Q3 2021 Nasdaq Inc Earnings Call

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

[music].

Good day, ladies and gentlemen, and welcome to Nasdaq's third quarter 2021 results conference call.

At this time all participant lines are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time to ask a question you would need to press Star then one on your telephone as a REIT.

Today's call is being recorded.

If anyone should require operator assistance. Please press Star then zero.

I would now like to hand, the conference over to your host today, Ed did Mayer senior Vice President of Investor Relations. Please go ahead.

Good morning, everyone and thank you for joining us today to discuss Nasdaq's third quarter 2021 financial results on the line are Adena Friedman, our CEO and Dennis <unk>, our CFO, John Zecca, our chief legal.

L. A Tory officer and other members of the management team. After prepared remarks, we will open up the line to Q&A. The press release and 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 SEC regulation update I'd like to remind you that certain statements.

<unk> regulatory in this presentation and during Q&A 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 1095.

Actual results may differ materially from these projections information concerning factors that could cause actual results to differ from.

Statements looking statements is contained in our press release and periodic reports filed with the SEC I'll now turn the call over to Athena. Thank you Ed and good morning, everyone. Thank you for joining US my remarks today will focus on Nasdaq's third quarter 2021 performance the progress, we're making on our strategic repositioning and updates on areas where.

Four we're making significant investments to address large opportunities I'll also share a brief remarks about the current operating environment before I turn the call over to Ann who will provide further details about our results as well as an update on our guidance our capital deployment and our corporate sustainability efforts before we move to Q&A let.

Let me begin by acknowledging the NASDAQ.

Weird dedication to our broader mission as he made notable progress in the third quarter. Their hard work has been critical to our success and delivering strong results for our clients together, we will continue our journey to become the leading provider of technology data analytics insights and marketplace excellence to the global capital markets and beyond.

Now.

Team to our financial results for the third quarter of 2021, NASDAQ delivered net revenues of $838 million, an increase of $123 million or 17% from the prior year period, our growth was largely driven by 13% organic revenue growth in our solutions segment, 14% organic growth in our.

Now turning services business and contributions from our acquisition of Irvine.

We continue to make notable progress across key secular growth opportunities as illustrated by total company annualized recurring revenue or a R. R of 183 $4 billion, an increase of 19% compared to the prior year period.

Our market our recurring revenue businesses, we are seeing some of our best performances from our SaaS based solutions, specifically anti financial crime technology is showing particularly strong results with revenues, increasing 16%, excluding the impact of <unk> <unk> will begin to be included in our organic growth calculation next year.

We then an increase of over 30% versus prior year in that business.

Additionally, in our investment intelligence business, our SaaS products, including the NASDAQ asset owner solutions, which is the new name for the combined investment in service products drove the 13% increase in analytics revenue.

Our third quarter <unk>.

To underscore the continued progress we've made to advance our strategy and additionally, demonstrate the value capture from the flywheel effect, which is our ability to leverage the momentum in one business area to drive success in other parts of the business.

For example, our success in attracting the majority of the quarter's new listings in capital raised to NASDAQ.

Drives higher growth in equities and options trading and multiply as cross sell opportunities for our Investor Relations and ESG related services. It also contributes to the vitality of our index business like the NASDAQ100, and the NASDAQ Nextgen 100, 100, indexes and enhances the brand strength and other strategic growth areas of the company.

As we continue to evolve NASDAQ into a high performance technology company each quarter that passes gives us an opportunity to reflect on the progress we've made.

A critical pillar of our success has been our ability to allocate capital towards our technology and analytics capabilities.

Our acquisition of Verifone has established us as a leader in anti financial.

Crime technology as we build upon our already strong foundation in that area of the market in the third quarter. Our legacy trade surveillance segment saw the largest quarterly order intake in the last several years, adding new business across all regions, while our market surveillance group signed two new clients for our SaaS based solutions, including a new crypto.

<unk> exchange client.

Another pillar has been our ability to advance our leading corporate and marketplace positions corporate platforms revenues increased 18% versus the prior year period, driven primarily by outstanding growth in the NASDAQ listed issuer base across our U S and Nordic markets. It has been a record year. So.

So far for new listings in the Nordics and with with over 132, new listings coming to NASDAQ year to date. Additionally, the U S has experienced the best new issuance here in the past two decades, and NASDAQ continues to demonstrate strength with a 75% win rate for ipos in the quarter and a 72% win rate year to date.

As our listed issuer base grows were seeing correlated demand for our suite of IR and ESG services within ESG, specifically, we see continued interest in our NASDAQ1 report and our ESG Advisory solutions coming from every from companies at every stage of their ESG journey, including companies preparing to list on Nasdaq.

I would like to acknowledge briefly here that we are pleased with the SEC's approval during the quarter of our proposal to enhance board diversity of disclosures, while there have been meaningful developments to advance board diversity across the governance ecosystem, we believe the standardized manner by which NASDAQ listed companies will disclose this information will be critical to driving further progress.

We look forward to working with our listed companies to implement the new listing rule.

Market services is another area of our business, where we are seeing that flywheel related success, our expanded issuer base benefits equity trading since our share of trading and average capture rate is significantly higher and NASDAQ listed stocks than it is in stocks listed on other venues.

An expanded ecosystem of equity trading in turn brings positive impacts to the options industry, where NASDAQ, but all exchanges in the third quarter in the U S equity options contracts traded.

We're also excited by the early progress we're seeing in the growing suite of ESG related capital market solutions within market services. These include the NASDAQ.

Sustainable Bond network, our European our European Green Bond listing service, our carbon removal marketplace Piero Earth as well as the expansion of our Nordic ESG derivatives offering.

Overall, our market services segment saw revenues increased 15% in the third quarter versus the prior year and this was largely driven.

Driven by increases in equity derivatives and cash equity net revenues, although all sub segments of market services delivered year over year increases.

Our investment intelligence business saw revenues increase 30% during the third quarter compared to the prior year period.

I'm sorry are our investment intelligence businesses saw revenues increased 15.

<unk> percent in the third quarter compared to the prior year period. This was driven by a combination of geographic expansion in our market data business higher assets under management and exchange traded products linked to NASDAQ indexes as well as strong new sales higher client retention and take up of new capabilities across the analytics offerings.

Our index business.

Continued its strong 2021 performance in the third quarter with revenues up 38% versus the prior year on a combination of both strong market performance of our most important amount of indexes as well as very material net inflows.

We're especially pleased to see positive responses from the market to some of our newer products and our index.

Index franchise with notable AUM growth in the Invesco innovation suite, the new more ETF tracking the Felix semiconductor index and the <unk> products linked to the NASDAQ Crypto index.

More broadly AUM in NASDAQ licensed Etp's launched since 2019 reached 13 billion.

Business hours at the end of the third quarter.

We are all also unlocking new areas of innovation in our analytics business to bring more data and transparency to the institutional marketplace. This includes a significant partnership announced in July with Mercer, a leading consultant for institutional asset owners that gives our asset owner clients broader access to HEICO.

High quality research on investment managers and their various investment strategies through a simplified workflow, enabling deeper due diligence. We expect this partnership to expand our client's usage of our asset owner solutions going forward.

While we continue our strategic journey I would like to highlight next how we are measuring our progress in evolving.

The company at the highest level using two key metrics.

First our year to date organic revenue growth across the solutions segments continues to meet or exceed the medium term outlook of 69% annualized growth that we initiated after adding paraffin or 2021 year to date organic growth across our solutions segments is 15.

Percent.

Secondly, because we are growing our SaaS revenues, even more quickly than the 19% increase in our year over year. The total percentage of IRR that we are generating from our SaaS businesses rose to 34% at the end of the third quarter. This is up from 28% in the prior year period and continues to move us closer to our medium term object.

<unk>, a 40% to 50% by 2025.

We're very pleased with the progress that our teams continue to make regarding SaaS contributions to our revenues both organically and inorganically.

Here are two brief examples that demonstrate our progress and innovation to support this growth.

It has been eight months since we completed the acquisition of Verifone.

And our collaboration to date affirms our belief that this combination can accelerate new opportunities. This is particularly the case with larger tier one and tier two banks and those international banks from outside of <unk> traditional customer franchise in North America.

The Verifone team is executing on its strategy to further penetrate tier two banks, which we defined as banks.

Holding total assets about $50 billion and we secured another significant win during the quarter through our joint efforts.

We are still have significant developments in progress to unlock broader adoption among new customer groups are early milestones certainly validate the potential that we have identified together.

Additionally.

We can at NASDAQ and it underscores our ability to give clients an efficient means to consume and manage market related datasets in the cloud, which is becoming a standard practice for many users.

Initial interest in NASDAQ data link is encouraging the platform has seen daily average of 33000, new visitors and 200 new account activation.

Both areas in the weeks following the launch.

Next I will briefly address areas of our business where factors impacting the current operating landscape are particularly relevant today and in the near term <unk>.

By and large we continue to operate within the confines of the pandemic. While there has been slow progress to enable in person activities and onsite client visits.

<unk> far from the environment in which we operated prior to March of 2020. We are however, fortunate that our diversified business model allows us to be executing at a very high level across our operations. Despite the prolonged backdrop of the pandemic.

The logistical challenges of COVID-19 to travel intense collaboration and onsite installation.

Ever immigration have had their highest impact on the market infrastructure technology business within our market technology segment.

We have had several complex clearing and post trade implementation projects that have experienced longer timelines and have required more resources to progress.

These challenges have slowed revenue recognition and have increased.

<unk> near term implementation expenses impacting near term margins and creating short term capacity constraints, despite growing demand from clients.

The second half of 2021 continues to be heavily impacted by this dynamic and with this business, having relatively high revenue visibility and clear capacity constraints, we know now that in the near term.

Market infrastructure technology revenue growth within the broader market technology segment will continue to be impacted in 2022, even if the underlying logistical challenges of the pandemic improve.

On the other hand, and our corporate platform business.

The pandemic period has created some efficiencies onto the go public.

Blick process, notably IPO Roadshows had turned virtual making them more efficient for companies and investors the new efficiencies that contributed to investors' ability to evaluate the multitude of new issuers and have increased bankers capacity to support companies going through the IPO process.

As of today, the pipeline for new listings remains.

Robust based on the number of active S. One registration on file with the SEC, assuming current market conditions persist, we have a strong visibility into the upcoming six months and we anticipate this momentum to continue as we enter the final months of the year and into at least the first quarter of 2022.

Turning to how we envision our ability.

Ability to sustain sizable growth in the long term I see two key elements to our potential future, our RSR or future potential.

First we've evolved nasdaq's businesses to focus on critical capabilities that are strategically important to our clients and we have become more client centric than ever.

This evolution has allowed us to focus.

On providing the right data insights and technology that are our clients need to be successful across the capital markets today and tomorrow.

Second we have strong competitive positions and very sizable markets with in the key areas of growth for NASDAQ. It.

It is a combined serviceable addressable market of 20 billion.

Across our anti financial crime and trade surveillance technologies, our indexes and investment analytics solutions as well as our Investor relations governance and ESG services.

Based on our traction in these growth businesses today, we are incredibly excited about the opportunities that lie ahead of us.

As I wrap up I want to reiterate.

Iterate that we're entering the final months of 2021 with remarkable momentum as we make steady and consistent progress across our key growth areas and our foundational marketplace businesses.

And bind with a favorable capital markets and macroeconomic backdrop, we remain well positioned to advance our strategy into 'twenty, two and 2022 and beyond.

And with that I will turn it over to Ann to review the financial results in greater detail.

Thank you Dana and good morning, everyone. My commentary will primarily focus on our non-GAAP results and all comparisons will be to the prior year period, unless otherwise noted reconciliations of U S. GAAP to non-GAAP results can be found in our press release.

<unk> as well as in our final located in the financials section of our Investor Relations website at IR that NASDAQ Dot com.

I will start by reviewing third quarter performance beginning on slide 11 of the presentation.

The 17% increase in reported net revenue of $838 million is the net result of.

Organic growth of 13%, including 13% organic increase in the solutions segment, and a 14% organic increase in market services.

And the contribution from <unk> as well as the impact from divestitures.

Moving to operating profit and margins non-GAAP operating income increased 20%.

While the non-GAAP operating margin of 53% increased one percentage point compared to the prior year period.

Non-GAAP net income attributable to NASDAQ for the third quarter of 2021 was $303 million or $1 78 per diluted share compared to $256 million.

Percentage of $1 53 per diluted share in the prior year period.

Turning to slide 12 as.

As Deno mentioned earlier <unk> totaled 183, 4 billion, an increase of 19% from the prior year period, while annualized SaaS revenues totaled $620 million in.

Or 42%.

Excluding the impact of <unk>, <unk> increased 10% year over year.

I will now review quarterly segment results on slides 13 through 16.

Starting with market technology revenue increased $28 million or <unk>, 33% the increase.

Increase the flex the positive $29 million impact from the acquisition of <unk> and a $5 million increase in our existing anti financial crime technology business, partially offset by an organic revenue decline of $6 million and our market infrastructure technology business.

Excluding a $3 million FX.

X impact as well as the $7 million purchase price adjustment on deferred revenue associated with the closing of the <unk> transaction.

<unk> revenues would have been $39 million in the third quarter period in anti financial crime technology would have been $73 million with both our existing surveillance and <unk> solutions.

<unk> continuing to exhibit strong momentum.

The revenue decline within the market infrastructure technology business was driven primarily by the planned rollout of our sizable maintenance and support licensing contract with a customer who will continue to use our technology under our license agreement.

As well as a decrease more.

And change request and installation revenues a consequence of both a strong comparison period in the third quarter of 2020 and capacity constraints, we're working through due to logistical implications of the pandemic.

<unk> for market technology was $428 million in the third quarter of 2021 and.

An increase of 54% compared to the prior year period the.

The market technology segment operating margin was 9% in the period, excluding the impact of the previously mentioned $7 million purchase price adjustment related to verify in the operating margin would have been 14%.

Investment intelligence revenue increased.

<unk> $36 million or 15% all of which was organic organic revenue growth. During the period reflects very strong growth in our index business as well as a meaningful contribution from analytics.

Annualized recurring revenue or <unk> was $555 million.

An increase of 9% compared to the prior year period.

AUM and Etp's licensed to NASDAQ indices rose, 15% compared to the prior year period to 361 billion, including 53 billion from net inflows and an $87 billion net increase for market.

Depreciation.

Partially offset by a $92 billion.

Negative impact related to the previously discussed ETP sponsors switches.

These switches collectively were associated with about a $3 million and run rate quarterly revenues, which will be fully reflected in our revenues for the first time in the fourth quarter.

2021.

The investment intelligence segment operating margin of 65% is unchanged compared to the prior year period as we continue to make strategic investments in index and analytics to support sustained growth.

Corporate platforms revenues increased $24 million or 18%.

Reflecting organic growth the increase was.

Primarily driven by higher U S listings revenues due to the expansion in our listed issuer base as well as higher adoption across the breadth of our Investor relations and newer ESG advisory and reporting offerings.

Corporate platforms.

With.

Was $529 million and increased 17% compared to the prior year period.

Corporate platform segment operating margin of 42% increased three percentage points compared to the prior year period.

Market services, net revenues increased $39 million or 15%.

The organic revenue increase was $37 million or 14% and there was a $2 million positive impact from changes in FX rates.

The organic increase reflects higher equity derivatives cash equities and trade management services revenues.

Segment operating margin of 63% increased three percentage.

<unk> points from the prior year period reflect reflecting strong operating leverage on higher trading revenues.

One modeling item to note is that for the fourth quarter of 2021 and January 22, we have waived the collection of certain regulatory fees for four of our U S equity options market.

This is in order to ensure that collection of the fees in combination with other regulatory fees and fines does not exceed our regulatory costs.

Holding all else equal the removal of the fee is expected to reduce our reported capture rate by approximately one five cents per contract in the fourth quarter of two.

Thousand 21, and approximately a half of a cent per contract in the first quarter of 2022.

Turning to page 17 to review both expenses and guidance.

Non-GAAP operating expenses increased $51 million to $397 million.

The increase reflects.

A $26 million or 8% organic increase of $21 million increase from the net impact of acquisitions and divestitures as well as a $4 million increase from the impact of changes in FX rates due to a weaker U S dollar.

The organic expense increase has two main drivers first higher.

Compensation expense, reflecting our continued investment to drive growth and an increase in variable performance linked compensation due to our outstanding results.

And second increased costs related to what has been a very active capital markets backdrop, including expenses related to increased trading capacity and marketing.

Getting commitments supporting our listing clients.

Consistent with what we said last quarter about expenses coming in near the high end of the range. If performance continues to be strong in relation to our medium term growth objectives. We are narrowing our 2021 non-GAAP operating expense guidance to a range of one.

Oh 5 billion to 162 billion.

From $159 billion to $1 six 2 billion previously the.

The updated range reflects the impact of strong and broad based organic revenue growth in the first nine months of 2021 on.

Six of all expenses.

Turning to slide 18 that increased by $226 million versus <unk> 21, primarily due to net issuances of $259 million of commercial paper, primarily used to fund the accelerated share repurchase program or ASR.

On <unk> and a net increase of $19 million of euro bonds from refinancing our 2023 eurobond with the 2033 eurobond during the quarter. This.

This was partially offset by a $52 million decrease in eurobond book values caused by a weaker euro.

Our total debt to.

12 months EBITDA ratio ended the period at three two times unchanged from the second quarter of 2021.

During the third quarter of 2021, the company paid common stock dividends in the aggregate of $90 million and repurchased common stock in the amount of $475 million, including.

To train the initial delivery of approximately 2 million shares of common stock related to the ASR agreement. We entered into in July we expect to receive the remaining shares related to the ASR in the fourth quarter of 2021 and for additional planned repurchases related to the sale of our U S fixed income business to resume in 2022.

Including as of September 32021, there was $984 million remaining under the share repurchase repurchase authorization.

We continue to expect EPS dilution from the sale of NASDAQ fixed income to be about 2% in the first 12 months. Following the June 25th close but to diminish to immaterial levels.

After that.

Turning to slide 19.

Want to begin regularly addressing our focus on ESG elements of our business, both internally and externally because we believe NASDAQ has an important set of opportunities in terms of our sustainability and external impact.

And we have a strong momentum in.

Executing against them.

We're committed to the highest level of sustainability in terms of how we run our businesses and serve all of our stakeholders, but also have positioned ourselves to develop high impact outside of the organization through our anti fin cram solutions, our carbon removal marketplace Piero and our unique ESG.

<unk> and services offered to our corporate clients.

As well as our efforts to further our corporate purpose through focused philanthropy and volunteerism. Our purpose is to champion inclusive growth and prosperity and we have chosen to emphasize financial literacy and extensive entrepreneurship education and support with an underserved communities.

Products throughout the U S.

During 2021, we've expanded our ESG disclosures with new climate reporting and task force on climate related financial commitments. Additionally, we have substantially expanded our anti financial crime and ESG products and services capabilities and we received SEC approval.

<unk> listing rule promoting increased transparency on board diversity.

We have much to do to continue executing on our ESG opportunities, but we were very encouraged to see sustainability, a leading provider of ESG research and ratings recently recognized our progress in these areas our latest sustainability ESG risks.

Risk rating improved to a level that puts NASDAQ in the top three percentile of all rated companies.

We look forward to updating you on a regular basis as we progressed, our ESG initiatives going forward.

Thank you for your time and I'll turn it back over to the operator for Q&A.

Thank you to ask a question.

For our need to press Star then one on your telephone to withdraw your question. Please press the pound key we ask that you limit yourself to one question and one related follow up again that is one question and one related follow up please standby, while we compile the Q&A roster.

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

Yes, good morning, Dana and good morning, and congrats on the strong results here. Thank.

Thanks for I guess.

Youre, having tremendous success with the annual growth of our annual recurring revenues.

So soft revenues in there and.

And you did talk about you said you focus on the critical capabilities of your clients and more clients. So the question is.

Looking back.

How important is equity trading and equity market share.

Even though.

Again, youre revenues are growing because volumes are looking.

And all metric was equity market share and revenue capture how important is that to NASDAQ as you make this.

Transformation.

Well I would say every part of our business is important rich and important to us and so we do look at we exam.

Every element of our business our core marketplace business really serves as our foundation for our ability to serve our clients and a lot of other ways. So we're extremely focused on it I think that we've seen some shifts in market share as well as just.

A couple of different dynamics.

One has been the increase in retail which is increasing.

Salmon internalization, and just and decreased overall exchanges share of trading and I think that within that that's an area that obviously, we're seeing some more some more work done by the regulators just to understand that dynamic I think that the the second is of course the launch of some new exchanges that are that have come forward.

Inquiry, they have actually primarily focused on gathering some of that retail order flow and trying to compete for it. So we have really taken a very balanced approach in terms of being strategic in how we serve our clients we want to make sure that we provide kind of a sustainable marketplace that we do things in a competitive way.

And it also creates a sustainable advantage for for our markets and for our clients that operate in our markets and so we've taken I would say a very measured and balanced approach to managing share managing capture and evaluating kind of the composition of trading in our markets to make sure that we're kind of balanced there are not that what.

That that applies to both our equities and options markets and how we're looking at our share and capture and the dynamics there.

Okay and then thanks.

The one follow up would be.

On market, Turkey, certainly explain the quarter over quarter decline in the pandemic.

Keith.

I would say, but could you give more color on sort of the pipeline.

Yes.

How long do you think this impact I guess.

If you could forecast that or just color going forward in the covenant if the environment stayed roughly the same I just yeah, I well first I do think the environment.

Turning to generally improve in terms of being able to travel a bit now.

But we're still doing most of our client interactions on zoom.

And that makes it harder it's also harder to develop the kind of what I'll call. The top end of the pipeline. The top end of the funnel in terms of identifying new clients, but I do think we've done a good job.

It started adopting there to try to make sure that we know which new marketplaces are starting to consider launching and how we can serve them. So you are seeing that we are still signing up new clients for sure. They are taking our SaaS based marketplace solutions, which were also pretty excited about I think more than 90% of our new.

Of our new clients any new clients signing up for us across all of market Tech and that includes market infrastructure technology clients as well as anti fin crime.

Well actually as well more than 90% are taking our SaaS based solutions and that includes new markets launching in the cloud and taking our nextgen trading system. So so we see a good.

Pipeline I would say rich and we also.

We also see that we have we could do more and we definitely want to be able to identify client client opportunities a little earlier and travel will help with that.

But I also would say that on the post trade side, which is where we've really experienced most of our delivery challenges those.

Good harder to implement they take their multiyear programs. They always have been but they are definitely lengthening out in time with our inability to be on site. We are starting to get on site now with some of our clients and that's helping on definitely helping to accelerate things and I also think that it's keeping us from being able to.

Those are our meet all the demands that our clients have so we do see good strong client demand there, but we have to make sure that we have the resources to be able to meet the demand. So we've been working with our clients to kind of stage that over time and Thats. What I think is going to is what we really were referring to in our comments around 2021 and 2022 is.

We see the need for us to manage through those capacity constraints before we can really meet all the demands that our clients have.

Got it and congrats on the continued transformation of Dana. Thank you great. Thanks, Thanks, a lot rich.

Our next question comes from the line of Dan Fannon with Jefferies. Your line.

Just open.

Thanks, Good morning, I wanted to follow up on the market Tech component and just thinking I think you mentioned some increased costs around <unk>.

Some of the implementations as well so the longer term kind of margin opportunity, which is in this business has that changed at all or is that also just kind of part of the temporary.

Revenue.

It's not a slowdown more of a factor than necessarily costs on it.

Go forward basis sure I think that there are two metrics that we provided to our investor base to kind of measure our progress in the business. One is just our overall medium to long term growth outlook on revenues and then the other is this notion of the rule of 40, which is.

A combination of the growth in the revenues and the EBITDA margin of the business and so what our outlook is that we expect to be able to deliver 13% to 16% annualized growth over the coming three to five year period across market technology and that includes the market infrastructure technology.

It's really a business and the anti financial crime business together and we do continue to believe that that is an appropriate expectation of growth for the business going forward I think that the on the the rule of 40, what we've communicated is that we want to get to a rule of 40, which is as I said the combination of.

Technology EBITDA by 2023, and we continue to see ourselves on track for that so you have to think about this as a shorter term or at least the near term challenge that we're having to work our way through that that part of the business that is most impacted to be able to get ourselves to a better gross state and and more scalability as we sign.

Growth in our clients' SaaS clients instead of on Prem clients.

Thank you that's helpful and then as a follow up on the index business just to clarify the switches that has not yet to impact the <unk>.

Revenue for as we think about the.

Fourth quarter and could you maybe talk about.

More of a difference in the fees associated with what's coming in in terms of net inflows I think you gave a stat around inflows since I think 2019, maybe discuss kind of a different.

Fee threshold as we think about the AUM mix.

So again on your first question, we've thought about half roughly.

Rap of the impact.

Around the switches coming in the third quarter and we'll see the full run rate in the fourth quarter and on the second part of your question.

Fee based for the the switches that we experienced.

Particularly one of them was was very low and so therefore that $3 million impact.

Roughly half is a low revenue impact against the AUM that was that was switched.

I think going with regard to the new products, we're launching the fees that we are able to attract with regard to kind of some of our innovative products like the NASDAQ Nextgen 100, the crypto index.

And the semiconductor indexes.

<unk> to me more in line with our normal kind of historical norms. So they do carry a higher fee base.

One that we lost.

Yeah.

Got it thank you.

Our next question comes from the line of Owen Lau with Oppenheimer Your line.

Those are open.

Good morning. Thank you for taking my question I have a question about your partnership with spot trading and the sports betting industry. Overall could you. Please talk about maybe the potential market size such as how many similar sports betting companies out there that you can provide your surveillance technology.

Line of sight, and then broadly speaking could you please talk about <unk>.

Recent traction in the financial space. It looks like we haven't talked about this whole wall. Thank you sure.

Great Hey on.

So on square trade there is a combination of what we're doing there. One is we have taken an investment in the business that fell through our venture portfolio and then we also are providing them the survey.

<unk> technology, and what's interesting about sport trade in the market model that they're creating is they are definitely creating more of what I would call. It like.

Our marketplace model, where theyre going to have market makers, they're going to have been a.

But our spreads for different different in game betting opportunities and it's going to be really an interesting an interesting.

Our model our surveillance technology, absolutely applies to that type of a market model, but actually at the module that we created around sports.

<unk> applies to multiple the traditional model as well in terms of having it.

Your own book, and then betting against the house kind of thing so I think that.

Being murky can apply the technology to a traditional sports book or to these new marketplaces, and we have created a module that specific to two that that segment. So we're pretty excited about that and.

We don't have a tam or Sam yet and that's actually a good question <unk>. So we will come back and think through how do we.

We got Sam developing particularly for our surveillance and trading technologies for that segment going forward, but it's obviously very early days here in the U S for that in terms of other new new markets and non financial markets. We are continuing to support the crypto exchange exchanges I think we have eight exchanges leveraging our technology.

Look I trading technology, and nine leveraging our surveillance technology today.

And then we also are seeing kind of fractional ise markets like Frac size real estate markets and others coming up and we actually have several really interesting new marketplaces.

Launching and Theyre, all coming on onto what we're calling our NASDAQ marketplace services platform.

Platform, which is really a SaaS based cloud and it can be delivered in the cloud or we can host it but it's a managed service platform, where we <unk>.

Provide the technology, but also the infrastructure.

That markets can spin up a lot faster so I would say, though as you know this is an early and early part of our strategy.

<unk> and but we are definitely seeing nice progress and we can provide you some more SaaS going forward on kind of new markets that we're launching there.

Got it that's very helpful.

Then could you. Please also explain a little bit more on how NASDAQ data link can expand what you have in Congo.

Related to integrating the data in cuando and provide clients with a more holistic view of data from different sources. Thank you.

You actually hit the nail on the head.

So.

We think about condo now is like one component of NASDAQ data link declined all data like the alternative.

Is it that we provide to investment managers are integrated into NASDAQ data link the technology that underpins quantal is actually the underpinning of NASDAQ data link technology, but it also includes our market information. It includes some investment information now, we're calling NASDAQ asset owner solutions data like on the investment management.

Funds and trends there. It actually you can a client can choose to put their own third party managed data into into the system and we can basically become their technology provider to making it to all of their data is managed and available to them in a really really nice modern API structure.

And so.

It's really an umbrella a way for us to deliver.

Market Information fund information alternative information in a modern API and cloud based infrastructure. So it's really easy to use by the way and it's really easy to take the datasets and integrate them into excel or anything else that you want to use internally.

Got it that's very helpful. Thank you very much sure. Thank you.

Our next question comes from the line of Chris Allen with Compass point. Your line is now open.

Good morning, everyone.

I was wondering if you give a little more color on the index business.

I apologize I missed it I'm just kind of curious on the sequential.

<unk> growth that we saw in the quarter, maybe give us a floor.

I'll give you a framework on how it's breaking down between.

Driven subscription and transaction.

Oh in terms of the futures versus the AUM.

I think.

My question. So I don't know if you have an idea.

We don't give the specifics on its about you can think about the asset.

AUM portion being about.

Two thirds of the index line and then the rest will include the futures portion.

Yes, and in general, though I think but what we have been doing now is in our our statistics.

Fix that we send out we provide you all an update on AUM. Both in terms of net inflows as well as market appreciation and as we've said, it's really been a combination of inflows and market appreciation that have driven up.

The assets under management I think it's 15% for the quarter and then our revenues has been even better than that for the quarter.

Based on a combination of those things.

And any color on the 12 million sequential increase in <unk> revenues, just it's a pretty big number, particularly when there I know, there's oh, we had a little bit of in the one 5 million from the switches coming out.

Yeah, I mean, it's really been I would say, it's really largely inflows.

And market appreciation driven more so than futures driven for the quarter.

Okay. Thank you.

Our next question comes from the line of Brian Bedell with Deutsche Bank. Your line is now open.

Great. Thanks, good morning folks.

Let's start with a question on <unk>.

On.

And kind of a broader question on crypto, but.

Also anti financial crime or just the question would be the broader question is.

Are you able to measure yet and I know it's early days.

Your contribution from from Crypto broadly because it does touch a lot of different segments.

Between.

The index licensing.

Potentially anti financial crime mandates and then also obviously.

Market technology and then.

If it's too early to size that.

Maybe just give some perspective on how you see.

Developing across the segments.

You know, especially anti financial crime, whether you're actually seeing mandates that are based on crypto surveillance.

Yeah, no. It's a great question. So I would say, there's probably until it's a little early but it's a good question. So let's take that back and see whether that's something we want to start to think about how we how we communicate to you guys.

And as far right. So we have we have the crypto index product.

That has about as we mentioned, it's about $600 million of assets under management there we have.

We have the surveillance and the market Tech solutions and so we will come back to Brian to kind of think about how we want to start to provide.

But you more clarity there, but it is early days.

And on the surveillance side and actually the broader anti financial crime side. That's an area that we are really spending a lot of time on to try to figure out how we can provide broader services across our bank clients as well as our brokerage clients because right now the surveillance capabilities is really.

<unk> driven by marketplaces, but over time as <unk> becomes more integrated into the financial system, we want to make sure that we can provide solutions that meet the needs across all of our customers. So that's actually an area of active evaluation right now and we're and we're looking at that is it's a great day.

2000 banks as our clients across.

So U S.

Canada really does give us a much broader opportunity to think about how to serve their evolving needs there.

No that sounds like an exciting growth opportunity and then maybe just switching over to just a question on market structure, obviously with the new.

<unk> administration were not so new now but.

With.

Across we've talked about different.

Views on on where.

Looking at market structure, especially when payment for order flow and I guess, what's your view on.

If you have a view on.

What you think would be a good solution to that obviously we've talked about.

Would it be pricing being allowed on exchanges.

Potential remedy for for the sort of the order flow situation and then also any other commentary on.

Market data, where that stands given the prior administration had.

Put that rule in place sure.

So I think that with regard.

The market structure discussions and I think the FCC's paper was to me early first step in a long process of evaluating how to continuously improve the markets I think what we are happy about with that report while a few things one they.

They did a really nice job of dissecting the activity and understanding that.

Yes, there was.

Two things there that.

That had I would say that there was nothing there that really signify that there was any significant manipulation of the markets. I think the second thing is that they really didn't notice note that the markets are really resilient and and very efficient.

And that obviously is a good thing for us, but they also did point out.

And any of the key areas of focus one is the quality of the national best bid and offer and the fact that so much more of the activity is happening in the dark is there an impact on the quality of the national that's been offer and that's an area. We've been we've been doing some work on I think our chief economist published a report on that last week.

And that.

Then <unk> to what are the incentive structures that underpinned the markets and so.

So are we finding that that order flow is being moved off exchange and brought into these darker venues because of incentive structures and I think I don't think that the FCC Nesse drew.

A conclusion, there, but its an area that.

I think that they will be focused on all we can say is we really believed in taking kind of iterative smaller steps iterative change rather than big Bang changes to market structure, because it's such an intricate woven system that it's really the law of unintended consequences are high but if they look at disclosure.

It was around <unk> or they look at making some some measured changes to the <unk> structure as well as making it. So we can compete more order flow like sub penny pricing or other other rules that encourage orders to come onto exchange in and be lit I think that those are all things that would be positive for us.

But <unk>.

Recognizing that we like innovation, we like.

Variety in competition, we think that those are all good for investors and so we have to we have to make sure we're taking measured steps there.

I got the sense that they werent looking at it looking at draconian steps and that they weren't going to take a pretty measured approach.

Okay.

Thank you.

Thank you.

And the interest of time, we ask that you. Please limit yourself to one question.

Our next question comes from the line of Alex <unk> with Goldman Sachs. Your line is now open.

Hey, good morning, Thanks for taking the question.

I wanted to ask you around just the thoughts on sort of inflationary pressures, we're kind of here on a number of different corners. So financial services, but also the markets broadly I guess, particularly when it comes to technology and technology talent.

I know you guys don't have a 2022 budget, yet, but as you're thinking about your growth.

Experience on where you're investing and where you're sort of making incremental investments.

How do you think about that as a potential headwind what does that sort of things you can do to maybe upside, though or reengineering I guess to some extent just curious to get your thoughts on what you're seeing in the marketplace sure. Yeah. I mean, I definitely think that there has been I think that we all.

The competition for talent is pretty pretty at a pretty heightened level right now and so we are we obviously benefited from the ability for us to attract talent from all over the world see benefits is that we have tech talent in the U S and Canada in Europe in Asia, and Australia, we have tech talent kind of spread throughout.

I'll know that different different.

Economies in different markets, which gives us more flexibility to seek out talented markets, where we think that we can do that efficiently, but at the same time it is a competitive environment.

Do think that theres going to be.

Increases in wage and I would say wage increases.

<unk> as we go into 2022, but as you said, we haven't yet finalized our budget and our planning so we'll be able to we'll be able to talk more about that on our fourth quarter call. As we provide you with our 2022 guidance, but we are evaluating that as part of our part of the needs for us to compete for talent, but also recognize we have.

Have some benefits from having such a global workforce.

Alright, Thanks, I'll stick with my one question great. Thanks, a lot Alex.

Our next question comes from the line of Michael Cyprus with Morgan Stanley. Your line is now open.

Hey, good morning, Thanks for taking the question just wanted to circle back to the NASDAQ data link that you.

We're talking about a little earlier, just how might ESG data become a component are captured in the data link and what's the opportunity more broadly for NASDAQ to become a driver of ESG standards and scoring in the industry and maybe you could talk a little bit about how you see that developing in the marketplace for probably yeah actually part of NASDAQ data linked to something called NASDAQ ESG data hub.

Hub.

So it's basically information that we've gathered from third party sources that allow buy side institutions to get information that they need whether it's climate related information or other other structured data that helps them evaluate companies in industry. So I think that we we.

Actually our serving that up very successfully within data link so thats one of the modules are battling.

But the one thing that we don't have and what we don't we don't intend to do is become a rating agency ourselves that's just not not our role.

We are here, we look at it is we have an ecosystem that includes.

4000, corporate clients they have a lot of information that they need to do to provide to investors and we want to support them and providing that information to investors. We then have thousands of institutional managers that that receive our information and we can deliver data to them either through ESG data link or through.

Our NASDAQ asset owner solutions, where they can gather up information they need to make better informed investment decisions.

And that over time, we hope that the data that we're helping our corporate clients.

Collect and distribute it can actually be served up through our NASDAQ asset owner solutions and not not just to the radiation.

Rating agencies, so that they can also can control the information that they are providing to investors, but I think that we're just not in the mode of actually being a rating agency ourselves I think there are many of them out there right now.

We have we have actually partnered with sustained <unk> to start to develop some index strategies that we think.

It will be really interesting in this space, but thats kind of the role that we're playing.

As opposed to trying to be that rating agency yourselves.

Great. Thanks.

Thank you Lasse.

Question comes from the line of Kyle Voigt with K VW. Your line is now open.

Yeah.

Hi, Good morning, Thanks for taking my question. So earlier in the call you reiterated that expectation for the 13% to 16%.

The annual revenue growth range for the market Tech segment as a whole but.

If we just narrow in on the market infrastructure business, specifically, it's a business that has been able to grow.

Quite strongly in the years before.

The pen, but before the pandemic.

I understand there are some near term challenges, but I'm just wondering if your medium term revenue growth expectations for that infrastructure business has changed at all over the last 18 months.

Or whether or not there I guess expectations are relatively similar.

I'm just trying to get through this kind of near term.

Near term headwinds, yeah, I mean, I would say our expectations are over the medium term or similar to where we have been and it's really just getting ourselves through these.

The immediate term issues that we're having kind of managing our way through a more challenging delivery.

So and I think that the client demand is definitely there our engagements with our clients are excellent.

Our clients are excited to be able to leverage the next gen technology, we have and we are delivering that to a lot of our clients, but but we just have to work our way through some of these near term challenges, but the medium term outlook remains the same.

<unk> got.

Got it thank you very much.

Thank you there are no further questions I will now turn the call back to Adena Friedman for closing remarks, alright, well. Thank you all very much and so so happy to have you on the call. We're very pleased to see that our business is continuing to deliver strong organic revenue growth.

And as you know we are really guided by our strategic direction and we have a clear focus as to.

How we want to continue to re imagine markets to realize the potential tomorrow. So thank you all very much we look forward to talking to you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you.

May now disconnect.

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