OTC Markets Group Reports First Quarter 2024 Financial Results

First Quarter 2024 Highlights:

• Gross revenues of $27.7 million for the quarter, down 1% versus the prior year period

• Operating income of $6.7 million for the quarter, down 3% versus the prior year period

• Operating profit margin of 25.0%, versus 25.4% for the prior year period

• Net income of $6.0 million, down 5% versus the prior year period, and quarterly diluted GAAP EPS of $0.49, down 6%

• Total cash returned to shareholders during the quarter of $5.1 million, comprised of dividends of $2.2 million and repurchases of common stock of $2.9 million

• Announcing second quarter 2024 dividend of $0.18 per share

• 577 OTCQX^® and 1,115 OTCQB^® companies at quarter end

• 7 graduates to a national securities exchange during the quarter

• 112 subscribers to OTC Link ECN as of March 31, 2024, up 10 versus March 31, 2023

• Approximately 34,000 average daily trades during the quarter versus approximately 35,000 during the prior year period

• On May 1, 2024, OTC Link announced to subscribers that it intends to launch closing cross functionality on OTC Link ECN and OTC Link NQB
  

NEW YORK, May 08, 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 first quarter of 2024.

“In the first quarter of the year, we stayed focused on improving trading functionality, investor information, and market integrity to better serve our broker-dealer and corporate clients,” said R. Cromwell Coulson, President and Chief Executive Officer. “We continue to invest in our people, platforms, and processes to make us a stronger, more resilient, and scalable organization, where managers intelligently allocate company resources and align our operating costs with revenue generation. We remain committed to delivering value for shareholders and creating future revenue growth.”

“During the first quarter of 2024, our Market Data Licensing business grew, and our OTC Link revenues remained relatively consistent. However, our Corporate Services business was impacted by macroeconomic challenges, which continued to pressure our OTCQB issuers and DNS subscribers,” said Antonia Georgieva, Chief Financial Officer. “We remain committed to delivering enhanced functionality to our subscribers and long-term, per share value.”

First Quarter 2024 compared to First Quarter 2023

Financial Highlights

		Three Months Ended March 31,
(in thousands, except shares and per share data)			2024				2023			% change			$ change
OTC Link		$	5,397			$	5,445			(1	%)		(48	)
Market data licensing			11,088				10,842			2	%		246
Corporate services			11,172				11,740			(5	%)		(568	)
Gross revenues			27,657				28,027			(1	%)		(370	)
Net revenues			26,817				27,231			(2	%)		(414	)
Revenues less transaction-based expenses			25,309				25,446			(1	%)		(137	)
Operating expenses			18,610				18,523			-			87
Income from operations			6,699				6,923			(3	%)		(224	)
Operating profit margin			25.0%				25.4%
Income before provision for income taxes			6,874				7,070			(3	%)		(196	)
Net income		$	5,984			$	6,319			(5	%)		(335	)
Diluted earnings per share		$	0.49			$	0.52			(6	%)
Adjusted diluted earnings per share		$	0.76			$	0.75			1	%
Weighted-average shares outstanding, diluted			11,863,089				11,866,646			-

• Gross revenues of $27.7 million, down 1% over the prior year quarter.   Revenues less transaction-based expenses also down 1%.

• OTC Link revenues down 1%, relative to the prior year quarter. Transaction-based revenues from OTC Link ECN and OTC Link NQB down 8%, reflecting a lower number of shares and a changing mix of securities traded on these platforms.   Lower subscriber count for our OTC Dealer application resulted in related revenue declining 6%. Partially offsetting these decreases was a 123% increase in certain connectivity revenue and an 8% increase in OTC Link ATS messages.

• Market Data Licensing revenues up 2%. Pro-user revenues were up 8%, reflecting a 4% increase in the number of professional users quarter over quarter. Revenues from non-professional users were down 18%, driven by a commensurate decrease in the number of non-professional users of our market data. Revenues from internal system licenses, delayed data licenses, and certain other data services increased 11% due to growth in subscribers and price increases for certain licenses. A 33% increase in revenue from our Blue Sky Data products partially offset a 33% decline in revenue from EDGAR Online, which did not include certain non-recurring revenue recognized in the prior year period.

• Corporate Services revenues down 5% quarter over quarter. Revenues from our OTCQX market remained relatively unchanged with pricing increases offsetting the lower number of companies on the OTCQX market. Revenues from our OTCQB market and our Disclosure & News Service^® (“DNS”) product declined 8% and 6%, respectively, in each case reflecting a lower number of companies subscribing.

• Operating expenses remained relatively flat compared to the prior year quarter. A 5% increase in compensation and benefits costs, reflecting the cumulative effect of higher stock-based compensation in prior years and related employer taxes was largely offset by a 10% decrease in professional and consulting fees, and a 46% decrease in general, administrative and other expenses. Operating expenses in the prior year period included approximately $900 thousand in one-time, non-recurring integration costs related to the EDGAR Online acquisition.

• Operating income decreased 3%, while net income decreased 5%, to $6.7 million and $6.0 million, respectively.

• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, remained approximately unchanged at $9.2 million, or $0.76 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 June 20, 2024, to stockholders of record on June 6, 2024. The ex-dividend date is June 5, 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. During the first quarter of 2024, the Company purchased 51,141 shares at an average price of $57.56 per share.

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.

First Quarter 2024 Conference Call

The Company will host a conference call and webcast on Thursday, May 9, 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 May 8, 2025):
https://edge.media-server.com/mmc/p/n63kk8qf

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/BIf8db86fe495f4ef1a0f0e4578cff9a8a

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 March 31,
		2024				2023
OTC Link	$	5,397			$	5,445
Market data licensing		11,088				10,842
Corporate services		11,172				11,740
Gross revenues		27,657				28,027
Redistribution fees and rebates		(840	)			(796	)
Net revenues		26,817				27,231
Transaction-based expenses		(1,508	)			(1,785	)
Revenues less transaction-based expenses		25,309		-		25,446
Operating expenses
Compensation and benefits		12,522				11,914
IT Infrastructure and information services		2,699				2,651
Professional and consulting fees		1,466				1,635
Marketing and advertising		263				318
Occupancy costs		585				579
Depreciation and amortization		653				650
General, administrative and other		422				776
Total operating expenses		18,610				18,523
Income from operations		6,699				6,923
Other income
Interest income		175				141
Other income, net		-				6
Income before provision for income taxes		6,874				7,070
Provision for income taxes		890				751
Net income	$	5,984			$	6,319
Net income per share
Basic	$	0.50			$	0.53
Diluted	$	0.49			$	0.52
Basic weighted average shares outstanding		11,705,383				11,642,968
Diluted weighted average shares outstanding		11,863,089				11,866,646
Non-GAAP Reconciliation
	Three Months Ended March 31,
		2024				2023
Net Income	$	5,984			$	6,319
Excluding:
Interest Income		(175	)			(141	)
Provision for income taxes		890				751
Depreciation and amortization		653				650
Stock-based compensation expense		1,826				1,574
Adjusted EBITDA	$	9,178			$	9,153
Adjusted diluted earnings per share	$	0.76			$	0.75
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)
	March 31,				December 31,
		2024				2023
Assets
Current assets
Cash and cash equivalents	$	27,346			$	34,101
Short-term investments		3,636				3,622
Accounts receivable, net of allowance for credit losses of $456 and $451		7,535				7,680
Prepaid income taxes		942				1,324
Prepaid expenses and other current assets		2,584				1,865
Total current assets		42,043				48,592
Property and equipment, net		8,538				8,429
Operating lease right-of-use assets		11,987				12,324
Deferred tax assets, net		8,381				7,691
Goodwill		3,984				3,984
Intangible assets, net		7,265				7,411
Long-term restricted cash		1,592				1,586
Other assets		951				508
Total Assets	$	84,741			$	90,525
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	1,684			$	2,152
Accrued expenses and other current liabilities		8,503				14,065
Income taxes payable		1,316				141
Deferred revenue		26,378				29,267
Total current liabilities		37,881				45,625
Income tax reserve		809				778
Operating lease liabilities		11,518				11,895
Total Liabilities		50,208				58,298
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,805,631 issued, 11,969,721 outstanding at
March 31, 2024; 12,716,135 issued, 11,931,366 outstanding at December 31, 2023		128				127
Additional paid-in capital		30,888				29,469
Retained earnings		26,255				22,425
Treasury stock - 835,910 shares at March 31, 2024 and 784,769 shares at December 31, 2023		(22,738	)			(19,794	)
Total Stockholders' Equity		34,533				32,227
Total Liabilities and Stockholders' Equity	$	84,741			$	90,525