OTC Markets Group Reports Fourth Quarter and Full Year 2023 Results Delivering Continued Revenue Growth

Fourth Quarter and Full Year 2023 Highlights:

• Gross revenues of $109.9 million for the year, up 5% versus 2022
• Operating income of $32.6 million for the year, down 11% versus 2022
• Operating profit margin of 30.6% for the year, versus 36.1% for 2022
• Net income of $27.7 million for 2023, down 10% versus 2022, and GAAP diluted EPS of $2.28 versus $2.53 for 2022
• Total cash returned to shareholders during 2023 of $29.9 million, comprised of dividends of $26.5 million and repurchases of common shares of $3.4 million, up 3% versus 2022
• Announcing first quarter 2024 dividend of $0.18 per share
• 600 OTCQX^® and 1,140 OTCQB^® companies at year end
• 38 graduates to a national securities exchange during 2023
• 108 subscribers to OTC Link ECN as of year-end 2023, up 6 versus 2022
• 136 unique OTC Link subscribers, up 3 versus 2022
• Approximately 32,000 average daily trades during 2023 versus approximately 36,000 during 2022
• Fourth quarter gross revenues of $27.6 million, up 1% versus the prior year quarter
• Fourth quarter operating income of $8.8 million, down 11% versus the prior year quarter
• Fourth quarter operating profit margin of 32.8%, as compared to 37.2% in the prior year quarter
• Continued progress in achieving state Blue Sky recognition for our OTCQX and OTCQB markets, with exemptions in 39 states and one U.S. territory as of March 1, 2024
• OTC market data feeds available on Nasdaq's Data Link platform
• Julia Sears appointed to OTC Markets Group Board of Directors
  

NEW YORK, March 06, 2024 (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 fourth quarter and full year 2023.

"Following a year of acquisitions, we spent 2023 coming together as one team, on one platform, to build the value of one share," said R. Cromwell Coulson, President and Chief Executive Officer. "As we turn to 2024, we remain committed to integrating our expanded data offerings and distribution capabilities to provide greater client value. By thoughtfully investing in our processes and platform, we can better empower broker-dealers and public companies to serve investors, and expand our markets."

"During 2023, OTC Markets Group reached nearly $110 million in gross revenues and exceeded $100 million in revenues less transaction-based expenses for the first time," said Antonia Georgieva, Chief Financial Officer. "Organic growth in our Market Data Licensing business and the contribution of full year revenue from our 2022 acquisitions drove the increase. However, our overall expenses also grew and outpaced the increase in revenues, thus impacting our operating margin and net income. We remain focused on driving top line growth and operational efficiencies, and increasing the value of one share in the long-term."

Fourth Quarter 2023 compared to Fourth Quarter 2022

		Quarter Ended December 31,
(in thousands, except shares and per share data)		2023				2022				% change			$ change
OTC Link		$	4,802			$	5,346			(10	%)		(544	)
Market data licensing			10,881				9,895			10	%		986
Corporate services			11,922				12,054			(1	%)		(132	)
Gross Revenues			27,605				27,295			1	%		310
Net revenues			26,772				26,537			1	%		235
Revenues less transaction-based expenses			25,442				24,867			2	%		575
Operating expenses			16,651				14,990			11	%		1,661
Income from operations			8,791				9,877			(11	%)		(1,086	)
Operating profit margin			32.8	%			37.2	%
Income before provision for income taxes			9,065				10,031			(10	%)		(966	)
Net income		$	7,001			$	8,630			(19	%)		(1,629	)
Diluted earnings per share		$	0.58			$	0.70			(18	%)
Adjusted diluted earnings per share		$	0.89			$	0.95			(7	%)
Weighted-average shares outstanding, diluted			11,874,331				11,895,058			(0	%)

Fourth Quarter 2023 Financial Highlights

• Gross revenues of $27.6 million, up 1% over the prior year quarter. Revenues less transaction-based expenses up 2%.
• OTC Link revenues down 10%. Transaction-based revenues from OTC Link ECN and OTC Link NQB down 16%, reflecting the impact of lower trading volumes on these platforms, which more than offset the effect of increases in certain fees. Reduced trading activity on OTC Link ATS resulted in messages revenue declining 11% and QAP One Statement fees declining 19%, which further contributed to the overall decline in OTC Link revenues.
• Market Data Licensing revenues up 10%, due to a full quarter contribution of the November 2022 acquisition of EDGAR Online as well as subscriber growth and price increases for certain licenses. Pro-user revenues were up 7%, in line with a 6% increase in the number of professional users quarter over quarter. Revenues from non-pro users were down 22%, driven by a 20% decrease in the number of non-pro users of our market data. Revenues from market data connectivity fees increased 68% and revenues from internal system licenses, delayed data licenses, and certain other data services increased 5%, in each case due to growth in subscribers and price increases for certain licenses.
• Corporate Services revenues down 1% quarter over quarter, with a 4% increase in revenues from our OTCQX market, offset by a 5% decrease each in revenues from the OTCQB market and the Disclosure & News Service^® ("DNS") product. A lower average number of companies on our OTCQB market as well as of companies subscribing to DNS during the quarter impacted the revenues for these products, offsetting the annual, incremental price increases effective at the beginning of 2023. Partially offsetting the decline in Corporate Services revenues was higher revenue from our Virtual Investor Conferences^® ("VIC") product due to a greater number of events held during the quarter, and higher revenue from the OTCIQ Basic product.
• Operating expenses increased 11% over the prior year quarter. The increase was primarily driven by a 69% increase in professional and consulting costs, largely as a result of an accrual related to an SEC matter. Further contributing to the growth in operating expenses was a 6% increase in compensation and benefits costs, reflecting a higher average headcount during the quarter.
• Operating income and net income decreased 11% to $8.8 million and 19% to $7.0 million, respectively.
• Adjusted EBITDA, which excludes non-cash stock-based compensation expense, decreased 7% to $10.8 million, or $0.89 per adjusted diluted share.
  

Fiscal Year 2023 Results compared to Fiscal Year 2022

		Year Ended December 31,
(in thousands, except shares and per share data)		2023				2022				% change			$ change
OTC Link		$	19,599			$	20,937			(6	%)		(1,338	)
Market data licensing			43,368				36,407			19	%		6,961
Corporate services			46,928				47,805			(2	%)		(877	)
Gross Revenues			109,895				105,149			5	%		4,746
Net revenues			106,658				102,048			5	%		4,610
Revenues less transaction-based expenses			101,134				96,201			5	%		4,933
Operating expenses			68,540				59,380			15	%		9,160
Income from operations			32,594				36,821			(11	%)		(4,227	)
Operating profit margin			30.6	%			36.1	%
Income before provision for income taxes			33,497				36,966			(9	%)		(3,469	)
Net income		$	27,661			$	30,814			(10	%)		(3,153	)
Diluted earnings per share		$	2.28			$	2.53			(10	%)
Adjusted diluted earnings per share		$	3.37			$	3.56			(5	%)
Weighted-average shares outstanding, diluted			11,863,180				11,887,868			(0	%)

Fiscal Year 2023 Financial Highlights

• Gross revenues of $109.9 million, up 5%. Revenues less transaction-based expenses up 5%.
• OTC Link revenues down 6%, primarily as a result of a reduction in revenues from OTC Link ATS messages of 18% and from OTC Link ECN and OTC Link NQB, which in aggregate declined 5%. Contributing to the overall decline in OTC Link revenues were also QAP One Statement fees, down 31%. The decline in OTC Link revenues is consistent with a year over year decline in trading activity on our markets.
• Market Data Licensing revenues up 19%, inclusive of the full year impact of the acquisitions of Blue Sky Data Corp and EDGAR Online. Excluding the impact of the acquisitions, Market Data Licensing revenues grew approximately 7%, due to 5% growth in revenues from professional user licenses, 67% growth in revenues from market data connectivity fees, and 9% growth in internal system licenses, delayed data licenses and certain other data services, offsetting a 27% decline in revenues from non-professional users.
• Corporate Services revenues down 2%. OTCQX revenues up 3% due to price increases and a relatively unchanged average number of companies on the OTCQX market. OTCQB and DNS revenues down 3% and 7%, respectively, due to a lower number of companies subscribing to OTCQB and DNS, more than offsetting the impact of pricing adjustments. Lower revenues from VIC, due to fewer events held during 2023, also contributed to the overall decline in Corporate Services revenues, but were partially offset by growth in revenues from OTCIQ Basic.
• Operating expenses were up $9.2 million, or 15%, reflecting a 13% increase in compensation and benefits as a result of higher average headcount, a 27% increase in IT infrastructure and information services costs, primarily as a result of our acquisitions, and a 25% increase in professional and consulting fees, primarily as a result of regulatory and legal costs related to an SEC matter. Operating expenses include approximately $1.1 million in one-time, non-recurring costs related to EDGAR Online, and approximately $1.4 million in costs related to the SEC matter.
• Operating income decreased 11% to $32.6 million and net income decreased 10% to $27.7 million.
• Adjusted EBITDA declined 5% to $40.9 million, or $3.37 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 March 29, 2024, to stockholders of record on March 22, 2024. The ex-dividend date is March 21, 2024.

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.

On March 4, 2024, 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.

Fourth Quarter and Full Year 2023 Conference Call

The Company will host a conference call and webcast on Thursday, March 7, 2024, 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 March 6, 2025):
https://edge.media-server.com/mmc/p/rhwuud87

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/BI142d90b57b7545e7bf967bd2ba364a54

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.

OTC Markets Group's Annual Report, earnings release, transcript of the earnings call, and management presentation will also be available in the Investor Relations section of our 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: [phone]
Email: [e-mail]

Media Contact:

OTC Markets Group Inc.
Phone: [phone]
Email: [e-mail]

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,
	2023				2022				2023				2022
OTC Link	$	4,802			$	5,346			$	19,599			$	20,937
Market data licensing		10,881				9,895				43,368				36,407
Corporate services		11,922				12,054				46,928				47,805
Gross revenues		27,605				27,295				109,895				105,149
Redistribution fees and rebates		(833	)			(758	)			(3,237	)			(3,101	)
Net revenues		26,772				26,537				106,658				102,048
Transaction-based expenses		(1,330	)			(1,670	)			(5,524	)			(5,847	)
Revenues less transaction-based expenses		25,442				24,867				101,134				96,201
Operating expenses
Compensation and benefits		9,460				8,887				42,467				37,585
IT Infrastructure and information services		2,298				2,323				10,311				8,091
Professional and consulting fees		3,077				1,817				8,048				6,464
Marketing and advertising		315				351				1,194				1,303
Occupancy costs		591				481				2,360				2,257
Depreciation and amortization		554				600				2,398				2,092
General, administrative and other		356				531				1,762				1,588
Total operating expenses		16,651				14,990				68,540				59,380
Income from operations		8,791				9,877				32,594				36,821
Other income
Other income		274				154				903				145
Income before provision for income taxes		9,065				10,031				33,497				36,966
Provision for income taxes		2,064				1,401				5,836				6,152
Net Income	$	7,001			$	8,630			$	27,661			$	30,814
Earnings per share
Basic	$	0.59			$	0.73			$	2.32			$	2.60
Diluted	$	0.58			$	0.70			$	2.28			$	2.53
Basic weighted average shares outstanding		11,669,376				11,609,318				11,658,694				11,600,122
Diluted weighted average shares outstanding		11,874,331				11,895,058				11,863,180				11,887,868
Non-GAAP Reconciliation
	Three Months Ended December 31,								Year Ended December 31,
	2023				2022				2023				2022
Net Income	$	7,001			$	8,630			$	27,661			$	30,814
Excluding:
Interest Income		(312	)			(154	)			(844	)			(155	)
Provision for income taxes		2,064				1,401				5,836				6,152
Depreciation and amortization		554				600				2,398				2,092
Stock-based compensation expense		1,493				1,106				5,858				4,345
Adjusted EBITDA	$	10,800			$	11,583			$	40,909			$	43,248
Adjusted diluted earnings per share	$	0.89			$	0.95			$	3.37			$	3.56
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.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
	December 31,
	2023				2022
Assets
Current assets
Cash and cash equivalents	$	34,101			$	37,368
Short-term investments	3,622				-
Accounts receivable, net of allowance for credit losses of $451 and $638	7,680				9,485
Prepaid income taxes	1,324				59
Prepaid expenses and other current assets	1,865				1,469
Total current assets	48,592				48,381
Property and equipment, net	8,429				8,637
Operating lease right-of-use assets	12,324				13,635
Deferred tax assets, net	7,691				4,853
Goodwill	3,984				3,984
Intangible assets, net	7,411				7,993
Long-term restricted cash	1,586				1,568
Other assets	508				567
Total Assets	$	90,525			$	89,618
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	2,152			$	1,684
Income taxes payable	141				567
Accrued expenses and other current liabilities	14,065				13,141
Deferred revenue	29,267				30,456
Total current liabilities	45,625				45,848
Income tax reserve	778				657
Operating lease liabilities	11,895				13,309
Total Liabilities	58,298				59,814
Commitments and contingencies
Stockholders' equity
Common stock - par value $0.01 per share
Class A - 17,000,000 authorized, 12,716,135 issued, 11,931,366 outstanding at December 31, 2023; 12,601,270 issued, 11,874,763 outstanding at December 31, 2022	127				126
Additional paid-in capital	29,469				24,847
Retained earnings	22,425				21,246
Treasury stock - 784,769 shares at December 31, 2023 and 726,507 shares at December 31, 2022	(19,794		)		(16,415		)
Total Stockholders' Equity	32,227				29,804
Total Liabilities and Stockholders' Equity	$	90,525			$	89,618