Q2 2020 Nasdaq Inc Earnings Call

July 22, 2020

[music].

Ladies and gentlemen, thank you for standing by and welcome to the NASDAQ second quarter 2020 results at this time all participants' lines are in listen only mode. After the speakers presentations will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone.

Please be advised to today's conference is being recorded if you are any further assistance. Please press star zero I would now like to have a conference over to your speaker today Mr., Ed Ditmire Vice President of Investor Relations. Please go ahead Sir.

Good morning, everyone. Thank you for joining us today to discuss NASDAQ second quarter 2020 financial results on the line or a Dina Friedman or a CEO Michael Taglich, our CFO John's ACA, our chief legal and regulatory officer and other members of the management team. After prepared remarks, we'll open up Humana. The press release on presentation are on.

Her website, we intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under FCC regulation FD I'd like to remind you that certain statements in this presentation and during Q Renee may relate to future events and 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 is contained in our press release and periodic reports filed with the FCC I'll now turn it over the call they would.

Deanna.

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

I would like to begin by acknowledging how deeply proud I am the NASDAQ teams continued commitment to our clients and the communities in which we live during these last few months.

With the second quarter being our first full period, but the vast majority of our global work brute force working remotely I could not be more proud, but the results that we have delivered for sure our stakeholders and made what is still a very unprecedented times.

Executive leadership team and I are acutely aware that our colleagues clients and so many of our stakeholders are tackling work family and help responsibility simultaneously.

We are in the fortunate position that our business can operate in a remote working environment globally, and we remain highly productive and available to our clients. Throughout this period that said, we also recognized that some of our team members prefer the opportunity to work in an office environment and over the long term, we believe that there are social and creativity benefits that come from working together physically.

Therefore, we are working to reopen our offices and deliberate way as the virus upside for specific cities in countries, where we operate and we're taking a very measured approach to the re opening up our offices that prioritizing our employees health and safety in that regard we will continue to make it completely voluntary until at least yearend 2024.

Our employees to choose to return to our offices.

The second quarter with Mark not only by the deepening unpack that the global health crisis, but by the escalation in recognition of the social injustices across many communities around us we.

We are committed to creating lasting positive change and I'll highlight two examples.

Last month, we announced immediate action.

To strengthen our continued commitment to diversity and inclusion in addition to our 5 million dollar first quarter pledged to cover the 19 relief in the second quarter, we pledged for an additional $3 million and Kathryn.

Since two organizations, serving underserved minority communities in fighting the impact of health crisis.

In addition, as we look at NASDAQ broader purpose into communities, where we operate particularly as a proponent of inclusive growth and prosperity, we see the NASDAQ Foundation as the core component of our suicidal mission.

As a result in addition to committing and that to an annual contribution to the foundation of approximately one quarter <unk> percent of operating profit starting in 2021. We also made a one time capital injection in Q2 of this year of $10 million to improve the funded position of the foundation and to support it for finds mission.

We'll update the market as we announced specific campaigns designed to support our foundations objective.

There's also a lot of momentum inside of that back to improve and accelerate our efforts to advance our culture.

Therefore were increasing our internal resources devoted to programs focused on diversity oriented professional development employee experience and talent acquisition. Our ultimate ambition is for not the NASDAQ team to reflect the diversity of the populations of each of the countries, where we operate and to provide a performance driven culture that demonstrates respect and below.

Longing for all of our employees.

We are fully committed to taking the necessary steps in the month end years ahead to achieve this ambition.

To start with publishing our diversity specifics from countries, where we are committed to collect that data, which we will start to do by the end of the third quarter.

These will serve as an honest assessment of where we are and how far we need to progress.

NASDAQ has always had a strong commitment to all three elements of E G environmental social and governance practices. We believe our suicidal efforts will further enhance our position as the leader that is continuously striving to approve.

No I will turn to our strong financial results for the second quarter 2020.

NASDAQ delivered net revenues of $699 million, an increase of $76 million or 12% from the prior year period, driven almost entirely by organic growth I'm incredibly proud to report that once again each of our core business segments delivered positive organic growth during the quarter, a testament to the resiliency of our business and it's.

Dedication of the NASDAQ team under the new remote working environment.

Net revenues in our markets services business grew 22% while revenues in our non training segments grew 7% start from the prior period on an organic basis revenues across the non trading segments increased 6% you every year with Bruce from acquisitions contributing 1% to total gross.

Operating leverage was particularly strong as expenses were up slightly during the period, resulting in the non-GAAP operating margin expanding nearly 500 basis points to 53% and contributing to non-GAAP EPS growth of 26%.

Turning now to the specific highlights in the second quarter I will also briefly address the evolving industry and client dynamics, we're reserving and how we see these influencing our performance for the remainder of 2020 I will begin with our foundational marketplace businesses.

Our market services segment saw net revenues of $276 million, a 22% increase from the prior year period. This was led by higher cash equity trading and equity derivatives revenue I missed the continued surgeon volumes for cash equities and equity linked derivatives.

These elevated volumes for driven not only not only by evolving expectations around the pandemics implications, but by the way the pandemic seems to be accelerating certain long terms of dynamics that have suffered significant sector rotations in the market.

We said last quarter that the volume outlook set of constructively due to both that's pandemics uncertainties and the fact that 2020 finishes with the U.S. presidential election.

A quarter later, we increasingly back that the current economic and political backdrop will continue to support elevated volumes during the latter half of the year.

Our corporate services segment delivered revenues of $126 million, a 2% increase boosted by a return and newly new lifting activity and continued demand for our Investor relations intelligent solutions as well as higher revenue from corporate governance solutions.

After returning to organic growth in 2019, our IR and governance businesses saw an acceleration in the first half of this year are driving 8% organic growth in corporate solutions in the second quarter, excluding a 2% impact due to unfavorable changes in foreign exchange rates.

Our IR advisory services, including our relatively new SG advisory solution, where top contributors in the period.

We believe the restructured and reposition corporate solutions product suite has a much stronger alignment with the secular trends that are driving our corporate clients interactions with their investment community and other stakeholders.

That said, we did experience reduced demand from corporate clients and sectors that are highly impacted by the affects the pandemic such as travel retail NRG and financials were focused on expense controls has become a priority.

Additionally, prospect engagement and virtual environment has created an elongated sales cycles for some of our corporate services.

Recognizing that these impacts could change quarter to quarter Weve endeavored to provide our clients of near term savings opportunities within the context of what are meant to be continued and eventually rebounding long term relationship.

And our listing segment NASDAQ with OLED U.S. exchanges for Ipos during the period welcoming 42 life goes for 67% win rates for the first six months of 2020, we welcome 69 Ipos.

Representing 69% of all your thought goes our Ipos have raised $17.4 billion, which represent 66% of total IPO capital raise in the United States. Excluding back we have welcomed 55 operating company Ipos for an 85% win rate in the first half the year.

Listings highlights from the second quarter includes three of the top four largest ipos by capital raise including royalty pharma the largest U.S. IPO of 2020 to date Warner Music group and zoom infill the largest technology I'd give the year notable back listings during the period included Draftkings and Nicola Motor Company.

The reopening of the IPO window is very encouraging we have seen a steady and live listings from technology healthcare industries illustrative of the kinds of companies innovating to solve some societies, most pressing challenges, which are finding a very receptive audience with investors.

Companies are also responding positively to NASDAQ virtual experienced during ipos, reflecting reflected in our market leading win rate.

Feedback from newly listed companies and also importantly from the investment banking and underwriting communities have been tremendous our partners appreciate the seamless men manner in which we transitioned our IPO first trade process once we shifted our operations to remote environment in March.

Looking ahead to the second half of the year, we see a very healthy pipeline of companies looking to tap public markets with many intending to execute again ahead of the November U.S. presidential election.

Now, let me turn to our technology and analytics businesses.

Our market technology segment delivered $84 million and revenue and signed $38 million and new order intake our annualized recurring revenue, but in the quarter was $268 million, a 9% increase year over year.

New order intake overall with moderate during the period as client decision, making around large scale technology project has slowed during the pandemics.

Looking within the product offerings. We note that we had strong new order intake in NASDAQ trade surveillance, a SAS offerings focused on our broker dealer clients and we signed five new marketplace technology customers all of which were signed after vertical sales process and all of whom selected our staff delivered market technology solutions.

We were also excited to announce during the second quarter. The launch of Nasdaq's marketplace services platform to provide our market technology clients with seamless access the standard cloud based infrastructure component and pulled free lifecycle capabilities as they move to the next phase of their digitalization.

This service was announced alongside the signing of our first client Lex markets, which will leverage our cloud matching service to power their trading platform for commercial real estate securities.

There is heightened interest in the ways that our next generation technology, particularly the fast capabilities that we have built into both market infrastructure and surveillance products can help our clients deal with heightened scalability and flexibility challenges at the pandemic brings.

These examples also highlight how we've made significant strides in adapting the ways that our technologists are performing in a more remote work environment.

Still implementation project, new order intake levels and funding for new markets initiatives have been modestly impacted by pandemic related factors. We continue to expect to see the short term, mostly logistical growth headwinds.

<unk> increased the risk the fed market technology being below the bottom of our medium term growth objectives for the current year.

Turning to our information services segment, we delivered net revenues of $213 million up 19 million or 10% from the prior year period.

Index AUM rose to $272 billion at the end of the at the end of the period up 34% versus the prior year and eclipsing the previous quarter and tie up $233 billion in the fourth quarter fields in 19.

Index revenue was $68 million up 24% year over year with contribution driven primarily by the increase in ETP license product AUM and secondarily from fees generated from trading of license futures.

We're incredibly pleased with the strength and resilience of our flagship index products during the quarter, we believe that the NASDAQ composite and another 100 performance reflects investor interest and the companies that are supporting the modern infrastructure for tomorrow's economy workforce and workplace.

Year to date women, all Atps license to NASDAQ indices are up over $40 billion and almost 26% of that increase or 64 $26 billion, sorry of that increase or 64% came from net investor inflows to the products with the remainder from market performance during the year.

While this segment is sensitive to what can be reversals and exhaustion us market beta and futures volume trends Theres no ignoring that the second quarters positive results put us in a better position for a full year performance.

Our investment data and analytics revenues increased 13% from the prior year period, including the contribution of solutions, which we acquired in March.

2020 organic growth of investment is seeing some impact from budget tightening on the part of the buy side. The addition of spillover says real time performance and risk modeling gives us more opportunities to catalyze allocation decisions on the part accosted owners decisions that in turn for higher usage of investments lead leading asset manager research and selection tools.

Revenue in market data some modest organic growth during the period and continues to deliver consistent results, we've seen relatively stable performance and expectations in our market data products.

And finally for the third quarter.

For the third consecutive quarter. The majority of our revenues in the information services business came from the index licensing and investment analytics products, a direct result of focusing our investments into expanding our capabilities in higher growth areas within invest information services.

So after reviewing each business collectively what does this mean from our investors perspective overall, we continue to benefit from a business model that delivers well during challenging times due to the resilient and diversified nature of our business.

With our diversity of offerings and customers, we benefit from certain segments bolstering our results when others faced some short term pressures that has been the story of NASDAQ for many years now and overall it provides for more stability and predictability than many of our direct peers.

We continue to see 2020 is an elevated risk environment related to the pandemics implications and related changes to client client purchasing behaviors could continue building and some portions of the business as the year progressive but we also recognize that the strong performance of our index business and the rebound in demand for Ipos has is feeling directly more optimistic than.

We were three months ago.

On the last quarter call, we referenced our long term outlook of 5% to 7% annualized growth in our non trading businesses.

As we experienced the early days of the Pandemics impact on the economy, we communicated that we saw risks and our ability to achieve the lower end of that growth range in 2020.

Given the strength of our second quarter performance, we believe that the risks have moderated somewhat therefore, there unless there is a sharp reversal in the current environment. Our confidence has increased in our ability to achieve the lower end of our 5% to 7% organic revenue growth range collectively across our non trading businesses for the full year of 2020.

We will continue to provide updates on our growth progress as we addressed our third quarter results in October.

In addition to the strong results from our businesses. This quarter. We also saw positive developments on the regulatory front in the period in June the DC Circuit Court of Appeals rule decisively against the FCC on two issues that were very important to us.

First the court ruled that the FCC exceeded its little legal authority by creating a process to review fees long activate taken effect the rule vacated or invalidated the fccs actions into in October 2018, when it overturned the ruling of its own administrative law judge that proprietary data prices are properly regulated and concern.

And by competition and mandated the review of hundreds of other fees.

Second the court ruled that the Fccs active fee pilot was on unauthorized because the FCC lacks the authority to adopt roles and impose obligations of their sole purpose is to gather data.

For the commission to regulate it must identify a problem and justified proposed solutions with sufficient economic analysis of the cost benefits and possible alternatives. The private would have subjective thousands of U.S. issuers to a multiyear experiment to determine what might happen if liquidity incenting rebates and exchanges were restricted or.

Emanated.

We continue to believe the fewest stock markets are the envy of the world delivering unmatched liquidity and resiliency and extremely low cost in a highly competitive environment, we hope that as the FCC move forward and its efforts to find ways to improve the markets. They do so with the utmost thoughtfulness to ensure that reforms truly deliver benefits across a wide.

Range of issuers intermediaries and investors that depend on them.

Going forward, we urge the FCC to adopt a more inclusive approach to developing consensus around rule proposals and significant rule changes, particularly when those changes are wide ranging and carry significant risk of unintended consequences.

As we look to the second half a 2020 and beyond we now know that we will be navigating a world and economy characterized by the pandemics effect for longer than we were expecting.

We've also learned important lessons during this period that bolsters, our confidence in our longer term strategy to maximize opportunities as a leading technology and analytics provider, while maintaining our foundational marketplace focus businesses.

Importantly, we observed several key trends that underscore the flexibility of our strategic ambitions to serve markets everywhere.

For example, we're now able to reach a new set of clients and finalize deals in our market technology business, using our SaaS based solutions, which provide more turnkey and scalable market capabilities for our clients in a fast changing economic environment.

While our index business will always be subject to cyclical beta beta related impacts to the nature of its revenue model, we have seen a new appreciation for the dramatic approaches that characterize majority of Nasdaq's index franchise and of course, the good fortune to be in the rights Amedica for world that is changing in ways that make technology in health care more important to everyone's lives than ever.

Additionally, our institutional investor clients are increasingly turn turning to a data driven decision, making in a volatile and unpredictable environment, which underscores the value of our data analytics offerings.

And lastly over over recent years Theres been a growing urgency among companies globally to make a positive contribution to the environment and to focus on governance practices. This year that focused on the pandemic and its impact on our society and in particular on our underserved communities has elevated a commitment from the private sector to key areas of social responsibility as well.

As a result, we're starting to be rewarded for our efforts to expand our offerings addressing corporate issuers and other clients rising you see needs.

As I wrap up I will summarize by saying that NASDAQ remains sharply focused on advancing our strategic mission. Our global team has demonstrated their seamless adjustment to the remote nature of our current operating environment and our team's ability to deliver uninterrupted service to our clients. This demonstrated in our strong results this past quarter and with that I will turn it over to Mike hold for review.

The financial details.

Thank you Dina and good morning, everyone.

My commentary will primarily focus on our non-GAAP results in all comparisons will be to the prior year period, unless otherwise noted reconciliations of us GAAP to non-GAAP results can be found in our press release as well as in a slow located in the financial section of our Investor Relations website at IR Nasdaq Dotcom.

I'll start by reviewing second quarter revenue performance as shown on page three of the presentation and organic revenue growth on pages for 14.

$76 million increase in reported net revenue of 699 billion is the net result of organic growth of 75 million, including 22% organic increase in mortgage services and 6% organic growth in the non treating segments.

You $3 million positive impact from acquisitions, and the 2 million dollar unfavorable impact from changes in foreign exchange rates.

I will now review quarterly highlights within each of the reporting segments.

Starting with information services, which is reflected on pages, five and 14 saw a $19 million or 10% increase in revenue.

Organic revenue growth during the period was 9%.

I remember, the reflecting very strong growth in or index business, and then smaller for positive contributions for each of the investment data and analytics and market data businesses.

Operating margin of 62% declined about one point compared to the prior year period, primarily due to the inclusion of spillovers.

Market technology revenue as shown on page 14 increased $5 million were 6% with organic growth of $4 million or 5%.

Got a growth during the period, primarily reflects an increase in software as a service surveillance revenues.

As you noted annualized recurring revenue or our rose, 9% compared to prior year period.

Operating margin of 18% was up eight points from 10% in the prior year period in year to date margin of 14% Foods segment is up four points.

Turning to core services on page seven at 14 revenues increased $3 million were 2%.

Organic revenue growth was 3% for $4 million, reflecting an increase in us listings revenues and increases in both our intelligence revenues and government solutions revenues.

This was partially offset by lower event related revenues as a NASDAQ market site and lower NASDAQ private market program activity, both mainly due to the business impact of Koby My team.

The operating margin of 39% for the segment was up three points from the prior year period.

Mortgage services net revenues on pages, eight and 14 saw a $49 million were 22% increase excluding the negative 1 million dollar impact from unfavorable changes in foreign exchange. The organic revenue increase was $50 million also 22%.

The organic increase during the period, primarily reflects increases in cash equities in equities derivatives net revenues due to higher industry trading volumes.

The operating margin of 64% for the segment remains elevated due to the high volume environment.

Turning to page is minus 14 to review expenses non-GAAP operating expenses were $327 million into second quarter of Twentytwenty, an increase of $5 million were 2% compared to the second quarter of 29 team.

This reflects the $70 million increased from the impact of acquisitions as well as higher compensation expense infrastructure costs, and depreciation expense, partially offset by lower corporate travel expenses, even spending and changes in foreign exchange rates.

Turning to slide 10, we're tightening our Twentytwenty non-GAAP operating expense guidance range to 1.33 billion to 1.36 billion.

Well, we've experienced reduced levels of travel and event spending it is important to note that we plan to continue to invest in the infrastructure necessary to support the current and potential for even greater activity on our platforms.

In addition, we were also continued to allocate the capital resources to deliver on our longer term growth initiatives and our full year expense guidance range reflects these investments in the second half of the year.

Based on our latest internal expense forecast, which takes into account the impact relative of the relatively strong organic growth has on compensation on variable compensation as well as the latest foreign exchange rates as we stand here today, we see ourselves as most likely to be in the top half of our updated expense guidance rich.

Moving to operating profit and margins non-GAAP operating income increased $71 million in second quarter 2020, and the non-GAAP operating margin was 53% compared to 48% in the prior year period.

Nearly 500 basis point increase in the margin year over year reflects strong operating leverage, particularly in markets services business as well as multiyear efforts to enhance the company scalability. So we would expect some near term reversion revered version should market volumes moderate.

Net interest expense was $25 million in the second quarter 2020, a decrease of 3 million versus the prior year.

The non-GAAP effective tax rate was 26.4% for the second quarter 2020.

Full year 2020, we continue expect to non-GAAP tax rate three between 25.5% 27%.

Non-GAAP net income attributable to NASDAQ through second quarter, 2020 was $256 million or $1.54 per diluted share compared to $203 million per dollar 22 per diluted share in the prior year period.

Let me now turn to the balance sheet.

Taking steps in the first quarter of 2020 to increase cash reserves and eliminate near term maturities in the second quarter NASA took advantage of receptive credit environment and issued a $500 million 30 year bond.

As a short term credit environment continued to improve we became more comfortable with reducing our cash position to more normal levels and use the proceeds from our debt offering and the excess cash on hand to redeem outstanding commercial paper and to repay all the borrowings on our revolver.

As a result, because of the returns and lower leverage while enhancing available liquidity.

Turning to slide 11, the net of these actions is that debt decreased by 626 million versus March 30, Onest, primarily due to $1.1 billion aggregate note payments on revolver borrowings and commercial paper moment.

Paper that I mentioned, a moment ago.

Our total debt to EBITDA ratio ended the period of 2.4 times down from three times in the first quarter of Twentytwenty net debt to EBITDA was 1.9 times down from 2.3 times in the first quarter 2020.

Also during second quarter 2020 of the company page come common stock dividend in the aggregate of $80 million and repurchase common stock in the amount of $30 million year to date through June thirtyth, the company's repurchase common stock in the amount of $152 million largely completing our objective to use share repurchases to offset delay.

Issuance of equity compensation and other sources of gross issuances to assure investors benefit from stable share count.

With that I'll turn it back over to the operator for today.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Withdraw your question press the pound key please limit yourself to one question and re queue for any follow ups.

Please standby, while we compile the today roster.

Our first question comes from Rich Repetto with Piper Sandler Your line is open.

Yes, good morning, Edina good morning, Mike.

I guess my question is.

Good morning.

You seem like you're in the sweet spot right now given the exposures to.

Equity trading new equity options as well as having the high percentage of recurring revenue.

I guess.

This.

My question is with so much volume now going into.

From retail.

The Trs percentage up in the fourth in the low 40 percentage are we missing anything im trying to look at the unintended consequences of having so much off exchange volume your revenue capture actually went up in equities, which I didn't understand but just trying to see how.

Given that you're in the sweet spot.

Make sure we're catching.

All the reflections here all the possibilities.

Sure well I would agree that on retail participation in the markets, but the equities markets and the equity options market has been yes, certainly has been elevated this year and you are right that is resulting in more off exchange volume occurring I think that but we've been really focused on is for the volume that does that come to the exchanges what can we do to.

Maximize our position and so we've been working really hard goods on a few fronts. One is certainly just overall customer service and availability second is just the scalability of our business and ability to handle these really large volume days, particularly like the Russell and the S&P 500, Rebalances third is that we continue to.

Improved the performance of our systems with the Tech Peck improvements and things that we're doing to make sure that we optimize the performance of our market and then the last thing is making sure that we really.

Educate our customers on how to use all the elements of our markets like our EMEA low orders and other things like that to capture as much volume as we can but the retail volume generally gets internalized and then of course turns into secondary volume that comes to the exchanges. So we do benefit from an overall elevate.

Good environment, but but we do find that they the level of.

Internalization.

It is something that we watch very carefully because you don't want you don't want there to be a diminishment of the price discovery, that's occurring in the market by having too much of the volume go up exchange. So it's something that we certainly are focused on.

I don't I think the one thing that we are focused on rich is just making sure retail investors are educated as they're coming into the market.

The online retail brokers do have really good job of that FINRA does it really good out of that so we're just partnering with them to make sure that we're helping them with their educational efforts with the retail investors.

Got it anything on the revenue capture that was part of the quest to one so the revenue for its really a function of a lot of things. So one is just which markets are they leveraging to come into the market and therefore with our capture rate I think we also are.

We're very careful in looking at how much volume is coming on to the into the auctions. We did have two very large auctions in the quarter at the end of the quarter with the S&P 500, I think that was 1.2 billion shares and the Russell Rebalanced was was 1.5 billion shares and those obviously create lift as well in terms of the auction.

Versus the intra day trading.

Got it.

Thank you.

Thank you. Our next question comes from Alex Kramm with CBS. Your line is open.

Hey, good morning, everyone.

Quick one on on coal, but at the current pandemic.

You talked about how obviously, there's some negative impacts on the revenues, but also positive on the expenses anything to note on the positive on the revenues I mean, if they're new business wins or anything that has come out no. New use cases that does your clients have seen where you where you may be benefiting coming out of this or is it too early to tell.

No actually I had a couple areas Alex I think it's it is actually relevant so the first is how the demand for more of our staff based technology is actually elevated during during this period, because I think more and more declines are realizing that to have the scalability and flexibility they want to be able to half what I will take.

Has the on demand to be able to manage their infrastructure remotely all of those things really benefit from a staff a south market a market structure stock market technology, and and certainly as they've moved a lot of their compliance and surveillance teams remotely that there's even more demand for our surveillance solutions because.

They want to make sure there that they are able to to propagate those across the firm. So I think those things actually have benefited from the need for people to be more flexible about where people work and having less reliance on their own there they're kind of home grown infrastructure.

So all five of the new clients in the market operators that we signed in the quarter of work staff based deliberate and stock based solutions to their all our next generation solutions, both in surveillance end market and and upgrading and and I think that in general our overall demand for those types of services gone up I think the second thing is in the index side.

We are continuing to have a lot of great dialogue with our index partners about new products that we can bring to market that do play into the long term changes in.

In in the economy, and making sure that we deliver indexes that investors feel like taken an investment over the coming decade that we'll have a positive trend around them. So I think that's another area that we're really focused on Alex that more cobot related and then I guess the last thing is on our our data analytics platform Pondel.

We are seeing more demand for certain elements of alternative data because they're trying to get ahead of government data for instance, or they're really trying to get much better insights into demand and how it's changing and shifting in the world.

And I do think that a lot of our our quantum products are relevant there. So those are the things that we're seeing Alex.

Hi, good thank you I'll be back in the Q.

Great. Thanks, Alex.

Our next question comes from Ken Hill with Rosenblatt. Your line is open.

Hey, good morning.

Hoping to ask about NASDAQ marketplace services platform. So I know you guys launches that the into June and have some detail on the web site and.

I was hoping you could help me kind of narrowed the focus a little bit because it seems to have all a lot of great buzzwords in there and how to huge focus which can do a lot of things that a lot of Fintechs and exchange is one that do so I'm, hoping to understand maybe how you see it specifically position within Mastec I know you mentioned some early wins reflects there but that may be who.

Natural customer bases for this.

Maybe the addressable market for us here over time, yeah, no problems. So I think as funny, we always joke with our marketing department on the buzzwords.

So, but I think that good let me just kind of break it down if we think about what we've been investing in over the last several years in Mark pack. The first thing is is what we call NASDAQ financial framework, which is really the platform. The core platform that allows for Mike or service architecture, and what that means you have this like common data layer common data management capability common stick.

During the layer a common code base across everything you're building and that's kind of core platform, regardless of what functionality you put on top of it on what capabilities to build its this common platform that effort that the all of our market Tech solutions. Now are are built on top up and then on top of that you then build capabilities like Fox.

Banality trading prepaid risk management post trade processing settlements surveillance things like that what we've done with the marketplace services platform is essentially completed the trade lifecycle in a micro service architecture. So that you can you can be say deploy a market much faster in the cloud.

So everything is fully cloud native and you can go and it's a much more of a kind of a turnkey solution for new market. So I'd say Ken.

Primary client for the marketplace services platform, our new markets they could be existing clients that wants to launch new markets. They want to launch a repos market or they want to launch.

Something that's in the financial instruments themselves crypto markets and things like that as well or it can also be used for these kind of this new market concept that we've been talking about in terms of outside the traditional capital markets. Lex market is a real estate securities platform.

Really knew a new construct and we think that marketplace services platform is kind of a perfect use case for that.

And so it's just really creating a full trade lifecycle. Our first the duration of it was the matching engine itself and now we have a full trade lifecycle in that might for service architecture. So hopefully that helps kind of break down a bit.

Yeah got it thanks for the detailed there sure.

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

Great. Thanks, good morning folks.

Maybe just took years to the.

And so look and could you comment on that make the.

Just a yeah, obviously very good performance with the operating margin units each Brian how are your and it looks like he yes about 300 basis points of operating leverage through for.

Halfway through the year.

X percent on trading revenue growth of 3% op expense relative to maybe as we move into the second half of the gear.

Do you think we can still.

Operating leverage and maybe just since reversion to the saw a comment on the.

And then on trading revenue growth side.

Technology with a little bit list.

On the new order intake does that roughly depend on that sales trajectory, improving a little bit and second.

Okay.

Bundled question no no. That's like I said, we've got odds discuss of operating leverage in the discussion of order intake in Mark pack. So.

I just want to make sure Michael do you have any comments comments enough operating levers that you want to start with.

Well I think we've covered at some degree in the remarks, the DNS obviously, the operating leverage is getting the benefit from the additional revenue Rouge.

Receiving on the trading activity on that side of the business and we can continue to.

As we said in my remarks invest in the business and so we do think that there will continue for the full year. The overall expense guidance is around that 3% range. So thats what were targeting and thats what it when you look at that in my remarks, it sort of the made to the to the upper end of the range with respect to that expense guidance, that's where we come in around 3%.

For the full year and then on the revenue side, it's really with respect to what happens with respect to the operating.

The the revenue activity, we have on the trading side, which is what the real driver as to whether it's going to stay where it is increase or decrease is dependent somewhat in the short term based on the trading activity.

Yeah, and then and then on the or the order intake question for Mark attack I think the question is are we dependent on.

The same kinds of order intake for us to driver here are our current year results and I would say Brian that.

We certainly continue to see a good pipeline I AUC opportunity with order intake as I said before I think that we are seeing a little bit more moderated order intake. This year because of the fact that bigger bigger technology decisions are taking longer so that has a chunky big order intake that we tend to get from our larger clients are.

Taking taking longer as they're managing through their own situation before making significant changes to their systems or the or are launching new things within their market.

But I would say that we do continue to see a healthy pipeline and and as we said before we we do see some some risks through our ability to reach the lower end of the growth target for.

For our market Tech business. This year, just because of some of the challenges in terms of time to sales and and and the way that we're implementing in a remote environment, but overall the overall health of that business continues to be really strong and demand for our services continue to be really strong. So I don't have a specific answer your question about order.

And take relative to two revenue I'm, hoping that we've given you guys enough enough understanding of the dynamic for seeing free free rocket guys great conclusion there.

Yes, definitely looks promising in this environment.

For the detailed answer.

Thank you.

Thank you. Our next question comes from my carrier with Bank of America. Your line is open.

Hi, good morning, Thanks for taking the questions.

You mentioned that you're more comfortable in the low end of the non transaction revenue growth range. This year.

Taking some client activity in corporate and tend to be slower which makes sense.

Just curious if you were you seeing this scenario for a longer time period like are you seeing clients and obviously getting NASDAQ is but adapting enough that you could eventually you see a pickup in orders you really get four in some of this type of environment for a longer period of time it Michael if you do that indication.

Don't see a pickup in activity.

What areas, which you have on kind of the expense side, you know for flexibility. Thanks.

Sure. So I do think that clients are adapting you know, it's kind of they first had to get through really.

Surgeon volume in a complete change in their operating model and today, obviously put certain decisions on hold and then you have the second thing which is okay. Now we've got to deal with this new normal and what does it mean for our business and so how much how far we get a lean and on new enhancements or new products new market I think though however, there was this an enormous amount of kind of men.

Let them and demand coming into the year for new markets to launch for people to try to put more instruments on their platforms and and presented to really drive towards frankly, a more flexible infrastructure and so I don't think those decisions. We put on hold forever, Mike I think that a lot of them are just taking a little bit longer. So they know exactly how they're going to make that cap.

Allocation decisions, while they managed through a longer term environment. The other thing I would say is obviously the exchange world in General has done has performed well and that I was the markets performed well I think that the volume activity is not just here in the United States, but it's in other countries as well and so the overall resilience of the busy.

This models of our customers make it so that those types of decision might take a little longer but will ultimately be made because they definitely see the benefit of modernizing their infrastructure on the broker dealer side I think that a lot of some of the sales have been more on those immediate needs and that's why our surveillance sales have been really strong but over time broker dealers also.

I want to optimize their infrastructure, they're going to prioritize things that where they're making money and they are making money and trading. So we do think that that those are opportunities also in the long term to revert back to where we were seeing demand before.

And then I'll turn it over to Mike Michael on the question on expenses.

Yes, I think it's just a bit of extension, whether dino, saying with respect to.

We look at the expenses in the context of the revenue and so we're in a period, where this is continuing.

And then obviously will go there along with that Theres good chance for uncertainties, and we'll be seeing good revenue or activity on the transactional side of the business. So thats goes to really the resiliency of the business.

But obviously in an environment there were sitting and we are seeing the benefit at reduced levels of spending on on some of the discretionary spend or things like travel.

Our marketing events have moved online and so you save some of the in person costs in the custom hosting those events and we have moved those online. But then there are some savings is related to that so we'll obviously always look at our discretionary spend that we'll look at the non essential initiatives that we're looking at as an organization that you do over the longer term, but were dead.

Okay got it and I want to make sure. We're clear about this and continuation my remarks are continuing to invest in the capacity and the infrastructure to meet the market's demands. In addition to that we will continue invest in the long term growth initiatives for the business and so we will look to managing expenses, where we where we can where possible, but we will continue invest for the future.

Got it thanks a lot.

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

Thanks, Good morning.

There was a.

A decent sized dropped in the U.S. options capture rate in the quarter can you talk a little bit about what what's going on there and then as a good run rate or would you say for where you assumptions capture.

Sure. So do you want passes capture is really a function of the level of retail that's come into the options market because they had those types of orders tend to gravitate towards the price time market.

As opposed to the the floor rates markets or their complex markets like we have in IC.

So that and as you know that price high market tend to have a have a lower capture so I do think it's much more of a trend of retail now whether or not that trend will continue over the long term is something that we all.

We'd like to see in general because while while the capture as lower the volumes are up right. So you have to kind of look at it as the balance there and so in general we feel that having more participation in the market.

More varied participation in markets that more democratized or decision the markets. Those are all good things for further capital markets in general and so I would say, we just Chris we just have to that we'll have to see how much how resilient that retail as but I, but I would say that you should look at it more as a function of that as opposed to concrete or.

Great decisions, we've made its more just where the volume feeling.

Got it thanks.

<unk>.

Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.

Great. Good morning, Thanks, everybody.

It was almost begins to the infrastructure segment for second could you guys talk a little bit about source of growth, particularly around the U.S. profit business this quarter as well as a pickup in investment in data products out. There also seems like to be pretty pretty nice pickup sequentially should maybe a little bit more color there will be helpful. Thanks sure Yep.

Sure so on the crop product our proprietary product we are continuing to find.

Demand for our product, particularly as as frankly, the retail at the retail investing dynamic continues to increase I think that more and more of the retail brokerage firms.

Those firms that are really geared towards retail investors want to have access to real time information and we offered in a really flexible way and so and we worked very hard to be highly competitive with our peers on in terms of offering us barrier products had a great price. So so that has been an area of growth for us as we've continued to expand.

And the usage of our data across the across the broader capital markets ecosystem I think that in terms of the data and analytics business. Its been driven by couple of things first we still continue to have good growth in investment, although it's somewhat moderated from from last year basis, because we've been really working very hard to.

To really solidified the core value proposition that we have for clients, we've changed our pricing model last year, and it's actually really benefiting the resiliency of that business. This year the usage of our of our our data and analytics. This year on investment and it's kind of setting us up to really continues to drive and.

New growth for new product delivery. So we've had actually a 39% increase in the usage of investment this year over last year, and Thats really because more and more of this piece, we have the of them asset managers are really picking up and.

Leveraging the investment data to make more strategic decisions around how they want to launch products or allocate their assets to different investment strategies and I think that will give us a really good position to grow and expand the product base. There. We also have the benefit of spillover coming in and and also driving growth stay pad.

Strong demand for their services and we signed our first kind of the lowest client on the back of it being an investment clients. So we are of opening doors through our investment relationship for the slowest product. So I think all of those things are the reasons why we're seeing healthy growth in that business, but are also shoring up the resiliency that business with.

The change in pricing.

Great. Thanks very much.

Sure.

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

Hi, Thanks for taking my question, maybe just one on the index business owner, who can update on how much of that index revenue line is driven by you and base fees now I think last update was around 60%.

I'm wondering if you could help us understand the average fees on assets bench benchmark to that NASDAQ 100.

I think primarily because we're the you ends up 54% year over year versus the total AUM up 34%. Just wondering if there is some favorable mix shifts going on there on top of the really strong growth.

So in general I, just want to make sure you know we've been looking at this in terms of percentage of our revenue in the index business that comes from am driven revenue versus the futures volumes and that data revenue and about 60% to 65% of the revenue.

In the index. This is Tom from anyone and that's kind of an average over the last or a range that we've experienced over the last two years and somewhere in the range of kind of 10% to 20% comes from the futures volumes and really just depends on the quarter in terms of the level of activity. There. So hopefully that gives you a little bit of a sense of the scale.

In terms of the fee based we don't we don't help us fees, specifically to an index businesses are a specific indexes that we launched with our clients on but I would say that the NASDAQ 100 Index program and the way that there was a partnership we have with Invesco is a longstanding evergreen.

Partnership so that the fee based within the next 100 has been a theme for a long time.

Understood. Thank you.

Thank you. Our next question comes from Ari Ghosh with Credit Suisse. Your line is open.

Hey, good morning, everyone. So just circling back to your call Mems on the index business no. If I look at the recent performance.

Especially mobile will be given that you've been outside of market data organic net slow growth I believe is accelerated you're almost 50% range on this outpacing industry trends. So could you talk about some of the differentiating factor those and multi round index business. Most of some larger index players in the in the industry.

Then looking ahead, just curious where you see the most regal product innovation is is it around small data is cheap or some other white space felt that on where you see the most opportunities yes. John do you think about you you'd have news MLP hit that medium term growth target leverage business.

Sure. So I think that the first thing I would say is the NASDAQ 100, and if not the biotech indexes are just great great foundational franchises for US and then we have a very I think actually a great cod Ray of Smart beta indices that also have done quite well in terms of just leaning into overall thematics trends.

So so I just think that we've been pretty good [laughter] selecting the types of themes that we want to launch in our index business work, we're a little bit more I would say of a niche type of player. We don't do every index that you can possibly imagine we really do on worked very closely with our partners to launch products that we think we'll have really strong investor.

Demand, but also plan to trend so the trends that we've seen as being highly successful our trends around technology cloud indices, IP security indices biotech indices and obviously the flagship now 100, which is which has a lot of I'm waiting towards the technology sector in general.

It is actually a broad based Indra index and has a lot of sectors in there, but technology is obviously the most.

Prevalent so I think it's just that our market as well as the indices that that we build around our market trends are I think just playing into the next generation of our economy and I think as a result of that we've had this resilience and even in other down periods like in 2018, the fourth quarter.

We did not have this much reduction a land because even if the market performance was down for the quarter. We saw a lot of inflows coming in which offsets obviously dropped from our performance in this particular case. That's why we noted in my remarks that over 60% of the increase in Iran was actually from inflows not just market performance.

Because it does tell you that we're leaning into a lot of long term trends that are indexes. So.

So I hopefully that answers. Your question are you on that.

Very helpful. Thank you okay.

Thank you everybody have a follow up from Alex Kramm from you've yes. Your line is open.

Yes, Hey, Hello again.

Quick one maybe.

Maybe not.

I mentioned, adding that you mentioned CSG three times in your prepared remarks today. So just curious if you can give us a little bit more color, which is obviously a.

Super fast growing macro trend and so any any idea how big is GE is for you today, how fast has been growing and.

Well you see.

How much it wasn't in Pakistan, making the future in terms of potential growth yeah.

Sure, Yes, and that actually goes to our its second question, which I Didnt answer, which is where do we see that bigger trends going forward in the index business and he is certainly one of the big macro trend and it is an area that we want to make sure that we again in a in a very specific way that where we're also playing into the trend we're trying to make sure that we do.

Since SG versions of the net of the OMEX 30, we have other obvious setomatic indexes that we're launching with with our partners, but that one that's one area of yesterday that that we're definitely focused on but it's still very small for us Alex I think that the other is actually in our corporate services business where.

We did make a very small acquisition and a company called one report, but that is really catalyzed demand from our corporate clients. So our I think our largest near term opportunity, but still coming off of you know, we just launched the SG Advisory service like 18 months ago. So this is still pretty new is is really in helping our cost.

Summers navigate a very complex environment around you see reporting making it easier for them to report their information by putting in one place and having one repository that we then translate and map out all the metrics providers ultimately, we're going to want to expand that that we can actually map that directly into institutional investors databases.

And then additionally, I'm, making sure that we capture those that information and make it that we can provide our corporate clients with more reports on their own trending how they're trending against peers things like that so to that they can get more intelligent.

All of the work Theyre doing around DSG and I think that so we see that is kind of ish short term in terms of really building up our consulting capabilities as well as our technology service to make it easier for them to review the reporting and then long term as they really create even more intelligence for our corporate clients and for institutional investors.

On overall trends.

In that and then the last area of DST that we're focused on but again is still very small on from a revenue perspective, but we definitely see a lot of growing demand for it is in the NASDAQ sustainability Bond index is I'm, sorry, NASDAQ sustainable Fondant network, which is really kind of up in the EU in Europe, It's a sustainable bond market where.

Are they lift the bond.

And make them available to investors in Europe in the U.S., it's not yet a market, but it's essentially a listing venue for people to come in and we do a lot of work to to make sure. We vet the bond and other financing instruments around sustainability and confirmed that they are in fact meeting sustainability needs.

And that and giving giving those companies access to the market through through the sustainability not bond and Vonn network, sorry, but thats still again small so if I were to rank order them in terms of near term opportunity I would say the corporate corporate products that we're launching are definitely the highest near term opportunities, but all three of.

Some have good long term opportunities for growth for us out.

Okay, but too early to give any sort of corporate is why it's yes, GE metrics. So revenues like some of you information services PSR are already doing.

Yes, now I would say, it's too early for us and they're kind of embedded in different segments. So it's not something we pulled together as one number.

Okay. Thank you.

[music].

Thank you and I was out there are no further questions in the queue I'd like to turn it back up to misfit Dana Friedman for closing remarks, okay, great well. Thank you all very much for your time today. We are very pleased to see that our businesses are delivering strong organic organic revenue growth in the quarter, you've guided by our strategic direction, we have a clear focus.

Finished 2020 strong as we re imagine markets to realize the potential of tomorrow, and we're committing to executing our plan diligently while keeping our employees safe and set up for success well in a remote environment. So, but thank you very much and have a great day.

Yeah.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

[music].

[noise] [noise].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the NASDAQ second quarter 2020 results at this time all participants' lines are in listen only mode. After the speakers presentation will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone.

Please be advised that today's conference is being recorded if you acquire any further assistance. Please press star Zero I would now like to have a conference over to your speaker today Mr., Ed Ditmire Vice President of Investor Relations. Please go ahead Sir.

Good morning, everyone. Thank you for joining us today viscous NASDAQ second quarter 2020 financial results on the line or the in a pretty meant our CEO Michael Potasnick, our CFO John's ACA, our chief legal and regulatory officer and other members of the management team. After prepared remarks, we'll open up Humana. The press release on presentation are on.

Our website, we intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under FCC regulation update I'd like to remind you that certain statements in this presentation and during Q Renee may relate to future events and 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 over the call there.

Dana.

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

I would like to begin by acknowledging how deeply proud I am the NASDAQ teams continued commitment to our clients and the communities in which we live during these last few months.

With the second quarter being our first full period with the vast majority of our global work force working remotely I cannot be more proud with the results that we have delivered for our share our stakeholders in mid what is still a very unprecedented time.

The executive leadership team and I are acutely aware that our colleagues clients and so many of our stakeholders are tackling work family and help responsibility simultaneously.

We are in the fortunate position that our business can operate in a remote working environment globally, and we remain highly productive and available to our clients. Throughout this period that said, we also recognize it some of our team members prefer the opportunity to working in office environment and over the long term, we believe that there are social and creativity benefits that come from working together physically.

Therefore, we are working to reopen our offices and deliberate way as the virus subsides a specific cities in countries, where we operate and we're taking a very measured approach to the reopening our offices that prioritizes our employees health and safety in that regard we will continue to make it completely voluntary until at least yearend 2024.

Our employees to choose to return to our offices.

The second quarter with Mark not only by the deepening unpack that the global health prices, but by the escalation in recognition of the social injustices across many communities around us.

We are committed to creating lasting positive change and I'll highlight two examples.

Last month, we announced immediate actions.

To strengthen our continued commitment to diversity and inclusion in addition to our 5 billion dollar first quarter pledge to cover the 19 relief in the second quarter, we pledged an additional $3 million and cash donations to organizations, serving underserved minority communities and fighting the impact of health crisis.

In addition, as we look at NASDAQ broader purpose and the communities, where we operate particularly as a proponent of inclusive growth and prosperity, we see the NASDAQ Foundation as the core component of our suicidal mission.

As a result in addition to committing and that to an annual contribution to the foundation of approximately one quarter percent of operating profit starting in 2021. We also made a onetime capital injection in Q2 of this year of $10 million to improve the funded position of the foundation and to support it for finds mission we will up.

Based on market as we announced specific campaigns designed to support our foundations objectives.

There's also a lot of momentum inside of that back to improve and accelerate our efforts to advance our culture.

Therefore, we're increasing our internal resources devoted to programs focused on diversity oriented professional development employee experience and talent acquisition. Our ultimate ambition is for NAS. The NASDAQ team to reflect the diversity of the populations of each of the countries, where we operate and to provide a performance driven culture that demonstrates respect and build.

Longing for all of our employees.

We are fully committed to taking the necessary step in the months and years ahead to achieve this ambition.

This starts with publishing our diversity specifics from countries, where we are permitted collect that data, which we will start to do by the end of the third quarter.

These will serve as an honest assessment of where we are and how far we need to progress.

NASDAQ has always had a strong commitment to all three elements of ESG environmental social and governance practices. We believe our suicidal effort will further enhance our position as the leader that is continuously striving to approve.

No I will turn to our strong financial results for the second quarter 2020.

Dedication of the NASDAQ team under the new remote working environment.

Net revenues in our markets services business grew 22% while revenues in our non training segments grew 7% start from the prior period on an organic basis revenues across the non trading segments increased 6% you every year with growth from acquisitions contributing 1% to total growth.

Turning now to the specific highlights in the second quarter I will also briefly address the evolving industry and client dynamics, we reserving and how we see these influencing our performance for the remainder of 2020 I will begin with our foundational marketplace businesses.

These elevated volumes were driven not only not only by evolving expectations around the pandemics applications, but by the way the pandemic seems to be accelerating certain long term dynamics that have suffered significant sector rotations in the market.

We said last quarter that the volume outlook set of constructively due to both fits pandemics uncertainties and the fact that 2020 finishes with the us presidential election.

A quarter later, we increasingly back that the current economic and political backdrop will continue to support elevated volumes during the latter half of the year.

Our corporate services segment delivered revenues of $126 million, a 2% increase boosted by a return in newly new lifting activity and continued demand for our Investor relations intelligent solutions as well as higher revenue from corporate governance solutions.

After returning to organic growth in 2019, our IR and governance businesses saw an acceleration in the first half of this year driving 8% organic growth in corporate solutions in the second quarter, excluding a 2% impact due to unfavorable changes in foreign exchange rates.

Our IR advisory services, including our relatively new SG advisory solution, where top contributors in the period.

We believe that restructured and reposition corporate solutions product suite has a much stronger alignment with the secular trends that are driving our corporate clients interactions with their investment community and other stakeholders.

That said, we did experience reduced demand for corporate clients and sectors that are highly impacted by the effects. The pandemic set this travel retail NRG and financials were focused on expense controls has become a priority.

Additionally, prospects engagement in a virtual environment has created an elongated sales cycles for some of our corporate services.

Recognizing that these impacts could change quarter to quarter Weve endeavored to provide our clients with near term savings opportunities within the context of what are meant to be continued and eventually rebounding long term relationship.

And our listing segment NASDAQ, let us exchanges for Ipos during the period welcoming 42 life goes for 67% win rate for the first six months of 2020, we welcome 69 IPO.

Representing 69% of all your stock is our Ipos have raised $17.4 billion that represent 66% of total IPO capital raising the United States.

Fluting back we have welcomed 55 operating company Ipos for an 85% win rate in the first half the year.

Listings highlights from the second quarter includes three of the top four largest ipos by capital raised including royalty pharma the largest us IPO of 2020 to date Warner Music group and zoom infill the largest technology I'd give the year.

Notable backlist things during the period included Draftkings and Nicola Motor Company.

The reopening of the IPO window is very encouraging we have seen a steady and live listings from technology healthcare industries illustrative of the kinds of companies innovating to solve some societies Smith pressing challenges, which are finding a very receptive audience with investors.

Companies are also responding positively to NASDAQ virtual experienced during ipos, reflecting reflected in our market leading win rate.

Feedback from newly listed companies and also importantly from the investment banking and underwriting communities have been tremendous our partners appreciate the seamless men manner in which we transitioned our IPO first trade process. Once we shifted our operations to a remote environment in March.

Now, let me turn to our technology and analytics businesses.

New order intake overall with moderate during the period as client decision, making around large scale technology project has slowed during the pandemic looking within the product offering. We note that we had strong new order intake in NASDAQ trade surveillance, a SaaS offerings focused on our broker dealer clients and we signed five new marketplace technology customers.

All of which were signed after vertical sales process and all of whom selected our staff delivered market technology solutions.

We were also excited to announce during the second quarter. The launch of Nasdaq's marketplace services platform to provide our market technology clients. The seamless access the standard cloud based infrastructure component and full trade lifecycle capabilities as they move to the next phase of their digitalization.

This service was announced alongside signing of our first client Lex markets, which will leverage our cloud backing service to power their creating platform for commercial real estate securities.

There is heightened interest in the ways that our next generation technology, particularly the fast capabilities that we have built into both market infrastructure and surveillance product product can help our clients deal with heightened scalability and flexibility challenges at the pandemic brings.

These examples also highlight how we've made significant strides in adapting the ways that our technologists are performing in a more remote work environment.

The increase the risks if that market technology being below the bottom of our medium term growth objectives for the current year.

Turning to our information services segment, we delivered net revenues of $213 million up 19 million or 10% from the prior year period.

Index AUM rose to $272 billion at the end of the at the end of the period up 34% versus the prior year and eclipsing the previous quarter and tie up $233 billion in the fourth quarter 2019.

Index revenue was $68 million up 24% year over year with contribution driven primarily by the increase in ATP licensed product AUM and secondarily from fees generated from trading of licensed future.

We're incredibly pleased with the strength and resilience of our flagship index products during the quarter, we believe that the NASDAQ composite and then ask 100 performance reflects investor interest and the companies that are supporting the modern infrastructure for tomorrow's economy workforce and workplace.

Year to date women, all Atps license to NASDAQ indices are up over $40 billion and almost 26% of that increase or 64 $26 billion, sorry of that increase or 64% came from net investor inflows to the product with the remainder from market performance during the year.

While this segment is sensitive to what can be reversals and exhaustion us market beta and futures volume trends Theres no ignoring that the second quarters positive result put us in a better position for a full year performance.

Our investment data and analytics revenues increased 13% from the prior year period, including the contribution of the loop as such we acquired in March.

2020 organic growth investment is seeing some impact from budget tightening on the part of the buy side. The addition of spillover says real time performance and risk modeling gives us more opportunities to catalyze allocation decisions on the part of asset owners decisions that in turn for higher usage of investments lead leading asset manager research and selection tools.

Revenue in market data some modest organic growth during the period and continues to deliver consistent results, we've seen relatively stable performance and expectations in our market data products.

And finally for the third quarter.

For the third consecutive quarter. The majority of our revenues in the information services business came from the index licensing and investment analytic products, a direct result of focusing our investments into expanding our capabilities in higher growth areas within invest information services.

With our diversity of offerings and customers, we benefit from certain segments bolstering. Our result, when others faced some short term pressures that has been the story of NASDAQ for many years now and overall it provides for more stability and predictability than many of our direct peers.

We continue to see 2020, as an elevated risk environment related to the pandemics implications and related changes to client client purchasing behaviors could continue building in some portions of the business as the year progressive but we also recognize that the strong performance of our index business and the rebound in demand for Ipos has a feeling directly more optimistic than.

We were three months ago.

On the last quarter call, we've referenced our long term outlook of 5% to 7% annualized growth in our non trading businesses.

As we experienced the early days of the Pandemics impact on the economy, we communicated that we saw risks and our ability to achieve the lower end of that growth range in 2020.

We will continue to provide updates on our growth progress as we addressed our third quarter results in October.

First supports role that the FCC exceeded its little legal authority by creating a process to review fees long activate taken effect the rule of vacated or invalidated the fccs actions into in October 2018, when it overturned the ruling of its own administrative law judge that proprietary data prices are properly regulated and country.

And by competition and mandated the review of hundreds of other fees.

Second the court ruled that the Fccs accuracy pilot was on unauthorized because the FCC lacks the authority to adopt roles that impose obligations of their sole purpose is to gather data.

For the commission to regulate it must identify a problem and justified proposed solutions with sufficient economic analysis of the cost benefit and possible alternatives. The pilot would've subjective thousands of U.S. issuers to a multiyear experiment to determine what might happen if liquidity incenting rebates on exchanges were restricted or.

Emanated.

We continue to believe the fewest stock markets are the envy of the world delivering unmatched liquidity and resiliency and extremely low cost in a highly competitive environment, we hope that as the FCC move forward and its efforts to find ways to improve the market. They do so with the utmost thoughtfulness to ensure that reformed truly deliver benefits across a wide.

Range of issuers intermediaries and investors that depend on them.

Going forward, we urge the FCC to adopt the more inclusive approach to developing consensus around real proposals and significant rule changes, particularly when those changes are wide ranging and curious significant risk of unintended consequences.

As we look to the second half a 2020 and beyond we now know that we'll be navigating a world and economy characterized by the pandemics effect for longer than we were expecting.

Importantly, we observed several key trends that underscore the flexibility of our strategic ambitions to serve markets everywhere.

For example, we're now able to reach a new set of clients and finalized deals in our market technology business using our staff based solutions, which provide more turnkey and scalable market capabilities for our clients in a fast changing economic environment.

And lastly, Everest over recent years Theres been a growing urgency among companies globally to make a positive contribution to the environment and to focus on governance practices. This year the focused on the pandemic and its impact on our society and in particular on our underserved communities has elevated the commitment from the private sector to key areas of social responsibility as well.

As a result, we're starting to be rewarded for our efforts to expand our offerings addressing corporate issuers and other clients rising DST needs.

As I wrap up I will summarize by saying that NASDAQ remains sharply focused on advancing our strategic mission. Our global team has demonstrated their seamless adjustment to the remote nature of our current operating environment and our team's ability to deliver uninterrupted service to our clients as demonstrated in our strong results this past quarter and with that I will turn it over to Michael's her view.

The financial details.

Thank you Dina 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 us GAAP to non-GAAP results can be found in our press release as well as in a file located in the financial section of our Investor Relations website at IR Nasdaq's Dotcom.

I will start by reviewing second quarter revenue performance as shown on page three of the presentation and organic revenue growth on pages for 14.

76 million dollar increase in reported net revenue of 699 billion is the net result of organic growth of 75 million, including 22% organic increase in market services and 6% organic growth in the non treating segments.

The $3 million positive impact from acquisitions, and the $2 million unfavorable impact from changes in foreign exchange rates.

I will now review quarterly highlights within each of the reporting segments.

Start with information services.

Okay, just five from 14 saw a $19 million or 10% increase in revenue.

Organic revenue growth during the period was 9%, primarily reflecting very strong growth in our index business and this smaller but positive contributions for each of the investment data and analytics and market data businesses.

Operating margin of 62% declined about one point compared to the prior year period, primarily due to the inclusion of so locus.

Market technology revenue as shown on page is fixed and 14 increased $5 million were 6% with organic growth of $4 million or 5%.

Organic growth during the period, primarily reflects an increase in software as a service surveillance revenues.

As a dina noted annualized recurring revenue or a our rose 9% compared to the prior year period.

Operating margin of 18% was up eight points from 10% in the prior year period in year to date margin of 14% for the segment is up four points.

Turning to corporate services on page seven at 14 revenues increased $3 million were 2%.

Organic revenue growth was 3% for $4 million, reflecting an increase in us listings revenues and increases in both our intelligence revenues as government solutions revenues.

This was partially offset by lower event related revenues at the NASDAQ markets site and lower NASDAQ private market program activity, both mainly due to the business impact of coking 19.

The operating margin of 39% for the segment was up three points from the prior year period.

Market services net revenues on pages, eight and 14 saw a $49 million were 22% increase excluding the negative 1 million dollar impact from unfavorable changes in foreign exchange. The organic revenue increase was $50 million also 22%.

The organic increase during the period, primarily reflects increases in cash equities equities derivatives net revenues due to higher industry trading volumes.

The operating margin of 64% for the segment remains elevated due to the high volume environment.

Turning to pages, 914th review expenses non-GAAP operating expenses were $327 million in second quarter of Twentytwenty, an increase of $5 million were 2% compared to the second quarter of 2019.

This reflects the $7 million increase from the impact of acquisitions as well as higher compensation expense infrastructure costs and depreciation expense, partially offset by lower corporate travel expenses is that spending and changes in foreign exchange rates.

Turning to slide 10, we're tightening our Twentytwenty non-GAAP operating expense guidance range to 1.33 billion to 1.36 billion.

Well, we have experienced reduced levels of travel and event spending is important to note that we plan to continue to invest in the infrastructure necessary to support the current and potential for even greater activity on our platforms.

In addition, we're also continuing to allocate the capital resources to deliver on our longer term growth initiatives and our full year expense guidance range reflects these investments in the second half of the year.

Based on our latest internal expense forecast, which takes into account the impact relative of the relatively strong organic growth has on compensation variable compensation as well as the latest foreign exchange rates as we stand here today, we see ourselves as most likely to be in the top half of our updated expense guidance rich.

Moving to operating profit and margins.

GAAP operating income increased $71 million in the second quarter 2020, and the non-GAAP operating margin was 53% compared to 48% in the prior year period.

Nearly 500 basis point increase in the margin year over year reflects strong operating leverage, particularly in markets services business as well as multiyear efforts to enhance the company scalability that we would expect some near term reversion revered version should market volumes moderate.

Net interest expense was $25 million in the second quarter 2020, a decrease of 3 million versus the prior year.

The non-GAAP effective tax rate was 26.4% for the second quarter 2020.

Full year 2020, we continue expect to non-GAAP tax rate to be between 25.5% 27%.

Non-GAAP net income attributable to NASDAQ for the second quarter 2020 was 256 million or dollar 54 per diluted share compared to 203 million or dollar 22 per diluted share in the prior year period.

Let me now turn to the balance sheet.

Taking steps in the first quarters 2020 to increase cash reserves and eliminate near term maturities in the second quarter ethics took advantage of receptive credit environment and issued a $500 million 30 year bond.

Then as the short term credit environment continues to improve we became more comfortable with reducing our cash position to more normal levels and use the proceeds from our debt offering and the excess cash on hand to redeem outstanding commercial paper and to repay all of the borrowings on our revolver.

As a result, the company to returns lower leverage while enhancing available liquidity.

Turning to slide 11, the net of these actions is that debt decreased by 626 million versus March 31st primarily due to $1.1 billion aggregate net payments on revolver borrowings and commercial paper moment commercial paper that I mentioned a moment ago.

Our total debt to EBITDA ratio ended the period, a 2.4 times down from three times in the first quarter of 2020 net debt to EBITDA was 1.9 times down from 2.3 times in the first quarter 2020.

Also during the second quarter 2020 of the company page come common stock dividend in the aggregate $80 million and repurchase common stock the amount of $30 million year to date through June thirtyth, the company's repurchase common stock coming out of $152 million largely completing our objective to use share repurchases to offset the.

Issue equity compensation and other sources of gross issuances to assure investors benefit from stable shirt.

With that I'll turn it back over to the operator for today.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Withdraw your question press the pound key please limit yourself to one question and re queue for any follow ups.

Please standby, while we compile the today roster.

Our first question comes from Rich Repetto with Piper Sandler Your line is open.

Yes, good morning, Edina good morning, Mike.

I guess my question is.

Good morning.

You seem like you're in the sweet spot right now given to exposures to.

Equity trading your equity options as well as having the high percentage of recurring revenue.

I guess.

This.

My question is with so much volume now going into.

From retail.

The Trs percentage up in the fourth in the low 40 percentage are we missing anything I'm trying to look at the unintended consequences of having so much off exchange volume your revenue capture actually went up in equities, which I didn't understand but just trying to see how.

Given that you're in the sweet spot.

Make sure we're catching.

All the reflections here all the possibilities.

Sure well I would agree that retail participation in the markets, but the equities markets any equity options market has been yes, certainly has been elevated this year and you are right that is resulting in more off exchange volume occurring I think that but we've been really focused on is for the volume that does that come to the exchanges what can we do them.

Maximize our position and so we've been working really hard rates on a few fronts. One is certainly just overall customer service and availability second is just the scalability of our business and ability to handle these really large volume days, particularly like the Russell and the S&P 500 rebalance days.

Third is that we continue to improve the performance of our systems with a tech tech improvements and things that we're doing to make sure that we optimize the performance of our market.

Then the last thing is making sure that we really.

Environment, but but we do find that they the level of internalization.

This is something that we watch very carefully because you don't want you don't want there to be a diminishment of the price discovery thats occurring in the market by having too much of the volume go off exchange. So it's something that we certainly are focused on.

I don't I think the one thing that we are focused on rich is just making sure retail investors are educated as they're coming into the market.

The online retail brokers do it really good job of that FINRA does it really good job of that so we're just partnering with them to make sure that we're helping them with their educational efforts with the retail investors.

Got it anything on the revenue capture that was part of the question. The one so rather than I have for its really a function of a lot of things. So one is just which markets are they leveraging to come into the market and therefore, what's our capture rate I think we also are.

We're very careful in looking at how much volume is coming onto the into the auctions. We did have two very large auctions in the quarter at the end of the quarter with the S&P 500, I think that was 1.2 billion shares and the Russell Rebalanced was with a 1.5 billion shares and those obviously create lift as well in terms of the auctions.

Versus the intra day trading.

Got it.

Thank you.

Thank you. Our next question comes from Alex Kramm, what CBS. Your line is open.

Hey, good morning, everyone.

Quick one on on coal of it and the current pandemic.

You talked about how you obviously, there's some negative impacts on the revenues, but also positive on the expenses anything to note on the positive on the revenues I mean, if other new business wins or anything that has come out no new use cases that you'll clients have seen where you where you may be benefiting coming out of this or is it too early to tell.

No I'm actually I had a couple areas Alex I think it's it is actually relevant so the first is how the.

Demand for more of our SaaS based technology is actually elevated during during this period, because having more and more declines are realizing that to have the scalability and flexibility they want to be able to half what I will take capacity on demand to be able to manage their infrastructure remotely all of those things really benefit from a staff a south market.

Market structure.

Market technology, and and certainly as they've moved a lot of their compliance and surveillance teams remotely that there's even more demand for our surveillance solutions because they want to make sure there, but they are able to to propagate those across the firm. So I think those things actually have benefited from the need for people to.

To be more flexible about where people work and having less reliance on their own there, they're kind of home grown infrastructure.

And so all five of the new clients in the market operators that we signed in the quarter, where SaaS based deliberate and to SaaS based solutions to their all our next generation solutions, both in surveillance end market and and upgrading and and I think that in general our overall demand for those types of services gone up I think the second thing is in the index side.

We are continuing to have a lot of great dialogue with our index partners about new products that we can bring to market that do play into the long term changes in.

You know in in the economy, and making sure that we deliver indexes that investors feel like taken an investment over the coming decade that we'll have a positive trend around them. So I think that's another area that we're really focused on Alex that more cobot related and then I guess the last thing is on our our data analytics platform Pondel.

I do think that a lot of our our quantum products are relevant there. So those are the things that we're seeing Alex.

Hi, good thank you I'll be back in the Q.

Great. Thanks, Alex.

Your next question comes from Ken Hill with Rosenblatt. Your line is open.

Hey, good morning.

Hoping to ask about NASDAQ marketplace services platform. So I know you guys launches at the into June and have some detail on the website and.

Is hoping you could help me kind of narrowed the focus a little bit because it seems to have all a lot of great buzzwords in there and how to huge focus which can do a lot of things that a lot of fintechs and exchanges want to do so I'm, hoping to understand maybe how you see it specifically position within Mastec I know you mentioned some early wins with flex there, but that may be who.

Natural customer bases for this.

Maybe the addressable market for us here over time, yeah, no problems. So I think it's funny, we always joke with our marketing department on the buzzword.

So, but I think that let me just kind of break it down if we think about what we've been investing in over the last several years in market pack. The first thing is is what we call NASDAQ financial framework, which is really the platform to core platform that allows for a micro service architecture and what that means as you have this like common data layer common data management capability comments Dick.

Charity layer, a common code based across everything you're building and that's kind of core platform, regardless of what functionality you put on top of it on what capabilities you build if this common platform that effort. That's the all of our market Tech solutions now are built on top up and then on top of that you then build capabilities like Fox.

So everything is as fully cloud native and you can go and it's a much more of a kind of a turnkey solution for new market. So I'd say Ken.

Primary client for the marketplace services platform, our new markets they could be existing clients that wants to launch new markets. They want to launch a repos market or they want to launch.

Really knew and new construct and we think that the marketplace services platform is kind of a perfect use case for that and so it's just really creating a full trade lifecycle. Our first the duration of it was the matching engine itself and now we have a full trade lifecycle in that my for service architecture, So hopefully that help kind of breakdown.

A bit.

Yep got it thanks for the detailed there sure.

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

Great. Thanks, good morning folks.

Let me just shift gears to the.

The expense outlook.

Coming from that make the.

Just so yeah, obviously very good performance with the operating margin.

Brian how are your and it looks like.

Yes, but it's a basis points of operating leverage so far.

Halfway through the year.

6% on trading revenue growth of 3% op expense so maybe.

As we move into the second half of the gear.

Do you think we can still.

Operating leverage and maybe just sort of ocean saw comment on that.

And is on trading revenue grips on it in more technology with a little bit of us on the on the new order intake does that roughly depend on that sales trajectory, improving a little bit and second.

Sure.

Bundled question no. That's okay. So we thought odds discussion of operating leverage in the discussion of order intake in Mark pack. So.

I just want to make sure Michael do you have any comments comments enough operating levers that you want to start with.

Well I think we've covered at some degree in the remarks, the DNS obviously, the operating leverage is getting the benefit from the additional revenue rose.

Rick receiving on the trading activities.

On that side of the business and we can continue to.

As we said in my remarks invest in the business and so we do think that there will continue for the full year. The overall expense guidance is around that 3% range. So thats what were targeting and thats what it when you look at that my remarks, it sort of the made to the to the upper end of the range with respect to that expense guidance, that's where we come in around three.

Percent for the full year and then on the revenue side, it's really with respect to what happens with respect to the operating or the the revenue active you have on the trading so which is what the real driver as to whether it's going to stay where it is increase or decrease is dependent somewhat in the short term based on the trading activity.

Yeah, and then and then on the or the order intake question for Mark attack. I think the question is are we dependent on the same kinds of order intake for us. The driver here are our current your results and I would say Brian that we certainly continue to see a good pipeline of AUC opportunity with order intake as I said before.

For I think that we are seeing a little bit more moderated order intake. This year because of the fact that bigger bigger technology decisions are taking longer so that kind of the chunky big order intake that we tend to get from our larger clients are taking taking longer as they're managing through their own situation before making significant changes to their system.

Or or or launching new things within their market, but I would say that we do continue to see a healthy pipeline and and as we said before we we do see some some risk through our ability to reach the lower end of the growth target for for our market Tech business. This year, just because of some.

With the challenges in terms of time to sales and and and the way that we're implementing in a remote environment, but overall that overall health of that business continues to be really strong and demand for our services continue to be really strong. So I don't have a specific answer your question about order intake relative to two revenue I'm, hoping that we've given you guys enough.

Enough understanding of the dynamic for seeing free free or look at the right conclusion there.

Yes, definitely looks promising in this environment.

Thanks for the detailed answered.

Thank you.

Thank you. Our next question comes from my carrier with Bank of America. Your line is open.

Hi, good morning, Thanks for taking the questions.

You mentioned that you're more comfortable in the low end of the non transaction revenue growth range. This year.

Expecting some client activity in corporate and tech to be slower, which makes sense I'm. Just curious if you were you seeing this scenario for a longer time period like are you seeing clients and obviously getting NASDAQ is but adapting enough that you could eventually you see a pickup in orders you really get four in some of this type of environment for a longer.

Period of time it Michael if you that is the case and we don't see a pickup in activity.

What areas, which you have on kind of the expense side for flexibility. Thanks.

Sure. So I do think that clients are adapting you know, it's kind of they first had to get through really.

Surgeon volume in a complete change in their operating model and so they obviously put certain decisions on hold and then you have the second thing which is okay. Now we've got to deal with this new normal and what does it mean for our business and so how much how far we get a lean and on new enhancements or new products, new market I think though however, as there was this an enormous amount of kind of men.

Tim and demand coming into the year for new markets to launch for people to try to put more instruments on their platforms and and for them to really drive towards frankly, a more flexible infrastructure and so I don't think those decisions really put on hold forever, Mike I think that a lot of them are just taking a little bit longer. So they know exactly how they're going to make that cap.

Allocation decisions, while they managed through a longer term environment. The other thing I would say is obviously the exchange world in General has done has performed well and the I was the markets have performed well I think that the volume activity is not just here in the United States, but it's in other countries as well and so the overall resilience of the busy.

And then I'll turn it over to Mike Michael on the question on expenses.

Yes, I think it's just a bit of extension, what a dino saying with respect to.

We look at the expenses in the context of the revenue and so we're in a period, where this is continuing.

And then obviously will go there along with that Theres good chance for a certainty. So we'll be seeing good revenue or activity on the transactional side of the business. So thats goes to really the resiliency of the business.

But obviously in an environment there were sitting and we are seeing the benefit at reduced levels of spending on on some of the discretionary spend or things like travel.

Our marketing events have moved online and so you save some of the in person costs in the custom hosting those events and we have moved those online. But then there are some savings as relates to that so we'll obviously always look at our discretionary spend that we'll look at the non essential initiatives that we're looking at as an organization that you do over the longer term, but were dead.

Finally, going to and I want to make sure. We're clear about this and continuation my remarks are we're continuing to invest in the capacity and the infrastructure to meet the market's demands. In addition to that we will continue to invest in the long term growth initiatives for the business and so we will look to managing expenses, where we where we can were possible, but we will continue invest for the future.

Got it thanks a lot.

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

Thanks, Good morning.

There was a.

A decent sized drop in the U.S. options capture rate in the quarter. If you talk a little bit about what what's going on there and then it is a good run rate would you say for you a Fox news capture.

Sure. So do you have talked to capture is really a function of the level of retail that's come into the options market because they had those types of orders tend to gravitate towards the price time market.

As opposed to the the floor rates markets or their complex markets like we have an IC.

So that and as you know that price time markets tend to have a have a lower capture so I do think it's much more of a trend of retail now whether or not that trend will continue over the long term is something that we all.

I'd like to see in general because well evolve the capture as lower the volumes are up right. So you have to kind of look at as the balance there.

And so in general we feel that having more participation in the market.

More varied participation in markets that more democratized organization. The markets. Those are all good things for for the capital markets in general and so I would say, we just crisply does have that well have to see how much how resilient the retail as but I, but I would say that you should look at it more as a function of that as opposed to concrete or.

Great decisions, we've made its more just where the volumes going.

Got it thanks.

<unk>.

Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.

Great. Good morning, Thanks, everybody.

I was hoping to get to the infrastructure segment for a second could you guys talk a little bit about source of growth, particularly around the U.S. processes this quarter as well as a pickup in investment in data products out. There also seems like to be pretty pretty nice pickup sequentially, maybe a little bit more color there would be helpful. Thanks sure Yep.

Sure so on the top product our proprietary products, we are continuing to find.

Demand for our products, particularly as as frankly that retail at the retail investing dynamic continues to increase I think that more and more of the retail brokerage firms.

Those firms that are really geared towards retail investors want to have access to real time information and we offered in a really flexible way and so and we work very hard to be highly competitive with our peers in terms of offering us barrier products had a great price. So so that has been an area of growth for us as we've continued to expand.

And the usage of our data across the across the broader capital markets ecosystem I think that in terms of the data and analytics business. Its been driven by couple of things first we still continue to have good growth in the investment although it's somewhat moderated from from last year, but it's because we've been really working very hard to.

To really solidify the core value proposition that we have for clients, we changed our pricing model.

Last year, and it's actually really benefiting the resiliency that business. This year they'll usage of our of our our data and analytics. This year on investment and it's kind of setting us up to really continues to drive and new growth for new product delivery. So we've had actually a 39% increase in the usage of investment this year over last year.

There and Thats really because more and more of the C suite of the of them asset managers are really picking up and.

Leveraging the investment data to make more strategic decisions around how they want to launch products or allocate their assets to different investment strategies and I think that will give us a really good positions to grow and expand the product base. There. We also have the benefits below the coming in and.

Also driving growth they've had to have strong demand for their services and we signed our first kind of so Lucas client on the back of it being any investment clients. So we are opening doors through our investment relationship for the slowest product. So I think all of those things are the reasons why we're seeing healthy growth in that business, but are also show.

Shoring up the resiliency that business with the change in pricing.

Great. Thanks very much.

Sure.

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

Hi, Thanks for taking my question, maybe just one on the index business owners and an update on how much of that index revenue line is driven by you and base fees now I think last update was around 60%.

I'm wondering if you could help us understand the average fees on assets bench benchmark to that NASDAQ 100.

I think primarily because we are that you ends up 54% year over year versus the total AUM up 34% just wondering if there's some favorable mix shifts going on there on top of the really strong growth.

<unk>.

In the index business comes from a Lam and that's kind of an average over the life or a range that we've experienced over the last few years and somewhere in the range of kind of 10% to 20% comes from the futures volumes and really just depends on the quarter in terms of the level of activity. There. So hopefully that gives you a little bit of a sense of the scale.

In terms of the fee based we don't we don't publish fees specifically fuel index businesses are a specific indexes that we launched with our clients.

But I would say that the NASDAQ 100 index program and the way that the the partners that we have with Invesco is a long standing evergreen.

Partnership so that's the fee based within the next 100 has been a theme for a long time.

Understood. Thank you.

Thank you. Our next question comes from Argos with Credit Suisse. Your line is open.

Hey, good morning, everyone. So I was just circling back to your call Mems on the index business. So if I look at the recent performance.

Especially mill will be given that you've been outside of market data organic net slow growth I believe is accelerated to around 50% range I'm is outpacing industry trends should could you talk about some of the differentiating factor those and mold pure round index business well some of the larger index players in the in the industry.

Then you know looking ahead, just curious what you see the most eagle product innovation is is it around even small data is cheap or some other white space felt that on what you should the most opportunities. Yes, just thinking about you are you.

Revenues from LPG had that you can tell much growth targets you need that's for sure.

Sure. So I think that the first thing I would say is on the NASDAQ 100 and have now biotech indexes are just great great foundational franchises for US and then we have very I think actually a great cod Ray of Smart beta indices that also have done quite well in terms of just leaning into overall automatic trends.

So so I just think that we've been pretty good at selecting the types of themes that we want to launching our index business work for a little bit more I would say of a niche type of player. We don't to every index that you can possibly imagine we really do on worked very closely with our partners to launch products that we think we'll have really strong investor.

Demand, but also plan to trend so the trends that we've seen as being highly successful our trends around technology cloud indices, IP security indices biotech indices, and obviously the flex it sounds like 100, which is which has a lot of I'm waiting towards the technology sector in general.

It's actually a broad based Indra index that has a lot of sectors in there, but technology is obviously the most.

We did not have this much reduction a land because even if the market performance was down for the quarter. We saw a lot of inflows coming in which offsets obviously dropped from our performance in this particular case. That's why we noted in my remarks that over 60% of the increase in a around what's actually from inflows not just market performance.

Because it does tell you that we're leaning into a lot of long term trends that are indexes. So.

So I hopefully that answers. Your question are you on that.

Very helpful. Thank you okay.

Thank you everybody have a follow up from Alex Kramm from you've yes. Your line is open.

Yes, Hello again.

Quick one maybe maybe not.

You mentioned that you mentioned CSG three times in your prepared remarks today.

So just curious if you can give us a little bit more color, which is obviously a.

Super fast growing macro trend and so any any idea how big is GE is for you today, how fast has been growing and.

When you see.

How much on and thank you can make in the future in terms of potential growth you.

Sure, Yes, and that actually goes to our second question was I Didnt answer, which is where do we see the bigger trends going forward in the index business and he is certainly one of the big macro trend and it is an area that we want to make sure that we again in that in a very specific way that where we're also playing into the trend we're trying to make sure that we do.

Since SG versions of the now of the on Mxnthirty, we have other setomatic indexes that we're launching with with our partners, but that one that's one area as you see that on that we're definitely focused on but it's still very small for us Alex I think that the other is actually in our corporate services business where.

We did make a very small acquisition and a company called one report, but that is really catalyze demand from our corporate clients. So our I think our largest near term opportunity, but still coming off of you know, we just launched the FDA Advisory service like 18 months ago. So it is still pretty new is really in helping our cost.

Summers navigate a very complex environment around is the reporting making it easier for them to report their information by putting it in one place and having one repository that we then translate and map out to all the metrics providers ultimately, we're going to want to expand that so we can actually map that directly into institutional investors databases.

And then additionally, on making sure that we capture those that information and make it that we can provide our corporate clients with more reports on their own trending how they're trending against peers things like that so to that they can get more intelligence from all of the work they're doing around DSG and I think that so we see that is kind of Oh sure.

Our term in terms of really building up our consulting capabilities as well as our technology service to make it easier for them to review the reporting and then long term as they really create even more intelligence for our corporate clients and for institutional investors on overall trends.

In that and then the last area of DST that we're focused on but again, it's still very small on from a revenue perspective, but we definitely see a lot of growing demand for it is in the NASDAQ sustainability Bond index is I'm, sorry, NASDAQ sustainable abandoned network, which is really kind of up in the you in Europe, it's a sustainable bond market where.

They list the bond.

And make them available to investors in Europe in the U.S., it's not yet a market, but it's essentially a listing venue for people to come in and we do a lot of work to make sure we bet the bonds and other financing instruments around sustainability and confirmed that they are in fact meeting sustainability needs.

And that and giving giving those companies access to the market through through the sustainability not bonds.

On network, sorry, but that's still again small so if I were to rank order them in terms of near term opportunity I would say that corporate corporate products that we're launching are definitely the highest near term opportunities, but all three of them have good long term opportunities for growth for us out.

Okay, but too early to give any sort of corporate is why it's yes, GE metrics. So revenues like some of your information services peers are already doing.

Yes, now I would say, it's too early for us and they're kind of embedded in different segments. So it's not something we pulled together as one number.

Okay. Thank you.

Thank you and I was low or no further questions in the queue I'd like to turn it back to misfit Dana Friedman for closing remarks, okay, great well. Thank you all very much for your time today. We are very pleased to see that our businesses are delivering strong organic organic revenue growth in the quarter, you've guided by our strategic direction we have.

A clear focus to finished 2020 strong as we reimagine markets to realize the potential of tomorrow, and we're committed to executing our plan diligently while keeping our employees safe and set up for success well in a remote environment. So, but thank you very much and have a great day.

[music].

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Q2 2020 Nasdaq Inc Earnings Call

Request a DemoDemo

NDAQ

Nasdaq

Earnings