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OTC Markets Group Reports Fourth Quarter and Full Year 2020 Results

NEW YORK, March 17, 2021 /PRNewswire/ --

Fourth Quarter and Full Year 2020 Highlights:

  • The COVID-19 pandemic did not adversely affect our financial results during 2020, and each of our three business lines grew revenue
  • Gross revenues of $71.2 million for the year, up 13% versus 2019
  • Operating income of $21.4 million for the year, up 20% versus 2019
  • Net income of $18.3 million for the year, up 22% versus 2019, driving a 22% increase in GAAP diluted EPS to $1.53
  • Fourth quarter gross revenues of $19.8 million, up 23% versus the prior year quarter, and operating income of $6.7 million, up 42% versus the prior year quarter
  • Operating profit margin of 31.3% for the year and 35.0% for the quarter (versus 29.6% and 30.5%, respectively, for 2019)
  • Total cash returned to shareholders during 2020 of $18.1 million, comprised of dividends of $14.6 million and repurchases of common shares of $3.5 million, up 14% versus 2019
  • Announcing first quarter 2021 dividend of $0.15 per share
  • 66 graduates to a national securities exchange during 2020
  • 73 subscribers to OTC Link ECN as of year-end 2020, up 20 versus 2019; approximately 11,500 average daily trades during 2020, versus approximately 3,400 during 2019
  • Virtual Investor Conferences® business hosted 27 events during 2020, with 387 companies participating and reaching more than 21 thousand investors
  • Publication of final rule amending Securities Exchange Act Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system (QIDQS)

OTC Markets Group Inc. (OTCQX: OTCM), operator of the OTCQX® Best Market, the OTCQB® Venture Market, and the Pink® Open Market for 11,000 U.S. and global securities, today released its financial results for the fourth quarter and fiscal year 2020.

"We exited 2020, an unprecedented year, with strong results. Our ability to thrive in a time of global uncertainty leaves us well-positioned to serve clients, grow organically and seize new business opportunities," said R. Cromwell Coulson, President and Chief Executive Officer. "As we progress throughout 2021, we are guided by our strategic initiatives, including successful implementation of amended Rule 15c2-11, delivering reliable and efficient trading systems and supporting the diverse array of issuers on our public markets."

"Our business delivered strong results despite the challenging macroeconomic conditions.  We are pleased to report strong overall year-over-year growth of 13% in top line revenues and 20% in operating income," said Antonia Georgieva, Chief Financial Officer. "Our OTC Link business benefited from an active equities market environment and growth in its subscriber base.  In our Market Data Licensing business, the impact of price increases combined with a significant increase in the number of users, drove robust growth.  Our Corporate Services business experienced a strong rebound in sales in the second half of the year and delivered year-over-year revenue growth despite facing significant headwinds in the early part of 2020."

Fourth Quarter 2020 compared to Fourth Quarter 2019



Quarter Ended December 31,





(in thousands, except shares and per share data)


2020


2019


% change


$ change

OTC Link


$                5,095


$                2,946


73%


2,149

Market data licensing


7,358


6,214


18%


1,144

Corporate services


7,325


6,898


6%


427

Gross Revenues


19,778


16,058


23%


3,720

Net revenues


19,064


15,433


24%


3,631

Revenues less transaction-based expenses


17,702


15,219


16%


2,483

Operating expenses


11,021


10,510


5%


511

Income from operations


6,681


4,709


42%


1,972

Operating profit margin


35.0%


30.5%





Income before provision for income taxes


6,662


4,726


41%


1,936

Net income 


$                5,728


$                3,808


50%


1,920










Diluted earnings per share


$                  0.48


$                  0.32


51%



Adjusted diluted earnings per share


$                  0.66


$                  0.48


37%



Weighted-average shares outstanding, diluted


11,661,096


11,725,557


(1%)



Fourth Quarter 2020 Financial Highlights

  • Gross revenues of $19.8 million, up 23% over the prior year quarter.
  • OTC Link revenues up 73%, with increased trading volumes across U.S. equity markets and the impact of additional subscribers driving a 429% increase in transactional revenues on our OTC Link ECN.
  • Market Data Licensing revenues up 18%, with price increases introduced at the beginning of 2020, combined with a 5% quarter over quarter increase in pro-users driving an 18% increase in related revenues. The number of non-professional users of our market data increased 60%, reflective of the increased retail participation in the U.S. equities markets and helped drive a 73% increase in related revenues.
  • Corporate Services delivered 6% growth in revenues quarter over quarter, driven primarily by a 14% increase in revenues from our Disclosure & News Service® product and a 372% increase in revenue from our Virtual Investor Conferences business.
  • Operating expenses increased 5% over the prior year quarter, the result of a 4% increase in compensation costs, an 8% increase in information technology costs and a 62% increase in professional and consulting fees, partially offset by a 30% decline in marketing fees.
  • Net income increased 50% to $5.7 million for the quarter, reflecting the increase in operating income and a quarter over quarter decrease in our effective tax rate ("ETR") from 19.4% to 14.0%, primarily due to the recognition of an excess stock-based compensation tax windfall.
  • Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 36% to $7.9 million, or $0.66 per adjusted diluted share.

Fiscal Year 2020 Results compared to Fiscal Year 2019



Year Ended December 31,





(in thousands, except shares and per share data)


2020


2019


% change


$ change

OTC Link


$              15,890


$              11,676


36%


4,214

Market data licensing


28,133


24,447


15%


3,686

Corporate services


27,206


26,716


2%


490

Gross Revenues


71,229


62,839


13%


8,390

Net revenues


68,419


60,350


13%


8,069

Revenues less transaction-based expenses


65,397


59,604


10%


5,793

Operating expenses


43,963


41,722


5%


2,241

Income from operations


21,434


17,882


20%


3,552

Operating profit margin


31.3%


29.6%





Income before provision for income taxes


21,407


17,985


19%


3,422

Net income 


$              18,274


$              14,942


22%


3,332










Diluted earnings per share


$                  1.53


$                  1.25


22%



Adjusted diluted earnings per share


$                  2.20


$                  1.84


20%



Weighted-average shares outstanding, diluted


11,630,685


11,702,863


(1%)



Fiscal Year 2020 Financial Highlights

  • Gross revenues of $71.2 million, up 13%.
  • OTC Link revenues up 36%, with revenues contributed by our OTC Link ECN the primary driver.
  • Market Data Licensing revenues up 15%, largely a result of growth in users and fee increases.
  • Corporate Services revenues up 2% for the year, primarily driven by an increased demand for virtual investor events and a price increase for our Disclosure & News Service.
  • Operating expenses up $2.2 million, or 5%.
  • Compensation costs increased $1.9 million, or 7%, with year-over-year growth in headcount and the impact of annual salary increases for 2020 driving a 4% increase in base salaries. Additionally, cash and stock-based incentive awards for 2020 increased by 13% and 14%, respectively.
  • Net income increased 22% to $18.3 million, a result of the 20% increase in income from operations, combined with a decrease in the Company's ETR, from 16.9% in 2019 to 14.6% in 2020.
  • The Company's 2020 ETR was lower than the prior year, primarily as a result of the reversal of previously recorded uncertain state tax expenses. These reversals were premised on the Company being accepted into the Voluntary Disclosure Agreement programs of certain U.S. states.
  • Adjusted EBITDA increased 19% to $26.2 million, or $2.20 per adjusted diluted share.

Dividend Declaration – Quarterly Cash Dividend

OTC Markets Group announced today that its Board of Directors authorized a quarterly cash dividend of $0.15 on its Class A Common Stock.  The quarterly cash dividend is payable on March 31, 2021 to stockholders of record on March 23, 2021.  The ex-dividend date is March 22, 2021.

Stock Buyback Program

On March 12, 2021, 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.  The Company is authorized to purchase shares from time to time on the open market and through block trades, in compliance with applicable law.

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.

Fourth Quarter and Full Year 2020 Conference Call

The Company will host a conference call and webcast on Thursday, March 18, 2021, at 8:30 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: 1-877-665-5564 (Domestic); 1-470-495-9522 (International); Conference ID: 3583593

Call Replay Dial-in Numbers (available until April 1, 2021): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 3583593

Participants can access the conference via webcast at the following link (replay available until March 17, 2022):

https://edge.media-server.com/mmc/p/b6t66qrz

OTC Markets Group's 2020 Annual Report, the earnings release, transcript to the earnings call and 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 the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for 11,000 U.S. and global securities.  Through OTC Link® ATS and OTC Link ECN, 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 and OTC Link ECN are SEC regulated ATSs, operated by OTC Link LLC, member FINRA/SIPC.

Subscribe to the OTC Markets RSS Feed

Investor Contact:

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

OTC MARKETS GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share information)



Three Months Ended December 31,


Year Ended December 31,


2020


2019


2020


2019

OTC Link

$                 5,095


$                 2,946


$               15,890


$               11,676

Market data licensing

7,358


6,214


28,133


24,447

Corporate services

7,325


6,898


27,206


26,716

Gross revenues

19,778


16,058


71,229


62,839

Redistribution fees and rebates

(714)


(625)


(2,810)


(2,489)

Net revenues

19,064


15,433


68,419


60,350

Transaction-based expenses

(1,362)


(214)


(3,022)


(746)

Revenues less transaction-based expenses

17,702


15,219


65,397


59,604

Operating expenses








Compensation and benefits

6,977


6,711


28,896


26,994

IT Infrastructure and information services

1,717


1,591


6,452


6,383

Professional and consulting fees

903


559


2,704


1,982

Marketing and advertising 

259


368


807


1,117

Occupancy costs

335


541


2,303


2,548

Depreciation and amortization

490


448


1,761


1,492

General, administrative and other

340


292


1,040


1,206

Total operating expenses

11,021


10,510


43,963


41,722

Income from operations

6,681


4,709


21,434


17,882

Other income








Other income

(19)


17


(27)


103

Income before provision for income taxes

6,662


4,726


21,407


17,985

Provision for income taxes

934


918


3,133


3,043

Net Income 

$                 5,728


$                 3,808


$               18,274


$               14,942









Earnings per share 








Basic

$                   0.49


$                   0.33


$                   1.56


$                   1.28

Diluted

$                   0.48


$                   0.32


$                   1.53


$                   1.25









Basic weighted average shares outstanding

11,418,394


11,380,397


11,402,703


11,364,217

Diluted weighted average shares outstanding

11,661,096


11,725,557


11,630,685


11,702,863

















Non-GAAP Reconciliation









Three Months Ended December 31,


Year Ended December 31,


2020


2019


2020


2019

Net Income

$                 5,728


$                 3,808


$               18,274


$               14,942

Excluding:








Interest Income

-


(24)


(19)


(109)

Provision for income taxes

934


918


3,133


3,043

Depreciation and amortization

490


448


1,761


1,492

Stock-based compensation expense

716


641


3,059


2,703

Adjusted EBITDA

$                 7,868


$                 5,791


$               26,208


$               22,071









Adjusted diluted earnings per share

$                   0.66


$                   0.48


$                   2.20


$                   1.84









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)






December 31,


2020


2019

Assets




Current assets




Cash and cash equivalents 

$               33,733


$               28,217

Short-term restricted cash

32


-

Accounts receivable, net of allowance for credit losses of $194 and $168

6,609


5,157

Prepaid income taxes

356


318

Prepaid expenses and other current assets

1,375


1,338

Total current assets

42,105


35,030

Property and equipment, net 

5,367


6,418

Operating lease right-of-use assets

14,844


16,018

Deferred tax assets, net

343


771

Goodwill

251


251

Intangible assets, net

40


40

Long-term restricted cash

1,532


1,561

Other assets

328


266

Total Assets

$               64,810


$               60,355





Liabilities and stockholders' equity




Current liabilities




Accounts payable

$                 1,251


$                    321

Income taxes payable

16


99

Accrued expenses and other current liabilities

9,965


9,154

Deferred revenue

18,765


15,815

Total current liabilities

29,997


25,389

Income tax reserve

801


1,764

Operating lease liabilities

14,466


15,529

Total Liabilities

45,264


42,682

Commitments and contingencies




Stockholders' equity




Common stock - par value $0.01 per share




Class A - 14,000,000 authorized, 12,346,491 issued, 11,709,857 outstanding at




December 31, 2020; 12,189,022 issued, 11,655,326 outstanding at December 31, 2019

123


122

Additional paid-in capital 

19,770


18,042

Retained earnings

11,770


8,106

Treasury stock - 636,634 shares at December 31, 2020 and 533,696 shares at December 31, 2019

(12,117)


(8,597)

Total Stockholders' Equity

19,546


17,673

Total Liabilities and Stockholders' Equity

$               64,810


$               60,355

(PRNewsfoto/OTC Markets Group Inc.)

 

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SOURCE OTC Markets Group Inc.

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