OTC Markets Group Inc

OTC:OTCM

Earnings Call Analysis

Navigating Growth Amidst Challenges

In the latest fiscal period, the company faced a mix of headwinds and tailwinds. Revenues from corporate services slid by 1%, with declines in OTCQB market and the DNS product partially offset by a 4% rise in OTCQX revenues. The overall number of companies on OTCQX and OTCQB experienced a downtrend, with OTCQX companies down by 2% and OTCQB companies seeing an 8% decrease. Despite these obstacles, the company successfully retained a significant percentage of its subscriber base for the OTCQX market, achieving a 95% retention rate for the subscription period beginning in January 2023.

Mixed Performance Across Segments

The year 2023 was characterized by a 5% increase in gross revenues, amounting to $109.9 million. Market Data Licensing emerged as a strong growth driver, with a notable 19% year-over-year revenue expansion, credited to the full-year contributions from Blue Sky Data Corp and EDGAR Online. However, the OTC Link segment struggled as it saw a 6% revenue downturn. Subscriptions to OTCQX and OTCQB increased, but overall, Corporate Services revenues dipped by 2%.

Rising Expenses Impacting Profitability

Costs escalated for the company, with a notable 11% quarter-over-quarter rise in operating expenses, led by increased compensation and a steep 69% surge in professional and consulting fees. These fees were largely attributed to a $1.2 million accrual for an SEC matter, highlighting that regulatory issues can have significant financial implications. In a broader sense, operating expenses for the year climbed by 15%, bringing challenges to the bottom line.

Profit Margins and Earnings Under Pressure

This uptick in expenses affected the company's income metrics with operating income and net income falling by 11% and 10%, respectively, while the operating profit margin contracted to 30.6% from 36.1% year-over-year. Although the company's adjusted EBITDA also declined by 5%, the business managed to maintain competitive earnings with adjusted diluted earnings per share sitting at $3.37, giving investors a glimpse of resilience amidst financial pressure.

Commitment to Shareholder Returns

Despite the challenging environment, the company prioritized shareholder value, evidenced by the distribution of $29.9 million to shareholders in dividends and stock buybacks, marking a 3% uptick from the previous year. This move reflects a strategic balance between reinvestment for growth and rewarding investor loyalty.

Strategic Focus on Long-Term Growth

Looking forward, the company did not offer explicit revenue or earnings guidance, instead emphasizing the pursuit of organic growth driven by user and usage expansion, client value enhancement, and new product innovation. Acquisitions remain a part of this strategy but are considered secondary to organic development. International market engagement is slated as a significant growth avenue, with the management highlighting the potential for increased volumes and user base expansion as global broker-dealers show heightened interest in U.S. markets.

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to OTC Markets Group Fourth Quarter and Full Year 2023 Earnings Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Dan Zinn, General Counsel. Please go ahead.

[Daniel Zinn, executive]

Thank you, operator. Good morning, and welcome to the OTC Markets Group fourth quarter and year end 2023 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. 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 2023 annual report, which is 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.

[Robert Coulson, executive]

Thank you, Dan. Good morning, everyone. Thank you for joining us today. I will begin by discussing our year-end 2023 results at a high level, and I will review how we performed against our strategic initiatives. I will then discuss our priorities for 2024. Our business achieved record gross revenues of over $109 million for the year. Our results highlight the resilience of our business model as our company-wide performance was supported by a strong revenue increase in our Market Data Licensing business, offset by declines in Corporate Services and OTC Link revenues.

The 19% revenue increase in market data reflects the full year impact of our Blue Sky Data Corp and EDGAR Online acquisitions during the prior year. The onboarding of the EDGAR Online technology stack and dataset involved a large-scale effort during 2023. We recognize that we will need to continue integrating and optimizing this business. We view this as a multiyear project. Our team is focused on improving operational efficiency and developing differentiated data products and digital disclosure distribution services. While the Corporate Services and OTC Link businesses did not meet their high watermarks in a year of lower overall activity across global financial markets, the work we did to expand our global relationships provides for growth in the years to come.

The trend towards international activity continued with trading in non-U.S. companies encompassing the overwhelming majority of dollar volume across our OTCQX, OTCQB and Pink markets. In part, due to the increased costs associated with the EDGAR Online integration and operation, our overall expenses rose 15% during the year. Our expenses were also impacted by a one-time regulatory accrual. These increases in expenses led to decreases in our operating margin and net income. As commercial operators, we are committed to sustainable growth over the long term, and that focus remains stronger than ever following the results from the past year. Antonia will cover the details of our financial results in a few moments.

Throughout our history, we have made significant investments in market integrity initiatives. We have built out our market surveillance to publicly flag risk to investors based on disclosure, stock promotion, bankruptcy and other potential public interest concerns. We believe in the value of well-lit financial markets to inform investors, shine a light on risks that could impact prices and empower our regulators, both to oversee markets and enforce rules. We provide data and actively make referrals to SEC, FINRA and other state and federal agencies. When companies fail to meet our OTCQX rules and OTCQB standards, we remove them from those markets on a timely basis. While these initiatives are not revenue generating, we believe they protect investors, incentivize compliance with securities laws and ultimately add value to the overall integrity of the market.

Operating regulated financial market subjects us to oversight from the SEC, FINRA and other government agencies. As described further in our 2023 annual report, we have been in discussions with the SEC's Division of Enforcement regarding certain OTC Link policies and procedures related to the filing of suspicious activity reports. We have taken an accrual with the expectation of reaching a settlement with the SEC. Being a well-regulated market operator makes us a stronger more resilient organization. We benefit from our interactions with regulators, all the associated inspections, inquiries and reviews ultimately helps us better serve our clients and the industry as a whole. We have an obligation to stay ahead of evolving expectations as we build our compliance programs and supervisory procedures to follow the letter and principles of applicable regulations.

As we look back at 2023, several themes emerge. We spent a good portion of the year onboarding personnel, technology and data from our EOL acquisitions the previous year. This data fuels our compliance engines and allows us to fulfill our role as a qualified interdealer quotation system under SEC rule 15c2-11. The acquired datasets also support compliance, risk management and market oversight systems at broker-dealers and SROs. Our results last year showed a good top line increase. However, the corresponding growth and expenses kept us from reaching our overall goals. Throughout 2024, we will pursue the projects and operational improvements that create sustainable revenue growth. Meeting this goal requires building scalable processes to provide competitive value and share the benefits of scale with our subscribers, thus driving long-term earnings per share.

During 2024, we will pursue the following strategic priorities: one team, one platform driving results to build the value of one share; continue to integrate our teams and consolidate our technology platforms to drive operational efficiencies, client value and ultimately, revenue growth; increase the number of securities on our markets; continue to grow the size of our markets by adding securities, new asset classes and training functionality for our broker-dealer subscribers; transform the client connection and improve the quality of information; enhance the client experience through modernized interfaces and enriched data for external and internal users; mitigate operational risk and strengthen regulatory compliance; invest in our core trading infrastructure, operational processes and risk management systems to strengthen our resilience and invest in our regulatory procedures to enhance their reliability and compliance with securities laws and regulations; and finally, grow revenue across business lines and align resources with long-term value creation, continue to deliver long-term, meaningful shareholder value.

In closing, I'm pleased to announce 2 important outcomes from our March 4th Board meeting. First, I am delighted to welcome Julia Sears as the 5th Independent Director on our Board. Julia is the Chief Digital Officer at Altus Power, where she oversees the company's digital and technology strategy and operations and innovation initiatives. Prior to Altus, Julia held leadership positions at NASDAQ and TIAA, working with leading technology companies on strategic product launches. We're thrilled to have Julia join us and look forward to her contribution.

I'm also happy to announce that our Board of Directors declared a quarterly dividend of $0.18 per share payable later this month. This dividend reflects our ongoing commitments to providing superior shareholder returns.

With that, I will turn the call over to Antonia.

[Antonia Georgieva, executive]

Thank you, Cromwell, and thank you, everyone, for joining us today. I would like to start by thanking our entire OTC Markets team for their continued commitment to our subscribers and for driving our business forward. I will now review our results for the fourth quarter and year ended December 31, 2023. Any references made to prior period comparatives refer to the fourth quarter for the year ended December 31, 2022. In 2023, our overall gross revenues, which include full year revenues from our Blue Sky Data Corp and EDGAR Online acquisitions increased, but we also experienced increased expenses related to these acquisitions. Additionally, declines in trading activity and investor engagement on our markets impacted our OTC Link business, while declines in corporate subscribers impacted our Corporate Services business.

A review of our fourth quarter results is included on Page 7. We generated $27.6 million in gross revenues, up 1% as compared to the prior year period. Revenues less transaction-based expenses were up 2%. OTC Link saw gross revenues decline 10%, primarily as a result of lower revenues from OTC Link ECN and OTC Link NQB, which in aggregate declined 16% and revenues from OTC Link ATS messages, which decreased 11%. As an offset, transaction-based expenses decreased 20%. The decline in OTC Link revenues and transaction-based expenses was consistent with the decline in trading activity on our markets compared to the fourth quarter of 2022.

OTC Link finished the fourth quarter with 108 subscribers on OTC Link ECN and 86 subscribers on OTC Link ATS compared to 102 and 87, respectively, at the end of the prior year. OTC Link had 136 unique subscribers to our ATSs at the end of 2023, up 3 from the end of 2022. Trading volumes remain highly unpredictable and could continue to decline in the future. Revenues from our Market Data Licensing business were up 10% quarter-over-quarter, including full quarter contribution from the acquisition of EDGAR Online in November 2022. The growth in Market Data Licensing revenues, excluding the impact of EDGAR Online was approximately 7%.

Pro user counts were up 6%, driving a 7% increase in the corresponding revenues. Market data connectivity fees were up 68% quarter-over-quarter and revenues from internal system licenses, delayed data licenses and other data services increased 5% in each case a result of price increases to certain licenses and subscriber growth. Offsetting these increases was a 22% decline in revenues from non-pro users, in line with a 20% decline in period-end non-professional user count. Historically, and in the normal course of business, we have seen significant changes in the number of non-professional users as market volumes and retail participation in the U.S. equity markets fluctuate, and we may experience a further decline in the future.

Corporate Services revenues decreased 1% in the fourth quarter. OTCQX revenues increased 4%, but were offset by a 5% decrease each in revenues from the OTCQB market and the DNS product. In the fourth quarter, we added 24 OTCQX companies compared to 21 new sales in the prior year quarter and finished the period with 600 OTCQX companies down 2%. On OTCQB, we added 41 new companies in the fourth quarter compared to 53 in the prior year period and had 1,140 OTCQB companies at the end of the quarter, down 8%. We had 1,461 Pink companies subscribing to DNS and other products at the end of the fourth quarter, down 5%. 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 8 for our full year results. In 2023, we generated gross revenues of $109.9 million, up 5%. OTC Link revenues declined 6%, with an 18% decline in revenues from OTC Link ATS messages and a 5% decline in revenues from OTC Link ECN and OTC Link NQB as the main drivers. Our Market Data Licensing business delivered 19% revenue growth year-over-year with the benefit of full year revenues from Blue Sky Data Corp and EDGAR Online. Excluding the impact from our acquisitions, Market Data Licensing saw approximately 7% revenue growth, driven by the same factors as previously mentioned. Corporate Services revenues decreased 2%, with a 3% increase in OTCQX revenues, mostly due to pricing adjustments, offset by a 3% decline in OTCQB revenues and a 7% decline in DNS revenues driven by lower average number of companies subscribing to DNS and OTCQB, respectively.

During 2023, we added 90 new companies to OTCQX compared to 133 in the prior year and 184 new companies to OTCQB compared to 322 in the prior year. For the annual OTCQX subscription period that began on January 1, 2023, we achieved a 95% retention rate compared to 96% in the prior year. The retention rate for the annual OTCQX subscription period beginning January 1, 2024, was 93%.

Turning now to expenses on Page 9. On a quarter-over-quarter basis, operating expenses increased by 11%. The primary drivers were a 6% increase in compensation and benefits and a 69% increase in professional and consulting fees. The increase in compensation and benefits reflects higher average headcount, stemming from our acquisitions, annual base salary increases and an increase in stock-based incentive compensation, partially offset by lower commissions and lower cash-based incentive compensation. Compensation and benefits comprised 57% of our total operating expenses during the fourth quarter compared to 59% in the prior year period.

Professional and consulting fees increased primarily due to a $1.2 million accrual related to an SEC matter and approximately $200,000 in related legal and consulting costs. On a year-over-year basis, on Page 10, operating expenses were up 15%, driven by similar factors. During 2023, we also incurred approximately $1.1 million in one-time expenses related to EDGAR Online. Compensation and benefits comprised 62% of our total expense base in 2023 compared to 63% in the prior year.

Turning to Page 11. In the fourth quarter, income from operations and net income declined 11% and 19%, respectively. Operating profit margin contracted to 32.8% compared to 37.2% in the prior year quarter. For the full year, income from operations declined by 11% and operating margin contracted to 30.6% compared to 36.1% in the prior year. Net income decreased by 10%, and our diluted earnings per share decreased commensurately to $2.28 per share compared to $2.53 per share.

In addition to certain GAAP and other measures, management utilizes adjusted EBITDA, a non-GAAP measure, which excludes non-cash stock-based compensation expenses. Our adjusted EBITDA was $40.9 million for the full year 2023 and our adjusted diluted earnings were $3.37 per share, each down 5% compared to the prior year. Cash flows from operating activities for 2023 amounted to $33 million and free cash flows were $31.5 million, each approximately $700,000 lower than in the prior year.

Turning to Page 12. During 2023, we returned a total of $29.9 million to investors in the form of dividends and through our stock buyback program, an increase of 3% over the prior year. We remain focused on growing our business and delivering long-term value to our stockholders.

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

[Operator]

[Operator Instructions] The first question comes from Steve Silver with Argus Research Corporation.

[Steven Silver, analyst]

I was just trying to get a sense as to -- as the company thinks about 2024 broadly, just trying to see on your base assumptions, whether revenue growth this year is expected to come more from fee increases from the Market Data Licensing and Corporate Services versus expansion of the subscriber bases, either from licensing or for member expansion on QX and QB.

[Robert Coulson, executive]

Thank you, Steve, for your question. We don't give forward expectations. I mean, my view is that successful companies over the long term, drive organic growth. And organic growth is going to come from a mix of 3 things. It's going to come from user and usage growth. It's also going to come from value increase to the client that you can reflect in prices. And that's what I would call stuffing the visible client value is -- and then the third is new product development. And then fourth is acquisitions. However, acquisitions once you've owned them for a year, they're yours, and you need to be using the first 3 tricks or running them like a Yellow Pages business, which is where you're winding them down and trying to be cost efficient and deliver the service to a declining world.

So, international is a big opportunity for us. International across all of our business lines is a big opportunity. And all of those support each other. More international securities increases volumes across our markets. Better engagement, disclosure and integration in the U.S. broker-dealer compliance processes by those issuers increases accessibility, investor interest and ultimately volumes, is market data. The world is globalizing. International broker-dealers are wanting to come into the U.S. and trade more. Around the world, whether they like keeping their money in a U.S. online broker or with a broker in Miami or with a financial adviser in New York or an investment firm in San Francisco or one in Omaha.

This is -- the U.S. is the place where the world invests. So getting our data out there to all these other innovative online brokers around the world. And what's interesting is the U.S. has led the world in online brokers. We're the best. But other countries and regions are catching up to serve their own markets, which are actually quite small in the first place they connect to is the U.S. So that's where I'd say, we are trying to build for a long term. It's a bit -- we've never been a business that has straight-line consistent numbers, the way Jack Welch used to deliver GE, we're -- but we're trying to put in place the sustainable revenue growth is what I would describe it as.

[Steven Silver, analyst]

And one last one, if I may. I know on previous calls, I've asked about the number of, I guess, virtual investor conferences that the company has held and maybe over the last year or so, it sounded like activity on that front was a little lower just based on pent-up demand for in-person meetings coming out of COVID. Just curious as to whether there's any movement in that front now that the economy seems to be moving much more towards a normalized business flow?

[Robert Coulson, executive]

Yes. So Steve, you're talking about the Peloton problem is -- which is everybody did all this virtual stuff during COVID and suddenly, which sticks. And our virtual investor conferences are a key tool. What I would say is the bigger question to really ask is how our Investor Relations officers changing where they spend their time from pre-COVID to post-COVID and becoming more digital? One of our greatest challenges is that in most overseas markets, there's 1 or 2 cities where all the investors live. And an IRO can go to 1 of those -- 1 or 2 of those cities and visit all the investors. Also, there's a pretty clear split between institutional money and private clients.

The United States is completely different. We have 50 states. There's lots of investment managers all over the place. There's 50 different flavors between institutional and retail. So if you're an IRO and a senior management team and you're trying to get your story out, there is the valuable 2-way conversations with analysts, funds that really cover you and your competitors. But there's a lot of other activities that are 1-way conversations, and those are ripe for digital. So the online conferences are a skill set. We've gotten past the Peloton moment. And then now how does it become what part of the use case for public companies as an efficient way to tell your story to a broad audience without having to travel.

[Operator]

The next question comes from Brendan McCarthy with Sidoti.

[Brendan Michael McCarthy, analyst]

I just want to start off with the regulatory accrual. I think you mentioned it was related to the compliance downgrade process or filing suspicious activity reports. Can you go into detail about what, I guess, what the situation is about?

[Daniel Zinn, executive]

So, I'm glad you asked so that we can provide a little clarity here. So, the discussion that we've been having with the SEC is really related to OTC Link, our broker-dealer business and the policies and procedures and obligations that, that entity has as a broker-dealer. One of those things is, the potential for filing suspicious activity reports based on activity on the market and things of that nature. So that's the sort of bucket for this regulatory accrual and what that discussion has been about.

What you're relating it to though is, kind of what we've been talking about as well, which is our market integrity initiatives overall, all the work that we've been doing for years, [ really ] on the OTC Markets Group side of the house, through our surveillance team and our compliance team that deals with the issuers. And what we're talking about for the future is really merging those things and being able to drive, what we do on the OTC Link side based on a lot of the work that's being done in the OTC Markets Group side and that has been done for a long time.

So, there's a kind of a forward-looking focus there about how we're going to get better, how we have gotten better as an organization at merging those things. But it is important to understand what the specific baseline is for the regulatory accrual. And I know, Cromwell may want to comment here as well.

[Robert Coulson, executive]

Yes. So, Brendan, when we did our market integrity efforts, we've built them looking at how the exchange SROs operated, which was and we did it a little differently because the exchanges are very protective of their brands. So, they want to make it look like any company that rings their bell, is these fantastic exciting blue-chip investable securities. We have -- and they sell a brand. We have a much broader range of securities. We have OTCQX companies, which are not penny stocks. They need to meet financial standards, they need to meet governance standards, they need to be of a certain size to meet the Blue Sky standards at a wide range of states. Then we have OTCQB, which is a venture market, and a venture market is a public market that gives entrepreneurial and emerging companies the opportunity to be successful. It's more disclosure driven. There are also standards there.

And finally, we have the Pink market, which is often very misunderstood, because it exists not for the companies. It exists because if you're a shareholder, an outside shareholder, you own a property right in the company. And a property right, a security, a share, you've got the right to sell it. So as an outside investor, if you don't like what management is doing, you can sell. In the United States, you have to sell that to a broker-dealer. And that broker-dealer, if you show up with a security you want to sell or you want to buy your property, which the United States is pretty big about protecting people's rights to property, is that broker-dealer needs -- has an agency obligation, which is -- has been in the law forever to get the best price for their customer.

And so that market developed for distressed companies, companies that were not engaged, companies that were financially challenged, also companies where controlling shareholders did not have a fiduciary view towards minority investors. So that market was wide but had a role that is not -- was almost polar opposite from listing for the companies that list on an exchange, the better-quality companies that list on a National Securities Exchange. So, we developed this process where we would flag risk, and we also, from all the information we received, we would send referrals to regulators. And that's the classic SRO model. Because our ATS did not have end customers, it was a wholesale utility ATS.

We took the viewpoint mistakenly that we should not be filing SARs. And that was a mistake, because the regulatory view from the SEC side moved that if they're suspicious activity across a broker-dealer system, they should file SARs. So, we're cleaning it up, we're integrating the processes, we are going to move forward in a better place. We have a new CFO, not new CFO, sorry, new Chief Compliance Officer. And we have -- we brought in outside consultants who are ex-securities regulators to review our AML processes and make adjustments.

So, we are going to come out of this stronger. That's where we are and we have chosen to move forward. There is another ATS in our space, Archipelago Trading Services, which there is a public filing by the SEC [indiscernible] which talks further about this from their side. They did not have the market integrity efforts and investment that we've done. However, we're going to fix it and move forward.

[Brendan Michael McCarthy, analyst]

So, kind of fair to assume this is just related to the ATS messaging system on with a Pink listed security?

[Daniel Zinn, executive]

The ATS, just the operations of the ATS overall because it's all operated by broker-dealer and therefore covered by the same policy and procedure regulations.

[Brendan Michael McCarthy, analyst]

Okay. And one more question on the matter. I think $1.4 million expense related to the regulatory accrual. And was that all recognized in the fourth quarter?

[Antonia Georgieva, executive]

Brendan, I'll tackle that. The accruals for the proposed and expected settlement is $1.2 million. There is an additional approximately $200,000 that we incurred in legal and consulting costs referring to the consultants that Cromwell talked about. So, the overall cost is 1.4%. A portion of it was accrued in the third quarter. However, at that point, the amount was not material and not disclosed as such, and the remainder was accrued in the fourth quarter.

[Brendan Michael McCarthy, analyst]

Just a quick question on the Corporate Services subscriber base. I know you mentioned part of the lower subscriber count is driven by non-renewals, corporate events, or compliance downgrades. Just wondering if you could provide insight as to which of those was the largest driver of the lower subscriber counts in 2023 and what's your expectation there for 2024?

[Antonia Georgieva, executive]

As we have discussed throughout the year, compliance downgrade has been a material driver of removals from QX and QB from those marketeers during the year. And largely that was attributed to the more challenging economic environment, particularly facing our QB subscribers that tend to be smaller venture stage companies and therefore, more impacted when economic environment is less favorable with rising interest rates and inflation still stronger earlier in the year, albeit thankfully it's tapering off.

We saw more of our QB companies failing to meet the QB standards. And as Cromwell pointed out, it is our policy to swiftly remove those when -- from the marketeer when they no longer meet those standards. We did see some uptick in compliance downgrades or downgrades down to QB for QX companies as well more so than in prior years. And similarly, on the non-renewal side, we did see an uptick there as well, but certainly the compliance downgrades was the main driver.

[Robert Coulson, executive]

And Brendan, there's 2 factors that drive during times of uncertainty. There's downgrades from our markets and there's also downgrades to our markets. During this cycle, we have seen the companies coming off exchanges, not financially viable enough to go to OTCQX or OTCQB. And that's partially with the environment, which we've written about in blog posts of gaming the system with reverse splits and dilutive private placements that continually takes places on the exchanges. So, the exchanges have effectively become partially penny stock markets. And economically distressed companies can stay right till the end. And so, they end up in our Pink market.

[Brendan Michael McCarthy, analyst]

Maybe one more for me and then I'll jump back in the queue. I know I've asked this question on the call previously and I know it remains a multiyear undertaking. But I guess what would you estimate as far as percentage wise, I guess, what percent through the EDGAR Online integration is OTC Markets?

[Robert Coulson, executive]

Hopefully, we're at the beginning of forever. And that would be that we can integrate the technology into our systems and have it be viable going forward and consolidate our datasets and their datasets. That's a lot of work. It's much better to proceed thoughtfully rather than rush, rush, but we need to be intentionally moving forward.

Blue Sky Data was 18 months to a win, where we got the technology consolidation, we switched people over to receiving the data from us, we repapered all the contracts, we stuffed much more value into the product by increasing the coverage of securities and we will be increasing that coverage further. So, it was consumed in 18 months and moving forward within our services and we were a better organization for it.

EDGAR Online has a lot of pieces and it's got datasets that both can be useful for financial analysis by investors and also datasets for U.S. dollar regulatory compliance. How we integrate both of these platforms is something that needs to be carefully worked through, and thought through and staged. So my feeling is, we're going to have a good idea where we stand at the end of year 3, is we have this year is starting the integrations of a few key datasets, some technology optimizations of how we collect the data. And then there's some consolidations of databases, whether it's securities master, shares outstanding. Shares outstanding, we collect from various different sources. We have the best shares outstanding database for securities on our markets.

We have that because we collect it from EDGAR Online through SEC filings, we also collect it directly from transfer agents and we collect it from issuers. That dataset of consolidating on that for when people use the EDGAR Online dataset and people use our datasets will take some time to mesh together. And then there's the optimizations just to make the technology run smoother. A lot of legacy technology is like driving the car in Chitty Chitty Bang Bang, epic mechanics making it work.

However, we need to streamline and just let it do its thing is and then there's a -- we're working on our connect project, which is out to issuers that are on our OTCQX and OTCQB market, where as we consolidate 1 disclosure system and the ability to create standardized financial databases that includes SEC reporting, non-SEC reporting and banks. So, we can have the financials for every publicly traded company in the U.S. in an easily searchable and linkable to the original document that will, we believe be a useful product and also drive market efficiency. But this is a -- it's a lot of pieces.

And EDGAR Online is 10% of our market data revenues. So, the premium for sprinting is probably not there. But the future for public companies and people who operate public markets is being good at digitalizing the information stream that comes out of the issuers, so supply and demand can interact with fundamental financial information.

[Brendan Michael McCarthy, analyst]

One more question, if I may. Just looking at the Corporate Services segment, it looks like I was reading the annual report and it looks like the -- there are good amount of large international companies that subscribe to QX. And, I see that very positively and I think it speaks to the value proposition there. But just curious as to what's your outlook on the overall IPO market for 2024?

[Robert Coulson, executive]

I hope it is huge, but we'll survive if it isn't. I mean, the way I look at it is there's a lot of chatter for international markets about the valuations that are not the same valuation you get in the U.S. Some of those -- some of that is because those companies or countries have lower growth rates. However, there is nothing stopping an IRO at an international company of doing everything that a New York Stock Exchange or NASDAQ listed international company IRO does, that has an ROI. And part of that should be joining OTCQX if you can qualify. It's an easy win.

It's incredibly efficient because it's 12g3-2(b), you want to be in compliance with 12g3-2(b). If you're an international company, you want to be in compliance with 10b-5. It's really efficient if you're using your disclosure that you've done for your home market and you want to drive that disclosure, those news releases, the compliance information into the U.S. market. And then you want to do the other things that support it, such as if you're a large international healthcare company, you're going to want to go to the JPMorgan Healthcare Conference, and you're going to want to stand on a stage with your global competitors and comparable businesses. You can't just show up in the U.S. with your countrymen because then your peers are also lower valuation companies.

And you need to run your business to be competitive and offer comparable financial returns. And if you stand on a stage and your business is just as good as the U.S. peers, investors love buying securities that are at a discount, but you need to get out there. And whether it's JPMorgan Healthcare or Cowen's Conference, if you're a smaller company and across all these different industries, you need to make your comparable not just be your countrymen, but your competitors and the global leaders in your industry.

[Operator]

[Operator Instructions] I would like to turn the call over to Dan for any additional questions that have been submitted.

[Daniel Zinn, executive]

Thank you, operator. Yes, we did have one question submitted, and so I'm going to pose it to Cromwell in the voice of the investor. Given the recent approval of spot crypto ETFs, how does this affect OTC Markets Group's business given the high level of trading volume of cryptocurrency trust assets on OTC? I understand that digital assets have been approved for OTC trading, but is this a near-term risk?

[Robert Coulson, executive]

The important part about running a broad-based market is no one security is your overall business. GBTC was a fantastic story and listing on exchanges was also a fantastic story. And a couple of dynamics took place when they upgraded to the New York Stock Exchange. Number one, regulators allowed the issuance cancellation. We would have really liked regulators to allow issuance and cancellation when this security traded in the OTC market. If the SEC was concerned about market efficiency, they would have, it didn't happen.

The second part came in was competition arrived and thus the lower cost of holding these assets in securities wrappers. That would have been great too to happen on the OTC market. And then the third is they were listed on a National Securities Exchange. So, that has been a great success story too, because a lot of regulatory accessibility shows up and the brands of the exchanges. That created a nice bull market again in crypto assets. So, we're proud of what we did to support GBTC and competitors who showed up in the OTC market and the success of this class of assets. We see ourselves, our role as a gateway market that what GBTC can do, many others can do on our markets with innovative industries. So that part of it strengthens our system over the long-term.

Now the other side is our ATSs all file with FINRA transactions. Nobody in the OTC space looks at share volume. They look at transaction counts. And you can see that we benefit more from active markets than one security. And how do we broaden our base, add new securities. Digital asset securities, we have a license to put them on our ATS. The other key players within the regulated securities market do not exist yet. We will be ready. We are having conversations both with the industry and regulators until a broker-dealer is able to hold a digital asset security in a way that works for regulators, omnibus clearing, and this is a really important thing, accountants, that they don't have to take it as a liability on their balance sheet. This industry is going to be slow to develop, but we will be ready when it shows up.

[Operator]

I show no further questions at this time. I would now like to turn the call back to Cromwell Coulson for closing remarks.

[Robert Coulson, executive]

Thank you, operator. I want to thank each of you for joining us today. I would encourage you to read our full 2023 annual report 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, we look forward to updating you on our key initiatives that will continue to shape the integrity, efficiency, and competitiveness of the public markets.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.