Inc. (OTCQX: OTCM) today announced its financial results for the three and nine months ended September 30, 2011, noting continued strong revenue growth.

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Gross revenues for the third quarter totaled $8.2 million, an increase of $1.1 million, or 16%, as compared to third quarter 2010 results of $7.1 million, and net income totaled a record $1.3 million, an increase of 625%, compared to $182,000 in the third quarter of 2010, which included a $909,000 non-recurring bad debt expense write-off in the third quarter of 2010.    

"The increases in revenues and net income in the third quarter are primarily due to the continued outstanding growth of our Issuer Services business line, which represented more than twenty-five percent of our total revenues for the quarter, and the consistent performance of our Market Data Licensing and Trading Services business lines," stated R. Cromwell Coulson, President and Chief Executive Officer.  "Our OTCQX market tier now boasts over 290 securities.  This was a key factor driving our revenue growth.  More and more companies are using the quality-controlled OTCQX platform to create the information-rich marketplace that intelligent investors require to research, analyze and trade securities."  

Gross revenues for the nine months ended September 30, 2011 totaled $24.1 million, an increase of $3.6 million, or 17%, compared to $20.6 million in the first nine months of 2010, and net income totaled $3.6 million, an increase of 100%, compared to $1.8 million in the first nine months of 2010, which included a $909,000 non-recurring bad debt expense write-off in the third quarter of 2010.  

"We have maintained our growth while continuing to focus on investing in our people and core technology platforms," continued Coulson.  "The strength of our organization lies in the quality of our people and our proprietary technology platforms.  Our continued investment in these areas underscores our commitment to providing outstanding service to our subscribers that increases the trading efficiency and information availability in the unlisted markets.  Our strong revenues indicate that we are adding increased value to our subscribers across business lines."

For comparison purposes, the financial results for the three and nine months ended September 30, 2011 are presented in relation to the similar periods in 2010.  Operating expenses and net income for 2010 reflect the impact of a non-recurring bad debt expense write-off during the third quarter of 2010.  After the related tax benefit, this non-recurring charge totaled approximately $909,000.  For more information on the non-recurring charge and its effect on our results for the three and nine months ended September 30, 2010, see OTC Markets Group's Amended Quarterly Report for the quarterly period ended September 30, 2010, published on March 18, 2011, and the associated press release, also published on March 18, 2011.

Third Quarter Results

Net revenues, after redistribution fees and rebates, for the third quarter of 2011 increased approximately 17%, to $7.6 million compared to $6.5 million for the third quarter of 2010.  This increase in net revenues was primarily the result of an $870,000, or 68%, increase in our Issuer Services revenues and a $175,000, or 6%, increase in our Market Data Licensing revenues as compared to the third quarter of 2010.  The growth in Issuer Services revenues was attributable to the OTCQX® market tier more than doubling in size during the twelve months ended September 30, 2011, with 274 companies on the platform as of September 30, 2011.  The increase in Market Data Licensing revenue reflects an increase in the number of professional user licenses.

Operating expenses decreased approximately 11%, to $5.7 million from $6.4 million in the third quarter of 2010, due to the 2010 non-recurring charge.  The decrease was offset by an increase in compensation and benefits costs for the three month period that was attributable to growth in employee headcount and increases in commissions earned by Issuer Services sales representatives.  Without the impact of the non-recurring charge in the third quarter of 2010, operating expenses would have increased $740,000 or 15% in the third quarter of 2011.

Nine Month Results

Net revenues, after redistribution fees and rebates, increased $3.4 million, or 18%, to $22.3 million during the first nine months of 2011, as compared to $18.9 million in the first nine months of 2010.  Issuer Services revenues continued to increase dramatically, up 73%, to $5.8 million from $3.4 million during the first nine months of 2010, primarily driven by the increase in OTCQX companies.  Market Data Licensing also experienced positive growth, posting year over year revenue growth of approximately $700,000, to $9.5 million from $8.8 million in the first nine months of 2010, primarily due to an increase in the number of professional user licenses.  

Operating expenses for the first nine months of 2011 totaled $17 million, an increase of $1.0 million, or 6%, from $16 million in the first nine months of 2010.  Without the impact of the non-recurring bad debt expense write-off in the third quarter of 2010, operating expenses would have increased $2.5 million, or 17% for the nine months ended September 30, 2011. The increase in operating expenses during the first nine months of 2011 was primarily due to increased compensation and benefits costs related to the hiring of several highly compensated employees in 2011.

Net income for the first nine months of 2011 totaled $3.6 million, an increase of approximately $1.8 million compared to net income of $1.8 million in the first nine months of 2010. Without the impact of the non-recurring bad debt expense write-off in the third quarter of 2010, net income for the first nine months of 2011 would have increased $810,000 as compared to the same period in 2010. Net income per weighted average fully diluted share for the first nine months of 2011 increased to $0.34.

OTC Markets Group's Quarterly Report for the period ended September 30, 2011 is available publicly at: www.otcmarkets.com.

Dividend Declaration – Quarterly Cash Dividend

Contemporaneous with the announcement of earnings for the quarter ended September 30, 2011, OTC Markets Group announced today that its Board of Directors authorized a quarterly cash dividend on its Class A Common Stock of $0.04 per share.  The dividend is payable on January 5, 2011 to stockholders of record on December 20, 2011.  The ex-dividend date is December 16, 2011.  The dividend payment is unchanged from the Company's seven previous quarterly cash dividends.

"The Board and I believe that it is in the best interest of our shareholders to pay a consistent, attractive dividend," stated Coulson.  "In recognition of the strong cash flow produced by our operations, our substantial cash position and debt-free balance sheet, we are pleased to share these results with our stockholders by continuing our quarterly dividend at $0.04 per share."

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates the world's largest electronic marketplace for broker-dealers to trade unlisted stocks.  Our OTC Link® platform supports an open network of competing broker-dealers that provide investors with the best prices in over 10,000 OTC securities. We categorize the wide spectrum of OTC-traded companies into three tiers – OTCQX (the quality-controlled marketplace for investor friendly companies), OTCQB® (the U.S. reporting company marketplace for development stage companies) and OTC Pink™ (the open trading marketplace) – so investors can identify the level and quality of information companies provide.  To learn more about how OTC Markets Group makes the unlisted markets more transparent, informed, and efficient, visit www.otcmarkets.com.  

Forward-Looking Statements

Information set forth in this news release contains forward-looking statements, which involve a number of risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements.  Forward-looking statements can be identified by use of the words "expect," "project," "may," "might," "potential," and similar terms.  OTC Markets Group Inc. ("OTC Markets Group", "we" or the "Company") cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information.  Forward-looking statements involve a number of risks, uncertainties or other factors beyond OTC Markets Group's control.  These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and price fluctuations, government and industry regulation, U.S. and global competition and other factors.  We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading "Risk Factors" in our Annual Report for the year ended December 31, 2010.  We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.  Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

OTC MARKETS GROUP INC. (formerly Pink OTC Markets Inc.)

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)


















Three months ended September 30,


Nine months ended September 30,


2011


2010


2011


2010


(unaudited)


(unaudited,
as amended)


(unaudited)


(unaudited,
as amended)

Trading services

$        2,874


$           2,796


$        8,850


$           8,425

Market data licensing

3,171


2,996


9,470


8,785

Issuer services

2,150


1,280


5,811


3,363

Gross revenues

8,195


7,072


24,131


20,573









Redistribution fees and rebates

( 611 )


( 574 )


( 1,833 )


( 1,708 )

Net revenues

7,584


6,498


22,298


18,865









Operating expenses








Compensation and benefits

3,007


2,473


9,126


7,444

Computer operations and data communications

812


879


2,468


2,379

Professional and consulting services

437


563


1,503


1,833

Occupancy costs

417


341


1,144


948

Depreciation and amortization

364


258


928


747

Marketing and advertising

321


245


1,211


738

General, administrative and other

307


1,600


626


1,885

Total operating expenses

5,665


6,359


17,006


15,974

Income from operations

1,919


139


5,292


2,891









Other income/(expense)








Interest income

14


2


31


14

Interest expense

-


( 15 )


-


( 52 )

Miscellaneous expense

( 42 )


-


( 42 )


-

Income before provision for income taxes

1,891


126


5,281


2,853









Provision (benefit) for income taxes

571


( 56 )


1,729


1,023









Net income

$        1,320


$              182


$        3,552


$           1,830









Net income per share








Basic

$        0.126


$           0.017


$        0.339


$           0.175

Diluted

$        0.126


$           0.017


$        0.337


$           0.173









Weighted-average shares outstanding  








Basic

10,475


10,498


10,466


10,483

Diluted

10,508


10,581


10,528


10,588



OTC MARKETS GROUP INC. (formerly Pink OTC Markets Inc.)

CONSOLIDATED BALANCE SHEETS

(in thousands)





September 30, 2011

December 31, 2010


(unaudited)

(audited)

Assets



Current Assets



Cash and cash equivalents

$                       7,423

$                      6,703

Short-term investments

1,513

-

Accounts receivable, net

4,280

5,329

Prepaid income taxes

702

582

Prepaid expenses and other current assets

554

381

Deferred tax asset

259

259

Total current assets

14,731

13,254

Property and equipment, net

5,398

4,036

Other assets



Goodwill

251

251

Intangible assets, net

49

88

Security deposits

208

181

Total other assets

508

520

Total assets

$                     20,637

$                    17,810

Liabilities and stockholders' equity


Current liabilities



Accounts payable

$                          520

$                         387

Current portion of bank loan

-

92

Accrued expenses and other

2,032

1,971

Dividend payable

419

414

Income taxes payable

1,069

371

Deferred revenue

3,139

4,299

Total current liabilities

7,179

7,534

Long-term liabilities



Deferred rent

1,024

816

Deferred tax liabilities

439

200

Total long-term liabilities

1,463

1,016

Total liabilities

8,642

8,550

Stockholders' equity



Common stock - par value $0.01 per share



Class A

106

104

Class C

1

1

Additional paid-in capital

4,898

4,455

Retained earnings

7,395

5,100

Treasury stock

( 400 )

( 400 )

Accumulated other comprehensive loss

( 5 )

-

Total stockholders' equity

11,995

9,260

Total liabilities and stockholders' equity

$                     20,637

$                    17,810



SOURCE OTC Markets Group Inc.



RELATED LINKS

http://www.otcmarkets.com