By:
Delivers Continued Strong Revenue and Earnings Growth
Fourth Quarter and Full Year 2021 Highlights:
- Gross revenues of $102.9 million for the year, up 45% versus 2020
- Operating income of $38.0 million for the year, up 77% versus 2020
- Operating profit margin of 38.0% for the year versus 31.3% for 2020
- Net income of $30.5 million for the year, up 67% versus 2020, driving a 65% increase in GAAP diluted EPS to $2.52
- Total cash returned to shareholders during 2021 of $27.0 million, comprised of dividends of $25.5 million and repurchases of common shares of $1.5 million, up 49% versus 2020
- 212 new OTCQX companies added and 451 new OTCQB companies added during 2021 to end the year with 570 and 1,150 OTCQX and OTCQB companies, respectively
- 111% increase in the number of companies subscribing to our Disclosure & News Service® products
- 155 graduates to a national securities exchange during 2021
- 93 subscribers to OTC Link ECN as of year-end 2021, up 20 versus 2020; approximately 48,000 average daily trades during 2021, versus approximately 11,500 during 2020
- Launch of our third Alternative Trading System, OTC Link® NQB, offering a fully attributable matching engine model with ability to distribute depth-of-book market data
- 32 Virtual Investor Conferences® events during 2021, with 626 companies participating
- Implemented amendments to Rule 15c2-11, enabling our OTC Link ATS to act as a qualified interdealer quotation system
- Fourth quarter gross revenues of $26.2 million, up 32% versus the prior year quarter
- Fourth quarter operating income of $10.8 million, up 61% versus the prior year quarter, resulting in an operating profit margin of 42.4% as compared to 35.0% for the fourth quarter of 2020
- Announcing first quarter 2022 dividend of $0.18 per share
NEW YORK, March 09, 2022 (GLOBE NEWSWIRE) — OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for trading 12,000 U.S. and international securities, today released its financial results for the fourth quarter and fiscal year 2021.
“2021 marked an important milestone in our evolution as a regulated market operator. Our gross revenues surpassed one hundred million dollars for the first time, and we delivered record financial results across all our businesses,” said R. Cromwell Coulson, President and Chief Executive Officer. “Our cornerstone project last year was the implementation of the SEC’s amendments to Rule 15c2-11 to efficiently support the compliance of our clients and effectively meet our new responsibilities as a Qualified Interdealer Quotation System. As we build on this momentum in 2022, we remain focused on our strategic initiatives to maximize the potential of our enhanced regulatory role for public companies, support the success of our broker-dealer subscribers and deliver sustainable growth for our stockholders.”
“We are pleased to report on a remarkable year of growth, seamless implementation of critical regulatory changes, and continued reliable service for our clients,” said Antonia Georgieva, Chief Financial Officer. “2021 marked our fifth year of consecutive revenue growth. Strong customer demand led to record growth in revenues and earnings per share and a robust operating margin expansion. The strong free cash flows that our business generated allowed us to deliver 49% growth in cash returned to our stockholders. We remain focused on growing our business and creating sustainable long-term value.”
Fourth Quarter 2021 compared to Fourth Quarter 2020
| Quarter Ended December 31, | |||||||||||||
| (in thousands, except shares and per share data) | 2021 | 2020 | % change | $ change | |||||||||
| OTC Link | $ | 5,591 | $ | 5,095 | 10% | 496 | |||||||
| Market data licensing | 8,777 | 7,358 | 19% | 1,419 | |||||||||
| Corporate services | 11,819 | 7,325 | 61% | 4,494 | |||||||||
| Gross Revenues | 26,187 | 19,778 | 32% | 6,409 | |||||||||
| Net revenues | 25,397 | 19,064 | 33% | 6,333 | |||||||||
| Revenues less transaction-based expenses | 23,819 | 17,702 | 35% | 6,117 | |||||||||
| Operating expenses | 13,041 | 11,021 | 18% | 2,020 | |||||||||
| Income from operations | 10,778 | 6,681 | 61% | 4,097 | |||||||||
| Operating profit margin | 42.4% | 35.0% | |||||||||||
| Income before provision for income taxes | 10,710 | 6,662 | 61% | 4,048 | |||||||||
| Net income | $ | 9,054 | $ | 5,728 | 58% | 3,326 | |||||||
| Diluted earnings per share | $ | 0.74 | $ | 0.48 | 54% | ||||||||
| Adjusted diluted earnings per share | $ | 0.98 | $ | 0.66 | 48% | ||||||||
| Weighted-average shares outstanding, diluted | 11,900,839 | 11,661,096 | 2% | ||||||||||
Fourth Quarter 2021 Financial Highlights
- Gross revenues of $26.2 million, up 32% over the prior year quarter.
- OTC Link revenues up 10%, with sustained elevated trading volumes and the impact of additional subscribers driving a 16% increase in transaction-based revenues on our OTC Link ECN.
- Market Data Licensing revenues up 19%, with a 13% quarter over quarter increase in pro-users driving a 16% increase in related revenues. The number of non-professional users of our market data increased 36%, reflective of an increased retail participation in the U.S. equities markets and helped drive a 36% increase in related revenues.
- Corporate Services delivered 61% growth in revenues quarter over quarter, driven by a 44% increase in revenues from our OTCQX market, a 56% increase in revenues from our OTCQB market, and a 134% increase in revenues from our Disclosure & News Service product. Robust growth in the number of companies subscribing to our offerings as well as price increases introduced at the beginning of 2021 contributed to the growth in Corporate Services revenues.
- Operating expenses increased 18% over the prior year quarter, primarily driven by a 17% increase in compensation and benefits costs, reflecting higher incentive compensation and higher sales commissions. The increase was further impacted by a 20% increase in IT infrastructure and information services costs and a 30% increase in professional and consulting fees.
- Net income increased 58% to $9.1 million for the quarter, reflecting the increase in operating income, partially offset by a quarter over quarter increase in our effective tax rate.
- Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 52% to $12.0 million, or $0.98 per adjusted diluted share.
Fiscal Year 2021 Results compared to Fiscal Year 2020
| Year Ended December 31, | ||||||||||||
| (in thousands, except shares and per share data) | 2021 | 2020 | % change | $ change | ||||||||
| OTC Link | $ | 29,665 | $ | 15,890 | 87% | 13,775 | ||||||
| Market data licensing | 33,751 | 28,133 | 20% | 5,618 | ||||||||
| Corporate services | 39,516 | 27,206 | 45% | 12,310 | ||||||||
| Gross Revenues | 102,932 | 71,229 | 45% | 31,703 | ||||||||
| Net revenues | 99,911 | 68,419 | 46% | 31,492 | ||||||||
| Revenues less transaction-based expenses | 90,638 | 65,397 | 39% | 25,241 | ||||||||
| Operating expenses | 52,622 | 43,963 | 20% | 8,659 | ||||||||
| Income from operations | 38,016 | 21,434 | 77% | 16,582 | ||||||||
| Operating profit margin | 38.0% | 31.3% | ||||||||||
| Income before provision for income taxes | 37,965 | 21,407 | 77% | 16,558 | ||||||||
| Net income | $ | 30,476 | $ | 18,274 | 67% | 12,202 | ||||||
| Diluted earnings per share | $ | 2.52 | $ | 1.53 | 65% | |||||||
| Adjusted diluted earnings per share | $ | 3.56 | $ | 2.20 | 62% | |||||||
| Weighted-average shares outstanding, diluted | 11,811,320 | 11,630,685 | 2% | |||||||||
Fiscal Year 2021 Financial Highlights
- Gross revenues of $102.9 million, up 45%.
- OTC Link revenues up 87%, with revenues contributed by our OTC Link ECN as the primary driver. OTC Link ECN benefited from elevated trading volumes, which surged to unprecedented levels early in 2021 before moderating later in the year.
- Market Data Licensing revenues up 20%, mainly due to growth in professional and non-professional user licenses.
- Corporate Services revenues up 45% for the year, primarily driven by an increased demand for our OTCQX, OTCQB, and Disclosure & News Service offerings with price increases also contributing. Our premium OTCQX and OTCQB markets and our Disclosure & News Service product allow issuers to meet their current public disclosure requirements under federal and state securities laws.
- Operating expenses up $8.7 million, or 20%.
- Compensation and benefits costs increased 5.2 million, or 18%, primarily due to an increase in cash bonus awards, resulting from improved earnings performance and higher sales commission driven by strong OTCQX and OTCQB sales.
- Net income increased 67% to $30.5 million due to a 77% increase in income from operations, partially offset by an increase in the Company’s effective tax rate, from 14.6% in 2020 to 19.7% in 2021.
- Adjusted EBITDA increased 64% to $43.1 million, or $3.56 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 March 31, 2022, to stockholders of record on March 23, 2022. The ex-dividend date is March 22, 2022.
Stock Buyback Program
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. 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 2021 Conference Call
The Company will host a conference call and webcast on Thursday, March 10, 2022, 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: 2748035
Call Replay Dial-in Numbers (available until March 24, 2022): 1-855-859-2056 (Domestic); 1-404-537-3406 (International); Replay ID Number: 2748035
Participants can access the conference via webcast at the following link (replay available until March 9, 2023):
https://edge.media-server.com/mmc/p/6qc8u2ry
OTC Markets Group’s 2021 Annual Report, the earnings release, transcript of the earnings call and presentation will also be available in the Investor Relations section of its 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) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| OTC Link | $ | 5,591 | $ | 5,095 | $ | 29,665 | $ | 15,890 | ||||||||
| Market data licensing | 8,777 | 7,358 | 33,751 | 28,133 | ||||||||||||
| Corporate services | 11,819 | 7,325 | 39,516 | 27,206 | ||||||||||||
| Gross revenues | 26,187 | 19,778 | 102,932 | 71,229 | ||||||||||||
| Redistribution fees and rebates | (790) | (714) | (3,021) | (2,810) | ||||||||||||
| Net revenues | 25,397 | 19,064 | 99,911 | 68,419 | ||||||||||||
| Transaction-based expenses | (1,578) | (1,362) | (9,273) | (3,022) | ||||||||||||
| Revenues less transaction-based expenses | 23,819 | 17,702 | 90,638 | 65,397 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Compensation and benefits | 8,135 | 6,977 | 34,049 | 28,896 | ||||||||||||
| IT Infrastructure and information services | 2,057 | 1,717 | 7,633 | 6,452 | ||||||||||||
| Professional and consulting fees | 1,170 | 903 | 4,495 | 2,704 | ||||||||||||
| Marketing and advertising | 326 | 259 | 1,028 | 807 | ||||||||||||
| Occupancy costs | 595 | 335 | 2,348 | 2,303 | ||||||||||||
| Depreciation and amortization | 465 | 490 | 1,796 | 1,761 | ||||||||||||
| General, administrative and other | 293 | 340 | 1,273 | 1,040 | ||||||||||||
| Total operating expenses | 13,041 | 11,021 | 52,622 | 43,963 | ||||||||||||
| Income from operations | 10,778 | 6,681 | 38,016 | 21,434 | ||||||||||||
| Other income | ||||||||||||||||
| Other income | (68) | (19) | (51) | (27) | ||||||||||||
| Income before provision for income taxes | 10,710 | 6,662 | 37,965 | 21,407 | ||||||||||||
| Provision for income taxes | 1,656 | 934 | 7,489 | 3,133 | ||||||||||||
| Net Income | $ | 9,054 | $ | 5,728 | $ | 30,476 | $ | 18,274 | ||||||||
| Earnings per share | ||||||||||||||||
| Basic | $ | 0.77 | $ | 0.49 | $ | 2.59 | $ | 1.56 | ||||||||
| Diluted | $ | 0.74 | $ | 0.48 | $ | 2.52 | $ | 1.53 | ||||||||
| Basic weighted average shares outstanding | 11,519,180 | 11,418,394 | 11,506,294 | 11,402,703 | ||||||||||||
| Diluted weighted average shares outstanding | 11,900,839 | 11,661,096 | 11,811,320 | 11,630,685 | ||||||||||||
| Non-GAAP Reconciliation | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Income | $ | 9,054 | $ | 5,728 | $ | 30,476 | $ | 18,274 | ||||||||
| Excluding: | ||||||||||||||||
| Interest Income | – | – | (1) | (19) | ||||||||||||
| Provision for income taxes | 1,656 | 934 | 7,489 | 3,133 | ||||||||||||
| Depreciation and amortization | 465 | 490 | 1,796 | 1,761 | ||||||||||||
| Stock-based compensation expense | 786 | 716 | 3,332 | 3,059 | ||||||||||||
| Adjusted EBITDA | $ | 11,961 | $ | 7,868 | $ | 43,092 | $ | 26,208 | ||||||||
| Adjusted diluted earnings per share | $ | 0.98 | $ | 0.66 | $ | 3.56 | $ | 2.20 | ||||||||
| 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. | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| (in thousands, except share information) | ||||||
| December 31, | ||||||
| 2021 | 2020 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 50,394 | $ | 33,733 | ||
| Short-term restricted cash | – | 32 | ||||
| Accounts receivable, net of allowance for credit losses of $244 and $194 | 7,404 | 6,609 | ||||
| Prepaid income taxes | 790 | 356 | ||||
| Prepaid expenses and other current assets | 1,363 | 1,375 | ||||
| Total current assets | 59,951 | 42,105 | ||||
| Property and equipment, net | 5,049 | 5,367 | ||||
| Operating lease right-of-use assets | 14,889 | 14,844 | ||||
| Deferred tax assets, net | 387 | 343 | ||||
| Goodwill | 251 | 251 | ||||
| Intangible assets, net | 40 | 40 | ||||
| Long-term restricted cash | 1,564 | 1,532 | ||||
| Other assets | 124 | 328 | ||||
| Total Assets | $ | 82,255 | $ | 64,810 | ||
| Liabilities and stockholders’ equity | ||||||
| Current liabilities | ||||||
| Accounts payable | $ | 962 | $ | 1,251 | ||
| Income taxes payable | 13 | 16 | ||||
| Accrued expenses and other current liabilities | 12,357 | 9,965 | ||||
| Deferred revenue | 28,432 | 18,765 | ||||
| Total current liabilities | 41,764 | 29,997 | ||||
| Income tax reserve | 989 | 801 | ||||
| Operating lease liabilities | 14,548 | 14,466 | ||||
| Total Liabilities | 57,301 | 45,264 | ||||
| Commitments and contingencies | ||||||
| Stockholders’ equity | ||||||
| Common stock – par value $0.01 per share | ||||||
| Class A – 17,000,000 authorized, 12,483,128 issued, 11,801,761 outstanding at | ||||||
| December 31, 2021; 12,346,491 issued, 11,709,857 outstanding at December 31, 2020 | 125 | 123 | ||||
| Additional paid-in capital | 21,681 | 19,770 | ||||
| Retained earnings | 16,787 | 11,770 | ||||
| Treasury stock – 681,367 shares at December 31, 2021 and 636,634 shares at December 31, 2020 | (13,639) | (12,117) | ||||
| Total Stockholders’ Equity | 24,954 | 19,546 | ||||
| Total Liabilities and Stockholders’ Equity | $ | 82,255 | $ | 64,810 | ||
