OTC Markets Group Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Record second-quarter performance: Gross and net revenue grew 14% year over year, while operating income increased 19% and diluted GAAP EPS rose 18% to $0.71. All three business lines contributed to growth.
  • Positive Sentiment: OTC Link remained the strongest growth engine, with revenue up 27% amid robust trading activity, a 50% increase in average daily transactions on OTC Link ECN and NQB, and growth to 144 unique broker-dealer subscribers.
  • Positive Sentiment: Corporate services revenue increased 14%, supported by the OTCID Basic Market, pricing adjustments, and higher company counts on OTCQX and OTCQB. OTCID had 1,037 companies at quarter-end, while OTCQX reached 585 and OTCQB reached 1,101.
  • Positive Sentiment: Strategic and regulatory opportunities expanded: The BitGo alliance is intended to support regulated trading and custody of tokenized securities, while proposed SEC reforms could recognize OTCQX and OTCQB for ATM offerings and potentially reduce capital-raising and blue-sky-law burdens.
  • Neutral Sentiment: The company cautioned that trading volumes and non-professional market-data users are inherently variable, and EDGAR-related revenue has not yet stabilized. Overnight trading is also ahead of current demand, although management views it as strategically important for future continuous OTC trading.
AI Generated. May Contain Errors.
Earnings Conference Call
OTC Markets Group Q2 2026
00:00 / 00:00

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Operator

Good day, and welcome to the OTC Markets Group second quarter 2026 earnings conference call and webcast. At this time, all participants are in listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question, you will need to press star one one on your touch-tone telephone. Please note this call is being recorded. I would like to turn the call over to Dan Zinn, General Counsel and Chief of Staff. Please go ahead.

Dan Zinn
Dan Zinn
General Counsel and Chief of Staff at OTC Markets Group

Thank you, operator. Good morning, and welcome to the OTC Markets Group second quarter 2026 earnings conference call. With me today are Cromwell Coulson, our President and Chief Executive Officer, and Antonia Georgieva, our Chief Financial Officer. Today's call will be accompanied by a slide presentation. Our earnings press release and the presentation are each available on our website. Certain statements during this call and in our presentation may relate to future events or expectations and as such may constitute forward-looking statements. Information concerning risks and uncertainties that may impact our actual results is contained in the Risk Factors section of our 2025 annual report, which is also available on our website. For more information, please refer to the Safe Harbor statement on slide three of the earnings presentation. With that, I'd like to turn the call over to Cromwell Coulson.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Thank you, Dan. Good morning, everyone, and thank you for joining us. I will begin by reviewing our second quarter 2026 results at a high level and then turn to a discussion of our performance and priorities for the year. For the second quarter, gross revenues and net revenues grew 14%. This was another record quarter for OTC Markets Group, with each business line showing growth that contributed to our overall strong results. OTC Link revenue was up 27% in the second quarter and 29% for the first six months. Market data saw 7% growth in the quarter and is up 4% in the first half. Corporate services achieved 14% growth during the quarter and 17% over the first six months.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

OTC Link's performance continues to result from robust activity across our markets, with over $230 billion in market-wide dollar volume during the quarter and over $460 billion for the first half of the year. Increased trading volume is not the only measure of success for OTC Link. Our team added several unique broker-dealer subscribers across our ATSs, giving us nearly 145 unique subscribers as of June 30th. Our market data results were driven by growth in professional and non-professional subscribers during the quarter, combined with targeted price increases for certain products. Our ongoing success will depend on our ability to keep expanding our content and distribution network, increasing the client value of our products, and growing the number of subscribers. Results in our corporate services business reflect the higher use counts at the start of 2026, driven by our strong finish to last year.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

This growth was largely due to the continued impact of the OTCID Basic Market, which launched on July 1st of last year. Notably, we saw subscriber growth on both the OTCQX Best and OTCQB Venture markets, as well as growth in the overall number of corporate clients using our services. Success in the corporate services business will come from strong solution-based sales to connect more companies, coupled with our ability to drive client success and retention. We prioritize helping actively engage companies improve the quality of their public trading to close the investor and broker information experience gap with exchange-listed securities. With respect to operating expenses, we saw a 9% increase in the second quarter. Our investment in our people remains our largest, most important expenditure.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

I remain extremely appreciative of the hard work and client-centered approach our OTC Markets Group team brings every day and their individual contribution to supporting our clients, improving our products and growing the business. We continue to work to round out our senior management team with a new head of corporate services. We are conducting a thorough search and review process to find a leader who can build our team, expand our offerings, and engage more companies to improve market quality. We will report on our progress in future earnings calls. Our decision last year to prioritize building out our overnight trading capability and launching the OTCID Basic Market formed the foundation on which we have achieved growth through the first half of 2026. Overnight trading on our MOON ATS has been a useful learning experience to expand our capabilities.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Working to launch it last year helped us engage and build our broker-dealer community and move together to offer robust around-the-clock trading for a wide range of investors. We continue to focus on the importance of engaging subscribers with our OTC overnight market. The offering is ahead of actual demand. Providing investors convenient access to OTC securities on a continuous basis remains a key part of our vision for the future. The OTCID market has been a growth engine within corporate services, engaging and attracting a number of new corporate clients. We had over 1,100 companies trading on OTCID at the end of the second quarter. Not only has OTCID itself seen subscriber growth, we have also seen our efforts to educate the issuer community around OTCID lead to increased sales and retention on our OTCQX and OTCQB markets.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

One of our key metrics is the percentage of connected companies and related dollar volume on our markets. The connected companies trading on OTCQX, OTCQB, and OTCID contributed roughly 26% of the dollar volume traded on our markets during the first half of 2026. Recent mega-cap additions on OTCQX, such as Siemens Energy AG, give a positive indication of our ability to serve blue-chip issuers on our markets going forward. Turning to our 2026 initiatives, we have made significant strides in preparing our platform for the introduction of tokenized and digital asset securities into our markets. Our recently announced strategic alliance with BitGo will allow us to bring digital asset trading and custody infrastructure to broker-dealers utilizing OTC Link ATS. Enterprise-grade custody and clearing are a critical component of regulated securities markets. Currently, DTC performs that role for the industry.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Today, DTC's efforts are focused on tokenizing member firm entitlements rather than onboarding blockchain-native securities and other digital assets. By connecting OTC Link's qualified interdealer quotation system with BitGo as a qualified digital asset custodian, we are assembling the core components to bring legal and lawful trading of blockchain-native securities into regulated securities markets. As regulations and rules and guidance in this area develop further, we stand ready to support our FINRA member broker-dealers, market data customers, and other market participants as they innovate around these new technologies. You can look at our value add in two parts. First, wholesale trading on our ATSs and price transparency through our market data distribution, which supports broker-dealers in sourcing liquidity and delivering best execution for their customers, the investors. We serve broker-dealers trading in a wide range of securities based on investor demand.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Second, our premium markets provide engaged public companies with the platform to improve their investor experience, market quality, and breadth of accounts that can access their shares by distributing disclosure and demonstrating compliance with securities laws. These fundamentals are foundational to traditional securities and digital securities. They are applicable to shares held at DTC, ordinary shares custody overseas, and now shares on the blockchain. We have also begun to see the first contributions from the opening of our Hong Kong office earlier this year, another of our 2026 initiatives. While that office is still in its initial phase, this international expansion helps further our mission to educate non-U.S. companies about how best to use our market structure, data and disclosure tools, and to connect with more investors and build their brands in the U.S. Another high-profile initiative this year has been moving forward our regulatory agenda.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

We have invested our energy advocating for small company capital raising, recognition of our OTCQX and OTCQB markets, and achieving greater regulatory parity between comparable qualifying companies on our markets and those on NMS exchanges. The SEC's recent set of rule proposals, specifically their proposal on registered offering reform, marks a significant step forward on all fronts. The SEC's proposal, for the first time, formally recognizes OTCQX and OTCQB as qualifying public trading markets on which issuers can conduct At-the-Market offerings. This recognition reflects a long period of candid conversations with the SEC staff about how to increase the benefits of being a public company and reduce the burdens. We are excited at the prospects it represents to increase tangible benefits for public reporting companies and make capital raising less burdensome.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

The proposed rules also cover the potential federal preemption of certain state blue sky laws, expanding access to more investors and reducing cost and complexity for registered offerings. As the SEC moves to finalize these and other related proposals, we will discuss the potential benefits to OTCQX and OTCQB issuers, as well as their advisors, in future earnings calls and reports. At the beginning of this year, we announced a strategic determination to increase our quarterly dividend to better balance the ratio between quarterly and special dividends. We have also been opportunistically buying back shares in the public market. I'm pleased to announce that on August fourth, our board of directors declared a quarterly dividend of $0.30 per share payable in September. With that, I'll turn the call over to Antonia.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Thank you, Cromwell, good morning to everyone joining us today. We appreciate your continued interest in OTC Markets. I would like to start by recognizing our exceptional team. Their focus and execution in the second quarter delivered meaningful momentum that's positioning us well as we head into the second half of 2026. Let's turn to our results for the second quarter ended June 30, 2026, starting on page seven, with all comparisons to the same period of 2025. We generated gross revenues of $34.8 million, up 14% year-over-year, while revenues less transaction-based expenses grew 12% to $30.6 million. Our OTC Link business delivered another quarter of strong growth, with revenue increasing 27% as trading activity across our ATSs remained robust, with MOON ATS continuing to ramp up.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Transaction-based revenue generated by OTC Link ECN, OTC Link NQB, and MOON ATS increased 47%, while transaction-based expenses paid to liquidity providers increased 39%. Usage-based revenues from OTC Link ATS increased 6%, largely driven by a higher volume of trade messages. During the quarter, average daily transactions on OTC Link ECN and OTC Link NQB reached approximately 95,000, a 50% increase year-over-year, while MOON ATS saw approximately 69,000 average trades and 7.8 million average shares traded per session. While trading volumes have been strong year-to-date, they remain inherently unpredictable and could decline in the future. In terms of broker-dealer subscriber numbers, we ended the quarter with 144 unique subscribers across our ATSs, up from 137 a year ago. This subscriber engagement with our multi-ATS model reflects the value our open platform offers in support of the diverse business operation and compliance requirements of our broker-dealer subscribers.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Our market data licensing revenues increased 7%, comprised of an 8% increase in redistributor-based revenue, 10% increase in revenue from direct sold licenses, and 1% increase in revenue from data and compliance solutions. Redistributor-based revenues increased across both the professional user segment, which grew 6%, and the non-professional user segment, which increased 47%. In each case, the revenue increases were the result of growth in user counts, with professional users increasing 5% and non-professional users increasing 38%. The number of non-professional users continues to fluctuate period-to-period with market activity and varying retail participation in the market and may continue to fluctuate in the future. Revenues from direct sold licenses increased primarily due to price increases for certain licenses and growth in subscribers. Data and compliance solutions revenues benefited from growth in data services and our Blue Sky Data product, partially offset by lower revenue from EDGAR Online.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Our corporate services business delivered 14% revenue growth in the second quarter, with contribution from all of our markets. OTCQX revenues increased 9%, while OTCQB revenues grew 10%, supported by both higher average company counts and pricing adjustments effective January 1st, 2026. In terms of new sales, we added 33 OTCQX companies and 63 OTCQB companies in the second quarter, compared to 39 and 85, respectively, in the prior year quarter. Quarter end OTCQX companies reached 585, up 5%, while quarter end OTCQB counts were 1,101, up 3%. Revenues from our OTCID market and from Pink Limited subscribers to the Disclosure & News Service increased 32%, reflecting the continued impact of the OTCID Basic Market launch in July 2025. At quarter end, we had 1,037 OTCID companies, compared to 1,035 at launch.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Combined with the Pink Limited subscribers to DNS and other products, these companies reached a total of 1,477, up 8% from 1,362 a year ago. Month-to-month variability in our corporate services subscribers is driven by new sales, offset by non-renewals, corporate events, and compliance downgrades. Turning to page eight. Operating expenses increased 9% year-over-year. The primary drivers were professional and consulting fees, which increased 54%, and IT infrastructure and information services costs, which grew 11%. Professional and consulting fees reflect increased regulatory and clearing fees related to the higher trading activity, as well as certain accruals for regulatory matters. Compensation and benefits comprised 58% of our total operating expenses in the second quarter, compared to 63% in the prior year period. Moving to page nine. Operating income increased 19% to $10.5 million, and operating margin expanded to 31.1%, up from 29.9% in the prior year period.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Net income was $8.6 million, up 17%, and diluted GAAP earnings per share reached $0.71, up 18%. In addition to certain GAAP and non-GAAP measures, management utilizes adjusted EBITDA, a non-GAAP measure, which excludes non-cash stock-based compensation expenses. Our adjusted EBITDA was $12.7 million in the second quarter, up 14%, and our adjusted diluted earnings per share were $1.04, up 13%. Operating cash flow in the second quarter was $11.5 million, and free cash flow was $11.4 million, compared with $11.2 million for both measures in the prior year quarter. During the second quarter, we returned a total of $6.6 million to shareholders, including $3.6 million in dividends and $3 million in open market share repurchases. Compared to the prior year period, this represented a threefold increase. Turning to page 10.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

For the six months, we generated $11.2 million in cash from operations and $10.7 million in free cash flow, and returned $13.4 million to shareholders, compared to $10.4 million in operating cash flow, $10.2 million in free cash flow, and $7.3 million in cash return to shareholders, respectively, in the same prior year period. Overall, the second quarter reflected continued momentum from the start of 2026, with robust revenue growth in each business line, expanding margins, and continued progress on our strategic initiatives. We remain focused on disciplined execution, investing selectively to support growth, and returning capital to shareholders while maintaining financial flexibility. With that, I'll turn the call back to the operator to open the line for questions.

Operator

Thank you. As a reminder, to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Steve Silver with Argus Research Corporation Your line is open.

Steve Silver
Analyst at Argus Research Corporation

Thanks, operator. Congratulations on the quarter. In the prepared remarks, you guys mentioned that the Hong Kong office is still in its early days. I was curious as to whether you're seeing any trends into the OTCQX and OTCQB pipeline now that the company's come out of a period of contraction and it's returned to net additions for both QX and QB.

Dan Zinn
Dan Zinn
General Counsel and Chief of Staff at OTC Markets Group

Hey, Steve. Thanks. That office really is in such an early stage that it probably premature to talk about trends at this point. We're seeing a nice contribution and seeing that team, there's a couple of people in that office settle in nicely. Not quite ready to say this is a trend that we've either noticed or could expect to see going forward. Encouraging signs nonetheless.

Antonia Georgieva
Antonia Georgieva
CFO at OTC Markets Group

Steve, in addition to their Hong Kong office, we have had continued and continuous coverage of the Asia Pacific region through our New York-based sales force as well. While we do expect net positive contributions from the Hong Kong office, there's really no significant material change in our coverage of the region and how we have been doing globally and in that particular region over time.

Steve Silver
Analyst at Argus Research Corporation

Okay, great. One more, if I may. You mentioned the market data licensing growth despite the decline in EDGAR revenue. I'm just curious as to whether you're seeing any signs of stabilization in the rate of EDGAR cancellations. I believe the disclosure document mentioned 6% declines in revenue. Just curious, I know it's been a long-term process to integrate EDGAR into the market data licensing offering. Just curious if there are any emerging signs of stabilization there.

Dan Zinn
Dan Zinn
General Counsel and Chief of Staff at OTC Markets Group

Not yet.

Steve Silver
Analyst at Argus Research Corporation

Okay, fair enough. Thanks so much. Best of luck in the second half.

Dan Zinn
Dan Zinn
General Counsel and Chief of Staff at OTC Markets Group

Thanks, Steve.

Operator

Thank you. Our next question comes from Brendan McCarthy with Sidoti & Company. Your line is open.

Brendan McCarthy
Brendan McCarthy
Analyst at Sidoti & Company

Great. Good morning, everyone, and thanks for taking my questions here. I wanted to start off on the digital asset side and the potential alliance with BitGo. I recall that OTC Link received the regulatory approval from FINRA to trade digital assets. I think it was a couple of years ago. Curious as to what do you see as the key regulatory hurdles at this point for that initiative?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Thank you for that question, Brendan. I would say regulatory clarity. Congress is debating a set of rules, the Clarity Act, which may or may not pass. There's some very good stuff in the Clarity Act. However, there's also some places where the world of the crypto community wants a pass on fundamental and foundational parts of securities regulation. The part of how do we bring into regulated broker-dealers tokenized securities is really the question. When we got our license from FINRA to trade digital asset securities on our ATS, there was no way for FINRA member firm broker-dealers, but it was really because of the SEC, to custody and hold tokenized securities. The SEC is in a very different place, and we're expecting that the SEC is going to be rapidly moving forward on providing clear rules of the road.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

We want to make sure that broker-dealers have enterprise-grade competitive choices for the critical component of custody. That's where it is. We're setting up for, the SEC has been rumored for a while, but we believe it's getting closer, is to have an innovation release which is going to expand the amount of native tokenized securities that will be available. We don't know what that is going to look like, and I hear a lot of different sources, some based on overexcitement, some based on paranoia. We have an expectation that this SEC is going to be quite rational and thoughtful, and this technology will move forward and where it is useful, will find uses in financial markets.

Brendan McCarthy
Brendan McCarthy
Analyst at Sidoti & Company

Understood. I appreciate that detail, Cromwell. Just to clarify, it sounds like the SEC is trying to move forward with the initiative, but is it contingent on the Clarity Act passing here or do you think that the framework could develop?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

No, I don't believe the SEC really believes they need any tools for the assets that are securities. A big bulk of the CLARITY Act is related to the CFTC and spot crypto markets. Securities markets are the SEC. If something is a security, the SEC has, I would believe, everything they need and can start moving forward.

Brendan McCarthy
Brendan McCarthy
Analyst at Sidoti & Company

Great. That's helpful. Thank you. Next question. I'm curious about the new Nasdaq enforcement standards around the $5 million market value threshold. It appears tough to quantify at this point, but it seems like it'd obviously be a favorable read-through for OTC Markets. Do you have any comment on that change at the Nasdaq level?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Well, we have a fantastic comment letter on the Nasdaq rule proposal, which I would recommend every shareholder of OTC Markets and Nasdaq and any investor in smaller public companies, whether they are NMS securities or OTC securities, read. Nasdaq has a bulk of companies which has frustrated the industry of broker-dealers, SIFMA. You've seen comment letters from Schwab. You've seen comment letters from Citadel. You've seen comment letters from Robinhood. You've seen comment letters from Virtu. These are securities which are speculative and financially not sound. They use their Nasdaq listing to make themselves look more blue-chip. The exchanges have a model because it's very brand-driven. Anything in the blue Tiffany box is of the highest quality. That model starts to fail if the securities are not, because investors are not fully informed.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Our markets, we've always taken a very different approach because we have a range of securities. We've taken an approach which the auction houses have used. A leading auction house can sell a Rothko, and it can also handle a sideboard from grandma's house. They have that range of objects that trade at efficient prices by focusing on fundamentals. Is the object as described? For that, we use disclosure and updating material information. Number two: are known flaws disclosed? We call those risk disclosure in securities markets. Number three: what's the provenance ownership history? We call that governance. We call that share issuance. We call that insider activity in securities markets. Finally, is it legal and lawful to trade within this jurisdiction? Are there restrictions on ownership? It's a more nuanced approach, but our market model works better. We have Fannie Mae.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

It trades fine, but it does have known flaws. It's not a blue chip. We can also handle international blue chips. When companies are engaged, when they're putting the information onto investor screens and into broker machines, and they're maximizing their compliance, is they will be able to have the widest possible market with the greatest potential valuation. That's how I see it is, and it's a difference. That rule proposal is out there. There are people who make money doing discounted toxic financings who want to be able to peddle their wares on an exchange. My belief is that the SEC's registered offering reform and bringing ATMs in is really going to make the market more efficient and make the OTC market a more competitive capital-raising market in a way that's good for companies and is good for investors. Sorry, that was a bit long-winded.

Brendan McCarthy
Brendan McCarthy
Analyst at Sidoti & Company

No, that's great. I really appreciate the detail there. Thanks, Cromwell. I'll hop back in the queue.

Operator

Thank you. Our next question comes from Walter Hopkins with 18th Square. Your line is open.

Walter Hopkins
Analyst at 18th Square

Hi, Cromwell and the team. This touches on what you were just talking about a little bit, but just focusing more on those recent beneficial regulatory developments, the ATMs, federal blue sky preemption for registered offerings, and perhaps the 2028 ESOP parity provision. Can you comment on the degree to which these would stuff more value into the tiered corporate service offerings? Do you see any of these as potential big needle movers? In practice, I could see the potential ATM expansion standing out as a big value proposition to OTC-listed companies that are on OTCQX or OTCQB because it would provide a lot of financing optionality for a relatively small price. I'm really interested to hear how you think about it from that business perspective and from regulatory perspective, too, to the extent you want to add more comments there.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

The first part, I'm incredibly excited for public companies that do the work to be SEC-registered, is they're going to get a lot more value. They're going to be able to sell shares almost as easily as they buy back shares in the market through regular brokers transactions at a much lower cost from the fees they pay Wall Street, which is I'm going to say is brokers and investment banks. Also the intermediation discount, which is the private placement market, which companies that are newly public have smaller market caps and fewer shareholders and are traded in the top tiers of the top markets of the OTC market is. That I'm really excited about.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

How the world will change, because the status quo has been if you need to raise capital as a smaller public company, most of these companies went to became NMS securities because it was easier. There were fewer restrictions, and investors saw the brand as meaning you are closer to a blue chip than a speculative entrepreneurial entity. There's nothing wrong with being speculative. It's just when investors don't understand that and they can't price the security properly. That's a huge change. How it'll change the dynamic is, I don't know. Many of these companies that are on Nasdaq today, when they are finally delisted, they die pretty quickly because there wasn't anything there.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

This is comparison to financially strong, when a company leaves Nasdaq that's a community bank, there's no change in their market they've just saved a bunch of costs and they're still serving their shareholders. Having this competitive offering is really exciting. I can't tell how it's going to happen. The final piece, and I think Dan's been on two panels at the SEC, is that the SEC specifically has recognized OTCQX and OTCQB in the rule proposal. When we built OTCQX, it was a private market initiative. Many people said, "Oh, until the regulators opine on it or tell people to join it, why should we care?" Regulatory recognitions come from past performance and being a private market reference.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

The regulatory recognition is important, we're also going to work to make sure that our rule sets and how we run that market respond over time with the responsibilities of greater regulatory recognition. Is that, again, too long-winded? I think these are very big changes to our markets that are coming along.

Walter Hopkins
Analyst at 18th Square

That's perfect. Thank you. We've already hit on this a lot, so I'm not sure if I'm going to ask this perfectly the right way, but I'm curious to see how you see the regulatory landscape regarding the Nasdaq delistings. It seems that maybe it's got some teeth this time, and I could be kind of misinterpreting what's happened in the past, but it seemed like in the past, Nasdaq had rules that they didn't necessarily follow as closely as folks had hoped. Do you think that this time, with the minimum market value requirement and the accelerated compliance window, that it's got more teeth?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Well, my hope is that Nasdaq, with the change that the SEC, Nasdaq becomes more attractive to public companies and we become more attractive to public companies and the pies grow. I do believe they've been holding on to keep some metrics where they're looking at number of companies rather than quality of companies. We have a model because it's very different than their blue box branding. Our model of security by security, and based on core functionality, offers a better market for many companies on their journey of becoming a bigger, more successful company, building their products and creating value for shareholders.

Dan Zinn
Dan Zinn
General Counsel and Chief of Staff at OTC Markets Group

Walter, on a purely regulatory front, seeing the rule proposal, the rule gets approved and then stayed for a little while. There's obviously some regulatory mechanisms at work there. It does, from the core of your question, it does seem like this rule is likely to be enforced as soon as the stay is over and the SEC completes its review. Then Nasdaq is more aligned with seeing this happen than maybe they have been in the past. To Cromwell's point, it remains to be seen what happens with those companies by the time they get here and where they might fall on our market. It does seem like the industry support for this kind of movement and now the exchanges making these rule filings is moving things in that direction.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

With toxic financings that are discounted and the ability of companies to do multiple reverse splits, if you stay on Nasdaq, you can fund a bad business forever. That really removes market forces because usually, if management is not executing in a manner that investors want to fund, besides for an arbitrage, is they cut back their spending and they refine their focus. Traditionally, before we saw this world of multiple reverse splits, we would see companies that would come to the OTC market, have lowered expenses, and focus on turning around the business, resetting. This is a classic part of markets, is but when the pricing process gets broken and there's an ability to arbitrage capital at a discount where the loser is the public shareholder, the industry needs to fix that.

Walter Hopkins
Analyst at 18th Square

Thank you. Since the OTCID has rolled out, has your view of its role shifted at all based on what you've seen so far and heard from market participants?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Walter, I would say, one, it filled in a really important basic entry level. It also allows us to improve our standards for OTCQX and OTCQB because it's really a disclosure-based process, and it expanded the conversation. I still think we're very early days in understanding of how our markets work among the issuer community and how we talk about them and the value and functionality. We have great companies of all sizes that use our three markets to better serve investors, expand the number of investor accounts and brokers that can access their securities, and comply with U.S. securities laws. Building out that understanding is a process which I still believe we are early days of consensus recognition.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Part of it has been that we haven't been a financing market, and ATMs coming to our space is going to make that easier for securities that are traded, and federal preemption for SEC-registered offerings is going to put us in the mix.

Walter Hopkins
Analyst at 18th Square

Thank you. Just the last question on the share repurchase. We saw that you repurchased shares for what I think was the first time doing it in the open market. I'm just curious if you could share any more detail on that process. I think last time you had stressed not wanting to impact trading too much. Was it relatively easy during the quarter to repurchase shares without impacting trading too much? Could you see yourself repurchasing more shares if, say, that the price was to drop a decent bit relative to your perception of the value of the company?

Dan Zinn
Dan Zinn
General Counsel and Chief of Staff at OTC Markets Group

Walter, we actually did this quite a few years ago, so you are certainly forgiven for not remembering some open market repurchases. To the point of your question, it's been a relatively smooth process, right? A seamless process. We put a program into place. We've been able to access shares. You can see in the quarterly report the room we have left on our authorization to buy back. I don't think it was over-indexed for the time that the program's been in place so far. We have some room to go. The pricing has been relatively stable within that timeframe. All signs point to this being a regular and smooth part of what our going-forward process will be for a while now. Obviously, we'll report back if anything drastic changes.

Walter Hopkins
Analyst at 18th Square

Thank you.

Operator

Thank you. Again, to ask a question, please press star one one. Our next question comes from Jonathan Isaac. Your line is open.

Analyst

Hi. Thanks for taking my questions. Congrats on the great quarter. As always, rest assured there is a question at the end of this question.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

We expect a question at the end of the question, Jonathan, and then hopefully some thoughtful emails as your viewpoint as an investor. It's always welcome to hear different perspectives, especially thoughtful ones.

Analyst

Well, yes. Rest assured. I'm probably simplifying things, but when I think about your network effect, the proof I have is that from 2007 through 2025, the growth rate of your free cash flow per security quoted on your marketplace significantly outpaced the growth rate of the number of securities quoted on your marketplace. The monetization of units far outpacing the growth rate of units is, I believe, the secret sauce to your economic posture in the long term. Your success as a platform begins really with growing this network of securities and with being able to attract new incremental issuers to your value proposition. The 2007 through 2025 period was defined by a constant refrain. The public markets are shrinking. Companies are staying private longer or even permanently. You excelled in an environment which was not ideal.

Analyst

I'm excited to see how you perform if tokenization renders this narrative a historical artifact. My question is, how is your growth opportunity in a world where tokenization really catches on different from the one which existed before tokenization? Thank you.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Jonathan, I think tokenization is an important part of innovation and attractiveness of public markets. I would also say that regulatory modernization is just as important. We've come through a cycle where public companies paid more and got less for being SEC reporting. We've come through a cycle when politicians have put burdens on public companies around the world while private equity and private markets has grown. I think tokenization opens up a lot more excitement of investors to own different types of assets, but that also needs a regulatory rule set that can work.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

There's a lot of ideas around. Most of the blockchain-based securities that are traded in the U.S. are on extremely walled to slightly walled gardens, and they're not really tradable, what we would call a free-trading public share, where it can be transferred from broker to broker, and in an efficient, low-cost manner. That will change. We believe that the regulatory framework, in fits and starts, will move forward. Hopefully, there will be a large amount of securities and excitement that start coming into public markets. The foundational functionality we have, which is really, as I said in the call, it's a one-two punch. The first is the freemium model. It's not freemium because it's a great business providing a platform for broker-dealers to source liquidity and deliver best execution for investors in OTC securities.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

There we work really hard to improve operational efficiency and reduce risk for our broker-dealer clients. The second part is, companies have a choice. If a company is not connected into the trading market of their securities, if a company is not demonstrating clearly and easily their compliance with U.S. securities laws, both federal and state, as well as FINRA, what standards they meet, for what types of accounts and investors that can access them in a digital manner, they're going to have an imperfect market. Those tools matter if you're a tokenized security or if you're a traditional security. The traditional securities markets through DTCC is incredibly competitive and efficient. There are going to be new things that get created in how people do things, this part is, it's an opportunity.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

However, it is also a highly competitive market because the crypto industry has their technology stack. They trade things differently than the securities industry. We want to be able to serve regulated entities and issuers of securities. If that's the broad side. Now, getting down to the details to make all these things work and fit together is not going to be easy.

Analyst

As a follow-up, the DTCC aspires to eventually tokenize all 1.4 million securities in their custody, and they have a three year no action letter to get this going and presumably to reach escape velocity. While you may have opportunities in that wave of tokenization, do you see your opportunities to reach new issuers as mostly being in the wilderness of companies not in the DTCC ecosystem?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

The DTC is a walled garden. It's a big garden because it basically reaches every broker-dealer, either directly of DTC member firms or through other broker-dealers through their clearing firm. It is using tokenization for the technology's promises, smart contracts, atomic settlement, the ability to immediately move collateral. It has an opportunity to really improve the efficiency of the system, is by putting the framework of an internal database externally. Or the pieces of it. That I think is going to be an important tool. I also think the blockchain at the transfer agent level is going to be an important tool. The registered transfer agent. They have opportunities to create more value and transparency in the issuance of securities and the ownership by insiders.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

What happens in the wild, the success of the crypto community, the centralized platforms, has come from these tokens being created in DeFi and these tokens being created in overseas markets. Then as they become established, they flow through into the U.S. markets. It would not be out of line to assume that that could expand to securities with clear rules of the road from regulators. Does that make sense, Jonathan?

Analyst

Yes. Thank you. My last follow-up on this is, do you need any more partnerships or capabilities for your tokenization go-to-market strategy to be complete?

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

We've said that the different components, your clients need competitive offerings. There are a few enterprise-grade players whose platforms are well-proven in non-securities digital assets. We really believe for our broker-dealers, we want to be able to set up, we don't want to make a choice, you have to lock into this vendor. We think BitGo is an exciting first partner. As a first mover, they're going to get a real opportunity as the SEC moves rather rapidly to expand the ability of blockchain native tokenized securities to be tradable by regulated broker-dealers. This is early days.

Analyst

Great. Yes, my last question is about the Expert Market. After the updates to Rule 15c2-11, effective in late 2021, your Expert Market became a penalty box for companies who cannot be quoted publicly and are accessible only by deemed experts. There seems to be an opportunity to create a more premium product within the boundaries of the Expert Market, where sophisticated investors can engage with companies who choose and are not only forced to trade there. We can see examples overseas and in market history of how a premium restricted venue might emerge. In the U.K. today, there is the PISCES market. In Japan, there is the TOKYO PRO Market. Years ago, Nasdaq's PORTAL Market attempted to be a home for Rule 144A securities. A conceptual model for expanding the Expert Market beyond simply being a penalty box may exist in any of these.

Analyst

Dan, you recently issued a comment letter to the SEC stating how the Expert Market in its current form is not optimal and how it might begin to be modernized. Cromwell, you had a blog post nearly three years ago suggesting that an institutional space for more sophisticated trading might emerge within the Expert Market for Rule 144A securities, while also discussing how accredited investors might use the Expert Market to transact restricted securities. My question is, given the rationale of similar spaces overseas and in market history, and given your thoughts about market regulation and market structure, how do you think about the evolutionary capabilities of the Expert Market? Thank you.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

That's a big question, almost as long-winded as most of my answers that everybody complains about internally that I need to become briefer. However, thank you for reading our comment letter. The legal team has been very thoughtful as we've tried to have candid conversations with this SEC. Back in the previous regime of the SEC, really dropped the ball on the Expert Market, there was no guidance. We are very close to having a private market for professionals, with price transparency. We've always believed there's a need not only for fallen angels and companies that have gone dark, because a market price protects outside investors, is however, a place for best execution and liquidity sourcing in private securities or securities with restrictions. We're still in conversations, as you can see from the letter.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

We believe that you can have transparency without opening it up to plain vanilla investors. We believe that Rule 15c2-11 is a very good bargain overall, that for a company to have a public quote, they need to make adequate current information publicly available. That doesn't mean we shouldn't have a private quote and that we shouldn't both have limit orders, which is in the U.K., they've got markets which are really just investor limit orders, but also broker-dealer proprietary liquidity. Investors are not served, and the current way Rule 15c2-11 works, many investors' orders are hidden because it's too much of a regulatory burden for broker-dealers to identify if the insider is an affiliate. We're optimistic with this SEC across all areas that securities law can be modernized, streamlined, improved, but they've got a lot on their plate, and we're working hard on it.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

We will see. It's a lot of those points, though. You can set something up, and then you have to get engagement of the industry. That's my answer. I see potential, progress is much harder than potential.

Operator

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Cromwell Coulson, President and CEO, for closing remarks.

Cromwell Coulson
Cromwell Coulson
President and CEO at OTC Markets Group

Thank you, operator. I want to thank each of you for joining us today. I would encourage you to read our full quarterly report for the second quarter of 2026 and the earnings press release for more information. Links to both are available on the investor relations page of our website. On behalf of the entire team at OTC Markets Group, we look forward to updating you on our key initiatives that will continue to shape the integrity and competitiveness of the public markets.

Operator

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.

Executives
    • Dan Zinn
      Dan Zinn
      General Counsel and Chief of Staff
    • Cromwell Coulson
      Cromwell Coulson
      President and CEO
    • Antonia Georgieva
      Antonia Georgieva
      CFO
Analysts
    • Steve Silver
      Analyst at Argus Research Corporation
    • Brendan McCarthy
      Analyst at Sidoti & Company
    • Walter Hopkins
      Analyst at 18th Square
    • Analyst
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