OTCM - OTC Markets Group Reports First Quarter 2023 Results Delivering Continued Revenue Growth

First Quarter 2023 Highlights:

• Gross revenues of $28.0 million for the quarter, up 8% versus the prior year period
• Operating income of $6.9 million for the quarter, down 20% versus the prior year period
• Operating profit margin of 25.4%, versus 34.4% for the prior year period
• Net income of $6.3 million, down 17% versus the prior year period, and quarterly diluted GAAP EPS of $0.52, down 16%
• Total cash returned to shareholders during the quarter of $5.5 million, comprised of dividends of $2.1 million and repurchases of common stock of $3.4 million
• Announcing second quarter 2023 dividend of $0.18 per share
• 593 OTCQX ^® and 1,218 OTCQB ^® companies at quarter end
• 10 graduates to a national securities exchange during the quarter
• 102 subscribers to OTC Link ECN as of March 31, 2023, up 4 versus March 31, 2022; approximately 35,000 average daily trades during the quarter versus approximately 39,000 during the prior year period
• Successful migration of the EDGAR ^® Online platform to a cloud environment
• On May 5, 2023, FINRA granted our application to permit digital asset securities to be traded by broker-dealers on OTC Link ATS
  

NEW YORK, May 09, 2023 (GLOBE NEWSWIRE) -- OTC Markets Group Inc. (OTCQX: OTCM), operator of regulated markets for trading 12,000 U.S. and international securities, today announced its financial results for the first quarter of 2023.

“During the first quarter of 2023, our team completed the critical first step of the integration of EDGAR Online: the migration of the technology platform to our cloud environment. We achieved this goal while delivering uninterrupted service to our subscribers. We are excited about the possibilities the EDGAR Online data creates to enhance our compliance processes and product offerings,” said R. Cromwell Coulson, President and Chief Executive Officer . “We also recently received FINRA approval to permit digital asset securities to be traded by broker-dealers on OTC Link ATS. This approval furthers our mission of operating regulated markets for broker-dealers and issuers of securities. While it will be some time until the regulatory framework and infrastructure develop, we believe our markets are well-positioned to be part of new trading, data, and disclosure solutions for these securities.”

“OTC Markets Group delivered solid revenue growth during the first quarter of 2023, while deploying resources to integrate EDGAR Online,” said Antonia Georgieva, Chief Financial Officer . “Our Blue Sky Data Corp and EDGAR Online transactions contributed to the growth in our revenues, offsetting the impact of challenging economic conditions on our organic growth. Our overall costs increased, primarily due to the integration of EDGAR Online and investments in our business. We remain focused on enhancing our value proposition to subscribers and on retaining and growing our customer base.”

First Quarter 2023 compared to First Quarter 2022

Financial Highlights

• Gross revenues of $28.0 million, up 8% over the prior year quarter.   Revenues less transaction-based expenses up 8%.
• OTC Link revenues flat, relative to the prior year quarter. Transaction-based revenues from OTC Link ECN and OTC Link NQB up 12%, reflecting increases in certain fees that offset the impact of lower trading volumes on these platforms.   Reduced trading activity on OTC Link ATS resulted in messages revenue declining 20% and QAP One Statement fees declining 37%, which balanced out the increase in transaction-based revenues.
• Market Data Licensing revenues up 26%, largely due to the contribution of the acquisitions of Blue Sky Data Corp and EDGAR Online. Excluding the effect of the acquisitions, Market Data Licensing revenues increased 4%. Pro-user revenues were up 1%, in line with a 1% increase in the number of professional users quarter over quarter. Revenues from non-professional users were down 31%, driven by a 30% decrease in the number of non-professional users of our market data. Revenues from market data connectivity fees increased 57% due to price increases. Revenues from internal system licenses, delayed data licenses, and certain other data services increased 12% due to growth in subscribers and price increases for certain licenses.
• Corporate Services revenues down 2% quarter over quarter, with a 4% increase in revenues from our OTCQX market and a 1% increase in revenues from our OTCQB market, offset by a 12% decrease in revenues from our Disclosure & News Service ^® (“DNS”) product.   A higher average number of companies subscribing to our OTCQX and OTCQB markets, as well as annual, incremental price increases effective at the beginning of 2023, contributed to the quarter over quarter growth in revenues from OTCQX and OTCQB, while a reduction in the average number of companies subscribing to DNS drove the offset.   Contributing to the decline in Corporate Services revenues was also lower revenue from our Virtual Investor Conferences ^® product due to fewer events held during the quarter.
• Operating expenses increased 23% over the prior year quarter, primarily driven by a 17% increase in compensation and benefits costs, reflecting a higher headcount as a result of our acquisitions. The growth in operating expenses was further impacted by a 35% increase in IT infrastructure and information services costs and a 167% increase in general, administrative and other expenses, primarily as a result of the EDGAR Online acquisition. Operating expenses include approximately $900 thousand in one-time, non-recurring integration costs.
• Operating income and net income decreased 20% to $6.9 million and 17% to $6.3 million, respectively.
• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, decreased 11% to $9.2 million, or $0.75 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 June 22, 2023, to stockholders of record on June 8, 2023.   The ex-dividend date is June 7, 2023.

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. During the first quarter of 2023, the Company purchased 58,262 shares at an average price of $58.00 per share.

On March 6, 2023, 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.

First Quarter 2023 Conference Call

The Company will host a conference call and webcast on Wednesday, May 10, 2023, at 8:30 a.m. Eastern Time, during which management will discuss the financial results in further detail. The call and webcast may be accessed as follows:

Webcast:
The conference webcast and management presentation can be accessed at the following link (replay available until May 9, 2024):
https://edge.media-server.com/mmc/p/urin54ns

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/BI31de25e52ceb481cbef511743e01f5cb

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.

The Quarterly Report, 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

Media Contact:

OTC Markets Group Inc.
Phone: (212) 896-4428
Email: media@otcmarkets.com