OTC Markets Group Inc. (OTCM) Earnings Call Transcript & Summary

Welcome to the OTC Markets Group Investor Day, I'd like to share that today's presentation may contain forward-looking statements. For more information, please refer to the cautionary statement regarding forward-looking statements included in our presentation materials. We have an exciting program for you today, which will begin with opening remarks from our President and CEO, Cromwell Coulson.

Welcome to our OTC Markets Group 2022 Investor Day. I'm Cromwell Coulson, President and CEO of OTC Markets Group. It is my pleasure to kick off today's event. As I reflect on what our team accomplished during 2021, I am excited for the opportunities that lay ahead of us. 2021 was a record year for our business. The results we achieved reflected strong client-focused execution, increased product demand and our commitment to meeting higher regulatory standards across our markets. Gross revenues surpassed $100 million for the first time in our history, up 45% from the prior year. Our earnings per share increased 65%. Each business line contributed to the company's success as we pursued our mission of creating better informed and more efficient financial markets. 2021 marked the fifth consecutive year of revenue growth for OTC Markets. Our financial stewardship allowed us to deliver 49% growth in capital returned to our shareholders. We operate a service business, making consistent investments in our people and platform to provide useful solutions for clients. With a focus on long-term progress and thoughtful management of operating expenses, we are well-positioned to build on our recent success and deliver sustainable value to our shareholders. Our strategy remains focused on driving revenue growth by enhancing the capabilities of our core trading services, market data and corporate services business lines to provide greater benefits and operating efficiencies for our subscribers. We strongly believe that our future is predicated upon supporting the collective success of our clients. We are committed to delivering on 4 strategic initiatives: First, commercialize our regulatory role under Rule 15c2-11 to create new opportunities for companies to be public and enhance our technology platforms so that broker-dealers can efficiently and compliantly trade more securities; second, advocate for additional regulatory recognition of our markets to increase the value of being publicly traded and remove market inefficiencies; third, pursue corporate development efforts to grow and diversify our product suite and client base; and fourth, drive sustainable revenue growth across each of our business lines that increases per-share earnings power over the long term. Throughout our history, OTC Markets has increased the level of transparency in the market and improved the availability of information for investors, brokers and regulators. We believe the competitive markets thrive in daylight. We play an expanding role by supporting critical trading infrastructure that improves the integrity and price efficiency of financial markets. The implementation of amendments to SEC Rule 15c2-11 in September 2021, represents a culmination of these efforts, building a strong base for the future. This was a complex effort to deliver for broker-dealers and public companies the infrastructure to support Rule 2-11 compliance. Our on-time delivery reinforced over a decade of enhanced regulation that began back in 2012 when OTC Link LLC was established as a FINRA member broker-dealer and OTC Link ATS as an SEC-regulated alternative trading system. Regulatory modernization, increased responsibilities and recognition of our data-driven disclosure standards form the foundation of our public markets. We are now recognized as a regulated market operator and a qualified interdealer quotation system. Our role as a qualified IDQS allows our broker-dealer subscribers to rely on our publicly available determinations, which eases their regulatory burdens, increases the number of securities available to trade and supports a more transparent public market. With 3 distinct markets, the OTCQX Best Market, OTCQB Venture Market and the Pink Open Market, we inform investors and give public companies a stairway of standards to climb as they build their businesses. Our markets can accommodate the needs of companies at their infancy, and through maturation with tailored standards to support a diverse range of industry leaders and market innovators, collectively, the OTC Market provides companies with a gateway to become public and the building blocks to establish themselves as good corporate citizens, inform investors and demonstrate their compliance with securities laws. Last year alone, we saw over 200 companies join our OTCQX market and more than 400 joined OTCQB. Each market finished with the highest-ever year-end count of companies and securities. We take tremendous pride in this milestone and the relationships we've established with over 1,500 companies that choose to trade on these markets. Our corporate service team continues to build on this momentum, educating companies across the U.K., Western Europe, Australia and the Nordics on the differentiated value proposition our premium markets offer to international companies. Our OTCQX and OTCQB markets are effective solutions for engaged global companies seeking more efficient access to the U.S. capital markets by digitally distributing their disclosure data and governance credentials. Beyond Corporate Services, strong growth in users and the expansion of our real-time data and compliance products remain a priority for our market data licensing business. We continue to add U.S. and international distributors of real-time quotes, broadening the reach of our market data to a wider audience of institutional and retail investors across the U.S., Europe, Asia and Canada. We also recently announced our plan to acquire Blue Sky Data Corp., a leading provider of data on Blue Sky rules and regulations. This acquisition will result in a fully integrated product suite that provides a holistic comprehensive view of Blue Sky secondary trading compliance. This unique data offering will help our broker-dealer subscribers and public companies improve their compliance and understanding of state securities laws. Our goal is to deliver this information in the most efficient format for broker-dealers, financial advisers, public companies and regulators in both the equity and fixed income markets. Collectively, our 3 distinct business lines form a cohesive mutually reinforcing offering to a broad range of market participants. We generate diversified revenue streams, providing a stable foundation for growth. We benefit from a subscription-based revenue model with over 70% of our revenues in 2021 coming from subscription-based arrangements that are recurring in nature. Over the past year, we have managed a substantial increase in customer demand for our Corporate Services products, driven user growth in our Market Data business and handled record trading volumes on our ATSs. We have demonstrated our ability to provide reliable platforms that adapt and grow in lockstep with investors, broker-dealers, corporate clients and our broader community. Today, you will hear more from members of the senior leadership of OTC Markets Group as they discuss strategies for managing our business lines and the growth trajectory of the company. I look forward to your questions and the opportunity to provide further context at the end of the next discussion.

Thank you, Cromwell, and good morning, everyone. My name is Kristie Harkins, and I'm the Chief Marketing Officer here at OTC Markets Group. I'm pleased to be joined by Jason Paltrowitz, our EVP of Corporate Services; and Dan Zinn, our Chief General Counsel. Gentlemen, to start things off today, I just want to kind of expand upon our overall performance, which Cromwell touched on. So Jason, I'll first turn to you. If you could just talk a little bit about the key drivers that you saw in the business last year and what led to our overall growth.

Sure. Thanks, Kristie. I think there were 2 key themes for last year that led to our growth. First is, obviously, COVID. What we saw through the COVID crisis was companies really trying incredibly hard to reach out to U.S. investors. You saw a tremendous disconnect between valuations around the world and companies in the U.S. And you saw primarily, out of Australia, Europe, Canada, companies trying to bridge that valuation gap, being able to access U.S. retail investors was really pivotal in being able to do that. The second thing would be around the 2-11 regulation that I believe Cromwell touched on. Companies were now forced into a situation, or not forced, but wanting to be in a situation where they were providing timely disclosure to their U.S. investors, U.S. investors that are so important, as I just mentioned. So we saw a tremendous amount of companies coming to us wanting to be open and transparent, meet U.S. securities laws and provide the most disclosure possible in order to be on our markets.

Yes. I mean I think that's, in terms of the specific key drivers, that's exactly right. And to me, the point is being prepared for those kinds of events, right? So extreme volatility and more volume in terms of trading. If we didn't have our OTC Link ECN in place, we wouldn't have been prepared to take advantage of that piece of market structure and that piece of how business sort of grew last year. Similarly, Jason referenced 15c2-11, that was a long time of working with the SEC and working with our industry partners to get that rule implemented and get us to a point where we could have a service for those companies that wanted to remain compliant and stay in our market. And I think all of that tied together, in terms of drivers, just put more focus on the market and more focus on what we do, which really drives our market data business as well. The more people and the more entities that are interested in the kind of data we provide, the more that market data business can grow.

Right. Really kind of creates that cycle or that flywheel effect of each of those business lines kind of driving the other one.

Exactly.

We certainly talked a bit about -- in Cromwell's remarks about the changes to 15c2-11. I think one of the things we often get asked by investors is, "Okay, so that had a big impact in 2021. What does that look like moving forward for the business?"

I mean I think it really is important to reference how long the process was prior to 15c2-11 being implemented in September of last year. And really what happens when a rule like that comes into place is this mad rush of activity, which we saw and Jason referenced in terms of U.S. companies really wanting to ensure their compliance. But those compliance rules stay in place. So for all of the companies that, let's say, joined our disclosure in new service in order to be able to reach their investors and put out compliant disclosure, they're going to have to continue to do that in order to maintain compliance with the rule. And I think as we continue to show the benefits of being compliant and having a public quote, the number of companies that are interested, the types of companies that are looking at our markets is only going to grow. And so you'll see that impact over time. It won't be a single event like it was last year, but it will be this ongoing sort of focus on that part of the market.

Yes. And I think when you look at Corporate Services, you really have to remember, the world is our oyster, so to speak. There's tens of thousands of equities around the world, most of which want to access U.S. investment and most of which want to be and maintain compliance to the rules under 15c2-11. And so for us, as we grow the business out in the future, we're looking at new markets. We're looking at new companies that are coming to market in their own countries that are going to want to access the U.S. We look at our virtual investor conference series as a driver. That continues to gain traction as more and more companies are looking at travel budgets, but still want to be able to access those investors. So we're really just at the tip of the iceberg, if you think about the number of countries and companies that we can provide services for.

And so that really helps kind of amplify or answer that question in terms of what the company's growth trajectory looks like as we move forward.

Yes. I think to some degree, it does, right, with a specific regulation like 15c2-11 and some of the specific points of focus. And more than that, it's continuing to do what I referenced earlier, which is -- remain sort of ahead of the curve. So when we have a strategic plan for enhancing the kinds of services we can offer our broker-dealers, that comes to fruition in the form of something like OTC Link ECN, which then is able to step in and provide a real needed service when volatility and volume raise like they did last year. That's going to be part of how we continue to grow going forward, is remaining in touch with our subscribers and understanding what their needs are going to be going forward, and then being able to execute when the time comes and when those needs arise.

And certainly, I would think for you, Jason, just bringing some of those companies into the OTC news and disclosure fold under the Pink Market sort of then allows you to amplify and look at how you really elevate those companies into either our QX or our QB markets?

Yes. It's interesting. We've really transformed from what I would call a nice-to-have, right? It was really more about how do you access U.S. investors and part of it being an investor relations strategy. For most companies around the world now, in order to kind of have the right market here, a must-have. And as we're engaging with those companies, primarily through the disclosure of new service, they're seeing the opportunity that our premium markets afford them and want to kind of upgrade as they go through the process. Going back to that virtuous cycle or the circle, the more people that are trading, the more volume that's going through our platform, the more people that are taking our market data, right? We start to see interest out of Asia, the more companies are starting to see that. And really, it just feeds the demand for issuers wanting to be on our markets. So as I said before, it is the tip of the iceberg in that we're really focused on certain key regions, and now we're going to continue to expand out from there.

And I think one of the other interesting points that we should touch on that Cromwell mentioned was the announcement that we've recently signed a deal to acquire Blue Sky Data Corp. So I think maybe, Dan, if you could just fill us in a little bit more about what that means for the market data business, but also for how we think about the business overall.

Sure. I mean, on a granular level, what that does is provide us with state-level compliance data. It really complements what we're already doing through 15c2-11 on a federal level. So for a broker-dealer compliance department or a clearing firm compliance department, having a view into both state and federal law and how companies are complying and how securities are complying with those is going to be a nice additional offering. I mean, I think, on a broader level, it speaks to what we're able to do when the market becomes educated about the services we provide. Because really, a lot of what Jason was referring to earlier, the more we become that touch point, the more interest there is in our market data, the more likely a broker-dealer compliance department is going to look to us for some of our compliance analytics data or some of the other offerings that we have and the more educated the people in those compliance departments become, the more comfortable they become with things like differentiating OTCQX and OTCQB from the Pink Market and just having a better understanding of how our market structure operates. So it's a seemingly small piece of the puzzle, but it actually has an effect that will really be outsized compared to the size and scope of that particular business.

Well, it really continues to speak to the journey that we've been on in terms of becoming a regulated entity and having that both federal-level regulation, but also then the state-level regulation that's kind of competing and putting that puzzle together.

Sure. It's -- for us, 2-11 really represents an inflection point of some sort. And I think the Blue Sky Data acquisition just adds to that, where now the industry and even regulators are looking to us as the source of this information and as a reliable regulated market that they can really understand and grow with.

And I think, again, that just feeds the issuers because they're being told by their investors, by the broker-dealers that they're working with by their advisers and their investment bankers that there are now key standards in the U.S. that companies need to meet. There's disclosure requirements, there's state securities laws. There's all of these things that companies need to think about. Not necessarily limiting institutions from taking investment. But if you want to broaden and diversify your shareholder base as much as possible, you need to kind of tick these boxes and be mindful of what you're doing. And it all just feeds into growing that issuer business.

I think we'd be remiss if we didn't just sort of mention or talk a little bit about some of the outside factors that affect our business overall. I mean, certainly, there's quite a bit going on, whether it's from an economic level or geopolitical level. How do you think, Jason, about those kinds of sets of issues and how they impact our business over the long term?

Well, it still certainly creates volatility and uncertainty. And one of the things through my 20-plus years of a career, right, uncertainty is opportunity. And where you have volatile markets, you have companies that are looking to reduce that volatility. Broadening your shareholder base, diversifying your shareholder base, adding a retail component to your shareholder base is a tried and true way in which to kind of bridge that gap or to minimize the volatility in your stock. So we're still seeing -- even in this uncertain time, you're still seeing issuers reaching out and wanting to join our markets in order to do that. From a geopolitical standpoint, obviously, I don't know that I have the answers or Dan or you. We don't know where those things are going to go. But what we do know is the financial markets are still important. What we still are seeing is that from the SME, the small and medium enterprise space, being able to be in the U.S., whether it's in biotech or fintech or cleantech, being able to access U.S. investors and investment is probably more important than ever as certain parts of the world are a little dicey. And so it's a lot of uncertainty, but so far, so good from a business perspective.

Yes. I mean the experience of dealing with global economic events is not that dissimilar from dealing with COVID, right? And it does drive retail investors to either take more action or at least demand more information. Those impact our trading services business and our Market Data business. It drives companies to make sure they understand how they're interacting with investors. So to Jason's point about how our markets can help companies in those circumstances, right? It's almost, for us, less about the specific geopolitical event or the specific macroeconomic event and more about making sure that when those things arise, we have the ability to communicate with our subscribers; for Jason and his team, to talk to companies, whether they're on our markets now or thinking about it, and leverage our services to be able to get through whatever bump in the road or sometimes much larger than a bump in the road appears to them.

And you mentioned sort of the ways in which we help companies. And I know that one of the things that's near and dear to your heart is continuing to help companies and really make sure that the legislative agendas and that those regulatory agendas are really helping our issuers as well. So maybe if you just give a quick couple of thoughts on some of the key regulatory pushes that we're looking to make this year.

I just look at it as fun trips to D.C., but I like that you framed it. I think a lot of our legislative agenda is really driven by what we hear from the companies when we convene things like the OTCQX Advisory Committee and hear, really, from CEOs and CFOs that are experiencing life on the OTC Market. It's wonderful to hear what things are important to them. One of the biggest ideas that we got out of that group in those conversations was this concept of how companies on our markets can offer employee stock ownership plans, which is really a way of giving employees access to the economic benefit of a growing public company that has access to public market. The rules have been outdated for a long time, and they treated companies on our markets like private companies as opposed to the public companies that they really are. And so we're happy to say that just last week, the House passed the SECURE Act 2.0, which is a sweeping bill that deals with a number of retirement fund issues, but includes a provision that would modernize the way that rule works and allow companies on the OTCQX market, in particular, to offer ESOP plans on par with how their peers on an exchange would do so. We have a long list of regulatory asks and things that we think would level the playing field and really focus on the merits of the company, making sure that people understand the OTC Market has transparency, has easy-to-access market data and all the rest. So another key driver for us is margin eligibility, which really just boils down to being able to hold an OTC security in your margin account and borrow against it the way you might a security listed on an exchange. Again, sounds like a small piece, but every bit of recognition we get on Capitol Hill, in particular, that shows how our markets are really providing the same kind of public service that people have grown to expect over the years that really does allow us to then take a step further and a step further. And so we can do this for hours, but I'll pause on those 2 in terms of key drivers.

Well, I know those are certainly both issues that are near and dear to your heart and to those of our clients as well.

Well, yes, it's important to recognize that while we talk a lot about the growth being international, we have a sizable U.S. business. And things like Reg A or specs or anything that allows a domestic security where we're the primary market feel and look more like an exchange counterpart, really, has a tremendous amount of value. It certainly helps growth as a company. But the exchanges aren't always rightsized for a lot of the companies that still want to be public and want to support their shareholders. And so being able to address some of these regulatory inefficiencies between the markets are really important, not just, again, for our growth in the company, But for these companies. We're a company in our market and a small company. We face these issues as well. And so I think it's important that we kind of fly the flag for those companies that we support.

Thanks, Dan and Jason, for today's discussion. We will now transition over to our Q&A session, where you'll have the opportunity to ask questions of both Jason and Dan and the other members of our senior leadership team. Thank you.

Great. We've got everybody in the process of just logging in to join us for our Q&A session. [Operator Instructions] So as we kind of kick things off with this portion of the program, Matt, I'm going to direct the first question that we've had come in is towards you. Jason touched a little bit upon some of the trends that we were starting to see globally, but hoping you can expand a little bit more on sort of where you see growth coming from at a global level from a market data perspective.

Sure, Kristie. Yes, we're continuing to see opportunity and interest from the retail sector internationally. So activity has tailed off a little from the peak of COVID, but there's still a lot of opportunity there, especially in Europe and Asia. We see that sector growing, and we're seeing demand there, and we're starting to cover that as well. Additionally, because of that, we're also seeing, from the institutional trading community, both in Europe and Asia, demand as well. And that's something that we think is going to continue over the next 6 to 18 months. We see a lot of European firms looking at our data for after-hours and overnight in Asia. So we think there's a lot of opportunity there in -- definitely in those 2 regions.

And I think as we kind of think about and we talked a lot about in our sessions about how each business sort of feeds onto itself, Mike, there was a question just around, obviously, we saw a lot of volatility last year and Dan and Jason and Cromwell, all spoke to that. But maybe you could just talk a little bit about some of the early things we're seeing in 2022 and kind of how that ties in with some of those trends that Matt was just speaking to.

Sure. Although last year in Q1 was obviously the highest volumes we ever saw in over-the-counter trading, the volumes in this Q1 are down about 32%. But from our participation in the market, we've continued to grow our overall market share on the ECN, and we've been able to continue to advance our new products into being able to trade additional securities and be able to continue to grow that market share. So I think we're well positioned as market volumes come back and over-the-counter to be the place of choice for our subscribers to execute transactions.

I think that's helpful just to frame up sort of how things are shifting, but also the types of things that Dan was talking about earlier of how we've really set ourselves up to be prepared to handle those differences and those different trading strategies as well. One of the questions that just came in, Jason, I think I'll direct this one to you, which is really around companies becoming public later in their life cycle. And therefore, just kind of looking at that dynamic and kind of how we position ourselves based in and around how companies might view entering the public market. So maybe, Jason, I'll start with you. And then Cromwell, maybe add some additional remarks from your perspective on that kind of going public process.

Sure. Thanks, Kristie. I think there's a lot of press about companies staying private longer. I think what's missed in that is companies are actually choosing alternative routes to access public markets and not as much of a discussion around that phenomenon. Our markets are tailored for early-stage growth companies that maybe historically would have stayed private longer and waited for a big bang on a national exchange, but in essence, are using our markets to learn how to become kind of those future public companies. So we position ourselves, in some cases, as public venture capital, if you will, right, for those early-stage companies where the benefits of being public exist, where you can go out, tell your story, capture investment, grow your business without some of the complexity, risk, cost, burden of a huge national exchange and learn how to grow yourself up to that point so that when you want to become public, in what the press calls being public, you're ready to take that jump to a bigger national exchange. So we're actually seeing, and I think Cromwell, in his presentation, saw the numbers, right? The number of companies that are accessing our markets continues to grow. Those are public companies. It's just the alternative route that they're taking in order to get there.

And Cromwell, there's some maybe additional thoughts or color you just want to add around kind of that cycle of going public that Jason spoke to. And also the journey that companies are on, much like our own, to really learn how to be good public reporting companies and have the right governance and standards in place.

Thanks, Kristie. That's -- there's always been a debate, since I started in public markets, about how do we balance the needs of capital formation and compliance from a risk, entity size and cost perspective. We no longer live in a one-size-fits-all world. And the -- how -- so what we think about a lot is how do we offer a public company different stairways or standards to grow upward on. And instead of having the big package that you buy at once, our goal is pretty straightforward is to provide building blocks. And that understanding is different than a national securities exchange, but it's more forward-looking. And that's -- as we build it, what we've seen is our standards we've built, we've seen more regulatory recognitions of -- as the marketplace has recognized those standards, and that can increase value to companies of being public.

I think that's really helpful and also just gives a perspective of we, ourselves, have been on that same journey in terms of establishing ourselves within the public market. Just as we kind of switch gears a little bit. But again, Dan, this is over to you. It's just a bit of a look at expanding the thoughts around 2-11. So I know you touched on this a little bit in your remarks, but we did get a question just around -- given it was adopted last year, how does that drive growth into 2022 as you think about seeing more companies join the market. And is that impacted at all by things like a recession or rising inflation rates?

It's a good question. And I think it's important to address it both in the prior panel and in this discussion. I mean in terms of growth and how we see that working in 2022, think about 2021 as setting a baseline. So what I was referencing earlier was this flurry of activity that led up to the compliance date last year, but that now becomes the standard. So in terms of our growth possibilities into 2022, it's really building on what we already established last year, making sure our processes and procedures are as smooth as possible and allowing more companies to onboard as they see the value created by those companies that ensure their compliance last year. I think things like a recession or inflation or other macroeconomic events of the type that we were referencing earlier will always have some degree of impact on how the market operates and how investors think about how they want to interact with companies. But from our sort of silo here, in terms of the regulations that are very specific to what we do, 15c2-11 will continue to set that baseline. It will continue to be the market companies need to meet in order to remain publicly quoted on the market. And typically, even in times of economic distress, that's what companies want to do. They want to be able to have their disclosure out there, be transparent and communicate as much as possible with investors. So with that in mind, I think 2022 sets itself up as a year of seeing that part of the business grow.

And Jason, is that something that you're seeing as we look at the FERC just coming out of the first quarter of Q1?

Yes. I think when you get into times of economic uncertainty, and when you overlay kind of 15c2-11, what you're seeing is companies that are being much more proactive in wanting to engage investors. There's a saying when I started, stocks are sold, they're not bought, right? That's -- more than ever, companies are going out and trying to make sure they're doing what they can to grow their shareholder base, their investor base. And 15c2-11 is that benchmark in order to be able to do that in the over-the-counter market here in the U.S. For international companies, it's even more important as a large number of investors that use our markets are retail investors. Being able to access U.S. retail investors in times of uncertainty to mitigate a lot of the velocity that happens during those times has become increasingly important and being able to evidence their investability through rules like 15c2-11 are a significant part of that.

In terms of some of the other kind of questions that are coming in, I think this one, I'll turn over, Antonia, to you and to Cromwell. Obviously, we talked about our recent acquisition of Blue Sky Data Corp. So we've gotten a question just on any further color that we might be able to provide on that acquisition? And then kind of bridging that to sort of a longer-term thought about how we kind of think through our overall acquisition strategy. So maybe Antonia, I'll start with you. And then Cromwell, maybe you can pick up from there.

Certainly. Thank you, Kristie. In general, when we look at acquisitions, we certainly look for opportunities that further enhance and strengthen that flywheel effect that Cromwell and others touched on. And Blue Sky Data Corp. is no exception. In terms of the specific question around the economics of that acquisition, Blue Sky Data Corp. has been a leader in its space of delivering Blue Sky compliance data for 30 years and has operated profitably over that long period of time. So we are looking forward to bring onboard its clients and revenue. But in addition, we're also expecting to realize efficiencies and how we leverage our technology capabilities to deliver the same data set more efficiently to the existing client base. So we do expect to realize certain synergies on the cost side and, overall, see not only the strategic benefits from this acquisition that Cromwell touched on and others touched on in terms of expanding our capabilities into state securities law to augment and enhance our Federal-level compliance data, but we do expect to see positive financial impact from the acquisition as well.

And Cromwell, maybe you could kind of speak to the broader acquisition strategy. This is 1 example.

So Blue Sky Data was an acquisition that I would like to be able to do 1 every 6 months. It's timed well. The entrepreneur who founded it has built a strong business with recurring revenue and has a high-quality product. It's a smaller company, though, so we can bring to it our better technology platform. And we're actually moving the process of creating the data into our platform very quickly. So it's a big win from that side. However, we get to take the people and the knowledge and the domain knowledge to improve our product and also work on our overall data quality picture. So it's a very positive acquisition from a commercial standpoint for us is -- now, of course, the entrepreneur knew they had a good business so they sold -- we had to get to what was a fair price. She was a quite good negotiator, too. So -- but what we have now is a product that takes a very complex set of regulations and makes it easier for broker-dealers to be in compliance. And we get to take that critical mass and expand it out and have that toolset of helping brokers take complex regulations and be in compliance and scale it across a network. And then the second part is because platforms are much more valuable if you have a multisided effect, by our going out to the corporate community of issuers of equity and debt securities, helping them understand Blue Sky will give them the opportunity to go in -- to be compliant in more states, to take the extra steps, to provide the disclosure to put the credentials out. And so it becomes a win-win situation where the market becomes more efficient and more compliant. And that -- so that's exciting and because a good chunk of the securities are traded over the counter, while we'll cover listed equity and debt securities, it expands the access points for securities and the overall level of compliance with securities regulations in the market in an efficient manner and technology-driven. Now the second side is, I would say that's not every acquisition we're going to see. We're going to see a range of acquisitions that -- and there's going to be different opportunities. When we initially purchased the National Quotation Bureau, it was a turnaround situation, and it was a replatforming, and it was changing the fundamental service provided to clients rather drastically. But by doing that, we were able to put the business on a path to growth. And for us, we look at acquisitions as what does it do to increase our product suite, strengthen our platform or expand the skill set of our people. And if we do those thoughtfully and commercially, we should, over time, have a portfolio of purchases, investments and organic growth products that grow shareholder value over time.

I think that's really helpful to both frame sort of the reasons behind the Blue Sky acquisition, but also to look at how we think about acquisitions overall and as we move forward to the future. The next question, actually, Jason, looks like this one is for you, at least as a starting point. And it's really around talking a little bit about pipeline. And in this case, rather than talking about a private to public pipeline, really looking at the potential pipeline as it exists of companies that have maybe -- with a potential economic downturn, are facing the question of whether it makes sense to come to our markets, QX, for example, rather than remain on a national securities exchange. So maybe you can just speak to a little bit of that process and kind of how you view that overall.

Over the last, gosh, 5 to 10 years, that's been an ever-growing part of the pipeline as our markets have expanded, as we've gained more regulatory recognition, as everybody on this call has said, we've increased the product suite, the breadth and depth of the distribution of the information. Companies have always taken a look at whether or not being listed on a national exchange meets the needs of that company at any particular moment. Certainly, one of those factors is cost, but regulatory burden and others certainly come up. When markets turn down or we hit a recession or something that causes companies to think longer and harder about what they're getting out of their public market, we absolutely do see growth -- accelerated growth in the pipeline. Certainly, you also see companies that no longer want to be on that wheel of chasing, meeting and exchange listing standards. So not wanting to do reverse splits to meet the price requirement, not needing to do all of the things that come with being on a national exchange. So the short answer to the question is yes, absolutely. When markets turn, we see the impact through increased pipeline, but that's not something that's limited to just a market downturn. It's something that, as we've grown, has been part of our strategy for business development all along.

I think that's helpful again to understand that there's multiple sides of the equation, whether that's the private to public process, whether that's the uplisting process or whether that's looking at companies choosing our markets over a national exchange. Liz, I thought I might just turn to you for a second because we've obviously talked a lot in our remarks about 15c2-11 and the ongoing implications of that. Your team obviously sees this from kind of the ground swell up. We just came on a bunch of annual filing cycles and things like that. So can you just speak a little bit to what your team saw as we hit that kind of post 6-month mark from the implementation of 2-11?

Sure. As several people have mentioned, we spent last year leading up to the implementation date of the 15c2-11 amendments just sort of onboarding new clients onto our platform and working with them to provide the required disclosure under 15c2-11. And now we have to continue to serve those clients. And we are just coming off a large filing cycle, the 12/31 annual filing cycle. Just finishing that up, and it's typically our busiest time of the year. It's gone remarkably smoothly. And what we're seeing is the vast majority of the companies that selected last year to have OTC Markets play this role and confirm compliance with 2-11 to maintain a public market or continuing to provide the required disclosure. We are -- it's just -- it's going very smoothly. Companies are providing the disclosure that they need to provide to maintain their markets. That's -- that's what we're -- that's what we're seeing so far. We also -- we continue to see interest from new issuers who are inquiring about how they can sort of come into the lit markets as well and make their disclosure available -- newly available to investors.

And I think, Cromwell, that speaks to one of the things that you often talk about is, really, just the ESG factor of making sure that companies have good corporate governance in place and are continuing to meet those deadlines and those standards and making that information as transparent and as available to investors as possible.

Thanks, Kristie. The -- I -- we talk about our regulatory recognitions a lot, but those regulatory recognitions aren't for every company on our platform. And that's -- important to understand is our goal is to create a market where investors can identify and properly price opportunity and risk. And that's -- and so what that does is companies need to earn and own their public reputation. It's the company's reputation on the platform. It's the company's disclosure. It's the company's governance. It's the company's credentials. And we're the network that helps distribute those and digitalize that and provide a continuously updating stream of information, which then feeds into the market pricing process. And that's what an efficient market is. It's supply/demand with information for the market to move from the short-term dynamics of popularity to the long-term scale of value. And we look at it as governance and good corporate citizenship is on the front burner for every company and is not going away because for companies that want to be public and successful over the long term, they need to practice a form of sustainable capitalism. It's connected to their community, delivers value and also complies with securities laws and other rules and regulations wherever they operate. And our goal as a market operator is to help those companies distribute that information into the market, their information.

That's very helpful, Cromwell, thank you. I think as we kind of look at a few more other questions that have come in, Dan, this one's for you. Obviously, there's a lot going on right now within the SEC and within the regulatory space. I know we obviously talked a bit in your remarks earlier about our legislative and our regulatory agenda. But maybe you can just touch on what some of those more critical pieces are for our markets that the SEC currently has under review or at least a few highlights anyway.

Sure. They are prolific lately. Last year, I was wondering when the rule proposals were going to start coming and they turned on the faucet. And so a lot of things have come out recently. The things that impact our market and that we pay close attention to are largely around disclosure. So there are climate disclosure proposals out there, cybersecurity disclosure proposals out there. We look at that both to try to understand what our SEC reporting companies are going to need to include in their disclosure, how folks might react to that and whether that's something we should adopt or pieces of that. We get a nice process of learning by watching the comment period and watching implementation of some of those rules. Similarly, the SEC put out a rule proposal regarding the definition of an exchange and looking at how trading systems operate and, really, with the goal of expanding the pool of organizations and trading facilities that qualify as an ATS. And so we're going to welcome more people into the place where we sit as a regulated market operator. And so seeing how the SEC implements rules like that is also very core and very key to what we look at. There are really new ones almost every day. But I think focusing on those 2 things, those that impact kind of how we deal with our regulators as a regulated entity and how our regulators are thinking about expanding or minimizing those responsibilities and how companies that might be included in our markets can be a part of what the SEC is. That's really where we're going to spend a lot of our time.

And certainly, that's a -- it's a passion area for everyone that's on this call is how are we really helping the companies that sit on our markets, the broker-dealers that trade with us, our market data subscribers make the most out of their ability to be here with us. As we kind of wrap things out, we've got just a couple more questions coming in. If anyone's been holding off and not asking a question, I would invite you now as we start to wind things down to add it into the Q&A module. But the next question that came in, and I think, Matt, you touched a little bit upon this, but this is for more of a Corporate Service perspective. The question was around just Asia and China as core markets or what we're seeing in terms of the potential for those markets as we look forward. So maybe, Jason, I'll start with you. And then Matt, to the extent you want to add anything further, that would be great.

Thanks, Kristie. Certainly, from a Corporate Service perspective, Asia is a market on which we plan to focus. I think the question was China/Asia. So I don't know if that's both or all. But certainly, countries with public markets, Japan, Hong Kong -- Tokyo, Hong Kong, Singapore are markets where we're looking, where there's a tremendous opportunity for us on the corporate services side as well as tremendous opportunities for companies. Again, back to my earlier response about wanting to access U.S. investors and have a public market, we are the beneficiary of being a secondary market for a significant number of companies that are primarily quoted on their home markets. So if you look at Tokyo or Hong Kong or Singapore and those exchanges, as an example, to be able to have an OTCQX or QB quote and to be able to access U.S. investors through their home market disclosure is really advantageous. And as you look, China is something that comes up a lot as we've looked at what's going on with single listed Chinese companies on the exchanges here, being able to redomicile and become publicly traded in their home market, Hong Kong as the example. But to be able to still maintain that secondary quotation on our market and be able to access those investors or maintain their investor relations strategy to the investors they already have is something we spend a lot of time looking at and are focused on.

And certainly, Matt, as we bring on more and more companies from some of these different regions, and we see the trading community interested in those markets specifically, obviously, that opens stores for you from a market data perspective.

Right. I mean, Asia gets thrown around as a region, but it's -- there's so many different, obviously, countries within it and different markets, right? So they all have a lot of opportunity from a data perspective. So it really feeds on what Jason was saying. Also, the growth of the retail investor, the growth of the middle class in these places. They're interested in trading. It's getting easier. And so that's bringing a lot of opportunity on the data side as well.

Yes. And Bruce, as we think about sort of the technology, obviously, to serve both those companies, our broker-dealer subscribers as well as our market data subscribers, maybe you can just talk a little bit about the investment that we continue to make in our technology in order to make those things happen.

Sure, Kristie. We're constantly increasing our technology spend year-over-year. That's in both infrastructure, personnel, development. I think Blue Sky is a good example as Cromwell pointed out before. We continue to increase our systems to handle 2 to 3x capacity. So they're never running at the top of the stack, so to speak. A good example, year-over-year, we are constantly upgrading our broker-dealer community offerings so that we enhance the capability of the company's value there. So at the end, we're a fintech company, and we're always ensuring that our technology is both scalable, resilient and most certainly reliable.

So I think, guys, that about brings us to the end of our Q&A session. But Cromwell, maybe I'll flip it to you if there's any closing remarks or anything else you just wanted to highlight. And while I give everyone an opportunity if there's any last breaking questions.

Thanks, Kristie. I would like -- there's a big long-term trend, which is transparency and technology has increased information availability and diversity of investor access points to public markets, and that's really highlighted the importance of active investing. The stock markets, when I was starting out, active investing was the top of the chain. And passive index investing created an incredible product where investors can put their money as savings in a diversified portfolio and free ride off the market forces. However, that only works if there's active investing and there's an ecosystem feeding the large index companies all the way to the beginning of the capital formation process. And so that conversation with regulators, how do we keep improving that environment and increasing information availability and a diversity of access points to the public markets. Brokers have -- brokers offer lots of different business models and pricing strategies to investors and information availability. So that's a big change. And because of that, that great information distribution is -- the value of going and being public as the long-term trend of transparency of companies becoming more transparent, becoming more connected to their community, wanting to have their community be investors in their company is -- and that's demonstrated from direct listings, is demonstrated from specs. It is a changeover. And our challenge is how do we balance the complexity, time burden, cost for companies over their life cycles and how do we tailor it for different companies, whether they're global companies, community banks, early start-ups, Bitcoin trusts and solve those problems so that there is good information for investors in the market and that companies own that reputation and can earn a reputation or be priced properly for their own risks and putting that together. And that's always our challenge because we have public companies. We have investors, we have broker-dealers who have to -- are highly regulated and need to meet standards and -- in a very competitive market. And finally, that conversation with regulators, if the markets are moving in the right direction. And those are the things that we work on. And as we get -- work on those, we're also building out the technology platform to actually -- and the people platform to accomplish those commercial needs.

I think that's an excellent place to wrap up our discussion today. Obviously, we've talked a lot about that continued trajectory, whether that be from a regulatory agenda perspective or from a business perspective. So I'd just like to thank all of you in attendance today. You will receive a copy of both the Q&A session as well as the previous sessions, and we look forward to continued dialogue with all of you and the ability to answer your questions moving forward. So thank you very much for joining us for our OTC Markets Investor Day. Thanks, everybody.