OTC Markets Group Reports Second Quarter 2024 Results

August 07, 2024 at 17:00 PM EDT

Second Quarter 2024 Highlights:

Gross revenues of $27.6 million for the quarter, up 1% versus the prior year period
Operating income of $8.1 million for the quarter, down 2% versus the prior year period
Operating profit margin of 30.4%, versus 31.4% for the prior year period
Net income of $6.7 million, down 3% versus the prior year period, and quarterly diluted GAAP EPS of $0.56, down 2%
Total cash returned to shareholders during the quarter of $2.2 million in the form of dividends
Announcing third quarter 2024 dividend of $0.18 per share
569 OTCQX^® and 1,085 OTCQB^® companies at quarter end
12 graduates to a national securities exchange during the quarter
114 subscribers to OTC Link ECN as of June 30, 2024, up 10 versus June 30, 2023
Approximately 35,000 average daily trades during the quarter versus approximately 32,000 during the prior year period
In May 2024, OTC Markets Group announced the expected launch of OTC Overnight, an upcoming new offering for overnight trading in OTC equity securities

NEW YORK, Aug. 07, 2024 (GLOBE NEWSWIRE) -- OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for trading 12,000 U.S. and international securities, today announced its financial results for the second quarter of 2024.

“We continue to progress towards launching OTC Overnight, to facilitate trading from 8pm to 4am eastern time, Sunday through Thursday,” said R. Cromwell Coulson, President and Chief Executive Officer. “Overnight trading functionality will allow our broker-dealers to better support investor needs and benefit from existing connectivity to our mission critical systems. This new offering underscores the importance of our markets for global trading.”

“Our business saw modest increases in both revenues and expenses in the second quarter of 2024,” said Antonia Georgieva, Chief Financial Officer. “OTC Link revenues increased as a result of higher trading volumes, while Market Data Licensing saw growth in certain products offsetting declines in others. Corporate Services continued to face declining numbers of customers as many of our smaller and more financially vulnerable companies were still navigating a challenging economic environment. We will continue to support our subscribers and work towards creating sustainable, long-term value per share.”

Second Quarter 2024 compared to Second Quarter 2023

Financial Highlights

	Three Months Ended June 30,
(in thousands, except shares and per share data)	2024			2023			% change		$ change
OTC Link	$	5,408		$	4,821		12	%	587
Market data licensing		10,782			10,643		1	%	139
Corporate services		11,372			11,763		(3	%)	(391	)
Gross revenues		27,562			27,227		1	%	335
Net revenues		26,771			26,424		1	%	347
Revenues less transaction-based expenses		25,222			25,169		-		53
Operating expenses		17,082			16,874		1	%	208
Income from operations		8,140			8,295		(2	%)	(155	)
Operating profit margin		30.4	%		31.4	%
Income before provision for income taxes		8,324			8,556		(3	%)	(232	)
Net income	$	6,733		$	6,960		(3	%)	(227	)

Diluted earnings per share	$	0.56		$	0.57		(2	%)
Adjusted diluted earnings per share	$	0.85		$	0.86		(1	%)
Weighted-average shares outstanding, diluted		11,838,453			11,854,762		-

Gross revenues of $27.6 million, up 1% over the prior year quarter. Revenues less transaction-based expenses remained flat to the prior year quarter.
OTC Link revenues up 12%, relative to the prior year quarter. Transaction-based revenues from OTC Link ECN and OTC Link NQB up 19% due to higher volume of shares traded on those platforms. Contributing to the overall increase in OTC Link revenues was a 130% increase in certain connectivity revenue and a 15% increase in revenue from OTC Link ATS messages, with fee increases offsetting a lower number of messages.
Market Data Licensing revenues up 1%. A 35% increase in revenues from Blue Sky data products and a 10% increase in revenues from internal system licenses, delayed data licenses, and certain other data services served as an offset to a 13% reduction in revenues from non-professional users, due to a commensurate decrease in the number of non-professional users of our market data and a 22% decline in revenue from EDGAR Online, due to subscriber cancellations. Pro-user revenues were flat to the prior year quarter.
Corporate Services revenues down 3% quarter over quarter, driven by a 6% decrease in revenues from the OTCQB market and a 7% decrease in revenues from our Disclosure & News Service^® (DNS) product, in each case reflecting a lower number of companies subscribing, which more than offset the impact of pricing increases. OTCQX revenues increased 2%, with pricing increases balancing out a lower number of companies on the OTCQX market.
Operating expenses increased 1% over the prior year quarter, primarily driven by a 3% increase in compensation and benefits costs, reflecting certain one-time costs, and a 50% increase in general, administrative and other expenses. These increases were partially offset by an 8% reduction each in IT infrastructure and information services costs and in professional and consulting costs, primarily due to the elimination of certain one-time integration costs related to EDGAR Online that were unique to the prior year quarter.
Operating income and net income decreased 2% to $8.1 million and 3% to $6.7 million, respectively.
Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, decreased 1% to $10.3 million, or $0.85 per adjusted diluted share.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized and approved a quarterly cash dividend of $0.18 per share of Class A Common Stock. The quarterly cash dividend is payable on September 19, 2024, to stockholders of record on September 5, 2024. The ex-dividend date is September 4, 2024.

Stock Buyback Program

The Company is authorized to purchase shares from time to time on the open market, from employees, and through block trades, in compliance with applicable law. The Company did not repurchase any shares during the second quarter of 2024.

On March 4, 2024, 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.

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 2024 Conference Call

The Company will host a conference call and webcast on Thursday, August 8, 2024, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail. The call and webcast may be accessed as follows:

Webcast:
The conference webcast and management presentation can be accessed at the following link (replay available until August 7, 2025):
https://edge.media-server.com/mmc/p/pqtpnn92

Live Call:
Participants intending to ask a question during the live call and Q&A session should also register in advance at:
https://register.vevent.com/register/BI08f1a04768ed467fa745746ee8d08f21

Upon registration, participants will receive a dial-in number along with a unique PIN number that can be used to access the live call. Live call participants may also select a “Call Me” option.

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

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates regulated markets for trading 12,000 U.S. and international securities. Our data-driven disclosure standards form the foundation of our three public markets: OTCQX^® Best Market, OTCQB^® Venture Market and Pink^® Open Market.

Our OTC Link^® Alternative Trading Systems (ATSs) provide critical market infrastructure that broker-dealers rely on to facilitate trading. Our innovative model offers companies more efficient access to the U.S. financial markets.

OTC Link ATS, OTC Link ECN, and OTC Link NQB are each an SEC regulated ATS, operated by OTC Link LLC, a FINRA and SEC registered broker-dealer, member SIPC.

To learn more about how we create better informed and more efficient markets, visit www.otcmarkets.com.

Investor Contact:

Antonia Georgieva
Chief Financial Officer
Phone: (212) 220-2215
Email: ir@otcmarkets.com

Media Contact:

OTC Markets Group Inc.
Phone: (212) 896-4428
Email: media@otcmarkets.com


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

	Three Months Ended June 30,
	2024			2023
OTC Link	$	5,408		$	4,821
Market data licensing		10,782			10,643
Corporate services		11,372			11,763
Gross revenues		27,562			27,227
Redistribution fees and rebates		(791	)		(803	)
Net revenues		26,771			26,424
Transaction-based expenses		(1,549	)		(1,255	)
Revenues less transaction-based expenses		25,222			25,169
Operating expenses
Compensation and benefits		10,934			10,657
IT Infrastructure and information services		2,545			2,771
Professional and consulting fees		1,521			1,656
Marketing and advertising		362			270
Occupancy costs		576			592
Depreciation and amortization		682			621
General, administrative and other		462			307
Total operating expenses		17,082			16,874
Income from operations		8,140			8,295
Other income
Interest income		187			158
Other income, net		(3	)		103
Income before provision for income taxes		8,324			8,556
Provision for income taxes		1,591			1,596
Net income	$	6,733		$	6,960

Net income per share
Basic	$	0.56		$	0.58
Diluted	$	0.56		$	0.57

Basic weighted average shares outstanding		11,723,459			11,657,736
Diluted weighted average shares outstanding		11,838,453			11,854,762

Non-GAAP Reconciliation
	Three Months Ended June 30,
	2024			2023
Net Income	$	6,733		$	6,960
Excluding:
Interest Income		(187	)		(158	)
Provision for income taxes		1,591			1,596
Depreciation and amortization		682			621
Stock-based compensation expense		1,496			1,393
Adjusted EBITDA	$	10,315		$	10,412

Adjusted diluted earnings per share	$	0.85		$	0.86

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)

	June 30,			December 31,
	2024			2023
Assets
Current assets
Cash and cash equivalents	$	29,881		$	34,101
Short-term investments	4,405			3,622
Accounts receivable, net of allowance for credit losses of $463 and $451	7,443			7,680
Prepaid income taxes	699			1,324
Prepaid expenses and other current assets	2,789			1,865
Total current assets	45,217			48,592
Property and equipment, net	8,105			8,429
Operating lease right-of-use assets	11,646			12,324
Deferred tax assets, net	9,049			7,691
Goodwill	3,984			3,984
Intangible assets, net	7,120			7,411
Long-term restricted cash	1,597			1,586
Other assets	821			508
Total Assets	$	87,539		$	90,525

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	1,510		$	2,152
Accrued expenses and other current liabilities	10,442			14,065
Income taxes payable	12			141
Deferred revenue	23,031			29,267
Total current liabilities	34,995			45,625
Income tax reserve	850			778
Operating lease liabilities	11,137			11,895
Total Liabilities	46,982			58,298
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,806,608 issued, 11,970,698 outstanding at June 30, 2024; 12,716,135 issued, 11,931,366 outstanding at December 31, 2023	128			127
Additional paid-in capital	32,334			29,469
Retained earnings	30,833			22,425
Treasury stock - 835,910 shares at June 30, 2024 and 784,769 shares at December 31, 2023	(22,738		)	(19,794		)
Total Stockholders' Equity	40,557			32,227
Total Liabilities and Stockholders' Equity	$	87,539		$	90,525