Q4 2019 Earnings Call

January 29, 2020

Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I'll now like to hand, the conference over your speaker today, Mr., Ed Ditmire, Vice President of Investor Relations. Thank you. Please go ahead Sir.

Good morning, everyone. Thank you for joining us today to discuss nasdaq's fourth quarter and full year 2019 financial results.

On the line or Edina freedom in our CEO , Michael Metabank, our CFO John's ACA, our chief legal and regulatory officer and other members of the management team.

After prepared remarks, well open up to Q and <unk>. The press release on presentation or on our website, we intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under regulation FD I'd like to remind you that certain statements in this presentation during Q in a may relate to future events.

In expectations and as such constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Actual results may differ materially from these projections information concerning factors that could cause actual results to differ from forward looking statements contained in our press release and periodic reports filed with the FCC I will now turn the call over to Indiana.

Thank you Ed and good morning, everyone. Thank you for joining us.

My remarks today will focus on the following areas Nasdaq's 2019 financial and business performance. The progress we've made to drive traffic forward, along our strategic direction and our ambitions for 2020 and beyond.

Turning to our results I'm very pleased to report NASDAQ strong financial performance for the fourth quarter and full year 2019.

Achieved 600 and start to $646 million net revenues in the fourth quarter. If he has 19, while non-GAAP earnings per share of $1.29 rose, 4% compared to the fourth quarter 2018, despite a significantly lower volume and lower volatility market environment in the U.S. as compared to the same period in 2018.

Turning to full year 2019, we generated total net revenue of $2.54 billion, including 8% organic revenue growth across our non trading businesses tempered by 3% decline in our trading businesses with total organic revenue growth of 3% for the year.

2019 was another year of strong execution for NASDAQ exceeding our longer term revenue growth objectives in our non trading businesses well also exhibiting increases in efficiency hitting a multiyear high at 49% for our non-GAAP operating margin. Despite an operating leverage headwind presented by moderated trading revenues.

Throughout 2019, we also continue to invest organically and inorganically to advance our offerings guided by our strategic pivot to maximize opportunities as a technology and analytics provider, while also investing to sustain the strong competitive position of our core marketplace franchise.

We are now in our third year since the announcement of our new vision for NASDAQ. Our 2019 results illustrate how NASDAQ can deliver on our technology led strategy and more importantly, how our disciplined client centric focus is creating value not just for our clients, but for all of our shareholders.

We entered 2020 with strong momentum following a great finishing 2019, we experienced an acceleration in market technology, new order intake as the year progressed.

And with the investment almost 40% of our new sales were two new clients an existing clients exhibited higher average spend as product usage broadened.

Our ATP assets under management are at record levels, and we have a very healthy new listings pipeline.

Turning to specific highlights from our businesses in the fourth quarter and throughout the year, our market technology segment delivered 12% organic growth in the fourth quarter and 11% organic growth in 2019 as it progressed with the development and implementation of our next Gen technology platform.

Our total revenue growth in 2019 was 25%, including the positive impact of the Snover acquisition.

New order intake totaled $204 million for the fourth quarter, while our annualized recurring revenue or a our our totaled $260 million, an increase of 17% year over year.

The fourth quarter feature some particularly encouraging wins.

As part of our new market strategy, We recently announced that we have signed a new partnership with an Airbus subsidiary called Skytron.

In which we agreed to provide the full suite a marketplace solutions to enable the air travel industry to price and manage the revenue risks associated with fluctuating ticket prices.

And our sell side business, we signed two new tier one global bank store execution platform in the fourth quarter, bringing our total to six banks and brokers as we enter 2020.

We also signed extension and expansion agreements with five existing marketplace clients in the fourth quarter, including Japan Exchange group for derivatives trading a surveillance and FINRA for its multi product trading and data platform services.

Next I'd like to update you on the development and deployment of our next generation market technology product offering the NASDAQ financial framework.

Work on the core platform of NFF has reached a advanced stages and while our efforts on application solutions on top of the core platform continue we believe that both are on target in terms of our product planning schedule. As he began 2020 other phases of this long journey become increasingly important for example, we will focus significantly.

On our go to market approach with our managed services and SaaS based solutions and we've made recent or organizational changes to optimize efficient Klein delivery and support.

We are encouraged by the growth momentum in the segment of our business with our sites now set a continuing to scale the business and delivering improved profitability in 2020 and 2021.

Turning to our information services segment, we delivered $194 million and net revenue during the fourth quarter, 4% increase from the prior year period bolstered by index licensing and investment data analytics revenues.

Over the course of the full year and 20 and 2019 information services rose 9%.

Driven overwhelmingly by organic growth.

We're supposed to higher gross index and investment data and analytics businesses as well as the more mature market data businesses performing in line with their respective long term organic growth objectives.

The fourth quarter marked an interesting milestone for investors and information services for the first time over 50% of revenue was generated by our higher growth indexing and investment analytics businesses.

It's exciting to see this progress in the areas with clear secular growth opportunities born out of our strategic pivot inaction and while quarterly figures can fluctuate I expect this trend to continue over time.

As we move into 2020 or making investments to ensure these growth engines have the fuel to continue performing in the long term for instance, we're working to bring investments capabilities and insights to the fast expanding more private market space. Additionally, our new investment products research management and market lens.

Given us new capabilities for our existing clientele and can provide new growth engines in 2020.

Moving to our foundational marketplace businesses, our corporate services segment delivered revenue of 120, <unk> hundred $29 million, the fourth quarter, a 5% increase.

Boosted by particularly strong performance in our listing business and increased demand for our Investor Relations intelligence offerings.

Full year organic revenue growth in corporate services was 3%.

For the seventh consecutive year, NASDAQ led U.S. exchanges for Ipos in 2019, with a 78% U.S. win rate welcoming 188 ipos.

We welcomed 50 ipos in fourth quarter alone, achieving an 82% U.S. win rate during the period.

In 2019, we listed 10 of the top 15 Ipos by dollars raised in total the U.S. NASDAQ Ipos raised $34.5 billion in 2019, well in excess of the dollar phrase by our competitor exchange.

We are extremely pleased that our listing clients are demonstrating their trust in us as a true partner to them as they enter and navigate the public markets.

Meanwhile, our Nordic Baltic and first north exchanges continues to attract new companies from across Europe , adding 53, new listings, including 34 Ipos in two and 2019.

I'm also very pleased to report that we had 16 new companies switch their corporate Liftings from either the New York stock exchange or I I. He acts to NASDAQ in 2019, including Exelons and the newly created Viacom CBS .

Sanity, and Tcf financial also transferred U.S. components of their listings to NASDAQ, which combined with the 16, new switches, resulting in an aggregate of $230 billion and global equity market capitalization coming to NASDAQ last year.

On the private capital side, our NASDAQ private market business set a new record for annual volume in 2019, facilitating $4.8 billion and transaction by value for private company liquidity programs.

Demand for our IR intelligence.

Offerings drove growth in the corporate solutions sub segment, we saw a 6% increase in the fourth quarter I'm proud of the growing momentum in that business. It underscores the years of under the Hood work by our team to focus and build solutions that best suit our clients, our corporate clients needs like our new SG offerings, expanding the ways, we help them addressed.

Most acute challenges for a public issuers.

Finally, our market services Big business delivered net revenue of $225 million in the fourth quarter, an 8% organic decline compared to the prior year period, reflecting a large part the lower volume and volatility comparison against a very active prior year period.

So the full year the organic decline was 3% again due principally to moderation in industry volumes in our largest equity derivatives and cash equities products.

When I look at the factors that we have the most influence on our competitive standing as represented by our market share and capture trends, we delivered consistently and our larger revenue categories, U.S. and European cash equities and equity derivatives.

Our smaller FICC area continues to be a work in progress, where we're working to enhance our offerings to deliver the kind of performance, we're looking for going forward.

In the U.S. the NASDAQ stock market remains the largest single venue of liquidity for traded listed cash equities, while in options. We retained the largest combined market share from multiply listed options with fairly steady capture and share developments.

In Europe , Nasdaq's Nordic linked lit equity market share increased to 71% in 2019 versus 67% in 2018.

As part of our broader commitment to engaging with our clients I would like to highlight one regulatory developments.

Now I think introduce our total markets reform agenda last April which outlines our ideas and proposals aimed to make the capital markets more efficient for investors and combined with our revitalize efforts also attractive to small and medium growth companies. The blueprint also highlighted our thinking around areas, where we could help our clients be more effective in the market.

In that regard we're pleased to see the SEC proposed emerging of the consolidated tape facilities to propose and to propose governance changes to give customers more involvement in the Sip plans.

As we review the Fccs proposal in detail through the comment period, we will focus our comments and recommendations on ensuring the best interest of the market and the goals of the plan are maintained going forward.

Switching gears I would like to talk now about our efforts to advance our practices in corporate sustainability, both within our own operations and as we support our clients and solving complex challenges.

NASDAQ launch several SG focused commercial offerings in 2019 to meet demand from our clients across our respective businesses.

It includes our Iasci advisory program for corporate clients.

The NASDAQ sustainable Bond network, the NASDAQ center for corporate governance, as well as publishing our global issue reporting guide.

And just lastly, just this past week, we announced our new SG work flow technology to simplify the SG reporting process for public companies.

Our offering is in response to corporate seeking to bring efficiency to a process that more often not is played by data management challenges and survey fatigue.

We're excited to be a strategic partner to our clients in this rapidly growing area the market.

We're also very proud to have announced that NASDAQ achieved carbon neutrality across our business operations changing our energy sources, where possible to renewable energy and purchasing renewable energy certificates that offset the emissions impact of our office locations datacenter usage corporate travel and employee commuting.

And as it has also actively exploring ways to further reduce both its consumption of resources and resulting emissions.

As I've said 2019 represent an important here in terms of progress on our strategic journey as we continue on that path I'd like to share our core ambitions for the next several years.

First it is to become the most trusted most successful market technology, and Reg Tech partner to trading firms financial marketplaces, and new nonfinancial markets worldwide.

Second is to evolve as a strategic market, operator, and specialized analytics partner to the investment management industry across index active and alternative management.

Third it to service the destination exchange and partner for companies worldwide with unparalleled expertise across equity markets Investor Relations and governance.

Fourth to strengthen our position as a preeminent marker on market operator in North America in Europe , enhancing by enhancing the client experience across the trading data and connectivity aspects of our exchange complex and fifth to be the trusted provider of liquidity solutions for private asset classes, including private company shares private.

Refunds and other traditional and digital assets.

We intend to execute against these ambitions through the combination of the incredibly talented and client focus NASDAQ team by understanding the clear needs of our customers as we work together and lastly by investing in and embracing the capabilities of today's most powerful technologies in particular cloud and machine intelligence, notably through the deployment.

The NASDAQ financial framework to accelerate the delivery to our clients.

We look forward to updating you on our progress on these ambitions in the quarters to come.

As I wrap up I will summarize by saying our fourth quarter produced solid results for NASDAQ completing a successful night 2019 for our company.

Moving forward into 2020, we remain relentlessly focused on advancing our strategic pivot to maximize opportunities as a technology and data analytics provider, while maintaining seven leadership in our foundational marketplace businesses in the U.S. in Europe I.

I remain confident we are moving asking the right direction. This year as we capitalized on the strong momentum generated in 2019 and with that I'll turn it over to Michael to review the financial details.

Thank you Dan and good morning, everyone. My commentary will primarily focus on our non-GAAP results and all comparisons will be to the prior year period, unless otherwise noted reconciliations of U.S. GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation. That's available on our website at IR dog Nasdaq's Dot com.

I'll start by reviewing fourth quarter revenue performance as shown on page three of the presentation and organic revenue growth on pages, four and 14, the $1 million increase in reported net revenue of $646 million is the net result of 6% organic growth in the non treating segments, the $5 million net positive impact from acquisitions and divestitures.

This was largely offset by the 8% organic decline to Mark and service market services as compared to last year's active Q4, and a 5 million dollar unfavorable impact from the changes in foreign exchange rates.

I will now review quarterly highlights within each of the reporting segments start with information services, which is reflected on pages, five and 14, sorry, 7 million dollar or 4% increase in revenue organic revenue growth. During the period was 4% reflecting growth in the investment data analytics and index businesses.

Scooting dozens purchase price adjustment of deferred revenues in Q4, 18 organic growth would have been 3%.

For the full year of 2019 information services organic revenue growth was 9% or 6% excluding investment purchase price adjustment with the growth coming primarily from nonregulated sources.

Market technology revenue as shown on page, six and 14 increased $22 million or 29%, including organic growth of 9 million or 12%.

Annualized recurring revenue totaled $260 million up 17% year over year and represented 66% of annualized fourth quarter segment revenues down from 76% in Q3 19, primarily due to the increase in change request and software delivery revenues during the fourth quarter.

For the full year 2019 market technology organic revenue growth was 11% and the operating income margin totaled 16%.

As previously stated in 2020, we expect to begin to see year over year margin improvement in the segment as we leverage our investments in the NASDAQ financial framework over a larger recurring revenue base and experience the benefits of the run rate synergies achieved from the Snover acquisition.

Turning to corporate services on pages, 74, gene revenues increased $6 million or 5% due to organic revenue growth, reflecting an increasing the number of listed companies and higher revenues from our IR intelligence offerings.

Market services net revenues on pages, eight and 14, so a $24 billion or 10% decrease excluding the negative 3 million dollar impact from unfavorable changes in foreign exchange the organic revenue decrease was $21 million or 8%.

Got it declined during the period reflects decreases in cash equities equity derivatives and FIC trading revenues, primarily due to the lower industry trading volumes compared to the particularly active Q4 18 period.

Turning to pages 914 to review expenses non-GAAP operating expenses increased $5 million to 335 million.

While expenses came in at the high end of our range year over year increase reflects only 2% or $8 million organic increase. In addition, there was a $1 million increase from the net impact of acquisitions and divestitures, partially offset by 4 million dollar favorable impact from changes in foreign exchange rates.

During 2019, the company's organic expense increase totaled 2%.

Turning to slide 10, we're initiating or 2020 non-GAAP operating expense guidance range of $1.31 billion to 1.36 billion adjusting for foreign exchange rates. The midpoint of the expense range represents an approximate 3% organic increase year over year consistent with our medium term expert 3% expectation.

Moving to operating profit emergence non-GAAP operating income decreased $4 million in the fourth quarter of 29 team and the non-GAAP operating margin was 48% during the full year 2019, the non-GAAP operating margin increased one percentage point to 49% versus 48% the prior year.

Increased in the full year margin reflects in part the benefits from a business model that is becoming more scalable as we evolve we strategically pivoted to reorient, our product portfolio towards more SAS offerings, we continue to make investments and our technology platform that we expect to provide for even greater operating leverage in the future.

Net interest expense was $26 million in the fourth quarter of 29 team decrease of $9 million versus the prior year due to lower debt balances and refinancing the 5.55% 600 million dollar us.

Denominated bond with a new 1.75% 600 million Euro notes.

The non-GAAP effective tax rate was 25% for the fourth quarter 2019, and 26% for the full year 2019, 2019 tax rate came in at the lower end to the full year guidance, primarily due to reduction in us taxes associated with certain foreign derived income.

For the full year 2020, we expect the non-GAAP tax rate to be between 25.5% at 27%.

non-GAAP net income attributable to NASDAQ for the fourth quarter of 2019 was $215 million or $1.29 per diluted share compared to $270 million or $1.24 per diluted share in the prior year period.

Turning to capital on Slide 11 debt decreased $91 million versus Q3, 19, primarily due to net payment of $148 million, a commercial paper, partially offset by $56 million increase in euro bonds booked value caused by the stronger euro.

Our total debt to EBITDA ratio ended the period of 2.6 times unchanged from the third quarter of 219.

During the fourth quarter 2019, the company paid a dividend in the aggregate of $77 million for during 2019. The company returned 505 million to the shareholders through dividends and our share repurchase program with the latter achieving objective.

Our keeping our diluted share count flat.

Okay. Thank you free time, I'll turn it back to the operator for today.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key and the interest of time, we ask that you. Please limit yourself to one question and if necessary one related follow up please standby, while we compile the Q and a roster.

Our first question comes from Richard Repetto with Piper Sandler Your line is now.

Good morning, Dan Good morning, Mike.

I guess first my question first question is on Mark construction seems like there's a lot of things.

Excuse me going on and you made some comments about the Sip and the proposal that the FCC and then the recent approval of the CB, we market encore close market close order. So I guess a data the question would be.

First on the I guess on the ship.

Hey, you did lead you to come up with the plan if the proposal is approved.

I guess, what's your response to that will you come up maybe there's going be any how you're thinking about we've just follow that plan to do you think the changes will be positive for Nasdaq.

Well I think that as as as you all know the way that the SEC process works is they are putting out a proposal for rulemaking and actually it really was a pre proposal before the proposal for rulemaking. So that is the start of a pretty long and comprehensive process to consider changes in that governance and composition of the of the securities information.

Processor plans.

And so there will be ample opportunity for us and all of our clients and peers to comment and provide recommendations to the FCC along the lines of their proposals and I think that that will ultimately kick off.

Most likely a multiyear process for determining the future of that part of the of the market structure and I. We are pretty encouraged by some of the things that they have in their proposal and there are other things that we certainly will have an opinion about as we think through what is best for the markets. How do you leverage the securities information process for the right way if you think about it it is a.

Regulated.

In our opinion kind of monopoly component to the industry. So how do you make sure that year governing at the right way and how do you make sure that you also are giving that caused our clients proper choice and alternatives.

With our proprietary products in the market. So we have a lot to think about as we go forward, but we are pleased that the fccs, taking it on and considering it we do think theres some elements that need to be modernized and as we had laid out in total the total markets proposal.

Thank you and then my related follow up might be.

Maybe to the punch on sort of outline your strategy going forward after.

So to implement in the strategic pivot over the last two to three years and I guess, what I'm trying to understand is the it seemed like the strategy the strategic pivot and then divesting of.

Assets that Werent provided a good return has been well received so the question is on what are you outlined the five things could you just highlight the differences or what would you you highlight as the differences between what you've been doing for the past three years well I. It's a good question rich I would say that the five goals that we.

I have for the next several years are inline with the pivot that we've already established but but work moving down the road on it. So when we when we first announced that we had this strategic pivot we really focused on what do we believe the long term trends that are clients are managing through and long term, meaning over a period of the next 10 years back in 2000.

17 kind of what we're seeing over the next 10 years that can really impact our clients and therefore, how should we be positioning ourselves and so we're kind of three years into a long term journey. The ambitions that we have laid out for the next several years are not a change, but rather contained down the road and I think the differences that we can.

Turning to gain confidence in our ability to actually deliver against some of the ambitions that we have meaning to be the most trusted market tech and write tech provider to the industry, we really feel that art art, NASDAQ financial framework and technology implementations are cloud based services, how we're delivering against SaaS now all of those things give us a lot more.

Confidence that we can continue to expand and accelerate the business.

The same time within our data analytics business, we've really gotten to know the investment management industry in a way that we we didnt frankly getting it coming into the strategic pivot I think investments really given us a level of insight and expertise there and it allows us to continue to think through how do we expand our offerings to be even more of a strategic partner.

To them. So those are that kind of a couple of examples where we just feel more and more confidence that we're going down the right Road and then also having that what I laid out five different ambitions, but the fifth one being private markets. It's still very small business for us, but the momentum in the private assets space in terms of liquidity solutions is really picking up.

We're seeing really good feedback on the private equity fund offering as well as our Corp. private shares offering and how we can continue expand that so we've elevated that up to be one of our key ambitions.

Got it thank you very much a dana.

Yeah.

Thank you and our next question comes from Dan Fannon.

With Jefferies. Your line is now.

Good morning, this is actually James steel filling in for Dan.

Hi, James.

My question is info services segment, just on the sequential decrease in market data revenue.

I think you mentioned FX is a drivers that I was just hoping you can maybe elaborate if there's anything else that drove the sequential decrease.

On the sequential side one of the other key factors was the drop in the.

Under reported revenue from from an reported revenue usage and so that was 9 million in Q3 and 5 million. This quarter. So that was one of the other key drivers.

Quarter to quarter.

Okay that helps and then my follow up is just sticking with the same segment.

400, Bips decrease in operating margin sequentially is that 9 million also a factor there.

So that was a part of it and there was also some increased investments both in infrastructure and the new initiatives that Dean referred to earlier.

As well as there is some timing around some of the compensation mix in there as well so that was some of the key drivers of why the expenses were up higher in the quarter.

Great. Thank you.

Thank you and our next question comes from Ari goes with Credit Suisse. Your line is now.

Hey, good morning, everyone. Hello, just on on market deck. This was another strong quarter, even offer like accounting for some seasonality. So do you not could you give us an update on the customer mix and revenue contribution that you're seeing from non financial and maybe some of the new markets beginning traction and then just related to that too if you could.

You must an update on the competitive landscape in this business either from ill slot initiatives or maybe new a fintech entrance in the space. Just as you have time continues to evolve in the business.

Sure Great. So I think we look at the business in terms of how we are measuring revenue success and growth in four key areas. One is in our what we call our core marketplaces business. So exchanges financial markets Thats, one key area of revenue and revenue opportunity. The second is in our Reg tax earlier, our smart.

Surveillance offering and how we.

Offer that out to the banks and brokers.

Third areas in the banks and brokers in terms of selling trading solutions to then trading technology solutions to them and then in the fourth is in this new market space and certainly still the.

The vast majority of our revenue really comes from the first two which are our core marketplace businesses and the right Tech space and both of them had strong growth characteristics and we're renewing conch client contracts expanding those client contracts and signing up new new customers, particularly in a post trade area, that's where the majority of.

The.

Marketplace demand is coming from in addition to continued expansion of smart, but what we really try to focus on in our my remarks, or the fact that we went from having one.

In place banks and broker client coming into 2019 to now having six on the exit of 2019 and those are really interesting opportunities because they're often offer not in every case, but often offer to either as a managed service or as a SaaS offering. So it's a new way of delivering a service. It's a more comprehensive service than just delivering the software were also.

So providing hosting and surveillance for some of the clients. So that's a really interesting area and that's definitely one of the key growth opportunities that we have and then the last as you mentioned is in new markets still very small.

What we are focused on as we go into 2020 is the fact that we have been expanding the number of clients and the sports betting and gaming space.

We launched two new clients in the in the horse racing area, both in Australia and suite in the share we have the football index, which is in soccer or.

Or I should say European football.

And not space and then also on insurance, we with the acquisition of Snover. They have a really interesting risk modeling tool that they have deployed out to insurance. So it gives us an opening into insurance and then in the transportation space as we mentioned with Airbus partnership. So we definitely are seeing growth opportunities there, but it's going from a very small base.

To something that where we see a growing tam as we get more engaged in each of those industry verticals I would just say from a competitive perspective.

This is a business I would argue that's very much a scale business, particularly in the core market Tech and training solutions business.

It is a scale play and we believe that we are the most successful scale player and providing these comprehensive end to end trade lifecycle solutions to the marketplace industry and also too.

Thanks, and brokers and then on the surveillance side, they're always little niche players that are trying to come up with new things, but frankly, we've been really investing in machine intelligence in that business, we've launched the NASDAQ data discovery platform for surveillance and.

And so weve continue to innovate to make sure. We stay ahead of this niche players that are coming into the market. So long answer, but it's a big area of opportunity for us and the Tam is growing as are expanding into the banks and brokers and into the new markets.

Okay very helpful.

And then just quickly follow up on on the margins in the business again like following the heavy investment feeds the improvements been sold it over the last couple of quarters.

Appreciate that this can be lumpy, but should we expect some of these margin benefits from the business to play out more in 2020.

I think more of a sustained level as the 2021 event again thinking of it as the year will be improvement. Thanks.

And we do look at that from a year over year perspective. So corridor as you said things can be a little lumpy on a quarterly basis, but about on an annualized basis.

We do expect to start to demonstrate that we can grow our margins along with the topline growth as we go through 2020 and in 2020 and 2021, so we've been saying not all along and we do expect to deliver that.

Great. Thank you very much.

Thank you and our next question comes from Jeremy Campbell with Barclays. Your line is now.

Hey, thanks.

With the Airbus and I'm going to put your list, but skyterra deal.

I Trust you've got it.

I was hoping to get a little bit more detail on what that opportunity looks like maybe.

Maybe first what exactly air travel price derivatives might look like and is there any way for us to think about the size of the potential market sure. So it was it really interesting Airbus came to us by the way. They are the ones, who really came up at this really creative idea, which is how do they create more stability of revenue for the airlines and for the travel agencies.

So that and putting in particular airlines feel that they can look further out into their planning cycle and they can be more confident in their revenue opportunities. So that they obviously can make larger capital investments over time, including new airplanes. So you can kind of see where the that natural alignment of interest comes with Airbus being the provider of this debate it really came out.

Within a group within Airbus. They said, Okay US go for it on let's create a new subsidiary and launched this thing as a de novo startup called Skytron.

They are basically leveraging a lot of data.

It's a vast majority of that ticket prices in terms of both tickets sold but also actual settlement of tickets to meaning it's one thing to sell it ticket to a clients and other things for the client actually get on the airplane and fly so they they have both the what I would say.

Pre trade pricing information from the Airlines and then the post trade execution.

The tickets actually being sold and use and they have data from certain industry sources and they are basically creating index and an index that looks at different route. So it could be our roots. So it could be a route from New York to London or could just be a route from eastern us to Europe .

It can be can look at different routes and look at trends in pricing and so if they have this index that allows them to create trends and pricing. They can then create a future on that index and the and that that will enable as the industry to use it as hedging tool So airlines and travel agencies are natural.

Users of this where they through broker dealers. So it is a broker dealer professional system. They can basically hedge out there, they're revenue risk and and allow for them to have a longer term orientation. So it's really creative in terms of our involvement we are providing them. The trading solution. We're finding that surveillance overlay and then there are.

Our services that we hope that we will continue to be able to offer them as well across our trade lifecycle solutions and operations. It is offered as assaf SaaS based service and they are leveraging our next gen technology. So we're really excited about that.

Interesting interesting and then just I guess Im a follow up and this is similar to your answered already on the last question, but can you just remind us for for market Tech wins.

Your minus a typical ramp timeline from signing to kind of piano contribution for something either like this and non financial markets or more traditionally the two new cell site execution of unused you guys fund in Fourq you, yes, so from signing so that that frankly, the longest for trading solutions. The longest timeline is to get a signal trying to page.

So from the first meeting until signing then from signing until we actually launch is usually we can usually do that in it for a very simple system six months for more comprehensive system nine to 12 months, depending on the level of complexity of the client.

And so and then also of course, they often need to make sure that they're integrating it inside their systems as well. So I would say nine to 12 months is a more common.

Time from signing two to production.

And then in terms of post trade systems that are much more complicated it can be anywhere from 18 months to two years to deliver a full end to end post rate solution clearing and settlement.

Into some of these larger scale clients and we do have several of those ongoing right now.

But from a ready yet but from a revenue right, yes standpoint, though as we start to build out the platforms in that six to nine to 12 month period that is going to describe there will be revenue recognized as were building. The platform there will be typically a higher costs.

In the delivery as we move more and more SaaS it will become lower cost going forward, but right now there is a bit of a higher cost.

And then you see the more of the run rate revenues in the after that 12 month period or after the implementation and that was a change to the revenue recognition with a few years ago. So we now recognize revenue as soon as we sign through to deployment the costs are higher between signing and deployment and then it goes into more of a service and maintenance cost base.

So once you get to that six 912.

Finally, as implementation level, that's you're at full run rate for revenue and margin. So that point, yeah. The margins to improve as we go into production after weve been able to complete the development phase.

Thanks, So much you guys. Thank you.

Thank you as a reminder, ladies and gentlemen, please limit yourself to one question.

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

Hey, good morning, everyone wanted to stay on market tech, but want to bring it back to the numbers for second I mean, you. Mike you went through kind of the growth numbers here and I think you said the organic growth was primarily driven by the nonrecurring portion. So maybe you can also tell us how organic was on the recurring side given that.

Oh, we're supposed to measure you and then related to that maybe just dimensionalize like how we should be thinking about the nonrecurring portion because that obviously was up more than 50%. This this quarter. So that's going to be more bouncy incentives were making them more balance your as we think about the 2020 outlets think about the trajectory of those kind of like more onetime.

How much items sport.

Paul to items.

Yes. So there was as you know there is typically more in the fourth quarter.

With respect to some of the change request and the other elements with come into play I think if you look at the.

Annualized recurring revenue slides you can see that the.

Yes.

I went up from 255 to 260 in the quarter. So I think that's an indication of the type of growth you're seeing and more of the in the recurring revenue side of the business and you can look at that on a regular basis to see what's happening from recurring standpoint relative to more of the change request et cetera, and I wouldn't say soon over necessarily changes the composition of that so I think.

Certainly our finance their revenue was generally generally consistent with the way that we look at it in terms of both the recurring and non recurring revenue.

Okay Fair enough and then I'm sorry.

And that slide 19, you can kind of see this sequential quarter over quarter increase.

Sure and then just coming back to rich I think at the beginning of the call you mentioned the CBLI I guess closing cross, but then I think there was not really a question about it so I guess that coming back to of course second.

No that work a little bit closer to this I know you commented on it a couple of years ago. When this was first envisioned but any updated thoughts on kind of like the addressable market. They are I mean, clearly some of this pre cross already exist on the brokers world. So.

What is really the addressable market, maybe dimensionalize little bit more and will be great. If you could actually give us some of the economics that that you deriving from that maybe add to risk portion off off after closing auctions.

Sure well I think first of all we don't just we don't separately disclose kind of different components of the us equities trading business, but I would say that generally we don't expect us to be at material change to our financials in terms of how we're going to address it I think well we've been focusing more on Alex over the last couple years is enhancing the functionality of the close.

We've been making some changes and really working very closely with the buy side and the sell side to implement changes that really continued to make the close as.

I would say is as functional and as useful as possible in generating a true reflection supply and demand at the close if you think about it several trillion dollars of assets under management are tied to that price. So having it be a really a comprehensive supply and demand price discovery van is critical we were quite disappointed to see that the FCC ultimately.

Proved that rule filing not from a financial perspective, but really frankly from a market perspective, and investor perspective, we had issuers right. In there were indexes who wrote in there were investors, who expressed concern and yet the FCC really didnt address a lot of their concerns me approval order, but rather just decided that exchange competition is more import.

With regard to this new entrant and make sure that we continue to have a very vibrant close and we don't see any material impact on that on our financials from that.

Fair enough. Thank you.

Thank you. Our next question comes from Chris Allen with Compass point. Your line is now.

Morning, everyone I wanted to dig into actually the new order intake in markets like a little bit obviously very big number one of those concentrate if you think color in terms of the concentration in terms of.

Specific needs.

One or two deals that drove that.

Type of deals they were just think about.

Revenue realization.

Yes, we had it wasn't it was that we were very pleased the number we've been working on these these new contracts for many months, though would they just all kind of came into play in the fourth quarter. There are some.

Significant existing clients like we mentioned in terms of the Japan exchange Griffin FINRA. Those are those are large scale long term contracts that we we were working on.

To make sure we expand and extend our agreements at those existing clients those are significant.

As we mentioned the two new banks that came in as.

As well as some of these other and some smaller some smaller new deals that came into play in the fourth quarter. All kind of came to fruition. All at the same time. So we've always said that order intake is quite lumpy. This isn't particularly lumpy year, but it is actually positioning us very well into in terms of securing our revenue on growing our revenue.

New into our existing base as well as signing up some new customers. So I don't I mean, there were definitely more names in the fourth quarter than in prior quarters, but some of the bigger names came into play that quarter.

Thanks, So just.

Just on the change request I believe you mentioned last quarter, you pulled forward two to 3 million so.

And just kind of going back to alexs question, a little bit is just increasing just.

The two.

It seems a little bit outside.

Yes, there were couple of other deals.

Specific requests that came through and.

Specific transactions both on the change request and also.

Some of the software deliveries that were higher this quarter than we typically see in Q4. So we had both last quarter and this quarter that we continue to see the increase in that business. So youre right. There were a couple of other specific situations where.

We had some additional request being done.

Thanks, and that's important just stick I just want to go back to Alex's question on the recurring side just to make sure it's clear Alex and I mentioned the to 55 56 that was Q3 to Q4. So that has continued to progress on the annualized recurring revenue rate. So thats going back last years to 22 that would includes an over but there as they need a said they're makeup of there.

Business would be very similar so we are seeing the benefit of the recurring revenue continued to grow in addition to the change requests that we're just talking about.

Thank you.

As a reminder, ladies and gentlemen, and the interest of time. So that we can get to every question. Please limit yourself to one question only our next question comes from Brian fiddle with Deutsche Bank. Your line is now.

Great. Thanks, very much I want to folks.

Maybe just go back onto the ramp up in market technology.

Do you can you.

Frame, how many client how many non financial clients you have now I know that was just a handful way back when you were starting this effort.

And how large that contribution is I mean, you mentioned the four different elements of market, Texas being in the fourth just wanted to get a sense of how big that is and when you think about the.

A new air travel price derivatives is that something that can be ruled out do you think potentially too many.

Carriers.

And then as we look at the growth trajectory in this business. It was 12% in the fourth quarter, it's above your 8% to 11% guide.

If you combine that with pretty good growth in the other segments are we looking at a potential of even exceeding once again, the 5% to 7% growth.

For target for 2020.

Recurring revenue.

So theres a lot to impact our so let's start with that the nonfinancial markets.

We I think we're trying to do account in our heads I I would say, we're probably probably around 15 clients today in the non financials, but that doesnt that's on an exact number.

But thats kind of the range, but I mean of those at least five to seven of them, where new clients that we signed this year. So said that it is definitely a growth area for us and as I mentioned, we signed new clients in the sports space.

Signs on new clients in this transportation space and then we signed other kind of other new clients along the way that are in non financial markets. So, but it's still as we mentioned, it's definitely a small but growing area and the Tampa keeps expanding there in terms of our overall growth rate and Mark attack, we are where.

We still believe that the 8% to 11% is the right way to evaluate the business going forward and we will continue to.

Evaluate that as we as we do move forward, but we're very pleased to see that the growth characteristics of the business are consistent with that kind of growth rate and we want to make sure that we continue to deliver against that which is why we continue to invest in the business, but our as I mentioned before the growth in our investment should be outweighed by the growth of the revenue. So we should.

Our two year to demonstrate some margin expansion going into 2020 2021.

Indeed, you also mentioned overall in the non trading businesses.

Overall growth rate that we are again.

That 5% to 7% is what we believe is high the right way to look at our longer term mid mid to longer term outlook and so we continue to believe that's the right way to evaluate our business.

Okay, great. Thank you.

Thank you and our next question comes from Ken Hill Rosenblatt. Your line is now.

Great. Thanks, good morning.

Wanted to touch on the SG offering a little bit I know this has been important for you guys for a long time, probably particularly within your European business, It's a little bit more but I was hoping you kind of flush out.

A little bit more about the offering how kind of differs from some of the competitors, particularly in exchange based we've seen more recently and how your sizing about how you're thinking about sizing for this category going forward.

Sure well it is very much a nascent a nascent commercial area and we have two areas of focus one is on investable products, so that could either be sustainable bonds, and we have our sustainable bond market and in Europe , and we're now we've just launched the sustainable bond network in the United States with our European team, whose really leading that.

As well and then any TSR SG related indexes. So those are kind of what I call Investable products and then the other side is really supporting our corporate clients. So we are different than a lot of our peers in that we're really focusing in on how can we be the right partner to all of these companies now have just increasing demands from investors on manage.

Turning and and reporting on MSG, it's a very complicated world that's helping out there. They're all these different center senators and metrics makers and the company's really need our support and so we've chosen to be the bright partner to them in terms of encouraging them to report on MSG, particularly in our European markets, but also giving them tools.

Bice consulting services to support this growing area and that has been a really interesting commercial area for us. So I would say, you'll you'll hear more about it and going into 2020, because we are.

Supplementing our consulting services with some technology offerings as well, but it's very small at this point I just want to say I think it's a new area for everyone.

Okay. Thanks for taking the question.

Thank you and our next question comes from Alex flows Fine Goldman Sachs. Your line is now.

Hi, good morning, everyone.

Just wanted to touch base on capital priorities as you guys look out into 2020.

Hey, down a little bit of commercial paper in the fourth quarter.

It feels like a leverage level is kind of where you wanted to be so maybe some of the adult around the buyback in particular as you guys looking out to 2020. Thanks.

Yes. So thanks for the question, we're going to continue on with the capital plan that we stated.

Consistent with that so again look for great opportunities to invest and continue to grow the business number one priority. In addition to that we look to grow the dividend as earnings and cash flow growth and then with respect to the buybacks we are using the buybacks.

Offset the dilution that we would see from or any of our equity programs and then at the end of that if there is additional cash available from a debt standpoint, you're right. We've achieved the debt leverage targets that we were targeting and so we are comfortable maintaining our investment grade status and so if there's additional cash available after we pick up.

Those things into consideration.

Looking at.

If there is nothing specific with that we are looking to invest in within the horizon. Then at some point, we'll consider doing additional buybacks beyond that point, but thats really not quarter to quarter, saying thats going to be something that we'll look at over longer period of time, So very consistent capital plan with the way that we've articulated in the past.

Thank you and our next question comes from Owen Law with Oppenheimer. Your line is no.

Good morning, Thank you, but taking my question.

Yeah, I want to go back to the Sky truck deal I never thought of SK mess that can do business within the airplane manufacturers.

So you mentioned that help us which show to Mastec for this partnership but lost a competitive bidding process.

So could you. Please talk about what are the things mastec, it's doing to increase the chance of all screen encore slides and how NASDAQ increased outreach to identify new markets and do industry. Thank you sure. So in terms of the process that would be a question for Airbus not for NASDAQ in terms of how we ended up.

Becoming their partner, but I think in general we we'd like to make sure that people know about what we're doing with companies like Airbus. So that we do get more inbounds, but at the same time, we have actually been sizing up our sales organization in the new market space. It's been one of the areas of investment in market Tac.

Continuing to make sure that we have the right expertise that we can apply into the industry is that we're finding the most interest to think about a markets economy like approach so whether thats in transportation insurance in a sports space. Those are all areas, where we've been investing in sales. In addition to making sure technology is.

Relevant. So we also have been creating modules within our technology, where we can showcase our capabilities to these new nonfinancial markets, where they need a little bit more of an education and then we're also looking at other partners that we can provide to make it easier and faster deploy these technologies to the customer. So all of those are things that we're doing to expand and.

And grow that part of the business.

We love inbound, but it's very important for us to be able to.

Surface opportunities too so the sales effort has been definitely a wrap up for us.

That's very helpful. A will lead a question. It's I want to go back to a slight 19 try to understand the numbers on was it better.

So so you mentioned that the third quarter, New order intake was 62 medium for Q1, 204 meeting, which is like three tons higher but the overall was kind of flat how should we kind of handicapped use number should we expect the one Q2 thousand 22nd quarter of 2024 or.

Hi, yes, what's the right through to kind of reconcile these two numbers.

Yes so.

With respect to the new order intake again, some of that is temporary or temporary but it's in within the quarter.

It's going to be recognized for some of that but the are.

Good portion of that 204 will turn into Arizona on an ongoing basis. It depends somewhat on the respect to some of the contracts that are recognized in that 204 million would they are renewals of contracts that we already have.

Recognized so if we have a client that was already in the are and then we are renewing a contract and extending that for let's say another five year period, then there could be the if theres an increase in the amount that there will be paying us in that we'll have some reflection in the error.

So that that will be continuation of it it's it but the new contracts for the new clients. That's what's going to continue to increase it and the new order intake is not annualized number. It is a multi year so that could be a five year number the 204 million or depending on the size of the contracts. So thats reflects the total amount of the order intake for the total contract time.

That's that's being thats being contracted.

I'm in the way that I would look at that also in terms. They are I mean, it we actually feel like it's pretty good progression of air our from quarter to quarter to quarter through 2019, and and Michaels right that that 200 set 4 million. The majority that will turn into either a continuation or growth of bear are but I.

I would say that it's there's a lot of there's a lot that goes into the combination of two numbers and we're getting used to giving out a ours. That's our new stat for us. So we'll continue to make sure we're evolving our explanations around it. So that you guys have better better understanding of how to interpret that versus the order intake going forward.

Thank you.

Thank you and our next question comes from Michael Carrier with Bank of America. Your line is now.

Good morning. This is that you submit remarkably well on for Michael carrier. Thanks for taking my question. Just a question related to expense guide and I think you announced the divestment of NFX.

Yes, I think so one of that expect close and I guess, how much of the benefit are you seeing from that divestment in 2020 expense guide I guess, just with the R&D Guide I think thats up around 20% year over year.

Can you provide some details.

On what's flowing into R&D guidance 2020.

Yes, so a couple of things. The first thing is the NFX, we expect that to continue to migrate over to he acts through the first quarter of of 2021 and start to pick.

Come out of our financials as we going through the second quarter. However, it was in R&D initiatives. So it has been reflected in our R&D numbers and so therefore, what we're basically saying with the chain with our R&D numbers are that we are moving the money that we are otherwise spending on NFX into some of these higher growth higher potential opportunities and we're really.

Concentrating our R&D on those things that we think have a very large total market opportunity and have real growth potential. The reason why the investments in air are I mean, and R&D are increasing is because the revenues are also increasing so I've got a good example of that would be banks and brokers thats actually considered in R&D initiatives and.

Terms of building out and supplying our trading solutions to the banks and brokers, but we have a very significant increase in ever clients. So the revenue from that business is going up but so are the investments in that business to supply to support those revenues. So be it we're only showing you one side of the ledger when we're showing your cost guidance in the R&D spend but the revenues are down.

We're also increasing along the line so that it's the net the net cost of that program is around the same year over year.

Thank you and our next question comes from Chris Harris with Wells Fargo. Your line is now.

Good morning, Thank you.

Is it.

Strategic M&A.

Still a priority for NASDAQ or do you feel like the focus at least for 2020 will be more centered on your organic growth opportunities.

Well, we evaluate acquisitions all the time frankly, so it's it's a it's a part of what we look at and we always the way that we think about acquisitions are can accelerate our ability to achieve our strategy in a particular segments. So are we are we.

Either expanding our client base or explain expanding our capabilities to support our clients in new ways within a segment with a particular focus on technology and the data and analytics, but frankly, we also have done we did a small acquisition within corporate services last year and we always look at we will look at act.

Positions within market services as well so long as it provides the right financial.

Framework, So I would say, we always look at them.

The environment right now is that they're pretty pricey. So we are we definitely really focus on making sure we have real conviction around.

They that financial model. In addition to obviously the strategic benefit before we make a decision to move forward with an M&A initiative and that has definitely traded a disciplined inside of NASDAQ, where we obviously look at a lot, but we have on executing on appeal.

I think if you look at the priorities and strategic ambitions that idea lines in her comments with the five that we mentioned earlier.

Those are organic pursuits that we are engaging on and if there are opportunities to accelerate that with M&A. Then we will look to do so as long as that obviously meets the the strategic and financial criteria that ruling out but those ambitions are ones that are we're pursuing organically.

Thank you and our next question comes from Kyle Voigt with KBW. Your line is now.

Hi, maybe just a follow up on a prior question related to this consolidated tape proposal.

Yes, Thats still really early days, but the FCC seems to want to.

Developed these this new governance committee that to develop fair and reasonable fees for this new said do you have any idea what the FCC would view as fair and reasonable would it be a certain maxim operating margin or some other metric.

And if that language makes its way into the final rule do you see some risks to this overall sip revenue pool or do you see that even being stable through through the transition.

So the first thing I would say is that fees in the Sip our have always gone for a pretty rigorous regulatory process ever since the sit committees are formed many many moons ago. So it already does have a lot of regulatory oversight an overlay whenever there is a fee our proposal free change there they have not defined what they.

Mean by fair and reasonable I think that our view is that it will the governance of the Seth and the way that it would be structured will help make sure that we have client client involvement in these types of decisions, but also recognizing the fact that there is a lot of value that comes from the products that are created and the other thing is that these.

The fees not only just pay for the creation of the product, but also pay for the regulatory oversight that the exchanges have to support a fair and reason a fair and by market environment. So all of those things are taken into consideration I don't think the FCC, though has clearly defined their ambitions there and we'll have to see how it goes how it moves forward and.

And period.

Understood. Thank you.

Thank you ladies and gentlemen, this concludes our question and answer session.

Now, let's turn the call back over to a Dina Friedman for any closing remarks.

Great. Thank you in closing NASDA Q4 th quarter and full year 2019 was a solid performance and we are starting off 2020 with strong momentum our leadership team remains focused on executing our technology led strategy to deliver for our stakeholders and I look forward to our continued discussions throughout the year on the progress we aim to make against our strategic priorities.

Thank you very much for your time today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

[noise] [noise].

Ladies and gentlemen, thank you for standing by and welcome to the NASDA Q4 th quarter 2019 results conference call. At this time, all participants' lines are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you when your press Star one on your telephone please be advised today's conference.

Is being recorded.

Your acquire any further systems, Please press star zero.

Now I'd like to hand, the Congress or your speaker today, Mr., Ed Ditmire, Vice President of Investor Relations. Thank you. Please go ahead Sir.

Good morning, everyone. Thank you for joining us today to discuss NASDA Q4 th quarter and full year 2019 financial result.

On the line or Deanna, president or CEO , Michael topic, our CFO John's ACA, our chief legal and regulatory officer and other members of the management team.

After prepared remarks, well open up to <unk>. The press release on presentation or on our website, we intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under regulation FD I'd like to remind you that certain statements on this presentation during here and I may relate to future events and.

Expectations and I've such constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Actual results may differ materially from these projections information concerning factors that could cause actual results to differ from forward. Looking statements is contained in our press release and periodic reports filed with the assay say I will now turn the call over to Indiana.

Thank you Ed and good morning, everyone. Thank you for joining up.

My remarks today will focus on the following areas Nasdaq's 2019 financial and business performance.

The progress we've made to drive traffic forward, a lot or strategic direction and our ambitions for 2020 and beyond.

Turning to our results I'm very pleased to report NASDAQ strong financial performance for the fourth quarter and full year 2019.

We achieved 600 and start to $646 million net revenues in the fourth quarter. If he has 19, while non-GAAP earnings per share of $1.29 rose, 4% compared to the fourth quarter 2018, despite a significantly lower volume and lower volatility market environment in the U.S. as compared to the same period in 2018.

Turning to full year 2018, we generated total net revenue of $2.54 billion, including 8% organic revenue growth across our non trading businesses tempered by 3% decline in our trading businesses with total organic revenue growth of 3% for the year.

2019 was another year of strong execution for NASDAQ exceeding our longer term revenue growth objectives in or non trading businesses, well also exhibiting increases inefficiency hitting a multiyear high at 49% for our non-GAAP operating margin. Despite an operating leverage headwind presented by moderated trading revenues.

We are now in our third here since the announcement of our new vision for NASDAQ. Our 2019 results illustrate how now that can deliver on our technology led strategy and more importantly, Howard disciplined client centric focus is creating value not just for our clients, but for all of our shareholders.

We entered 2020 with strong momentum following a great finish in 2019, we experienced an acceleration in market technology, new order intake as the year progressed.

And with the investment almost 40% of our new sales were two new clients an existing clients exhibited at higher average spend its product usage broadened our.

Our ATP assets under management are at record levels, and we have a very healthy new listings pipeline.

Our total revenue growth in 2019 was 25%, including the positive impact of this number acquisition.

New order intake totaled $204 million for the fourth quarter, while our annualized recurring revenue or a our total $260 million an increase of 17% year over year.

The fourth quarter feature so, particularly encouraging win.

As part of our new market strategy, We recently announced that we have signed a new partnership with an Airbus subsidiary called Skytron in which we agreed to provide the full suite of marketplace solutions to enable the air travel industry to price and manage the revenue risks associated with fluctuating ticket prices.

In our sell side business, we signed two new tier one global bank store execution platform in the fourth quarter, bringing our total to six banks and brokers as we enter 2020.

We also signed extension and expansion agreements with five existing marketplace clients in the fourth quarter, including Japan Exchange group for Derivates trading of surveillance and FINRA for its multiproduct trading and data platform services.

Next I'd like to update you on the development and deployment of our next generation market technology product offering the NASDAQ financial framework.

Work on the core platform of NFF has reached a advanced stages and while our efforts on application solutions on top of the core platform continue we believe that both are on target on terms of our product planning schedule.

As we began 2020 other phases of this long journey become increasingly important for example, we will focus significantly on our go to market approach with our managed services and staff based solutions and we've made recent or organizational changes to optimize efficient client delivery and support.

We are encouraged by the growth momentum in the segment of our business with our sites now set of continuing to scale the business and delivering improved profitability in 2020 and 2021.

Turning to our information services segment, we delivered $194 million and that revenue during the fourth quarter, 4% increase from the prior year period bolstered by index licensing and investment data analytics revenues.

Over the course of the full year in 20, and 2019 information services Rose 9%.

Driven overwhelmingly by organic growth.

Both the higher growth index, and investment data and analytics businesses as well as the more mature market data businesses performing in line with their respective long term organic growth objectives.

The fourth quarter marked an interesting milestone for investor.

Ration services.

The first time over 50% of revenue was generated by our higher growth indexes and investment analytics businesses.

Given us new capabilities for our existing clientele and can provide new growth engines and 2020.

Moving to our foundational marketplace businesses, our corporate services segment delivered revenue of 120 $229 million in the fourth quarter, a 5% increase.

Boosted by particularly strong performance in our listing business and increased demand for our Investor Relations intelligence offerings.

Full year organic revenue growth in corporate services with 3%.

For the seventh consecutive year, NASDAQ led us exchanges for Ipos in 2019, with a 78% us win rate welcoming 188 ipos.

We welcomed 50 ipos in the fourth quarter alone achieving an 82% us win rate during the period.

In 2019, we listed 10 of the top 15 Ipos by dollars raised in total the U.S. NASDAQ IPO has raised $34.5 billion in 2019, well in excess of the dollar phrase by our competitor exchange.

We are extremely pleased that our listing clients are demonstrating their trust in us as a true partner to them as they enter and navigate the public markets.

Meanwhile, our Nordic Baltic and first north exchanges continues to attract new companies from across Europe , adding 53, new listings, including 34 Ipos in 2019.

I'm also very pleased to report that we had 16 new companies switched their corporate Liftings from either the New York stock exchange or I am I correct to NASDAQ in 2019, including Exelons and the newly created Biocon CBS .

Canopy and Tcf financial also transferred U.S. components of their listings to NASDAQ, which combined with the 16, new switches resulted in an aggregate of $230 billion and global equity market capitalization coming to NASDAQ last year.

On the private capital side, our NASDAQ private market business set a new record for annual volume in 2019, facilitating $4.8 billion in transactions by value for private company liquidity programs.

Man for our IR intelligence.

Most acute challenges for our public issuers.

Finally, our market services Big business delivered net revenue of $225 million in the fourth quarter, and 8% organic decline compared to the prior year period, reflecting a large part the lower volume and volatility comparison against a very active prior year period.

For the full year, the organic decline was 3% again due principally to moderation in industry volumes in our largest equity derivatives in cash equities products. When I look at the factors that we have the most influence on our competitive standing as represented by our market share and capture trends, we delivered consistently in our larger revenue categories U.S.

And European cash equities and equity derivatives.

Our smaller FICC area continues to be a work in progress, where we're working to enhance our offerings to deliver the kind of performance, we're looking for going forward.

In the U.S. the NASDAQ stock market remains the largest single venue of liquidity for treated lifted cash equities, while in options. We've retained the largest combined market share from multiply listed options, but fairly steady capture and share development.

In Europe , Nasdaq's Nordic Lick lit equity market share increased to 71% in 2019 versus 67% in 2018.

As part of our broader commitment to engaging with our clients I would like to highlight one regulatory development.

Now I'd like to introduce our total markets reform agenda last April which outlines our ideas and proposals aimed to make the capital markets more efficient for investors and combined with our revitalize efforts also attractive to small and medium growth companies. The blueprint also highlighted our thinking around areas, where we could help our clients be more effective in the market.

In that regard we're pleased to see the FCC proposed emerging of the consolidated tape facilities to propose and to propose governance changes to give customers more involvement in the Sip plans.

As we review the Fccs proposal, one detail through the comment period, we will focus our comments and recommendations on ensuring the best interests of the market and the goals of the plan are maintained going forward.

Switching gears I would like to talk now about our efforts to advance our practices and corporate sustainability, both within our own operations and as we support our clients and solving complex challenges.

NASDAQ launch several SG focused commercial offerings in 2019 to meet demand from our clients across our respective businesses.

This includes our SG advisory program for corporate clients.

The NASDAQ sustainable Bond network, the NASDAQ center for corporate governance, as well as publishing our global issue reporting guide.

And just lastly, just this past week, we announced our new SG workload technology to simplify the SG reporting process for public companies.

Our offering is in response to corporate seeking to bring efficiency to a process that more often not is plagued by data management challenges and survey fatigue, we're excited to be a strategic partner to our clients in this rapidly growing area the market.

Now I think is also actively exploring ways to further reduce both its consumption of resources and resulting emissions.

As I've said 2019 represented important year in terms of progress our strategic journey as we continue on that path I'd like to share our core ambitions for the next several years.

First it is to become the most trusted most successful market technology, and Reg Tech partner to trading firms financial marketplaces, and new non financial markets worldwide.

Second is to evolve as a strategic market, operator, and specialized analytics partner to the investment management industry across index active and alternative management.

Third it to serve as the destination exchange in partner for companies worldwide with unparalleled expertise across equity markets Investor Relations and governance.

Fourth to strengthen our position as a preeminent marker out market operator in North America, and Europe , enhancing by enhancing the client experience across the trading data and connectivity aspects of our exchange complex and fifth to be the trusted provider of liquidity solutions for private asset classes, including private company shares private.

Refunds and other traditional and digital assets.

Of the NASDAQ financial framework to accelerate the delivery to our clients.

We look forward to updating you on our progress on these ambitions in the quarters to come.

As I wrap up I will summarize by saying our fourth quarter produced solid results for NASDAQ completing a successful night 2019 for our company.

I remain confident we are moving NASDAQ into right direction. This year as we capitalize on the strong momentum generated in 2019 and with that I'll turn it over to Michael to review the financial details.

Thank you Dan Good morning, everyone. My commentary will primarily focus on our non-GAAP results and all comparisons will be to the prior year period, unless otherwise noted reconciliations of U.S. GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation. That's available on our website at IR Dot NASDAQ Dot com.

I'll start by reviewing fourth quarter revenue performance as shown on page three of the presentation at organic revenue growth on pages, four and 14, the $1 million increase and reported net revenue of $646 million is the net result of 6% organic growth and the non trading segments and a $5 million net positive impact from acquisitions and divestitures.

This was largely offset by the 8% organic decline in market service market services as compared to last year's active Q4, and a 5 million dollar unfavorable impact from the changes in foreign exchange rates.

I will now review quarterly highlights within each of the reporting segments start with information services, which is reflected on pages, five and 14 size $7 million or 4% increase in revenue organic revenue growth. During the period was 4% reflecting growth in the investment data analytics and index businesses.

Good investments purchase price adjustment of deferred revenues in Q4, 18 organic growth would have been 3%.

For the full year of 2019 information services organic revenue growth was 9% or 6% excluding investment purchase price adjustment with the growth coming primarily from nonregulated sources.

Market technology revenue as shown on page, six and 14 increased $22 million or 29%, including organic growth of 9 million or 12%.

Organic growth during the period, primarily reflects an increase in change request revenues and software as a service surveillance revenues as well as an increase in the size and number of software delivery projects annualized recurring revenue totaled $260 million up 17% year over year and represented 66% of annualized fourth quarter segment.

Revenues down for 76% in Q3 19, primarily due to the increase in change request and software deliveries revenues during the fourth quarter.

For the full year 2019 market technology organic revenue growth was 11% and the operating income margin totaled 16%.

As previously stated in 2020, we expect to begin to see year over year margin improvement in the segment as we leverage our investments in the NASDAQ financial framework over a larger recurring revenue base and experienced the benefits of the run rate synergies achieved from the Snover acquisition.

Turning to corporate services on pages, 714 revenues increased $6 million or 5% due to organic revenue growth, reflecting an increase in the number of listed companies and higher revenues from our IR intelligence offerings.

Market services net revenues on pages, eight and 14, so a $24 million or 10% decrease excluding the negative 3 million dollar impact from unfavorable changes in foreign exchange the organic revenue decrease was $21 million or 8%.

Turning to pages 914 to review expenses non-GAAP operating expenses increased $5 million to $335 million, while expenses came in at the high end of our range the year over year increase reflects only 2% or $8 million organic increase. In addition, there was a $1 million increase from the net impact of acquisitions and.

Divestitures, partially offset by a $4 million favorable impact from changes in foreign exchange rates.

During 2018, the company's organic expense increase totaled 2%.

Turning to slide 10, we're initiating or 2020, non-GAAP operating expense guidance range of $1.31 billion to 1.36 billion.

Adjusting for foreign exchange rates, the midpoint of the expense range represents an approximate 3% organic increase year over year consistent with our medium term expect 3% expectation.

Moving to operating profit margins non-GAAP operating income decreased $4 million in the fourth quarter of 2019, and the non-GAAP operating margin was 48% during the full year 2019, the non-GAAP operating margin increased one percentage point to 49% versus 48% the prior year.

The increase in the full year margin reflects in part the benefits from a business model that is becoming more scalable as we evolve we strategically pivoted to reorient, our product and business portfolio towards more SAS offerings. We continue to make investments in our technology platform that we expect to provide for even greater operating leverage in the future.

Net interest expense was $26 million in the fourth quarter of 29 team a decrease of $9 million versus the prior year due to lower debt balances and refinancing the 5.55% 600 million dollar us.

Nominated bond with a new 1.75% 600 million Euro notes the non-GAAP effective tax rate was 25% for the fourth quarter 2019, and 26% for the full year 2019 to 2019 tax rate came in at the lower end of the full year guidance, primarily due to reduction in us taxes associated with certain foreign derived income.

For the full year 2020, we expect the non-GAAP tax rate to be between 25.5% 27%.

non-GAAP net income attributable to NASDAQ for the fourth quarter of 2019 was $215 million or $1.29 per diluted share compared to 207 million or $1.24 per diluted share in the prior year period.

Our total debt to EBITDA ratio ended the period of 2.6 times unchanged from the third quarter of 219.

During the fourth quarter 2019, the company paid a dividend in the aggregate of $77 million.

And during 2019, the company returned 505 million to the shareholders through dividends and our share repurchase program with the latter achieving objective.

Our of keeping our diluted share count flat.

With that I think you free time, I'll turn it back to the operator for today.

As a reminder to ask the question you will need to press star one on your telephone to withdraw your question press the pound key and the interest of time, we ask that you. Please limit yourself to one question and if necessary one related follow up please standby, while we compile the Q and a roster.

Our first question comes from Richard Repetto with Piper Sandler Your line is now.

Good morning, Dan Good morning, Mike I.

I guess the first my question first question is on Mark construction seems like there's a lot of.

Thanks.

Excuse me going on and you made some comments about the Sip and the proposal that the FCC and then the recent approval of the CV, we market encore close market close order. So I guess Edina question would be.

I guess on the ship.

What you did lead you to come up with a plan if the proposal is approved.

I guess, what's your response to that will you come up maybe there's going to be any.

How are you thinking about we've just follow that plan to do you think the changes will be positive for Nasdaq.

Well I think that.

As you all know the way that the FCC process works is they are putting out a proposal for rulemaking and actually really with a pre proposal before the proposal for rulemaking. So that is the start of a pretty long and comprehensive process to consider changes in the governance and composition of the of the securities information processor plans.

And so there will be ample opportunity for us and all of our clients and peers to comment and provide recommendations to the FCC along the lines of their proposals.

And I think that that will ultimately kick off our most likely a multiyear process for determining the future of that part of the of the market structure and I. We are pretty encouraged by some of the things that they have in their proposal on their other things that we certainly will have an opinion about as we think through what is best for the market.

How do you leverage the securities information process to the right way if you think about it it is a regulated.

In our opinion kind of monopoly component to the industry. So how do you make sure that youre governing at the right way and how do you make sure that you also are giving that call our clients proper choice and alternatives.

With our proprietary products in the market. So we have a lot to think about as we go forward, but we are pleased at the fccs, taking it on and considering that we do think theres some elements that need to be modernized and as we had laid out in total the total markets proposal.

Thank you and then Mike related follow up might be.

To the punch on sort of outline your strategy going forward after.

So to implementing the strategic pivot over the last two to three years and I guess, what I'm trying to understand is the it seemed like the strategy the strategic pivot and then divesting of.

Assets that Werent provide a good return has been well received so the question is on what do you outlined the five things could you just highlight the differences or what would you you highlight as the differences between what you've been doing for the past three years well I. It's a good question rich I would say that the five goals that we.

We have for the next several years are inline with the pivot that we've already established but but work moving down the road on it. So when we when we first announced that we have this strategic pivot we really focused on what do we believe the long term trends that are clients are managing through and long term, meaning over a period of the next 10 years back in 2000.

17 kind of what we're seeing over the next 10 years that can really impact our clients and therefore, how should we be positioning ourselves and so we're kind of three years into a long term journey. The ambitions that we have laid out for the next several years are not a change, but rather than continuing down the road and I think the differences that we can.

Thank you to gain confidence in our ability to actually deliver against some of the ambitions that we have meaning to be the most trusted market tech and wrecked tech provider to the industry, we really feel that art art, NASDAQ financial framework and technology implementations are cloud based services, how we're delivering against SaaS now all of those things give us a lot more.

Our confidence that we can continue to expand and accelerate the business.

The same time within our data analytics business, we've really gotten to know the investment management industry in a way that we we didnt frankly guiding it coming into their strategic pivot I think you vestments really given us a level of insight and expertise there and it allows us to continue to think through how do we expand our offerings to be even more of a strategic partner.

To them. So those are that kind of a couple of examples where we just feel more and more confidence that we're going down the road and then also having that what I laid out five different ambitions, but the fifth one being private markets. It's still very small business for us, but the momentum in the private assets space in terms of liquidity solutions is really picking up.

We're seeing really good feedback on the private equity fund offering as well as our core private shares offering and how we can continue expand that said, we've elevated that up to be one of our key ambitions.

Got it thank you very much Dana.

Thanks.

Thank you and our next question comes from Dan Fannon.

With Jefferies. Your line is now.

Good morning, this is actually James steel filling in for Dan.

Hey, Dan.

My question is info services segment, just on the sequential decrease in market data revenue.

I think you mentioned FX is a driver that I was just hoping you can maybe elaborate if there's anything else that drove that.

Thanks will decrease on the sequential side one of the other key factors was a drop in the.

Under reported revenue from from an reported revenue usage and so that was 9 million in Q3 and it was 5 million. This quarter. So that was one of the other key drivers.

Quarter to quarter.

Okay that helps and then my follow up is just sticking with the same segment.

400, Bips decrease in operating margin sequentially is with that 9 million also a factor there.

So that was a part of it and there was also some increased investments both in infrastructure and the new initiatives that Dina referred to earlier as well as there's some timing around some of the compensation mix in there as well so that was some of the key drivers of why the expenses were up higher in the quarter.

Great. Thank you.

Thank you and our next question comes from Ari goes with Credit Suisse. Your line is now open.

Hey, good morning, everyone.

Just on on market. This was another strong quarter, even also like accounting for some seasonality. So do not could you give us an update on the customer mix and revenue contribution that you're seeing from non financial and maybe some of the newer markets for getting traction and then just related to that too if you could give us an update on the competitive.

Landscape in this business either from ill slide initiatives, all maybe new fintech entrance in the space just as your time continues to evolve in the business sure great. So I think we look at the business in terms of how we are measuring revenue success and growth in four key areas. One is in our what we call our core.

Marketplaces business, so exchanges financial markets. That's one key area of revenue and revenue opportunity. The second is in our Reg tax earlier, our smarts surveillance offering and how we offer that out to the banks and brokers.

Third areas in the banks and brokers in terms of selling trading solutions to them trading technology solutions to them and then in the fourth is in this new market space and certainly still the.

Vast majority of our revenue really comes from in the first two which are our core marketplace businesses and the right Tech space and both of them had strong growth characteristics and we're renewing contracts client contracts expanding those client contracts and signing up new new customers, particularly in the post trade area, that's where the majority of the.

Marketplace demand is coming from in addition to continued expansion of smart, but what we really try to focus on and on my remarks, or the fact that we went from having one.

Providing hosting and surveillance for some of the clients. So that's really interesting area and Thats definitely one of the key growth opportunities that we have and then the last as you mentioned is in new markets still very small.

What we are focused on as we go into 2020 is the fact that we have been expanding the number of clients and the sports betting and gaming space.

We launched two new clients in the in the horse racing area, both in Australia and suite in the share we have the football index, which is in soccer or.

Or I should say European football.

And that space and then also insurance, we with the acquisition of Snover. They have a really interesting risk modeling tool that they've deployed out to insurance. So it gives us an opening into insurance and then in the transportation space as we mentioned with Airbus partnership. So we definitely are seeing growth opportunities there, but it's going from a very small base.

To something that where we see a growing tam as we get more engaged in each of those industry verticals I would just say from a competitive perspective.

This is a business I would argue that's very much a scale business, particularly in the core market Tech and training solutions business. It is a scale play and we believe that we are the most successful scale player and providing these comprehensive end to end trade lifecycle solutions to the marketplace.

Industry and also too.

And so weve continue to innovate to make sure. We stay ahead of those niche players that are coming into the market. So long answer, but it's a big area of opportunity for us and the Tam is growing as our expanding into the banks and brokers and into the new markets.

Very helpful.

And then just a quick related follow up on the margins in the business again like following the heavy investment feeds the improvement has been solid over the last couple of quarters.

Appreciate that this can be lumpy, but should we expect some of these margin benefits in the business to play out more in 2020.

I think more of a sustained level as the 2021 event again thinking of it as the year will be improvement. Thanks.

And we do look at that from a year over year perspective. So corridor as you said things can be a little lumpy on a quarterly basis, but about on an annualized basis.

We do expect to start to demonstrate that we can grow our margins along with the topline growth as we go through 2020 and in 2020 and 2021, so we've been saying that all along and we do expect to deliver that.

Great. Thank you very much.

Thank you and our next question comes from Jeremy Campbell with Barclays. Your line is now open.

Hey, thanks.

With the Airbus and I'm going to put your list, but skyterra deal.

I Trust you've got it.

But I was hoping to get a little bit more detail on what that opportunity looks like maybe.

Maybe first what exactly air travel price derivatives might look like and is there any way for us to think about the size of that potential market sure. So it was it really interesting Airbus came to us by the way. They are the ones, who really came up at this really creative idea, which is how do they create more stability of revenue for the airlines and for the travel agencies.

So that and put it in particular airlines feel that they can look further out into their planning cycle and they can be more confident in their revenue opportunities. So that they obviously can make larger capital investments over time, including new airplanes. So you can kind of see where the their natural alignment of interest comes with Airbus being the provider of this but they it really came out.

Within a group within Airbus. They said, okay. Let's go for it on let's create a new subsidiary and launched this thing as a de novo startup called Skytron.

They are basically leveraging a lot of data.

It's a vast majority of that ticket prices in terms of both tickets sold but also actual settlement of tickets to meaning it's one thing to sell it ticket to a client's another thing for the CLI actually get on the airplane and fly so they they have both the what I would say.

Pre trade pricing information from the Airlines and then the post trade execution.

The tickets actually being sold and used and they have data from certain industry sources and they are basically creating index and an index that looks at different routes. So it could be our roots. So it could be a route from New York to London or could just be a route from eastern us to Europe .

It can they can look at different routes and look at trends and pricing and so if they have this index that allows them to create trends and pricing. They can then create a future on that index and the and that then ill enables the industry to use it as hedging tool So airlines and travel agencies are natural.

Users invest where they through broker dealers. So it is a broker dealer professional system. They can basically hedge out there the revenue risk and and allow for them to have a longer term orientation. So it's really creative in terms of our involvement we are providing them the trading solution or Brian . This is surveillance overlay and then there are.

Our services that we hope that we will continue to be able to offer them as well across our trade lifecycle solutions and operations. It is offered as assaf SaaS based service and they are leveraging our nextgen technology. So we're really excited about that.

Interesting interesting and then just I guess my follow up and this is similar to your answered already on the last question, but can you just remind us for market Tech wins.

I remind us of a typical ramp timeline from signing to kind of piano contribution for something either like this and non financial markets for more traditionally the two new cell site execution venues you guys signed in Fourq you, yes, so from signing so that the frankly the longest for trading solutions. The longest timeline is to get a second trying to page.

So from the first meeting until signing then from signing until we actually launch is usually we can usually do that in it for a very simple system six months for a more comprehensive system nine to 12 months, depending on the level of complexity of the client.

And so and then also of course, they often need to make sure that they're integrating and inside their systems as well. So I would say nine to 12 months is a more common.

Time from signing two to production.

And then in terms of post trade systems that are much more complicated it can be anywhere from 18 months to two years to deliver a full end to end post trade solution clearing and settlement.

Into some of these larger scale clients and we do have several of those ongoing right now.

But from a from a revenue right, yes in standpoint, though as we start to build out the platforms in that six to nine to 12 month period that at the end described there will be revenue recognized as were building the platform there will be typically a higher cost.

In that delivery as we move more and more access it will become lower cost 0.4, but right now there is a bit of a higher cost.

And then you see the more of the run rate revenues in the after that 12 month period or after the implementation and that was a change to the revenue recognition rules a few years ago. So we now recognize revenues as we sign through to deployment the costs are higher between signing and deployment and then it goes into more of a service and maintenance cost base.

So once you get to that six 912.

Finalize implementation level, that's you're at full run rate for revenue and margin. So that point yeah. The margins do improve as we go into production after weve been able to complete the development phase perfect. Thanks. So much you guys. Thank you.

Thank you as a reminder, ladies and gentlemen, please limit yourself to one question.

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

While we are supposed to measure you and then related to that maybe just dimensionalize like how we should be thinking about the nonrecurring portion because that obviously was up more than 50%. This this quarter. So that's going to be more bouncy incentive or making a more balanced youre as we think about the 2020 out how do I think about the trajectory of those kind of like more onetime.

Which items sport.

Paul to items.

Yes. So there was as you know there is typically more in the fourth quarter.

With respect to some of the change request and the other elements of come into play I think if you look at the.

Annualized recurring revenue slides you can see that the.

Yes.

Went up from 255 to 260 in the quarter. So I think thats, an indication of the type of growth, you're seeing and more of them in the recurring revenue side of the business and you can look at that on a regular basis to see what's happening from recurring standpoint relative to more of the change request et cetera.

And I wouldn't say soon over necessarily changes the composition of that and so I think that we are finance their revenue was generally generally consistent with the way that we look at it in terms of both the recurring and nonrecurring revenue.

Okay Fair enough and then that's all right and.

And that slide 19, you can kind of seem to sequential quarter over quarter increase.

No that work a little bit closer to this I know you commented on it a couple of years ago. When this was first and vision, but any updated thoughts on kind of like the addressable market. They are I mean, clearly some of this pre cross already exist on the brokers world. So.

What is really the addressable market, maybe dimensionalize, a little bit more and will be great. If you could actually give us some of the economics that that you deriving from that maybe add to risk portion off off after closing auctions.

Sure well I think first of all we don't we don't separately disclose kind of different components of the us equities trading business, but I would say that generally we don't expect us to be at material change to our financials in terms of how we're going to address it I think well we've been focusing more on Alex over the last couple years is enhancing the functionality of the close.

We've been making some changes and really working very closely with the buy side and the sell side to implement changes that really continued to make the close as.

I would say is as functional and as useful as possible in generating a true reflection on supply and demand at the close if you think about it several trillion dollars of assets under management are tied to that price. So having it be really a comprehensive supply and demand price discovery van is critical we were quite disappointed to see that the FCC ultimately.

Proved that rule filing not from a financial perspective, but really frankly from a market perspective, and investor perspective, we had issuers right in there were indexes, who rodin they were investors, who expressed concern and yet the FCC really didnt address a lot of their concerns me approval order, but rather just decided that exchange competition is more import.

In our opinion than than the quality of the closing price. So we're pretty disappointed in that but having said that we've been working with our clients for the last couple years, we expect to be able to address any concerns they have with with regard to this new entrant and make sure that we continue to have a very vibrant close and we don't see any money.

I will impact on that on our financials from that.

Fair enough. Thank you.

Thank you. Our next question comes from Chris Allen with Compass point. Your line is now.

Morning, everyone I wanted to dig into how should the new order intake in markets like a little bit obviously, a very big number one of those contra true think color in terms of the concentration in terms of.

Specific needs.

One or two deals that drove that.

And then just what type of deals they were just think about.

The revenue realization.

Yes, we had it wasn't it was that we were very pleased the number we've been working on these these new contracts for many months. So would they just all kind of came into play in the fourth quarter. There are some.

Significant existing clients like we mentioned in terms of the Japan Exchange group Infinera. Those are those are large scale long term contracts that we we were working on.

To make sure we expand and extend our agreements at those existing clients those are significant.

As we mentioned the two new banks that came in.

As well as some of these other smaller some smaller new deals that came into play in the fourth quarter, all kind of came to fruition. All at the same time. So we've always said that order intake is quite lumpy. This is a particularly lumpy year, but it is actually positioning us very well into in terms of securing our revenue growing our rep.

Revenue into our existing base as well as signing up some new customers. So I don't I mean, there were definitely more names the in the fourth quarter than in prior quarters, but some of the bigger names came into play that quarter.

Thanks, So just.

Just on the change requests.

The last quarter, you pulled forward two to 3 million so.

I mean, just kind of going back to alexs question, a little bit is just increasing just an overall magnitude.

It seems a little bit outsize growth.

Yes, there were couple of other deals.

Specific requests that came through in.

Specific transactions both on the change request and also.

Some of the software deliveries that were higher this quarter than we typically see in Q4. So we had both last quarter and this quarter that we continue to see the increase in that business. So you're right. There were a couple of other specific situations, where we had some additional request being done.

And it's important just got just want to go back to Alex's question on the recurring side just to make sure. It's clear Alex and I mentioned the to 55 56 that was Q3 to Q4. So that has continued to progress on the annualized recurring revenue rate. So thats why back last years to 22 that would includes an over but there as it either said they're makeup of that.

Business would be very similar so we are seeing the benefit of the recurring revenue continued to grow in addition to the change request that we were just talking about.

Thank you.

As a reminder, ladies and gentlemen in the interest of time. So that we can get to every question. Please limit yourself to one question only our next question comes from Brian Fiddle with Deutsche Bank. Your line is now open.

Great. Thanks, very much I want to folks.

Maybe just go back onto the ramp up in market technology.

Do you can you.

Frame, how many client how many non financial clients you have now I know that was just a handful way back when you were starting this effort.

And how large that contribution is I mean, you mentioned the four different elements of market, Texas being the for its just wanted to get a sense of how big that is and when you think about the.

A new air travel price derivatives is that something that can be ruled out do you think potentially too many.

Carriers.

And then as we look at the growth trajectory in this business. It was 12% in the fourth quarter, it's above your 8% to 11% guide.

If you combine that with pretty good growth in the other segments are we looking at a potential of even exceeding once again, the 5% to 7% growth.

For target for 2020 and recurring revenue.

So there's a lot to unpack there so let's start with that the non financial markets.

We I think we're trying to do account in our heads I I would say, we're probably probably around 15 clients today in the non financials, but that doesnt that's on an exact number.

Signs on new clients in the transportation space and we signed the other kind of other new clients along the way that are in non financial markets. So, but it's still as we mentioned, it's definitely a small but growing area and the Tam keeps expanding there in terms of our overall growth rate in market Tech we are where.

We still believe that the 8% to 11% is the right way to evaluate the business going forward and we will continue to.

Our two data demonstrate some margin expansion going into 2020 2021.

And you also mentioned overall in the non trading businesses.

Overall growth rate that we are again.

That 5% to 7% is what we believe is how the right way to look at our longer term mid mid to longer term outlook and so we continue to believe thats the right way to evaluate our business.

Okay, great. Thank you.

Thank you and our next question comes from Ken Hill Rosenblat. Your line is now.

Great. Thanks, good morning.

Turning and and reporting on MSG, it's a very complicated world Thats, helping out there they're all these different centers headers and metrics makers and the company's really need our support and so we've chosen to be the bright partner to them in terms of encouraging them to report on MSG typically in our European markets, but also giving them tools.

Supplementing our consulting services with some technology offerings as well, but it's very small at this point I just want to say I think it's a new area for everyone.

Okay. Thanks for taking the question.

Thank you and our next question comes from Alex Bluestine Goldman Sachs. Your line is now.

Hi, good morning, everyone.

I wanted to touch base on capital priorities as you guys look out into 2020, so you pay down a little bit commercial paper in the fourth quarter.

I'll feel like the leverage level is kind of where you wanted to be so maybe some updated thoughts around the buyback in particular as you guys are looking out the 2020. Thanks.

Yes. So thanks for the question, we're going to continue on with the capital plan that we stated.

Consistent with that so again look for great opportunities to invest in continue to grow the business number one priority. In addition to that we look to grow the dividend as our earnings and cash flow growth.

And then with respect to the buybacks we are using the buybacks.

The things into consideration.

Looking at.

If there is nothing specific with that we are looking to invest in within the horizon than at some point, we'll consider doing additional buybacks beyond that point, but thats really not quarter to quarter, saying, that's going to be something that we'll look at over longer period of time, so very consistent capital found with the way that we've articulated in the past.

Thank you and our next question comes from Olin Law with Oppenheimer. Your line is now.

Good morning, Thank you for taking my question.

Okay I want to go back to the Sky truck deal.

Sort of NASCAR mess that can do business within the airplane manufacturers.

So you mentioned that help us reach out to NASDAQ for this partnership but lost a competitive bidding process.

Also could you. Please talk about what are the things NASDAQ it's doing to increase the chance off well scheme encore slight dates and how NASDAQ increased outreach to identify new markets in new industry. Thank you sure. So in terms of the process that would be a question for Airbus not for NASDAQ in terms of how we ended up.

Becoming their partner, but I think in general we we'd like to make sure that people know about what we're doing with companies like Airbus. So that we do get more inbound but at the same time, we have actually been sizing up our sales organization in the new market space. It's been one of the areas of investment in market Tac.

Continuing to make sure that we have the right expertise that we can apply into the industry is that we're finding the most interest to think about a market economy like approach so whether thats in transportation insurance in a sports space. Those are all areas, where we've been investing in sales in addition to making sure technology.

As relevant so we also have been creating modules within our technology, where we can showcase our capabilities to these new nonfinancial markets, where they need a little bit more of an education and then we're also looking at other partners that we can provide to make it easier and faster deploy these technologies to the customers. So all of those are things that we're doing to expand.

And grow that part of the business.

We love inbound, but it's very important for us to be able to.

Surface opportunities too so the sales effort has been definitely ramp up for us.

That's very helpful laid a question it's I want to go back to slide 19 try to understand the numbers on the is it better.

So so you mentioned that the third quarter, New order intake was 62 medium for Qs 21 for meeting, which is like three times higher but the overall was kind of flat how should we kind of handicap. These numbers should we expect the one Q2 thousand 20 or second quarter 2024 or.

The higher what's the right way too to kind of reconcile these two numbers.

Yes so.

With respect to the new order intake again, some of that is temporary or temporary but it's in within the quarter.

It's going to be recognized for some of that but the are.

Good portion of that 204, well turn it to err on the on an ongoing basis. It depends somewhat on the respect to some of the contracts that are recognized in that 204 million would they are a renewals of contracts that we already have.

Recognized so if we have a client that was already in the are and then we are renewing a contract and extending that for let's say another five year period, then there could be the if there is an increase in the amount that there'll be paying us than that we'll have some reflection in the error.

So that that will be continuation of it it's it but the new contracts for the new clients. That's what's going to continue to increase it and the new order intake is not annualized number. It is a multi year so that could be a five year number that 204 million or depending on the size of the contracts. So thats reflects the total amount of the order intake for the total contract time.

That's that's being thats being contracted.

Yeah, I mean, the way that I would look at that also in terms of EMR I mean, it we actually feel like it's pretty good progression of EMR from quarter to quarter to quarter through 2019, and and Michaels right that that 200 set 4 million. The majority of that will turn into either continuation our growth they are.

But I would say that it's.

Theres a lot of there's a lot that goes into the combination of the two numbers and we're getting used to giving out a ours. That's our new stat for us. So we'll continue to make sure we're evolving our explanations around it to that you guys have better better understanding of how to interpret that versus the order intake going forward.

Thank you.

Thank you and our next question comes from Michael Carrier with Bank of America. Your line is now.

Good morning. This is actually some they're more quickly on for Michael carrier. Thanks for taking my question. Just a question related to the expense guide and I think you announced the divestment of NFX.

Yes, I think so one is that expected to close and I guess, how much of the benefit are you seeing from that divestment in the 2020 expense guide I guess, just with the R&D Guide I think thats around 20% year over year.

Can you provide some details.

On what's flowing into R&D guide 2020.

Yes, so a couple things. The first thing is that NFX, we expect that to continue to migrate over to he acts through the first quarter of 2020 and and start to.

Come out of our financials as we go in for the second quarter. However, it was an R&D initiatives. So it has been reflected in our R&D numbers and so therefore, what we're basically saying with the chain with our R&D numbers are that we are moving the money that we are otherwise spending on NFX into some of these higher growth higher potential opportunities and we're really.

The building out in supplying our trading solutions to the banks and brokers, but we have a very significant increase in number clients. So the revenue from that business is going up but so are the investments in that business to supply to support those revenues. So the it's we're only showing you one side of the ledger when we're showing your cost guidance in the R&D spend but the revenues are down.

We're also increasing along the lines. So that is the net net cost of that program is around the same year over year.

Thank you and our next question comes from Chris Harris with Wells Fargo. Your line is now open.

Good morning, Thank you.

It.

Strategic M&A.

Still a priority for NASDAQ or do you feel like the focus at least for 2020 will be more centered on your organic growth opportunities.

Well, we evaluate acquisitions all the time frankly, so it's it's it's a part of what we look at and we always the way that we think about acquisitions are can accelerate our ability to achieve our strategy in a particular segment. So are we are we.

Either expanding our client base or expanding our capabilities to support our clients in new ways within a segment with a particular focus on technology and the data and analytics, but frankly, we also have done we did a small acquisition within corporate services last year and we always look at we will look at act.

Positions within markets services as well so long as it provides the right financial.

Framework, So I would say, we always look at them.

The environment right now is that they're pretty pricey. So we are we definitely really focus on making sure we have real conviction around.

The financial model. In addition to obviously the strategic benefit before we make a decision to move forward with an M&A initiative and that has definitely created a discipline inside of NASDAQ, where we obviously look at a lot, but we have only ask you John I feel.

I think if you look at the priorities and strategic ambitions that idea lines in her comments with the five that we mentioned earlier.

Those are organic pursuits that we are engaging on and if there are opportunities to accelerate that with M&A. Then we will look to do so as long as that obviously me to the strategic in the financial criteria that ruling out but those ambitions are ones that were pursuing organically.

Thank you and our next question comes from Kyle Voigt with KBW. Your line is now.

Hi, maybe just a follow up on a prior question related to this consolidated take proposal.

Yes, Thats still really early days, but the FCC seems to want to.

Develop these this new governance committee debt to develop fair and reasonable fees for this new said do you have any idea what the FCC would view as fair and reasonable would it be a certain maxim operating margin or some other metric.

And if that language makes its way into the final rule do you see some risks to this overall sip revenue pool or do you see that you can being stable through through the transition.

So the first thing I would say is that this season. The Sip our have always gone for a pretty rigorous regulatory process ever since the sit committees reforms. Many many moons ago. So it already does have a lot of regulatory oversight an overlay whenever there's a fee proposal free change there they have not defined what they.

Mean by fair and reasonable I think that our view is that it will the governance of the Seth and the way that it would be structured will help make sure that we have client Klein involvement in these types of decisions, but also recognizing the fact that there is a lot of value that comes from the products that are created and the other thing is that these.

The fees not only just pay for the creation of the product, but also pay for the regulatory oversight that the exchanges have to support a factories at fair market environment. So all of those things are taken into consideration I don't think the FCC they'll has clearly defined their ambitions there and we'll have to see how it goes how it moves forward and.

And period.

Understood. Thank you.

Thank you ladies and gentlemen, this concludes our question and answer session.

Now, let's turn the call back over to Adena Friedman for any closing remarks.

Great. Thank you and closing NASDA Q4 th quarter and full year 2019 was a solid performance and we are starting off 2020 with strong momentum our leadership team remains focused on executing our technology led strategy to deliver for our stakeholders and I look forward to our continued discussions throughout the year on the progress we aim to make against our strategic priorities.

Thank you very much for your time today.

Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.

Q4 2019 Earnings Call

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