Thank you, Operator. Good morning.

Welcome to the OTC Markets Group second quarter 2020 earnings conference call. Joining me today are Cromwell Coulson, our President and Chief Executive Officer; and Bea Ordonez, 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. Actual results may differ materially from these forward-looking statements.

Information concerning risks and uncertainties that may impact our actual results is contained in the Risk Factors section of our 2019 Annual Report and our quarterly report for the first quarter of 2020, which are also available on our website. For more information, please refer to the Safe Harbor statement on Slide 3 of the earnings presentation.

With that, I’d like to turn the call over to Cromwell Coulson.

Thank you, Dan. Good morning, everyone.

Thank you joining us today. I hope you and your loved ones remain safe and healthy.

First, I want to recognize the commitment and dedication of our colleagues at OTC Markets. Our team's exceptional focus on serving our subscriber base has kept our markets open and efficiently operating through these unprecedented times as we carefully navigate the pandemic together.

We are fortunate that our businesses can operate remotely. We have had all hands on deck and online this quarter.

We rose to survive the unprecedented storm and are starting to learn how to thrive in these new times. The global health crisis and the recognition of social injustices have tested communities and economies.

Across our own community and among our colleagues and clients, every individual has had to shoulder difficult work, family and health responsibilities. We must be a positive and understanding contributor in helping move our people and the economy forward.

As we noted last quarter, and again in our second quarter report, our framework for managing through this challenging environment is grounded in four key principles, supporting our colleagues and prioritizing their safety and well-being, continuing to serve our subscribers and our customers, ensuring that we take the measures necessary in the short-term to protect our current operations and remain financially strong, and remaining focused on the critical long-term strategic initiatives that position our business for future growth. Our most recent quarterly report and earnings release present the second quarter results in the context of broader global events, the current economic conditions and this framework.

We continue to see good results in the second quarter with significant revenue growth in our OTC Link business line and solid results in our Market Data Licensing business offsetting 2% contraction in corporate services. Bea will cover our financial resort results in greater detail in a few moments.

Throughout the quarter, our OTC Link ATS interdealer quotation system continued to support our broker dealer subscribers and facilitate their trading needs. At the same time, our OTC Link ECN handled record trade volumes.

With this continued volatility, we remain focused on the availability and reliability of our systems to keep our markets open and meet investors liquidity needs. We met this challenge with the majority of our employees continuing to work remotely through the quarter.

I remain impressed and humbled by the contributions of our entire team. Our BCP, planning and IT systems are such that we do not need to have a physical presence in order to operate.

Our platform allows us to develop our plans methodically and to slowly and cautiously reopen our New York and Washington DC office. We have adopted a phased in approach to reopen that prioritizes employee health and safety and is permitted a small portion roughly 10% of our staff to return to the office on a part time basis.

We will continue to evaluate the environment in New York and throughout the country. And we'll phase in additional time in our offices for our team as appropriate.

System reliability remains paramount. And while we focus our attention on ensuring our operational capacity during this time, we have not taken our eye off our longer term goals.

I noted earlier that we placed particular emphasis on the transition from surviving the initial shock of the pandemic and its implications to thriving in a new environment that sees our team distributed across remote and in office work. Our management, product design and engineering teams continue to work on initiatives that will improve our technology platform, and that in turn provide the backbone for our future growth and productivity.

The increased usage of our virtual investor conferences solution during the first half of the year highlights our ability to connect companies to their investors and to each other, even when we can't gather in person. Now more than ever, we embrace our strategic vision for a future that's online data driven and social.

As we anticipated, our corporate services business line is felt the most acute effects of the COVID -19 pandemic thus far. While on a quarter-over-quarter basis, revenues contracted 2% and uptick in new sales during June provides a positive indication of our ability to engage issuers even during a period of global economic uncertainty.

There was a decline in the number of companies on our OTCQB market this quarter, small and venture stage companies remain among the most at risk of being impacted by the deterioration in economic conditions. We believe that the OTCQB venture market plays an important role in giving companies an efficient cost effective way to access the benefits of a public market, as they address their financial or economic challenges.

Our Market Data Licensing business delivered quarter-over-quarter revenue growth from a combination of pricing increases and user growth. Following the first quarter introduction of hot sector data and risk flags to our small cap listed compliance product covering more than 2300 NASDAQ and NYSE listed securities, in April, we added a hot sector designation for companies engaged in activities related to COVID-19.

In June, we added a quantitative risk scoring metric to this robust data set. Last month, we made the U.S.

bank holding companies corporate structure data more available on our website. This information provides historical data trends and charting functionality on all call report data points for the more than 550 U.S.

community banks trading on the OTCQX, OTCQB, and Pink markets. During the second quarter, we continue to work closely with the SEC on significant regulatory proposals impacting our markets.

After filing our third comment letter on the SEC's proposed amendments to Exchange Act Rule 15c2-11 in April, we continue to engage SEC commissioners and staff on this pivotal proposal. The SEC’s proposal includes several positive aspects.

However, if adopted as proposed, the new rule would cause significant collateral damage to sophisticated investors, startup and early stage companies and broker dealers participating in the OTC market. As a result the proposal is brought out differing perspectives from individual and institutional investors, broker dealers, companies, advisors and regulators.

We’ve propose several practical solutions that would modernize and streamline the rule in a more effective manner. We appreciate the SEC's willingness to engage with market participants as they consider how to structure a final rule.

During this quarter we also submitted two comment letters on a proposal by the National Securities Clearing Corporation. We are urging the SEC to disapprove the NSCC proposal, it will lead to an increase in the costs applicable to trading OTC securities and would disproportionately impact smaller broker dealers accessing our markets and increase fees for investors seeking to trade and settle and clear transaction in the market for smaller company, and OTC traded securities.

This would also affect smaller companies listed on Natural Securities Exchanges. Finally, I'm pleased to announce that on August 5, our Board of Directors declared a quarterly dividend of $0.15 per share payable in September.

This dividend reflects our ongoing commitment to providing superior shareholder returns. We remain focused on maintain operational and financial strength on prudently navigating these unprecedented times and on serving our clients, colleagues and communities while positioning ourselves for future growth.

I'm confident that we're in a strong position to do just that. With that, I'll turn the call over to Bea.

Thank you, Cromwell. And thank you all for joining the call today.

I hope that everyone is staying healthy and safe. I want to start by commending the efforts of the whole team at OTC markets, who have continued to adapt to the difficult environment to support our clients and subscribers.

I will now spend a few minutes reviewing our results for the second quarter of 2020. Any reference made to prior period comparatives refers to the second quarter of 2019.

As we review our financial results, I will endeavor to provide additional information and disclosure related to how the unfolding COVID-19 pandemic has affected our second quarter results and how it could affect our future performance. For the second quarter of 2020, we generated $17.1 million in gross revenues up 9%.

In the aggregate, the COVID-19 pandemic and the current challenging economic conditions did not have a material adverse effect on our second quarter revenues. In our trading business, we saw strong growth in transaction based revenue.

In our market data business, the impact of price increases introduced at the beginning of the year, as well as gross and users drove quarter-over-quarter revenue gains. These more than offset contraction in our corporate services business.

We operate three distinct business lines that generate diversified revenue streams and serve a broad range of market participants and a wide spectrum of U.S. and global issuers.

We benefit from a subscription based revenue model with for the six months ended June 30, 2020, approximately 84% of our revenues coming from subscription based contracts that are recurring in nature. We ended the quarter with a strong balance sheet $25 million in cash on hand and no debt and are well positioned to continue to invest in our business and to prudently deploy capital.

We've continued to operate our core businesses, serve our subscribers and customers and devote resources to enhancing our product suite and to adding subscribers and growing the number of issuers on our market. We are confident that we are well positioned to navigate the difficult economic conditions ahead.

With that said it is clear that while considerable uncertainty exists, our operations and financial results in the coming quarters are likely to be impacted by the macroeconomic environment. Turning now to look in more detail our individual business lines.

OTC Link revenues were up 26% we continue to see a very active trading environment throughout the second quarter. This drove a substantial increase in the number of transactions executed on our OTC Link ECN as well as a marked increase in the number of trade messages on our OTC Link ATS.

For the second quarter, we executed some 552,000 transactions on our ECN more than double the 205,000 transactions executed during the prior quarter. This coupled with the impact of additional subscribers on boarded over the past several months, drove an increase in our quarterly ECN revenues of 211%.

We've continued to see a very active trading environment during the month of July and in the short-term it is likely that our OTC Link business will benefit from increased trading volumes that we are seeing in global equity markets more generally. However, as broker dealers and others continue to navigate the difficult environment, it is possible that potential subscribers could delay purchasing or implementation decisions.

Further over the longer term, a prolonged downturn in economic activity could depress trading activity and adversely affect our subscribers and in turn our trading revenues. Revenues from our market data licensing business were up 13%.

Effective on January 1, we raised the monthly subscription price to level one and level two professional users of our data, the first such raise since 2014. This coupled with a 4% quarter-over-quarter increase in the number of reported users drove a 16% increase in revenues.

We also raised the monthly subscription cost of certain of our broker dealer enterprise licenses again the first such increase since 2014. This drove a 17% quarter-over-quarter increase in related revenue.

Finally, sales of our data file products and sales of and upgrades to premium versions of our compliance offerings drove a 16% increase in data license revenues. As of August 1, 2020 44 subscribers use our products to streamline and automate their compliance processes, including almost every institution active in the OTC space.

We have devoted significant resources to growing our subscriber base and believe that we have captured much of the addressable market for our existing suite of products. With that said, we are devoting internal resources to developing and rolling out additional products that better serve the complex needs of participants in the OTC and broader U.S.

equity markets. While revenues from our market data business have not thus far been materially impacted by the economic slowdown, it is possible that we could see potential subscribers delaying purchasing decisions.

While existing subscribers might look to curtail their spending, or cancel services. Revenues from our corporate services business declined 2%.

To provide a little more color revenues from our QX market were roughly flat versus the prior year quarter, reflecting a small decline in the number of companies on the market. We benefited from a higher starting point at the beginning of 2020 with 442 companies on the QX market on January 1, versus 409 companies at the beginning of 2019.

For the 2020 annual subscription period we saw a small decline in our renewal rate from 94% to 92%. In the first quarter of 2020, we saw a significant slowdown in sales, with nine companies added versus the 30 companies that joined the market during the first quarter of 2019.

When compared to that first quarter of 2020. We have seen an uptick in sales in the current quarter with 19 companies joining the market, including 13 sales in the month of June.

However, our Q2 sales significantly lagged the 30 companies added in the first quarter of 2019. On a quarter-over-quarter basis, the ending number of companies on our QB market has contracted by roughly 3%, driving a 7% decline in quarterly revenue.

In 2019, we raised market standards on our OTCQB market, which had the effect of reducing the available pool of domestic companies. Further relative to 2018, we saw a much less active cannabis market.

As a result to 2019, we saw roughly 17% decline in sales, driving a contraction in the number of companies on the QB market at the beginning of 2020. We saw a significant drop in new sales during the first quarter of 2020 with 28 companies joining the market versus the 68 companies that were added to the market during the prior year quarter.

Again, we saw an uptick in sales in the current quarter and actually outperformed the prior year with 45 new sales versus the 38 sales recorded in the second quarter of 2019. In the early months of the unfolding global pandemic and in respect of both QX and QB markets, we saw issuers differing buying decisions.

As the business community has adjusted to the challenges of the current environment. We've seen some encouraging trends in terms of new sales and issuer engagement and have a strong pipeline of prospects.

We remain cognizant of the very difficult business conditions that exist for our issuers and are extending relief, including where appropriate by extending payment terms and by providing temporary relief from certain market standards. While we've seen a slight uptick in our OTCQB non-renewal rates for service periods beginning during the second quarter of 2020, it has not been significant.

A, two to three percentage point increase in our non-renewal rate versus an average in 2019 of 6%. To the extent of the current economic downturn becomes more severe or it's prolonged, we could see a continued dampening of demand for our Corporate Services products.

Further, we are likely to see an increase in the number of customers, particularly OTCQB customers who choose not to renew their services at the end of their service term. On the other hand, a prolonged downturn would over the longer term likely result in an uptick in companies delisting from national exchanges, and could expand the pool of qualified companies from markets.

Turning now to expenses. On a quarter-over-quarter basis operating expenses increased 5%.

The primary driver was a 9% increase in our compensation costs, reflecting increased headcount, the impact of annual salary raises, as well as an increase in cash incentive compensation accrued and an equity-based compensation expense. Finally, we are carrying a higher than usual accrual in respect of paid time off for our employees.

In terms of other spend an increase in professional and consulting fees a result of certain one-time cost was offset by declines in technology expenses in marketing spend and in occupancy costs. Marketing expenses are down as a result of reduced travel and sponsorship spend, while occupancy costs declined as a result of one-time new related expenses incurred in the prior year quarter.

With revenues growing at 9% and expense growth contained at 5%. We delivered 8% quarter-over-quarter growth in income from operations, while net income for the quarter increased by 19%.

The company's effective tax rate decreased from 20% to 12% in the second quarter, largely as a result of the release in the current quarter of reserves related to uncertain state tax liabilities, which was partially offset by a quarter-over-quarter decline in excess tax benefits recognized in respect of stock-based compensation. In closing, we've continued to work diligently to adapt to the new working environment, to support our colleagues and to continue to efficiently serve the thousands of subscribers and issuers that rely on our public markets.

We delivered strong earnings growth while remaining focused on the critical long-term initiatives that position our business to future growth. While we continue to evaluate the evolving challenges of the current environment, we remain focused on delivering for all of our stakeholders, and on continuing to innovate to support the needs of our diverse community of clients.

With that, I would like to thank everyone for their time and pass it back to the operator to open up the lines for questions.

Good morning, thanks for taking my questions and congratulations on a nice quarter in this environment. Bea Ordonez touched on, I know you mentioned that trends are improving around new additions on the QB and QX.

Can you just dive in on the improvement from Q1 in terms of what you're seeing from the new wins? Is that - just we’re past the pandemic and the economies are starting to open back up?

Just provide a little bit more color on that. And then also, have you changed your kind of go-to-market strategy at all, related to new companies coming on board?

Thanks.

Thanks for the question, Chris. Look, I'm certainly not going to be one who calls the end of the pandemic.

I think, as we've said throughout, we're continuing to evaluate what is a rapidly evolving, and frankly, unprecedented crisis that is being felt globally. And with that said, look we provided some context in Q1.

And obviously, what happened in Q1 towards the end of Q1 was that we had limited business travel fairly early on, really by the middle of Q1. We cancelled all in person events at our offices and elsewhere.

And both of those represent a significant form of outreach, for our sales team and for us as a company. So as we transition to a fully remote working environment, we certainly had to pivot our activities, pivot our marketing initiatives, pivot our outreach and, and really sort of fully transition.

And we did that really rather quickly. The other trend of course was, as I noted that, I think in the early days, what we'll call the early days of the pandemic through late March and April, many folks were sort of in a sort of hold the line, status-quo sort of mentality of thinking that we were all going to get back to some form of normal rather quickly or at least not knowing.

So a lot of people, what we saw in our pipeline with customers that we had already engaged with, were pausing on purchasing decisions. We're sort of waiting to see, waiting to return to the offices, perhaps waiting to see how things would play out, as it's become apparent that this is not going to be a two to three month crisis.

I think what we saw is, people returning to a new normal to continue to do their business and operate as they might do only from a remote working environment. And what we saw clearly is that obviously, the value we provide, and the needs that we serve still exist, public companies still need to access public markets, still need to engage with investors.

So I think, those two trends if you like, help drive some of the pick-up in sales. And what we're seeing is, as I said pretty encouraging.

We're seeing, strong engagement from investors. We have one of the strongest pipelines frankly that I have seen in quite some time.

There are some sectors that are driving some of that growth. The resource sector is obviously pretty active right now.

And we're seeing good engagement and good success out of that sector, both out of Canada, also out of Australia and domestically. We're continuing to push with global issuers so no change there.

But we're continuing to push that international story and are seeing, continued interest from global issuers, especially biotech companies certainly for obvious reasons, we're seeing some good success there. And we're continuing to devote resources to some of those regions, where we see those pockets of opportunity.

So Australia, I mentioned, the Nordics is an area that we focus on, Western Europe more generally. And we continue to see it, as I say strong engagement and are pushing our value story.

So have we changed our approach? Beyond the fact that we're all working remotely or by and large working remotely in terms of how we position our story and how we position our product, no.

We have to adapt our workflow and our outreach to the environment. But we continue to believe very strongly in the value proposition of our public market, both domestically and globally, and we're seeing a nice pickup in those trends.

Thanks for that color, sounds really promising. Just in thinking of, you've had a few - everyone's had a few months to kind of look at the pandemic.

Is there anything that maybe you've changed strategy wise in thinking about, the longer term growth, related to the impact of COVID on the business or maybe better opportunities that you see now that you will take advantage of in this kind of environment?

Chris, this is Cromwell and so, my feeling is, the world every one of these cycles we've been through from 9/11 to the 2008 financial crisis to COVID, there's the short-term, a) let's make sure we can survive, whatever gets thrown at us. And then, the start learning how to thrive.

And the learning process is, is something that we have to watch what's happened in the conditions and see where our clients and our community is taking us. And that part of it is and we want to be able to move towards those parts, what I'd say is, as a feedback to my sales team is that their corporate services.

They're having an easier time getting the right people on the phone, to talk our value portion for our OTCQX or OTCQB, because, you know CEOs and CFOs aren't meeting to spend their time. I think exchange listed companies spend about one-third of their time going around to conferences and meeting investors.

And if you look at our platform for public companies is really a data disclosure and demonstration of compliance, distribution platform. And so, those places where it can be seen as how do companies tell their story to investors, how do they get their information out to the brokerage industry, into the compliance processes on online broker screens into the financial databases.

I think those will be much more interesting versus the - and public companies will really take a look at, which is the really important face-to-face meeting they're doing after this. And then what are the other ones where they're really having one way conversations that they can digitalize.

And I think our markets are built for that, so, that side is. And then in the trading business, it's really the industry has been about keeping markets open.

And I think 2021 we're going to see what the appetite is for new product changes and where we push out through there. And we also have a lot of interest in, continuing to develop smart data around compliance products to help the brokerage industry, which are the securities that's easier for white-list and which are the securities which they want to put risk flags on.

And that's a place where we have a data expertise, and a cornerstone of data that we can really help drive efficiencies for the industry.

Just a couple more questions? One, any updates on Blue Sky exemptions, anything upcoming?

Sure. Thanks, Chris.

So we saw Virginia come through, right at the beginning of the quarter on July 1, their rule became final. We've actually seen a lot more engagement, I think, maybe driving off of what being combo we're talking about with a new normal and companies sort of readjusting.

We've seen regulators certainly state regulators do a little bit of the same and start to reengage a bit. And we've moved from a place where I think a lot of states were waiting on an official word from [NASA], which is still pending, but they're taking matters into their own hands.

We're 37 now, we're engaged with quite a few others. So the effort certainly continues in full when we push within that asset as well.

So no states that I can say here's their definitive date, where rule is going to go live. But it has been encouraging to see a lot of people engage and franchise stay in touch even, again while everybody is remote.

You've covered several of my questions but just following on from your points about the more recent pickup in the pipeline. Is it the case with most of the companies you're speaking to - they just need more time to elapse and confidence to grow before they would make a decision to join one of the markets.

And then secondly, on OTC Link, I was wondering whether the elevated volumes you seen still experiencing from what you said are fairly concentrated or whether it's broader and reflecting the general volatility rather than being particular hot sector?

Thanks for your question, Andrew. On the first part, yes, I mean, look, I think that's certainly part of it.

We see some cyclical trends within sales more generally, obviously, around resources or sectors that are performing well or not. IPO market helps more generally.

But I think here, what we're seeing, as I noted, was, yes, a lot of folks who were waiting to see perhaps waiting for a return to normal before making those decisions. In terms of Link, you know, look at - as we noted, certainly the U.S.

equities markets more generally are seeing a very active market environment. That's across the spectrum of stocks both OTC stocks, and NMS stocks more generally.

We saw a massive uptick in Q2. It's continued through July, which was another record month.

And we've continued to see it in August, which traditionally is perhaps a quieter month. So obviously, the very active market environment is a big contributor here.

It is worth noting that we have increased the number of subscribers on our ECN very significantly. We have 65 subscribers connected as August 1 of this year, and we have 45 connected at the end of last year or at the end of August 01, 2019.

So we've seen significant growth there. And while it's a little challenging to tease out what drives the increase in terms of those new subscribers as well as the volume, certainly the presence of more liquidity provided in the presence of more participants in the market is definitely contributing there.

So we're going to remain focus. We can't control volatility in the market or how active the trading market is.

We see it continuing at least in the short-term and after that, we'll see how the broader economic factors play out in terms of trading activity and volumes more generally. But what we'll do in the short-term and beyond is remain focused on continuing to onboard additional subscribers and winning more clubs.

And just on the cost side of things is looking forward, I imagine based on what you said in the statement, and just now on the presentation, there aren't any particular factors to look out for in forthcoming courses and longer term or they're wondering whether something like that so that's the conference which is obviously an extraordinary timely acquisition as it turned out, and I wonder does that needs some more investment to provide volume or get necessarily platform, which you can just use more fully?

Well, Andrew, this is for a big picture. I think the virtual investor conferences have been a fantastic tool to connect companies and investors, and also a few other key stakeholders of conferences, [AER] banks have used within our community of key players.

And it's really been about getting - having it out there today because - and - you know, where there were these face-to-face meetings, and we were doing conferences in our offices and others, others did the face-to-face side, we now have an online product that is fitting the short-term knee. Over the longer term, our strategy is clear there, the future is online data driven and social.

So connecting companies with investors with digital platforms is something that we will be supporting for our issuers. But it's part of the package, which goes from data distribution, disclosure, compliance demonstration, all of this information that is part of a public company's commitment to provide continuous information in the market.

So the price setting process is efficient.

And just to jump in on the expense side Andrew, I think Cromwell has covered the big. And certainly we're - as you said timely, perhaps, and we're pleased with the performance of that business, we've seen a really nice uptick both in terms of the number of events that we're able to host just based on demand, in terms of the number of participating companies on each of the events.

And importantly, because that's what drives the future engagement in terms of the number of investors, who are tuning in both live and who are clicking through to engage with those companies in an online environment thereafter. So we'll continue to invest there and to drive that product forward, because we think it's certainly right for the moment, but also for longer term transit around how companies effectively and efficiently engage with our investors and reach new investors.

In terms of expenses, look as you noted, and as I've noted in past percentage of our operating expenses are broadly fixed, meaning that they're related to compensation and technology and infrastructure, close to 80%. We're small company if you know, we're just a shade over 100 people and we run pretty lean.

We're fortunate that we benefit as I said in my remarks from a subscription based business model. And we're even more fortunate that our business is proving to be very resilient through these unprecedented times.

So we're at a point now where suddenly we don't feel any need to do anything dramatic. We don't need to contain us spending to respond to the pandemic.

We'll just continue to monitor the situation. We make every effort just through our ordinary course of business and managing the business to align our expenses with revenue growth, so that we can deliver strong performance and strong earnings growth.

So as Cromwell noted, we've remained focused on weathering the storm, and also now continuing to sort of grow the business and position ourselves for the longer-term.

Thank you, Operator. I want to thank all of you for joining us today.

As always, we remain committed to supporting our clients in this challenging time. I say this from our offices in Downtown, New York.

It is a great city that was at the center of the storm. After so much gloom, the city is today showing rays of light with resilience and ingenuity is a comeback story I look forward to.

On behalf of our entire team, I would like to wish you and your families continued health and safety and we look forward to connecting with you next quarter.