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, firstname.lastname@example.org
OTC Markets Group Announces Third Quarter 2012 Financial Results
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