OTC Markets Group Announces Third Quarter 2012 Financial Results

       OTC Markets Group Announces Third Quarter 2012 Financial Results

Announces Special and Quarterly Cash Dividends

PR Newswire

NEW YORK, Nov. 12, 2012

NEW YORK, Nov. 12, 2012 /PRNewswire/ --

Third Quarter 2012 Highlights:

  oGross revenues increased 6% to $8.7 million as compared to the third
    quarter 2011
  oOperating profit margin of 23%
  oAdded two directors, further strengthening the Board's expertise
  oAnnouncing special dividend of $0.25
  oAnnouncing quarterly dividend of $.05, marking sixteenth consecutive
    quarterly dividend

OTC Markets Group Inc. (OTCQX: OTCM) operator of Open, Transparent and
Connected financial marketplaces for 10,000 U.S. and global securities, today
announced its financial results for the three and nine months ended September
30, 2012, a special dividend of $0.25 and a quarterly cash dividend of $0.05.

(Logo: http://photos.prnewswire.com/prnh/20110118/MM31963LOGO )

"Our focus during 2012 has been on the execution of our core mission: to
create better informed and more efficient marketplaces," said R. Cromwell
Coulson, President and Chief Executive Officer. "We have been able to grow
revenue while providing services that enable investors to intelligently
analyze, value and trade securities through the broker of their choice."

"We are especially pleased to announce that our Board of Directors declared a
special dividend of $0.25 per share, payable in December 2012," continued
Coulson. "This special dividend, in addition to our sixteenth consecutive
quarterly dividend, highlights our commitment to providing superior returns to
our shareholders."

"We have continued to grow revenue during a period of lower trading volumes
and general economic uncertainty. The small decrease in operating profit
margin during the third quarter of 2012 was primarily due to a strategic
decision to reinvest in our business during a period of slightly slower
revenue growth" said Wendy Fraulo, Chief Financial Officer.

Third Quarter Results

Revenues

Gross revenues during the third quarter of 2012 increased $0.5 million, or 6%,
to $8.7 million from $8.2 million during the third quarter of 2011. Revenue
from the company's OTC Link ATS Trading Services business line was negatively
impacted by low trading volume throughout the industry during the third
quarter of 2012. Revenue generated by the QAP One Statement service and an
increase in subscriber quote volume on OTC Link ATS helped offset a decrease
in revenue from OTC Dealer license subscriptions. Revenue from the Market
Data Licensing business line increased $0.2 million during the third quarter
of 2012, largely driven by increases in professional licenses and
broker-dealer enterprise license subscriptions. The increase in OTCQX
companies continues to be a significant driver of the company's revenue
growth, contributing $0.4 million of the increase in total gross revenue
during the third quarter of 2012, although the OTCQX marketplace's rate of
growth has slowed in 2012 during a period of low trading volumes. The Issuer
Services business line had the largest growth in gross revenue from the third
quarter of 2011 to the third quarter of 2012, although Issuer Services
revenues from services not related to OTCQX decreased $0.1 million.

Operating Expenses

Operating expenses for the third quarter of 2012 increased $0.7 million, or
12%, to $6.4 million from $5.7 million during the third quarter of 2011,
largely driven by an increase in compensation and benefits expenses of $0.3
million, or 8% as headcount increased by 8 employees to 72 at September 30,
2012 from 64 employees at September 30, 2011. Marketing and advertising
expenses increased $0.3 million, or 100%, primarily attributable to our use of
a dedicated outside advertising agency, which increased related agency fees by
$0.2 million, as well as other increases in costs related to promoting the
www.otcmarkets.com website. Increases in operating expenses were offset by a
$0.1 million decrease in general, administrative and other expenses, primarily
due to a $48 thousand decrease in bad debt expense and lower general spending.

Income from Operations and Net Income

Income from operations remained constant at $1.9 million for each of the third
quarters of 2012 and 2011, and operating profit margin decreased from 25%
during the third quarter of 2011 to 23% during the third quarter of 2012. The
lower operating margin was primarily due to higher consulting and marketing
expenses in a period of slower revenue growth.

Net income for the third quarter of 2012 decreased $0.1 million, or 13%, to
$1.2 million, as compared to $1.3 million during the third quarter of 2011.
Net income per weighted average diluted shares outstanding decreased to $0.11
for the third quarter of 2012, as compared to $0.12 in the third quarter of
2011.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2012 increased 5% to $2.5 million,
compared to $2.4 million in the prior year period as significant non-cash
expenses, such as depreciation and stock based compensation expense, grew as a
percentage of total operating expenses.

Year to Date Results

Revenues

Gross revenues during the nine month period ended September 30, 2012 increased
$2.0 million, or 8%, to $26.1 million from $24.1 million during the same
period in 2011. Overall revenue from OTC Link ATS remained constant. Revenue
from QAP One Statement service contributed $0.3 million, and transaction
revenue from quotes increased $0.1 million, or 5%, due to increased quote
activity on OTC Link ATS. This increase was offset by decreases in revenue
from lower messaging activity on OTC Link ATS and fewer OTC Link ATS
subscription licenses and licenses of OTC Dealer due to some contraction in
the broker-dealer industry. Market Data Licensing revenues increased $0.7
million, or 7%, primarily due to a 4% increase in professional license
subscriptions and a 28%, or $216 thousand, increase in broker-dealer
enterprise licenses. Growth in Issuer Services revenue of $1.3 million, or
22%, was driven by the increase of 120 OTCQX companies during the twelve
months ended September 30, 2012.

Operating Expenses

Operating expenses during the nine month period ended September 30, 2012
increased $1.3 million, or 7%, to $18.3 million from $17.0 million during the
same period in 2011, primarily due to an increase in compensation and benefits
expenses of $0.7 million, or 7%, driven by the increase in headcount and
related direct costs. Compensation cost as a percentage of gross revenue
remained consistent at approximately 38% during the nine months ended
September 30, 2012 and 2011, respectively. Marketing expenses increased $0.2
million, or 20%, primarily due to the increased use of an outside advertising
agency and increased sponsorship costs. Professional and consulting fees
increased $0.3 million, or 18%, due to an increased use of professional and
technical specialists during 2012, offset by lower legal fees of $0.2 million.

Income from Operations and Net Income

Income from operations increased $1.2 million, or 22%, to $6.5 million as
compared to $5.3 million during the nine month periods ended September 30,
2012 and 2011, respectively, and operating profit margin improved to 26% from
24% during the same periods. The increase in profitability through the nine
month period ended September 30, 2012 demonstrates management's efforts to
scale operations during the course of the year.

Net income increased $0.3 million, or 10%, to $3.9 million, as compared to
$3.6 million during the nine month periods ended September 30, 2012 and 2011,
respectively, and net income per weighted average diluted shares outstanding
increased to $0.36 from $0.33 during the same periods.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended September 30, 2012 grew 27% to $8.4
million, compared to $6.6 million for the comparable period in 2011 as
significant non-cash expenses, such as depreciation and stock based
compensation expense, grew as a percentage of total operating expenses.

Dividend Declaration – Special and Quarterly Cash Dividends

OTC Markets Group also announced today that its Board of Directors authorized
a special cash dividend on its Class A Common Stock of $0.25 per share, and a
quarterly cash dividend of $0.05 per share. The special dividend is payable
on December 6, 2012 to stockholders of record on November 23, 2012, with an
ex-dividend date of November 21, 2012. The quarterly dividend is payable on
December 26, 2012 to stockholders of record on December 6, 2012, with an
ex-dividend date of December 4, 2012.

The special dividend is the first in the company's history, and the quarterly
dividend marks the Company's 16^th consecutive quarter of dividend payments.

Third Quarter 2012 Conference Call

The company will host a conference call on Tuesday, November 13, 2012 at 8:00
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: 1-800-447-0521 (Domestic);
1-847-413-3238 (International); Call Confirmation Number 3364-4840. Replay
Dial-in Numbers (Available until November 27, 2012): 1-888-843-7419
(Domestic); 1-630-652-3042 (International); Replay Passcode: 3364-4840#.

A live webcast and webcast replay of the call will also be available in the
Investor Relations section of the corporate web site at
http://www.otcmarkets.com/investor-relations/overview.

OTC Markets Group's Quarterly Report for the three and nine month periods
ended September 30, 2012 is available publicly at www.otcmarkets.com.

About OTC Markets Group Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates Open, Transparent and Connected
financial marketplaces for 10,000 U.S. and global securities. Through our OTC
Link^® ATS, we directly link a diverse network of broker-dealers that provide
liquidity and execution services for a wide spectrum of securities. We
organize these securities into tiered marketplaces to inform investors of
opportunities and risks - OTCQX^® - The Intelligent Marketplace for the Best
OTC Companies; OTCQB^® - The Venture Marketplace; and OTC Pink^® - The Open
Marketplace. Our data-driven platform enables efficient trading through any
broker at the best possible price and empowers a broad range of companies to
improve the quality and availability of information for their investors. To
learn more about how we create smarter financial marketplaces, visit
www.otcmarkets.com.

OTC Link ATS is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated
ATS.





OTC MARKETS GROUP INC. (formerly Pink OTC Markets Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
                     Three Months Ended September  Nine Months Ended September
                     30,                           30,
                     2012             2011         2012           2011
Trading services     $          $       $         $     
                      2,821           2,874     8,837       8,850
Market data          3,380            3,171        10,163         9,471
licensing
Issuer services      2,502            2,150        7,101          5,811
 Gross revenues     8,703            8,195        26,101         24,132
Redistribution fees  ( 474 )          ( 611 )      ( 1,367 )      ( 1,834 )
and rebates
 Net revenues       8,229            7,584        24,734         22,298
Operating expenses
 Compensation and   3,260            3,007        9,783          9,126
benefits
 IT Infrastructure
and data             817              812          2,444          2,469
communications
 Professional and   682              438          1,780          1,503
consulting services
 Marketing and      643              321          1,448          1,211
advertising
 Occupancy costs    364              417          1,052          1,144
 Depreciation and   406              364          1,235          927
amortization
 General,
administrative and   191              306          530            626
other
Total operating     6,363            5,665        18,272         17,006
expenses
 Income from        1,866            1,919        6,462          5,292
operations
Other
income/(expense)
Interest income     2                14           13             31
Miscellaneous       20               ( 42 )       18             ( 42 )
income (expense)
 Income before
provision for income 1,888            1,891        6,493          5,281
taxes
Provision for income 734              571          2,595          1,729
taxes
 Net Income        $          $       $         $     
                      1,154           1,320     3,898       3,552
Net income per
share
 Basic              $          $       $         $     
                       0.11           0.12     0.36       0.34
 Diluted            $          $       $         $     
                       0.11           0.12     0.36       0.33
Basic weighted
average shares       10,541,505       10,474,591   10,529,119     10,466,061
outstanding
Diluted weighted
average shares       10,574,281       10,508,172   10,582,661     10,528,273
outstanding
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 our current
financial performance and our prospects for the future.
Non-GAAP
Reconciliation
                     Three Months Ended June 30,   Nine Months Ended September
                                                   30,
                     2012             2011         2012           2011
Net Income           $          $       $         $     
                      1,154           1,320     3,898       3,552
Excluding:
 Provision for      734              571          2,595          1,729
income taxes
 Interest, net      (2)              (14)         (13)           (31)
 Depreciation and   406              364          1,235          927
amortization
 Stock-based        248              167          725            445
compensation expense
Adjusted EBITDA      $          $       $         $     
                      2,540           2,408     8,440       6,622
Adjusted diluted     $          $       $         $     
earnings per share     0.24           0.23     0.80       0.63





OTC MARKETS GROUP INC. (formerly Pink OTC Markets Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares)
(Unaudited)
                                       September 30,       December 31,
                                       2012                2011
Assets
Current assets
 Cash and cash equivalents            $            $       
                                       13,426             10,170
 Short-term investments               246                 1,297
 Accounts receivable, net of
allowance for doubtful accounts of     4,757               7,194
$331 and $268
 Prepaid income taxes                 383                 307
 Prepaid expenses and other current   570                 417
assets
 Deferred tax assets, net             293                 293
Total current assets                  19,675              19,678
 Property and equipment, net         4,314               5,143
 Goodwill                             251                 251
 Intangible assets, net               40                  40
 Security deposits                    209                 209
Total Assets                          $            $       
                                       24,489             25,321
Liabilities and stockholders' equity
Current liabilities
 Accounts payable                     $          $         
                                        422               629
 Accrued expenses and other           2,777               3,066
 Dividend payable                     533                 419
 Income tax reserve                   -                   109
 Deferred revenue                     3,756               6,628
Total current liabilities             7,488               10,851
 Deferred rent                        825                 926
 Deferred tax liabilities, net        95                  475
 Income tax reserve                   255                 197
Total Liabilities                     8,663               12,449
Stockholders' equity
 Common stock - par value $0.01 per
share
Class A - 14,000,000 authorized,
10,776,247 issued, 10,661,672
outstanding at September 30, 2012;
10,589,170 issued, 10,484,595        108                 106
outstanding at December 31, 2011
Class C - 130,838 shares authorized,
issued and outstanding at September    1                   1
30, 2012 and December 31, 2011
 Additional paid-in capital          5,736               5,027
 Retained earnings                    10,578              8,276
 Treasury stock - 114,575 shares at
September 30, 2012 and 104,575 shares  ( 595 )             ( 532 )
at December 31, 2011
 Accumulated other comprehensive loss ( 2 )               ( 6 )
Total Stockholders' Equity            15,826              12,872
Total Liabilities and Stockholders'   $            $       
Equity                                 24,489             25,321

SOURCE OTC Markets Group Inc.

Website: http://www.otcmarkets.com
Contact: Wendy Fraulo, Chief Financial Officer, +1-212-220-2215,
wendy@otcmarkets.com
 
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