OTC Markets Group — Q122 – net income up 11%, but costs start to bite

OTC Markets Group (US: OTCM)

Last close As at 20/05/2024

55.78

0.74 (1.34%)

Market capitalisation

661m

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Research: Financials

OTC Markets Group — Q122 – net income up 11%, but costs start to bite

OTC Markets Group’s (OTCM’s) Q122 net income was up 11% y-o-y despite weaker financial markets trading volume and prices. Corporate services (+51% y-o-y) and market data licensing (+9% y-o-y) revenue was as resilient as expected and compensated for the 47% decline in OTC Link revenue. However, operating expenses rose by 12% due to rising staff compensation and IT. OTCM purchased Blue Sky Data for $12m cash in May 2022, allowing OTCM to improve its value proposition and expand its subscriber base. We maintain our assumption that markets will remain choppy due to concerns about inflation and rising interest rates. We have cut our EPS forecasts for FY22 and FY23 by 19% and 17% respectively to reflect higher operating expense assumptions. We have cut our dividend forecasts by 20% but note that this could be conservative given OTCM’s strong balance sheet and cash flow generation.

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Financials

OTC Markets Group

Q122 – net income up 11%, but costs start to bite

Q122 update

Financial services

30 May 2022

Price

US$55.80

Market cap

US$657m

Net cash ($m) at end Q122 excluding restricted cash

45.3

Shares in issue

11.8m

Free float

64.8%

Code

OTCM

Primary exchange

OTCQX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.0

(2.1)

24.8

Rel (local)

1.6

3.3

26.1

52-week high/low

US$56.80

US$42.40

Business description

OTC Markets Group operates regulated markets for trading 12,000 US and global securities. Data-driven disclosure standards form the foundations of its three public markets: OTCQX Best Market, OTCQB Venture Market and Pink Open Market. The company’s three SEC-regulated alternative trading systems (ATSs) – OTC Link ATS, OTC Link ECN and OTC Link NQB – provide critical market infrastructure, which broker-dealers rely on to facilitate trading and offer companies more efficient access to the US financial markets.

Next events

Q222 results

August 2022

Analysts

Pedro Fonseca

+44 (0)20 3077 5700

Andrew Mitchell

+44 (0)20 3681 2500

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

OTC Markets Group’s (OTCM’s) Q122 net income was up 11% y-o-y despite weaker financial markets trading volume and prices. Corporate services (+51% y-o-y) and market data licensing (+9% y-o-y) revenue was as resilient as expected and compensated for the 47% decline in OTC Link revenue. However, operating expenses rose by 12% due to rising staff compensation and IT. OTCM purchased Blue Sky Data for $12m cash in May 2022, allowing OTCM to improve its value proposition and expand its subscriber base. We maintain our assumption that markets will remain choppy due to concerns about inflation and rising interest rates. We have cut our EPS forecasts for FY22 and FY23 by 19% and 17% respectively to reflect higher operating expense assumptions. We have cut our dividend forecasts by 20% but note that this could be conservative given OTCM’s strong balance sheet and cash flow generation.

Year end

Gross revenue ($m)

PBT
($m)

EPS*
($)

DPS**
($)

P/E
(x)

Yield
(%)

12/20

71.2

21.4

1.53

1.25

36.4

2.2

12/21

102.9

38.0

2.52

2.16

22.1

3.9

12/22e

96.9

28.0

1.86

1.72

30.1

3.1

12/23e

102.3

31.0

1.95

1.72

28.6

3.1

Note: *Fully diluted and calculated after restricted stock award allocation. **Including special dividends of 65c in FY20, $1.50 in FY21 and $1.00 in FY22e and FY23e.

Q122: Costs rose by 12%

Staff expenses rose by 14% y-o-y driven by higher wages and the number of staff rising by nine to 112, while IT expenditure rose by 20%. The rising costs reflect job market pressure, the need to invest for growth and compliance costs. We expect some one-off acquisition-related expenses in Q222. We have raised our forecast operating expenses for FY22 and FY23 by 22% and could make some adjustments following more guidance regarding Blue Sky Data.

Blue Sky Data acquisition

Blue Sky Data Corp provides equity and debt compliance data on state ‘blue sky’ securities rules and regulations. This will help subscribers better understand US compliance and state securities laws. The deal is expected to bring approximately 30 clients in addition to the synergies with the market data licensing business. OTCM had a net cash position of $45m (excluding restricted cash) at the end of Q122. OTCM aims to largely integrate Blue Sky Data by the end of June. A handful of employees are expected to be added to OTCM’s headcount.

Valuation: $42.7–64.4 per share, 3.1% yield

We have reduced our FY22 and FY23 EPS forecasts by 19% and 17% respectively. OTCM is trading on FY22e and FY23e P/E multiples of 30.1x and 28.6x respectively, a premium to our sample of peers. Our DCF-based valuation range is $42.7–64.4 per share (previously $42.4–66.3); we flex the cost of equity (7–11%) and the annual growth rate for 2026–32e (3–6%).

Q122 analysis

A summary of the quarterly progress in OTCM’s profit and loss figures is given in Exhibit 1. We highlight the key points below (the comparisons are year-on-year unless stated):

Gross revenue was $25.9m, flat year-on-year, -1% q-o-q. Lower trading volumes drove the significant 47% decline in OTC Link, which was nevertheless a little bit better than we expected (55% decline). The quarter-on-quarter decline was 3%. Corporate services rose by 51% driven by an increase in listed companies on the OTCQX and OTCQB and price increases, while market data licensing rose by 9%. It is noteworthy that both corporate services and market data licensing have remained relatively resilient during the market downturn: on a quarter-on-quarter basis the former rose by 1% and the latter declined only 2%. Exhibit 2 shows how the corporate client base for the OTCQX and OTCQB markets has evolved from Q120 and shows steady, good growth from Q320.

Transaction-based expenses (liquidity provider rebate payments) fell by 57%, reflecting the lower trading volumes, while redistribution fees (relating to Market Data Licensing) rose by 6%.

Net revenue less transaction-based expenses rose 8% to $23.6m (down 1% q-o-q).

Operating expenses (before depreciation and amortisation) increased by 12% mainly reflecting salary and headcount increases (see Exhibit 3 and discussion below for further details), as well as the expansion of the electronic trading system.

Profit before tax rose by 3% to $8.6m and was down 19% q-o-q due to the higher operating expenses and lower trading volumes. The effective tax rate was quite below the trend level at 12% and led to EPS increasing by 9%, although this was still down 16% quarter-on-quarter. As we discuss later, we assume a 22% rate going forward. The operating margin was 34.4% after the unusually high 42.4% in Q421.

A quarterly dividend of $0.18 was maintained.

Exhibit 1: Q122 results summary

$000s unless stated

Q121

Q221

Q321

Q421

Q122

% change y-o-y

% change q-o-q

OTC Link

10,282

7,682

6,110

5,591

5,433

(47)

(3)

Market Data Licensing

7,899

8,586

8,489

8,777

8,583

9

(2)

Corporate Services

7,895

9,182

10,621

11,819

11,933

51

1

Gross revenues

26,076

25,450

25,220

26,187

25,949

(0)

(1)

Redistribution fees and rebates

(741)

(746)

(744)

(790)

(788)

6

(0)

Net revenue

25,335

24,704

24,476

25,397

25,161

(1)

(1)

Transaction-based expenses

(3,539)

(2,487)

(1,668)

(1,578)

(1,515)

(57)

(4)

Revenues less transaction-based expenses

21,796

22,217

22,808

23,819

23,646

8

(1)

Operating expenses (excluding depreciation & amort.)

(12,933)

(12,633)

(12,686)

(12,576)

(14,562)

13

16

Depreciation and amortisation

(444)

(441)

(446)

(465)

(440)

(1)

(5)

Income from operations

8,419

9,143

9,676

10,778

8,644

3

(20)

Other income/net interest

5

0

12

(68)

0

Profit before tax

8,424

9,143

9,688

10,710

8,644

3

(19)

Taxes

(1,586)

(2,071)

(2,176)

(1,656)

(1,030)

(35)

(38)

Net income

6,838

7,072

7,512

9,054

7,614

11

(16)

Diluted EPS ($)

0.57

0.59

0.62

0.74

0.62

9

(16)

Operating margin on net revenue (%)

33.2

37.0

39.5

42.4

34.4

Tax rate (%)

18.8

22.7

22.5

15.5

11.9

Source: OTCM, Edison Investment Research

Exhibit 2: Evolution of OTCQX and OTCQB corporate client base

Q120

Q220

Q320

Q420

Q121

Q221

Q321

Q421

Q122

OTCQX

Start

442

414

415

441

461

482

530

561

570

Additions

9

19

44

34

52

70

55

35

33

Other (cancellations, downgrades)

(37)

(18)

(18)

(14)

(31)

(22)

(24)

(26)

(32)

End

414

415

441

461

482

530

561

570

571

Net change

(28)

1

26

20

21

48

31

9

1

OTCQB

Start

907

893

885

874

902

962

1,020

1,067

1,150

Additions

28

45

62

94

108

112

115

113

113

Other (cancellations, downgrades)

(42)

(53)

(73)

(66)

(48)

(54)

(68)

(30)

(39)

End

893

885

874

902

962

1020

1067

1150

1224

Net change

(14)

(8)

(11)

28

60

58

47

83

74

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

Our next table summarises the change in operating expenses with commentary on year-on-year changes. Compensation and benefits remain the most significant driver of costs and the increase was driven mainly by cash awards. The current pressure on wages in the United States, especially for IT personnel, has had an impact on compensation and benefits.

Exhibit 3: Analysis of operating expenses

$000s unless stated

Q121

Q122

Absolute chg y-o-y

% chg
y-o-y

Comments on year-on-year change

Compensation and benefits

8,946

10,223

1,277

14.3

Headcount up 9 to 112, higher annual base salary increases, stock-based compensation +19% to $185k

IT Infrastructure and information services

1,638

1,958

320

19.5

Increased spending on third-party information systems and software licences to increase security and improve support systems

Professional and consulting fees

1,242

1,217

(25)

(2.0)

Lower regulatory and clearing costs due to lower OTC Link ECN transaction volumes. Blue Sky Data Corp M&A costs offset some of that decline

Marketing and advertising

205

278

73

35.6

Rebound in travel and event related spending, third-party market research

Occupancy costs

613

595

(18)

(2.9)

Depreciation and amortisation

444

440

(4)

(0.9)

General, administration and other

289

291

2

0.7

Total

13,377

15,002

1,625

12.1

Source: OTC Markets Group, Edison Investment Research

Exhibit 4 shows changes in operating data and related revenue data. Trading volumes fell sharply in the OTCQX both year-on-year (-53%) and quarter-on-quarter (-30%). The Pink segment’s trading was more resilient, down 17% y-o-y but up 6% q-o-q. OTCQB volume fell 82% from an unusually strong Q121 and was down 38% on Q421.

On the other hand, the number of OTC Link ATS participants (90, +10% y-o-y) and ECN subscribers (98, +20% y-o-y) continues to increase.

Corporate Services also showed very strong year on-year increases across the three segments: OTCQX (18%), OTCQB (27%) and Pink (101%). Revenue per client dropped by 2%.

Market Data Licensing saw a 12% year-on-year drop in the total number of users. However, the number of professional users (which generate more revenue) increased by 10%. As we expected, the weak financial markets had a significant impact on the number of non-professional users, which fell by 31%. Revenue per terminal rose by 24%, reflecting this change in user mix.

Exhibit 4: Operating and related revenue data

$000s unless stated

Q221

Q321

Q421

Q421

Q122

% change y-o-y

% change q-o-q

OTC Link

Dollar volume traded (millions)

OTCQX

77,599

60,030

41,802

51,331

36,168

(53)

(29.5)

OTCQB

17,062

8,796

5,008

4,986

3,108

(82)

(37.7)

Pink

134,063

100,644

107,295

105,231

111,078

(17)

5.6

Number of securities quoted

12,091

12,725

11,604

12,011

12,071

(0)

0.5

Number of active ATS participants

82

83

85

86

90

10

4.7

Number of ECN subscribers

82

84

90

93

98

20

5.4

New Form 211 filings

197

200

151

96

90

(54)

(6.3)

Revenue per security quoted ($)

850

604

527

465

450

(47)

(3.3)

Corporate Services

Number of corporate clients (period end)

OTCQX

482

530

561

570

571

18

0.2

OTCQB

962

1,020

1,067

1,150

1,224

27

6.4

Pink

789

999

1,556

1,563

1,584

101

1.3

Total

2,233

2,549

3,184

3,283

3,379

51

2.9

Revenue per client ($)

3,640

3,840

3,705

3,655

3,582

(2)

(2.0)

Graduates to a national securities exchange

29

46

45

35

24

(17)

(31.4)

Market Data Licensing

Market data professional users

24,404

25,647

25,870

26,563

26,756

10

0.7

Market data non-professional users

27,814

28,977

29,156

28,206

19,061

(31)

(32.4)

Revenue per terminal (total - $)

151

157

154

157

187

24

16.9

Market data compliance file users

46

47

47

49

51

11

4.1

Source: OTCM, Edison Investment Research

Blue Sky Data acquisition

Blue Sky Data Corp provides equity and debt compliance data on state ‘blue sky’ securities rules and regulations. The deal enables OTCM to improve its value proposition and expand its subscriber base by allowing OTCM to provide ‘a comprehensive view of Blue-Sky secondary trading compliance data’ that is ‘delivered in an efficient format for broker-dealers, financial advisors, public companies, and regulators’. This will help these subscribers better understand compliance and state securities laws in the US. The deal is expected to bring approximately 30 clients, in addition to the synergies with the market data licensing business.

The purchase price is approximately $12m paid in cash and completed in May 2022. We note that OTCM had a net cash position of $45m (excluding restricted cash) at the end of 1Q22. The company hopes to largely complete the integration of Blue Sky Data by the end of June. A handful of employees are expected to be added to OTCM’s current headcount of 112.

Current trading environment and outlook

US inflation and recession fears have been increasing and this has been resulting in weaker financial markets, including equities. Back in December 2021, the market was pricing a 0.5% Fed Funds target rate at the end of 2022. This had moved to 1.8% when we wrote our last note on OTC two months ago (Q421 was another beat, 2022 is more uncertain) and now the forecasts are for a 2.8% target rate for the end of 2022.

As the Citi US Inflation Surprise Index (Exhibit 6) shows, the market has been underestimating inflation for quite a while. It is clear much of the inflation is transient, driven by supply chain disruptions, consumers spending money saved during the lockdowns and the current war in Ukraine. However, much uncertainty remains regarding how much will be sticky and anchor into wage and inflation expectations.

The degree of the economic slowdown (US GDP growth was already negative in Q122) and the degree to which the Fed will have to apply the brakes to rein in inflation are all weighing on equity markets. Exhibit 7 shows that the pain in equities is broad-based both in larger and smaller companies, although smaller companies (which on average present stronger long-term growth potential as well as higher risk) are usually sold off more during downturns. The technology-heavy Nasdaq index (previously quite highly rated, and now one of the sectors more actively sold) is down 28% over the last six months compared to 16% in the S&P 500.

The cryptocurrency boom has been a major factor in rising volumes in OTC (since crypto-related stocks are among the most traded stocks on OTC markets) and currently cryptocurrencies are also contributing to slowing volumes.

Exhibit 5: US Fed Funds rate expectations rising

Exhibit 6: Citi Inflation Surprise Index – US

Source: Refinitiv. Note: Expectations based on the overnight swaps.

Source: Refinitiv

Exhibit 5: US Fed Funds rate expectations rising

Source: Refinitiv. Note: Expectations based on the overnight swaps.

Exhibit 6: Citi Inflation Surprise Index – US

Source: Refinitiv

Exhibit 7: Recent market index performance (total return %)

Period

S&P 500

Nasdaq
Composite

OTCQX
Composite

OTCQB
Venture

S&P TSX
Venture

US$

US$

US$

US$

C$

Three months

-10.1

-16.6

-4.1

-6.6

-19.6

Six months

-16.0

-28.4

-10.7

-15.1

-29.6

One year

-4.4

-14.1

-1.3

-26.7

-26.7

Source: Refinitiv. Note: Priced on 19 May 2022.

The State Street Investor Confidence Index tracks changes in institutional investor holdings in risky versus safer investments. Exhibit 8 shows that confidence is higher than during the early stages of the pandemic in 2020. However, clearly the confidence is falling following the boost after Omicron proved to be less dangerous than first feared. With the index below 100, the mood is currently bearish.

Exhibit 8: State Street Investor Confidence Index

Source: State Street Corporation

2021 was a record year for IPOs on the Nasdaq, TSX Ventures and TSX exchanges, rising by 138% and 159% on Nasdaq and TSX Ventures respectively and by 12% on TSX. The first quarter saw 84 IPOs in the Nasdaq, which although less than a year ago (135) is still above the long-term average of 59.

Exhibit 9: Number of IPOs, Nasdaq

Exhibit 10: Number of IPOs, TSX and TSX Venture

Source: Nasdaq

Source: TMX

Exhibit 9: Number of IPOs, Nasdaq

Source: Nasdaq

Exhibit 10: Number of IPOs, TSX and TSX Venture

Source: TMX

Financials

We have slightly increased our revenue forecasts and now estimate that OTCM’s gross revenue will drop by 6% in FY22 (previously we expected a 9% decrease). The driver for this drop remains the same: weaker financial markets and elevated macroeconomic and political uncertainty will lead to lower trading volumes.

The forecast increase in FY23 revenue remains similar (5.5% vs 5.0% previously) but from a slightly higher FY22 forecast. We assume that trading levels normalise and resume an upward trend, but are still factoring in relatively difficult markets in FY23, which may prove to be excessively cautious.

Exhibit 11 shows details of our revenue assumptions. We forecast a 35% decline in revenue from the OTC Link business; this segment accounted for 29% of OTCM’s revenue in FY21 and is most exposed to a drop in trading volumes.

Trading volumes in OTC Link ECN (the key driver in OTC Link’s variable revenue component) are not reported monthly and the pricing structure is complex (variables include the type of investors that are trading, lot sizes, which securities are being traded and even the fact that different share prices have different trading costs). This complicates forecasts beyond the usual challenge in that trading volumes can be quite volatile.

We forecast a 4% decline in revenue from Market Data Licensing. This segment has been proving more resilient to weaker markets, but we would expect to see a decline as some users step back from trading in less favourable market conditions, especially non-professional users, which had been the fastest growing segment. The Blue Sky Data acquisition boosts OTCM’s offering in this segment and could provide potential upside. We do not have guidance on revenue from Blue Sky Data (or reliable historical data), but we have increased Market Data Licencing revenue growth for 2023 from 4% to 6%.

Corporate Services is the most resilient of the three segments as it correlates more with economic activity than trading volume or market performance. We have upped our FY22 growth forecast from 12% to 14% to reflect the good Q122 performance and raised FY23 growth from 4% to 5%.

Exhibit 11: Selected revenue and cost assumptions

$000s unless stated

2018

2019

2020

2021

2022e

2023e

Gross revenue

OTC Link

11,175

11,676

15,890

29,665

19,377

20,540

Market Data Licensing

23,384

24,447

28,133

33,751

32,448

34,395

Corporate Services

24,719

26,716

27,206

39,516

45,068

47,321

Gross revenues

59,278

62,839

71,229

102,932

96,893

102,256

% year-on-year

OTC Link

11%

4%

36%

87%

(35%)

6%

Market Data Licensing

7%

5%

15%

20%

(4%)

6%

Corporate Services

9%

8%

2%

45%

14%

5%

Gross revenues

8%

6%

13%

45%

(6%)

6%

Operating expenses (incl. depreciation & amort.)

Compensation and benefits

23,820

26,994

28,896

34,049

42,001

44,101

IT Infrastructure and information services

5,554

6,382

6,452

7,633

7,963

8,201

Professional and consulting fees

2,110

1,982

2,704

4,495

4,479

4,568

Marketing and advertising

1,148

1,117

807

1,028

1,062

1,105

Occupancy costs

2,107

2,548

2,303

2,348

2,424

2,473

Depreciation and amortisation

1,042

1,492

1,761

1,796

1,819

1,855

General, administration and other

1,029

1,207

1,040

1,273

1,201

1,237

Total

36,810

41,722

43,963

52,622

60,948

63,540

% year-on-year

Compensation and benefits

11%

13%

7%

18%

23%

5%

IT Infrastructure and information services

(6%)

15%

1%

18%

4%

3%

Professional and consulting fees

22%

(6%)

36%

66%

0%

2%

Marketing and advertising

27%

(3%)

(28%)

27%

3%

4%

Occupancy costs

19%

21%

(10%)

2%

3%

2%

Depreciation and amortization

(23%)

43%

18%

2%

1%

2%

General, administration and other

42%

17%

(14%)

22%

(6%)

3%

Total

9%

13%

5%

20%

16%

4%

Source: OTCM, Edison Investment Research

We have raised OTCM operating expenses to factor in the cost pressure in staff compensation and IT costs (these two items account on average for about 80% of operating expenses). We have also factored in some costs from the Blue Sky Data acquisition. Our forecasts for operating expenses have been raised by 22% in FY22 and FY23, which has an adverse impact on the earnings forecasts.

Exhibit 12 summarises the changes to our forecasts. We cut our EPS forecasts by 19% and 17% for FY22 and FY23 respectively and the DPS by 20%. OTCM does not have fixed dividend pay-out guidance but usually the pay-out is significant (80–126% since 2014). We have assumed 90% and 86% for FY22 and FY23, within the 83–97% range of the last four years. We expect the quarterly dividends (excluding special dividends) to remain at $0.18 in FY22 and FY23.

Despite the $12m Blue Sky Data acquisition, OTCM’s balance sheet remains strong with no debt. We are forecasting a net cash position of $34.7m including restricted cash ($33.2m ex-restricted cash) at the end of FY22 (FY21: $52.0m with restricted cash, $50.4m ex-restricted cash).

Exhibit 12: FY22 and FY23 estimate revisions

Gross revenue ($m)

PBT ($m)

Diluted EPS ($)

Dividend ($)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

2022e

93.6

96.9

3.5

35.6

28.0

-21.2

2.29

1.86

-19.0

2.16

1.72

-20.4

2023e

97.6

102.3

3.5

36.9

31.0

-21.2

2.36

1.95

-17.3

2.16

1.72

-20.4

Source: Edison Investment Research

Valuation

Exhibit 13 compares OTCM’s P/E ratios to those of a range of market information providers and global exchanges. OTCM is trading at an 9% discount on trailing earnings, but at a premium to forward earnings. The premium is deserved due to OTCM’s strong growth track record, balance sheet and relatively high proportion of subscription-based revenues. Furthermore, its ratios are more comparable to the US-based peers with more subscription revenue, such as MSCI and S&P Global.

Exhibit 13: OTCM comparative multiples

P/E ratios (x)

2021

2022e

2023e

OTCM

22.1

30.1

28.6

MSCI

25.4

27.0

22.8

S&P Global

47.5

38.0

33.2

Euronext

16.8

15.0

14.1

Hellenic Exchange

26.4

24.7

20.6

London Stock Exchange

25.8

23.7

20.8

BMF (Brasil)

16.1

14.8

13.9

Intercontinental Exchange

13.8

18.4

17.0

NASDAQ

21.7

19.2

17.9

Average

24.2

22.6

20.0

OTCM vs average

(9%)

33%

43%

Source: Refinitiv, Edison Investment Research. Note: Prices as at 24 May 2022.

The sensitivity of our discounted cash flow valuation to different discount rates and long-term growth assumptions is shown in Exhibit 14 below. The model factors in lower explicit forecasts for FY22–23, together with an assumption of FY24–25 cash flow growth of 12% and a terminal cash flow multiple of 16x. We obtain a valuation range of $42.7–64.4 per share by flexing the discount rate from 7% to 11% and assuming long-term growth (2026–32e) of 3–6%. This compares to the previous range of $42.4–66.3.

Exhibit 14: Discounted cash flow valuation sensitivity ($ per share)

Discount rate (right)
2026–32e growth

7%

8%

9%

10%

11%

3%

56.2

52.3

48.8

45.6

42.7

4%

58.8

54.7

51.0

47.6

44.5

5%

61.5

57.2

53.2

49.6

46.4

6%

64.4

59.8

55.6

51.8

48.4

Source: Edison Investment Research

Exhibit 15: Financial summary

$000s

2020

2021

2022e

2023e

Year end 31 December

PROFIT & LOSS

OTC Link

15,890

29,665

19,377

20,540

Market Data Licensing

28,133

33,751

32,448

34,395

Corporate Services

27,206

39,516

45,068

47,321

Revenue

71,229

102,932

96,893

102,256

Re-distribution fees and rebates

(2,810)

(3,021)

(2,936)

(3,096)

Net revenue

68,419

99,911

93,957

99,160

Transaction-based expenses

(3,022)

(9,273)

(5,419)

(5,751)

Revenues less transaction-based expenses

65,397

90,638

88,538

93,409

Operating expenses

(42,202)

(50,826)

(59,129)

(61,685)

EBITDA

23,195

39,812

29,409

31,724

Depreciation

(1,761)

(1,796)

(1,819)

(1,855)

Operating profit

21,434

38,016

27,590

29,870

Net interest

(27)

(51)

446

1,100

Profit Before Tax

21,407

37,965

28,036

30,970

Tax

(3,133)

(7,489)

(5,296)

(6,813)

Profit after tax

18,274

30,476

22,740

24,156

Profit after tax and allocation to RSAs

17,839

29,766

22,208

23,624

Average Number of Shares Outstanding (m)

11.6

11.8

12.0

12.1

EPS - basic (c)

156.4

258.7

190.8

200.7

Fully diluted EPS (c)

153.4

252.0

185.6

195.2

Dividend per share (c)

125.0

216.0

172.0

172.0

EBITDA Margin (%)

34

40

31

32

Operating profit margin (%)

31

38

29

30

BALANCE SHEET

Cash & cash investments

33,733

50,394

33,177

40,257

Debtors

6,609

7,404

8,000

8,000

Other current assets

1,763

2,153

4,764

4,764

Long term restricted cash

1,532

1,564

1,564

1,564

Intangible assets

291

291

291

292

Property and other long-term assets

20,882

20,449

21,928

21,011

Total assets

64,810

82,255

69,724

75,888

Deferred revenues

18,765

28,432

28,200

29,610

Other current liabilities

11,232

13,332

9,170

9,170

Tax, rent and other long-term liabilities

15,267

15,537

17,913

17,558

Total Liabilities

45,264

57,301

55,283

56,338

Net assets

19,546

24,954

26,441

19,550

NAV per share ($)

1.67

2.11

2.23

1.65

CASH FLOW

Net cash flow from operating activities

26,013

46,456

19,794

29,827

Capital expenditure, intangible investment

(1,034)

(1,395)

(764)

(1,300)

Blue Sky Data acquisition

(12,000)

0

Dividends

(14,610)

(25,459)

(20,018)

(20,247)

Purchase of treasury stock

(3,520)

(1,522)

(2,776)

0

Financing / investments

(1,330)

(1,419)

(1,454)

(1,200)

Net cash flow

5,519

16,661

(17,217)

7,080

Opening net (debt)/cash

28,217

33,733

50,394

33,177

Closing net (debt)/cash

33,733

50,394

33,177

40,257

Cash and restricted cash

35,297

51,958

34,741

41,821

Source: OTCM, Edison Investment Research


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London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

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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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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 2022 Edison Investment Research Limited (Edison).

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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

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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