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OTC Markets Group delivers first-quarter revenue and earnings growth

Published: 12:35 15 May 2020 EDT

OTC Markets Group Inc. -
The group said that OTC Link revenue increased 17%, with significant volatility across US equity markets driving increases in trading volumes on the company’s OTC Link ECN, and in quote and message volumes on its OTC Link ATS

OTC Markets Group Inc (OTCQX:OTCM) posted first-quarter results late Wednesday that saw revenue rise 8% versus the prior-year period on the back of strong growth in both their trading business and market data business.

For the quarter ended March 31, 2020, OTC Markets Group reported revenue of $16.6 million, compared to $15.4 million in the first quarter of 2019.

The company reported a 9% increase in net income to $3.9 million for the quarter, and a 7% increase in diluted earnings per share on a GAAP basis to $0.32.

READ: OTC Markets Group clocks continued revenue growth of 4% in 4Q

"The COVID-19 pandemic has sent a 100-year viral storm around the world, with tragic human consequences and vast economic challenges," said OTC Markets Group CEO R Cromwell Coulson.

"At the same time, I am incredibly proud of the whole team at OTC Markets for the commitment they have shown during these challenging times. I remain confident in our ability to navigate these difficult waters and to continue to build a company that serves our community of subscribers and clients and to chart a course that delivers long term value to all of our stakeholders," he added.

OTC Markets Group CFO Bea Ordonez noted that despite the coronavirus lockdown, the group delivered “8% top line revenue growth” and drove margin expansion to generate 11% growth in operating income.

“To achieve these results in the context of an extraordinarily challenging business environment speaks to the resilience of our subscription-based revenue model. Further, our ability to continue to operate our markets and serve our clients from a remote working environment is a testament to the investments made in our people and infrastructure as well as to the hard work of the whole OTC Markets team," said Ordonez.

"We continue to evaluate the challenges of this rapidly evolving environment, to focus on protecting our franchise and ensuring our financial stability, while positioning ourselves to continue to deliver long-term value to our shareholders," she added.

The company announced a second-quarter dividend of $0.15 per share.

Total cash returned to shareholders during the quarter totaled $5.3 million, an increase of 68%, which comprised of dividends of $1.7 million and share repurchases of $3.5 million.

Through OTC Link ATS and OTC Link ECN, the company’s SEC-regulated Alternative Trading Systems, OTC Markets Group connects a network of US broker-dealers to provide liquidity and execution services for securities on its markets.

The group said that OTC Link revenue increased 17%, with significant volatility across US equity markets driving increases in trading volumes on the company’s OTC Link ECN, and in quote and message volumes on its OTC Link ATS. Launched in late 2017, OTC Markets had 61 subscribers to its OTC Link ECN as of May.

“We have seen increased transactional volume on our OTC Link ECN, a result of the active market environment as well as continued growth in our subscriber base, with 61 subscribers connected to our ECN as of May 1, 2020,” said the company.

Meanwhile, market data licensing revenue saw 11% growth, with price increases impacting professional user license fees and broker-dealer enterprise license fees, together with growth in professional users and usage of its suite of data license products.

The company reported 2% growth from its corporate services business, driven by a 6% rise in revenues from its OTCQX market, while revenue from the OTCQB market was down 4%. The group noted declines in new sales in the quarter, a result of the economic dislocation caused by the coronavirus pandemic while also noting that future demand could be constrained.

However, the group noted that it continues to devote internal resources to growing the number of issuers on its markets and to providing enhanced disclosure and investor engagement tools. These initiatives include a renewed focus on its Virtual Investor Conference business, as well as other visibility initiatives such as its company video and podcast series.

“Against the backdrop of the governmental measures instituted globally to contain the spread of COVID-19, we see this offering as an important tool for issuers to continue to communicate with and engage with their investor base,” said the company.

During the first quarter, the group hosted five Virtual Investor Conferences with 46 companies participating. Since then, three more events have taken place and another 9 are scheduled through the rest of the year.

The OTC Markets Group operates the OTCQX Best Market, the OTCQB Venture Market and the Pink Open Market for 10,000 US and global securities.

The New York-based operator of financial markets has 460 securities from 28 countries trading on its OTCQX Best Market.

Contact Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter: @UttaraProactive

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