OTC Markets Group Announces Second Quarter 2015 Financial Results

Aug 10, 2015, 07:00 ET from OTC Markets Group Inc.

NEW YORK, Aug. 5, 2015 /PRNewswire/ --

Second Quarter 2015 Highlights:

  • Unaudited second quarter 2015 GAAP diluted EPS of $0.20 and adjusted diluted EPS of $0.42
  • Revenues grew 21% to $12.4 million from the prior year quarter
  • Operating profit margin of 35%
  • Announces a 40% increase in the quarterly dividend to $0.14 per share
  • Continued growth in OTCQX Best Market from U.S. Companies and Community Banks
  • New standards implemented to establish OTCQB as "America's Venture Market"
  • 17 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 second quarter 2015.

"Our OTCQX Best Market and OTCQB Venture Market provide public trading, transparency and trust to a critical mass of companies, without the complexity and cost of a national securities exchange listing. With over 975 companies verified for trading as of July 31, the OTCQB Venture Market has been transformed into a better regulated, more transparent, world-leading venture market for developing companies," said R. Cromwell Coulson, President and Chief Executive Officer. "We also modified our pricing structure for market making in securities traded on OTCQX and OTCQB, which will allow broker-dealer subscribers to expand their coverage of securities that meet our higher market standards and improve liquidity in a competitive environment." 

"Our strategy remains focused on organically growing our revenues by 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," Mr. Coulson continued. "We continue to invest in our technology platform, products and people to improve functionality and increase reliability. During the second quarter, we implemented significant enhancements to our OTC Link ATS quote and messaging platforms that handle higher quote volumes with lower latencies. Other enhancements to OTC Link ATS will help us meet SEC Regulation SCI requirements."

"Revenue growth was primarily driven by the addition of OTCQB verified companies, which generated 95% of the increase in Corporate Services revenue during the second quarter. The increase in Corporate Services revenue was the primary contributor to the expansion of our operating profit margin to 35% from 28% on a quarter over quarter basis," said Wendy Fraulo, Chief Financial Officer.

Second Quarter 2015 Results compared to Second Quarter 2014

Revenues

Gross revenues increased $2.2 million, or 21%, to $12.4 million. This increase was primarily driven by the growth in verified companies on the OTCQB market, which contributed $1.9 million of the increase in gross revenues. During the second quarter, 334 companies completed the OTCQB verification process, which increased the total number of companies to 955 as of June 30, 2015.  Certain of these additions had a limited revenue impact during the second quarter due to the timing of approvals, but will be recognized over each company's annual subscription period. 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 increased $0.2 million, or 6%, to $2.9 million, primarily related to a 43% increase in combined subscription revenue due to an updated FIX connection pricing schedule, a new internet connection charge and an increased OTC Dealer® license fee introduced in July 2014. These increases were partially offset by a 10% decline in usage revenue due to lower trading activity on OTC Link ATS. Market Data Licensing revenues were flat at $5.2 million, as increases in reported professional user licenses and sales of the compliance data files were substantially offset by a decrease in reported non-professional user licenses and advertising revenue.

Operating Expenses

Operating expenses increased $0.8 million, or 11%, to $7.7 million, primarily related to increases in compensation and benefits costs. Compensation and benefits costs increased $0.6 million, or 15%, primarily due to annual compensation increases, higher salaries of new employees, increased commission expense related to Corporate Services sales, and increased stock-based compensation expense due to a higher amount of equity awards outstanding and the rise in our stock price.

Income from Operations and Net Income

Income from operations increased $1.4 million, or 53%, to $4.1 million, and operating profit margin expanded to 35% from 28% during the same prior year period. The increase in Corporate Services revenue contributed to the increase in operating income, although margin was narrowed by higher compensation and benefits costs.

Net income increased $0.8 million, or 48%, to $2.4 million, primarily due to the increase in operating income, partially offset by an increase in the Company's provision for income taxes. Net income per diluted share increased 43% to $0.20 as compared to $0.14 during the same prior year period.

Adjusted EBITDA

Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased $1.6 million, or 48%, to $4.9 million, or $0.42 per adjusted diluted share, during the second quarter of 2015, as compared to $3.3 million, or $0.29 per adjusted diluted share, during the same prior year period, primarily due to the increase in income from operations and stock-based compensation expense.

Dividend Declarations – Quarterly Cash Dividend

OTC Markets Group also announced today that its Board of Directors authorized a 40% increase in the quarterly cash dividend to $0.14 per share on its Class A Common Stock, which is payable on September 22, 2015 to stockholders of record on September 8, 2015. The ex-dividend date is September 3, 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.

Second Quarter 2015 Conference Call

The Company will host a conference call on Thursday, August 6, 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 August 20, 2015): 1-877-870-5176 (Domestic); 1-858-384-5517 (International); Replay PIN Number: 13615345

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

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

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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 better 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.

Subscribe to the OTC Markets RSS Feed

Investor Contact:

Wendy Fraulo
Chief Financial Officer
+ 1 (212) 220-2215
ir@otcmarkets.com   

 

 

OTC MARKETS GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share information)

(Unaudited)


Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

OTC Link ATS

$                 2,931


$                 2,772


$                 5,975


$                 5,674

Market data licensing

5,169


5,148


10,401


10,107

Corporate services

4,330


2,319


7,577


4,429

Gross revenues

12,430


10,239


23,953


20,210

Redistribution fees and rebates

(600)


(581)


(1,199)


(1,185)

Net revenues

11,830


9,658


22,754


19,025

Operating expenses








Compensation and benefits

4,763


4,128


9,721


8,051

IT Infrastructure and information services

1,145


1,112


2,302


2,095

Professional and consulting fees

546


451


935


933

Marketing and advertising 

340


358


606


661

Occupancy costs

344


370


705


715

Depreciation and amortization

420


373


826


743

General, administrative and other

183


190


415


361

Total operating expenses

7,741


6,982


15,510


13,559

Income from operations

4,089


2,676


7,244


5,466

Other income








Other income

7


6


23


7

Income before provision for income taxes

4,096


2,682


7,267


5,473

Provision for income taxes

1,704


1,063


3,020


2,189

Net Income 

$                 2,392


$                 1,619


$                 4,247


$                 3,284









Net income per share 








Basic

$                   0.21


$                   0.15


$                   0.38


$                   0.29

Diluted

$                   0.20


$                   0.14


$                   0.36


$                   0.29









Basic weighted average shares outstanding

11,006,339


10,813,086


10,997,194


10,801,177

Diluted weighted average shares outstanding

11,435,355


11,077,636


11,426,136


11,044,825






















Non-GAAP Reconciliation









Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Net Income

$                 2,392


$                 1,619


$                 4,247


$                 3,284

Excluding:








Provision for income taxes

1,704


1,063


3,020


2,189

Depreciation and amortization

420


373


826


743

Stock-based compensation expense

396


253


825


560

Adjusted EBITDA

$                 4,912


$                 3,308


$                 8,918


$                 6,776









Adjusted diluted earnings per share

$                   0.42


$                   0.29


$                   0.76


$                   0.59









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)


June 30,


December 31,


2015


2014

Assets




Current assets




Cash

$             23,964


$             20,272

Accounts receivable, net of allowance for doubtful accounts of $178 and $138

5,681


5,674

Prepaid expenses and other current assets

1,838


1,395

Prepaid income taxes

566


523

Deferred tax assets

177


177

Total current assets

32,226


28,041

Property and equipment, net 

4,168


4,357

Non-current deferred tax assets, net

472


277

Goodwill

251


251

Intangible assets, net

40


40

Security deposits

210


210

Total Assets

$             37,367


$             33,176





Liabilities and stockholders' equity




Current liabilities




Accounts payable

$                  752


$                  562

Accrued expenses and other current liabilities

2,987


3,888

Income taxes payable

91


-

Deferred revenue

11,323


9,521

Total current liabilities

15,153


13,971

Deferred rent

272


391

Income tax reserve

691


563

Total Liabilities

16,116


14,925

Commitments and contingencies




Stockholders' equity




Common stock - par value $0.01 per share




Class A - 14,000,000 authorized, 11,412,902 issued, 11,213,243 outstanding at




June 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 June 30, 2015




and December 31, 2014

1


1

Additional paid-in capital 

10,000


8,838

Retained earnings

12,756


10,752

Treasury stock - 199,659 shares at June 30, 2015 and 187,823 shares at December 31, 2014

(1,620)


(1,453)

Total Stockholders' Equity

21,251


18,251

Total Liabilities and Stockholders' Equity

$             37,367


$             33,176

 

SOURCE OTC Markets Group Inc.



RELATED LINKS

http://www.otcmarkets.com