March 2015 OTC MARKETS GROUP

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1 March 2015 OTC MARKETS GROUP

2 Note on Forward-Looking Statements Information set forth in this 2014 Annual Report (the Annual Report ) contains forward-looking statements, which involve a number of risks and uncertainties that could cause our actual results to differ materially from those reflected in the forwardlooking statements. Forward-looking statements can be identified by use of the words expect, project, may, might, potential, and similar terms. OTC Markets Group Inc. ( OTC Markets Group, we or the Company ) cautions readers that any forwardlooking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Forward-looking statements involve a number of risks, uncertainties or other factors beyond OTC Markets Group s control. These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and price fluctuations, government and industry regulation, U.S. and global competition, and other factors. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. 2

3 OTC Markets Group Inc. (OTCQX: OTCM) Our mission, vision and strategy drive market transparency so brokers and investors are empowered to make intelligent choices. Mission To create better informed and more efficient financial marketplaces Vision To expand the world of investment opportunities by creating the financial marketplaces of choice Strategy To operate a world-leading securities market 3

4 Our Strategy To operate a world-leading securities market Share information widely through open networks that foster greater transparency Connect broker-dealers, organize marketplaces & inform investors Deliver elegant, reliable & cost effective subscription-based solutions 4

5 Our 2015 Strategic Initiatives Reliability of our core systems, processes and data, with a focus on OTC Link ATS achieving full compliance with Regulation SCI Enhancing the broker-dealer trading experience on OTC Link ATS and the corporate client offering on the OTCQX and OTCQB premium marketplaces Increasing the breadth and depth of securities traded on OTC Link ATS and reach of our market data 5

6 Key Operational Metrics Total Annual Dollar Volume of all securities $238 billion 19% year on year growth OTCQX Best Marketplace 92% increase in OTCQX U.S. companies Including 34 banks Total Annual Dollar Volume of OTCQX securities $36 billion 22% year over year growth OTCQB Venture Marketplace 311 verified OTCQB companies 70% approved to continue trading on OTCQB Number of broker-dealer subscribers 122 4% year on year decline Five New Indexes 4 track OTCQX 1 tracks OTCQB As of December 31, 2014 or during 2014 Number of market data professional users 21,033 Approximately 8% of the Nasdaq UTP feed number of users Number of Corporate Clients 1,429 23% year over year growth 6

7 Powering the Marketplace Flywheel Broker-Dealer Trading Efficiency OTC Link ATS Company Trust & Safety Market Data Corporate Services Investor Transparency 7

8 OTC Link ATS 8

Efficient Trading How It Works Broker-dealers and regulators use our market data feeds, marketplace designations and issuer data to monitor best execution, apply risk checks and implement trading

9 Efficient Trading How It Works Broker-dealers and regulators use our market data feeds, marketplace designations and issuer data to monitor best execution, apply risk checks and implement trading controls Investors can buy and sell through the broker-dealer of their choice, providing an electronic trading experience nearly identical to trading a NYSE or NASDAQ security Companies: Tiered marketplaces that reflect the quality of a company s operations, its management history, its level of disclosure, and its degree of shareholder engagement Broker-dealers: Electronic quoting and trading capabilities for a network of over 120 broker-dealers through OTC Link ATS, an SEC-registered Alternative Trading System Investors: The opportunity to analyze, value and trade a breadth of securities with transparent pricing, widely disseminated company information, and a system of tiered marketplaces 9

10 What is OTC Link ATS? OTC Link ATS: our SEC-registered Alternative Trading System provides a fully attributable, network-based model to its FINRA member broker-dealer subscribers to have access market liquidity in 10,000 U.S. and global securities Links a network of 120+ leading U.S. broker-dealers that provide liquidity & execution OTC Link ATS offers broker-dealer subscribers greater choice of trading partners, control of their Broker-dealers are required to comply with FINRA and SEC regulations Provides investors with an electronic trading experience almost identical to trading a NYSE or NASDAQ security Top broker-dealers on OTC Link ATS Archipelago Trading Services, Inc. / ARCA Automated Trading Desk Fincl Svcs, LLC / ATDF Canaccord Genuity Inc. / CSTI Cantor Fitzgerald & Co./ CANT Citadel Securities LLC / CDEL G1 Execution Services LLC / ETRF Intl FCStone Securities, Inc. / INTL Jane Street Markets, LLC / JANE Knight Capital Americas LLC / NITE Maxim Group LLC / MAXM 10

11 Market Data Licensing 11

Market Data Distribution OTC Markets Group sets the best price standard by broadly distributing our market data through top-tier distributors and financial portals The distribution network for

12 Market Data Distribution OTC Markets Group sets the best price standard by broadly distributing our market data through top-tier distributors and financial portals The distribution network for real-time OTC Markets Level 1+ & Level 2+ Quotes includes all major financial data distributors Activ Financial Bloomberg Interactive Data Corp Morningstar NASDAQ Ultrafeed Investors can widely access market data through financial portals & online brokerages Bloomberg E*Trade Factset Fidelity Interactive Data Corp NYSE Superfeed REDI Technologies SIX Financial Thomson Reuters Morningstar OTC Markets Group TD Ameritrade Thomson Reuters TradeKing 12

13 OTC Markets Group Indices Our Indices are designed to help build visibility for the companies on our OTCQX and OTCQB premium marketplaces. Investors and analysts now have a convenient yardstick for measuring the performance of these companies over time. OTC Markets Group Indices OTCQX Composite Index (.OTCQX) OTCQX ADR 30 Index (.OTCQX30) OTCQX International Index (.OTCQXINT) OTCQX Composite Index OTCQX U.S. Index (.OTCQXUS) OTCQX ADR Index (.OTCDR) OTCQX Banks (.OTCQXBK) OTCQB Composite Index (.OTCQB) Investors can find OTCM index data at: Bloomberg Thomson Reuters OTC Markets Group 13

Reach of our Market Data Our OTCQX, OTCQB and OTC Pink marketplace designations are displayed on a wide variety of online brokerage platforms and financial information portals Financial portals and

14 Reach of our Market Data Our OTCQX, OTCQB and OTC Pink marketplace designations are displayed on a wide variety of online brokerage platforms and financial information portals Financial portals and online brokerages that display our marketplace designations CNBC CNN Money E*Trade Financial Times MSN Money OTC Markets Group Schwab Scottrade Seeking Alpha ShareBuilder SNL Financial TD Ameritrade TSX We continue to introduce innovative services for broker dealers to have more choices OTC Compliance Data File is a comprehensive file of key compliance data points that helps broker-dealers and compliance/risk mitigation teams more efficiently analyze and monitor OTCQX, OTCQB and OTC Pink securities trading in an easily-consumable format. 14

15 Corporate Services 15

16 Our Tiered Marketplaces We strive to ensure that investors are well informed wherever they analyze, value or trade securities Best Marketplace Venture Marketplace Open Marketplace 16

17 The Best U.S. Marketplace for Globally Listed Companies OTCQX: ADDYY OTCQX: BRGYY OTCQX: BNPQY OTCQX: BDRBF OTCQX: CESDF OTCQX: COSWF OTCQX: DANOY OTCQX: PFSCF OTCQX: REPYY OTCQX: RHHBY OTCQX: SSDOY OTCQX: TFIFF 17

18 Strong Venture Markets Support Growth The Venture Marketplace 18

19 Making OTCQB a True Venture Marketplace The OTCQB venture marketplace offers transparent trading of entrepreneurial and development stage companies Introduced new standards for the OTCQB marketplace in May 2014 Meet minimum bid test of $0.01 Not subject to bankruptcy or reorganization proceedings Current in their disclosure Verified key company information For the first time OTCQB was opened to international companies traded on a qualified foreign stock exchange TSX, TSX-V and CSE are qualified foreign stock exchange Since its launch in May 2014, the OTCQB venture marketplace has gained strong momentum 500+ companies have been verified and are trading 1,600 companies remain unverified on the OTCQB marketplace 19

20 Financial Performance 20

21 Recurring Revenue Trends 1,800,000 Monthly Revenue by Business Line 1,600,000 1,400,000 1,200,000 1,000, , ,000 OTC Link ATS Corporate Services Market Data Licensing 21

22 Operating Expense Trends 80% 70% 60% 50% 40% 30% 20% 10% 0% Operating Expense as a % of Revenue Analysis Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 General, administrative and other Depreciation and amortization Occupancy Marketing and advertising Professional and consulting services IT Infrastructure and information services Compensation and benefits 22

23 Financial Highlights for 2014 Annual Revenues $42 million 19% year on year growth Market Data Licensing Revenues $20 million - 38% growth 64% of growth came from price increases 10% increase in the number of professional users Expansion of enterprise licenses Corporate Services Revenues $10 million - 6% growth $0.6 million in new revenue from OTCQB fees 10% increase in revenue from premium services 7% decline in OTCQX subscription revenue Capital Expenditures $1.6 million 232% year on year increase As of December 31, 2014 or during 2014 Operating Profit Margin $4.6 million 55% year over year growth OTC Link ATS Revenues $12 million - 5% growth 20% increase in subscription revenue from new fee schedule 4% decrease in quote position revenue 7% decline in broker-dealer subscribers Dividends paid per share $0.32 Incraesed quarterly dividends by $0.04 during Q3-14 and Q4-14 and paid a special $0.50 dividend in Dec-14 Operating Cash Flows $12.5 million 50% year over year growth 23

24 Financial Metrics and Ratios for 2014 Diluted EPS $ % year on year growth Dividend Yield 2% As compared to 4% in 2013 and normalized for special dividends Adjusted EBITDA $15.7 million 42% year on year increase Stock Price $ % increase since December 31, 2014 and 100% increase from December 31, 2013 PE Ratio 22 As compared to 15 in 2013 Adjusted Diluted EPS $ % year over year increase Operating Profit Margin 32% Expansion from 25% during 2013 Working Capital $14 million 4% year over year decline As of December 31, 2014 or during

25 Thank You For more information, contact: Cromwell Coulson, CEO Wendy Fraulo, CFO FOLLOW US! 25

OTC MARKETS GROUP INC.

OTC MARKETS GROUP INC. A Delaware Corporation 304 Hudson Street New York, NY 10013 Telephone: (212) 896-4400 Facsimile: (212) 868-3848 Federal EIN: 13-3941069 NAICS: 523210 SIC Code: 6289 2015 Annual Report