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Long term focus remains as volumes spike

OTC Markets Group 11 May 2021 Update
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OTC Markets Group

Long-term focus remains as volumes spike

Q121 results

Financial services

11 May 2021

Price

US$42

Market cap

US$491m

Net cash ($m) at 31 March 2021

33.5

Shares in issue

11.7m

Free float

63%

Code

OTCM

Primary exchange

OTCQX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.1

8.6

47.2

Rel (local)

1.7

1.3

2.9

52-week high/low

US$42.0

US$27.3

Business description

OTC Markets Group operates the OTCQX, OTCQB and Pink financial markets for over 11,000 US and global securities. OTC Link LLC, a member of FINRA, operates OTC Link ATS and OTC Link ECN, both SEC-registered Alternative Trading Systems. Approximately 82% of revenues were of a subscription-based recurring nature in FY20 and 63% in Q121.

Next events

Q221 results

August 2021

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

OTC Markets Group is a research client of Edison Investment Research Limited

Exceptionally high US equity market trading volumes in the first quarter benefited OTC Market’s (OTCM’s) revenues and at the same time demonstrated the resilience of its systems. The group is maintaining its focus on developing its transparent and cost-effective markets and, encouragingly, the strengthening of net additions of corporate clients has continued, which should be beneficial even as trading activity normalises.

Year end

Revenue ($m)

PBT
($m)

EPS*
($)

DPS**
($)

P/E
(x)

Yield
(%)

12/19

62.8

18.0

1.25

1.25

33.7

3.0

12/20

71.2

21.4

1.53

1.25

27.4

3.0

12/21e

85.9

28.6

1.93

1.25

21.7

3.0

12/22e

77.7

25.6

1.73

1.35

24.3

3.2

Note: *Fully diluted and calculated after restricted stock award allocation. **Including special dividends of 65c each year for FY19–21e and 75c for FY22e.

Q121 boosted by unprecedented trading volumes

OTCM reported a very strong first quarter with gross revenues of $26.1m, up 57% compared with Q120. Segmentally this was led by OTC Link (+210%), which benefited from elevated US equity trading levels, but Market Data Licensing (+17%) and Corporate Services (+21%) were also strong. Expenses, including redistribution fees and transaction-based expenses, increased by 46% reflecting volume-related costs and incentive compensation as well as increases in base salaries. This left pre-tax profit up 87% and, after a higher tax charge, diluted EPS increased by 78%. A maintained second quarter dividend of $0.15 was announced.

Normalisation likely but also underlying progress

Following the first quarter there are signs that the level of US equities trading activity may be beginning to normalise, and we have assumed that this continues while acknowledging that it is not possible to forecast this with any confidence. This affects our estimates for OTC Link and to some extent Market Data Licensing. The positive trend in corporate clients joining OTCQX and OTCQB is likely to have longer-lasting benefits and work developing new data products and offering new functionality to OTC Link clients should also be helpful through market cycles. Our 2021 estimate for EPS has increased by 23%, while, reflecting our assumptions about normalisation, the estimate for 2022 is only marginally increased (+2%).

Valuation

Following our estimate changes, the shares trade on a P/E multiple below the average for global exchanges for 2021 but modestly above the figure for 2022. For both years the multiples remain significantly below those of information providers. The high proportion of subscription-based revenues and longer-term potential for development of OTCM’s cost-effective markets are supportive factors.

Q121 results analysis

Exhibit 1 provides a summary of profit and loss figures comparing the Q121 results with Q420 and Q120. In the comments below we are comparing Q121 with Q120 unless stated.

Gross revenue increased by 57%, with the largest increase coming from OTC Link where trading volumes on OTC Link ECN and messaging volumes on OTC Link ATS drove a 210% increase in revenue (see subdivisional analysis in Exhibit 3 for further detail). The extent of the first-quarter increase in activity is underlined by the sequential comparison, with OTC Link revenue doubling compared with Q420. OTC Link’s commitment to ensuring the reliability of its core systems was validated by this period of exceptionally high activity. Market Data Licensing revenue increased by 17% with the main contributor to this being the growth in non-professional users as retail participation in the equity market increased. Growth in professional users and price increases were among the other factors at play here. Corporate services revenue growth of 21% was generated by a combination of strong additions of new clients for OTCQX and OTCQB markets (see Exhibit 2), price increases and increased demand for Virtual Investor Conferences’ services.

Re-distribution fees, which relate to market data services (+6%) and transaction-based expenses (payments for liquidity provision on OTC Link ECN), up eightfold, grew with the respective activities. Operating expenses (before depreciation and amortisation) were up 22%, with the main contributors being personnel costs and clearing and regulatory costs resulting from the expansion of ECN trading (see further detail in Exhibit 4).

At the pre-tax profit level, the increase was 87% to $8.4m, while a higher tax charge of 19% versus 14% left diluted earnings up 78% at $0.57.

Exhibit 1: Profit and loss analysis

$000

Q120

Q420

Q121

% change vs Q120

% change vs Q420

OTC Link

3,320

5,095

10,282

210

102

Market Data Licensing

6,745

7,358

7,899

17

7

Corporate Services

6,539

7,325

7,895

21

8

Gross revenues

16,604

19,778

26,076

57

32

Re-distribution fees and rebates

(701)

(714)

(741)

6

4

Net revenue

15,903

19,064

25,335

59

33

Transaction-based expenses

(438)

(1,362)

(3,539)

708

160

Revenues less transaction-based expenses

15,465

17,702

21,796

41

23

Operating expenses (exc depreciation and amortisation)

(10,568)

(10,530)

(12,933)

22

23

Depreciation and amortisation

(414)

(491)

(444)

7

(10)

Income from operations

4,483

6,681

8,419

88

26

Other income / net interest

16

(19)

5

(69)

(126)

Income before provision for income taxes

4,499

6,662

8,424

87

26

Taxes

(644)

(934)

(1,586)

146

70

Net income

3,855

5,728

6,838

77

19

Diluted EPS ($)

0.32

0.48

0.57

78

19

Operating margin (%)

28.2

35.0

33.2

Tax rate (%)

14.3

14.0

18.8

Source: OTCM, Edison Investment Research

Exhibit 2 shows how the corporate client base for the OTCQX and OTCQB markets has evolved from the beginning of 2019. After a low point in Q120, the rate of new client additions for both markets improved with a markedly stronger second half of the year. Q121 showed a continuation of the strong momentum with 52 additions for OTCQX and 83 for OTCQB, representing 11% and 9% of the opening client base for each market respectively. At the same time, the rate of cancellations and downgrades was lower than in the prior year period at 6.7% (OTCQX) and 2.5% (OTCQB), leaving net additions in the quarter at 21 and 60 companies respectively. Out of the 52 new corporates joining OTCQX, 35 were international issuers, a reminder of the importance of these companies as a source of growth and of the value that OTCM can offer to international companies seeking access to the US capital market without the cost and administrative burden of a listing. International companies account for about 65% and 45% of companies on OTCQX and OTCQB.

Exhibit 2: Evolution of OTCQX and OTCQB corporate client base

Q119

Q219

Q319

Q419

Q120

Q220

Q320

Q420

Q121

OTCQX

Start

409

414

421

436

442

414

415

441

461

Additions

30

30

31

32

9

19

44

34

52

Other (cancellations, downgrades)

(25)

(23)

(16)

(26)

(37)

(18)

(18)

(14)

(31)

End

414

421

436

442

414

415

441

461

482

Net change

5

7

15

6

(28)

1

26

20

21

OTCQB

Start

934

941

916

915

907

893

885

874

902

Additions

68

38

53

43

28

45

62

94

83

Other (cancellations, downgrades)

(61)

(63)

(54)

(51)

(42)

(53)

(73)

(66)

(23)

End

941

916

915

907

893

885

874

902

962

Net change

7

(25)

(1)

(8)

(14)

(8)

(11)

28

60

Source: OTCM, Edison Investment Research. Note: Start, end and additions (new sales) figures are reported, while the other figures (cancellations and compliance and other downgrades) are a residual.

Exhibit 3 shows an indicative subdivisional analysis of gross revenue based on management commentary in the Q121 report. The most prominent feature here is the $5.9m increase in revenue for OTC Link ECN from $0.7m to $6.7m. Not shown in the table but the ECN generated revenue of about $2.2m in Q420. Following this substantial growth, OTC Link ECN accounted for 26% of group gross revenue, but after deducting transaction-related expenses this falls to, a still significant, 14% of net revenue.

In Market Data Licensing, the main contributor to revenue growth was the increase in the number of non-professional users, which generated a 138% increase in revenue year-on-year and 38% sequentially (not shown). Increases in professional user licences and subscriptions to other products including compliance data and analytics also contributed.

In Corporate Services, OTCQX and OTCQB followed a relatively stable Q420 with material increases in revenue driven by higher sales and price increases. Virtual Investor Conferences continued to show very strong growth, hosting seven conferences in the quarter with 143 companies participating (Q120: five and 46 respectively).

Exhibit 3: Indicative subdivisional revenue analysis

$000

Q120

Q121

Change

Change %

Comments

OTC Link

OTC Link ECN

723

6,666

5,943

822%

High market volumes and subscribers increase to 82 vs 61

OTC Link ATS message revenues

898

1,311

413

46%

High trading volumes

QAP One Statement

122

721

599

491%

High market activity

Other

1,577

1,584

7

0%

3,320

10,282

6,962

210%

Market Data Licensing

Professional user licence subscriptions

3,533

3,745

212

6%

9% increase in users

Non-professional users

380

905

525

138%

Increased retail participation in US equity markets

Internal, derived and data services

860

1,118

258

30%

User growth and price increases

Other

1,971

2,130

159

8%

User growth, new products

6,745

7,899

1,154

17%

Corporate Services

OTCQX

2,304

2,903

599

26%

Higher sales from H220, strong calendar renewals and price increase

OTCQB

3,046

3,442

396

13%

Higher sales from H220, strong renewals and price increase

Virtual Investor Conferences

99

282

183

184%

More events/participants

Other

1,090

1,268

178

16%

6,539

7,895

1,356

21%

Source: OTCM, Edison Investment Research. Note: Subdivisional absolute numbers are mainly calculated from absolute and percentage changes given in the Q121 report and are therefore approximate.

Exhibit 4 shows changes in operating expenses between Q120 and Q121. As noted earlier, the main drivers of the 22% change were increases in compensation and professional and consulting costs. The former reflected variable compensation and base salary increases and the latter OTC Link ECN clearing and regulatory costs.

Exhibit 4: Analysis of operating expenses

Q120

Q121

Absolute change

% change

Comments

Compensation and benefits

7,487

8,946

1,459

19.5

Headcount and salary increases + higher commissions related to OTCQX and OTCQB sales

IT infrastructure and information services

1,533

1,638

105

6.8

Incremental data centre and network costs to support ECN growth

Professional and consulting fees

490

1,242

752

153.5

Higher ECN clearing/regulatory costs with volume + support costs for VIC business

Marketing and advertising

242

205

(37)

(15.3)

Lower travel and entertainment spend

Occupancy costs

557

613

56

10.1

Higher real estate taxes allocated

Depreciation and amortisation

414

444

30

7.2

Previous investment related to new HQ and two data centres

General, administration and other

259

289

30

11.6

Higher payment processing fees and bad debt expenses

Total

10,982

13,377

2,395

21.8

Source: OTC Markets Group, Edison Investment Research

Exhibit 5 sets out operating and related revenue data showing year-on-year and quarter-on-quarter changes. OTC Link data shows substantial increases in trading volumes in line with US equity markets generally and the growth in number of ECN subscribers. For Corporate Services, analysis of the growth in OTCQX and OTCQB client numbers has been shown above. Within Market Data Licensing, the rise in non-professional market data subscribers is striking and reflects the increase in retail investor activity seen in recent periods. Historically the number of non-professional subscribers has been quite volatile, and it remains to be seen how a normalisation in equity market activity levels affects user demand. The reduction in the revenue per terminal metric reflects the lower revenue generated by non-professional users.

Exhibit 5: Operating and related revenue data

Q120

Q420

Q121

% change y-o-y

% change q-o-q

OTC Link

Dollar volume traded

OTCQX

21,572

34,082

77,599

259.7

127.7

OTCQB

4,684

9,468

17,062

264.2

80.2

Pink

91,427

82,828

134,063

46.6

61.9

Number of securities quoted

10,828

11,758

12,091

11.7

2.8

Number of active ATS participants

82

84

82

0.0

(2.4)

Number of ECN subscribers

61

73

82

34.4

12.3

New form 211 filings

75

154

197

162.7

27.9

Revenue per security quoted ($)

307

433

850

177.3

96.2

Corporate Services

Number of corporate clients (period end)

OTCQX

414

461

482

16.4

4.6

OTCQB

893

902

962

7.7

6.7

Pink

689

742

789

14.5

6.3

Total

1,996

2,105

2,233

11.9

6.1

Revenue per client ($)

3,205

3,537

3,640

13.6

2.9

Graduates to a national securities exchange

16

22

29

81.3

31.8

Market Data Licensing

Market data professional users

22,437

23,463

24,404

8.8

4.0

Market data non-professional users

11,694

20,673

27,814

137.8

34.5

Revenue per terminal (total - $)

198

167

151

(23.5)

(9.3)

Market data compliance file users

41

45

46

12.2

2.2

Source: OTCM, Edison Investment Research

OTCM continues with its plans to operate a third ATS, OTC Link NBQ alongside OTC Link ATS and OTC Link ECN. The two existing platforms are complementary, with OTC Link ATS providing a network to publish quotes and to facilitate trades between subscribers, while OTC Link ECN operates an anonymous matching engine and acts as an order router, functioning as the execution party on an agency basis. Subject to Securities and Exchange Commission (SEC) approval, OTC Link NBQ will provide alternative functionality to broker dealers enabling electronic matching and execution, but with full disclosure rather than anonymity and allowing distribution of full depth of book data rather than top of book alone as at OTC Link ECN. OTCM hopes to launch OTC Link NBQ before the release of its Q221 results (early August).

On regulatory developments, OTCM continues to focus on its response to the SEC’s final rule amending Exchange Act Rule 15c2-11. This has a compliance date of 28 September this year. As a reminder, Rule 15c2-11 deals with information requirements before quotes may be published on interdealer quotation systems such as OTC Link ATS. Positively, the amended rule recognises OTCM markets’ disclosure standards and OTC Link ATS is permitted to act as a qualified interdealer quotation system (IDQS) reviewing disclosure to determine whether a security is eligible for public quoting. This will enable it to streamline onboarding of securities to OTCM’s markets, removing the risk and administrative burden of certifying the suitability of securities for quotation from broker dealers, which in turn will allow them to focus on their financial advisory role. OTCM notes that it does not expect the disclosure rules for companies on its OTCQX, OTCQB and Pink Current and Limited Information tiers will change materially. In December the SEC published a proposed exemptive order that would, subject to approval, allow OTC Link to operate an Expert Market for companies that do not meet the information requirements allowing sophisticated or professional investors to continue to trade in the securities.

The initial phase of Consolidated Audit Trail (CAT) obligations for OTC trading began in June 2020 with subsequent obligations taking effect this year, beginning in April. The prospective costs for firms such as OTC Link LLC and other FINRA broker dealer members to fund the database of trading activity have yet to be established but OTCM does not expect the impact to be material in FY21.

OTCM continues to work towards increasing regulatory recognition for its markets including the number of states granting Blue Sky recognitions for OTCQX and OTCQB (unchanged at 37 and 33 respectively).

Background and outlook

While its Q121 results were strongly influenced by the surge in trading volume in US equities, OTCM has reiterated its three strategic priorities for 2021 as:

1.

Successful implementation of Amended Rule 15c2-11 including seeking exemptive relief for an Expert Market. OTCM sees the amended rule as a significant shift for the group moving it from being a provider of ATS platforms to being recognised as setting the standard for monitoring the level of disclosure, compliance and governance of OTC companies. The group will devote significant resources to implementation, but the net financial impact (positive or negative) is not yet clear and will depend on any relief received from the SEC.

2.

Remaining focused on the reliability of trading systems and enhancing their functionality for traders. The group has invested over time in these systems and the level of capital spending is likely to be consistent with that seen in 2020.

3.

Continued support for OTCQX and OTCQB issuers. This will include enabling efficient interaction with shareholders, providing an efficient onboarding process for new clients and maintaining high service levels.

Our first background table shows recent performance from a selection of equity indices (Exhibit 6). All have shown positive moves over the periods greater than three months, reflecting the recovery in market levels as they looked forward to implementation of countermeasures to the pandemic. The OTCQB and TSX venture indices have shown strength relative to the other indices over 12 months, perhaps reflecting a rotation towards smaller cap and more economically sensitive sectors. The OTCQX index has shown a performance profile more in line with the Nasdaq Composite, albeit with a positive three-month performance.

Exhibit 6: Recent market index performance (%)

Period

S&P 500

Nasdaq Composite

OTCQX Composite

OTCQB Venture

S&P TSX Venture

US$

US$

US$

US$

C$

3 months

8.3

-1.6

6.3

-8.2

-10.3

6 months

19.2

26.7

27.9

50.1

30.2

1 year

44.5

50.8

50.0

90.1

94.1

Year to date

12.7

6.7

9.7

19.4

9.1

Source: Bloomberg. Note: Priced on 7 May 2021.

The Economic Policy Uncertainty Index (Exhibit 7) is included as an indicator of the environment for investor and corporate decision-making. The index component selected here reflects daily newspaper coverage related to economic uncertainty and shows the substantial impact of the pandemic compared with the global financial crisis, for instance. The index has subsequently moved significantly lower and now stands at a level within the range seen prior to the pandemic suggesting a more settled background for investor and corporate decisions.

Exhibit 7: US Economic Policy Uncertainty Index (newspaper-based, monthly)

Source: 'Measuring Economic Policy Uncertainty' by Scott Baker, Nicholas Bloom and Steven J. Davis at www.policyuncertainty.com (CC BY 4.0)

Given the impact of trading activity on recent results, Exhibit 8 is included, showing an index of the average daily volume of US equity share trading. This shows two spikes in early 2020 and from the end of 2020 to Q121. In line with OTCM’s commentary, this appears to have begun normalising in April.

Exhibit 8: US equity share trading (consolidated monthly average daily volume)

Source: Nasdaq, Edison Investment Research

The trends in numbers of IPOs on the Nasdaq, TSX and TSX Venture exchanges are shown in Exhibits 9 and 10. Reflecting more favourable market conditions, the number of IPOs on Nasdaq has bounced strongly with the Q121 number of IPOs substantially ahead of the already increased levels seen in Q320 and Q420. TSX IPOs for the first four months of 2021 were up 38% by number compared with the same period in 2020 and the TSX Venture exchange saw an 83% increase.

Exhibit 9: Nasdaq – number of IPOs

Exhibit 10: TSX and TSX Venture – number of IPOs

Source: Nasdaq

Source: TMX

Exhibit 9: Nasdaq – number of IPOs

Source: Nasdaq

Exhibit 10: TSX and TSX Venture – number of IPOs

Source: TMX

Looking at the trend in the number of corporate client additions for OTCM shown earlier in Exhibit 2, the Q121 figures mirrored the favourable movement shown in IPOs above and OTCM indicates that this has continued into the current quarter with a good pipeline of potential clients also in place.

For OTC Link, the high level of trading seen in Q121 may not be sustained, with signs of normalisation already evident, but, on a longer view, OTCM will continue to work on attracting new subscribers and adding additional functionality as exemplified by the proposed launch of OTC Link NQB.

Market Data Licensing may be affected by a reduction in non-professional subscribers in due course if market activity levels do normalise, but professional subscribers have historically proven more resilient and efforts to develop the product offering continue, with a focus on compliance products.

Financials

Headline figures from our revised estimates are shown in Exhibit 11 with further detail, including the divisional breakdown of revenues, shown in the financial summary (Exhibit 13). Following the very strong start to the year, our group revenue estimate for 2021 is increased by 17%, including a 65% increase in the estimate for OTC Link, reflecting its first quarter performance followed by the assumption of a progressive normalisation of activity levels. We continue to assume a significant normalisation (-40%) in revenue for the division in 2022. For Corporate Services the increased rate of corporate client net additions has prompted an increase in our estimates (to 18% and 10% for 2021 and 2022) though we do not assume client additions continue at the same rate. Our revenue growth assumptions for Market Data Licensing (10% and -7% for 2021 and 2022) are tempered by the thought that moderation in market trading levels could affect non-professional subscription levels, particularly in 2022. Uncertainty on this point together with the outlook for trading activity levels in US equities should be considered when viewing our estimates. Transaction related expenses have been increased in tandem with related revenue, but changes in assumptions for other expenses are smaller, resulting in an increase in our diluted EPS estimate for 2021 of 23% while for 2022 the increase is only 2%, reflecting the comments about normalisation above.

Exhibit 11: Estimate revisions

 

Gross revenue ($m)

PBT ($m)

Diluted EPS ($)

Dividend ($)

 

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

2021e

73.6

85.9

16.7

23.1

28.6

23.8

1.57

1.93

22.9

1.25

1.25

0.0

2022e

76.3

77.7

1.9

25.0

25.6

2.4

1.69

1.73

2.4

1.35

1.35

0.0

Source: Edison Investment Research. Notes: Dividends include the special dividend of 65c announced for FY20 and estimates of 65c for FY21 and 75c for FY22. FY20 figures show our estimate under old and actual under new.

OTCM’s balance sheet remains strong, with no debt and cash of $33.5m or $35.1m including restricted cash. Operating cash flow for Q121 was $3.6m, of which $0.2m was allocated to capital expenditure, $1.8m to dividends and $1.5m to purchases of treasury stock; other items totalling $0.3m left a $0.2m outflow. In addition to the cash held, OTCM has an undrawn line of credit of up to $1.5m available.

Valuation

An updated version of our comparative P/E table is shown in Exhibit 12. This includes information providers MSCI and Markit together with the average multiples for global exchanges. OTCM shares are trading on a prospective P/Es below the average for global exchanges for 2021, but slightly above the average for 2022, reflecting the normalisation of trading we have factored into our estimate for that year. The shares trade on markedly lower P/Es than the those for information providers. While the multiple applied to prospective earnings may be limited by the relative illiquidity of OTCM shares, the group is financially strong and has a high proportion of subscription-based revenues.

Exhibit 12: OTCM comparative multiples

P/E ratios (x)

2021e

2022e

MSCI

50.5

45.0

Markit

33.8

30.3

Average information providers

42.2

37.6

Average global exchanges

25.9

23.7

OTCM

21.7

24.3

Source: Refinitiv, Edison Investment Research. Note: Prices as at 7 May 2021.

Exhibit 13: Financial summary

$ 000s

2016

2017

2018

2019

2020

2021e

2022e

Year end 31 December

PROFIT & LOSS

OTC Link

10,573

10,074

11,175

11,676

15,890

23,082

13,849

Market Data Licensing

21,054

21,922

23,384

24,447

28,133

30,799

28,643

Corporate Services

19,254

22,660

24,719

26,716

27,206

32,061

35,198

Revenue

50,881

54,656

59,278

62,839

71,229

85,942

77,690

Re-distribution fees and rebates

(2,317)

(2,480)

(2,448)

(2,489)

(2,810)

(2,962)

(2,864)

Net revenue

48,564

52,176

56,830

60,350

68,419

82,980

74,826

Transaction-based expenses

0

0

(375)

(746)

(3,022)

(6,157)

(1,939)

Revenues less transaction-based expenses

48,564

52,176

56,455

59,604

65,397

76,823

72,887

Operating expenses

(30,032)

(32,511)

(35,768)

(40,230)

(42,202)

(46,505)

(45,515)

EBITDA

18,532

19,665

20,687

19,374

23,195

30,318

27,372

Depreciation

(1,606)

(1,361)

(1,042)

(1,492)

(1,761)

(1,779)

(1,796)

Operating profit

16,926

18,304

19,645

17,882

21,434

28,539

25,576

Net interest

9

47

116

103

(27)

40

40

Profit Before Tax

16,935

18,351

19,761

17,985

21,407

28,579

25,616

Tax

(6,407)

(5,792)

(3,524)

(3,043)

(3,133)

(5,416)

(4,867)

Profit after tax

10,528

12,559

16,237

14,942

18,274

23,164

20,749

Profit after tax and allocation to RSAs

10,252

12,241

15,840

14,588

17,839

22,729

20,314

Average Number of Shares Outstanding (m)

11.3

11.6

11.6

11.7

11.6

11.8

11.8

EPS - basic (c)

92.4

109.9

140.8

128.4

156.4

198.9

177.7

Fully diluted EPS (c)

90.4

105.8

136.3

124.7

153.4

193.2

172.6

Dividend per share (c)

116.0

116.0

123.0

125.0

125.0

125.0

135.0

EBITDA Margin (%)

38

38

36

32

34

37

37

Operating profit margin (%)

35

35

35

30

31

34

34

BALANCE SHEET

Non-current assets

 

 

 

 

 

 

 

Intangible assets

291

362

312

291

291

299

309

Property and other

3,267

3,506

4,584

25,034

22,414

20,428

18,566

Current assets

 

 

 

 

 

Debtors

6,262

6,450

4,942

5,157

6,609

9,500

9,500

Cash & cash investments

25,034

23,683

28,813

28,217

33,733

40,909

50,942

Other current assets

1,789

2,316

2,998

1,656

1,763

1,478

1,478

Current liabilities

 

 

 

 

 

Deferred revenues

(14,664)

(15,531)

(16,070)

(15,815)

(18,765)

(20,920)

(22,966)

Other current liabilities

(5,372)

(5,644)

(6,711)

(9,574)

(11,232)

(8,336)

(8,336)

Long-term liabilities

 

 

 

 

 

Tax, rent and other

(1,101)

(1,351)

(2,459)

(17,293)

(15,267)

(14,043)

(12,688)

Net assets

15,506

13,791

16,409

17,673

19,546

29,315

36,806

NAV per share ($)

1.36

1.21

1.42

1.52

1.67

2.50

3.14

CASH FLOW

Net cash flow from operating activities

15,740

16,483

22,590

21,413

26,013

24,677

27,142

Capital expenditure, intangible investment

(415)

(1,165)

(549)

(5,516)

(1,034)

(1,005)

(1,300)

Dividends

(13,059)

(13,262)

(14,195)

(14,560)

(14,610)

(14,654)

(15,808)

Purchase of treasury stock

(1,714)

(2,176)

(1,047)

(1,390)

(3,520)

(1,522)

0

Financing / investments

557

(1,231)

(1,669)

(543)

(1,333)

(320)

0

Net cash flow

1,109

(1,351)

5,130

(596)

5,516

7,176

10,034

Opening net (debt)/cash

23,925

25,034

23,683

28,813

28,217

33,733

40,909

Closing net (debt)/cash

25,034

23,683

28,813

28,217

33,733

40,909

50,942

Cash and restricted cash

25,244

24,375

30,534

29,778

35,297

42,473

52,506

Source: OTC Markets Group annual reports, Edison Investment Research


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This report has been commissioned by OTC Markets Group and prepared and issued by Edison, in consideration of a fee payable by OTC Markets Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by OTC Markets Group and prepared and issued by Edison, in consideration of a fee payable by OTC Markets Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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