OTC Markets Group Reports Second Quarter 2022 Results Delivering Revenue and Earnings Growth

News Update

OTC Markets Group

Second Quarter 2022 Highlights:

• Gross revenues of $26.0 million for the quarter, up 2% versus the prior year period

• Operating income of $9.3 million for the quarter, up 1% versus the prior year period

• Operating profit margin of 36.7%, versus 37.0% for the prior year period

• Net income of $7.4 million, up 5% versus the prior year period, and quarterly diluted GAAP EPS of $0.61, up 3%

• Total cash returned to shareholders during the quarter in the form of dividends of $2.1 million

• Announcing third quarter 2022 dividend of $0.18 per share

• 594 OTCQX^® companies and 1,227 OTCQB^® companies at quarter-end, up 12% and 20%, respectively

• 62% increase in the number of companies subscribing to our Disclosure & News Service^® (“DNS”) products

• 15 graduates to a national securities exchange during the quarter

• 101 subscribers to OTC Link ECN as of June 30, 2022, up from 84 as of June 30, 2021; approximately 35,000 average daily trades during the quarter, down 23% from the prior year period

• Closed the acquisition of Blue Sky Data Corp, a provider of equity and debt compliance data regarding state Blue Sky securities rules and regulations
  

NEW YORK, Aug. 10, 2022 (GLOBE NEWSWIRE) --  OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for 12,000 U.S. and international securities, today announced its financial results for the second quarter of 2022.

“During the second quarter, we successfully closed the Blue Sky Data Corp acquisition,” said R. Cromwell Coulson, President and Chief Executive Officer. “Our team thoughtfully executed the integration. Shortly after closing, we transferred the data production to our platform and onboarded their team. We continue to focus on bringing positive changes to our markets by creating new opportunities and product value for our subscribers.”

“OTC Markets Group delivered revenue and earnings growth in an increasingly uncertain business environment,” said Antonia Georgieva, Chief Financial Officer. “Our diversified revenue streams provide strength and resilience to our business model. The continued growth in our Corporate Services business led the overall growth in revenues and more than offset the impact of reduced OTC Link trading activity.”

Second Quarter 2022 compared to Second Quarter 2021

Financial Highlights

		Three Months Ended June 30,
(in thousands, except shares and per share data)			2022				2021			% change			$ change
OTC Link		$	5,132			$	7,682			(33	%)		(2,550	)
Market data licensing			8,901				8,586			4	%		315
Corporate services			11,957				9,182			30	%		2,775
Gross revenues			25,990				25,450			2	%		540
Net revenues			25,209				24,704			2	%		505
Revenues less transaction-based expenses			23,851				22,217			7	%		1,634
Operating expenses			14,589				13,074			12	%		1,515
Income from operations			9,262				9,143			1	%		119
Operating profit margin			36.7	%			37.0	%
Income before provision for income taxes			9,253				9,143			1	%		110
Net income		$	7,402			$	7,072			5	%		330
Diluted earnings per share		$	0.61			$	0.59			3	%
Adjusted diluted earnings per share		$	0.88			$	0.86			2	%
Weighted-average shares outstanding, diluted			11,873,711				11,778,886			1	%

• Gross revenues were $26.0 million for the quarter, up 2% as compared to the prior year quarter, while revenues less transaction-based expenses increased 7%.

• OTC Link revenues decreased 33%, driven by a decline in transaction-based revenues from OTC Link ECN and OTC Link NQB, as compared to revenues from OTC Link ECN in the prior year period, consistent with trading volumes during the quarter remaining at lower levels compared to the prior year quarter.

• Market Data Licensing revenues grew 4%, reflecting professional and enterprise subscriber growth and the acquisition of Blue Sky Data Corp. The number of professional subscribers increased 4%, resulting in a 5% increase in related revenues. As a result of new enterprise subscribers, revenues from broker-dealer enterprise licenses increased 17% and revenues from internal system licenses, delayed data licenses and certain other data services increased 20%. The increase in Market Data Licensing revenues was partially offset by a 41% decline in revenue from non-professional users.

• Corporate Services delivered 30% growth, with revenues from our OTCQX market up 7% and revenues from our OTCQB market up 34%. New sales and the 96% retention rate we achieved for OTCQX during the 2022 annual renewal cycle, up from 94% in 2021, contributed to the growth. OTCQB maintained over 90% renewal rate. DNS revenues increased 83%, driven by a higher number of companies subscribing to DNS in connection with the enhanced current information requirements under Rule 15c2-11 that became effective last September.

• Operating expenses increased $1.5 million, or 12%, to $14.6 million, primarily as a result of a 6% increase in compensation costs, reflecting higher headcount, the impact of annual salary increases, and increases in incentive compensation as well as a 62% increase in professional and consulting fees, primarily related to the acquisition of Blue Sky Data Corp.
  
  

• Net income increased 5% to $7.4 million, driven by a 1% increase in operating income and a decrease in the Company’s effective tax rate from 22.7% in the prior year quarter to 20.0% in the second quarter of 2022, primarily as a result of an increase in the amount of excess tax benefit on stock-based compensation.

• Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, increased 4%, to $10.7 million, or $0.88 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 22, 2022, to stockholders of record on September 8, 2022. The ex-dividend date is September 7, 2022.

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 2022.

On March 7, 2022, 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 2022 Conference Call

The Company will host a conference call and webcast on Thursday, August 11, 2022, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail. The call and the webcast may be accessed as follows:

Webcast:
The conference webcast and management presentation can be accessed at the following link (replay available until August 10, 2023):
https://edge.media-server.com/mmc/p/qhkmqxaw

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/BI6d9edfc771dd4660bb55731a5a64e19a

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.

OTC Markets Group’s Quarterly Report for the quarter ended June 30, 2022, the 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

OTC MARKETS GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share information)
(Unaudited)
	Three Months Ended June 30,
		2022				2021
OTC Link	$	5,132			$	7,682
Market data licensing		8,901				8,586
Corporate services		11,957				9,182
Gross revenues		25,990				25,450
Redistribution fees and rebates		(781	)			(746	)
Net revenues		25,209				24,704
Transaction-based expenses		(1,358	)			(2,487	)
Revenues less transaction-based expenses		23,851				22,217
Operating expenses
Compensation and benefits		9,045				8,497
IT Infrastructure and information services		1,894				1,876
Professional and consulting fees		1,738				1,076
Marketing and advertising		380				280
Occupancy costs		598				619
Depreciation and amortization		496				441
General, administrative and other		438				285
Total operating expenses		14,589				13,074
Income from operations		9,262				9,143
Other income(expense)
Other income(expense), net		(9	)			-
Income before provision for income taxes		9,253				9,143
Provision for income taxes		1,851				2,071
Net income	$	7,402			$	7,072
Net income per share
Basic	$	0.62			$	0.60
Diluted	$	0.61			$	0.59
Basic weighted average shares outstanding		11,593,227				11,497,856
Diluted weighted average shares outstanding		11,873,711				11,778,886
Non-GAAP Reconciliation
	Three Months Ended June 30,
		2022				2021
Net Income	$	7,402			$	7,072
Excluding:
Interest Income		-				-
Provision for income taxes		1,851				2,071
Depreciation and amortization		496				441
Stock-based compensation expense		980				764
Adjusted EBITDA	$	10,729			$	10,348
Adjusted diluted earnings per share	$	0.88			$	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)
(Unaudited)
	June 30,				December 31,
		2022				2021
Assets
Current assets
Cash	$	37,649			$	50,394
Accounts receivable, net of allowance for credit losses of $324 and $244		7,559				7,404
Prepaid income taxes		1,824				790
Prepaid expenses and other current assets		1,554				1,363
Total current assets		48,586				59,951
Property and equipment, net		5,076				5,049
Operating lease right-of-use assets		14,269				14,889
Deferred tax assets, net		469				387
Goodwill		3,984				251
Intangible assets, net		8,283				40
Long-term restricted cash		1,565				1,564
Other assets		286				124
Total Assets	$	82,518			$	82,255
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	1,068			$	962
Accrued expenses and other current liabilities		8,929				12,357
Income taxes payable		7				13
Deferred revenue		23,312				28,432
Total current liabilities		33,316				41,764
Income tax reserve		943				989
Operating lease liabilities		13,937				14,548
Total Liabilities		48,196				57,301
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,583,911 issued, 11,857,404 outstanding at
June 30, 2022; 12,483,128 issued, 11,801,761 outstanding at December 31, 2021		126				125
Additional paid-in capital		23,076				21,681
Retained earnings		27,535				16,787
Treasury stock - 726,507 shares at June 30, 2022 and 681,367 shares at December 31, 2021		(16,415	)			(13,639	)
Total Stockholders' Equity		34,322				24,954
Total Liabilities and Stockholders' Equity	$	82,518			$	82,255

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/2d030069-81ff-4261-8f00-9012eb583051