(MENAFN- PR Newswire)
NEW YORK, March 6, 2019 /PRNewswire/ --
Fourth Quarter and Full Year 2018 Highlights:
- Gross revenues of $59.3 million for the year, an increase of 8% over 2017 and operating income of $19.6 million for the year, an increase of 7% over 2017
- Net income of $16.2 million for the year, an increase of 29% over 2017, driving a 28% increase in GAAP diluted EPS to $1.36
- Fourth quarter gross revenues of $15.4 million and operating income of $4.8 million, an increase of 11% and 3% over the prior periods
- Operating profit margin of 35% for the year and 33% for the quarter (35% and 35%, respectively, for 2017)
- Total cash returned to shareholders during 2018 of $15.2 million, comprised of dividends of $14.2 million and repurchases of common shares of $1.0 million
- Announcing first quarter 2019 dividend of $0.15 per share
- 70 graduates to a national securities exchange during 2018, up 15% from 2017
- Continued progress in achieving state Blue Sky exemptions for our OTCQX and OTCQB markets, with OTCQX reaching 34 states and OTCQB reaching 31 states
- Announced opening of our new European subsidiary, OTC Markets Group International Ltd, headquartered in London
- Announced acquisition of QaravanSM Inc., enhancing our suite of Market Data Services
- Announced acquisition from PR Newswire of assets related to the Virtual Investor ConferencesSM business
- Announced upcoming move to new corporate headquarters at 300 Vesey Street, part of the premier Brookfield Place complex in downtown New York City
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 released its financial results for the fourth quarter and fiscal year 2018.
"We were excited to announce two small acquisitions that will help us strengthen our organization and better serve client needs. Announced in February 2019, our acquisition of Qaravan Inc., positions us to provide cost-effective benchmarking and regulatory data to the banking sector. Announced in January 2019, our acquisition of assets related to the Virtual Investor Conferences business from PR Newswire aligns with one of our core objectives – to provide more dynamic online communication and investor engagement tools for public companies," said R. Cromwell Coulson, President and Chief Executive Officer.
"Each of our three business lines delivered strong organic revenue growth in 2018 which in turn drove strong earnings and growth in our free cashflow. As we look to 2019, we intend to continue to invest in and commit resources to those strategic opportunities that best position us to deliver continued and sustainable growth," said Bea Ordonez, Chief Financial Officer.
Fourth Quarter 2018 compared to Fourth Quarter 2017
Quarter Ended December 31,
(in thousands, except shares and per share data) 2018
2017 % change
$ change
OTC Link $ 2,918
$ 2,546 15%
372
Market data licensing 5,949
5,445 9%
504
Corporate services 6,538
5,898 11%
640
Gross Revenues 15,405
13,889 11%
1,516
Net revenues 14,797
13,243 12%
1,554
Revenues less transaction-based expenses 14,650
13,243 11%
1,407
Operating expenses 9,842
8,592 15%
1,250
Income from operations 4,808
4,651 3%
157
Operating profit margin 32.5%
35.1%
Income before provision for income taxes 4,845
4,657 4%
188
Net income $ 4,118
$ 2,915 41%
1,203
Diluted earnings per share $ 0.34
$ 0.24 43%
Adjusted diluted earnings per share $ 0.47
$ 0.45 4%
Weighted-average shares outstanding, diluted 11,660,075
11,614,683 0%
Financial Highlights
- Gross revenues of $15.4 million, up 11% over the prior period.
- Corporate Services delivered 11% growth in revenues versus the prior period, driven by continuing strong sales, moderately reduced churn, as well as the impact of price increases in respect of our OTCQB Market.
- Market Data Licensing revenues saw a 9% increase, with price increases and new sales of our compliance and other data license products and EOD pricing services, and quarter over quarter increases in reported professional and non-professional users driving much of that increase.
- OTC Link revenues were up 15%, largely a result of revenues from our OTC Link ECN which launched in December 2017.
- Operating expenses increased 15% over the prior year quarter, the result of a 12% increase in compensation costs, a 62% increase in occupancy costs and a 65% increase in marketing spend, partially offset by a 6% decrease in information technology costs.
- Compensation costs in the quarter increased as a result of an increase in headcount, the impact of annual salary increases, an increase in sales commissions and an increase in cash bonus payments accrued in respect of 2018, including a true up to actual incentive awards which was booked in December.
- Net income increased 41%, to $4.1 million for the quarter, reflecting the increase in operating income and a quarter over quarter decrease in our effective tax rate ("ETR") from 37.4% to 15.0%.
- The Company's ETR decreased following the reduction in the federal corporate tax rate from 35% to 21% that resulted from the 2017 enactment of the Tax Cuts and Jobs Act, as well as the impact of an increase in the amount of Research and Development Credits claimed in 2018 and the inclusion in 2018 of a deduction in respect of Foreign Derived Intangible Income.
- Adjusted EBITDA, which excludes non-cash stock-based compensation expense, increased 4% to $5.6 million, or $0.47 per adjusted diluted share.
Fiscal Year 2018 Results compared to Fiscal Year 2017
Year Ended December 31,
(in thousands, except shares and per share data) 2018
2017 % change
$ change
OTC Link $ 11,175
$ 10,075 11%
1,100
Market data licensing 23,383
21,922 7%
1,461
Corporate services 24,720
22,659 9%
2,061
Gross Revenues 59,278
54,656 8%
4,622
Net revenues 56,830
52,176 9%
4,654
Revenues less transaction-based expenses 56,455
52,176 8%
4,279
Operating expenses 36,810
33,872 9%
2,938
Income from operations 19,645
18,304 7%
1,341
Operating profit margin 34.6%
35.1%
Income before provision for income taxes 19,761
18,351 8%
1,410
Net income $ 16,237
$ 12,559 29%
3,678
Diluted earnings per share $ 1.36
$ 1.06 28%
Adjusted diluted earnings per share $ 1.93
$ 1.82 6%
Weighted-average shares outstanding, diluted 11,622,770
11,566,086 0%
Financial Highlights
- Gross revenues of $59.3 million, up 8% versus the prior year.
- Corporate Services revenues up 9% for the year. On our OTCQB market, continuing strong sales, and moderately improved voluntary retention rates, with overall churn roughly in line versus the prior year, and the impact of a 20% price increase effective for new and renewing customers for 2018 combined to deliver a 12% increase in our OTCQB revenues. A significant increase in new sales on our OTCQX market was the primary driver of an 11% increase in OTCQX revenues.
- Market Data Licensing revenues up 7%, with price increases and new sales of our compliance and other data license products and EOD pricing services contributing to a 26% year over year increase in related revenues and increases in reported professional and non-professional users driving a 2% increase in relates revenues.
- OTC Link revenues were up 11%, with the late 2017 launch of our OTC Link ECN driving much of that increase and an 11% increase in revenues from trade messages also contributing.
- Operating expenses for the 2018 fiscal year were up $2.9 million, or 9%.
- Compensation costs increased $2.3 million, or 11%, a result of the impact of increased headcount, annual salary increases, an increase in sales commissions, an increase in the amortized cost of stock-based compensation, and an increase in the level of cash incentive awards for 2018.
- Net income increased 29%, or $3.7 million, a result of the 7% increase in income from operations as well as a decrease in the Company's ETR, from 32% to 18%.
- The Company's ETR for the year was primarily impacted by the lower rate of federal corporate income tax in effect for 2018.
- Adjusted EBITDA increased 6% to $23 million, or $1.93 per adjusted diluted share.
Business Developments and News
- In February 2019, we announced our acquisition of Qaravan Inc., a provider of software and risk and performance analytics to the public and private banking industry. This acquisition serves to enhance our suite of Market Data services and positions us to better serve the needs of the banking sector.
- In January 2019, we announced our acquisition from PR Newswire LLC of certain assets related to the Virtual Investor Conferences business, an online investor conference platform that directly connects issuers with investors, analysts and advisors.
- In January 2019, we announced the establishment of our overseas subsidiary, OTC Markets Group International Ltd., incorporated in October 2018 and headquartered in London. In expanding our global footprint, we hope to continue to grow the number of international issuers on our premium markets.
- In December 2018, the SEC adopted rules to allow SEC reporting companies to use Regulation A to raise up to $50 Million in a 12-month period. These amendments to Regulation A became effective January 31st and were largely based on our 2016 Petition for Rulemaking to the SEC.
- In December 2018, we announced our inclusion at number 28 on Crain's List of the 100 Best Places to Work in New York City. The annual list recognizes companies with the highest levels of employee satisfaction and engagement based on an employee survey and feedback on the company's culture, benefits, philosophy and workplace environment.
- Effective in October 2018, we executed a sublease for approximately 33 thousand square feet of prime office space at 300 Vesey Street, part of the premier Brookfield Place complex in downtown New York City. This space will serve as our new corporate headquarters and we expect to occupy the space during the first quarter of 2019.
- As of March 1, 2019, our OTCQX market is exempt from state Blue Sky laws regarding secondary trading in thirty-four states and our OTCQB market is exempt in thirty-one states.
- As of March 1, 2019, there are thirty-eight transfer agents participating in our Transfer Agent Verified Shares Program, making current share information publicly available for approximately 99% of the U.S. companies on the OTCQX and OTCQB markets. The continued expansion of the program further enhances the availability and reliability of company share information in the OTC space.
- Since its launch in December 2017, our OTC Link ECN has added eleven new broker-dealer subscribers and enabled thirty existing OTC Link ATS subscribers for access to the OTC Link ECN. Over the course of 2018, we have seen consistent quarter over quarter increases in the average daily volume traded on the platform and in corresponding transaction-based revenues.
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 28, 2019 to stockholders of record on March 18, 2019. The ex-dividend date is March 15, 2019.
Stock Buyback Program
On March 5, 2019, 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 2018 Conference Call
The Company will host a conference call on Thursday, March 7, 2019, 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: 1-877-407-9124 (Domestic); 1-201-689-8584 (International)
Replay Dial-in Numbers (Available until April 7, 2019): 1-877-481-4010 (Domestic); 1-919-882-2331 (International); Replay PIN Number: 44768
Participants can access the conference via Internet webcast at the following link: https://www.investornetwork.com/event/presentation/44768
OTC Markets Group's 2018 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 10,000 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 operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.
Subscribe to the OTC Markets RSS Feed
Investor Contact:
Bea OrdonezChief Financial OfficerPhone: 212-220-2215Email:
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,
2018 2017
2018 2017
OTC Link $ 2,918
$ 2,546 $ 11,175
$ 10,075
Market data licensing 5,949
5,445 23,383
21,922
Corporate services 6,538
5,898 24,720
22,659
Gross revenues 15,405
13,889 59,278
54,656
Redistribution fees and rebates (608)
(646) (2,448)
(2,480)
Net revenues 14,797
13,243 56,830
52,176
Transaction-based expenses (147)
- (375)
-
Revenues less transaction-based expenses 14,650
13,243 56,455
52,176
Operating expenses
Compensation and benefits 6,075
5,421 23,820
21,481
IT Infrastructure and information services 1,478
1,565 5,554
5,895
Professional and consulting fees 530
424 2,110
1,732
Marketing and advertising 402
244 1,148
902
Occupancy costs 750
462 2,107
1,776
Depreciation and amortization 260
267 1,042
1,361
General, administrative and other 347
209 1,029
725
Total operating expenses 9,842
8,592 36,810
33,872
Income from operations 4,808
4,651 19,645
18,304
Other income
Other income 37
6 116
47
Income before provision for income taxes 4,845
4,657 19,761
18,351
Provision for income taxes 727
1,742 3,524
5,792
Net Income $ 4,118
$ 2,915 $ 16,237
$ 12,559
Net income per share
Basic $ 0.36
$ 0.25 $ 1.41
$ 1.10
Diluted $ 0.34
$ 0.24 $ 1.36
$ 1.06
Basic weighted average shares outstanding 11,268,305
11,151,240 11,250,984
11,141,161
Diluted weighted average shares outstanding 11,660,075
11,614,683 11,622,770
11,566,086
Non-GAAP Reconciliation
Three Months Ended December 31, Year Ended December 31,
2018 2017
2018 2017
Net Income $ 4,118
$ 2,915 $ 16,237
$ 12,559
Excluding:
Interest Income (37)
(9) (76)
(21)
Provision for income taxes 727
1,742 3,524
5,792
Depreciation and amortization 260
267 1,042
1,361
Stock-based compensation expense 533
454 2,263
1,913
Adjusted EBITDA $ 5,601
$ 5,369 $ 22,990
$ 21,604
Adjusted diluted earnings per share $ 0.47
$ 0.45 $ 1.93
$ 1.82
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,
2018 2017
Assets
Current assets
Cash $ 28,813
$ 23,683
Short-term restricted cash 160
-
Accounts receivable, net of allowance for doubtful accounts of $169 and $146 4,942
6,450
Prepaid income taxes 478
1,013
Prepaid expenses and other current assets 2,360
1,303
Total current assets 36,753
32,449
Property and equipment, net 1,980
2,018
Deferred tax assets, net 1,043
796
Goodwill 251
251
Intangible assets, net 61
111
Long-term restricted cash 1,561
692
Total Assets $ 41,649
$ 36,317
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 693
$ 786
Accrued expenses and other current liabilities 6,018
4,858
Deferred revenue 16,070
15,531
Total current liabilities 22,781
21,175
Deferred rent 1,001
246
Income tax reserve 1,458
1,105
Total Liabilities 25,240
22,526
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 14,000,000 authorized, 12,035,941 issued, 11,548,956 outstanding at
December 31, 2018; 11,891,366 issued, 11,444,706 outstanding at December 31, 2017 120
119
Additional paid-in capital 15,772
14,150
Retained earnings 7,724
5,682
Treasury stock - 486,985 shares at December 31, 2018 and 446,660 shares at December 31, 2017 (7,207)
(6,160)
Total Stockholders' Equity 16,409
13,791
Total Liabilities and Stockholders' Equity $ 41,649
$ 36,317
SOURCE OTC Markets Group Inc.
Related Links
http://www.otcmarkets.com
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