News Column

OTC Markets Group Reports 2Q 2014 Financial Results

August 21, 2014

OTC Markets Group reported its financial results for the three and six month periods ended June 30.

"During the second quarter, solid revenue growth in the Market Data Licensing business line led to the expansion of our operating profit margin. We made several exciting enhancements to our service offerings for corporate clients during the second quarter of 2014, which resulted in 12 U.S. community and regional banks joining the OTCQX best marketplace and 36 companies joining the OTCQB venture marketplace as of July 31," said R. Cromwell Coulson, President and CEO.

"We substantially completed the upgrade of our secondary data center in the second quarter. Upgrades to our primary and secondary data centers and improvements to our technology platform over the last two years will improve stability and increase the scalability of our network so we can continue to expand our offerings to OTC Link subscribers, Market Data Licensing users and Corporate Services clients," continued Coulson.

"Revenue growth during the second quarter was concentrated in our Market Data Licensing business line. Approximately 60 percent of the $1.5 million increase in the Market Data Licensing revenue was driven by price increases for the majority of our market data licenses, while the remaining 40 percent reflects the expansion of our distribution network and end-user numbers," said Wendy Fraulo, CFO. "Operating profit margin expanded to 28 percent, primarily due to the increase in Market Data Licensing revenue and management's focus on balancing increases in costs related to headcount and IT infrastructure with reductions in other operating expenses, such as consulting fees and marketing expenses."

Second Quarter 2014 Results compared to Second Quarter 2013

Revenues

In its release on August 13, the Company noted that gross revenues during the second quarter of 2014 increased $1.3 million, or 15 percent, to $10.2 million, driven by a $1.5 million, or 41 percent, increase in Market Data Licensing revenue. This increase was the result of January 1, price increases for the majority of market data licenses, retention of existing subscribers and expansion in professional users and enterprise license subscriptions. OTC Link ATS revenue decreased $0.2 million, or 6 percent, to $2.8 million, primarily related to a decline in revenue from quote positions, lower subscription revenue due to fewer broker- dealers and OTC Dealer users active on OTC Link ATS and lower trading activity on OTC Link ATS, which generated lower QAP service fees and trade message revenue. Corporate Services revenues decreased 1 percent, to $2.3 million, due to a 10 percent decrease in OTCQX subscription revenue, partially offset by a 16 percent increase in premium service subscription revenue, primarily related to improved retention rates and an increase in the Disclosure & News Service corporate client base.

Operating Expenses

Operating expenses increased $0.4 million, or 6 percent, to $7.0 million during the second quarter of 2014, primarily related to increases in compensation and benefits and IT infrastructure expenses. Compensation and benefits costs increased $0.5 million, or 14 percent, primarily due to higher headcount and annual salary increases. IT infrastructure and information services costs increased $0.2 million, or 21 percent, due to higher costs associated with operating our primary and secondary data centers. These increases were partially offset by decreases in marketing and advertising expenses and professional and consulting fees. Marketing and advertising costs decreased 41 percent, primarily related to an 87 percent decrease in outside agency fees and less sponsorship of certain industry events. Professional and consulting fees decreased 18 percent primarily due to a 90 percent reduction in IT consulting work, partially offset by an increase in fees related to other technical specialists and advisors.

Income from Operations and Net Income

The Company noted that income from operations increased $0.8 million, or 41 percent, to $2.7 million during the second quarter of 2014, and operating profit margin expanded to 28 percent from 22 percent during the same period in 2013. These increases were primarily attributable to the increase in Market Data Licensing revenues and controlled increases in operating expenses.

Net income of $1.6 million during the second quarter of 2014 increased $0.2 million, or 13 percent, over the second quarter of 2013, primarily due to the increase in operating income, partially offset by an increase in the Company's provision for income taxes. The Company's effective tax rate was 40 percent during the second quarter of 2014, primarily due to the exclusion of the benefit from R&D tax credits that were included in the tax provision for the second quarter of 2013 and resulted in an effective tax rate of 24 percent during that period. Net income per diluted share was $0.14 during the second quarter of 2014, as compared to $0.13 during the second quarter of 2013.

Adjusted EBITDA

Adjusted EBITDA, which excludes non-cash stock based compensation expense, was $3.3 million, or $0.29 per adjusted diluted share, during the second quarter of 2014, as compared to $2.6 million, or $0.24 per adjusted diluted share during the second quarter of 2013. The 27 percent increase in Adjusted EBITDA during the second quarter of 2014 was directly correlated with the increase in income from operations.

Year to Date June 2014 Results compared to Year to Date June 2013

Revenues

OTC said that gross revenues increased $2.6 million, or 15 percent, to $20.2 million. Consistent with our results for the second quarter, growth in revenues was primarily driven by the $2.9 million increase in revenue generated by the Market Data Licensing business line. OTC Link ATS revenue decreased by $0.1 million, or 2 percent, primarily due to a decline in revenue from quote positions and subscription revenue, partially offset by an increase in QAP service fees and trade message revenue. Revenue in Corporate Services decreased $0.1 million, or 2 percent, primarily due to a 10 percent decrease in OTCQX subscription revenue due to a decline in corporate clients in the OTCQX marketplace, partially offset by an 11 percent increase in premium service subscriptions, related to improved retention rates and an increase in the Disclosure & News Service corporate client base.

Operating Expenses

Operating expenses increased $0.5 million, or 4 percent, to $13.6 million. Compensation and benefits costs increased 10 percent, to $8.1 million, although these costs decreased to 40 percent of gross revenues during the first half of 2014 from 42 percent during the same prior year period. IT Infrastructure and data communications costs increased 14 percent to $2.1 million, related to increases in software maintenance and other costs associated with operating our primary and secondary data centers. Costs associated with marketing campaigns and corporate client outreach efforts were higher during the first half of 2013, which contributed to the 30 percent reduction in marketing and advertising expenses during the first half of 2014 to $0.7 million. Professional and consulting fees decreased 12 percent, primarily related to a 93 percent reduction in IT consulting fees that was partially offset by an increase in the use of other technical specialists and advisors.

Income from Operations and Net Income

The company noted that income from operations increased $1.9 million, or 52 percent, to $5.5 million and operating profit margin expanded to 29 percent from 22 percent during the same prior year period. The increase was primarily attributable to the increase in Market Data Licensing revenues and controlled increases in operating expenses.

Net income increased $0.7 million, or 25 percent, to $3.3 million. The increase in income from operations was partially offset by a $1.2 million increase in the Company's provision from income taxes. The Company's effective tax rate increased to 40 percent, primarily due to an exclusion of the benefit from R&D tax credits that to date have not been enacted for the 2014 tax year. During the six months ended June 30, 2013, a benefit was recognized from R&D tax credits for both the 2012 and 2013 tax years, as the 2012 R&D tax credit was not enacted until January 2013. Net income per diluted share was $0.29 during the six months ended June 30, as compared to $0.24 during the same period in 2013.

Adjusted EBITDA

Adjusted EBITDA, which excludes non-cash stock based compensation expense, for the first half of 2014 increased 34 percent to $6.8 million, or $0.59 per adjusted diluted share, as compared to $5.0 million, or $0.46 per adjusted diluted share during the same period in 2013, primarily due to an increase in income from operations that was partially offset by less stock based compensation recorded during the period.

Dividend Declaration - Quarterly Cash Dividend

OTC Markets Group also announced that its Board of Directors authorized a quarterly cash dividend on its Class A Common Stock of $0.10 per share, which represents a 67 percent increase over the prior quarter cash dividend. The dividend is payable on September 25, to stockholders of record on September 11. The ex-dividend date is September 9.

OTC Markets Group operates Open, Transparent and Connected financial marketplaces for 10,000 U.S. and global securities.

More information:

otcmarkets.com

((Comments on this story may be sent to newsdesk@closeupmedia.com))


For more stories covering the world of technology, please see HispanicBusiness' Tech Channel



Source: Manufacturing Close - Up


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters