NEW YORK, Nov. 8, 2017 /PRNewswire/ --
Third Quarter 2017 Highlights:
- Gross revenues of $13.6
million for the quarter versus $12.6
million for prior year quarter, up 8%
- Operating income of $4.6
million for the quarter versus $4.4
million for the prior year quarter, up 4%
- Operating profit margin of 35% for the quarter, down from
36% for the prior year quarter
- Net income of $3.5 million for
the quarter, up from $3.0 million for
the prior year quarter
- OTCQX and OTCQB Markets receive state Blue Sky recognition
from Hawaii and exemption under
existing law in Pennsylvania,
bringing the total to 27 states for OTCQX and 24 states for
OTCQB
- 15 Transfer Agents participating in the Transfer Agent Verified Shares Program, an
initiative launched in October 2016
and designed to improve the timeliness and reliability of OTC
company share information
- Announced a Strategic Alliance with the Canadian Securities
Exchange, a Canadian listing exchange
- Announced a Strategic Alliance with Issuer Direct
Corporation, (NYSE American: ISDR), a provider of communications
and compliance solutions to issuers
- Filed a Form ATS with the SEC to create "OTC Link ECN," a
matching engine and router for certain OTC equity securities
expected to launch in the fourth quarter 2017
- Announcing special dividend of $0.60 per share and fourth quarter 2017 dividend
of $0.14 per share
- 12 graduates to a national securities exchange during the
quarter
OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX®
Best Market, the OTCQB® Venture Market and the Pink® Open Market
for 10,000 U.S. and global securities, today announced its
financial results for the third quarter 2017.
"During the third quarter, we continued to execute on our
strategic goal of making it less painful for companies to be
public," said R.
Cromwell Coulson, President and Chief Executive
Officer. Mr. Coulson continued, "Our continued
progress towards national Blue Sky recognition and the growth of
our Transfer Agent Verified Shares Program allow us to provide our
OTCQX and OTCQB companies with more efficient, effective public
markets."
"The third quarter of 2017 saw 8% quarter over quarter revenue
growth. While the 10% increase in operating expenses
contributed to a 100 basis points contraction in our operating
margin, we were able to deliver 4% growth in quarter over quarter
operating income, 16% growth in net income and 12% growth in
quarter over quarter diluted EPS. We continue to make
significant investments in the people and technologies that will
deliver innovative solutions to our subscribers and drive long term
value creation for our shareholders," said
Bea Ordonez, Chief Financial
Officer.
Third Quarter 2017 Compared to Third Quarter 2016
|
|
Quarter Ended
September 30,
|
|
|
|
|
(in thousands, except
shares and per share data)
|
|
2017
|
|
2016
|
|
%
change
|
|
$
change
|
OTC Link
ATS
|
|
$
2,413
|
|
$
2,530
|
|
(5%)
|
|
$
(117)
|
Market data
licensing
|
|
5,505
|
|
5,274
|
|
4%
|
|
231
|
Corporate
services
|
|
5,704
|
|
4,809
|
|
19%
|
|
895
|
Gross
revenues
|
|
13,622
|
|
12,613
|
|
8%
|
|
1,009
|
Net
revenues
|
|
13,038
|
|
12,056
|
|
8%
|
|
982
|
Operating
expenses
|
|
8,448
|
|
7,657
|
|
10%
|
|
791
|
Income from
operations
|
|
4,590
|
|
4,399
|
|
4%
|
|
191
|
Operating profit
margin
|
|
35%
|
|
36%
|
|
|
|
|
Net
income
|
|
$
3,488
|
|
$
3,006
|
|
16%
|
|
$
482
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
0.29
|
|
$
0.26
|
|
12%
|
|
|
Adjusted diluted
earnings per share
|
|
$
0.45
|
|
$
0.42
|
|
7%
|
|
|
Weighted-average
shares outstanding, diluted
|
|
11,593,890
|
|
11,428,716
|
|
1%
|
|
|
Financial Highlights
- Gross revenues increased $1.0
million, or 8% over the prior year quarter, to $13.6 million.
- $895 thousand, or 19%, increase
in Corporate Services revenues, largely driven by significant
growth in companies joining the OTCQB Venture market and price
increases related to the OTCQX market.
- Revenues from OTC Link® ATS declined $117 thousand, or 5%, to $2.4 million, reflecting a continued decline in
the number of active market participants, decreases in the number
of OTC Dealer® users at our remaining broker-dealer subscribers as
well as reduced quote volumes.
- Market Data Licensing revenues were up $231 thousand, or 4%, primarily a result of
significant growth in the number of non-professional users
consuming our market data as well as the impact of price increases
and strong sales related to certain data license products.
- Operating expenses increased $791
thousand, or 10%, to $8.4
million, primarily due to quarter over quarter increases in
compensation costs and information technology costs.
- Income from operations increased $191
thousand, or 4%, to $4.6
million.
- Net income increased $482
thousand, or 16%, to $3.5
million, due to the increase in operating income as well as
a decrease in the company's effective tax rate for the quarter from
32% to 24%. The decrease in the effective tax rate was the result
of discrete, one-time benefits recognized from amending prior year
federal tax returns to claim a deduction against qualifying income
pursuant to the "Domestic Production Activities Deduction" and to
claim the lower rate of Corporate Tax available in New York state to entities who meet the
criteria of a "Qualifying Emerging Technology Company".
- Adjusted EBITDA, which excludes non-cash stock-based
compensation expense, increased $92
thousand, or 2%, to $5.3
million, or $0.45 per adjusted
diluted share.
Business Developments and News
- Announced that Hawaii state
regulations recognize the OTCQX and OTCQB markets as securities
manuals for the purposes of its state "Blue Sky Manual Exemption",
and that secondary transactions on OTCQX and OTCQB are exempt under
existing Pennsylvania law.
Hawaii and Pennsylvania bring the total number of states
recognizing the OTCQX Market to 27 and the total recognizing the
OTCQB Market to 24. This marks continued progress in respect of the
initiative, which began in May 2016,
and had the objective of achieving Blue Sky recognition for
secondary trading activities on our OTCQX and OTCQB markets.
- The Transfer Agent Verified Shares Program, launched in
October 2016, provides investors with
current and reliable share data on OTCQX, OTCQB and Pink
securities. As of October 31, 2017,
15 transfer agents have joined the program, including Continental
Stock Transfer & Trust and Broadridge Financials Solutions Inc,
providing timely data that improves the availability and accuracy
of share information for companies on the OTCQX, OTCQB and Pink
markets.
- On October 2, 2017, announced a
Strategic Alliance with the Canadian Securities Exchange, a
Canadian listing exchange. This first-of-its-kind North American
capital and visibility solution is designed to offer a new program
for issuers looking for an efficient IPO experience in Canada and cost-effective access to North
American investors.
- OTC Link LLC filed the requisite Form ATS with the Securities
and Exchange Commission to establish "OTC Link ECN", an Electronic
Communications Network that will function as a matching engine and
router for certain OTC securities. OTC Link ECN is expected to
launch in the fourth quarter of 2017.
- On November 1, 2017, announced a
Strategic Alliance with Issuer Direct Corporation, (NYSE American:
ISDR), a provider of communications and compliance solutions to
small corporate issuers. The Strategic Alliance positions the
Company to offer a premier suite of cost effective news,
communications, compliance and investor relations services.
Dividend Declaration – Quarterly Cash Dividend
OTC Markets Group announced today that its Board of Directors
authorized and approved two dividends on its Class A Common Stock:
a special cash dividend of $0.60 per
share and a quarterly cash dividend of $0.14 per share. The special dividend is
payable on December 6, 2017 to
stockholders of record on November
22, 2017. The ex-dividend date is November 21, 2017. The quarterly cash
dividend is payable on December 21,
2017 to stockholders of record on December 7, 2017. The ex-dividend date is
December 6, 2017.
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.
Third Quarter 2017 Conference Call
The Company will host a conference call on Thursday, November 9, 2017, 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: 1-888-567-1602 (Domestic); 1-404-267-0373
(International);
Replay Dial-in Numbers (Available until November 23, 2017): 1-877-481-4010 (Domestic);
1-919-882-2331 (International); Replay Pin Number: 22418
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 Quarterly Report for the period ended
September 30, 2017 is available
publicly at www.otcmarkets.com.
About OTC Markets Group Inc.
OTC Markets Group Inc.
(OTCQX: OTCM) operates the OTCQX® Best Market, the OTCQB® Venture
Market and the Pink® Open Market for 10,000 U.S. and global
securities. Through OTC Link® ATS, we connect a diverse
network of broker-dealers that provide liquidity and execution
services. We enable investors to easily trade through the
broker of their choice and empower companies to improve the quality
of information available for investors.
To learn more about how we create better informed and more
efficient 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:
Bea Ordonez
Chief Financial Officer
Phone: 212-220-2215
Email: ir@otcmarkets.com
OTC MARKETS GROUP
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(in thousands, except
per share data)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
2017
|
|
2016
|
Gross
revenues
|
$
|
13,622
|
|
$
|
12,613
|
Redistribution fees and
rebates
|
(584)
|
|
(557)
|
Net
revenues
|
13,038
|
|
12,056
|
Operating
expenses
|
|
|
|
Compensation and
benefits
|
5,250
|
|
4,665
|
IT Infrastructure and
information services
|
1,499
|
|
1,378
|
Professional and
consulting fees
|
560
|
|
439
|
Marketing and
advertising
|
190
|
|
175
|
Occupancy
costs
|
469
|
|
442
|
Depreciation and
amortization
|
300
|
|
387
|
General, administrative
and other
|
180
|
|
171
|
Total operating
expenses
|
8,448
|
|
7,657
|
Income from
operations
|
4,590
|
|
4,399
|
Other (expense)
income
|
|
|
|
Interest
income
|
6
|
|
1
|
Other (expense)
income
|
(1)
|
|
10
|
Income before
provision for income taxes
|
4,595
|
|
4,409
|
Provision for income
taxes
|
1,107
|
|
1,404
|
Net
income
|
$
|
3,488
|
|
$
|
3,005
|
|
|
|
|
Net income per
share
|
|
|
|
Basic
|
$
|
0.31
|
|
$
|
0.26
|
Diluted
|
$
|
0.29
|
|
$
|
0.26
|
|
|
|
|
Basic weighted
average shares outstanding
|
11,414,750
|
|
11,087,328
|
Diluted weighted
average shares outstanding
|
11,593,890
|
|
11,428,716
|
|
|
|
|
Non-GAAP
Reconciliation
|
|
|
|
|
Three Months Ended
September 30,
|
|
2017
|
|
2016
|
Net
Income
|
$
|
3,488
|
|
$
|
3,006
|
Excluding:
|
|
|
|
Provision for income
taxes
|
1,107
|
|
1,404
|
Depreciation and
amortization
|
300
|
|
387
|
Stock-based
compensation expense
|
452
|
|
458
|
Adjusted
EBITDA
|
$
|
5,347
|
|
$
|
5,255
|
|
|
|
|
Adjusted diluted
earnings per share
|
$
|
0.45
|
|
$
|
0.45
|
|
|
|
|
|
|
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
number of shares)
|
(Unaudited)
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
2017
|
|
2016
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash
|
$
24,603
|
|
$
25,034
|
Accounts receivable,
net of allowance for doubtful accounts of $166 and $145
|
5,647
|
|
6,262
|
Prepaid expenses and
other current assets
|
1,554
|
|
1,246
|
Prepaid income
taxes
|
295
|
|
435
|
Total current
assets
|
32,099
|
|
32,977
|
Property and equipment,
net
|
1,967
|
|
2,279
|
Deferred tax assets,
net
|
1,215
|
|
886
|
Goodwill
|
251
|
|
251
|
Intangible assets,
net
|
124
|
|
40
|
Security
deposits
|
192
|
|
210
|
Total
Assets
|
$
35,848
|
|
$
36,643
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
835
|
|
$
508
|
Accrued expenses and
other current liabilities
|
4,165
|
|
4,761
|
Income taxes
payable
|
139
|
|
103
|
Deferred
revenue
|
10,116
|
|
14,664
|
Total current
liabilities
|
15,255
|
|
20,036
|
Deferred
rent
|
274
|
|
187
|
Income tax
reserve
|
1,069
|
|
914
|
Total
Liabilities
|
16,598
|
|
21,137
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
|
|
|
Common stock - par
value $0.01 per share
|
|
|
|
Class A - 14,000,000
authorized, 11,860,898 issued, 11,414,238 outstanding at
|
|
|
|
September 30, 2017;
11,595,337 issued, 11,247,979 outstanding at December 31,
2016
|
119
|
|
116
|
Class C - 0 shares
authorized, issued and outstanding at September 30,
2017;
|
|
|
|
130,838 shares
authorized, issued and outstanding at December 31, 2016
|
-
|
|
1
|
Additional paid-in
capital
|
14,057
|
|
12,988
|
Retained
earnings
|
11,233
|
|
6,385
|
Treasury stock -
446,660 shares at September 30, 2017 and 347,358 shares at December
31, 2016
|
(6,159)
|
|
(3,984)
|
Total Stockholders'
Equity
|
19,250
|
|
15,506
|
Total Liabilities
and Stockholders' Equity
|
$
35,848
|
|
$
36,643
|
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SOURCE OTC Markets Group Inc.