Operator:

Good day and thank you for standing by. Welcome to Nasdaq's Second Quarter 2024 Results Conference Call. At this time, all participants are in the listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Ato Garrett, Senior Vice President, Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Ato, and good morning, everyone. Thank you for joining us. On the call this morning, I'll provide some perspective on the external environment, discuss our strong quarterly performance highlights as well as our progress against our strategic priorities, and then I'll hand the call to Sarah to walk through the financial results in more detail. Turning to the economy in the US, we're continuing to see solid, but slowing GDP growth, along with cooling inflation and slightly rising unemployment. These data points support the potential for easing monetary policy in the coming months as the Fed continues to strive for an economic soft landing. The general stability in the US economy and the potential for a lower cost of capital going forward is resulting in modest improvements in the IPO landscape as we progress through 2024, including solid activity this week. However, investors continue to contend with external uncertainties and the timing of monetary policy shifts as well as our dynamic macro political environment. As a result, we continue to expect modestly improving IPO activity for the remainder of 2024, and our current US IPO pipeline indicates that stronger momentum is likely to manifest starting in the first half of 2025. We're also seeing stronger economic underpinnings in Europe, aided by the ECB's easing monetary policy, including improving economic prospects in the Nordics. The improvement is not yet translating into a material increase in new public issuances, but our European IPO pipeline is healthy and growing, particularly for 2025. As investors and industry participants navigate the dynamic market environment, we continue to see sustained robust trading activity in the markets as well as strong demand for mission-critical technology solutions from financial institutions globally. As a result, our markets continue to experience strong volumes, and client demand for our FinTech solutions remains consistent with trends we have seen through the cycle, which provides a healthy backdrop for continued revenue growth across our solutions suite. Now let me turn to our financial results, which demonstrate the power and resilience of our diversified business model and our ability to succeed through economic cycles. We delivered a strong quarter with $1.2 billion in net revenues, an increase of 10% year-over-year, with solutions revenues at 13% growth. Our overall annualized recurring revenue, or ARR, grew 7% to $2.7 billion. I'm particularly pleased with the strength of the performance across our business, which is a testament to the power of our platform. We're integrating the Adenza acquisition ahead of schedule and are realizing the investment thesis that underpin the transaction as we demonstrate its value for clients, shareholders and employees. Our expenses for the quarter increased 7% year-over-year, within our guidance. Our operating income grew approximately 14%. And importantly, our operating margin increased to 53%, representing over one percentage point of operating leverage while we continue to invest to support growth in our business and deliver on synergies. Turning now to a discussion of the business highlights, starting with capital access platforms. While ARR growth in the division remained at 1%, our index revenue grew 29%, resulting in overall revenue growth for capital access platforms of 10%. In Listings, we welcomed 31 operating company IPOs maintaining our strong win rate of 72% based on Nasdaq eligible listings. While the slower IPO environment remains a headwind, we're encouraged by signs of improvement, as supported by our most recent IPO Pulse Index, which is near a three-year high. Overall growth in data and listings continue to experience challenges as modest growth in market data and the slowly improving IPO environment were offset by the impact of prior year delistings. Growth in our analytics business benefited from continued demand across the investment community for actionable intelligence and increased efficiency. However, that growth was partially offset by continued headwinds in corporate solutions, resulting in more muted growth for workflow and insights. Our index business delivered another exceptional quarter with $17 billion of net inflows during the quarter, totaling $53 billion over the last 12 months. We also achieved another record in Index ETP AUM exiting the quarter at $569 billion. Turning next to Financial Technology. ARR growth across the division was 13%, including 25% in Financial Crime Management Technology, 14% in the combined AxiomSL and Calypso solutions and 9% in the combined Market Technology and Trade Management Services. The division had 69 new client signings, 96 upsells and 4 cross-sells. We also saw continued cloud adoption as 68% of AxiomSL and Calypso 's combined bookings in the quarter were cloud-based with a strong pipeline for future quarters. Turning to the specific subdivisions. Financial Crime Management Technology continued its strong momentum. We signed over 50 new clients in the SMB space, and we continue to make progress in the Upmarket segment focused on Tier 1 and Tier 2 banks. In July, we signed a new international Tier 1 bank, which is also an exciting cross-sell. Going forward, we continue to maintain a strong sales pipeline within the core SMB segment, and we have a growing pipeline of new clients and upsells among Tier 1 and Tier 2 banks. Across Regulatory Technology, we see sustained demand across both existing and new clients as financial institutions face increasingly dynamic regulatory environment, including changes in regulation globally related to asset thresholds. Among the many regulatory trends that are driving sales demand, we're pleased with our progress in signing clients around the world as they focus on implementing Basel IV and preparing to implement Basel III end game. In Capital Markets Technology, we continue to see strong demand for mission-critical technology as many of our clients focused on modernizing their infrastructure to enhance resilience and performance. For Calypso, we see robust new demand, especially in the Treasury segment in addition to cloud transformation of large-scale clients. In our Market Services division, we delivered revenue growth of 3%. We experienced healthy volumes across North America and Europe, and we achieved a sequential increase in North American options market share as well as growth in Nasdaq US equities on-exchange market share and capture. Our US index options achieved record revenues, more than doubling versus last year, due to higher capture and volumes. In our US Cash Equities business, we executed successful Russell, MSCI and S&P rebalances during the quarter, which showcased the strength and resiliency of our markets. During the Russell event, for instance, nearly 2.9 billion shares, representing a record notional value of over $95 billion, were executed in the Closing Cross, representing the largest liquidity event on the Nasdaq Stock Exchange or the Russell Reconstitution. In our European markets, the strength of our market ecosystem, as evidenced by the depth of book, breadth of participants and product innovation continues to drive market share gains. Overall, we're pleased to report a solid quarter of market services and remain focused on retaining our leading position across all of our markets. I now want to spend a few minutes updating you on how we're executing against our 2024 strategic priorities of integrate, innovate and accelerate. Starting with integrate, we have actioned over 70% of the $80 million of net expense synergies, and our leverage ratio reached 3.9 times at quarter-end, both ahead of plan. Both AxiomSL and Calypso are fully integrated into the Financial Technology division and we've established strong leadership, a well-structured operating model and a One Nasdaq go-to-market approach to ensure we're delivering for our clients with the highest level of efficiency and effectiveness. Our CRM's integration for the Calypso and Axiom solutions is now completed ahead of schedule, and this supports divisional sales coordination as well as the sales incentive program established at the beginning of the year. Importantly, across AxiomSL, Calypso and Verafin, we've been highly focused on cultural integration into the broader Nasdaq enterprise. And internal surveys continue to show that our employees are highly engaged and energized to deliver for our clients. We're also making strong progress advancing our innovate priority. We currently have approximately 50% of our employee base working with AI tools focused on enhancing productivity as well as driving our product road map. By the end of Q3, 100% of our developers will have access to AI copilot tools and we recently had over 650 employees participate in several AI hackathons across Nasdaq. During the quarter, we continued to introduce new AI capabilities within our client-facing solutions. Consistent with other Gen AI capabilities recently launched in our Verafin and Boardvantage solutions, with an investment, we have deployed a new AI-powered feature for the Market Lens module called Pension Meeting Minute Summarization. The feature provides asset managers with key insights on current and future pension fund strategies to help inform their business development and engagement priorities with top pension decision makers. We also have a strong pipeline of AI features scheduled to launch in the coming quarters, including in Market Surveillance and IR Insight. And we're seeing strong early traction in client adoption and effectiveness related to the capabilities that are already in market. Specifically, Dynamic M-ELO, the first SEC approved AI order type, which we launched in April, is driving a 20% increase in both volumes for this order type and improvement in fill rates compared to the prior static version. Verafin's integrated Gen AI feature, Entity Research Copilot, is now deployed at more than 250 clients and we expect to complete our rollout in the third quarter. Client feedback has been positive, demonstrating that the integrated copilot functionality with the integrated copilot functionality, Verafin solutions can reduce alert research time by up to 90% compared to banks that do not use Verafin. Beyond AI, we continue to drive innovation towards key growth priorities. For example, in our Index business, innovation is at the heart of our growth strategy as we extend the franchise to new markets globally, drive institutional adoption and introduce new products beyond the NASDAQ 100. During the quarter, 50% of index product launches were outside of the United States. And we're quickly gaining traction in investor adoption. In total, we launched 18 new products with our partners, including 12 ETPs and three insurance annuity vehicles geared towards our institutional clients. Additionally, we're pleased that our AI-themed ETP saw more than $1 billion of inflows over the last 12 months. Wrapping up with our Accelerate priority. The addition of AxiomSL and Calypso has significantly elevated the dialogue we have with our clients as a strategic partner. There's no better evidence of that than the early traction we're seeing in our cross-sell efforts. Since closing the transaction, we have executed on 11 FinTech cross-sells. We had four this quarter, including two cross-sells of our AxiomSL solution, two Calypso clients. This is a great start, but it's only the beginning on our journey to exceed $100 million in cross-sells by the end of 2027. Just eight months since the acquisition closed, 10% of the opportunities in our pipeline are cross-sells, and we expect this to grow sequentially. The division has several strategic cross-sell campaigns underway, which are generating strong top-of-funnel interest and underpins our continued confidence in our ability to grow cross-sell bookings over the coming years. To wrap up, we're pleased to deliver a quarter of strong results, driven by continued momentum in solutions and the power of our diversified platform to drive scalable, profitable and durable growth. Importantly, we're delivering on the Adenza acquisition thesis as our clients increasingly see Nasdaq as a strategic partner that can help solve their largest, most complex challenges. We look forward to leveraging this momentum to unlock our next phase of growth. And with that I'll now turn the call over to Sarah to review the financial details.

Operator:

Thank you. [Operator Instructions] And I show our first question comes from the line of Dan Fannon from Jefferies. Please go ahead.

Adena Friedman:

Sure. Well, I would just say that as we've talked about in the past, price increases are different per product and kind of different from -- in terms of how we structure contracts with our clients within FinTech. So we don't provide you a very specific answer to that question. But I think that if we think about what we've said at least for the AxiomSL and Calypso products in the past is that about half of the revenue increase that we see in any given quarter comes from upgrades and upsells of our clients and the other half comes from new sales and price increases, the price changes we make within the contracts. Some of our contracts have CPI increases and somewhere -- what we would do is we would upsell our clients or increase price upon contract renewal. So that would mean that we would have a constant price for a period of time and then increased price on contract renewal. We do that on the basis of increased value to the clients or the fact that the clients themselves are growing and, therefore, they're getting more value out of the product. So that's -- it kind of depends on the product, Dan.

Adena Friedman:

Sure. Well, within the quarter, as I mentioned, we had four cross-sells, and two of them were selling AxiomSL to Calypso clients. And so that really comes from the fact that we have a really strong relationship with our clients. In Calypso, they have new regulatory obligations that they're having to become ready for and they've chosen to work with us. And one of the benefits we have is that we can actually -- we have a data API connector between those two products. So we can take data directly out of the Calypso platform and feed it into AxiomSL and make it much easier to implement the AxiomSL solution for those regulatory obligations. So that is definitely helping to drive demand. We also -- in terms of our cross-sell campaigns, we have one cross-sell campaign that's really focused on our exchange clients where we have clients -- where we provide clearing technology and Calypso has amazing collateral management capabilities. And so we are working with them to show the benefits of adding the Calypso collateral management into their clearing operations. I mean, then we also have, as I mentioned, the Calypso AxiomSL. And then the third one is actually looking at our Verafin clients across the United States and offering both treasury management as well some AxiomSL regulatory reporting solutions to the broader bank community. So those are the areas where we're doing strategic campaigns, and we're definitely seeing that feeding the funnel. But also, frankly, as I mentioned in July, we have one of our great Tier 1 clients for AxiomSL and Calypso has now signed up to take Verafin. So I think the strength of our relationship with them across all of our, frankly, all of our business has been a driver of having them trust us with their anti-financial crime needs as well.

Operator:

And I show our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead.

Adena Friedman:

Yes. I mean I think that the best way to measure that is through ARR. So because the ARR, the contract values of the new sales are factored into ARR in terms of the annualized contract value. And so that as you see the ARR coming in, I think it's 13% across all of FinTech. And then we've given you the ARR growth for each of the subdivisions, it really does help you have a predictive effect on the subscription revenue that's coming in across those businesses going forward. And I think we give you a lot of the ARR figures both in the script and in the release and presentation. So I think that's what we look at in terms of the overall health of the business, the overall health of how we look at the forward potential of the subscription revenue. And then, of course, there is also the professional services revenues, and we try to give you some understanding of the dynamics there. As we've mentioned before, for the AxiomSL and Calypso combined properties, when we look at the overall outlook for the business, meaning some outlook for revenue, it's slightly below our ARR expectations because of the fact that professional services fees grows a little bit more slowly in general over a long period of time than the subscription revenues. But that's -- I think that's the way to kind of evaluate the business.

Adena Friedman:

Yes, great. Well, first of all, today, the Tier 1, Tier 2 banks, the revenue contribution is still very small because we're still signing new clients, we're implementing them. We don't start recognizing the revenue until we implement in terms of making sure that we have them up and running. And the implementation times are ranging from, I would say, six months to a year depending on the complexity of implementation. So and most of the new sales that we've had in the Tier 1, Tier 2 space have focused on payments fraud. We also have this new consortia-based check fraud solution that's really exciting that we're definitely driving demand. And as we go into the international banks, one of the things that we've been focused on, both in Canada and the UK, is looking at payments fraud across kind of what I'll call international payments fraud into their US operations in other parts of the world. But that's where we really have this incredible strength in our business and in our solution. We can cut down false positives anywhere from, frankly, 20% to 40% depending on how they implement it. We can increase fraud found, and that's been really exciting for the banks to see. We run these proof-of-concepts to prove out the solution, and it's pretty remarkable actually as to the benefit they get. Taking that proof-of-concept and turning to a contract takes time. So we are super excited to see our latest Tier 1 signed in July. The proof-of-concept was done probably by April or so, just to give you a sense.

Operator:

Thank you. And I show our next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Sarah Youngwood:

Thank you very much, Kyle. So we remain focused on the capital priorities that we have outlined at Investor Day. So of course, always the organic growth first and then the deleveraging remains very important. So you are right that we would start with the CP and the balance that you mentioned is approximately correct. And then after that, we would be opportunistic. We, first of all, have done about half of the employee dilution-related share repurchases. So I think you would expect us to continue to do that. And we use the word opportunistic, flexible because there are other things we could be doing, which is around either debt or equity.

Sarah Youngwood:

So what I gave is that in 2Q, it's $1 million year-on-year. And then in 3Q and after for the following three also, it would be $3 million. So you could add two on the sequential, but it's year-on-year. So $3 million year-on-year, $1 million becomes $3 million between 2Q and 3Q.

Operator:

Thank you. And I show our next question comes from the line of Michael Cho from JPMorgan. Please go ahead.

Adena Friedman:

Yes, sure. Yes. So right now, we've actually had an increasing number of POCs and we're -- we don't give specific numbers, but it's a really healthy number of clients evaluating our solution with the proof-of-concepts that we have underway. Over time, we'd like to actually think we won't have to run as many because we'll have proven the solution out enough times across clients that it just becomes something that people fully understand and they don't necessarily need a proof-of-concept, which is why we're -- right now that number is building as we're gaining more traction, we're signing clients. More clients are curious about it and they want to understand the benefit to them. But over a period of years, we'd like to think that it will just become part of the flywheel. So I would say right now, we should continue to expect a small number of clients over a period of a year, not necessarily every quarter, as we've kind of shown, but hopefully, we're going to see more momentum and more regular signings in the years ahead. So it just -- it builds on itself. And that certainly has been the experience of Verafin over time, and they leg into a new segment of the banking industry. They'll get 1s or 2s kind of in a quarterly basis, it will start to trickle in and then it starts to become more of a regular pace. And then they start to really demonstrate the strength, particularly with the consortium data that they have that really kind of feeds on itself and, therefore, it gains momentum. But I can't give you a specific, I wish I could, give you a specific understanding of how much time that would take. But we're definitely measuring in a period of years at a time like how do we gain more momentum, how do we sign more clients in the years to come. But that's about as much color as I can give you right now.

Sarah Youngwood:

Sure. So basically, what we had is really a broad momentum across our businesses, but specifically here also in the Calypso where we had one of strategic early renewal, but also 29 upsells and several new clients and so it was five new clients. And so as you look forward, you are going to continue to see solid momentum in the business. And we told you also that 2024 would remain in line with our medium-term outlook. But of course given the type of first half we have had, I think, it was not a surprise that we mentioned that we would expect more normalized growth across the products within the division versus the first half of the year. And also we pointed out consistent growth across quarters. And so this is what we said at the Capital Markets Technology revenue level.

Michael Cho:

Okay. Great. Thank you.

Operator:

Thank you. And I show our next question comes from the line of Patrick Moley from Piper Sandler. Please go ahead.

Adena Friedman:

Sure. Well, I think we've seen a modest improvement year-over-year. I think in a way, I think we've all been surprised by the fact that you've got strong market performance in general, but a continued, I would say, muted IPO environment. Now we are seeing a very good week. We have the largest IPO of the year happening today, and we had another great IPO yesterday. But I think that we still are seeing it coming trickling in like that, not necessarily a steady stream of IPOs coming to market in size. And so as we look out over the pipeline and certainly, the conversations we've had with clients, we do think that we'll continue to see a modest improvement year-over-year in the IPO environment, which, of course, last year was not a strong year. But as we -- a lot of the conversations we're having, particularly in the technology space, has been more geared towards the first half of 2025. Now that's changed, right? So if we can -- if there's some positive momentum that happens in the economy, positive things that are happening as we go through the fall, I think you could see the door opening up because more and more companies are getting ready to go out. But I'd still think a lot of them are thinking that they'll wait past the year and go in 2025.

Adena Friedman:

Well, I think, first of all, we're really excited about how the index options business is developing. And I think that the trading ecosystem as well as investors are recognizing the benefits of being able to hedge their index exposure through the options market. And obviously, we've seen that with other index franchises, but now with the NASDAQ 100, we're really building momentum and leveraging both futures, where futures volumes were up 25% year-over-year a quarter, as well as in terms of the options business. And now you have more ability to do that. So very excited about where that's going. It is something where we have it as a premium part of our options franchise because I think that the benefits that our clients are getting from the hedging capabilities are very strong. And so it kind of warrants the fees that we charge there. It is not having a -- that's not having an impact on demand. The demand is really strong and continuing to grow. Now we've done a lot of work. There's been a lot of leg work over the last several years to build up an understanding of the options, how to use hedging. We have a data capability that we give out, we provide to the clients to help them understand just do a lot of analytics on it to help them understand how to use the options the right way. And so the educational process we've had, frankly, over three years, I think, is really now paying off. And we expect to continue to grow. We will be looking at additional indexes, additional indexes that we want to bring on to our index options franchise. But even now, the other thing I would mention is that there's also a really pulled flywheel back to the index business. So the index team and the options team have been working hand-in-hand to make this work really well because there's benefit back to the institutional community with index and their ability then to have better hedging tools and their ability, therefore, to adopt our index products more successfully. So that's another part of the flywheel that's coming out of this.

Adena Friedman:

Sure. Thank you.

Craig Siegenthaler:

Thanks. Good morning, everyone.

Craig Siegenthaler:

So we had a question on Solovis. Back in May, Bloomberg reported that you're considering a sale of Solovis and while this could help you reach your financial leverage target faster and maybe the next deal. We were just curious, given the news because Solovis is strategic fits pretty well within your objective to provide software data and other services in the financial service ecosystem. And arguably, there's other businesses, maybe like the Nordic Exchange, which doesn't fit as well. So I was just wondering if you could comment on the potential for Nasdaq to sell existing businesses. Thank you.

Craig Siegenthaler:

Thank you, Adena. And just I had a follow-up on the response to the last question on index options and specifically the NASDAQ 100 Index. What is your desire and ability to expand NDX with zero DT options? And then also with rising retail engagement and there's a lot of interest around tech overall, so it fits perfectly in here. I was curious on your comment about launching other indexes. I'm just curious in terms of what you could do there.

Craig Siegenthaler:

Thank you.

Alex Kramm:

Yes. Hey, good morning, everyone. Just wanted to come back to what you called out on Calypso or Capital Markets with that early strategic renewal. Can you just explain what exactly happened there? Why? And is that something that we should expect more often? And then maybe related to that, on the impact side, looks like ARR up $25 million quarter-over-quarter in that segment. Can you dimensionalize how big that renewal specifically was? Also on the transactional side, you beat me pretty handily, so maybe more than $10 million. Is it all related to that? So just trying to understand how big some of these individual renewals could be. Thank you.

Sarah Youngwood:

Yes. The only thing I would add is, by definition, ARR impact of a renewal is not as much as a new client or an upsell. And then so if you were focused on why we had a good performance on ARR at Calypso or in Capital Markets deck, it was really because of the breadth of everything that has happened.

Adena Friedman:

Actually, we are seeing conversions of our clients to paying clients at the end of the free period. So that is still happening, Alex. But I think that there are other headwinds. So a few things to mention on IR services, and I would actually say this across Corporate Solutions. So the first thing is that we obviously gain new clients through IPOs, right? So that's one of the avenues for us to gain new clients, whether that's for our IR solutions or ESG solutions and our governance solutions. So that is definitely a funnel, a pipeline for us. Now some they then become paying clients on their base services over a period of two to four years, depending on the kind of the way that the IPO is structured. But we also can upsell clients in that period of time. So when you have a healthy IPO environment, you have new companies coming in, and then you're showing them the base services and you can upsell them on new services, that really does become a really nice flywheel right after the IPO. And then you have an additional opportunity when, as you mentioned, the IPO package rolls off. And those IPO packages are rolling off. And so we are still seeing that happen. But the flip side of it is when you have delistings, then you have paying clients who are no longer listed, and that obviously creates churn. And you have other clients who are continuing to take the services, but they are -- they're maybe taking fewer services because their IR budgets are being squeezed. And so that's becoming the contra, I'll call it, the contra flywheel of having more delistings. I would say when we look at the overall conversion rates, they are lower than what we've seen on an average basis. But they are -- but I think that's partly because of the fact that some of the companies are delisting. But those who are seeing this, they were seeing relatively normalized conversion rate.

Adena Friedman:

Sure.

Owen Lau:

Hi. Good morning. Thank you for taking my questions. So for AI, you have many initiatives going on. And when we look at Dynamic M-ELO, you highlighted a 20% increase in both volumes and improvement in fill rate. Could you please talk about how it could impact your market shares and financials over time and how difficult it is for your client -- for your competitor to launch similar products? Thanks.

Owen Lau:

Got it. And then for Financial Crime Management Technology, we heard that some other enterprise software companies had to lower the ARR guidance because of some uncertainty in the macro environment, but the momentum in your business seems to be quite robust. And you highlighted the new Tier 1 clients signed in July. Could you please remind us how Verafin could fare or grow in different macro environments? Is there any reason we should be worried about if the macro environment turn? Thanks.

Owen Lau:

Got it. Thanks a lot.

Adena Friedman:

Thank you. Well, as you heard this morning, Nasdaq continues to make progress on our three key priorities of integrate, innovate and accelerate. And through our complementary and integrated solutions, Nasdaq is delivering consistent growth, and the One Nasdaq strategy is accelerating our evolution as a trusted technology provider to the financial services industry. We look forward to updating you on our strategic progress in the quarters to come. And thank you all for joining and have a great day.

Operator:

Good day and thank you for standing by. Welcome to Nasdaq's First Quarter 2024 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

Ato Garrett:

Good morning, everyone, and thank you for joining us today to discuss Nasdaq's First Quarter 2024 Financial Results.

Today, my remarks will cover the following areas:

our outlook on the external environment as well as highlights from our first quarter financial and operational performance, including innovation milestones and key progress updates on our cross-sell efforts and synergies. I will then turn the call over to Sarah for a review of our financial results. I'll start with our outlook on current economic environment.

Sarah Youngwood:

Thank you, Adena. And good morning, everyone.

Kwun Sum Lau:

Could you please add more color on the cross-sell campaigns to achieve your $100 million target? What is the plan for the rest of this year? Does it mainly cover the cross-sell within Adenza or between Adenza and Verafin or across the whole company?

Adena Friedman:

Sure. Yes, sure. So you're right. We didn't sign any new clients, but we are working really well and implementing the clients we signed last year. And that's going quite well. And we have a lot -- a very, very good pipeline of companies either that we're in the middle of doing proofs of concepts for or we're in the middle of contracting. And so we do feel very good about our ability to continue to sign those clients as we proceed through the year. And it's interesting.

Operator:

And I show our next question comes from the line of Alexander Blostein from Goldman Sachs.

Adena Friedman:

Sure. Thanks, Alex. Actually I'll go -- I'll cover Calypso and AxiomSL together, so -- I mean each of them. But I think Sarah did a really nice job of laying out the growth for each of the products as well as combined. And what you're seeing is some of it is timing of renewals. So we did have a really good renewal quarter for Calypso and AxiomSL but particularly at Calypso with more of the on-prem deliveries, so our on-prem renewals, which you know is a good revenue driver for us in terms of how we recognize the license fees.

Alexander Blostein:

Great. And then my second question is just around the market tech business. You flagged that you signed agreement to upgrade a number of clients, I think you said 3, to a new matching engine next-gen platform. Can you help us maybe contextualize what that means in terms of revenues? Is it stronger revenue? Is there any sort of installation fee upfront, profitability of those platforms? If there's any -- any meat around the bone would be great.

Operator:

And I show our next question comes from the line of Dan Fannon from Jefferies.

Adena Friedman:

Sure. I'm going to hand the first part of the question over to Sarah. And I'll talk about Corporate Solutions.

Adena Friedman:

Yes. So that -- I think we started to talk about that towards the end of last year, but I think it's important to recognize, as Sarah said, it's a slow-moving train in terms of both the impact of the delisting environment but then also the impact of an improving IPO environment.

Daniel Fannon:

Great. That's helpful. And then I guess, just on the Index business, based upon quarter-to-date or year-to-date activity, is -- can you give us a sense of when the tiering might occur with the pricing with CME based on where things sit now?

Operator:

And I show our next question comes from the line of Michael Cho from JPMorgan.

Adena Friedman:

Yes. So I think that I would say, first of all, as we said before, we have about -- half the revenue increases tend to come from upsells. And half come from pricing changes and new sells -- sales. We don't try to break that out further than that. And I think that's generally the case. I don't know if it's precisely the case for this quarter, but that's the general way that we consider the revenue growth.

Sarah Youngwood:

Yes. So you heard me well that we would be well positioned within the 3% to 5% range there. And I did say a muted second quarter and the fourth being back ended.

Adena Friedman:

Yes. I just want to say we have some deliveries that we're delivering kind of partway through the year. That, obviously, has been turned on the license revenues, and so that can help. And then we feel that we have a good pipeline of growth and new clients so that we'll be able to deliver growth as we go through the year, but we feel very good about -- as you said, it's within the range, and I think you said strong within the range.

Operator:

And I show our next question comes from the line of Craig Siegenthaler from Bank of America.

Adena Friedman:

Yes. Thanks, Craig. Yes, you're right. So we have a great opportunity there, and we've been putting a lot of focus on that. It's been a good collaboration between our index team and the options team, so we -- what's nice is we have all of that within Nasdaq. So together, they're working on building a really good, robust trading ecosystem for the NDX options platform, as well as building on an institutional demand for our index products, which then drives interest in hedging and other things that would then drive interest in the index options.

Craig Siegenthaler:

And just for my follow-up, it's on the comparison between ARR and revenues given the growing focus you have on ARR. As you move into more subscription and reoccurring businesses, should we see more of a delta between these 2 metrics on a quarterly basis?

Benjamin Budish:

Just following up on that last question from Craig, is there anything you can share about sort of the upcoming pipeline in 2024 in terms of on-prem versus cloud implementations? Just I know you're kind of guiding and talking about the business on an ARR basis, but just as we think about our models, is there anything specific we can think about quarter by quarter?

Sarah Youngwood:

Yes, yes. Almost half.

Benjamin Budish:

Got it. Understood. And then for my follow-up, I just wanted to ask on the IPO win rate. Just Q1 looks a little bit lower than what you reported in the past, but is that sort of just a function of the quarter itself? And based on the pipeline for the rest of the year, do you have any expectations on should that sort of trend back upwards? What are your thoughts there?

Operator:

And I show our next question comes from the line of Simon Clinch from Redburn Atlantic.

Adena Friedman:

Yes. Actually we had -- just had a meeting about it across the management committee last week, where we talked about how we're going to approach enterprise sales and making sure that we have -- across Nasdaq, we have a good connective tissue to make sure that we can deliver for the enterprises. And we're doing a lot in blocking and tackling.

Adena Friedman:

Yes. So you're right. So we've given a stat at Investor Day that I think is worth mentioning. So about 70% of our revenue comes from the Nasdaq-100 franchise, but another 30% comes from other indices that we have in terms of innovative indexes around AI, cloud and cyber as well as momentum and other factor indices that we have around the world. So it actually is a pretty diversified platform.

Kyle Voigt:

Maybe just a couple of follow-ups. So first is a follow-up on Dan's earlier question on the Workflow and Insights business. It still sounds like the Analytics business is posting high single-digit solid growth. I think the Corporate Solutions, that likely imply is kind of flattish. And you noted the elongated sales cycles. I guess can you just talk about the average sales cycle for that business and kind of the lag time that you'd expect between when the IPO environment ramps and when you ultimately expect to see an acceleration in revenues in that Corporate Solutions business?

Sarah Youngwood:

Thanks, Kyle. So in terms of the capital prioritization, we're super consistent with what we said at the Investor Day. We were really glad to be able to pay down the term loan this quarter and to end the quarter at 4.1. We are totally committed to all of the time lines that we have given at Investor Day. So the 9 to 12 months ahead, you can consider that to be something that we will deliver.

Operator:

And I show our next question comes from the line of Brian Bedell from Deutsche Bank.

Adena Friedman:

Sure. Yes, we're not going to provide you specific kind of views of the revenue growth other than we say that it's mid-20s. And we feel good about the overall outlook there. I think that as -- with the copilot capability, the way that we're rolling out copilot would be the same that we're rolling out any new module that we provide to our small to medium bank clients. So when a small and medium bank client signs up for Verafin, they sign up for the platform. And we then introduce new modules into that platform -- or new capabilities into that platform through their contract period. And then at the end of the contract period, we walk through with them what's the return that we've offered them through that period and, therefore, what would be the price increase that we think is appropriate for the value that we're providing to them.

Michael Cyprys:

Just wanted to ask about the Adenza business now that it's been about 6 months or so since close. Just curious, in conversations with clients of Calypso and Axiom, where you see the strongest moat across their business and capabilities? And where is there room for you to improve the moat as you kind of look out over the next couple of years?

Adena Friedman:

Yes. So well, first of all, we are in a kind of what I would call an upgrade cycle for Calypso. So we have a new version that we're rolling out. And we're working to make sure we get all of our clients onto that version this year. So that's driving renewal activity.

Adena Friedman:

Great. Well, thank you very much.

Operator:

Good day and thank you for standing by. Welcome to Nasdaq Fourth Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker, Ato Garrett, SVP, Investor Relations. Please go ahead.

Operator:

Ladies and gentlemen, please continue to hold. Your conference call will resume momentarily. Please remain on the line. Your conference call will resume shortly. Ladies and gentlemen, please continue to hold. Your conference call will resume shortly. Please remain on the line. Your conference call will resume shortly.

Sarah Youngwood:

Thank you, Adena, and good morning everyone. I am thrilled to be here for my first earnings call at Nasdaq. I could not be more excited to join the firm at such a transformational time and I look forward to seeing many of you at Investor Day. Now, I will turn to our financial results. My commentary will be focused on non-GAAP results and year-on-year growth rate will be provided on an organic basis. Similarly, operating margins will be discussed ex-Adenza for comparability purposes. I will discuss Adenza's [generic] (ph) results at the end of the fintech section. Before we move to the quarter, I would like to give you the highlights for the full year 2023 starting on Slide 12 of the earnings presentation. In an uncertain environment, we delivered solid financial performance and strong cash flow generation. Revenue of $3.9 billion was up 5%, with solutions revenue of $2.9 billion, an increase of 7%. Non-GAAP expense was $1.8 billion, up 5%, in line with guidance for a 52% operating margin, which was flat versus the prior year. This resulted in diluted EPS of $2.82, reflecting organic growth of 6%. We had $1.6 billion of free cash flow ex-Adenza, a growth rate of 11%. Moving on to the fourth quarter on Slide 13. We reported revenue of $1.1 billion, up 7%, with Solutions revenue of $860 million, an increase of 9%. Non-GAAP expense was $504 million, up 2%, and with an operating margin of 52%, up 3 percentage points. Overall, this resulted in diluted EPS of $0.72, reflecting organic growth of 11%. Turning to Slide 14. ARR totaled $2.6 billion, up 6% organically. The annualized SaaS revenue totaled $910 million, representing organic growth of 12%. Excluding Adenza, SaaS was 38% of ARR, an improvement of 2 percentage points. Including Adenza, that number is 35%, which will improve as the cloud portion of their revenue increases. As a reminder, we only consider the cloud portion of their revenue to be SaaS. Let's review division results for the quarter starting on Slide 15. For capital access platforms, revenue of $461 million increased 10%, driven by excellent performance in Index. In Data and Listing Services, we saw 3% growth. In data, we have seen a continued increase in proprietary data revenues, driven largely by higher international demand. In listings, the positive impact of pricing was partially offset by the combined impact of de-listings, a muted IPO environment and the rollup of prior year's initial listings revenue. Workflow and Insights revenue increased 3%. Analytics delivered high single digit growth, reflecting our ability to monetize the value of our data to the buy side with new business and increased pricing across traditional and alternative asset managers. The strength in analytics was partially offset by a weaker capital raising markets and the impact of elongated sales cycle in corporate solutions. Index revenue increased 26% and overall AUM grew by 34%. Over the last 12 months, our net inflows were $31 billion, $10 billion of which occurred during the fourth quarter. Licensing revenues for futures contracts linked to the Nasdaq 100 Index increased as well, driven by higher capture partially offset by a decline in trading volumes. As a reminder, our capture increases once we cross a volume threshold and then resets at the beginning of each year. While smaller in size, Index revenue also benefited from index data revenue growth. ARR for capital access platforms was $1.2 billion, up 3%. ARR growth was largely driven by analytics and to a lesser extent, data and listings. The muted IPO environment impacted ARR growth. However, we are cautiously optimistic that we could see a recovery in IPOs combined with more normalized sales cycles as we progress through 2024. As a reminder, substantially all our Index revenue is excluded from ARR. The division's operating margin was 54% for the quarter, an increase of 4 percentage points due to higher revenues. For the full year, it was 55%, up roughly by 50 basis points. The increase was driven by higher revenues, partially offset by inflation, revenue-related expense, and investments in particular across data and Index. Moving to financial technology on Slide 16. The division delivered revenue of $399 million for the quarter, up 8%. Regulatory technology grew 17% with Verafin at 25%. Verafin added 100 new clients this quarter, including our Tier -- third Tier 1 bank. While we are excited about these additions, as we have previously discussed, the contracting and implementation with these larger, more complex institutions is longer. We will start recognizing subscription revenue in 2024 but we believe that the effect will only accelerate as we expand relationships with these clients. The strong performance of Verafin along with 6% growth in Surveillance led to the 17% growth of regulatory technology. For Surveillance, the fourth quarter growth was impacted by the timing of bookings in 2023 versus 2022, but fundamentals remained strong for the year with six new clients in the fourth quarter and 27 for the full year. We also made inroads with the Tier 3 broker client cohort, which reflects progress beyond our leadership position with large banks. Cloud for trade Surveillance is now above 50% deployment, which is an important driver of client stickiness through the speed and efficiency it enables us to provide. Moving on to Capital Markets Technology, we saw 3% growth driven by data center connectivity demand. We had new market tech contract signings in Latin America and with one of our US Tier 1 clients. We expect these contracts to start to accrue in 2024. As Adena mentioned, we continue to increase our market technology presence in Latin America and to have a leading role in the modernization of markets in the region. ARR for FinTech totaled $1.35 billion, an increase of 10% due to continued customer wins at Verafin as well as growth in Trade Management Services and Market Technology. The division's operating margin in the fourth quarter was 40%, up 4 percentage points. The organic margin expansion reflects solid top line growth and expense control with an overall increase in revenue-related costs, offset by efficiencies and lower professional fees. We are progressing on our journey to improve the efficiencies in Market Technology while continuing to support the growth of Verafin and Surveillance. For the full year, the operating margin was 40%, up 5 percentage points with a story which mirrors that of the quarter, including strong operating leverage and investments. Before closing on FinTech, a few additional words on Adenza. For November and December, Adenza contributed [$149] (ph) million in revenue, $458 million of ARR of which $98 million was in SaaS, and $35 million in non-GAAP operating expense. A strong finish to the year drove a 77% operating margin for our two month ownership. On a full year basis, Adenza had an adjusted EBITDA margin of 59%, ahead of our initial 58% outlook for the year. Let me now talk about Adenza's full year revenue and ARR. Revenue was $583 million in 2023, up 14%. ARR of $458 million with 16%, excluding a significant bankruptcy that occurred during the year or 14% net of it. Both metrics are on a constant currency basis. We had nearly 50% of new ACV coming from cloud this year. The strong cloud take-up by our clients supports our growth and efficiencies. Revenue growth benefited from a large portion of ARR up for renewal in the quarter and in the year. Going forward, we expect Adenza's revenue growth to be in the low to mid-teens, consistent with the medium to long term outlook we provided when we announced the acquisition. The timing of contracts being up for renewal and the mix of revenue between cloud and on-premise delivery will have an impact on revenue growth in any given quarter and year. This is why we are focused on ARR growth, which is not as impacted by annual renewable and delivery method. We'll provide more details on the revenue dynamics of our FinTech division at Investor Day. And wrapping up our divisional overview with Market Services. Net revenue was $247 million for the quarter, roughly flat with growth in US cash equities offset by decreases in US options. US cash equities growth was driven by higher capture, partially offset by lower share. In a very competitive US options environment, we are defending our strong market share lead and our attractive capture. Meanwhile, in Europe, tepid exchange volumes were positively offset by a $7 million nonrecurring payment and by the benefits of diversification between fixed income and equity. The investments we have made in leveraging our technology and data to provide our European market clients with transparency helps them to generate [indiscernible]. This has enabled us to help our clients improve their execution quality and has been key to our ability to reclaim our 72% market share, a 2 percentage point increase. The division's operating margin was 57% in the fourth quarter 2023 compared to 60% in the prior year quarter as a result of higher compensation costs as we continue to invest in our people and higher technology costs due to ongoing investments related to both capacity and migrating US market to the cloud. The full year operating margin for the division totaled 59% with the same drivers as recorded history. Turning to Slide 19. This quarter's non-GAAP operating expense was $504 million, an organic increase of $8 million or 2% versus our organic revenue growth of 7%. I went through the story in the businesses, and it reflects good expense discipline as well as the timing of marketing and professional fees. Overall, this reflects a 52% operating margin, up 3 percentage points. For the full year, our non-GAAP operating expense was $1.83 billion, in line with guidance. We were up 5% consistent with revenue growth for a flat operating margin at 52%. The increase is due to investments in key growth areas, inflation and higher revenue-related expense. We also achieved efficiencies during the year as we continue to optimize our location footprint and bring the divisions together as part of our divisional realignment. If you include Adenza for the full year, operating expense totaled $2.05 billion. Now on to guidance. We are initiating 2024 non-GAAP operating expense guidance of $2.105 billion to $2.185 billion, the midpoint of which reflects pro forma growth of 5%. This includes a full year of Adenza and the in-year expense benefit of net synergies. On an organic basis, excluding Adenza, Nasdaq's expense growth will be just under 4.5%. We will spend more time on synergies at Investor Day, but we reiterate the net $80 million synergy target by the end of 2025 and $80 million cost to achieve are set forth in the restructuring program we just initiated. Additionally, we are guiding the full year tax rate of 24.5% to 26.5% on a non-GAAP basis, slightly higher than 2023, due to lower expected tax benefit on equity awards. Turning to Slide 20. Strong free cash flow continues to be the hallmark of Nasdaq. For the year, we had $1.6 billion of free cash flow ex-Adenza, and Adenza had $306 million in unlevered pretax free cash flow. Our gross leverage ratio was expected to be at 4.7 times at the time of deal close but we are pleased to share that at year-end, we are at 4.3 times despite 0.1 times headwind from euro strength. Let's go through the details on the chart. At the end of the third quarter, our adjusted leverage ratio was 2.4 times. We added the leverage to acquire Adenza. At the beginning of December, we posted share repurchases and repaid $260 million of term loans. The ratio benefited from the incremental EBITDA from Adenza's full year and net tax growth. We expect to continue deleveraging in the first quarter of 2024. And to wrap up on free cash flow utilization, we have repurchased $269 million of our common stock this year, including $110 million in the fourth quarter. And we paid a quarterly dividend of $0.22 per share for a 35% annualized payout ratio. In closing today, this quarter and this year's performance shows Nasdaq's ability to deliver consistent growth, margin and free cash flow in a range of environments. We are committed to disciplined execution and continued innovation. The investment we have made in our resilience, our technology and our data over the years, coupled with our reach and track record, position us for sustainable growth as we power our client's success. Thank you for your time, and I will turn it back to the operator for Q&A.

Owen Lau:

Hi, good morning. Thank you for taking my question. I know Sarah mentioned that as you may talk about that during Investor Day, but could you please add more color on the initial progress of integrating Adenza and achieving revenue and cost synergies? Thanks.

Owen Lau:

Got it. So on Verafin, you published a report, you talked about the amount of fraud and also potential opportunity. Can you talk about the strategy for you in 2024 for Verafin? Which area do you think you can win more Tier 1 and Tier 2 clients? Is it more on the payment side or in other areas? Thanks a lot.

Operator:

Thank you. And I show our next question comes from the line of Michael Cho from JPMorgan. Please go ahead.

Adena Friedman:

Sure. Yeah. I would just say on an ARR growth perspective, we did provide you kind of that mid-teens view of ARR growth and we continue to see the business dynamics supporting that. And so we would expect that, that medium-term outlook for Adenza will continue to support that mid-teens growth. I think that as we know, revenue growth is -- also is impacted by timing of bookings, timing of renewals there and whether or not it's on-prem or cloud. So we're going to actually unpack that at Investor Day to help you understand how do you turn ARR into revenue, how do revenue dynamics change and recognizing there would be more quarterly shift in revenues. But the general view is that, that ARR growth is definitely the fundamental thing to look at in terms of how you evaluate the growth and progress of Adenza or Calypso and Axiom. And at the same time, we do want you to understand how the revenue dynamics work. The more we sign cloud, the more the contracts become ratable over the life of the contract. And whereas in on-prem deals, we recognize half the license fees upfront upon signing. So there's a lot to unpack there. But we feel great about the overall demand drivers. The other thing to think about with Axiom and Calypso is that timing of renewals also can have an impact in revenue recognition. But again, we're seeing really strong demand cycles for both Axiom and Calypso, so we feel very good about that, whereas timing of revenue might be a little different from one to another just based on when the renewal cycles hit in that kind of given year. So that's definitely -- again, we'll go through it. I would say the foundation is very strong and remains consistent with what we expected.

Dan Fannon:

Thanks. Good morning. Was hoping to expand upon that a little bit and maybe incorporate pricing in terms of what pricing contributed to revenue growth and/or ARR growth in 2023 and how you think about that for the Adenza business prospectively?

Dan Fannon:

Understood. And then just as a follow-up, based on, I think, some of the factors that were mentioned for listings, revenue in fourth quarter, as you think about the first half of this year and/or the full year with the roll-off of initial fees from prior years plus a hopeful recovery and new listings, how should we think about the revenue dynamics here in 2024?

Operator:

Thank you. And I show our next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Adena Friedman:

Sure. So all of the solutions within Workflow & Insights are SaaS solutions. So how you end the year really determines a lot about the following year. And so we definitely saw a more challenging environment with corporates last year. The listing environment was more muted, but also they were just not as focused on investing across IR in a more challenging market backdrop. That improved in the fourth quarter. And so we did start to have a more, I would say, more normalized environment for conversations and signings of corporate clients for our IR solutions in the fourth quarter, but it was against the backdrop of a harder year overall. So it will take time for that improved environment to actually flow through and show up in the actual SaaS revenues because we obviously have to continue to see that and it will kind of build on itself. But I would expect that 2024 will continue to kind of have some overhang from the weaker environment in ‘23, even with a more normalized sales environment. With analytics, it's actually what's interesting, our overall analytics growth was quite strong in the fourth quarter at 9%. And I think that, that really reflects demand for our data across the buy side and the analytic solutions we have that serve the buy side. But our asset owner solutions, this is a very specific software capability that we offer to endowments and pensions and others. That actually did have an uptick in demand and signing in the fourth quarter, but it was an overall difficult year. So that again, I think will create a headwind as we go through 2024 with the hope that we can start to show some pick-up as we go through the year.

Adena Friedman:

I would say we will provide at least more color on that in Investor Day. But if we think about it, I think, Sarah, it's like 14% of overall revenue?

Adena Friedman:

And then in ARR, it's 21%?

Adena Friedman:

Yeah, 21% of ARR is cloud. So we have a lot of runway here. So as we renew clients, moving them into the cloud modules, as we sign new clients, sign them for new modules. But recognizing that we can sign a client just on a new module in cloud, like it doesn't have to be that they're signing for Calypso and they're adding new functionality, just that new functionality we can deliver in cloud. That's how flexible the platform is. They don't have to kind of redo the whole platform implementation on cloud. But that also means that as we work with clients on renewals and changes, is they're going to have different timelines for how they want to bring that cloud capabilities in. Some banks are marching very fast into cloud and they have like actually top down mandates to move to cloud and that can obviously be a huge catalyst for us. But other banks are marching quite slowly towards it. So we want to be flexible. We expect this to be, as we said, very much a multi-year transition, going from 21% of ARR and growing and growing. But I have to say, it will be a slow moving train. In terms of the economics, it is both an opportunity for us to be a true managed service provider, which gives us more revenue opportunity, and also provide it with a very nice margin for both them and us. So that's an opportunity for uplift, but again, a slow moving train. So we'll want to make sure that we give you a little more color on that at Investor Day.

Chris Allen:

Yeah, good morning everyone. I was wondering if you could help us think about the contract value from client wins at Adenza. Maybe any color just in terms of how much a new client -- [you had six this quarter would] (ph) translate from a new contract perspective and we expand relationships with existing clients, we're talking about a 10% increase, 15% increase? Any color that would be helpful.

Chris Allen:

That was it for me. Thanks.

Adena Friedman:

Thank you.

Patrick Moley:

Yeah, good morning. Thanks for taking my question. I just had one on the retention ratios for Adenza. It looked like, for the full year, they -- on both the gross and net basis, came in a little bit lower than what you were expecting when you initially announced the deal, even after you include the impact of those bankruptcies. So just was hoping maybe you could provide some more color on what you think led to that underperformance there? And then any color on the retention ratios or what your targeted retention ratios would be going forward. Thanks.

Sarah Youngwood:

Yeah, the retention on a gross basis was actually flat at 97% if you exclude that bankruptcy. So when we look at it in terms of like long-term trends, we feel that it's very solid.

Patrick Moley:

Okay, great. That's it for me.

Patrick Moley:

Thank you.

Michael Cyprys:

Hi, good morning. Thanks for taking the question. I just wanted to ask on capital allocation, how you're thinking about allocating capital now that the Adenza deal has closed? How you're thinking about the pace of debt pay down as well as buybacks? I thought I heard you mention that you paused on buybacks. Is that pause still in place and what would lead you to reinstate buybacks?

Adena Friedman:

You know, one thing we're pretty good at is that, that just leaving 2023, as Sarah mentioned, we're at 4.3 times leverage. So that's ahead of what we had anticipated at the closing of the deal. And so that's actually kind of both the strength of the business, as well as some very specific tactical decisions we made to pay down the term loan as we're kind of getting started to kind of launch into 2024 with a very solid plan on deleveraging. But also the focus though will be on that balanced approach over time.

Adena Friedman:

Yeah, go ahead.

Adena Friedman:

Sure, yeah. So I would say that, first of all, we've been really focused on making sure that we are being as efficient as possible across the business, just on a go -- on a run rate basis. That we are also though continuing to make the investments in driving our products forward, our growth forward, but also automation, on bringing more automation into the company. And at the same time, beginning the synergy achievement on the Adenza deal. And the midpoint really reflects all of that. What would drive the expenses above that would be higher growth. So if we're able to grow faster and we're able to grow more, there might be some revenue related expenses that come in in terms of just being able to achieve that revenue. But I think that it has also more to do with can we continue to actually accelerate some of our investments if we're seeing higher revenue growth throughout the year. And that's why we always give you a range of kind of the mid to long term outlook on our solutions business growth, revenue growth, and expense growth so that you can kind of understand how we calibrate it. But we do feel like it's been a good combination at the midpoint of expense discipline, Adenza synergies, but also targeted investments in our business.

Andrew Bond:

Hey, good morning. Could you update us on any new plans or strategies Nasdaq is exploring in digital assets since you've aborted custody offering? Obvious tailwinds following the spot ETF approvals and a lot of new large institutional players that you're familiar with becoming more active in the space. So how's Nasdaq positioning itself now?

Andrew Bond:

Thanks, Adena.

Alexander Blostein:

Hey, good morning. Thanks for squeezing me here. So just a quick follow up again on Adenza. Over the last couple of years, it sounded like they went through a pretty meaningful improvement in their technology stack, and there's probably a bit of CapEx around it. So as you move forward, do you think they're largely done? Are there still kind of things that might be on a heavier lifting side that needs to get implemented that they're not part of Nasdaq? And maybe just talk to your overall CapEx expectations for 2024.

Sarah Youngwood:

No, we don't have, like, any particular trends, so you're not going to see, like, a particular acceleration or something of note. We're continuing to invest in the business, and we'll come back and give you a lot of, like, color at Investor Day on the type of returns and the type of breakdowns of our investments. And we have very much a cash on cash view as to what it gives us and in addition to, of course, the investments that are foundational in the business.

Brian Bedell:

Great. Thanks very much for taking my questions. Most of them have been asked and answered. But a couple more. One just on the Verafin. I think, Sarah, you mentioned if I heard correctly, Verafin growth in the quarter year-over-year of 25% against the legacy regulatory tech segment of 17%. And then I missed something you said about the surveillance part of that. So I just wanted to clarify, was that 25% at Verafin and there was some offset at the surveillance business? And then as you look at that legacy business going forward, do you see Verafin as sort of a core 20%-ish type of program?

Adena Friedman:

For surveillance.

Adena Friedman:

I think, as you know, Brian -- as you know, Brian, we have a kind of an 18% to 23% kind of expectation across CSD. Now, as we move to reg tech and we integrate that with AxiomSL, we're going to be providing kind of a view and I think it's -- I always look at it as 10% to 14% across fintech, all told. And that will incorporate Verafin and surveillance along with market tech and the Adenza products.

Sarah Youngwood:

So we continue to focus on our operating margin and to focus on having operating leverage as we invest on a GAAP basis, but we will always give you the details on the ARR basis, which is really the better economic view of what we are doing.

Operator:

Thank you. That concludes our Q&A session for today. I would now like to turn the conference back to Adena Friedman, Chair and CEO, for closing remarks.

Operator:

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

Operator:

Good morning, and welcome to Nasdaq Third Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker, Ato Garrett, Senior Vice President and Investor Relations Officer. Please go ahead.

Adena Friedman:

Thank you, Ato, and good morning, everyone. Thank you for joining us for Nasdaq's third quarter earnings call. Before I begin, I would like to offer brief comment on the situation in the Middle East. We were horrified by the acts of terrorist violence that occurred in Israel last week, and we were deeply saddened by the subsequent loss of innocent lives in Israel, Gaza and the wider region. Our focus has been on supporting our people and our clients with connections in the region. We will continue to monitor the situation closely and stay engaged with them throughout this emerging crisis. Turning now to my remarks about the quarter. I will start by covering Nasdaq's performance and how our strategy is unfolding in the context of the current operating environment, as well as provide key business highlights. I will then turn the call over to Ann for a detailed review of our financial results. I'm pleased to share that Nasdaq continues to make solid progress in our strategic objectives to capitalize on the key megatrends shaping the financial system. Nasdaq continues to execute against the strategic vision to become the trusted fabric of the global financial system, delivering broad-based growth across our businesses, including 6% overall net revenue growth and 8% year-over-year organic revenue growth in our Solutions Businesses. I'm proud of the team's efforts to continue to serve our clients and I'm pleased to see our revenue growth improving in the third quarter, aided by strong performance in our Capital Access Platforms division, particularly in our Index business. In addition, our Anti-Financial Crime division delivered -- continued to deliver strong results with solid growth in our Surveillance business and Verafin continuing to demonstrate strong new customer growth, as well as an expansion contract with the Tier 2 clients. With respect to the market backdrop, during the quarter, we saw variety of cross currents, including increasing market volatility, fluctuating equities markets and rising long-term interest rates. Nevertheless, we experienced modestly improving momentum in our Listings business amid a gradual re-emergence of the U.S. IPO activity with 35 operating companies choosing to list in Nasdaq during the quarter. Based on our client conversations and our growing IPO pipeline, we remain cautiously optimistic on the outlook for the upcoming year. Across the company, as we've discussed before, Nasdaq is well-positioned to thrive by capitalizing on three key megatrends that are shaping the financial system

Adena Friedman:

Thank you, Ann. And before we turn to Q&A, I would like to take a moment to acknowledge Ann Dennison. After eight years at Nasdaq, Ann will be stepping down from her role as CFO at the end of this year. Ann has been a guiding voice to the market on our financial performance, a leader in enhancing our Investor Relations and ESG reporting efforts, and as steward to our company's transformation, most recently, through our announced acquisition of Adenza. In conjunction with Ann's upcoming departure from Nasdaq, we're pleased to welcome Sarah Youngwood as our next EVP and CFO. Sarah will join us from UBS Group, where she served as CFO and a Group Executive Board member. Sarah will officially join us on December 1, and will work closely with Ann and the team to ensure a seamless transition. I want to thank Ann personally for her many contributions to Nasdaq. She has been a phenomenal partner to me and the company, and we wish her the very best. And now, I'll turn the call back over to the operator for Q&A.

Michael Cho:

Hi. Good morning. Thanks for taking my question. I just wanted to touch on Adenza for my first question. I think, Adena, you talked through the update and I think you mentioned the ARR. But can you also just -- hoping you can talk about for both Axiom and Calypso, the year-to-date revenue growth trends for both of the segments? And then related to that, I was hoping you can touch on kind of the revenue opportunity or revenue growth opportunity as you think about clients going from on-prem to the cloud solution for Adenza. Thanks.

Michael Cho:

Okay. No. Great. Thanks for all the color there. If I could just switch gears a little bit for my second question. I just want to touch on Verafin. I mean, it seems like revenue growth is accelerating there. I'm just curious the types of conversations that Nasdaq’s happened with clients there. I mean, do you get the sense that the SMB clients are tightening budgets or expanding budgets for these types of solutions in Verafin?

Michael Cho:

Great. Thank you so much, Adena.

Kyle Voigt:

Hi. Good morning. So now that you have line of sight to deal closure and you have a bit more clarity on the interest rate environment and where your stock is trading, just wanted to revisit the topic of capital allocation after the deal closure. How should we think about capital priorities, specifically on deleveraging versus buyback, post deal closure? And is there any framework you could provide for maybe level of buybacks anticipated for a specific period post deal closure that could kind of help frame the mix there?

Ann Dennison:

Sure. Hi, Kyle. Absolutely. So, as we think about post deal closure, obviously, we will evaluate the market conditions from a share repurchase perspective. But in terms of our capital priorities, first and foremost, we are going to continue to invest to drive the business organically. But after that, our priority is to deleverage and to meet the deleveraging targets that we set out when we announced the Adenza acquisition. And then beyond that, we -- our next priority will be to increase our dividends to get our payout ratio up to the 35% to 38% ratio over the next three to five years. And then beyond that, what's left over, we're going to use to offset the dilution, both from our employee share issuances and then also from the issuance related to the Adenza deal. And our cash flows remain very strong. I mentioned we had $1.6 billion in free cash flow on a trailing 12-month basis. So we feel really well positioned to do all of those things in the priority order that I listed.

Adena Friedman:

Yeah. So we don't, as you know, provide anything specific to a year. But our medium-term outlook of low to mid-teens revenue growth across the Adenza business, and that would be ARR plus the customer delivery revenue. We continue to have confidence in our ability to achieve that once Adenza becomes part of Nasdaq. I think, as I mentioned, there continues to be a really nice strong demand generally for the solutions. And then also, I think that they've really been able to show the ability to upsell the clients. So the fact they're signing more new clients this year than last year just gives us more upsell capability over time. And the environment is -- these are kind of need to have solutions from banks. I think that, particularly as we're managing through an increasingly complex regulatory environment, there’s more risk in the system than there has been in the past, pretty risk and other things that – and also across currents across asset classes, they really are driving demand for the solution. So over the medium-term outlook, our medium-term outlook remains the same at that low to mid-teens overall revenue growth.

Operator:

Thank you. And I show our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Adena Friedman:

Sure. Yeah. So I think that there is a difference between what Google is doing and what we're doing. So Google is partnering with a specific bank and providing AI algorithms to support that internal bank's -- essentially think of it as like an internal build but leveraging Google's infrastructure. So the bank is bringing to that relationship very specific algorithms and patterns of that they're looking for, what we call agents. And so that really is kind of what I would say, more of a facilitated on -- a facilitated bespoke build, but with the Google -- underpinning the Google infrastructure and you're right, in the benefit of their AI capabilities. What we do is a purpose built complete software solution that is purpose built for the needs of fraud and AML detection, investigation and reporting. And so we provide an end-to-end solution. The fact that we have transaction data across 2,500 banks, and we also -- we are a cloud-based solutions. So we're able to bring all of that transaction data together. And we leverage AWS. So AWS is our cloud provider. We're leveraging their AI capabilities and their AI engines, including the bedrock solution that we're using for the Gen AI capabilities that we're adding. I think that it allows us to benefit from another great large technology company. But we have built a purpose built solution that is scaled across 2,500 banks. And so it makes it to the bank doesn't have to do their own bespoke build. We are benefiting from the knowledge across all of these banks and the experience in what they're seeing to continue to tune our engines and to build out the solutions. And the last thing I would say is, we do weekly releases. And so we're always staying on touch with the banks as to what they're seeing and bringing those agents into the system that then benefits all of our clients, not just one client. So we're really -- we do think it's a different -- it's certainly a different sale than it would be to look at -- as compared to what Google is doing with that one bank. The last thing I would say is, we are winning share and we're winning in terms of taking out internal builds because of the benefit of the consortium data that we have and the really nice workflow solution and we're also taking out competitors. So we're really pleased with the momentum.

Adena Friedman:

Yeah. Actually, we do. We connect with FedNow. We connect with the clearing house. So we are rolling out a real-time payment solution. And we've been in contact with the Fed in the context of their rollout. We've been working with the big banks, the core banking system providers because they also -- they provide core infrastructure to the banks to be able to integrate FedNow and other real-time payment solution. So we've been working with them to make sure we're integrated into their solutions and make it easy for the banks to onboard us for fraud detection. So it's definitely -- that is actually a specific growth area that we're engaged with our SMB banks, our small to medium banks on as we speak.

Operator:

Thank you. And I show our next question comes from the line of Craig Siegenthaler from Bank of America. Please go ahead.

Adena Friedman:

Yeah. It's a great question, Craig. It has impacted it. So I think I would say what -- how would you characterize '22 and '23? It's been -- we're coming off of a very significant environment in, what I would call a free money environment, coming into an environment that with rising interest rates, which creates unpredictability of the future, an economy that seems to have a lot of resilience, but is still slowing down and a lot of unpredictability that investors are struggling with, because at the end of the day, they have to underwrite the future earnings of a company, and if they can't understand the overall economic environment it's hard to underwrite that risk. So I would say '23 started with a pretty deep frost (ph). We started to see some light green shoots, as Nelson, likes to say, as we went through the spring or as the interest rate environment became a little bit more known. But the fact is that it kind of fits and starts. So we'll have a window open and we obviously had some really interesting companies come out in September. And then you're starting to see the macro environment change again, the geopolitical environment become much more unstable. And that, of course, is making investors pause again on understanding how to take that risk. So we do actually have a really good pipeline of companies. We're really, really proud of the team. I mean, our team is just awesome. And so they're really working hard to work with clients. But the majority of the conversations we're having with clients, not all of them, but the majority are about the first half of next year much more so than the second -- than the fourth quarter of this year.

Adena Friedman:

Yeah. Again, a good question to understand kind of the dynamics in the listings business. So I don't know the exact percentage of revenue that's coming from new listings. Because just to remind everyone, we have our annual listing fees and then we have our initial listing fees. Our initial listing fees are amortized over a two to four-year period -- two to six-year period, I think, depending on the type of listing it is, and how big it is. So you're right that there is some initial listing revenue that's rolling off in -- from the 2021 listings, not all, but some as that amortization flows through, and that will come off in '24. The answer is around 10% of our overall listing revenues, so -- which is and the listing revenue is somewhere in the range of...

Adena Friedman:

Yeah, $300 million. So it's -- that revenue will have some fluctuation as you go into 2024. And so you've got to look at the combination of the new listings and as well as from an annual listing fee revenue perspective, the de-listings that we're experiencing, we do provide you that data every quarter, as we think about what the billing cycle is going to look like in January for the annual fees. So those are the big factors to consider in '24.

Adena Friedman:

Sure.

Owen Lau:

Good morning. Thank you for taking my question. So your organic growth of the Solution Businesses accelerated and come back to your medium to long-term outlook. You talked about the strength in Index and anti-fin crime business. I'm just wondering, if the equity market, Verafin and other business remain stable in the near term and IPO market remain like muted (ph), how should investors think about your organic growth over the next few quarters excluding Adenza? Thank you.

Owen Lau:

Got it. That's helpful. And a quick one on the sales cycle on Adenza. I mean, we have been talking about the elongated sales cycle. I'm just wondering, is there any like sales cycle impact on Adenza? I mean, you talked about high-teens growth, I think, for Adenza in the third quarter. I'm just wondering, if there's no, like, elongated sales cycle, the budget gets hike (ph) in release or things like that, how high it could have gone? Thanks.

Owen Lau:

Got it. Thank you very much.

Operator:

Thank you. And I show our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Adena Friedman:

Great. Well, generally, we do see the -- I think it's somewhere in the range like 40% of bookings occurs in the fourth quarter for our Anti-Financial Crime business and we would say that, that's generally what we're seeing. And so we -- now the difference, though is that if we, when we do upsell to the largest banks, there's a little bit of that's not necessarily seasonal, and we don't have as much experience there. So we're not seeing -- that's not something that every single fourth quarter, we're going to see something different. But certainly with the small and medium banks, which is the core business of the anti-fin crime business so far, the fourth quarter is a big sales quarter. And that's actually the case for Adenza as well, kind of 40% to 45% of bookings tend to come in the fourth quarter. In terms of just the general growth characteristics of the anti-fin crime business, we're very pleased with the progress. We continue to see good opportunity to continue to grow in that 18% to 23% growth rate that we've been experiencing.

Adena Friedman:

I think that on the four proposals that the SEC has proposed, I would expect that we'll see something come out to be -- to start to get implemented as we go through 2024. We don't know what that's going to look like yet. I think they've had a lot of comments on the proposals. And I think that in general, the two that seem very -- that feel a little bit more certain are the tick sizes and the 605. Those two proposals feel quite certain. I think that on the best decks and the order competition rule, those are ones that have engendered a lot more debate within the industry. So we don’t know exactly how that’s going to turn out.

Operator:

Thank you. And I show our next question comes from the line of Simon Clinch from Redburn Atlantic. Please go ahead.

Adena Friedman:

Great. Thanks. Well, I can say that Tal and the entire team has been extremely focused on building out a very robust integration plan. We've been engaged with the Adenza team now for several months, and we're having regular engagement with them to develop those plans and make sure that we feel really good about how we're going to kick off the integration on day one. And we built a lot more granularity to the plan and we still obviously don't own them. So once we own them and we're able to meet more people and really understand the operations, we'll be able to flesh that out into a great amount of detail. But we're extremely committed to achieving the integration, our expectations that we delivered to you all at the announcement. We also definitely see benefit in the cloud infrastructure that we have. That's actually part of our integration. We have not done a lot of detailed work yet on that because we don't own them. We have a lot of, in my opinion, proprietary IP when it comes to our cloud capabilities and our cloud team. So we want to make sure that we own them before we go into really, really deep dives on the technical infrastructure. But our relationship with AWS, we think will be a benefit. I think the expertise that we have in creating very efficient cloud infrastructure, particularly from a data ingress/egress (ph) perspective, I think it's going to be very helpful. And so we look forward to really working with them to continue to develop this cloud capabilities. I have a great view of -- in five years, like how do we want these services to be delivered, how much do we want to have a single-tenant, multi-tenant capabilities, what kind of overall or overarching environment do we want to create for our clients so they see us as a strategic partner across risk management, reg tech, anti-fin crime, capital markets? There's a lot that we can do there, but we have to get in there, we have to own them. We have to kind of get really engage with them so that we can give you a better answer to that in the coming months and quarters.

Adena Friedman:

Well, I think one of the things we've always said is that we like to make sure that we have a good balance between share and capture. And one of the things we've been focused on is, what is our share of available liquidity? And Ann mentioned before, we've been able to manage to a pretty stable share of available liquidity and what do we mean by that? In times when volatility goes down, there tends to be more trading that occurs off exchange. So the off-exchange trading percentage tends to go up. So then we look at it and say, well, what can we actually achieve and bring into the exchange and how are we competing with other exchanges? And there, we look at what we call available liquidity. And I think we've maintained a pretty stable share of about 30%. And then within that, we then said, hey, what kind of volumes are we trying to attract into our solution? We want to attract volumes that are additive to overall volumes in the platform. So one, certain orders that come into the market feed other orders, and we're going to work hard to get those orders in. The other thing is we provide a lot of really interesting, as we mentioned, specialized order types that also allow us to charge different rates for these services because they're specialized execution capabilities, and that allows us to have a higher capture. But the one thing we don't do is just chase share that just is fleeting, that if you chase that share, you can really have a significant negative impact on capture, and frankly, not get share that's additive to the NBBO (ph) not get share that brings other on their volume in. So we're very, very intentional about that, and that's why you're seeing some capture go up because more of the volumes moving towards our specialized capabilities, and we're not doing what others of our competitors are doing in terms of chasing fleeting share.

Adena Friedman:

Sure.

Adena Friedman:

Great. Thank you. Well, we are excited to continue to update all of you in the coming quarters as we approach the closing of the Adenza transaction and we continue to advance along our journey to become the trusted fabric of the world's financial system. And so thank you very much, and have a great day. Thank you.

Operator:

Good day and thank you for standing by. Welcome to the Nasdaq Second Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ato Garrett, Senior Vice President, Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Ato, and good morning, everyone. Thanks for joining us. My remarks today will focus on Nasdaq's second quarter business and financial performance, the solid progress we're making to deliver on our strategic objectives, and how our recently announced acquisition of Adenza advances our vision to become the trusted fabric of the world's financial system. I'll then turn the call over to Ann to review -- for a review of our financial results. I'd like to begin with an update on the strategic transformation underway at Nasdaq. Since 2017, when we sharpened our focus towards becoming a leading technology provider to the global financial system, we've made significant progress on our strategic journey by allocating capital to our biggest growth opportunities and reorienting our businesses to align better with the key megatrends shaping the global economy. Over that period, we have focused on our innovation strategy on maximizing the potential of cloud computing and AI across our products and markets, while strategically divesting more than $700 million in non-core assets. We've also delivered consistent execution in our operating business through dynamic operating environments, demonstrating the power of the diversified platform we've built at Nasdaq. That execution strength is reflected in our second quarter performance, which I'll discuss shortly in greater detail. But first, let's spend a few moments on Adenza. When we announced the acquisition of Adenza on June 12, we took a seminal step in our journey to becoming a leading technology provider to the global financial system. Our consistent [growth] (ph) throughout Nasdaq's and Adenza's journeys have been our dedication to our clients. As the financial industry faces a steady stream of new regulations and reforms, that present reputational and financial risk. We are positioned to be a key partner in helping participants manage those risks. Most suitably, we will enable our clients to meet regulatory mandates to reduce financial crime, manage liquidity risk, and provide resilient capital markets infrastructure, all while reporting on their compliance to over 100 regulators and agencies around the world. The addition of Adenza's capabilities to the Nasdaq platform will increase our serviceable addressable market by approximately 40%. We saw further evidence of the power of the Adenza business and its performance during the first half of 2023. The company has maintained strong Annualized Recurring Revenue or ARR growth in the high teens as compared to the prior year period, which was underpinned by continued strength in gross and net revenue retention at 98% and 115%, respectively. As we discussed at our initial investor call post-announcement, the fundamental drivers of growth in Adenza's business comes from new client sales, cross-sells, and up-sells to existing clients. Consistent with their strong performance in signing new clients over the last two years, which is provided in more detail in the supplemental information that we provided this morning, both Calypso and AxiomSL continued to demonstrate strong growth across new logo-wins and client up-sells in the first half of 2023, validating our acquisition thesis. Specifically, Calyspo signed seven new clients and completed upsells to 40 existing clients in the first half of the year, while AxiomSL added seven new logos, two of which were cross-sells of Calypso clients and completed upsells to 25 existing clients during the period. The recent performance of Adenza furthers our conviction that we are working towards acquiring a business that delivers world-leading solutions that meet the growing dynamic regulatory needs of our clients. Upon closing of the Adenza acquisition, our focus will be to maximize the client and shareholder benefits. With our strong combined free-cash flows, our capital allocation priorities over the next three years are as follows

Operator:

Thank you. [Operator Instructions] And I show our first question comes from the line of Owen Lau from Oppenheimer. Please go ahead.

Adena Friedman:

Sure. Thanks, Owen. So with the Tier 1 and Tier 2 clients, some of them -- we signed two of them kind of early in the quarter and signed two more of them a little bit later in the quarter. I think that each of them is going to have a slightly different time line. These are more complex implementations. But we would expect kind of a six to nine month implementation period for them. So -- and we will start to therefore be able to kind of demonstrate the revenue benefit of them as we bring them online. So hopefully, that means that we'll be able to bring at least most of them into online before the end of the year or early next year is, I think, the plan right now. In terms of the pipeline, we actually are very encouraged by the continued pipeline of larger banks that are working with us, either in contracting or on POCs. We have several that are working with us in their proof of concepts, and we have another several that are working with us in contracting. But of course, as we've talked about from the very beginning, the contracting process with banks takes a long time, particularly as you get up market. And so this will continue to be, what I would call, a slow-moving train as we continue to bring more of the larger banks online to our Anti-Fin Crime solutions.

Adena Friedman:

Sure. Thanks, Owen. We did update our disclosures since the beginning of the year to help you understand the average AUM for the quarter -- for each quarter. I think with regard to -- so you have to kind of look at it both on the AUM side, and we do provide a fair amount of disclosures to help you estimate that. I think then on the trading side, it's -- as we said, it's a combination of things. It's obviously combination of the pricing that CME chooses, they are combination of the volumes and then how the contract works. And as of prior quarters, we did hit a new contractual tier in the second quarter, which I think has been consistent with prior years. I don't think there's really other things to really mention there other than just we're really excited, frankly, to see the recovery of the Index AUM, the fact that it's obviously reflecting the recovery of the market. And most notably, what we can control, which is the inflows into the indexes at $25 billion over the last year.

Adena Friedman:

Thanks, Owen.

Patrick Moley:

Yes. Good morning. Thanks for taking my question. Adena, I wanted to go back to Adenza. Your stock has reacted negatively since the acquisition. So just wondering, based on maybe your conversations with investors, what do you think investors are getting about this acquisition? And then what, if anything, if you could has maybe surprised you about the reaction since the announcement? Thanks.

Patrick Moley:

Great color. Thank you.

Operator:

Thank you. And I show our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Adena Friedman:

Thank you, Michael. We don't provide details on every country, but I would say, we've been very successful in expanding across Asia and Lat Am, and that continues. So it's not just -- I would say, as we started our efforts in Asia several years ago, we found a lot of great demand in China, and then we expanded into Korea and now into Southeast Asia. And so, it's just -- it's a great opportunity for investors from all over the world to gain exposure to U.S. markets and understand the data in real time. And then we also expand -- have done a really nice job of working with our colleagues that manage, for instance, listings and market tech in Latin America to kind of open up the Latin American market for data, and we continue to see really strong demand there. So it really has been kind of a global expansion of the distribution of real-time information. And then we also have our Data Link platform, and that's also growing nicely with some really unique data sets that our clients are adding to their portfolios. And so, that also has been a really nice growth pillar for us in the data business.

Adena Friedman:

I mean we've talked about Data Link being kind of a delivery mechanism for our market data, for third-party kind of what we call unique data sets that we think will help clients look at kind of underpinning, like KPIs and other things that might underpin the performance of companies. We also provide information around retail flows within the Data Link platform in partnership with the client, with the partner. I mean, so it's really kind of a full range of information or data sets that are available. Data Link, there is actually a website, if you're interested, and that provides kind of a library of all the different data sets that are available through Data Link. And it's actually -- what's really cool is, they're all offered on and out through a very modern API structure, so it's really easy for our clients to take the data in and integrate them into their internal audit systems.

Adena Friedman:

Sure. Yes. Actually, it's one of the things we really like about how they've organized the business. So when Calypso and Axiom came together, what they did was, they still have two discrete platform -- technology platforms, and I think that they do solve different needs. So it makes sense for those platforms to be discrete. But they first of all, before I talk about marketing, they do -- they're all -- they're starting to demonstrate the power of the business by sharing data through modern APIs that they can cross over from one platform to another to service specific clients, and I think that's going to help with cross-sells going forward. But the way that they organize their go-to-market is that, they have a product team and the product team has kind of a marketing team within it, so product marketing, and then they also have specific product sales on people. And then they have an enterprise sales team. And that enterprise sales team really is regionally focused and really talks to -- kind of goes high up in the organization as possible to talk about the complete solution set to understand their needs, understand their problems, and then they'll bring in the product sales team to help with specific -- kind of [client] (ph) specific products and capabilities that the company has. And then once a client signs a contract, then they start to engage with the client success team, the client implementation team. And the way that they've been able to organize that as they try to match up the client success organization with specific sales -- enterprise sales people so that there's consistency in the experience that the clients have moving into implementation. And then they have, I think, a very good and scaled client success organization. So we like that model because it kind of creates kind of an umbrella go-to-market and client service capabilities across multiple products. And so as we bring Adenza into Nasdaq and we think about how we want to integrate that with our Market Technology business, with the Surveillance business, we think there's opportunities for us to really leverage that scaled model for the broader technology platform. And that then allows us to go in kind of towards the top of the house within the banks, explain our complete solution suite and then deploy our product teams appropriately into meeting their needs. So we're very excited about that.

Adena Friedman:

Sure.

Alex Kramm:

Yes. Hey, good morning, everyone. Just starting with a follow-up on Verafin and this maybe nitpicky, because we're just getting used to some of these new disclosures. But when I look at signed ARR on a quarter-over-quarter basis, which should imply net new sales, I think that was $11 million, which, if my numbers are right, is flat year-over-year. So when I think about those four bigger size wins, does that mean that -- what does it imply for the rest of the business? Does it mean slower sales to Tier 3 and beyond? Slower pricing power? Or again, these are small numbers, but just wondering if the remainder of the business is chugging along quite well as well.

Alex Kramm:

Fair enough. And then secondly, this is maybe a little bit more strategic. But clearly, you announced another divestiture during the quarter and that's been part of kind of like the strategic pivot as well. Now that you've done Adenza here, reasonably sizable deal, big leverage, the question has been coming up a little bit more, it's like, hey, could there be other bigger divestitures that actually help accelerate the pivot even further? And not surprisingly, OMX comes up a lot here. So, I know you're not going to talk specifically about that asset, I guess, in terms of any potential to sell it. But maybe you can just remind us why OMX and other related business is a core component of the Nasdaq strategy, how it fits in there? Because clearly, people are asking the question. Thanks.

Alex Kramm:

Very clear, and I'll try to forget the OMX name. Thanks.

Operator:

Thank you. And I show our next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Adena Friedman:

Yes. I actually would agree with that completely. So as we've talked about, when you're selling into some of these larger banks, the process of getting sales done tends to be longer. So you're right, if they kind of came together in 2021, they then had integrations. They had their own operational integrations they were implementing. They want to educate their sales organization. They have their whole enterprise sales model, I mentioned it before. And so, they are just now really starting to demonstrate how the cross-sells can work. I think they've had five cross-sells and now they've been able to add two more. So, they are starting to show that there is real potential here to cross-sell capabilities. And hopefully, that also means the potential to shorten sales cycles. Because if you have a master services agreement and then you cross-sell another product, the hope is that you can cut down on the contracting time. But it is just beginning in terms of showing how they can open up doors. And the other thing to mention is on Page 3 of the supplement, we show you the revenue composition by bank tier or by client tier, and you can kind of see that they're different, right, from between Calypso and Axiom, but they're selling into all of those tiers, both of them. But they have certain strengths in different tiers. And so, as we think about the power of bringing those two platforms together and then the power of bringing our ASC capabilities and our Market Tech with it, you can kind of think about how we can help each other grow and expand in those tiers where they may be less penetrated. So that's obviously part of our investment thesis as well.

Adena Friedman:

Yes, sure. They are gaining share. So that's really exciting to see. And they are, in fact, winning -- they're winning mandates from companies that have competitors. So, that is kind of how -- obviously, how they're winning share. So I think that, that's a very -- that's an exciting part of why we really like their business. They have -- unlike some of their competitors, they're very modular. So they can go in and with one module to kind of breakthrough to a client and then demonstrate their value and then start to expand across other modules, which then allows them to say, you know what, we can do that for you instead of this competitor. We can do this for you instead of that competitor. And they start to penetrate the client by gaining share as well as reducing their internal spend. And frankly, that's a strategy that we're seeing really successfully play out within Verafin as well. So we do know that strategy can be very effective. Within Verafin, just to digress for one second, we penetrated one of the clients that we went into on the Tier 2s, we went in just showing them our alerting capabilities. And they then said, "Well, wait, your workflow is so much better than what we have. Let me actually -- we're going to use not only your learning, but we're going to use your workflows as well." And now they want to -- and that was on AML and now they want to kind of look over on the fraud side. And they have existing systems in fraud, but they realized just how, frankly, awesome our platform is. So it allows us to go in and land and then expand by potentially taking out competitors. And I think -- I also think that Calypso and Axiom, the teams, they don't stand still. They're adding new capabilities that will, obviously, continue to grow the market opportunity. And an example of that is that Calypso, in the last few years have moved into the buy side. And not just opening up a whole new segment, client segment, they went from like three to -- I don't want to say the wrong thing, but like 3% to 14% of their revenue coming from the buy side just in the last few years, so that's a growth area. And then lastly, as they're deploying their solutions in cloud, so 53% of their sales this year so far have been cloud-deployed modules. That actually allows them to be a managed service provider, which then, of course, allows them to take a bigger share of wallet as they're managing the product and not just deploying it. So those are all the reasons why we think the revenue growth is highly sustainable.

Adena Friedman:

Thank you.

Michael Cho:

Hi. Good morning. Thanks for taking my question. I guess I'll just follow-up with another Adenza question as well. When we kind of think about the large recurring revenues of Adenza, I realize the new clients and upsells are driving the majority of the revenue growth here. But if we think about existing clients and kind of existing contracts, is there a volume component to any of those contracted revenues? I mean just trying to better understand the recurring nature of the revenue profile and revenue growth for Adenza. I think this may speak to more towards [indiscernible], but maybe you can elaborate there.

Michael Cho:

Yes. No, great. And then just a follow-up, just to switch gears on digital assets. I realize you mentioned about the custodian initiative being halted. Is this a clean pivot away permanently or more of a delay? And I realize Nasdaq is still going to be highly involved in the digital assets ecosystem in a meaningful way. But hoping you can kind of flesh out some of the considerations here as you thought about the custodian initiative. Thanks.

Michael Cho:

Great. Thank you.

Brian Bedell:

Great. Thanks, good morning. Thanks for taking my questions. I can keep these quick, I think. One on Verafin, the growth -- the year-over-year growth rate has been in the 20% plus area. It's come down into the high teens, but now it's moved back up in the second quarter up to 19% year-over-year. So I'm wondering are the new sales coming in? I know there's a six to nine month time line in the Tier 1 and 2s. But with organic growth of the Tier 3s and below, do you see this business moving back into a sustainable 20% plus area of annual revenue growth over the next couple of quarters?

Brian Bedell:

Okay. That's super helpful. And then the follow-up just for Ann. I think I heard you say on the Power business that it wasn't going to be material overall, and I heard the $35 million and $20 million. Can you just restate that again in terms of the revenue impact and then the expense impact?

Brian Bedell:

Okay. Great. Thank you.

Adena Friedman:

Great. Thank you, and thanks very much for your time today. We are excited to continue to update you on all of our progress in our business, while we also prepare for our next chapter with Adenza as part of the Nasdaq organization. So thanks for all your questions, and I hope you all have a great day. Thank you. Bye-bye.

Operator:

Good day and thank you for standing by. Welcome to the Nasdaq First Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ato Garrett, Senior Vice President, Investor Relations. Please, go ahead.

Adena Friedman:

Thank you, Ato, and good morning, everyone. Thanks for joining us. Before I start, I would like to welcome Ato Garrett to the Nasdaq team as our new Investor Relations Officer. I know he's looking forward to meeting each of you very soon. I will now turn to my remarks today, which will focus on Nasdaq's first quarter performance and the solid progress we're making to deliver on our strategic objectives. I will then turn the call over to Ann for a review of our financial results. Let's begin with the current market landscape. Nasdaq continued to perform well, what was clearly a very dynamic operating environment, with a shock to the banking sector happening amid an already uncertain macro backdrop. During this challenging period, we delivered solid financial performance, while demonstrating operating and strategic momentum across each of our divisions. We achieved a new milestone for our anti-financial crime division with the signing in April of our first Tier 1 client with over $1 trillion in assets for our fraud solutions, including the comprehensive fraud detection capabilities across wires, ACH and checks, as well as case management and reporting functionality. We maintained our leading position in US cash equities and equity derivatives trading, while seeing strong demand for both our ESG services and our SaaS-based market technology solutions. Overall, the current uncertain financial backdrop highlights the value of our diverse platform of mission-critical solutions. In the first quarter, we also saw a generational technology breakthrough with the emergence of new artificial intelligence tools called generative AI. While the debate surrounding use cases for generative AI needs time to evolve, it is clear to us that companies that have invested in modern technologies, including cloud architecture and deployment, modern APIs and machine learning are poised to take advantage of this new era of technological advancement. At Nasdaq, we've been focused on investments to modernize our technology across our businesses, and therefore, we're well positioned to incorporate more advanced AI capabilities in the future. Against this evolving economic and technological backdrop, our team remained hyper-focused on delivering for our clients. Our results underscore our ability to navigate successfully amid a dynamic market environment and to deliver on our long-term commitment to provide world-leading platforms that improve the liquidity, transparency and integrity of the global economy. Now let's turn to our results. I'm very pleased to report Nasdaq's solid financial performance for the first quarter of 2023. We achieved $914 million in net revenues, an increase of 2% compared to the prior year period, an increase of 4% on an organic basis, excluding the impact of changes in FX and an acquisition divestiture. Revenues across our Solutions businesses were $646 million, up 4% from the prior year period, driven by organic growth of 5%, partially offset by the impact of changes in FX. Excluding the Index business, which declined by 10% due to a continued weak beta backdrop, revenues in our Solutions businesses increased 8% organically compared to the prior year period. Our total annualized recurring revenue, or ARR, increased 7% to $2 billion. Annualized SaaS revenues totaled $729 million for the first quarter, which represents an annual growth rate of 11%. Our SaaS revenues now comprise 36% of total company ARR. Across each of our divisions, we delivered well for our clients during the quarter. In our Capital Access Platforms division, we delivered $416 million in total revenue in the first quarter. Despite growth in data, as well as in workflow and insights, headwinds across our Listings and Index businesses resulted in flat organic revenue for capital access platforms year-over-year. Index experienced a 10% revenue decline and Listings was stable year-over-year. While our Index business continues to show year-over-year decline due to higher market levels at the start of last year, during the first quarter, we did experience a 5% improvement in average AUM from the fourth quarter of 2022. If the markets continue to demonstrate some level of recovery from last year, we should experience an improving year-over-year index performance as we continue through 2023. Data and Listing Services revenues grew 4% organically, driven largely by higher international demand for our proprietary data during the period. Our Workflow and Insights business revenue grew 5% organically, which reflects continued demand for our IR, ESG and analytics solutions, as clients navigate a dynamic and challenging market environment. Turning next to our Market Platforms division. We delivered $413 million in total revenues during the first quarter, a 6% organic increase from prior year period. Amid a volatile capital markets environment, our core trading services business experienced strong performance in North American markets, where we saw double-digit revenue growth, partially offset by a decline in our European markets revenues, primarily reflecting lower value traded and cash equities due to market declines in a softer volume environment. In the US, we continue to provide our clients with the premier trading experience, while optimizing the revenue and capture mix for both US cash equities and multiply listed equity options. In Marketplace Technology, we delivered 11% revenue growth, driven by strong results in both trade management services and market technology. During the quarter, we signed a Marketplace Services platform agreement with an innovative carbon trading platform in -- sorry, carbon trading marketplace in Latin America, as well as a new European risk modeling customer. We also signed a multiyear extension and expansion with a Tier 1 bank for our trading platform. Finally, turning to our Anti-Financial Crime division, we delivered $84 million in total revenue in the first quarter, an 18% organic increase from the prior year period and a 16% increase, excluding the impact of the deferred revenue write-down in the first quarter of 2022. Revenues in our fraud detection and anti-money laundering solutions or what we call our [indiscernible] solutions, grew 30% compared to the first quarter of 2022 or 27% excluding the impact of the deferred revenue write-down. The overall anti-financial crime business saw continued growth with 42 new ASC clients during the period. Our first quarter financial performance also illustrates the progress we've made to capitalize on certain growth opportunities that are aligned with three key trends that we believe are shaping the financial system. First, the modernization of markets where we can deliver innovation that powers the world's economies and enhances the underlying market infrastructure. Second, the development of the ESG ecosystem, where we help companies and investors successfully navigate increasingly complex reporting frameworks, access more seamless roots to capital and achieve their net zero or sustainability objectives. And third, the increasing need for advanced anti-financial crime technology, where we can enhance the integrity of the financial system through emerging technologies, including cloud and AI, coupled with end-to-end workflow solutions for our clients. In this regard, I'd like to provide two highlights for the quarter. First, our focus on markets modernization continues to deliver innovation that enhances the liquidity and the underlying market infrastructure that powers the world's economies. From the successful migration of Nasdaq MRX, which is one of our six options markets to the cloud infrastructure in the fourth quarter of last year in partnership with AWS, we announced during the first quarter our plans to migrate our second options market to the AWS Edge Cloud by the end of 2023. Second, as financial institutions make investments in technologies to detect and fight financial crime, in early April, we are very pleased to sign our first global Tier 1 client with over $1 trillion in assets to our fraud solution, including comprehensive fraud detection capabilities across wires, ACH and checks as well as case management and regulatory reporting functionality. Additionally, we signed another Tier 2 client to our enterprise anti-money laundering solution during the period. These signings further demonstrate our ability to displace legacy providers and manual processes through our cloud-based and market-proven solutions. As we look ahead, I want to take a moment here to discuss in more detail the breakthrough developments in the field of artificial intelligence, which have captivated businesses across all industries concerning its applicability and impact. As a result of our years of investment in our cloud architected market solutions and SaaS applications, coupled with our recent acquisitions of advanced cloud-based investment analytics and anti-financial crime solutions, I believe Nasdaq is uniquely positioned within our sector to play a leading role with this technology in the future through the responsible deployment of AI to drive meaningful impact to our business, products and clients. To-date, we've been very intentional in migrating critical workloads and capabilities into a cloud environment with modern APIs to support client connectivity and functionality. We've also built unique data sets across various areas of our business. Both are foundational to our ability to leverage this generational shift in the technology. While we're just beginning the process of evaluating specific ideas for the use of generative AI in our products and across our business operations, we see compelling opportunities to lever broader AI models, including deep reinforcement learning, predictive control and computer vision across our business divisions to support our strategic efforts to enhance the liquidity, transparency and integrity of the financial ecosystem. This is already happening in various elements of our business today. For example, in our anti-financial crime business, Verafin has integrated AI and machine learning into their solutions and capabilities since their founding 20 years ago. The combination of the advanced data sets combined with the self-learning capabilities of the AI and machine learning model is a key differentiator for the product. This improves the efficiency in the banking industry's daily compliance processes and achieved a step change in their ability to detect and stop money laundering, fraud and market abuse across their networks as well as to reduce false positives. In our Market Platforms division, we're in advanced stages of new product developments that incorporate AI, including new dynamic order types that improve our clients' fill rates while minimizing market impact. In fact, we've submitted for regulatory approval, our first AI-based market order or market order type, which is context aware, meaning that it is designed to incorporate awareness of market conditions on a real-time basis. As we seek out more ways to leverage AI across other parts of our business, we intend to take a principled approach to leveraging generative AI for the right purpose. Our data scientists and agile development teams will continue their research and development responsibly, so that our regulated and unregulated businesses can deploy this technology to create and maintain fairness across markets and develop more advanced solutions to fight crime. We look forward to updating you on our progress with these opportunities in the quarters to come as we continue our journey to become the trusted fabric of the global financial system. Before I turn the call over to Ann, I'd like to offer some operating environment as we move further into 2023. When we gathered in January for our fourth quarter results call, we discussed some of the impacts and market driven headwinds that we are beginning to see related to the market environment and the uncertainty in the global economy. As we progressed through the first quarter, as we expected, we saw a decrease in the total number of operating company IPOs versus the prior year period, as companies put their IPO plans on pause while investors closely monitored interest rates and correlated inflation figures. Despite the slower start to the year, we maintained our track record for winning new operating company listings across our US and European markets in the first quarter. In the US, we welcomed 30 new operating company IPOs during the period for a 91% win rate, bringing seven of the top 10 IPOs by proceeds raised. In addition, there's a significant backlog of operating companies in the pipeline with 147 active operating companies on file with the SEC to go public and committed to Nasdaq, which is a 10% increase versus the fourth quarter of 2022 and a 25% increase versus the prior year period. Our team continues to be in close contact with these companies, and we believe that we are well-positioned to capture future listing activity once the IPO window reopens. Beyond listings, we're still seeing elongated sales cycles in our Workflow and Insights businesses. As we previously observed, while overall interest in client demand for our Workflow and Insight solutions remains healthy, the process for some clients is taking longer as they escalate buying decisions through more levels of approval. Demand for our strategic focus areas, including our anti-financial crime solutions, our ESG solutions for corporates and our modern market solutions for established exchanges continues to be strong and largely unaffected by the market environment at this stage. Overall, we're very fortunate to have deep and trusted relationships with our clients who rely on us even more during complex operating environments. For example, during periods of heightened volatility, pensions and endowments often need to make swift asset allocation decisions to manage their portfolios, which can increase their reliance on our analytics solutions. Similarly, for our public company clients, these cycles can drive demand for our Investor Relations solutions as company leaders seek shareholder activity insights in real-time. As the global markets demonstrate sustained volatility, our market technology clients are focused on modernizing their market infrastructure to improve their agility and addressing client needs while improving – also improving the resiliency and scalability of their markets. And within our anti-financial crime business, the disruption caused by the banking crisis has caused – has resulted in clients moving deposits at unprecedented rates. Because of our cloud-based consortium data models, our fraud and AML solutions are instrumental in helping banks monitor payments and behavioral changes. These patterns underscore how our diverse pattern – our diverse platform of mission-critical solutions allows us to maintain our competitive strength through dynamic periods of uncertainty like we've experienced during the quarter. With our continued client engagement, coupled with the long-term investments we're making in our future, we remain confident in our medium-term revenue growth outlook for our Solutions businesses. And with that, I will now turn it over -- turn the call over to Ann, to review the financial details.

Operator:

Thank you. [Operator Instructions] And I show our first question comes from the line of Rich Repetto from Piper Sandler. Please go ahead.

Adena Friedman:

Hey, Rich. Thank you, Adena, for giving us sort of a lot of info on the outlook of the business in the prepared remarks. But I guess if I was to zone in on the outlook in sort of the sales cycle businesses, the anti-financial crime and market infrastructure, you talked about the -- in AFC that there was a lot of deposit movement. But with that -- is that going to -- the deposit movement appeared to go to the large banks. How are you doing? And what's the outlook for the Tier 2 banks? And just a little bit more color, I guess, on the sales cycle with market infrastructure. Has that been impacted at all, I guess, by the market volatility?

Rich Repetto:

Thank you. Thanks.

Operator:

Thank you. And I show our next question comes from the line of Michael Cho from JPMorgan. Please go ahead.

Adena Friedman:

Hi.

Adena Friedman:

Sure. Well, I'll answer the first question and Ann will focus on the second one. With regard to the overall environment with opening of the banks, I think, first of all, I would just say, we have about 2,500 banks and credit unions that rely on us today, but there are over 5,000 overall banks and credit unions across the US and Canada. So we still have lots of opportunity for growth and to find and land new clients. And so even if there are some unfortunate situations with banks as they're managing through a very really big change in the operating environment, we do feel like we have plenty of opportunity to continue to grow and expand the business. And so far, we have an amazing team that supports the small to medium banks, and they're seeing a very normalized environment both in terms of new sales and in terms of renewals. So we're not seeing a disruption in the cadence of our business in that regard. And as I mentioned before, we did -- we had 39 new clients in the first quarter of last year and 42 this year. So we're continuing to show some really strong demand characteristics there. But the focus on Tier 1s and Tier 2s, there's a whole team just focused on that. So we've kind of -- we've done a really nice job of segmenting the teams. One team supports the small to medium banks, one team supports the enterprise banks, which are the larger banks; and then we have a team, obviously, supports surveillance, et cetera. And on the Tier 1 and Tier 2s, as I mentioned, the pipeline is really strong. So we have kind of an equal focus, I would say, on continuing to grow the SMBs while we focus on moving up market. And in terms of the margin quarter-over-quarter, I don't know if you have any comments, Ann?

Adena Friedman:

Yes. And I think we've also said that we are really focused in this business on optimizing for growth. And so we want to make sure that we're -- as we're taking in more revenue, we're reinvesting that revenue to continue to really amplify the growth of the business. So the margin is wonderful, but it's also something we're really -- we are focused on making sure that we're investing in our growth there.

Operator:

Thank you. And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead.

Adena Friedman:

Great. Thanks, Alex. So actually, it is interesting to see the opportunity here. So we went in having conversations specifically on fraud detection, and they did a POC with us on that. And once they saw the quality of the outcomes, then they started to say, 'Well, let's look at the rest of the platform.' And so they didn't just take the detection capabilities and plug it into their platform, they actually had a collection or they have a collection of smaller platforms. And they said, 'Let's actually replace everything we do with fraud to with the Verafin solution.' So that means that we have fraud detection across all of their payment types as well as our workflow solutions. So our investigations, tools, our case management tools as well as our regulatory reporting tool. So it ended up being a bigger opportunity. But even with that, it was only for the US portion of the bank. So we do have an opportunity over time to move internationally. And they don't actually -- they're not using any of the AML capabilities that we have. So we also have an ability to continue to expand as they think more broadly about their anti-fin crime needs to take on more of our capabilities as we continue to work with them. We obviously have to prove ourselves with them that we are really great as great as we've been able to show so far and that we have a smooth implementation and those will be the key proof points. But we're already having conversations about how they can think about a broader use case. And that's actually what's exciting about going into the larger banks. Both Tier 1s and Tier 2s is that their needs are very expensive. We're going in with modules that really show like clear ROI, but as we engage with them and they start to see the broader platform, they start to think about how we can -- they can use us more. And so there is a really good land-and-expand approach that we can take care. And you're right about breaking through the barrier. Getting to that first Tier 1 win has been a very important milestone for us because now that we can prove ourselves there, it will make it easier for other banks to say, 'Okay, I'm not taking a risk here, I'm actually taking a proven solution.' And as you said, they do talk to each other. So we do see it as a way to help accelerate other conversations. I would just say, though, that it's not something where we have -- we're going to have the lining up to have every single quarter, we're going to have a great – a big announcement. But I think that we are starting to have a really good pipeline that will give us more of a regular cadence as we go further. And lastly, in terms of size, we don't disclose that. But I would remind everyone that it is not included in the Q1 signed ARR because it was signed in April. So it will be included in Q2.

A – Adena Friedman:

Thank you.

Owen Lau:

Good morning and thank you for taking my question. I mean, I would want to ask about AFC, but there are lot of questions already, but maybe we can switch gears a little bit too to AI. So Adena, you talked about there are many benefits of AI and Nasdaq has been leveraging this technology in many different areas. Maybe can you talk -- please talk about any additional area other than AFC and maybe modernization of the market you can further leverage AI? And then I think more importantly, can you also talk about, do we need some kind of regulations around AI so that bank actors are how accountable for using this technology? Thank you.

Owen Lau:

Got it. Thank you very much.

Operator:

Thank you. And I show our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Adena Friedman:

Sure. Great. Thanks Michael. The partnership with AWS is going extremely well. And we've been really pleased with our first market, which is MRx going to the cloud. So, what we did experience is a 10% improvement in latency as we moved MRx cloud. And so -- and we can look at that as a direct comparison because we have one of our options markets already on our next-gen trading platform, which we call Fusion. And then -- but it's on-prem. And then we have a second options market in Fusion, but on AWS. And we can see that there's a 10% improvement in latency on the AWS implementation. So really pleased with that. But both of those markets, as we move them onto Fusion and with one of them into AWS, we are actually seeing better market share because of the fact that we have a more deterministic trading experience across both of these platforms. And then -- so we have seen a growth in market share across those exchanges. And I think that, that is highly related to the fact that the technology is as good as it is. And so we are really, really encouraged. So now we're moving our second market -- our third market on to Fusion and then moving it into the cloud. And then we also have a plan over the next several years to continue that progress. It gave us -- it's giving us confidence that we're moving in the right direction, and our clients are highly engaged with us. So we feel very good about it. We're not kind of trying to ascribe specific revenue to it, but rather knowing that this market modernization opens up opportunities or, as we pointed out, like new order types, new capabilities as well as a more scalable infrastructure. And over time, we will not have to do server refreshes, right? So that will start to show some real cost savings to us over time as we continue to bring the markets into the cloud.

Operator:

Thank you. And our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Adena Friedman:

Thank you, Brian. Well, as you know, we don't give specifics in-year guidance, so -- but I can give you some color commentary. I think that when it comes to the Workflow and Insights business, I think that we definitely are seeing, as we've said before, kind of a mixed environment there in a longer sales cycles. We are very engaged with clients, but the fact is that they have to go through more gates to get approvals. And of course, particularly in our governance area where we do find really good sales opportunities with IPOs, we don't have as many IPOs. So that also is hindering some of the growth across governance. But I would also say, we are continuing to manage the pipeline. We're continuing to engage. And we're hopeful that as the markets start to improve a bit, hopefully, the IPO environment gets more healthy. That gives us more opportunity and the sales cycle start to improve there. So we have some hope, but we also have to recognize the fact that it is a different environment right now and we're calibrating to that. With regard to the Marketplace Tech, we are very happy with the growth that we are demonstrating in the first quarter. I would mention that there are two things that are happening in that business that are creating some opportunities. So I mentioned that's 8% overall ARR growth in Market Platforms, which really reflects Marketplace Tech, whereas, we had 11% growth in the business. And the 11%, that delta really comes from some testing revenue we got in our Trade Management Solutions business and a delivery fee that we got in our Market Tech business. So I would kind of calibrate a little bit on that as you think about the rest of the year. And then the last on AFC, we were – every single quarter is going to be a little bit of a different answer, but I think that we feel very good about our overall growth prospects. Clearly, as we do move up market, it gives us higher TAM, right? There's a bigger TAM that we're going after, as well as the fact that the contract values are higher. So it does give us a chance to continue to demonstrate really strong growth there going forward.

Adena Friedman:

Sure.

Kyle Voigt:

Hi, good morning. You've delevered significantly, now have a fair amount of balance sheet flexibility. And just given that, I'm just wondering if you could provide an update on M&A? I guess, broadly speaking, it seems to be challenging to get deals announced still given the macro volatility. But I guess are you starting to see seller expectations come in or normalize at all, or do you feel the environment is turning more constructive to getting deals done versus where we were in the second half of last year? And then just any color you can provide on certain segments of the business where you're seeing the most interesting M&A opportunities right now?

Kyle Voigt:

Thanks Adena.

Craig Siegenthaler:

Hey, guys. Adena, congrats on the Tier 1 bank signing, but Actually, all my questions have been asked. So I think I'm good right now.

Operator:

Thank you. And our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead.

Adena Friedman:

Sure. So first of all, we do take a long-term view as to how we manage the prices of our capabilities and solutions. And so we do think that way. But at the same time, we also have within our contracts, particularly with our non-regulated businesses, we do have the ability to increase price to reflect the overall inflationary environment around us. And we do leverage that. So we have -- but we also tend to -- if it's a service where there's kind of an annual type of cadence, we tend to look at those price increases at the end of the year that then get effective at the beginning of the year. And so you're going to -- you're seeing that already flowing through the financials for 2023. I think that in the regulated businesses, it's a little bit of a different environment just because it's not only that we do want to make sure we get paid for our value, but we also have to go through a regulatory process to do that. And so that's just a little bit of a different dynamic. I would say, Alex that we're doing -- making the right decisions there where we feel that we have the ability to price up to reflect the value we're serving, we're doing it, but we're not overdoing it. We're not being as aggressive as we possibly can because we want to make sure that we're thinking about it over the long-term and not the short-term.

Operator:

Thank you. And I show our next question comes from the line of Simon Clinch from Atlantic Equities. Please go ahead.

Adena Friedman:

Sure. Great. Thank you. Well, we do provide information on flows at an aggregate level. So we did have $6 billion of inflows in the quarter versus last -- from the end of the year through the end of the first quarter. We also had $23 billion of inflows year-over-year. So we definitely are seeing good strong demand from investors for our Index products, and that's not just the QQQs, but also other thematic indexes, our smart beta index franchise. So we feel really good about overall client interest, investor interest. But obviously, the market dynamics have been what's really driven the downward trend in the revenues. I think also we're still out there creating product, launching product. We're primarily focused on thematic indexes, which really mean things that could be leaning into innovative technologies, leaning into specific trends in the industry. And so we tend to kind of put a lot of our new product development focus on those areas. And then we also have a smart beta environment like our Momentum Index franchise and some of the other smart beta indexes, where we definitely put time and attention there too, but I would say the thematic indexes have been more an area of new product focus for us right now.

Adena Friedman:

Sure.

Andrew Bond:

Hey, good morning. Just in regard to the crypto business. Did you see any impact from the recent banking crisis in terms of interest from potential customers? And thinking about the broader space, there are a number of players currently there and it seems to be some commoditization in terms of pricing. So, how does Nasdaq differentiate in terms of its offering in custody? And finally, is the launch still planned for this quarter? Thanks.

Andrew Bond:

Great. Thanks.

Unidentified Analyst:

This is June [ph] on behalf of Dan. Thanks for taking my question. I just wanted to quickly ask about ESG. Just given some of the slowdown in the ESG investment strategies, are you seeing any impact from that on the demand for ESG service at all?

Unidentified Analyst:

Helpful, thank you.

Operator:

Thank you. And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead.

Adena Friedman:

Okay. So on the ASC side, we actually did have -- I remember the Q1 of last year was a particularly, I would say, a slower quarter than normal for ASC, but we did have 39 new clients then. This year, we have 42. So we do have more new clients signing up this year than last year. And as you said, the ARR associated with larger clients is going to be higher. So I think that, that helps also. I can't give you a complete bridge from the 6% to 16%. We're going to have to go back and look at that. But generally speaking, we have -- I think that, we are seeing some strong revenue tailwinds, as we continue to engage with clients and upsell and sell new customers. So I think that's really engaged [ph]. And also recognize that when we do renew contracts with clients, we don't charge -- we don't do annual increases, but we actually charge on renewal. And that also gives us an opportunity to upsell the clients. So that's been a pretty active environment on that as well this year. So I think that gives you, hopefully, Alex, some more color there. On Credit Suisse, the impact to Credit Suisse, first of all, it's going to take a while for us to fully understand how the two organizations are going to come together and how that -- what kind of impact it has on our capital markets business. But I would say that if Credit Suisse as we see trading moving away from Credit Suisse, it's going somewhere. And so we were continuing to see healthy volumes, help the liquidity. It's just that, that volume will probably move to other players. And then it's a matter of us making sure we're engaging with those players to get the flow. With regard to other solutions like our Anti-Financial Crime solutions, namely our Surveillance Solutions, that will be up to how they organize themselves to understand how we will continue to manage that contract going forward. We don't have a line of sight into that at this point. And I think those are probably our bigger areas of exposure to Credit Suisse right now, right, Ann?

Alex Kramm:

Excellent. Thank you very much.

Operator:

Thank you. And I show our last question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Adena Friedman:

Yes. I take kind of all of the above. So that kind of depends on the solution. So there are going to be areas where we might be able to offer a specific bespoke solution at a premium price. There might be some areas where we -- like life with AFC, where it just creates a better product, and that gives us better sales opportunities. And we do -- we are very focused with our AFC solutions on being a premium provider of that. So -- and we see that because of the fact our value proposition is higher. So we kind of embed that into the overall price of the service. And then in terms of efficiency, particularly with generative AI, you start to have -- we've had some brainstorm sessions internally, and we say looking at generate AI in the business, meaning in our products offered to clients and then generative AI on the business in terms of how we manage it into our operations. And we see a lot of opportunities in both and in ways to create more scale and efficiency, but we also -- it's so early. So we have to also make sure that we're putting that technology into an environment that we feel is secure and safe and that allows us in kind of ring-fencing it and allowing us to make sure we manage our IP and our data. So we'll take some time to do it the right way and to find ways that we can be efficient, but also provide more premium product to our clients. And that's how we're focused on it right now. We also have a governance -- I should mention, we do have a governance committee that vets all the AI use cases inside of Nasdaq, and I think that's really important. We have to make sure we're doing this in a responsible way that we're thinking through the risks as well as the benefits. And so our governance committee is led by John Zecca, who is our Chief Regulatory Risk and Legal Officer, but also includes members from technology as well as other parts of our organization to make sure we're doing it in a responsible way.

Adena Friedman:

Thank you.

Adena Friedman:

Great. Well, thank you very much for your time today, and we look forward to continuing our discussions throughout the year on the progress that we aim to make against our strategic priorities. And thanks a lot for your questions. Talk to you later. Have a great day.

Operator:

Good day, and thank you for standing by. Welcome to the Nasdaq Fourth Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Neil Stratton, Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Neil, and good morning, everyone. Thank you for joining us. My remarks today will focus on the following areas

Operator:

[Operator Instructions] And I show our first question comes from the line of Richard Repetto from Piper Sandler. Please go ahead.

Adena Friedman:

Sure. Okay. So that was a good long and multi-pronged question, Rich.

Adena Friedman:

That's okay. No, no, that was good. Okay. So in terms of outlook for 2023, I think the general view inside of Nasdaq right now is that we continue to have really strong client interactions across all the businesses that comprise our annualized recurring revenue. So that's our Anti-Financial Crime business, our -- what we call our Corporate Solutions business, our investment analytics capabilities and particularly in our analytics and our data businesses and in our Marketplace Technology business. We still see really good client demand, client interactions, progress against our strategy. I feel our ESG services had double-digit growth and we continue to see really great capabilities and opportunities there. Our anti-financial crime technology continues to show really strong growth. And I think that the market modernization efforts are really impact -- having a positive effect on our engagement with our market tech clients as they're thinking about modernizing their infrastructure. So what I would say, the long-term trends that we're really driving towards feel good as we go into 2023, and we feel really great about the client engagement. The market backdrop, obviously, we're not immune to it. No company is. But I would agree that exchanges have a really resilient -- we're a resilient platform because we have this underpinning of trading, we have this underpinning of our listings and listing fees. We have an underpinning of data that really help keep us really strong and quite resilient in -- across all different market environments. But there are a couple of areas where we have market beta. So certainly, listings revenues won't grow as fast if we don't have listings come out to the market. We have 200 companies on file looking to tap the NASDAQ and hopefully, if the markets open up as we go through the year. But as you know, it takes 2 to tango. So we've got the supply the demand really comes for investors feeling confident underwriting new deals. And I think if we can see interest rates kind of top out and we kind of know where that ends up, we see inflation continue to come down and we have a more certain economic underfooting, we could actually see activity pick up, particularly in the latter half of the year. And we're hopeful for that. And that will help, obviously, with '23 growth but also help with '24. I think with the Index business, it's obviously subject to market beta with our AUM. And we were able to withstand a lot of changes in market values last year. But the fourth quarter, you could see, had a big impact. So the AUM dropped a lot. We didn't have as robust inflows in the fourth quarter to counteract that. But as we go into 2023, we're leased off to a better start. We'll have to see how that evolves, and that's an area where we will have market data through the year. So we'll have to see that goes. But if I were to sum it up, though, the areas where we have recurring revenues and we have our SaaS revenues, we feel really good about how we're engaging with clients. We do have some elongated sales cycles across IR and analytics. But generally speaking, really strong demand. The trends that we're underwriting, we feel really good about and investments we're making there. And I think the markets will be the markets, but I think we've been able to demonstrate really strong performance across different market cycles. Lastly, you asked a question about Reg NMS and the fees and volumes. It's really early, Rich. It's an initial proposal from the SEC. There'll be rounds of comments, there'll be probably revisions in the proposals. And so it will be several years before we kind of see the impact of that. But you're doing the same tactics that we're trying to do, which is we see more opportunity to bring more retail volume onto lit venues, and that's obviously going to benefit us. But we also see a change in the tick sizes and the relevant access fees, and that's where we have to kind of look at that, the kind of what I'll call the different dynamics that that will result in. And so we actually kind of net-net are generally positive on what the SEC's proposed. But we obviously want to make sure we're calibrating the tick sizes and the access fees appropriately for what they're trying to achieve there.

Operator:

And I show, we have our next question from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Adena Friedman:

Sure. Yes. Thanks, Michael. So generally, if we look at all of AFC, so you've got anti-financial crime, so you've got the FRAML business which is kind of the Verafin capabilities, and then you have our trade surveillance, which is really the surveillance technology we offer to trading firms and we have market surveillance, which is the technology -- the surveillance technology we offer to markets. In Verafin, as I mentioned, we continue to see really nice strong demand there, and client -- especially with small and medium banks, the conversion has been quite consistent, finding a lead to getting them to become paying clients. And we had, I think it was 98 new clients in the quarter. And we had really strong dynamics there. And it's -- I have to say, I think what we offer is a great product and it shows up in the sales. As we go upmarket, that's where we're kind of -- we, as Verafin, are facing some new unchartered waters, right? We're getting up to the top of the top of the banking universe. And I think that what we're seeing is Tier 2 banks, we're getting them signed up and lined up slowly but surely. The proof of concepts are showing a significant reduction in false positives and a better ability to identify real fraud. And so I think that's really -- the proof points are really helpful in getting to convert a client. Tier 2 banks, you're talking more like a, I would say, anywhere from a 6 to 12-month sales cycle there. And then you get up to the large Tier 1 banks. And that's where, again, we have several proofs of concepts that are completed now, and I think that we're showing really strong results in terms of improvements in lower false positives, better fraud detected. But the contracting cycles there are really long because they go through a really deep review internally. We go through, obviously, cyber review. We go through a lot of different things. And those sales cycles can be anywhere from, I would say, kind of 9 to 15 to 18 months. So we are really hopeful because we completed some of those proof of concepts in the first half of last year that we should be able to convert them this year. And I can only say, Michael, we're not giving specific numbers, but it's a good number of proof of concepts that we've completed. It gives us an opportunity to show that we can get into the Tier 1 banks as we go through '23. And so we're confident we'll be able to show those proof points as we go through the year.

Operator:

And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead.

Adena Friedman:

Yes. So Alex, thanks for the question and it's not snippy. So -- but I would say this. We actually made that change, so what happened was we used to have the options tape revenue sitting inside the Market Services business, and we have the equities tape revenue sitting inside of Market Data. And -- but what we did with the realignment was we actually moved the management of the equities tape into the Markets team because of the fact that the revenues associated with the equity tape are more -- they ebb and flow with market share and other dynamics in the market as opposed to just pure client demand. And so we decided, and so when we first redid -- went into the new divisional alignment, we actually moved the options tape into data as opposed to moving the equity tape into the markets. And we -- as we went through the fourth quarter and we really thought about kind of aligning the business with the management, we actually decided to make a switch. So we kind of moved the options and equities tapes now into market platforms because that's where the team that supports them are moving into the Market Platforms division, are being managed by the Market Platforms team. So we did not do it intentionally to kind of recast targets or anything like that. We're not changing our medium to long-term outlook across our Solutions businesses. 7% to 10% is the target and the outlook that we expect to be able to achieve over medium to long term. But we did want to move those products just into the group that's managing them. That's really the only catalyst.

Owen Lau:

Good morning. Thank you for taking my question. So on the expense outlook, could you please talk about the area that you will invest in ESG and Anti-Fin Crime? Is there any specific examples you can give to us? And how should we think about the new product launches or even incremental revenue potential from these investments? Thank you.

Adena Friedman:

Yes. And I think, Owen, one thing we did point out because embedded in that 5% annual growth in expenses is about, 1 percentage point of that is really the continued investment we're making in our digital assets business. As we kind of get closer to launching that business, hopefully in the first half of this year. So that's one concentrated investment that we've called out as we went through and discussed the outlook. I think beyond that, when we look at the remaining 4% growth, as Ann said, the majority of that growth really just comes from making sure we're making the right investments across the three key pillars. We're not kind of quantifying investments in each one of those pillars. But they're all -- you have to think about it this way. The growth outlook of one of those businesses, if there's a higher growth outlook, it's likely that we're putting more investment dollars or at least on a percentage basis, putting more investment into those businesses. So like our AFC business. If we have a medium to long-term growth outlook of 18% to 23%, we're investing in the R&D and the go-to-market and the sales capabilities to make sure we support that growth. And so that would have a higher level of investment than something that's growing 5%, let's say. But I also think that -- as a general matter, we feel like we're making the right choices of where to invest our capital to make sure we can sustain our growth and make sure we achieve this on the medium to long-term outlook.

Craig Siegenthaler:

Good morning, everyone. So I had a question on the pretax charges from the divisional alignment. I was wondering if you could provide more detail behind the employee-related costs. And what does this really mean in sort of simple terms? Is it layoffs, new hires? And where are you increasing headcount and where are you potentially reducing headcount?

Operator:

And I show our next question comes from the line of Dan Fannon from Jefferies. Please go ahead.

Adena Friedman:

Sure. Well, I think that as we look at our kind of our medium- to long-term outlook, that 18% to 23%, we feel is well supported by the sales opportunities, the pipeline and the overall continued investment in the actual products so that we can continue to expand our capabilities. I thought I'd give you just a little bit more detail on how we look at the dynamics. And I mentioned -- as I mentioned before, we have our FRAML solutions. And that obviously, that's our Verafin asset, and that was delivering more than 20% growth in the quarter and continues to have really strong growth potential even as it continues to scale. And so I think there, Dan, we definitely think that the Tier 1, Tier 2 -- we're not dependent on Tier 2 and Tier 1 banks to support that growth rate in the short term. But as we continue -- as we move upmarket and we are able to attract this Tier 1 and Tier 2 banks, the ticket sizes are much, much higher. So over the longer term, showing momentum across that will be important to continue to maintain the strong growth trends that we're showing in that business. The other two parts of the business, trade surveillance, that continues to have kind of high single-digit, low double-digit growth, and it has for a long time. That's providing surveillance solutions to trading firms. And there, we're continuing to drive that growth by expanding the types of modules that we offer, like our crypto modules as well as more -- bringing more asset classes onto the platform and really continue to globalize the clientele there. We have gotten to the point where we become an enterprise provider of surveillance across large banks, and that continues to be a good growth opportunity to support that kind of high single digit, low double digits. The one area that is actually has a low -- I would say flat to low growth profile is our market surveillance business where it's the smallest part of the division. But it's a harder one to grow a lot because the overall base of client opportunities is smaller. That's where we provide surveillance to markets and regulators. And there, that business was largely flat for the year and continues to have a low growth profile. So that's -- I think certainly in 2022, that has created a little bit of kind of a lower growth view. And as we go into '23 and '25 or '23 to '24, '25, '26, we hope to find new ways to catalyze some growth there, but we will expect that to be a low grower in the years to come. So hopefully, that just gives you a little more context.

Brian Bedell:

Good morning. Thanks for taking my question. Maybe just one confirmation just on the divisional alignment program, the $115 million to $145 million. I just want to make sure that's those expenses are not included in the non-GAAP guidance. So just a clarification on that. And then more broadly, just in terms of the Solutions growth for this year, I realize 7% to 10% remains your longer-term target. But given the headwinds that you're describing this year from the elongated sales cycles and of course, the pressure on index licensing, should we be thinking of a near-term 2023 as being sort of lower than that? And then the initiatives that you're investing in would potentially then raise that in '24? So kind of a slowdown and then a reramp of that Solutions revenue.

Adena Friedman:

Yes. And then with regard to the overall outlook for the business, I think that -- I would say it this way, I think, Brian, that in general, we feel really good about how we're delivering on the growth of our Solutions businesses across, as we mentioned, AFC as well as the investment analytics, so insights and workflows for the corporates and I know market tech business. And I think we continue to see really good client demand. There are some elongated sales cycles and that could bring the growth down a little bit for the year. But I think the one area that we do have some dependence on the market backdrop is in our listings business and our Index business. And there, we are hopeful that we'll see some improvement across index values, market values, which will then, of course, support bringing more companies to market, and that will help us manage through the year and be consistent with how we are looking at our targets. But those areas could create more of a challenge if we don't see an improvement in the overall market environment for this year. I think that's why we like to keep those targets as kind of medium to long term as we look at an average over multiple years just because of the fact that there are years where you have a tougher market backdrop. I would point out, though, that even with the tough market backdrop that we had in 2022, we were able to deliver 10% organic growth across our Solutions businesses. And we had 8% improvement -- increase in our ARR and 13% increase in our SaaS. So even with a really challenging market environment from last year, I think we were able to show a consistent story across Nasdaq.

Gautam Sawant:

Good morning, Adena and Ann. I wanted to just spend a second on Puro.earth and the long-term opportunity there. I know Puro.earth presented at COP 27 and the trading certificates increased 250% in 2022. Can you talk about the potential earnings contribution from this business in the future? And is there an opportunity to sell Puro.earth directly to your corporate clients that are across the U.S. and Nordic businesses?

Operator:

And I show our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead.

Adena Friedman:

Great. Yes. Thanks, Alex. I mean the SPAC revenue represents just over about 1% of total revenue for Nasdaq. So it's a small part of our revenue stream. We are seeing SPAC combined, but we're also seeing a number of SPAC decide to provide the money back to their shareholders. So it's a small part of our revenue. And -- but we're -- but we also recognize that the environment has changed a lot for SPACs, and so we would anticipate some reduction in revenue coming from the back of SPAC ultimately not finding combinations. So I think that's something that will probably have more of an effect in 2024 than in 2023, but it's something we're watching pretty closely. But as I said, just to size it, it's a little more than just 1% of the revenue. I think with regard to Corporate Services and Solutions, which is our IR and our ESG solutions to support corporates, you are right. We have a lot of clients who come on to our platform. We've been supporting them through the IPO package for the last two years. And so as we get particularly into 2024, we're going to see the opportunity for us to turn them in and convert them into paying clients. And so that is obviously -- that part of our outlook for that business is how we convert those clients to paying customers. We've also upsold those clients even during the IPO package period where we might sell them into some of our ESG packaged solutions and into a deeper set of IR solutions. So we do have them some of them as paying clients now. And I think that obviously, even bolsters our view that they'll continue to want to use our services beyond the IPO period. But I just want to say, I think that's more of a '24 opportunity than '23, but we're very optimistic about that. We have strong retention of clients as we convert them.

Kyle Voigt:

Good morning. Maybe a question on the BEC migration from your on-premise solution to your cloud-based platform. Could you just remind us of the revenue and margin impact for Nasdaq from this type of on-premise to cloud migration? I'm just trying to put some numbers around the impact so we have a better understanding of kind of the larger opportunity if we see more similar type announcements over the coming year or two?

Operator:

Thank you. That concludes our Q&A session. At this time, I would like to turn the call back over to Adena Friedman for closing remarks.

Operator:

Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.

Operator:

Good day and thank you for standing by. Welcome to Nasdaq's Third Quarter 2022 Quarterly Update Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today to Mr. Ed Ditmire, Head of Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Ed, and good morning, everyone. Thank you for joining us. I'll begin today with a summary of the new corporate structure for Nasdaq that we announced during the quarter. The new structure organizes our business units into the following three divisions that align us more closely to the foundational shifts that are driving our strategic evolution. Market Platforms led by Tal Cohen will include our North American and European market services as well as our market infrastructure technology business. The division will also include our digital assets and carbon markets businesses. Capital Access platforms led by Nelson Griggs will combine our corporate platforms and investment intelligence businesses. And Anti-Financial Crime led by Jamie King, will include Verafin, our fraud detection and anti-money laundering solution, as well as our market and trade surveillance business. Our new structure will take effect by the end of the fourth quarter of 2022. As Ann will note later, we have provided supplemental information to help investors and analysts prepare for the financial and reporting implications of our new structure. This information is available on our IR website and was furnished in our Form 8-K filed this morning. Additionally, we will discuss our businesses through the lens of this new structure at our upcoming Investor Day on November 8. We believe the new structure will elevate our strategy and amplify our growth opportunities by allowing us to provide even more holistic solutions to our clients' most complex challenges. We view this as the next chapter in the strategic pivot that we launched five years ago, which solidified our focus on liquidity, transparency and integrity as the foundation of our strategic growth pillars. While these strategic themes are carried across our divisions, each division has a central theme that will help define its strategic focus. Market platforms will focus on maximizing the liquidity of the capital markets through our role as a market operator and as a provider of market ecosystems to our technology clients. This division will center around the modernization of markets, including the migration of markets and core infrastructure to the cloud and the emergence of blockchain and the resulting digital assets as elements of future market infrastructure. Nasdaq today serves as a powerful capital markets platform. We are a leading force in the modernization of marketplaces through our world-class technology, including the progress we're making as we migrate our own markets to our next-gen exchange platform in an edge cloud environment. We are also actively deploying our next-gen market platform to our market technology clients. And through our new structure, we see an opportunity for us to drive a broader strategy as one integrated unit. For instance, as we move forward with our digital assets platform, we see our role as being broader than a market operator or a market technology provider. It is a true platform opportunity, creating a custody foundation with strong anti-financial crime capabilities that allows multiple market venues, including those to whom we sell our market technology to connect and where we can facilitate institutional liquidity across venues more seamlessly than exist today. It's just one example of how the divisional structure will have more power, working together both as an operator and as a technology partner. We are excited to demonstrate how we can combine our expertise in managing market infrastructure coupled with our focus on leading technologies to support exchanges and market participants in new ways to drive the global flow of capital. In our Capital Access Platforms division, we will leverage the insights and capabilities across our corporate platforms and investment intelligence team. And we will be focused on the transparency pillar, reflecting the profound shift in behavior among corporates and investors with a focus on long-term value creation. We are seeing a sustained prioritization across the buy-side on long-term value creation and the subsequent response across corporates to engage their investor base in this evolving construct. For instance, there is a notable opportunity for Nasdaq to be a leading ESG solutions provider. We are centered first on a foundation of serving the specific needs of corporate issuers by providing advisory services along with SaaS-based data aggregation and reporting capabilities to facilitate their ability to communicate their ESG and climate strategies and progress to the investment community. As we mature our strategy, we have an opportunity to bridge these capabilities into the investment community through analytics, indexes and data solutions. More generally, capital access platforms will be positioned to connect the investor and the issuer communities through actionable insights, industry-leading indexes and modernized workflows. This will allow us to provide more seamless, more holistic and more impactful solutions that help both stakeholder groups navigate the increasing complexity of the evolving financial system. And finally, our Anti-Financial Crime division will continue to focus on strengthening and safeguarding the integrity of the financial system. Anti-financial crime technology represents an already large and fast-growing sector with structural and regulatory tailwinds. And as the financial system transforms and becomes more technologically driven and sophisticated, the threats to its integrity are growing in scale and sophistication as well. Financial institutions face increasing -- I'm sorry, face significant challenges in detecting and preventing financial crime, and therefore, are investing significant capital and resources and combating those threats. Nasdaq's Anti-Financial Crime division focuses on delivering a world-class platform with holistic solutions and capabilities to support financial institutions and fighting financial crime more effectively across their networks and the wider financial system. We are very excited about the opportunities ahead of us to further lean into the areas that are prime for growth as we become the trusted fabric of the financial system. As I noted earlier, we will have an opportunity to provide more details and answer your questions about this new structure for Nasdaq at our upcoming Investor Day on November 8. Now let's turn to our results. Nasdaq delivered strong third quarter results with $890 million in net revenues, a 6% increase compared to the prior year period and a 9% on an organic basis, excluding the impacts of the changes in FX rates in acquisitions and divestitures. Our total annualized recurring revenue, or ARR, increased 8% to $1.97 billion. Annualized SaaS revenues totaled $699 million in the third quarter of 2022, growing at an even faster rate of 13%. We are pleased with the continued consistent growth across our recurring revenue segments, complemented by positive organic contributions from other areas, including index licensing and trading. Turning next to the specific business highlights starting with our Solutions segment. Our Solutions segment delivered total revenue of $584 million during the third quarter, an 8% increase from the prior year period or 10% organically, excluding the effect of FX and an acquisition. The growth was driven from activity across the full breadth of our businesses, including our index and investment analytics offerings, the expansion of our listed issuer base, our anti-financial crime offerings and market infrastructure technology business as well as strong demand for our IR and ESG services. In our Investment Intelligence segment, we delivered $284 million in total revenue in the third quarter, a 4% increase overall from the prior year period. Our organic growth was 6%, excluding the effect of FX, with contributions to organic growth from each of the three businesses during the quarter. Revenue in our market data business increased by 2% from the prior year period and 5% organically, excluding the impact of FX, primarily due to an increase in proprietary data revenues from international clients. Our index business saw revenue growth of 5% versus the prior year period, driven by positive net flows of $56 billion over the last 12 months. We also saw continued strong results from licensed futures activities, which, together with the impact of positive inflows more than offset the negative impact of market beta. In our Analytics business, revenues grew 8% from the prior year period and 10% organically, excluding the effect of FX. Our combined investment in Solovis offerings saw strong revenue growth driven by the sequential impact of new sales and client retention. This was the sixth consecutive quarter of double-digit organic growth for that team, which underscores the power of these offerings across both asset owners and asset managers. Turning next to our Market Technology segment. We delivered $132 million in total revenues in the third quarter, a 16% increase from the prior year period. This was driven by growth in both the anti-financial crime and the market infrastructure technology businesses. Our anti-financial crime technology business had a very encouraging third quarter with a 24% increase in revenues versus the prior year period. Growth was driven by new sales across both our fraud and anti-money laundering and surveillance solutions as well as the $7 million impact of the Verafin acquisition deferred revenue adjustment recorded in the prior year period. Regarding Verafin specifically, we grew revenues 25%, excluding the $7 million impact of the deferred revenue write-down on the prior year period. We are particularly proud of the team's continued ability to sign new clients across small to medium banks, which is the core of the current franchise with 54 new small, medium banks clients signed during the quarter. We are also pleased by the results of recent proof of concepts with several Tier 1 banks. As an example, in one POC that we ran, we were able to reduce false positives by 25% by simultaneously identifying 3.5x more dollars in fraudulent payments. Moving next to our market infrastructure technology business. We generated $55 million in revenues, representing 8% organic growth. We are pleased to see the business return to positive organic growth versus the prior year period for the first time in over a year. We continue to be on track with large complex deliveries, and we have a strong pipeline of engaged clients and prospects. Moving to our foundational marketplace businesses. Our Market Services segment delivered net revenues of $305 million during the third quarter, a 4% increase versus the prior year period or 8% higher organically, excluding the impact of FX. The increased revenue year-over-year was broad-based, with especially strong growth in trade management services, which had a record quarter and increases across each of our trading businesses, equity derivatives, cash equities and FICC. Lastly, we were excited to announce during the quarter the launch of our new digital assets business to power the digital asset ecosystem. This new business underscores our ambition to facilitate broader institutional participation in digital assets by providing trusted and institutional-grade solutions, focused on custody, liquidity and integrity. As part of our Market Services segment, Nasdaq Digital assets will initially develop and advanced custody solution, coupled with liquidity and execution capabilities geared to serving institutional clients by enabling safe transaction and storage of digital assets. This solution is developed through an innovation and innovative technology approach that brings together the best attributes of hot and cold crypto wallets, providing a high degree of accessibility without compromising security. Additionally, we will incorporate our anti-financial crime technology with new coverage for the cryptocurrency ecosystem, including a comprehensive suite of crypto-specific detection and investigation capabilities. Finally, our Corporate Platforms segment delivered revenue of $168 million in the third quarter, an 8% increase from the prior year period or 11% organically, excluding the impact of FX and an acquisition. The growth was driven primarily by the increased demand for our IR and ESG services and secondarily, due to the expansion of the issuer bases across both our U.S. and Nordic listing franchises. Revenues in our IR and ESG services businesses increased 13% organically, underscoring the strong demand for our technology-based and consultative solutions during the period. The number of corporate clients using Nasdaq's IR and ESG solutions increased 5% from the prior year period. Examining our IR ESG solutions more specifically, we have increased the number of companies using our ESG advisory services by 35% versus the prior year. We've also tripled the number of clients using our ESG workflow solutions to 170 companies, coming from both strong growth in one report and the acquisition of Metrio. Turning to our Listing Services business. Revenue increased 6% to $105 million as the number of Nasdaq listed corporate issuers, excluding SPACs, increased 5% compared to the prior year period. Nasdaq continued its competitive leadership in attracting the majority of new U.S. listings during the quarter with 28 operating company IPOs and a 90% win rate. Next, I want to touch briefly on the current market environment. As we enter the final months of 2022, we continue to find ourselves amid an uncertain macroeconomic and geopolitical backdrop. While we will remain vigilant and maintain flexibility to respond effectively to changing conditions, we believe we continue to be well positioned to deliver for our clients and our shareholders throughout the cycle. Our results continue to demonstrate the quality of our businesses and the value inherent in diversified model. We also continue to see compelling opportunities to further deepen relationships with our clients in this environment and expand the ways we support them as they navigate these dynamics. The new corporate structure we unveiled last month will serve as a great foundation, providing us even more opportunities to lean into areas most prime for growth and deliver even more holistic solutions to our clients across the ecosystem. With that, I will now turn the call over to Ann to review our financial details.

Operator:

Thank you. [Operator Instructions] I saw our first question comes from the line of Richard Repetto from Piper Sandler. Please go ahead.

Adena Friedman:

Sure. So with regard to the way that we're going to manage disclosures, Rich, we recognize the fact that we provided investors with a lot of visibility into the market infrastructure technology business for quite some time. And we intend to continue to provide periodic updates to investors to make sure they can continue to track our progress. Both in terms of revenue progress and overall progress against some of the goals and targets that we set at the 2020 Investor Day, and we'll discuss that at the Investor Day on November 8. So, we do recognize the need for us to continue to provide us disclosures as we're managing that business. I do want to say I think that with the market platforms construct with the divisional structure, it actually just increases the opportunities for us to find new ways to serve our market tech clients. And by thinking about us providing kind of an ecosystem orientation to delivering solutions to market tech clients, we hope that they see us as kind of a deeper partner in helping them navigate the kind of the modernization of markets, the way that you bring liquidity into markets, how you set up your infrastructure, et cetera. So, we're quite excited about how this can actually be an amplifier for the business. In terms of the conflict, we do very periodically have to manage through situations where we are providing market technology to a client in the same market in which we're competing. It's very rare, but it does happen. And we have a process and a governance structure internally, leveraging our risk management team, our legal team. And so those conflicts, we manage very actively. I think we've done a very good job of managing these conflicts very well over the years. And so that really doesn't change. It just -- it kind of moves under Tal's responsibility to think through those issues, continue to consult with John Zecca, our General Counsel and Chief Risk Officer, obviously consult with me. So I just don't see any change in kind of how we're going to govern that going forward.

Adena Friedman:

Sure.

Gautam Sawant:

Can you please expand on how your new initiatives in the digital asset space are complemented by some of the existing capabilities of the Nasdaq platform?

Operator:

Thank you. And I show our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Adena Friedman:

Great. Thank you. Yes. And we will cover that, I think, in more depth on Investor Day. So, we're excited to go through that and to make sure that you hear from Nelson and Tal and Jamie and the broader executive team as they're thinking through how we're going to manage the divisions going forward. But the whole purpose of the divisional structure is actually to unlock more opportunity to serve our customers. And we really thought long and hard as to how best to combine our organization so that we are looking at our customers outside in. And we're saying, okay, if you're a market participant, you're trading across Nasdaq's markets, and you're trading in all the markets in which we provide technology. When we think about the future infrastructure to support our markets, we're especially as we're moving into more of an edge cloud environment, and we're looking at developing our own data center into a local private zone and expanding what we can do to serve our ecosystem. We want to make sure we think about that both as a market operator and as a provider of technology and so that we can be more holistic in serving market participants and their needs. And then also making it so that we can really amplify the modernization markets with other exchanges, we have one technology stack now that didn't used to be the case. So, we now have one leading edge, we think, technology that really -- that underscores our exchanges and will underscore the exchanges that we provide technology to. And so, it allows us to think differently about how to serve those clients more holistically. So that's a market platforms. I think -- and therefore, that's a revenue opportunity to put it that way. And the way that those teams are going to work together is -- they're basically the leaders of the North American markets, European markets and Market Tech. They will serve as the key executive supporting Tal. And then we've actually moved the product engineering team under Brenda Hoffman into the division so that the technology organization will be able to work even more closely with the business, and we're moving product marketing into the division as well. So you've got kind of a more holistic way to run the business in an agile format. The same goes for capital access platforms, bringing investors and corporates closer together, thinking about the services that we offer to corporate to communicate to investors, well, what data could we offer investors to help them understand corporates better. How do we leverage our investment in Solovis technology platforms to make it to that asset owners and asset managers have better line of sight into trends such as ESG trends and other things where we're gathering a lot of data, and we're serving corporates well. So -- and then, of course, index products continue to be an area of just great imagination. We can do -- we've always done thematic indexes that underscore our role in the markets, and we'll continue to be able to do that. So I feel like there's, again, more that we can think about in terms of providing more services to investors treating investors also as corporates in terms of governance and IRs that they have in addition to finding new ways to serve our companies. So again, it's a revenue opportunity. And the businesses, Oliver and Jeff Thomas, who run those respective businesses, will report into Nelson and they will help him navigate that. And then lastly, again, the product engineering and marketing teams will be rolling into the division to create a more agile way to -- and more nimble way to move the business forward. So it is -- I just want to say the purpose of it is revenue opportunity. But the purpose of it also is to kind of make sure we're running these divisions as efficiently as possible, and that will be an evolution over time. And we're excited to be able to go through that with you in more detail at Investor Day.

Craig Siegenthaler:

Our question is on the equity options business. There were some positive market share trends in the business this quarter. Most of this was actually driven by the BX Option Exchange. So can you talk about what drove the sharp increase in volumes at this specific exchange?

Operator:

Thank you. And I show our next question comes from the line of Michael Cho from JPMorgan. Please go ahead.

Adena Friedman:

Sure. Yes. So one thing that we did at the end of last year within the anti-fin crimes business is we segmented the Verafin business into the small to medium banks and then what's the midsize to large banks. And we have two leaders that have really taken on responsibility for looking at each of those groups and those segments of clients. And I think that we did that work at the end of last year, and then we kind of put very specific programs in place to help amplify the growth characteristics in the small to medium bank space and then in the midsized to large bank space because the sales cycles are different. The approach to the product is different. And certainly, as we're moving up to the top tier banks, it's just -- it's a different process and a different orientation, and we wanted to make sure that we kept that machine going within the SMB banks while we also continue to evolve the organization to serve the bigger ones. And I think a lot of the things that we put in place at the beginning of the year for small to medium banks really have come to fruition. There's always a ton of focus on pipeline management, a ton of focus on client service, et cetera. And the sales cycles are relatively quick and the on-boarding is relatively quick. So I think you're just seeing the machine working really well. But I would also say you asked about the current environment, and this is how I look at software sales in an uncertain economic environment. I think, first of all, there is this driving trend across all industries and all segments towards automation and finding ways to do more with fewer people. And the employment environment is very tight. So if anything, banks are struggling to find personnel to be able to manage their financial crime risk so they want to bring in more technology. And technology generally and more automation will make them more efficient over time. So even in uncertain economic environment, you're still seeing generally strong demand for B2B software that that drives automation and allows for more efficiency. But even more powerful is when that software solution is easy to implement. It's a light lift. It's not costly to bring the solution in-house and it's not a big strain on your infrastructure. So cloud-based solutions, SaaS-based solutions are much in higher demand than heavy implementation on-prem solutions. And Verafin, therefore, kind of ticks every box, right? It takes every box for the small banks. It's an all-in-one platform solution that allows them to have much better crime management with fewer people. And then when you look at the largest banks, they're struggling with just an increasingly complex environment, and they need modules that can really help them be more efficient and more effective in finding criminals. And I think that Verafin can -- as it's scaling up to the top tiers, is looking at it more as a modular. They can come in and focus on wire fraud, ACH fraud, business e-mail compromise or they can do one of those things, they can do all of those things. But as banks are looking at their most acute problems, we're coming in with a solution that where we can show material improvement and their ability to manage it. And I think that, again, it's a SaaS-based cloud-based solution. So it's a light lift, light implementation against a really, really great result. So, the return on investment is high. And I think that's why we will be -- continue to be successful in managing through different economic environments. And we're very excited about how we're working with the large banks. That is a different sale. And our trade surveillance business has a lot of experience managing those complex sales, but those take a while. And we've known that from the very beginning. I think when we announced Verafin, we said that we have kind of a three-year view as to how we want to manage to start to penetrate the Tier 1s, and we think we're making great progress. But it takes time to sign those clients after showing that our product is offering them a really good return..

Daniel Fannon:

I wanted to talk about the revenue opportunity from the listings companies from all of the new IPOs over the last several years as they kind of come off the starter kit for a lot of the services that you provide for free. Is there a way to quantify things like ESG, and I think there's some IR and other services that is being utilized today, but are going to become potentially fee-paying services over the next handful of months and years. Is there -- I guess, just trying to help looking for ways to kind of quantify that opportunity?

Daniel Fannon:

Just a follow-up. Is there a way to think about what number of services that you bundle in that starter kit beyond IRs part of it? Is it just so we get a sense?

Operator:

Thank you. And I show our next question comes from the line of Alex Blostein from Goldman Sachs. Please go ahead.

Adena Friedman:

Thanks, Alex. I think that when we -- first of all, we really spend the majority of our time really focused on organic growth. But as we look at opportunities for acquisitions and obviously, we'll be very discerning during this period of time to make sure that we're driving to a financial return and a strategic value, I think that we focus -- we're focusing our acquisition reviews in three key areas. It's really the modernization of markets and the idea of technology is serving the financial community. The second is in ESG and how we can continue to provide better capabilities for companies and investors to connect together to manage the complexity there. And then the third is on anti-financial crime. So I think that you will see that we're focused in making sure that we make smart and value-additive decisions if we're going to grow inorganically. I have to say, in anti-financial crime, as you said, there's a really great growth runway with the business as it is, and it's a very good and complete solution. But there may be ways to amplify that strategy or to go into more adjacencies in anti-fin crime over time, and we'll evaluate that. But it's something that we look at. We're looking at across all three themes as we're thinking about acquisitions going forward.

Owen Lau:

Could you please talk about why you made the decision to get into digital asset custody space during -- in the middle of a crypto winter? I mean there are some other companies launching crypto solutions, but I would like to hear from you what Nasdaq is seeing in this market currently? And then for future products, what other products will make sense for Nasdaq down the road in the crypto space? And then, will Nasdaq build its own technology or you partner with third-party crypto custody or auto crypto companies to offer solutions to clients?

Operator:

Thank you. And I show our next question comes from the line of Andrew Bond from Rosenblatt Securities. Please go ahead.

Adena Friedman:

I think that with regard to -- I would just say that the complex order functionality is relatively stable. I don't think we're seeing significant changes in demand for complex order functionality. It's become increasingly competitive over the years. It's hard to build, and it's hard to support. So we are -- honestly, we feel great about being in that space because we do it really well. And I think we have a truly differentiated exchange offering around complex sort of functionality. But it's not an area that kind of goes and swings very broadly from one quarter or one year to the next, and it's institutionally driven. But also remember that we also have our floor brokers in PHLX and our auction capabilities and kind of the ability to handle block trade as well. And that's a different exchange with different capabilities. And that market does ebb and flow a bit with institutional demand. And so -- and that also commands a different fee structure than the retail platforms. So, I think that you're probably seeing a combination of both, Andrew, in terms of helping -- in terms of both pricing and our market share. Nasdaq has -- I think one of the things we do differentiate ourselves on is the fact that we have retail-driven platforms, and we have institutionally driven platforms with a lot of different functionalities. So we can be a complete service provider -- so in any environment where the trends are different or retail engagement ebbs and flows, we still have the ability to manage flow from everyone. And I think right now, you're just seeing us operating in all cylinders across the options franchise.

Adena Friedman:

Well, thank you very much for your time today. But before I conclude today's call, I would like to make sure you're aware of a change in our Investor Relations team. Specifically, Ed Ditmire has chosen to take on a new challenge as the Head of Investor Relations in a different sector, and this will be his last earnings call with us here at Nasdaq. Ed joined us in 2013, and he has been truly instrumental in shaping and improving our relationships with our investors throughout his tenure here. In nearly a 10-year time frame in which our stock delivered a 440% return, which is just an awesome track record for Ed. Along the way, Ed has become an integral part of the senior team at Nasdaq and has brought our investors into the room figuratively at least, as we've made important and impactful strategic decisions. We are launching a search for a new Head of Investor Relations, and we will provide an update once our new head of IR is selected. During the interim period, Neil Stratton will report directly to Ann Dennison, and he will be the primary contact for analysts and investors. I now want to turn the call now to you, Ed, for a few comments.

Adena Friedman:

Yes. And Ed will be with us at Investor Day where we'll have a chance to provide him a proper sendoff. But it is with sadness that we have to -- I don't make this announcement, but we're very excited for Ed. So, congratulations, Ed, on your new chapter, and your new adventure that you're going to be starting later in November. Well, in closing, Nasdaq's third quarter results demonstrate our strong execution thus far in 2022, and we look forward to speaking with you more about our future plans at our Investor Day. Thank you and have a great day.

Operator:

Good day and thank you for standing by. Welcome to the Nasdaq Second Quarter 2022 Results Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ed Ditmire, Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Ed, and good morning, everyone, and thank you for joining us. My remarks today will focus on Nasdaq’s second quarter 2022 financial and business performance as well as the progress we have made to drive forward our strategic priorities for the year. I’d like to begin by acknowledging that we continue to find ourselves amid an uncertain macroeconomic and geopolitical environment. Yet while markets, investors and corporate clients all experienced increased levels of volatility during the second quarter, Nasdaq’s strategic vision and our ability to execute on it remains clear. The strength and quality of our businesses puts us in an excellent position to navigate these dynamics. Our record net revenue and non-GAAP EPS results demonstrate our ability to capture new opportunities in different operating environments even as we continue to strengthen our positioning for longer-term growth through focused investments. I am proud of our team’s focus on delivering consistent results to our clients against this dynamic backdrop. Let’s turn to our results. I am very pleased to report Nasdaq’s strong financial performance for the second quarter of 2022. We achieved a record $893 million in net revenues, a 6% increase compared to the prior year period and 9% on an organic basis, excluding the impacts and changes in FX rates and acquisitions and divestitures. Our total annualized recurring revenue, or ARR, increased 9% to $1.97 billion. Annualized SaaS revenues totaled – sorry, $679 million in the second quarter of 2022, growing at an even faster rate of 12%, which reflects strong demand for our anti-financial crime solutions and investment analytics offerings. SaaS revenue now comprises 35% of total company ARR, a new high. The consistent growth we are seeing in our recurring revenue segments provides a powerful starting point for our overall performance, but we also delivered strong results across with our index licensing and trading revenues. Turning next to specific highlights from our business segments, our Solutions segment delivered combined total revenue of $582 million during the second quarter, a 10% increase from the prior year period or 12%, excluding the impact of FX. The growth was driven from activity across several of our businesses, including our index and analytics offerings, the expansion of our listed issuer base, our anti-financial crime offerings, as well as strong demand for our IR and ESG services. In our Investment Intelligence segment, we delivered $283 million in total revenue in the second quarter, an 8% overall increase from the prior year period and 10%, excluding the impact of FX with growth contributions from across the businesses during the quarter. Revenue in our market data business increased by 1% from the prior year period and 3% excluding the impact of FX, primarily due to an increase in proprietary data revenues from international clients. In our index business, we saw revenue growth of $17 million or 16% versus the prior year period, driven by positive net flows of $71 billion over the last 12 months, including $25 billion of inflows during the especially challenging beta environment experienced in the first half of 2022. We also saw especially strong results from license features activities, which together with inflows, more than offset the negative impact of market beta. And in our analytics business, revenues grew 8% from the prior year period and 10% excluding the impact of FX. Our flagship eVestment analytics offerings saw continued strong user adoption, both across our asset owners and asset managers and drove annualized SaaS revenues for the Investment Intelligence segment to increase 12% versus the prior year period to $215 million. Turning next to our Market Technology segment, we delivered $131 million in total revenues in the second quarter, a 12% increase from the prior year period. This was primarily driven by continued growth in our broader anti-financial crime technology solutions business. Our anti-financial crime technology business had a strong second quarter with a 29% increase in revenues versus the prior year period. Growth was driven by sales in our fraud and anti-money laundering, or what we call FRAML solutions, as well as the impact of the Verafin acquisition deferred revenue adjustment recorded in the second – in the prior year period. We welcomed 37 new clients during the quarter. We continue to gain momentum with our efforts to expand Verafin’s presence with larger Tier 1 and Tier 2 banks through our proof-of-concept trials. These are active evaluations within our prospective client’s compliance infrastructures. While this diligence process results in a relatively long technology purchasing cycle, it is an important step to drive our success in extending our solutions to this area of the market. Moving next to our Market Infrastructure Technology business, we generated $56 million in net revenues during the second quarter. Importantly, we made continued progress on the deliverables within a group of particularly large client projects that we have discussed in recent quarters, reflecting our increased ability to work with clients on site. Specifically, we completed Phase 1 deliveries for all four of our largest implementations by the end of the quarter. While some of the projects have follow-on phases, we are pleased to have met these important milestones so far this year. Market Infrastructure Technology also had some exciting new relationships that were announced during the period. In May, SP, a provider of financial products and services in Brazil, announced the development of their new trading platform for digital assets, which is leveraging Nasdaq’s next-gen technology deployed as a SaaS solution in the cloud. In June, Climate Impact X, a Singapore-based marketplace for carbon credits, announced their decision to leverage Nasdaq’s SaaS-based marketplace services platform to power their new spot exchange for carbon credits, which is slated for launch in early 2023. As I noted earlier, we are actively engaging in person with our clients again and the team recently welcomed over 100 officials from 50 global marketplaces to our Annual Technology of the Future Industry Conference. The overall sentiment from clients there was incredibly encouraging, particularly as the market infrastructure operators see the advantages that our technology, including our cloud deployed solutions, can bring to their respective customers as they contemplate shifts in their operating models and look for new ways to differentiate their offerings. We remain confident in our ability to improve our organic growth through the remainder of 2022 and into 2023. Moving to our foundational marketplace businesses, our Market Services segment delivered net revenues of $310 million during the second quarter. We maximized opportunities presented by robust levels of activity through strong market share and consistent pricing strategies. The share volume traded on Nasdaq Exchanges grew by 22% compared to the prior year quarter. And trade management services revenues hit a new quarterly high of $87 million, up 7% versus the prior year, reflecting an increase in demand for connectivity and infrastructure services. At the end of June, Nasdaq’s Closing Cross set a record for the number of shares traded during the 2022 Russell U.S. Indexes Reconstitution, 3.3 billion shares, representing nearly $64 billion were executed in two seconds across Nasdaq-listed securities, a 40% increase in shares crossed from last year’s event. I am incredibly proud of our market services team on achieving yet this important milestone. The new Closing Cross record is a testament to the investments we have made in our technology and a result of the trust the team has worked diligently to build with all investors, including through some of the most volatile market periods on record. Nasdaq’s Nordic equities markets also saw strong volumes as well. The value of our shares traded on Nasdaq’s Nordic and Baltic markets for the first half of 2022 was the second highest since 2008. Finally, our Corporate Platform segment delivered revenue of $168 million in the second quarter, a 13% increase from the prior year period, driven primarily by our expanded listed issuer bases across both our U.S. and Nordic listing franchises as well as growth in demand for our IR and ESG services. Revenues in our IR and ESG services business increased 9%, underscoring the strong demand for our consultative and technology-based solutions during the period. The number of corporate clients using Nasdaq’s IR and ESG services solutions increased 6% from the prior year period, while you have also been expanding relationships of existing clients. In addition, during the second quarter, we acquired Metrio, a provider of corporate sustainability data analytics and reporting services to corporates. Metrio’s SaaS-based platform is complementary to our existing suite of IR – I am sorry, of ESG reporting solutions and will accelerate our ability to support corporate clients and their expanding sustainability management and reporting needs. Our growing expertise in all components of E S and G enable us to help our corporate clients confidently navigate the complexity of the modern capital markets, including managing their investor relationships more successfully. Turning to our Listing Services business. Revenue increased 15% to $107 million as the number of Nasdaq-listed corporate issuers, excluding SPACs, increased 9% compared to the prior year period. Nasdaq continued its competitive leadership in attracting the majority of new U.S. listings for the 34th consecutive quarter, with 38 IPOs raising a combined $2.8 billion for an 88% win rate. In Europe, our Nordic, Baltic and First North exchanges also welcomed 25 new listings. As I wrap up, I will summarize by saying that our second quarter results demonstrate how Nasdaq’s client-centric culture and diversified business model provides us the stability to perform well in different market environments. As we enter the second half of 2022, we continue to focus on broadening opportunities within three major areas that align with our strategic evolution. First, under the pillar of liquidity, we are a leader in the modernization of marketplaces through our world class technology. This includes the progress we are making as we migrate our own markets to a cloud-enabled state, including the planned migration of our MRX Options market in the fourth quarter of this year as well as our efforts to enable more of our market infrastructure technology clients to maximize cloud and other powerful technologies within their offerings. Second, under the pillar of transparency, we believe that we are incredibly well positioned to execute on our unique and substantial opportunity to be a leading ESG solutions provider. We are centered first on a foundation of serving the specific needs of corporate clients by providing advisory services along with SaaS-based data aggregation and reporting capabilities to facilitate their ability to communicate their ESG and climate strategies and progress to the investment community. And third, under the pillar of integrity, we play an important role in seeking to make the entire financial system more safe and fair for savers and investors through our powerful and diverse anti-financial crime offerings combined with our network of bank and brokerage clients. We remain relentlessly focused on advancing our strategy and we believe that Nasdaq is well-positioned to navigate the geopolitical and macroeconomic uncertainties that may persist as we move forward into the latter half of this year. And with that, I will now turn the call over to Ann to review our financial details.

Operator:

Thank you. [Operator Instructions] Our first question comes from Rich Repetto with Piper Sandler. Your line is open.

Adena Friedman:

Yes, sure. Rich, it’s great to hear from you. And I would say that with regard to the market structure discussions and proposals that we’re seeing, first of all, we have a long way to go because we haven’t yet actually seen formal proposals. But as we’re listening to Chair Gensler and understanding where he’s focused, I think that we’re, first and foremost, pleased that he does really recognize the value of exchanges and competition in lit markets. He’s really focused on strengthening the National Best Bid offer so that investors have a really solid understanding of true supply and demand in the market at all times. And he’s really focused in on transparency in terms of transparency around best execution, disclosure of execution quality, and really focusing on how to bring more orders into the lit venues because, and that’s also focused on leveling the playing field from a competitive perspective between exchanges and dark pools. So overall, we see what he’s trying to achieve, we think is beneficial to investors. I think as we look at some of the incentive structures that he’s focused on, obviously, we see great value in the rebate structure that we have on exchanges because it really incentivizes participants to put their quotes into a lit venue and make those quotes available on the national – as part of the National Best Bid offer, so the incentive structure is really literally designed to support lit quotes and lit orders. But I think that generally speaking, we still have a long way to go to understand what all the proposals will be. And then, of course, that then starts a long process around the comments in the industry engagements to determine what a final proposal would look like. So it’s just the beginning, but we are encouraged by a lot of the areas that he’s focused on.

Ann Dennison:

Sure, Rich. So just back to sort of how we think about expenses in the context of revenue growth, we align our medium-term outlook for our Solutions segment revenues is 6% to 9%. And then against that, we think about a 3% to 6% expense growth. Coming into the year, we did – we talked about and built into our guidance an additional 2% to reflect inflationary factors as well as the cost of return to office and travel, et cetera. And so that’s all built into the guidance. There is some variability in the way that things come in throughout the year. And so when you look at the second quarter, there is a couple of things, FX, taking that down and just variability and the timing of accruals. And so as we look forward to the back half of the year, we’d expect to come in depending on performance, either at the midpoint or towards the top end of our expense guidance range. And just like in past years, we’d expect an increase in 3Q and that to be even higher in 4Q, where we have some seasonality in expenses.

Rich Repetto:

Got it. That’s great color. Thank you.

Operator:

Our next question comes from Alex Kramm with UBS. Your line is open.

Adena Friedman:

Sure. Yes. Thanks, Alex. So we do provide the numbers now on that – the basis of that sub-segment, which is anti-fin crime. But if I give some color around on the two components, so there is two components to the anti-fin crime business today. One is the Verafin business, which is the Fraud and AML detection and investigation technology; and the other is our market surveillance and trade surveillance business. And both of them continue to have healthy growth and healthy engagement with clients. I think that as we look at that business, just like we do with Market Tech, we look at it over a 12-month period, not so much quarter by quarter. But it is also probably worth noting that in the second quarter of last year, Verafin had a truly outsized growth quarter. And so we’re trying – we’re looking at that in the context of the current quarter in the context of that very outsized quarter last Q2. I think in general, as you mentioned, we are seeing continued strong growth across Verafin. We expect Verafin to continue throughout the year to perform along the lines of where we – what we’ve been discussing with all of our investors since we bought Verafin. And we also are seeing really good engagement with the Tier 1 banks to try to deliver those services up market. I think the one thing about that is that the sales cycles with those Tier 1 banks are long. And we know that. I mean we obviously serve Tier 1s with our surveillance solutions. Just getting through the contracting process can take time. And that can create a little bit more variability quarter-over-quarter in terms of the growth rate there. But we see really strong performance around the SME banks, the smaller banks, the midsized banks, fin-techs and now really engaging more and more with the Tier 1 banks. With regard to the trade surveillance and market surveillance business, trade surveillance continues to have really great engagement in terms of renewing contracts, expanding contracts. We now have a crypto trading module that we’re – we have – we signed our first client around. And we also – we’re continuing to invest in that business. I think the market surveillance part of that business is a little bit of slower growth business, and it always has been, always will be at a smaller client set. And there, we had, I would say, more of a kind of a flat quarter – year-over-year quarter experience. So I think all of that adds up, Alex, to what you saw. And I think that we – but we continue to see great momentum in the business.

Adena Friedman:

Yes, no. It’s – well, it’s a combination of things. So I’m going to try to answer some of it. I’m going to hand it to Ann to make sure I give you a complete answer. But I think the first thing is investment continues to have good growth. They continue to sign new clients and continue to grow and expand what they are doing. And that shows up incrementally every quarter sequentially. Obviously, there are going to be some quarters that are stronger than others just in terms of sales and expansions of our contracts. I think, though, that what you’ve got a couple of dynamics under the surface that one is just we have now some revenue associated with running programs around secondary transactions for private equity funds, and that showed up in the first quarter. And then I think there was something else in the fourth quarter. Was it FX or...

Alex Kramm:

Okay, we can flush it out later. Thank you very much.

Operator:

Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Adena Friedman:

Sure. Okay. So I think we’re going to answer the second question first just because it’s a probably shorter answer. Go ahead, Ann.

Adena Friedman:

Yes. And so on a run rate basis going forward, I mean, obviously, it’s subject to the volumes in the futures markets. But I think that...

Adena Friedman:

In terms of the bigger question that you asked regarding organic growth, I think that the first thing I would say is we really are pleased with the performance of the business, and we do have – we provide mission-critical software and analytics solutions to corporates, to other exchanges, to banks and brokers and to investment management firms. So we do feel that our solutions really do add value, particularly with these periods of volatility. It’s really important for corporates to really understand how their investors are changing and how to engage with investors. And obviously, ESG is a growth – long-term growth trend for that. With our investment analytics, asset allocation decisions are super important, being able to manage our portfolio successfully as an asset owner is really important. And so those services are really sticky. Anti-fin crime, obviously, huge long-term trend in providing more advanced technology there. And then for market operators, you’ve got mission-critical technology that drives our business. So we feel very good about the stickiness of our products as we’re delivering them to clients. We have been investing across the franchise in terms of really delivering and improved and more modern technology solutions as we go. And I think all of that is accruing to our benefit in terms of the growth rate. But we also – there are a couple of things to think about in terms of their solutions segments. I think that, as we think about going forward, we have really strong growth in our listings business because we still have 9% more listed companies today than we had 1 year ago. Based on the IPO environment we’re seeing today, that could be something that slows into 2023, that growth rate in our listings business. But the flip side of that is we now have 9% more companies. And as they roll off their IPO packages, we’d like to make sure that we secure them as paying customers for our IR and ESG services. So that kind of gives us the ability to continue to grow there. And beyond that, I think you’re right on the Market Infrastructure Technology side, Brian, that I do feel like we’re really engaging really well with clients today. They are focused on the future of their markets. They are focused on how they bring some of this latest technology into their marketplaces. And the conversations are going from kind of theoretical to more concrete. And then on the back of that, we also, with everyone getting back together, we’re able to identify new market or new markets that want to form, and we’ve signed some really interesting and innovative markets in the quarter. So we do feel like that has a lot of momentum as we’re going into the second half of this year and into 2023.

Adena Friedman:

I mean, we – I would say, I’m an external optimist, but I do remain optimistic that we’re really – we are delivering really great value to the clients. And so we’d like to continue that. I think we just know that there are always different dynamics we have to consider. And so therefore, we’re maintaining our overall medium-term outlook to the 6% to 9%. But obviously, we have been performing better than that.

Adena Friedman:

Thanks.

Alexander Blostein:

Hi, good morning, everybody. Hello.

Ann Dennison:

Hi, Alex.

Adena Friedman:

Well, sure. Well, I think the first thing we should note is we were pleased with the court decision in understanding the critical value of the exchanges in terms of overseeing the SIP plans and overseeing the consolidated tape. So, we are pleased with that. And I think infrastructure [ph] over consolidated data, which is a core part of the last – as you said, the last SEC rule proposal really means that the governance of that remains with the changes. But we also recognize we want to meet the needs of our clients. So, I think Alex, that there are lots of – there are a lot of components to that rule that was approved by the SEC. And I think that is slowly going to start to move forward now that the governance is kind of settled. But it will take some time because there were like multiple elements of that in terms of odd lots as well as the SIP data as well as multiple consolidators, and then they are like it’s a phase-in over multiple years. So, I don’t think we necessarily really fully understand the impact of that, but we also are engaging very much with the plans to figure out how we want to look at pricing. We have a pricing proposal with the SEC right now for them to consider. And we are also considering our role as a consolidator and the multiple consolidator model because that could be an opportunity for us. And so I think that it’s going to be a slow-moving train, it is going to start to move forward now, though, so that we – I think because the governance structure is set, and we will just have to see how that goes over the next several years.

Adena Friedman:

Sure.

Daniel Fannon:

Thanks. Good morning. I wanted to follow-up on market tech. And the margin there has moved around a lot. I wanted to see as you – or ask about whether you think you have seen the lows there and we can kind of consistently see margins kind of move higher. And then within that context, thinking about the normal seasonality of the legacy market tech business in terms of the fourth quarter with change orders and other things based on some of the dialogue you have been talking about with clients, should we assume some normalization of that in 2022?

Daniel Fannon:

Thank you.

Operator:

Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Adena Friedman:

Good morning.

Adena Friedman:

Well, I think that we have been – we have had very stable pricing in our auctions for a long time. I think there were some changes that our competitors did a couple of years ago in that space. We have been very, very stable there and I think that we continue to think we provide a very, very high value in the opening and closing auctions. We think we are paid for that value. And I think our clients appreciate the execution quality they get. So, we see that more as a steady as we go because of the fact that we provide a great service, and we do feel like that we are rewarded for that. Obviously, we are really excited about what happened with the Russell, because that was a – that’s a big event, and then you have the quarterly – the quad witches, you have other rebalances. Those are big events for us. We invest a lot in our infrastructure to support those events. Those are really – those are surge moments and we feel great about our ability to execute in those moments. But that’s – we invest a lot to make that happen. And I think therefore, we are paid appropriately for that. But that’s kind of how we are looking at it right now.

Operator:

Our next question comes from Kyle Voigt with KBW. Your line is open.

Adena Friedman:

Sure. I mean Ann, do you want to answer the first part of the question in terms of…

Adena Friedman:

Yes. And I mean I think the one thing we do say is that we do like our investment grade rating. And so we would work with the rating agencies to understand, looking at deals and making sure that we factor in our investment grade rating as we are looking at and financing deals. So, that’s how we generally look at it. In terms of the M&A environment, it is definitely a changing environment right now. I also think it takes time for companies to recognize what – in a changing market cap environment, it takes time for companies to think – to understand what their true value is over time. Like is the market going to recover and they feel that they are going to be able to grow their way into their market cap very quickly or their old market cap very quickly, or are they understanding that this might be just a different longer term environment. And I think that definitely factors into receptivity to M&A, both in the private markets and the public markets. We are definitely seeing in the private markets, generally speaking, reductions in valuations, but that’s kind of in line with the public markets or maybe not quite so much, not quite as dramatic. And – but again, that’s one thing to have that as a point in time reference for a CEO. It’s another thing to think that that’s the value that they should sell their company at. So, I still think it’s a very dynamic environment. But I think, Kyle, we are always evaluating opportunistic ways for us to continue to drive our strategy forward. But we are really focused on organic growth. I mean that is the vast majority of our focus inside of Nasdaq, is how we want to continue to sustain our organic growth with us also looking at M&A, like small deals like Metrio and other things that we might do is small to medium bolt-ons as we continue to grow out our business.

Adena Friedman:

Sure.

Michael Cyprys:

Hi. Good morning. Just a question on ESG. I was hoping you might be able to remind us how much that contributes in revenue today given some of the acquisitions that you have done. And when you look at the offerings that you have on the ESG side, which product services or on ESG, do you think would be the most meaningful to growth in ESG revenues at Nasdaq? And as you think about the offerings that you have on that side, how does that stack up relative to where you would like to be in the marketplace with respect to ESG? Thank you.

Michael Cyprys:

Alright. Thank you.

Operator:

Our next question comes from Gautam Sawant with Credit Suisse. Your line is open.

Adena Friedman:

Sure. I mean I think that we obviously don’t provide specific guidance in any of our businesses. But I would say in our SaaS businesses, the general – what we have seen so far is that we have not seen any material changes in buying behaviors across our SaaS-oriented businesses, and that includes investment analytics, our IR and ESG services, our anti-financial crime solutions and some of the newer sales in our market tech business. And so I think that we really don’t see any sort of significant changes in behaviors there. But as we go into a recessionary environment and that’s hard to predict right now, but if we were to go into that and have that a sustained economic environment that we are navigating through in 2023, I think that we would still look at the following. It is our products are very sticky because of the fact they provide such important services to clients to navigate the capital markets in every environment. In some cases, they are technology that are the capital markets. And so we do think they are very sticky. I think in terms of buying decisions in a protracted recessionary environment, some of those buying decisions will take longer. We could have companies, as you talked about, that could have some M&A and have some on the edges, some changes in their corporate status, and that will obviously have some effect on retention. But again, we are talking very high retention products, very, very important products, very sticky products. In terms of M&A, though, in the financial industry, generally, if we look back over prior recessionary periods, you don’t actually see a lot of M&A among banks and among asset managers as a general matter. On the edges, yes, but we are talking – we have 3,000 banks and we have 3,000 asset managers that use our services. So, it’s just not going to be a material part of the calculus in terms of our services just based on the breadth and depth of the companies we support. And also, by the way, I think it’s 10,000 corporate clients that use our IR and ESG services. So, we – just by the scale of who we are, the M&A is not going to be a huge factor. But we will certainly provide you updates if we are seeing changes there.

Adena Friedman:

Yes. I think that it’s interesting. Certainly, we have been doing the right things to make sure that we attract and retain great talent. And I feel very good about how we’ve been managing our compensation in this competitive environment. We have, I would say, in the last six weeks to eight weeks, started to see more people really wanting to come to Nasdaq, frankly. We are a really strong company and we have a strong financial profile. And I think that some people who left the company are coming back, employees that are in some of the more hard hit parts of the technology industry are understanding the benefits of working in a place like Nasdaq. And so I don’t know yet, Gautam, how much that might impact comp, but I would say that we feel good about our ability to attract great talent here.

Adena Friedman:

Sure.

Owen Lau:

Good morning and thank you for taking my question. Could you please give us more color on your migration into the cloud. And I think Adena, you mentioned the first migration will be completed in the fourth quarter this year. Could you please talk about what have you learned so far in this process? And how does that impact your process to migrate other systems in the future? Thank you.

Owen Lau:

Got it. Thank you very much.

Operator:

Thank you. And that’s all the time we have for questions. I would like to turn the call back over to Adena Friedman for closing remarks.

Operator:

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Operator:

Good day, and thank you for standing by. Welcome to the Nasdaq First Quarter 2022 Results Conference Call. After the presentation, there will be a question-and-answer session. [Operator Instructions]. I'd now like to hand the conference over to Ed Ditmire, Senior Vice President of Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Ed, and good morning, everyone, and thank you for joining us. I'd like to begin my remarks today by addressing the current market landscape. As I've noted in past calls, the Nasdaq team has become familiar with how unpredictable today's operating environment can be. The first quarter of 2022 was certainly no different, given the dynamic geopolitical and economic factors we experienced during the period. As I've noted in prior public comments, the war in Ukraine is a terrible tragedy, and we stand with the greater business community urgently calling for peace. Nasdaq has a proud and long-standing position in Europe, which includes 7 markets we operate across the Nordic and Baltic countries, specifically Denmark, Estonia, Finland, Iceland, Latvia, Lithuania and Sweden. We've been extremely diligent in monitoring the threat environment in Europe and across our global operations to protect our employees and to ensure the resiliency of our markets and client solutions. Our revenue exposure to Russian clients was de minimis, and we remain committed to ensuring full compliance with all relevant sanctions. In addition, our global workforce is highly engaged in humanitarian and philanthropic efforts to support the needs of those impacted by the senseless war. It fills me with immense pride to see the outpouring of support across our employee base. Regarding the backdrop we are operating against, our corporate clients and our investor clients are navigating through a very dynamic environment, where strong economic growth has been accompanied with significant inflation, continued supply chain and labor shortage challenges and increasing geopolitical impacts. This environment creates volatility in markets, which tends to be a volume driver, and we have continued to experience strong volumes across our U.S. and European markets. It also creates an uncertain landscape for investors to navigate, resulting in a slowdown in capital raising activities, including IPOs. And depending on the way the markets are moving, it creates interesting dynamics for our index business. This quarter, the drop in market cap was offset partially by inflows into our index products and strong index futures volumes. Looking beyond the direct market impacts, because we offer solutions that help our clients navigate through these uncertain times, it's actually increased our client engagement in 3 key areas where we have secular growth. Our bank clients are managing increasingly complex geopolitical risks, which results in strong demand for advanced anti-financial crime solutions, which we offer with Verafin. Asset owners, including pensions, sovereign wealth funds and endowments, are making quick asset allocation changes and must manage their portfolios very carefully, which increases their reliance on our eVestment and Solovis offerings. On the corporate side, our clients are navigating through a dynamic ESG environment, which drives demand for our ESG advisory and reporting solutions. Overall, our diversified business model gives us the means to be able to manage successfully in this environment recognizing, of course, that there are a lot of different forces at play. And in that context, let me briefly address the inflation-related pressures, which are certainly factors we are navigating as is the broader corporate community. On the revenue side, we are fortunate to benefit from a highly diversified revenue mix based on providing mission-critical solutions that support our clients and the broader financial system around the world. We take a long-term approach to value creation for our shareholders in the context of serving our clients, and we will continue to manage that balance thoughtfully. In addition, we are actively managing the evolution of inflationary pressures across our expense base. Our current expense guidance reflects the near-term actions we have taken to address the challenges of recruiting and retaining a highly skilled team in today's economy, and we'll continue to monitor the situation over time. Our team's focus on secular opportunities to drive organic growth as well as our business model's reliance on recurring revenue components has enabled Nasdaq to continue our track record of growth as we execute against our longer-term objectives. The record net revenue we achieved in the quarter against this very dynamic backdrop illustrates the strength of Nasdaq's business model. Next, I'd like to take a brief moment to thank 2 of our senior leaders for their years of impactful contributions to Nasdaq following the announcements that they will be moving on to new chapters in their lives. First, I want to congratulate Lars Ottersgard for his 16 years of leading our Market Technology business. During his tenure, he led a dramatic expansion in the capabilities and client network for the business and helped advance our ongoing transition to a more scalable SaaS-focused orientation. I also want to thank Lauren Dillard, who in her 3 years at Nasdaq delivered tremendous impact in strategically repositioning the Investment Intelligence business that now features a majority of revenue contribution from higher growth index and analytics products. We're incredibly excited about the strong successors we announced during the quarter for the market technology and Investment and Intelligence segments. Specifically, Jamie King, who joined us from Verafin, will lead the anti-financial crime technology business. Roland Chai, who joined in Nasdaq in 2020, will lead the market infrastructure technology business. Those 2 businesses will continue to roll out to form the Market Technology segment. Oliver Albers, a long-standing Nasdaq executive will lead our Investment Intelligence segment. All 3 are respected leaders in their fields with deep industry expertise and a proven track record of success. Let's now turn to our results. I'm very pleased to report Nasdaq's strong financial performance for the first quarter of 2022. We achieved a record $892 million in net revenues, a 5% increase compared to what was itself a very strong prior year period when the company previously set a quarterly record on trading revenues. Our total annualized recurring revenue, or ARR, increased 9% to $1.91 billion. Annualized SaaS revenues totaled $655 million in the first quarter of 2022, representing 34% of our total company ARR, reflecting particularly strong growth in our anti-financial crime and investment analytics businesses. Our recurring revenues and their consistent growth provide a powerful starting point for our overall performance, but we also delivered strong results across both index licensing and trading revenues. This solid start to the year positions us well to address the geopolitical and economic uncertainties that may persist as we move forward in 2022. Turning next to specific highlights from our business segments. Our Solutions segment businesses delivered combined total revenue of $576 million in the first quarter, a 15% increase from the prior year period, driven from several of our businesses, including our anti-financial crime offerings, our index and investment analytics offerings; the expansion of our listed issuer base as well as strong demand for our IR and ESG services. Excluding FX and the partial quarter impact of the Verafin acquisition, we achieved organic growth of 13% across our solutions segments. In our Investment Intelligence segment, we delivered $284 million in total net revenue in the first quarter, an 11% increase from the prior year period, with contributions across the business during the quarter. Revenue in our market data business grew by 2% versus the prior year period. Our strategy for geographic expansion, particularly in the APAC region, remains strong. In our Index business, we saw revenue growth of $20 million or 20% versus the prior year period, driven principally by growth in ETP assets, which saw positive net flows of $75 billion over the last 12 months, including meaningful inflows during the especially volatile first quarter itself. We launched 55 ETFs tracking Nasdaq indexes over the last 12 months, which in turn accumulated $2.5 billion in assets through the end of the quarter. Notable launches outside the U.S. include the Mara Philex Semiconductor Index ETP and the Samsung Nasdaq 100 ETP. In addition, we created and launched the first index representing the pricing of carbon removal credits during the first quarter based on our activity on our Puro Earth carbon removal marketplace. Moving from the asset-based index revenues to transactional, the volumes of Nasdaq licensed index futures were particularly strong with a record of over 147 million future contracts tied to the Nasdaq 100 traded in the quarter. And in our Investment Analytics business, revenues grew 13% from the prior year period driven by the sequential impact of strong sales across asset owners, asset managers and private markets throughout 2021. We are excited about the appointment of Oliver Albers to the Executive Vice President of Investment Intelligence. As a 20-plus year veteran of Nasdaq, Oliver is an experienced, results-oriented leader, who is instrumental in supporting Lauren in strategically repositioning Nasdaq's Investment Intelligence segment into the higher growth, more technology-enabled business you see today. Turning next to our Market Technology segment. We delivered $124 million in total net revenues in the first quarter, a 24% increase from the prior year period. This is primarily driven by the inclusion of revenues from Verafin in our results year-over-year and more broadly, continued organic growth in the broader anti-financial crime technology business. Our anti-financial crime technology business had a very strong first quarter, achieving 71% increase in revenues versus the prior year period, partially driven by the partial quarter inclusion of Verafin in the prior year period, the phasing out of revenue write-down associated with the acquisition as well as by strong organic growth with the majority of that coming from the fraud and anti-money laundering, which we call FRAML Solutions. The growth was driven by both new sales and expanded relationships within our existing client base. We have made meaningful progress in the last 12 months on our objective of helping Verafin expand its client franchise into larger Tier 1 and Tier 2 banks as well as to innovative fintech companies, all of which account for half of the industry spend. Since we closed on the acquisition, we have signed 10 new fintech clients and 2 new Tier 1 and Tier 2 banks with several ports of concepts currently underway at major Tier 1 banks. We also launched our first digital assets module for traditional banks and virtual asset service providers, or otherwise known as VAS, including crypto exchanges to detect and investigate fraud and money laundering within digital wallets and in transactions between traditional fiat and digital currencies. We are committed to supporting the financial ecosystem through its digital transformation by innovating quickly to deliver digital-ready versions of our advanced crime fighting solutions. And as a recent example, we responded quickly to the Russian invasion of Ukraine by expanding our sanctions product to include new sanctions agents for our bank clients. Verafin is meeting the high expectations we set at the time of the acquisition, while at the same time, the broader Nasdaq team is learning from Verafin in important ways. Their operational expertise as an all SaaS provider is invaluable to us as we build upon and improve our effectiveness in offering our expanded suite of other SaaS offerings. By bringing together all of Nasdaq's anti-financial crime solutions, including Verafin and our market and trade surveillance solutions under Jamie King, the CEO and Co-Founder of Verafin, we have an incredible opportunity to maximize those cross-product synergies. We're excited to have Jamie as the new Executive Vice President of Nasdaq's ASC business as he leads the future of Nasdaq's high-impact, high-growth solutions that focus on fighting crime and ensuring the integrity of the financial industry. Within our market infrastructure technology business, the first quarter results continue to reflect the revenue headwinds that we have communicated to investors over the past 2 years since COVID began. As we discussed on prior calls, these headwinds have stemmed from factors that include logistical challenges the pandemic presented to sales, installation and change request work that often occurred on site, as well as some specific client delivery challenges in the post-trade space. We are pleased that 2 of our post-trade clients successfully went live in the beginning of the second quarter with the first phase of their implementations, and we continue to make good progress in all of our major implementation projects. As I said last quarter, as we reengage in person with our clients, we're starting to see these revenue headwinds recede. With the healthy order intake trends in both 2021 and early 2022, we entered 2022 with an opportunity to improve the organic growth of our market infrastructure solutions as we progress through the year and into 2023. We have appointed Roland Chi as the new Executive Vice President and leader of our Market Infrastructure Technology business. Roland has been serving as our Chief Risk Officer. And just as importantly, he spent more than a decade leading key technology product areas at several of the world's leading exchange businesses and was, in fact, the customer himself of Nasdaq's marketplace technology. Roland has very specific mandates to strengthen, deepen and progress our client relationships and to continue to innovate across our product suite. I'm excited about this transition as it comes at a time when Nasdaq has never had more to offer to our technology clients, including our next-generation, cloud-native trade life cycle solutions, a newly built cloud-based trading risk management solution and as well as solutions to meet the needs of digital asset marketplaces. Moving to our foundational marketplace businesses. Our Market Services segment delivered net revenues of $315 million during the first quarter, its second highest quarter ever, second only to Q1 2021. Our market share in U.S. equity saw year-over-year and sequential quarterly improvement, which resulted from an industry uptick in on-exchange trading as well as early success increasing the demand for some of our unique functionalities. Equity derivatives set a new quarterly net revenue high, up 6%, maintaining our market share in U.S. options in a very busy period while realizing improved capture. Our U.S. options business saw average daily number of contracts traded of $12.8 million during the first quarter and led exchanges with a 32% market share. And in our Nordic and Baltic markets, equities markets saw robust volumes during the period, with the value of shares traded setting a decade high of EUR 289 billion. Finally, our Corporate Platform segment delivered record net revenue of $168 million in the first quarter, a 15% increase from the prior year period, driven primarily by our continued leadership in new listings across our U.S. and European markets as well as growth in demand for our IR and ESG services. We saw particularly strong growth in Nasdaq IR Insight and IR advisory offerings as well as across our Government Solutions suite, including our Board meeting management and advisory offerings and Nasdaq One Report, our ESG reporting workflow solution. Despite the slower start to the year for IPOs, Nasdaq continued its competitive leadership in attracting 70 total listings in the U.S. during the quarter, raising $9 billion for an 86% win rate. we listed 100% of all operating company IPOs during the quarter and 80% of stack listings. In Europe, our Nordic, Baltic and First North exchanges welcomed 19 new listings. As I wrap up, I will summarize by saying that our first quarter results demonstrate how Nasdaq's performance-driven culture and diversified business model enables the company to perform well in different data-driven environments. As a result, we will continue to make focused investments in our businesses to support sustainable growth and expansion of our impact to the financial industry, while also positioning us well as we work towards our medium-term goals. We remain relentlessly focused on advancing our strategy, and we believe that Nasdaq is well positioned to address the geopolitical and economic uncertainties that may persist as we move forward in 2022. With that, I'll now turn the call over to Ann to review the financial details.

Operator:

[Operator Instructions]. Our first question comes from Rich Repetto with Piper Sandler.

Adena Friedman:

Sure. Yes. Why don't I actually start with that and then we'll talk about anti-fincrime. So quarter-over-quarter, the fourth quarter is a seasonally high quarter for us, pretty much every year in market infrastructure technology just because we tend to have a lot of, what we call, change requests and other projects that we try to conclude during the quarter. Which then allows us to recognize the revenue in that quarter. And so that tends to be just a seasonally high quarter for us. So that's a general trend. But in general, but if I look at the market infrastructure technology business more generally, Rich, I think that as you mentioned, we still are facing the impacts of the pandemic just in terms of the level of client engagement we could have with our clients during 2020 and part of 2021. We did -- I think we are starting to show a recovery in order intakes in the level of engagement we have with our clients. We're back on the road. Roland has been traveling the world visiting our clients again, as has our sales and service teams. So I feel like we really are getting back to a more normal level of engagement. We're also making good progress on those post-trade implementations. As I mentioned in April, we've had 2 of our clients go live with first phases of that. So that helps also in terms of us getting past those projects, being able to deploy some of those people to other projects, but also just continuing the progress on those big implementations across the franchise. So we feel like we're getting ourselves back into a more normal cadence but it will take time for us to show that through the revenue line. And I think this quarter kind of reflects that. With regard to the anti-fincrime business, as you mentioned, the sanctions and other just general risks that the financial system has right now, I think, is definitely driving up an interest in making sure that companies have the most advanced solutions for anti-fin crime, that I think it is driving some of the interest that we have from the largest banks, and that's why we've launched a couple of proofs of concepts with some banks and we have others right in the very near-term pipeline for that so that they can start to understand how we can help them solve their problems with, I think, in a more advanced way. And then the sanctions, that capability, what our -- what the team does is amazing. They have a weekly release cycle. So when the sanctions hit, they were quickly able to update and upgrade the sanction module that we've had in the product for a while to really reflect the newest sanctions, and they're rolling that out to the clients right now. So hopefully, that helps give the color that you're looking for.

Adena Friedman:

Yes. We definitely have a backlog. I think that right now, there are -- if we look just in the SEC filings, we track the S-1 filings. And right now, there are 270 active S-1 filings that have -- that are on file to go to Nasdaq. I think that that's versus 222 filings at the same time last year. So the number of companies that are looking to go out into the public markets remains really strong. We have great engagement with some really interesting and large-cap IPO opportunities. But they need to feel that the environment is the right environment to go public and that investors are ready to take new risks on new issuers. And I think that's where, right now, they're just tracking that. I think that the markets are volatile, and it makes it harder for investors to predict the future, which makes it harder for them to take those risks. But we are hopeful that we might see a couple of bear listings come out later in this quarter, but we'll have to see how the markets -- kind of how the markets behave and whether or not it's an inviting environment for them.

Craig Siegenthaler:

Hope you're all doing well.

Craig Siegenthaler:

I am good. So I had a follow-up to Rich's question on market infrastructure technology. When do you expect the logistical headwinds to fade? And then what type of acceleration revenues could you experience as more clients go live following more normalization in the working environment and understand that the sales cycles can be longer in this business and contract wins can be lumpy, too.

Craig Siegenthaler:

Very helpful. For my follow-up, it was nice to see the 40% year-on-year increase in futures and options contracts on the Nasdaq indexes. Can you quantify what this equates to for revenues within index? And also how we should think about this growth trajectory as more investors trade options based on Nasdaq indexes and maybe also a refresher in terms of how the accelerator math works.

Ann Dennison:

Sure. So Craig, on your question about how much. So we don't give specificity at that level. But what I can say is if you look at the index business holistically, about 2/3 of that is asset based and the other 1/3 is the futures, plus some index data. And just on your question related to the accelerator. So I think we've talked about this coming out of the fourth quarter. In our contract, we have an accelerator that kicks in when we hit certain levels during the year. For the past 2 years, that's happened sort of midyear, end of June-ish. And so we did see a drop. And I think the number we shared coming out of fourth quarter was in reduction related to the accelerator coming off in the first quarter. And then assuming volumes stay at the same level as they were last year, we'd see that sort of pop up towards the middle of the year.

Operator:

Our next question comes from Owen Lau with Oppenheimer.

Adena Friedman:

Sure. Yes. I think that it really does just reflect good demand. Well, there's 2 things actually

Adena Friedman:

Yes, sure. So you're right. So we have I think it's somewhere in the range of about a dozen crypto exchanges that leverage our technology for trading and then for surveillance. And then we also, as I mentioned, the anti-financial crime team has built a module that's specific to digital assets to help both traditional banks and Bats really help manage their anti-fincrime efforts. So we're excited that we're rolling that out in the second quarter. And then also we have our crypto index products that we've launched. And so we continue to find ways to engage, Owen, in the crypto space. And we're continuing to watch that space in general, like how it's evolving, how it's maturing, how much institutional interest is coming in to understand how we can continue to expand our offerings over time.

Alexander Kramm:

I want to ask a question about trading for one. I guess you're joining a lot of other companies with the announced stock split today. But there's a lot of other Nasdaq-listed companies that are much bigger in terms of trading volumes that have also announced splitting. So I guess this is a no-brainer question. But obviously, I would assume that helps your Nasdaq-listed volumes on the equity side. So maybe you can just talk to that. But then more importantly, I would be interested in your view on what this means for options volumes. I guess lower share price probably means more contracts traded. But I think there's also this narrative that people have been using options to get into higher-priced stocks in a cheaper way. So just wondering if you've done any work on what stock split from that magnitude could mean on both equities and options.

Alexander Kramm:

Okay. Helpful. Secondly, on Verafin and financial crime. I think you talked about those businesses being strong organically. Can you give us some specific numbers, either how Verafin did or how financial crime in total did organically year-over-year, still at 20%, 30% growth rates, I think that we've seen or where you're tracking?

Ann Dennison:

Sure. So when we look at -- you look at AFC in total, that includes both Verafin and our trade and market surveillance businesses, the organic growth there was 31%. If you sort of adjust that for the deferred revenue write-down, the organic growth versus last year first quarter was 17%. So it's a very healthy combined numbers in that business.

Operator:

Our next question comes from Dan Fannon with Jefferies.

Adena Friedman:

Sure. Yes. So on equities in the U.S., I think there are 2 forces at play there. One is just a change in the mix of trading. So we had more retail trading last year first quarter, more institutional trading this year first quarter, and that drives just the different behaviors in the markets. I mean that, I think, has actually resulted in more intraday volumes, which then has just a lower capture rate to it. So that's one component, just the mix of trading. The second is, though, that we have been focused in on trying to drive volumes into the markets in certain ways. We do, as you know, it's like a monthly activity for us to look at pricing and how we use pricing to drive volumes. And so we did some programs at the beginning of the quarter that are, as I mentioned before, to increase participation in certain parts of our market functionalities. And I think that that's also showing up in terms of some incentives we put in to bring up our share, which has started to show some -- bear some fruit as well. In options, on the other hand, -- you saw -- I think we've mentioned in the fourth quarter, we have this payment we make to OCC. And I think you go at the end of the year, they have a fee holiday, which then drives down what our stated capture was in Q4. And then we saw -- we expect it to come up a little bit in Q1, which it did. And then we also had a little bit more institute, again, more institutional involvement in the options markets less retail and retail tends to come in at a lower price. So our options capture went up a little bit just by that change in mix.

Ann Dennison:

So Dan, I think it's fairly straightforward. You can think about it. We talk about our medium-term outlook for the Solutions segment in the aggregate as being at 6% to 9% growth. And so this quarter, collectively, we put up 13% organic growth, so well above that 6% to 9%. And so that's how we think about it.

Operator:

Our next question comes from Alex Blostein with Goldman Sachs.

Adena Friedman:

Yes. I mean I would say we've been managing through a really dynamic auctions environment for a long time. So I think that there are less for like 13 options exchanges, 14 options exchanges. So having additional options exchanges come in is something that's just part of the ecosystem today. I think that in terms of how we manage that, as you said, we are really thoughtful about how -- what kind of flow that we think is really optimally attractive to us in terms of the types of markets we have. So we really look at it. We have 6 options exchanges. We can have different types of investors and participants in each of those exchanges. We think about pricing on each of those exchanges individually. And we can basically allow for the most complex options traders to come in through Philex and IC and the most basic retail traders to come in through GMX and MRx and others. So we try really hard, Alex, to make sure that we are balancing what we're trying to achieve with our platforms, what kind of investors we want to have in our platforms and how we serve them the right way. I think that the newer exchanges that are coming in are really competing really on those lower-end platforms that have the lowest capture, but they don't necessarily serve the more complex traders. I think the last thing I would say is part of the thing we also are focused on is our proprietary product franchise because we do think that we have some really interesting assets that we can bring into our options markets or having our options markets that really do have a different characteristic to them. So in addition to competing really actively, and we always will and we do that quite well, I think that we also are really trying to build up our proprietary product franchise as well.

Brian Bedell:

Maybe just focus back on anti-financial crime. Now sort of with more sort of a combination of the anti -- the legacy anti-financial crime businesses with Verafin under Jamie, and as you look at those cross-product synergies and also the organic growth that you've talked about with more crypto surveillance on digital wallets and obviously, growth in sanctions of agents monitoring, can you give us a sense for that whole unit? Obviously, Verafin was growing at 30%. But just for that entire unit combined with the synergies if -- what type of growth outlook would you see in the medium term given sort of the improvement in that since you did the Verafin acquisition. I know when you did it at that time, there was this -- it was a -- that segment was projected to grow at around a 17% rate at least industry-wide. Just getting a sense -- trying to get a sense of whether you think that rate could be moderately faster for Nasdaq over the next 2 to 3 years?

Brian Bedell:

Okay. That's fair enough. And then just on timing and maybe you may or may not be able to answer this. But on the infrastructure market side, given all of the headwinds that you talked about and now lapping that contract, do you think you can grow revenue in that segment year-over-year by the third quarter through the fourth quarter? And then if I can just ask also just on the crypto index licenses that you talked about. Will that revenue be seen in the index licensing part of Investment Intelligence? And is that material yet? Or is that more of a longer-term growth development?

Operator:

[Operator Instructions]. Our next question comes from Michael Cyprys with Morgan Stanley.

Adena Friedman:

Sure. Yes. Hey, Michael. So thanks for asking about that because we didn't mention that in the script. But it's moving along quite well. I think that we are heavily engaged with AWS. They're deploying their outpost solution into our data center. And on May 3, I think it is, that we're going to have our groundbreaking at Carteret because we're with Equinix and our partners there because we are breaking ground to expand that data center. That data center expansion will be done in 2024, which then allows us to offer more capabilities to our clients, expand the AWS presence and make it so that we can continue to really create that private local zone that is available to our ecosystem of market participants and investment clients beyond what we do today. But that's -- it's going to take a couple of years for that to come online. But in the meantime, we are -- AWS is deeply engaged with our engineering team, our infrastructure team and our development team to make sure that we are on track with our MRx migration. And as we mentioned, our goal is to have MRx, which is one of our options exchanges, migrate over to the Outpost implementation and on to our new Fusion platform before the end of this year. And so we're on track with that. There aren't any major challenges that I think that are impeding our progress at all. We're learning as we go for sure, but it's been a spectacular partnership so far.

Kyle Voigt:

Just wondering if you could tell us if you make any fee changes in the listings business or other notable changes across your other nontransaction businesses to start 2022 and if inflation continues to run at elevated levels, I'm just wondering if you consider adjusting price more than you have historically in the form of CPI adjustments or other pricing adjustments.

Operator:

Our next question comes from Gautam Sawant with Credit Suisse.

Adena Friedman:

Yes. So that was actually a technology agreement that we signed with the client in Brazil. So we actually have a carbon removal marketplace that we have a 70% ownership in called Curo Earth, which is based in Finland, but it is a global platform. The largest companies in the world rely upon us to find really high-quality carbon removal credits and suppliers of that. And I think we do an excellent job, and it's really been a really interesting area for us. It's very small. So we don't talk a lot about it yet. But it is certainly a growth engine for us in Europe to help companies around the world manage their carbon output through high-quality industrial carbon removals, and we're also moving into nature-based car removals. So that's an area as an operator, we're really engaged in. And then we also, of course, can provide the same technology we're using for our markets to open up those opportunities for other markets, and we are engaged with other clients, some of our tech clients on their ambitions to launch these carbon offset markets. So I think you'll see more of that over time. We just -- it's very early days, though. All right. Well, I want to say I think that's all the questions. So thank you very much for your time today. And in closing, Nasdaq's first quarter results demonstrate how we're off to a strong start in 2022, and I look forward to our continued discussions throughout the year regarding our progress. So thank you very much, and have a great day.

Operator:

Good day and thank you for standing by. Welcome to the Nasdaq Fourth Quarter 2021 Results Conference Call. [Operator Instructions] Please be advised today's conference may be recorded. [Operator Instructions] I'd now like to hand the conference over to your host today, Ed Ditmire, Senior Vice President of Investor Relations. Please go ahead.

Adena Friedman:

Thank you, Ed. And good morning, everyone. Thank you for joining us. Let me first note how proud I am of the resilience of Nasdaq's business, the nimbleness and dedication of our global team and the trusted relationships we have with our clients. We are certainly familiar with how unpredictable today's operating environment can be as we continue to navigate a dynamic pandemic and economic landscape. Before I turn to our performance, I would briefly like to address the current market environment. While the markets have experienced increased levels of volatility since the start of the year, we maintain a positive overall economic outlook going into 2022 as the underlying economy continues to have the ingredients for continued growth. Notably, consumer demand for products and services remains high. The ongoing digital transformation of industry continues to drive long-term demand for advanced software and other technology and market innovations. And the resulting employment environment is very strong. That said, there are several factors driving the current market volatility. Notably, due to the cyclical and structural issues we are entering 2022 with a tight labor market and supply chain challenges, both of which are contributing to inflationary pressures. Those pressures are then creating uncertainty around the pace and rate of monetary policy adjustments. Additionally, there are broader geopolitical challenges and continued pandemic impacts that are adding to the macro uncertainty. So, while our overall outlook remains positive, we expect the confluence of market-driven factors, and macroeconomic and political factors to continue to drive volatility over the near term. Within that context, we also remain confident in the strength and resilience of our business. For example, we've seen significantly higher trading volumes and within the last week, the industry processed and Nasdaq processed a new record number of messages in a single trading day. We continue to have a healthy pipeline of companies expecting to tap the public markets during 2022. In fact, we have more than double the number of S1s on file with the SEC compared to the prior year period, although market volatility could cause some delays to IPO, timing, something we are monitoring closely. And in our index business, we expect index asset values to experience some impact associated with various market levels and investor appetite for products tracking our indexes, but also the benefit from higher futures trading volume due to the use of our core indexes in market hedging strategies. The diversification of our business over the past number of years has created a flywheel effect between our foundational U.S. and European marketplaces and the technology solutions we deliver to thousands of clients across public companies, investment managers, and banks, as well as the 100 plus market infrastructure operators, all of whom rely on our mission critical software to navigate the financial system successfully. This is especially the case during these periods of heightened market turbulence. We help asset owners rebalance their portfolios and manage asset allocation decisions. We enable banks and brokers to prevent financial crime while handling increased investor activity. We provide critical investor relations insights to corporate clients to understand changes in their investor base. And we empower exchanges around the world to handle the market volumes and volatility. Nasdaq is there as a critical partner across the financial markets and our business has demonstrated time and again, that we can achieve success in the face of these types of backdrops. I'm confident this time will be no different. Let's now turn to our results. My remarks today will focus on the following areas

Operator:

[Operator Instructions] Our first question comes from Rich Repetto with Piper Sandler.

Adena Friedman:

Hey, Rich.

Adena Friedman:

Well, first of all, Rich, we welcome all of your questions. So thank you for that, and thanks for the mention on AWS. But Ann is going to go ahead and give you some color on that.