The paragraph is an introduction to Nasdaq's Fourth Quarter and Full Year 2024 Results Conference Call. The operator starts by explaining that all participants are in listen-only mode until the question-and-answer session. Ato Garrett, the Senior Vice President and Investor Relations Officer, welcomes everyone and notes that Adena Friedman, Sarah Youngwood, and other management team members are present to discuss the financial results. Attendees are informed that the press release and earnings presentation are available on Nasdaq's Investor Relations website. Garrett mentions that forward-looking statements will be made, highlighting risks described in their Form 10-K. The financial performance will be discussed on a non-GAAP basis, adjusting for acquisitions and other factors. It's also the first anniversary of Nasdaq's acquisition of AxiomSL and Calypso.

The paragraph discusses Nasdaq's 2024 financial and operational performance, highlighting key achievements and strategic priorities. Nasdaq integrated Calypso and AxiomSL, achieved growth objectives, and met expense synergies and deleveraging goals ahead of schedule. The company's competitive position has strengthened, evidenced by new client wins, upsells, and cross-sells. Financially, Nasdaq reported $4.7 billion in net revenues for the year, a 9% increase from 2023, with solutions growing by 10% and ARR at $2.8 billion, up 7.5% year-over-year. The fourth quarter saw a net revenue growth of 10% year-over-year to $1.2 billion, with solutions revenue growing 9%.

The paragraph outlines the full-year performance of the company's divisions in 2024, highlighting growth in Capital Access Platforms, financial technology, and market services. Key achievements include significant revenue growth driven by innovations in financial crime management, regulatory and capital markets technology, and increased activity in U.S. and European equities. Additionally, the acquisition of AxiomSL and Calypso has bolstered the company's position as a leading platform provider, enhancing its role as an innovative partner for over 3,800 clients in risk, regulation, and trade infrastructure. A report from Nasdaq and BCG indicates a shift in the financial industry, with growing trust in cloud-based solutions over in-house systems, as banks increasingly seek external strategic technology partnerships.

The paragraph highlights Nasdaq's success in expanding its client base and enhancing client relationships through its diverse product portfolio, leading to the signing of new clients, upsells, and cross-sells, particularly in Tier 1 and Tier 2 banks. Notably, major financial institutions have integrated various Nasdaq solutions, like Verafin and Calypso, evidencing deepened strategic relations. Nasdaq Verafin, recognized for its capabilities in combating financial crime, now serves over 2,600 institutions, including five Tier 1 banks, and is expanding into Europe. Additionally, Nasdaq's regulatory and capital markets technology drives the modernization of global markets and improves risk management. The paragraph concludes with preparations for significant deals in 2024.

In the fourth quarter, Nasdaq formed a long-term partnership with AxiomSL to provide regulatory management solutions to AuRep in Austria and expanded its regulatory technology efforts in France, India, and the Philippines. AxiomSL also secured an upsell with Societe Generale. Nasdaq's Surveillance signed 24 new clients, including market regulators and its first client in Taiwan, with 100% of new clients utilizing cloud solutions by the end of the quarter. The company expanded its capital markets technology presence internationally, achieving significant growth in Latin America, particularly in Brazil, Mexico, and Colombia. Calypso marked its 20th Central Bank signing, and Nasdaq signed new commitments with existing clients, bolstered by three new crypto client additions. Looking forward, Nasdaq aims to enhance the digital asset industry's infrastructure to improve market liquidity, transparency, and integration within financial institutions.

The paragraph discusses Nasdaq's activities and achievements in the digital assets and capital markets sectors. Nasdaq is active in the cryptocurrency space, offering products like the iShares Bitcoin Trust ETF and exploring opportunities for growth in digital assets options. The company aims to capitalize on new regulatory frameworks. In its Capital Access Platforms Division, Nasdaq maintained its leadership as the top U.S. exchange by number of IPOs for six years, raising $23 billion from 180 IPOs in 2024, including the largest one from Lineage. Nasdaq continued to attract significant listing transfers, including Palantir, and began 2025 with the listing of Domino's. The Index Franchise also saw significant success, with a 31% revenue growth in 2024.

The franchise launched 116 new products, over half outside the U.S., with 27 in the insurance annuity space and 30 in partnership with new index clients, highlighting innovation, globalization, and institutional growth. Demand for analytics from asset managers and owners led to strong year-over-year growth. In corporate solutions, the focus is on enhancing offerings despite elongated buying cycles, with expected improvements as the IPO environment stabilizes. The market services division showed leadership in U.S. and European markets, with index options revenue doubling and record trading volumes achieved. The migration of Nasdaq ISE to the Fusion derivatives platform was completed, and the Nordic Power Futures business was sold to Euronext to refine strategic growth. The European business remains crucial for global client service.

The paragraph highlights Nasdaq's strong growth and strategic achievements while focusing on three priorities: integrate, innovate, and accelerate. In 2024, they strengthened their financial technology division, improved their financial leverage, and exceeded net expense synergies targets. They also introduced AI-powered solutions across their divisions, experiencing solid client adoption and building a strong innovation pipeline for the future. Additionally, Nasdaq expanded their efficiency programs and achieved significant cross-sells following the Adenza acquisition, positioning themselves well for 2025.

The Financial Technology Division's cross-sell opportunities now represent over 15% of its pipeline, with several deals progressing well, contributing to Nasdaq's strong performance. The company is set to surpass $100 million in run rate revenue from cross-sells by 2027 and expects continued revenue growth into 2025. Nasdaq's transformation into a platform company is supported by a connected client network, purpose-built solutions, scalable technology, and standardized frameworks. These strengths, along with industry expertise, enhance client relationships and success in securing new business, up-sells, and cross-sells. The favorable U.S. economic conditions, including consumer spending, low unemployment, stabilized inflation, and interest rates, are boosting investor confidence and contributing to a positive global economic outlook, beginning in 2025.

The paragraph discusses expectations for increased IPO activity on Nasdaq beginning in the second quarter of 2025, anticipating a strong performance in the latter half of the year. Nasdaq has a robust pipeline of companies preparing to go public and plans to support them through various services. The text highlights the rising demand for financial technology solutions due to evolving risks, regulatory changes, and technological advancements. It also notes a business-friendly shift in U.S. policy, which could unlock capital and liquidity, benefiting companies and markets. Overall, Nasdaq achieved its growth and strategic goals in 2024 and remains confident in its strategy for 2025.

In the earnings call, Sarah Youngwood presents the financial results and outlook for 2025. The company reported an annual net revenue of $4.7 billion, a 9% increase, with solutions revenue up 10%. Operating expenses rose by 6%, aligning with guidance, resulting in an operating margin of 54% and an EBITDA margin of 56%, both up by over 1 percentage point. The net income was $1.6 billion with a diluted EPS of $2.82. Quarterly results showed a net revenue of $1.2 billion, a 10% increase, with solutions revenue up 9%. Operating expenses increased by 6%, achieving a 55% operating margin and a 57% EBITDA margin, resulting in a net income of $438 million and a diluted EPS of $0.76. Revenue growth drivers included 7 percentage points of Alpha for the year and 6 for the quarter, largely from new clients and product innovation, partially offset by lower market share. Beta factors contributed 2 percentage points annually and 4 quarterly, aided by higher valuations in Nasdaq indices and increased market services volumes. The company also reported ARR growth of 7.5% and SaaS revenue growth of 14%.

The paragraph discusses the financial performance of various divisions within a company. SaaS now represents 37% of ARR, a 2% increase from the previous year. Capital access platforms saw a 10% annual revenue growth and an 11% rise in quarterly revenue, though ARR grew only 3%. Data and listings revenue increased by 1% for the year and 2% for the quarter, with both driven by higher data sales, new listings, and pricing, but offset by delistings and changes in listing fees. The expected amortization impact on revenue is $3 million per quarter and will drop to $2 million in the third and $1 million in the fourth quarter of 2025. De-listings improved in 2024, reducing the revenue headwind from $10 million per quarter to $8 million for each quarter of 2025. Index revenue surged 31% for the year and 29% for the quarter, largely due to strong net inflows and higher asset-based revenue. The ETP AUM grew by $200 billion year-over-year to a record $632 billion, driven by $80 billion in net inflows over the last year. Workflow and Insights revenue increased by 4% for both the year and the quarter.

In the fourth quarter, revenue growth was primarily driven by analytics, especially eVestment, due to increasing demand from asset managers, owners, and consultants. New investment sales rose by 11% annually, with gross retention up by 2 percentage points. Corporate solutions revenue increased by 1%, and the full-year operating margin reached 58%, up by 3 percentage points, excluding a one-time legal settlement benefit. For 2025, the Capital Access Platform Division anticipates revenue growth within a 5% to 8% range. While data on listings is improving, listing revenue is still affected by de-listing and amortization, with growth expected in the low-single digits. The index segment is expected to grow above its mid-to-high single-digit outlook, excluding a $16 million one-time benefit from a settlement.

The paragraph discusses the financial performance and growth prospects of a company's Financial Technology division. It notes that while the Workflow and Insights segment is expected to see slower growth due to market challenges, the overall division experienced a 10% increase in annual revenue, with a 7% rise in quarterly revenue and 12% growth in annual recurring revenue (ARR). This growth is driven by professional services fees and new client acquisitions, despite challenges with Calypso's on-prem subscription revenue. The division has seen success in cross-selling initiatives, accounting for over 15% of the pipeline, with expectations to exceed a $100 million cross-sell revenue target by 2027. The Financial Crime Management technology segment saw a 22% revenue increase, driven by new clients and product enhancements, while the Regulatory technology segment had moderate growth.

The paragraph reports the financial performance and growth metrics of AxiomSL and other related business units for the year and quarter. AxiomSL's revenue grew by 7% annually, with notable client wins and up-sells contributing to this growth. Surveillance also saw an increase in revenue, supported by new clients and up-sells. The capital market technology sector reported significant growth in annual revenue and ARR, driven by market modernization efforts. Calypso's revenue showed strong annual growth, although quarterly growth was modest, influenced by deal timing. Trade Management Services and Market Technology saw moderate growth with new client wins and were buoyed by increased demand following data center expansion. Looking ahead, an improvement in professional services revenue is expected in 2025 due to new client engagements. Combined revenue for AxiomSL and Calypso grew, with an emphasis on moving their businesses to the cloud. AxiomSL and Calypso will now be reported within their respective subdivisions, with expectations for continued growth into 2025.

The Financial Technology division achieved a full-year operating margin of 47%, with expectations of 10% to 14% growth by 2025. The segment's quarterly margin remained flat at 49%. Within the division, growth is anticipated: Financial Crime Management Technology expects mid-20s growth, Regulatory Technology projects high-single to low-double-digit growth, and Capital Markets Technology anticipates high-single to low-double-digit growth. Market Services experienced 4% annual revenue growth and 12% quarterly revenue growth, driven by increased U.S. derivatives and cash equities revenue, despite some market shifts. The full-year Market Services operating margin decreased by 1% to 59%, but the fourth quarter margin improved by 1%, or 2% excluding a one-time payment. Operating expenses rose 6% to $2.162 billion due to investments in technology and personnel, with certain regulatory costs not expected to recur.

The paragraph discusses the financial impact of synergies and efficiencies related to the acquisition of Adenza, resulting in an increase in operating and EBITDA margins. The company has surpassed its initial cost reduction target of $80 million, now expanded to $140 million, with the program expected to be completed by the end of 2025. Cost savings are projected to reduce expense growth in 2024 and 2025, with long-term benefits extending into 2026. Some of the savings will be reinvested to support growth. The company has introduced a non-GAAP expense guidance for 2024 ranging from $2.245 billion to $2.325 billion, reflecting a 6% organic growth rate, while maintaining a non-GAAP tax rate of 22.5% to 24.5% for 2025.

The paragraph discusses Nasdaq's financial activities and achievements over the past year. It highlights the generation of $1.6 billion in free cash flow, repayment of $815 million in debt, and payment of $541 million in dividends in 2024. Nasdaq repurchased 2.3 million shares to offset employee issuances and aims to reduce its gross leverage ratio to 3.3 times by the end of 2025. The company plans to continue opportunistic share and debt repurchases. The author expresses pride in Nasdaq's accomplishments, including fulfilling growth ambitions, winning clients, achieving cross-sell targets, identifying cost efficiencies, and accelerating deleveraging. The paragraph concludes with opening the floor to a Q&A session, beginning with a question from Alexander Blostein of Goldman Sachs.

The Corporate Solutions business has been experiencing slower growth due to a sluggish issuance environment and increased delisting activity. However, the company believes it is well-positioned for future growth through innovation and competitive offerings. As the IPO and delisting environments stabilize and larger companies show improved earnings, this could boost sales in the Corporate Solutions division. Additionally, there is optimism around the Analytics segment, particularly with the eVestment product, which serves the investment side and investor audience within their Workflow and Insight Solutions.

The paragraph discusses the growth and potential impact of regulatory changes on AxiomSL, a regulatory technology business serving banks globally. Despite potential deregulation in the U.S. financial services industry under the Trump administration, AxiomSL sees strong demand due to global banking regulations and the need for solutions to manage them. The company anticipates continued strong growth, expecting its Regulatory Technology division to be at the high end of growth projections by 2025.

The paragraph discusses the financial performance and strategic positioning of Adenza, which consists of Calypso and AxiomSL. It highlights that 69% of revenues are generated from non-U.S. banks, while 31% come from U.S. banks. The company expresses confidence in its solutions across various regulatory landscapes and foresees growth opportunities as banks retain more capital, driving liquidity in global markets and expanding into new asset classes and geographies. The operator then introduces a question from Patrick Moley of Piper Sandler, who asks about the growth outlook for the Financial Technology segment and inquiries about the drivers behind Financial Crime Management's expected performance at the lower end of the range.

Adena Friedman discusses the Financial Crime Management business's success in expanding its client base, with 211 new clients signed up, including a Tier 1 bank in Q4. The growth strategy is based on three pillars: small to medium banks, Tier 1 and Tier 2 banks, and global expansion. They plan to leverage a healthy pipeline and expansion in Europe to support a mid-double-digit growth rate. Despite early stages, there's significant growth potential, especially since half the Serviceable Addressable Market lies within Tier 1 and Tier 2 banks.

The paragraph discusses the company's outlook for 2025, expecting to perform at the low end of their range but expressing excitement about business progress, particularly in the Fintech sector, which is anticipated to grow within a 10% to 14% range. The speaker highlights a successful 2024 with strong sales and confidence in business growth. The subsequent question from Benjamin Budish from Barclays focuses on Workflow and Insights and the IPO pipeline's conversion rates, touching on ESG and sustainability solutions amid a more negative tone concerning these policies. Adena Friedman responds that the Corporate Solutions part of Workflow and Insights lags behind the IPO environment, offering companies packages to support their growth, particularly in investor relations and ESG reporting.

The paragraph discusses the company's strategy of initially offering complementary solutions to clients, with the hope of converting them into paying clients and upselling them on additional solutions. The company acknowledges a decrease in delistings, which is beneficial, but anticipates a slow recovery to a normalized growth rate. In the ESG sector, there is a shift in demand towards non-U.S. companies, particularly in Europe, due to new disclosure obligations, offering opportunities for growth. The company plans to continue assessing this as U.S. policies develop. The paragraph concludes with a question from Michael Cho of JPMorgan about regulatory burdens on public companies, directed to Adena Friedman, who had previously expressed optimism about engaging with the new administration to make public company options more attractive.

The paragraph discusses the importance of public markets in driving global economies, highlighting $112 trillion in public market capital compared to $15 trillion in private markets. The speaker expresses optimism about current regulatory engagement, emphasizing the need to reform the proxy process and balance accounting policies to create a better environment for public companies. Additionally, they advocate for litigation reform and improved disclosure for public companies, particularly regarding short positions, to enhance their understanding of their investor base.

The paragraph discusses the outlook for professional service fees within the Fintech sector, specifically in relation to RegTech and new implementations. Adena Friedman mentions that the company does not provide a specific breakdown of these fees, as they focus more on delivering software products. While professional services are important for implementations, revenues generally follow sales. Due to a large Market Tech implementation in 2023, there was significant revenue that year, which is not expected to repeat in 2024, leading to downward pressure on professional services revenues.

The paragraph discusses the sales event and its impact on professional services revenues, particularly for AxiomSL solutions, noting a decline for 2024 but an upward trajectory expected for 2025. It mentions nine new commitments in Market Tech for both existing and new clients and positive sales in AxiomSL. The outlook anticipates increased professional services revenues, aligning with the forecast discussed by Sarah. It also includes disclosure about Adenza's acquisition, stating that professional services fees accounted for about 20% of Adenza's revenue and just over 10% of overall Fintech revenues. The paragraph concludes with Owen Lau from Oppenheimer questioning the decline in Capital Markets Tech ARR from 12% to 9%, attributed to year-over-year comparisons and timing of deal closings, which affect ARR but don't include contract ramps.

The paragraph discusses the factors influencing ARR (Annual Recurring Revenue) upon contract signing versus its long-term potential, noting that some contracts include growth ramps that aren't initially reflected. Despite some challenges in the current quarter, there's optimism about continuous growth, particularly with AxiomSL and Calypso. The conversation then shifts to the impact of AI advancements on the business. Adena Friedman explains that Nasdaq is leveraging cloud-based platforms to utilize both proprietary and open-source AI models, selecting the best options based on performance and cost efficiency to drive product innovation and enhance competitiveness.

The paragraph discusses the advancements and integration of AI, particularly generative AI, into various business models and products. It highlights cost efficiencies, governance of AI models, and the embedding of AI capabilities into product development. It mentions specific applications like Copilot in Anti Financial Crime and surveillance, auto-generation of regulatory reports in AxiomSL, and summarizing board materials. The overall aim is to enhance product value, demonstrate increased ROI to clients, and improve retention by differentiating solutions.

The paragraph discusses Nasdaq's focus on expanding its Proprietary Index Options business, which has seen its revenues double over the year. They aim to leverage their broader exchange platform to efficiently grow this business by developing new products and capabilities for both institutional and retail investors. Nasdaq has successfully integrated these products into major retail platforms like Robinhood and is working to increase institutional adoption by incorporating their products into data tools used for investment decisions. They are also targeting institutional clients, such as insurance companies, to boost options trading demand and enhance product capabilities.

The paragraph discusses a discussion during a financial call. Ashish Sabadra from RBC asks about the differences between ARR (Annual Recurring Revenue) and revenue growth, specifically for 2024 and looking ahead to 2025, as well as the impact of expanded expense synergies in 2025. Adena Friedman delegates the response to Sarah Youngwood, who explains the factors affecting ARR versus revenue, particularly professional services fees and Calypso's revenue recognition timing between 2023 and 2024. Regarding expenses, Youngwood mentions an efficiency program contributing to expense growth reductions, with significant impacts anticipated in 2024, a slight reduction in 2025, and a tail effect in 2026, though no specific quarterly details are provided.

The paragraph discusses the impact of bank mergers and acquisitions (M&A) on the financial services industry, particularly with a focus on the potential effects for Fintech companies. It notes that historically, around 4% of banks in the United States have merged over a certain period, usually involving smaller banks. The speaker, Adena Friedman, explains that their company's Anti-Financial Crime Technology contracts are designed to protect them when smaller banks merge into mid-sized ones. Furthermore, their Fintech solutions are primarily targeted at larger banks, ranging from Tier 1 to Tier 3, suggesting confidence in handling any potential M&A-related disruptions or regulatory uncertainties that may affect sales cycles.

The paragraph discusses how Verafin, within Financial Crime Management, has structured its contracts to adjust pricing tiers based on a bank's assets which can be affected by mergers. When two banks merge, and if one is a Verafin client, it presents an opportunity for Verafin to implement its solution across the new, combined entity. The paragraph emphasizes the company's strong position in catering to new regulatory obligations that arise from such mergers, particularly in areas of sophisticated risk management. While large mergers are considered rare, Verafin sees growth opportunities in small-to-mid and mid-to-large bank mergers. Despite typically long sales cycles in the banking industry, the company reports healthy prospects globally and isn't overly concerned about potential delays in a few sales, as there are numerous other opportunities available.

In the conference call, Brian Bedell inquired about the strong sales metrics for Nasdaq's Fintech segment in the fourth quarter and whether this trend indicates future growth in 2025 and 2026. Adena Friedman, President and CEO, responded that the fourth quarter is typically the peak sales period due to seasonal factors, but they are also observing strong client engagement that could drive growth into 2025. She reiterated that Q4 will consistently be the highest sales quarter. The session concluded with Adena Friedman expressing confidence in Nasdaq's strategic progress and its role as a technology partner in the financial ecosystem, before the call was officially ended by the operator.

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