NASDAQ, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Macro Environment: Major Central Banks lowering rates, US trending towards soft landing with expected rate cuts. Positive economic trends provide constructive potential for trading activity and IPO rebound.
• Financial Results: Strong quarter with 10% Y/Y growth in net revenues and solutions revenue, ARR grew 8% to $2.7 billion, operating margin increased to 54%.
• Business Highlights: Capital Access Platforms saw growth in Index and Data and Listings; Financial Technology had strong ARR growth across segments; Market Services had 13% revenue growth.
• Strategic Priorities: Integrate Adenza with 80% of net expense synergies achieved; innovate with AI, launching products like Nasdaq Verafin's Targeted Topology Analytics; accelerate cross-sells with over 10% of Fintech pipeline as cross sell opportunities.

Segment Performance

• Capital Access Platform: Delivered revenue of $501 million, up 9%. Data and Listings revenue was up 1% with flat ARR. Index revenue was up 26% in the third quarter, driven by $62 billion of organic net inflows. Workflow and Insights revenue was up 3% with ARR growth of 5%.
• Financial Technology: ARR growth across the division was 14%, including 24% in Financial Crime Management Technology, 15% in the combined AxiomSL and Calypso solutions and 11% in combined Market Technology and Trade Management Services.
• Market Services: Had net revenue of $266 million, up 13% driven by higher volumes in US and European cash equities and record revenue for US multi-listed options and proprietary index options.

Guidance

• Non-GAAP expense guidance tightened from $2.145 billion to $2.185 billion to $2.150 billion to $2.180 billion.
• Expectations for Fintech to continue strong ARR growth; Capital Access Platforms' Index expected to be above range, Data and Listing essentially flat, Workflow and Insights below range.

Risks

• Revenue variability in Fintech due to timing of professional services for Tier 1/Tier 2 clients.
• Impact of SEC Tick Rule on Market Services, particularly concerns about access fees affecting market liquidity.

Q: Owen Lau asked about Fintech's growth below medium term outlook.

A: Adena Friedman said it's related to professional services timing with Tier 1/Tier 2 clients, but remains confident in mid-20% medium term revenue outlook.

Q: Craig Siegenthaler asked about Verafin Tier 1 client.

A: Adena Friedman said it's the same client announced in July, starting with payment fraud, and they're working on upsells.

Q: Michael Cyprys asked about cross sell campaigns.

A: Adena Friedman discussed launching campaigns like Nasdaq Risk Platform and AxiomSL global shareholder disclosures.

Q: Unidentified Analyst asked about timing of client onboarding and IPO market.

A: Adena Friedman said implementation timing varies by client size, IPO market has green shoots but expects momentum in Q2 2025.

Q: Patrick Moley asked about cross sell campaign opportunity and journey.

A: Adena Friedman said early in journey, with over 10% of pipeline as cross sell opportunities.

Q: Kyle Voigt asked about international opportunity for Axiom.

A: Adena Friedman discussed AxiomSL's presence in regions and land and expand opportunities.

Q: Michael Cho asked about pricing and AI upgrades.

A: Adena Friedman explained pricing approaches vary by product, with AI capabilities adding value without explicit charging in many cases.

Q: Daniel Fannon asked about Market Tech business.

A: Adena Friedman said momentum building, professional services to build in 2025.

Q: Alexander Blostein asked about Adenza 2025 revenue.

A: Adena Friedman said consistent with mid-teens ARR and revenue growth outlook.

Q: Benjamin Budish asked about Axiom revenue growth.

A: Adena Friedman said demand strong, professional services to recover next year.

Q: William Katz asked about SEC Tick Rule and expenses.

A: Adena Friedman discussed Tick Rule implications, Sarah Youngwood talked about expense guidance range.

Q: Simon Clinch asked about renewal environment.

A: Adena Friedman said renewal environment strong, specific Calypso situation not indicative of broader trend.

Q: Brian Bedell asked about index options revenue and retail.

A: Adena Friedman said index options growing, focusing on retail platforms and international investors.