RE: Earnings update tomorrow18 Feb 2025 13:49
Today, PLUS stated that in 2021, 1% of revenue came from non-OTC (circa $7m). (Note: The Cunningham acquisition was completed in July of 2021).
The average customer segregated funds in 2021 were $70m. Given PLUS only “owned” these segregated funds for less than half the year, let’s call it $30m.
PLUS confirmed that in 2024, non-OTC revenue accounted for 10% of revenue ($77m). The average customer segregated funds in 2024 were $330m.
Therefore, from 2021 to 2024, customer segregated funds increased 11-fold, and revenue from the non-OTC business increased 10-fold.
Now, it’s never going to be perfectly correlated, but when you check out that in YTD 2025, PLUS is currently averaging $515m of segregated funds, which is growth of over 50% in a couple of months. It’s not unreasonable to assume that their guidance of tripling revenue from non-OTC in 3-5 years is likely to be a really soft target when we are less than 2 months into the new year and they are nearly a quarter of the way there.
Let’s take their guidance at face value. They are saying they can do at least a 3-fold increase on $77m in 3-5 years. They think they can do better than the 15% industry average margin, but let’s use this as our floor. This means they expect $77m x 3 x 0.15 of margin in 3-5 years. That’s an extra $23m on the 2024 non-OTC margin.
This is decent, but not massive gains. However, if you believe they are downplaying their targets, it starts to look really interesting. Plus, they indicated margins of more than 20% in my opinion (they only said something along the lines of “considerably better than 15%”).
It’s worth noting the OTC business is still ticking along. It will ebb and flow as volatility rises and falls, but the non-OTC is a new revenue line. It takes nothing away from the OTC business.
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