The paragraph introduces Nasdaq's Third Quarter 2024 Results Conference Call. The operator announces the listen-only mode, the recording of the call, and hands it over to Ato Garrett, Senior Vice President of Investor Relations at Nasdaq. Ato Garrett welcomes participants and introduces key figures on the call, including Chair and CEO Adena Friedman and CFO Sarah Youngwood. He mentions that the press release and earnings presentation can be accessed on the Investor Relations website. He also indicates that forward-looking statements involving risks will be made, with details available in the press release and annual report. The financial performance discussion will use pro forma financial results, considering acquisitions and revenue adjustments, and excluding FX impacts except for certain elements. Ato Garrett then hands the call over to Adena Friedman.

The paragraph provides an overview of the current macroeconomic environment and its impact on the company's performance. It highlights that central banks, including the European Central Bank, have lowered interest rates to address slowing economic growth, which has stabilized the European economy. The US economy remains strong, bolstered by a recent rate cut by the Federal Reserve. This economic environment is expected to sustain trading activity and boost the global IPO market in 2025. The company, Nasdaq, is well-positioned for growth and reported a strong quarter with 10% year-over-year growth in net revenues and solutions revenue, as well as an 8% increase in annualized recurring revenue. Expenses rose by 5% due to business investments, but operating margin improved to 54%.

The integration of AxiomSL and Calypso has contributed to achieving over 80% of net expense synergies and improved cash flow, reducing the leverage ratio to 3.8 times. In the Capital Access Platforms division, there was 2% ARR growth and 9% revenue growth, bolstered by strong index performance. Data revenue saw modest growth, while listings revenue declined due to lower activity. However, there was a slight increase in US listings, with Nasdaq achieving a 75% win rate for eligible company listings. Notably, Nasdaq listed five of the top ten largest IPOs and reached 500 listing switches from competitors, with significant companies like SAIC and Campbell's switching to Nasdaq. Data division performance was bolstered by new licenses, increased market demand, and international strength. Growth in Workflow and Insights was driven by analytics, despite challenges in Corporate Solutions and unchanged sales cycles.

The paragraph highlights Nasdaq's focus on client retention, product enhancements, and the introduction of new AI features to be ready for a resurgence in IPO activity. It notes increased demand for analytics and data solutions among asset owners and managers, along with significant growth in the Index business, which reported substantial net inflows and average assets under management (AUM). The Financial Technology division experienced 14% annual recurring revenue (ARR) growth, with strong performances in Financial Crime Management Technology, and AxiomSL and Calypso solutions. Nasdaq signed numerous new clients and upsells, with Financial Crime Management Technology recognized as the top provider in its field, and saw strong adoption of its GenAI Entity Research Copilot among US institutions, including 28 new small and medium bank clients.

The paragraph highlights the company's successful quarter with a strong pipeline of sales opportunities, especially focusing on larger clients in the SMB segment. They signed an international Tier 1 client for their wire fraud solution and are progressing in acquiring Tier 1 and Tier 2 clients. AxiomSL received top ranking by Chartis for regulatory reporting due to its jurisdictional coverage and regulatory expertise, acquiring seven new clients and 70 upsells. Notably, AxiomSL entered India and the Philippines with significant upsells. Surveillance achieved strong annual contract value growth and advanced its Nasdaq Trade Surveillance cloud transition, now with 64% of clients cloud-deployed. Capital Markets Technology also saw growth with four new clients, 40 upsells, and one cross sell, with highlights including Calypso’s 20th Central Bank client. There is a favorable environment for growth as financial institutions expand their global presence. The paragraph also notes the division's strong performance in Latin America.

The paragraph discusses Nasdaq's expansion and growth in Latin America and the US. In Latin America, Nasdaq has strengthened its partnerships, notably with Nubank in Colombia and BYMA in Argentina, and is modernizing market infrastructure to meet evolving client needs. It serves 10 marketplaces and around 50 banking and payment service clients in the region. In the US, Nasdaq experienced record revenue growth in the third quarter, driven by increased volumes in cash equities and options. The multi-listed and index options markets in the US also saw significant growth, with index options revenue doubling year-over-year.

The paragraph discusses Nasdaq's stable market share and successful integration of Adenza, resulting in strong net expense synergies and operational unity. Nasdaq was ranked fifth in the Chartis 2025 RiskTech100, highlighting the benefits of the acquisition. The company is advancing its innovation strategy by deploying AI tools to all developers and launching a GenAI platform to boost productivity. Additionally, Nasdaq introduced AI-enabled products, including enhanced detection capabilities for terrorist financing and drug trafficking in Verafin's analytics, with a new terrorist financing analytic to be released soon.

Calypso introduced a new AI-based methodology for faster investment portfolio risk calculations, enhancing trading efficiency. Nasdaq is innovating with its index franchise, recognized as a top index provider, and launched 35 new investment products globally, with a focus on international growth. The migration of Nasdaq ISE to the Fusion platform improved market services, increasing productivity. Progress on the One Nasdaq strategy shows over 10% cross-sell opportunities in Financial Technology, aiming for $100 million in cross-sells by 2027. Further cross-sell campaigns are planned for the fourth quarter.

The paragraph highlights Nasdaq's strong financial performance for the fourth consecutive quarter, with double-digit growth in solutions revenue and significant progress in integrating AxiomSL and CALYPSO, achieving over 80% of net expense synergies. The company's deleveraging has improved, and client traction is strong, with over 10% of the fintech pipeline from cross-selling. In the third quarter, Nasdaq posted net revenue of $1.2 billion, a 10% increase, driven by both Alpha and Beta growth factors. Operating expenses rose 5%, resulting in an operating margin of 54% and an EBITDA margin of 56%, both up two percentage points. Net income was $429 million, with an EPS of $0.74. Annual Recurring Revenue (ARR) grew by 8% and SaaS revenue by 17%.

In the latest quarter, SaaS accounted for 37% of ARR, marking a three-point increase. Capital Access Platform reported $501 million in revenue, a 9% increase, with Data and Listings revenue up 1% despite challenges like delistings and fee amortization. Improvement in delisting trends indicates reduced revenue impact in 2025. Index revenue rose 26%, fueled by $62 billion in organic net inflows and strong market performance, while Workflows and Insights revenue grew 3%, driven by innovative analytics products like eVestment. The Capital Access Platforms operating margin improved to 58%, maintaining its full-year revenue growth outlook with specific expectations for each segment.

The Financial Technology division reported a 10% increase in total revenue to $403 million, with a 14% rise in annual recurring revenue (ARR). The disparity between revenue and ARR growth is attributed to a decrease in professional services fees, shifting to ARR. Financial Crime Management Technology saw revenue and ARR growth of 20% and 24% respectively, partly due to a move from professional services to ARR. With 39 new clients, 110 upsells, and 2 cross-sells, net revenue retention was at 114%. There was a significant increase in annual contract value per SMB client, up 30% from last year. Capital Market Technology had revenue growth of 8% and ARR growth of 12%, while Calypso posted 14% revenue growth and 16% ARR growth, adding new clients and performing significant upsells, notably signing its 20th Central Bank client.

The paragraph discusses the financial performance and growth expectations for Calypso and its associated services. Despite fluctuations in revenue growth rates due to deal timings, Calypso's demand and retention remain strong, bolstered by a robust sales pipeline and execution. The Trade Management Services and Market Technology sectors saw significant ARR growth, particularly a record 14% in Market Tech, attributed to upsells and pricing changes. However, combined revenue grew only 5% due to the impact of professional services fees from the previous year. With new client deliveries and a strong sales pipeline, professional services revenue is expected to recover in 2025. Regulatory Technology and AxiomSL revenues also showed strong growth, with significant new client wins and upsells. Overall, Fintech achieved a 44% operating margin and maintains a positive outlook for ARR growth in 2024.

The paragraph outlines the financial performance of the company's divisions. Financial Crime Management Technology anticipates slightly below 23% growth for the year. Regulatory technology and Capital Markets Technology are expected to grow towards the low end of medium-term forecasts, partly due to delayed renewals. Market Services had strong results with a 13% increase in net revenue, driven by record US derivatives revenue and higher equities volume, though offset by some declines in market share. The operating margin for Market Services increased to 61%. Non-GAAP expenses rose 5% to $543 million, improving operating and EBITDA margins by two percentage points each. The company adjusted its annual non-GAAP expense guidance slightly lower and reported that it realized over 80% of net expense synergies by the third quarter.

The paragraph discusses Nasdaq's financial performance and capital allocation strategies. Synergies have led to a two-percentage-point reduction in expense growth and a decrease in the non-GAAP tax rate, partly due to acquisitions and tax credits from the Inflation Reduction Act. The non-GAAP tax rate is projected to remain slightly lower in 2024. In the third quarter, Nasdaq generated $300 million in free cash flow and reduced gross leverage due to EBITDA growth and debt repayment. A dividend of $0.24 per share was paid, totaling $138 million, and 1.4 million shares were repurchased for $88 million to neutralize employee-related dilution for 2024. The company plans to continue deleveraging in the fourth quarter. Nasdaq is focusing on integrating the Adenza acquisition and is well-positioned for future growth. The paragraph ends with the transition to a Q&A session.

In the paragraph, Adena Friedman explains that while the financial crime management tech experienced a 20% year-over-year growth, it fell short of the mid-20% medium-term outlook mainly due to variability in professional services revenue. This variability arises as the company moves upmarket, targeting Tier 1 and Tier 2 banks, which involves more complex implementations. The recent decline in implementation revenue is attributed to completing major projects, leading to a temporary dip. However, Friedman expresses confidence in achieving the mid-20% medium-term revenue outlook, driven by a strong customer pipeline in both the SMB market and demand from larger banks.

In the paragraph, Craig Siegenthaler from Bank of America asks Adena Friedman about a recent Tier 1 client signing related to Verafin and whether it was the same client mentioned in the previous earnings call. Adena confirms that it is indeed the same client and they will start with payment fraud services. She mentions that they are working to upsell and expand their services with current Tier 1 and Tier 2 clients, and they have successfully upsold a Tier 2 client. She notes that their clients are satisfied with the implementation results, which assists in discussions for additional enhancements, although these sales cycles take time.

In the paragraph, Adena Friedman discusses ongoing efforts in cross-selling campaigns within the Fintech division, specifically involving companies Axiom and Calypso. She mentions that there have been seven cross-sells year-to-date, including sales of Verafin to AxiomSL or Calypso clients. The campaigns aim to integrate Calypso's capabilities with market tech clients and offer AxiomSL capabilities to Calypso clients. A new campaign focuses on cross-selling the Nasdaq Risk Platform, a real-time risk management tool for exchange-traded products, to Calypso clients, highlighting the platform's relevance due to Calypso's focus on OTC instruments.

The paragraph discusses the implementation timing for onboarding new clients, particularly focusing on small to medium-sized banks (SMBs) and larger banks. It highlights that implementation takes more time and is more complex for larger banks compared to smaller ones. This year, there has been a shift towards signing more medium-sized bank clients within the SMB space, resulting in a 30% increase in annual contract value (ACV). The comment also mentions that new rules and requirements in shareholder disclosures are prompting focused cross-sell campaigns. Additionally, there are questions about the implications of upcoming elections on the IPO market.

The paragraph discusses implementation timelines for medium and large clients, noting that it generally takes 6 to 12 months, with large clients often requiring longer due to complexity. Upsells to existing clients may be quicker, but there's limited experience in this area. Professional services fees have become more significant in revenue due to these longer implementation times. The paragraph also touches on the IPO market, noting 33 IPOs in the quarter and a 75% win rate. There's a lot of interest in going public, but other market factors and the current rate environment might slow down new IPOs for the rest of the year.

In the paragraph, Adena Friedman addresses a question about the potential of new cross-sell campaigns being launched in the fourth quarter and the overall target of achieving $100 million in cross-sell revenue by the end of 2027. She notes that while she cannot disclose specific campaign opportunities, they collectively contribute to growth expectations for the Fintech sector. The company is in the early stages of its journey, having made substantial progress in integrating teams, operations, and implementing necessary tools. Despite this being a foundational year, they've achieved significant success, including securing seven cross-sell deals, with over 10% of their current pipeline consisting of cross-sell opportunities.

The paragraph discusses the non-linear path to reaching at least $100 million in sales, emphasizing that while momentum is expected to build over the next few years, the sales cycles for mission-critical technology solutions are lengthy, typically taking 9 to 12 months. Kyle Voigt from KBW inquires about Axiom's international opportunities in markets like India, the Philippines, Colombia, and Latin America. Adena Friedman explains that while AxiomSL is globally recognized, it has varying strengths in different geographies, with Nasdaq enhancing their presence in regions like the Philippines, where Nasdaq already has strong ties with the local financial community and regulators.

The paragraph discusses AxiomSL's successful strategy of expanding its services with existing bank clients by offering domestic regulatory reporting solutions in addition to their international reporting services. This approach has led to an increased presence in countries like the Philippines and India. Furthermore, AxiomSL and Calypso have established strong operations in Latin America, with numerous bank and broker-dealer clients using their technology. The paragraph also highlights a collaboration with a Brazilian digital bank expanding into Colombia, which represents an opportunity to strengthen AxiomSL’s foothold in the region. Overall, the "land and expand" strategy has facilitated growth and client engagement across various regions.

The paragraph discusses the pricing strategy for Fintech products, particularly focusing on the anti-financial crime management technology segment. Adena Friedman explains that they generally use three-year contract terms and evaluate growth, service usage, and value provided upon renewal to adjust pricing. They have implemented new features like the entity research copilot, which is currently not charged for but has been positively received by clients, as indicated by half of the 2,000 banks they've rolled it out to engaging with it. Feedback has highlighted efficiency gains, and these factors will play a role in renewal conversations and potential pricing adjustments.

The paragraph discusses strategies related to pricing and product offerings for Fintech platforms and Corporate Solutions. For Fintech platforms, products generally have terms of three to five years, with the possibility of CPI-based price adjustments annually. Pricing strategies consider the value delivered to clients and don't yet charge explicitly for AI enhancements, instead using them to add value and potentially raise prices upon contract renewal. In Corporate Solutions, a new paid module called the sustainability lens allows companies to compare sustainability disclosures, while other features like board summarization are added for free to boost retention and sales. Michael Cho acknowledges the explanation, and the conversation then shifts to Daniel Fannon from Jefferies, who inquires about the Market Tech business's growth and revenue context for the fourth quarter and into the next year.

The article highlights a significant project last year, where a client generated $27 million in professional services fees, impacting year-over-year comparisons, especially easing in the fourth quarter. This year, the company has gained strong momentum with new clients, including 13 upsells, as clients seek cloud-delivered solutions for market modernization. The company's next-generation products, particularly in clearing, trading, and settlement solutions, have seen strong uptake. This project converted into $11 million in annual recurring revenue by the third quarter. The company anticipates positive growth in professional services and overall business moving into the next year.

In the article, Alexander Blostein from Goldman Sachs asks about the near-term outlook for Adenza, especially regarding revenue growth expectations for its businesses, AxiomSL and Calypso, by 2025. Adena Friedman responds that they expect medium-term ARR growth in the mid-teens and revenue growth in the low to mid-teens, and their current business performance is consistent with these expectations. Benjamin Budish from Barclays follows up on Alex's question, asking for more details about Axiom, noting that Q4 is typically the biggest booking quarter and next year is expected to have a significant upgrade cycle.

In the paragraph, Adena Friedman discusses the revenue growth expectations for AxiomSL and Calypso. She notes that demand is strong, with AxiomSL experiencing a good sales year, which is anticipated to boost professional services fees in the coming year after a decline this year. The ARR and subscription revenue are expected to be consistent due to the shift to ratable revenue recognition. However, variability in revenue can arise from professional services fees. Regarding Calypso, half of the contract value is recognized upfront during client renewals or new signings, leading to potential revenue fluctuations quarter-over-quarter and year-over-year.

The paragraph discusses a conversation involving Adena Friedman, who responds to a question from William Katz regarding the recently passed SEC Tick Rule. Friedman explains that while the rule has some benefits and concerns, it is not expected to materially impact revenues in their Market Services business. The evaluation of such a rule focuses on improving market conditions for investors and ensuring it enhances the national best bid offer. Additionally, an unnamed person asks Sarah about the wide range for fourth-quarter non-GAAP adjusted expenses, seeking clarification on factors that would influence the high and low ends of this range. Friedman addresses the SEC Tick Rule before passing the question about expenses to Sarah.

The paragraph discusses changes in regulations affecting stock markets, specifically focusing on three main components of a new rule. First, tick sizes for smaller stocks are being reduced from $0.01 to $0.005, which is seen as beneficial for market price discovery. Second, odd lots will now be subject to price protection, also viewed positively. The third area of focus is the reduction of access fees by two-thirds across all stocks. This reduction is criticized as it may disincentivize market makers from participating in lit markets, potentially leading to wider spreads and less favorable conditions for investors. The speaker emphasizes the importance of evaluating the impact of these changes on investors.

The paragraph discusses the current renewal environment for a company, noting that it is generally strong. However, there was a specific situation with a client related to the Calypso platform, where the renewal was pushed out by up to two quarters. This delay was due to the client's decision to align the renewal more closely with their renewal date, though they remain satisfied with the platform, having recently taken an upsell. The company wanted to disclose the potential impact on quarterly revenue from this timing change, but emphasizes that the overall renewal environment remains solid as they provide essential technologies.

During the call, Adena Friedman discussed the growth prospects of the company's index options business, noting that while it currently makes a small contribution to overall options revenue, it shows promising growth and momentum. The company is targeting major retail platforms and international investors as potential growth markets. There's a particular interest in integrating index options into retail platforms, catering to international demand, and using them as overlays in ETFs, which are seen as future growth opportunities. The conversation concluded with a closing remark from Adena Friedman, as the Q&A session ended.

The paragraph discusses Nasdaq's ongoing growth and their commitment to their One Nasdaq strategy, which aims to deliver additional growth and value for clients, shareholders, and employees. The conference call concludes with a thank you to participants.

This summary was generated with AI and may contain some inaccuracies.