Q3 2024 Nasdaq Inc Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by welcome to NASDAQ third quarter 2024 results conference call.
At this time all participants are in a listen only mode.
Speaker Change: After the Speakers' presentation, there'll be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star one on your telephone you wouldn't hear an automated message advising you of hand. This race to withdraw your question. Please press star one again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I'd like to turn the call over to your first speaker to Akzo Garrett Senior Vice President Investor Relations at NASDAQ. Please go ahead.
Akzo Garrett: Good morning, everyone and thank you for joining us today to discuss Nasdaq's third quarter 2024 financial results unwind are Adena Friedman, our chair and Chief Executive Officer, Sarah Young our Chief Financial Officer, and other members of the management team. After prepared remarks, we'll open the line for Q&A.
Akzo Garrett: The press release and earnings presentation accompanying this call can be found on our Investor Relations website.
Akzo Garrett: To remind you that we'll be making forward looking statements on this call that involve risks.
Akzo Garrett: Summary of these risks is contained in our press release and a more complete description in our annual report on Form 10-K.
Akzo Garrett: He will discuss our financial performance using pro forma financial results and year over year growth rates as if we owned <unk> and calypso in all comparable periods recognized revenue ratably for <unk> on Prem contracts, our 2023 and 2024 excluded the previously announced one time revenue adjustment recognized in the third quarter.
Akzo Garrett: And also excluded the impact of FX, except for acts MSL, and kalypso, which are not yet calculated on an organic basis.
Akzo Garrett: Francis to organic growth exclude the impact of FX and acquisitions reconciliations of U S. GAAP to non-GAAP results can be found in our press release as well as in our filing.
Akzo Garrett: Filing located in the financials section of our Investor Relations website at IR that NASDAQ Dot Com I will now turn the call over to Adena. Thank you Rocco and good morning, everyone and thank you for joining us.
Adena Friedman: On the call. This morning, I'll provide some perspective on the external environment to discuss our quarterly performance and review our progress against our strategic priorities.
Akzo Garrett: And then hand, the call over to Sarah to walk through the financial results in more detail.
Adena Friedman: Beginning with the macroeconomic environment internationally major central banks have pivoted to lowering rates over the past several months to combat slowing economic growth, notably the European Central Bank cut rates three times, this year, which coupled with a solid labor market has helped the European economies stabilize in recent months.
Adena Friedman: <unk> continues to show overall strength supported by the Feds September rate cut and more recent services and labor data looking ahead, while the global macro environment remains fluid, which could lead to a range of potential outcomes. The us is currently trending toward a soft landing with additional rate cuts expected in the coming quarters.
Current positive economic trends and outlook provided constructive potential for sustained trading activity across our markets as well as a rebound in the global IPO environment in 2025.
Adena Friedman: And as financial institutions continue to operate in a dynamic environment, we see consistent demand for our mission critical technologies against this economic backdrop, NASDAQ remains well positioned to deliver sustainable and durable growth across our diversified platforms.
Adena Friedman: Now, let me turn to our financial results, we delivered a strong quarter with 10% year over year growth in both net revenues and solutions revenue, marking our fourth consecutive quarter of double digit solutions growth.
Adena Friedman: Total annualized recurring revenue or <unk> grew 8% to $2 7 billion.
Adena Friedman: Expenses increased 5% in the quarter, reflecting investment in the business, partially offset by synergy achievement, while our operating margin increased to 54%.
Adena Friedman: We continue to make progress on the successful integration of vaccine, Michelle and Kalypso, which has enabled us to action over 80% of our net expense synergies target and our strong key free cash flow generation has allowed us to continue to delever, resulting in a three eight times leverage ratio in the quarter.
Adena Friedman: Turning now to our business highlights starting with capital access platforms.
Adena Friedman: The division delivered 2% are our growth and 9% revenue growth fueled by another quarter of strong index performance.
Adena Friedman: Beginning with data and listings, we continued to see modest growth in data revenue offset by a decline in listings revenue due to lower listings activity in prior year delisting.
Adena Friedman: In the quarter, we experienced a modest uptick in listings activity in the U S. We welcomed 33 operating companies contributing to a 75% win rate year to date through September.
Adena Friedman: NASDAQ eligible operating company listings.
Adena Friedman: Additionally, we have listed five of the top 10 largest ipos in the first three quarters of the year, including the year's largest listing to date lineage.
Adena Friedman: We also celebrated a major milestone as we recorded our 500 listing switched to NASDAQ from our primary listing competitor cumulatively, representing approximately three trillion dollars of market value.
Adena Friedman: This year alone, we've attracted 16 switches, including prominent government technology contractor SAIC and legendary food manufacturer Campbell's reinforcing nasdaq's role as the premier venue for listings in the U S.
Adena Friedman: And data we benefited from new enterprise license sales higher demand from heightened market activity and continued strength in international markets.
Adena Friedman: Across workflow and insights we drove moderate growth with strength strength in analytics offset by corporate solutions.
Adena Friedman: In corporate solutions, the broader operating environment, including sales cycles has not materially changed.
Adena Friedman: We remained focused on client retention and product enhancements to assure NASDAQ is well positioned when the ipi <unk> resumes as evidenced by the previously announced the introduction of new AI features across our suite of solutions.
Adena Friedman: Within analytics, we've seen increased activity and demand for our data and workflow solutions with the asset owner and asset manage our communities.
Adena Friedman: Asset owners are using more manager research products and new tools, such as the recently launched peer benchmarking solution, while asset managers continue to seek unique insights through our data and services.
Adena Friedman: And finally, our index business delivered another exceptional quarter of growth with $62 billion of net inflows in the trailing 12 months period, including $14 billion in the third quarter, resulting in $575 billion in average AUM in the quarter.
Adena Friedman: This reflects the broad strength of our index franchise, while we continue to drive innovation and expansion with 35, new product launches this quarter.
Adena Friedman: Turning next to financial technology.
Adena Friedman: Across the growth across the division was 14%, including 24% in financial crime management technology, 15% and the combined axiom ESL Eclipsis solutions and 11% in combined market technology and trade management services.
Adena Friedman: Overall, we signed 39, new clients 110, Upsells and cross sells.
Adena Friedman: Moving to the specific subdivisions.
Adena Friedman: We're proud that financial crime management technology debuted as the number one provider for managed services and financial crime on Chartis researches industry rankings, representing a strong recognition of our leadership across the financial crime management industry.
Adena Friedman: From an operational standpoint, we've seen strong client adoption in our integrated Gen. AI entity research co pilot rollout, which now is in the hands of over 2000 U S institutions.
Adena Friedman: We signed 28, new small medium bank clients for a total of 109, new small to medium bank or SMB clients year to date.
Adena Friedman: We continue to maintain a robust pipeline of SMB sales opportunities with a particular emphasis on targeting larger clients in the segment.
During the quarter, we also signed one international tier one client to our wire fraud solution as previously announced.
Adena Friedman: We are making solid progress on our push for tier one and tier two clients and continue to have a growing pipeline in this key cohort.
Adena Friedman: Moving to regulatory technology axiom, Marcel was ranked number one by Chartis and regulatory reporting for markets and securities in part due to our extensive coverage across jurisdictions as well as our expertise in adapting to complex regulatory environment.
Adena Friedman: During the quarter, we maintain momentum across <unk> and surveillance with seven new clients and 70 Upsells.
Adena Friedman: Actually Marcel delivered two significant up sell as it signed its first local banks in India and in the Philippines that can service reference clients as we build new relationships in these geographies.
Adena Friedman: Surveillance delivered strong ACB bookings in the quarter with growth across exchanges and market participants and we continue to advance our NASDAQ trade surveillance cloud transition as 64% of clients are now cloud deployed.
Adena Friedman: An 11 percentage point increase since the beginning of this year.
Adena Friedman: We also continue to see sustained momentum in capital markets technology with a total of four new clients 40, Upsells and one cross sell.
Adena Friedman: This was a strong quarter across our market structure provider client segment as Calypso signed its 20th century of Central Bank client and market technology signed one new cross sell and 13 Upsells.
Adena Friedman: More broadly as financial institutions continue to expand coverage across the assets and geographies in which they trade we see constructive environment for continued growth across our solutions.
Adena Friedman: The financial Technology Division has a strong global presence and this quarter I would like to highlight our progress in Latin America, we continued to increase our footprint in the region through an enhanced partnership with New Bank, which is now using <unk> to support its regulatory reporting responsibilities in Colombia.
Adena Friedman: We also signed a significant expansion of our technology partnership with Argentina's leading stock exchange group <unk>, which is an.
Adena Friedman: Existing CSD client.
Adena Friedman: And we sign them to modernize its clearing technology through a cloud delivered through a cloud delivery of our next generation clearing solution.
Across Latin America, NASDAQ serves 10 marketplaces, as well as roughly 50 banking and payment services clients, comprising a broad range of digital and traditional banks local and regional players as well as tier one global banks.
Adena Friedman: We're experiencing strong new client growth and over half of our Latin American clients have adopted that have adopted axiom of selling calypso have sought to expand their partnership with us in the last 12 months.
Adena Friedman: Across the exchanges in the region clients are seeking to modernize critical infrastructure to serve the evolving needs of global market participants as well as our domestic clients many of which are digitizing their own operations.
Adena Friedman: Latin America is just one of the many regional economies, where we're helping financial institutions better navigate regulatory complexity and the modernization of market infrastructure and we look forward to our continued international expansion.
Adena Friedman: Turning to market services, where we're generating alpha in a higher beta environment, NASDAQ delivered a record third quarter with 13% revenue growth.
Adena Friedman: The growth was driven by higher volumes across U S and European cash equities as well as record revenue for U S. Multi listed options and proprietary index options.
Adena Friedman: In U S. Equities derivatives are multi listed options market share continues to increase over the course of the year. Additionally U.
Adena Friedman: U S index options continued high growth delivering another record quarter with revenue doubling year over year.
Adena Friedman: Turning to U S cash equities nasdaq's overall equity market share was stable and on exchange market share increased.
Adena Friedman: While capture remained healthy.
Adena Friedman: And wrapping up with European cash equities, our market share remains steady as members increasingly favor quality and retail participation increased.
Adena Friedman: I now want to provide an update on our strategic priorities of integrate innovate and accelerate.
Adena Friedman: Starting with integrated as we near the one year anniversary of the completion of the <unk> acquisition I'm extremely pleased with our progress to date.
Adena Friedman: The integration continues seamlessly and we are delivering ahead of plan on net expense synergies and deleveraging.
Adena Friedman: Operationally our teams are unified in delivering for our clients as one Nasdaq.
Adena Friedman: As a testament of the combined benefits of NASDAQ and at Denver for our clients. NASDAQ was recently ranked five in number five in <unk> 2025 risk Tech 100.
Adena Friedman: This is an early validation of the thesis underpinning the acquisition as it turns out in NASDAQ placed 10, 18th respectively last year.
Adena Friedman: Now I think is in the early innings of unleashing the power of our financial Technology Division and we look forward to building on this momentum.
Adena Friedman: We continue to make strong progress advancing our innovate priority we reached a major milestone during the quarter with the completion of the rollout of AI co pilot tools to 100% of our developers.
Adena Friedman: We also launched an internal to an AI platform that features custom built skills designed to enhance productivity and efficiency and.
Adena Friedman: In less than two months, we've had we've deployed roughly 400 unique skills with nearly 50% of our employees engaging with the platform.
Adena Friedman: NASDAQ also launched new AI enabled products headlined by the expansion of NASDAQ <unk> targeted topology analytics, which provides new detection capabilities for terrorist financing and drug drug trafficking activity.
Adena Friedman: Following an extensive beta program the terrorist financing analytic is expected to be released later this year.
Adena Friedman: Earlier this month Calypso also announced a new methodology to conduct investment portfolio risk risk calculations and produce predictive analytics using an AI based machine learning capability.
Adena Friedman: This technology allows financial institutions to improve the efficiency of conducting the most complex trading and regulatory risk calculations with up to 100 times faster processing speeds.
Speaker Change: Beyond AI, we continue to innovate by expanding our suite of new products and capabilities. This is particularly evident in our index franchise, which is a true innovation engine within NASDAQ and was recently recognized as the best index provider by structured retail products.
Speaker Change: Partnering with our clients, we brought 35, new investment products to market, including seven insurance annuity vehicles aligned with our growth with our focus on international adoption and an eight options overlay products, where we see strong sustained interest from investors.
Speaker Change: We also remain focused on international expansion with 57% of new products launched outside the United States.
Speaker Change: In market services, we successfully migrated NASDAQ ISC two our next generation derivatives platform called fusion.
Speaker Change: Today four of our six U S options markets are now running on fusion, resulting in lower latency higher throughput and overall increased productivity and.
Speaker Change: And concluding with our accelerate priority, we continue to make progress on our one nasdaq's strategy driving to cross sells across the financial technology Division in the quarter.
Speaker Change: The percentage of cross sell opportunities and financial technologies pipeline is now above 10% driven by strong client engagement and the cross sell campaigns launched to date.
Speaker Change: The pipeline spans across regions and client segments and product lines and we expect to build on this in the coming quarters, We will launch additional cross sell campaigns in the fourth quarter and remain on track to exceed $100 million of cross sells by the end of 2027.
Speaker Change: To wrap up the power of Nasdaq's diversified business model enable us to deliver another strong quarter headlined by our fourth consecutive quarter of double digit solutions growth.
Speaker Change: As we continue to execute against our strategic priorities and deliver on the <unk> acquisition thesis.
Speaker Change: NASDAQ has become a trusted partner to the world's financial system poised to solve our clients' most complex challenges. We look forward to capitalizing on this momentum to deliver sustained profitable growth to our shareholders and with that I will now turn the call over to Sarah to review the financial details.
Sarah Young: Thank you Ed and good morning, everyone. We're proud to share our fourth consecutive quarter of double digit solutions revenue growth and we are also making excellent progress integrating <unk> and Ken its bill.
Sarah Young: Notably we have action over 80% of net expense synergies to date.
Sarah Young: Deleveraging continues and is now down to three eight times and we are seeing strong traction with clients with over 10% of intake pipeline coming from cross sell.
Sarah Young: Let's turn to our third quarter results on slide 10.
Sarah Young: We reported net revenue of $1 2 billion.
Sarah Young: Up 10%.
Sarah Young: With solutions revenue of $904 million also up 10%.
Sarah Young: Operating expense was $543 million up 5%, resulting in an operating margin of 54%.
Sarah Young: <unk> EBITDA margin of 56% each up two percentage points.
Sarah Young: Overall this resulted in net income of $429 million and diluted EPS of <unk> 40.
Slide 11 shows the drivers of 10% net revenue growth for the quarter.
Sarah Young: We generated several number half percentage points of growth on a net basis.
Sarah Young: By new and existing clients product innovation as well as market share and capture.
Sarah Young: Overall beta factors contributed to our hospice and data points of growth this quarter, driven by higher valuations in NASDAQ indexes and higher overall volumes and market services.
Sarah Young: Also primarily by Dennis.
Sarah Young: Downgrades.
Sarah Young: I'll turn on slide 12, we had a growth of 8% with fast revenue growth up 17%.
Sarah Young: Notably.
Sarah Young: Other personal but they all increased.
Sarah Young: Percentage points to 37%.
Sarah Young: Let's review Division results for the quarter, starting on slide 13.
Sarah Young: In capital of this platform.
Sarah Young: Delivered revenue of five or $1 million up 9%.
Sarah Young: Listings revenue was up 1% with club Ah <unk>.
Sarah Young: Revenue from higher <unk> cell phone usage newly things on pricing was partially offset by the impact of BBC dot.
Sarah Young: Great and lower amortization of prior period initial listing fee.
Sarah Young: Looking ahead, we continue to expect the quarterly impact from initial listing fees to be about $3 million for.
Sarah Young: For the next three quarters.
Sarah Young: The interesting trends are improving.
Sarah Young: We have seen roughly 20% fewer de leasing year to date through the third quarter versus the prior year period.
Sarah Young: Suggesting that didnt things should be less of a revenue headwind in 2025.
Sarah Young: Industrial revenue was up two 6% in the third quarter.
Sarah Young: Even by 62 billion.
Sarah Young: Organic net inflows in the last 12 months include.
Sarah Young: Including 14 billion in the quarter.
As well as market performance, resulting in record average ETP AUM of 575 billion.
Sarah Young: With futures and options volume also.
Sarah Young: Up 24%.
Sarah Young: In local and in flight revenue was up 3% with ADR growth of 5%.
Sarah Young: The increase was driven by continued growth in innovative analytics products, mainly investment in data link with particularly strong for Evo Mint and the also grow new home consultants home segments.
Sarah Young: This was partially offset by a continuation of the environment. We have previously described in corporate solutions.
Sarah Young: Analytics had a strong quarter with revenue and <unk> growth in the high single digits.
Sarah Young: Operating margin for Capitola platforms.
Sarah Young: 58% up two percentage points.
Sarah Young: Looking ahead, our expectation for full year capital access platforms revenue growth remains unchanged.
Sarah Young: We expect to exceed our medium term growth outlook range with index expected to come in above its range.
Sarah Young: Data on this thing essentially flat year on year, and workflow and insights are expected to come in below its range.
Sarah Young: Moving to financial technology on Slide 14.
Sarah Young: Total division revenue of $4 $3 million was up 10% with a growth of 14%.
Sarah Young: The difference between revenue growth and a reward for Fintech and its subdivisions is primarily driven by a decline in professional services fees.
Sarah Young: Including a large 2023 market infrastructure client delivery and capital markets deck that converted to a on.
Sarah Young: And the timing of bookings on upgrades as well as a proportion of cloud bookings in <unk>.
Sarah Young: We had double digit growth.
Sarah Young: Of course, all subdivisions.
Sarah Young: Which benefited from 39, new clients 100, pent up sales.
Sarah Young: Two cross sales in the quarter.
Sarah Young: Financial Fund management technology revenue increased 20% with a growth of 24%.
Sarah Young: Affecting posted revenue growth against a tough comp of 29% in <unk> 2018.
Sarah Young: Accordingly that included higher professional services fees.
Sarah Young: This quarter, we saw a revenue mix shift from professional services fees to <unk> due to successful <unk> implementation from tier one and tier two clients.
Sarah Young: Additionally, we have minor changes in the timing of other client delivery.
Sarah Young: Clients are actively showing the appreciate the value of our products, including new enhancements such as the <unk> entity, we surgical pilot.
Sarah Young: This was evidenced by net revenue retention of 114% driven by pricing minimal churn upsell and renewals.
We are also making excellent progress with larger clients within the SMB cohort.
Sarah Young: New home planning this year have resulted in 30% higher annual contract value per SMB clients year to date compared to the same period last year.
Sarah Young: Capital market technology delivered 8% revenue growth and a growth of 12% with four new clients 40, Upsells on one cross sell in the quarter.
Sarah Young: <unk> was up 14% and had.
Sarah Young: Up 16%, including three new clients in 2007 Upsells.
Sarah Young: Notable deals in the quarter included capital planning, its 20th Central Bank clients and significant Upsells in Asia.
Sarah Young: While there will always be timing impact with specific deals creating variation in revenue growth rate.
Sarah Young: And for <unk> to enhance <unk> remains strong with good retention rate continuing momentum in our sales pipeline and consistent execution in our sales cycle.
Sarah Young: Together trade management services and market technology has won new clients 13, Upsells on one for sale.
Sarah Young: Combining <unk> was up 11%, primarily reflecting the benefit of upsells on pricing.
Sarah Young: This included a record 14% growth in market Tech, which include the conversion of the $11 million from a large implementation, we mentioned last quarter into subscription revenue.
Sarah Young: That's it.
Sarah Young: <unk> revenue grew 5% due to professional services fees in the prior year period.
Sarah Young: As we mentioned last quarter in market Tech and marketing personnel to clients that contributed $11 million of ALLL this quarter.
Sarah Young: $27 million of professional services fees in the full year of 2023.
Sarah Young: This year over year headwind.
Sarah Young: Abate in Q4 of this year.
Sarah Young: Additionally, with southern Collins deliveries signed to date on our strong sales pipeline for the wealth of the year, we anticipate a solid recovery in professional services revenue in 2025.
Sarah Young: Regulatory technology revenue increased 8% and 11.
Sarah Young: 11% with several new client wins and 70 upsells in the quarter.
Sarah Young: <unk> revenue grew 10% with 15% growth in all.
Sarah Young: The strong underlying performance, including one new client wins and 20 Upsells.
Sarah Young: Silvan group revenue.
Sarah Young: By 6% with six new clients and Upsells.
Sarah Young: <unk> operating margin was 44%.
Sarah Young: One percentage point increase.
Sarah Young: Electing both operating leverage and the benefit from realized synergies.
Sarah Young: Looking ahead at 2020 full growth expectation for Fintech.
Sarah Young: As we just discussed we have strong fundamentals and our growth, which we expect to continue for the rest of the year.
Sarah Young: Although reminder, we maintain our expectation we will combine estimate zelman <unk> growth in 2020 for two Permian within its medium term outlook range.
Speaker Change: For financial crime management technology, given revenue growth rates of 23% for the first half and 20% in Q3, we may end up a bit below 23% for the full year Bob said.
Speaker Change: Fundamentals of the business.
Speaker Change: Our competitive position and demand for our products continued to be excellent.
Speaker Change: We maintain our expectation for regulatory technology to come in towards the low end of our medium term growth outlook.
Speaker Change: And for capital markets Technology, we expect full year growth to come in towards the low end of our medium term growth outlook due to a shift in the expected timing, although <unk> still renewal from the fourth quarter of 2020 full to the first half of 2025.
Speaker Change: Rubbing division with a strong performance of market services, which had net revenue of $266 million up 13%.
Speaker Change: Revenue growth benefited from record USA related revenue as a result of higher volume and capture in U S options and index options.
Speaker Change: Higher volume and capture in U S and European cash equities, partially offset by a year on year decline in U S options market share and Noah European derivative capture.
Speaker Change: Of note you will pay plan revenue increased $4 million sequentially with $3 million, reflecting cumulative audit and other one time benefits.
Speaker Change: North America was a primary contributor to our soft performance with growth contributions, including index options option capture.
Speaker Change: To capture and share and take market share.
Speaker Change: U S equity market share was also up sequentially above 30%.
Speaker Change: Market services operating margin was 61%.
Speaker Change: Three percentage point increase.
Speaker Change: Moving to expenses on slide 16, we had non-GAAP expense of $543 million up 5%, resulting in operating margin and EBITDA margin expansion of two percentage points. Each we are tightening our non-GAAP expense guidance for the year.
Speaker Change: From 215 to $2 85 billion.
Speaker Change: 2215 to $2 $8 billion.
Speaker Change: We have actions more than 80% of our net expense synergies for the third quarter.
Speaker Change: The synergies we have auctions will fall have resulted in a two percentage point reduction.
Speaker Change: Expense was so far this year.
Speaker Change: And we expect the two percentage point to remain for the full year.
Speaker Change: Our non-GAAP tax rate decreased due to the integration of recent acquisitions as well all energy tax credit obtained under the inflation reduction Act.
Speaker Change: Although results on non-GAAP tax rate was 21, 3% in the quarter.
Speaker Change: Including the year to date capture well.
Speaker Change: And advancing the integration and powering nasdaq's evolution into a fintech powerhouse.
Speaker Change: Ideally positioned to execute on our next phase of sustainable growth.
Speaker Change: Without turning it to Q&A.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.
Speaker Change: Your question. Please press star one again.
Speaker Change: We ask that you. Please keep your questions to no more than one but please feel free to go back into the queue and if time permits we'll be more than happy to take your follow up questions at that time.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Yeah.
Speaker Change: And I show. Our first question comes from the line of Owen Lau from Oppenheimer. Please go ahead.
Owen Lau: Hi, Good morning, and thank you for taking my question. So your financial crime management Tac was pretty strong growing at 20% yields a year, but it was below the medium term outlook, which is mid 20% you said, mainly because of the top comm and timing of data for reed or or there is something else in there.
Owen Lau: There that we should be aware of and how should we think about them.
Speaker Change: Near term outlook for Albertsons. Thanks, great. Thanks, John Yeah, as we mentioned there's a significant difference is really related to the professional services as we move up market into the tier ones and tier twos, we're going to have more of a of an implementation element to those those clients.
Speaker Change: And so there could be more revenue variability as we look at kind of both the timing of those implementations when they move from implementation to IRR.
Speaker Change: And also the amount of implementation revenue that we can we might have in one quarter one year versus the next so in this particular quarter we had.
Speaker Change: Two significant implementations well underway.
Speaker Change: Last year third quarter that drove up our professional services fees and now we've completed those implementations move them to <unk>, but that also means that we're now in a mode of moving more of our clients into that implementation mode, but we just didn't have as much implementation revenue. This quarter. So it's really going to have there is going to be some of that variability going forward as we as.
Speaker Change: Continue to expand our presence with them and Theyre doing active evaluations of additional modules that we have and we did we have already up sold one of our tier two clients.
We're actively working with them I think they've been really I have to say I think our clients have been really happy with the results of implementations and so that's obviously, giving us nice tailwind to discuss further enhancements or extensions of what they take from us.
Speaker Change: But of course, those sales cycles are not instantaneous either.
Speaker Change: And so so we're in the process of working with them to continue to show all the different strengths that we have but it is a very very active.
An active conversation across several of our clients.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Michael <unk> from Morgan Stanley. Please go ahead.
Speaker Change: Great. Thanks, so much good morning, I was just hoping you could elaborate a bit on the cross sales campaigns, particularly with what's actually happening calypso, how thats progressing it seems like you're about to embark on some additional campaigns in the fourth quarter. If you can elaborate on what your plans are for that and what success might look like.
Speaker Change: Sure. Thanks, Yes, so far year to date, we've had seven cross sells but that also does include <unk> sales to axiom, a seller or clips of clients, but across the Fintech Division Southern cross sells and the campaigns are working well obviously it takes time for those campaigns to turn into sales, but we feel very good about what we've been able to see in terms of <unk>.
Speaker Change: <unk> more calypso capabilities to our market tech clients and vice versa, as well as enduring acts MSL capabilities to our <unk> clients and the two new campaigns that we're launching as we go through the rest of this year. One is we have a product called the NASDAQ risk platform, which is a real time risk management platform for exchange trade.
Speaker Change: Since day, one with.
Speaker Change: With the large clients like the tier ones or tier twos. It can be anywhere also from like six to 12 months, but more like nine to 12 months for implementation so far at least.
Speaker Change: And that's when you first land in the client if you are up selling and going to a second capability because we have already built a lot of the integrations with their data lakes internally and a lot of the systems that they have it can go quicker, but still youre dealing with a large institution. So you have a lot of program management and project management and we don't have a lot of.
Speaker Change: Prince yet on up sells there. So we're hoping that that could be a shorter time to implementation, but it still is going to be fairly long.
Speaker Change: And that's why professional services fees becomes more of an element of our revenue as youre dealing with medium banks and the larger banks and that dynamic is just that we had a year over year comps. This year that had more professional services fees last year I think it's just a moment of a timing issue.
Speaker Change: I will.
Speaker Change: Regards to the IPO market.
Speaker Change: The IPO market well it is.
Speaker Change: We're seeing some green shoots we had 33 ipos in the quarter really proud to have a 75% win rate year to date, we have a lot of companies that are in our pipeline, it's been very active actually in.
Speaker Change: Talking to those clients pitching the great benefits of NASDAQ.
Speaker Change: And you can feel that Theres, just a lot of pent up energy and demand to want to come to market.
Speaker Change: Also think that with a better rate environment. So as we hopefully continue to see the fed moderating the rates and to get it more in line with inflation today.
Speaker Change: We will also have a good robust economic environment, but I think you should assume that we won't see a lot going into the rest of this year, just because of other noise and and even into the first quarter. It's usually not a very active quarter anyway, and I think that there'll still be some transition there so where we are.
Speaker Change: Kind of aiming towards seeing more momentum in Q2 and beyond and we're hopeful that it could be a much more active year next year.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you.
Speaker Change: And then therefore, how meaningful some of these new international markets could be or maybe you can frame the international growth rate within axiom.
Speaker Change: And then just also if you could frame or give us some more color as to whether youre displacing any competitors in these international markets or if it's really just displacing the in house regulatory reporting functionality.
Speaker Change: Sure. Okay. So the first thing is that kind of sell it is global today, but you are right that there are certain geographies, where axiom SL. It just is.
Speaker Change: Really really strong and then there are certain geographies, where I think when NASDAQ is bringing them into geographies, where we're strong. So the Philippines is one example, where we are the provider technology to the exchange there we have good relationships with the financial community there and with the.
Speaker Change: The central regulators, there and so it gives us a great opportunity to go in and really engage the the.
Speaker Change: Financial.
Speaker Change: The banks within that space to help them manage their regulatory needs and the differences it could be that a bank for instance, the bank and Philippines was an upsell. We said it was up sell because they already may have used axiom itself for international reporting, but they werent using it for domestic reporting so now we've connected with them for domestic reporting and the same with <unk>.
Speaker Change: The bank in India, which is really exciting they were using us for reporting their international regulatory.
Speaker Change: Requirements, but not using us for the domestic and now we are working with them to make sure. We can deliver the domestic reporting requirements and that of course in India could open up a huge opportunity for us. So we see these as really great land and expand just in country, where NASDAQ has a strong presence, but but.
Speaker Change: Axiom itself may not have had a stronger presence Latin America actually has been an area, where eclipsing document XL have been strong and we are over the last 10 years, we have really built up a great presence in Latin America, I think that it has been a really fun.
Speaker Change: <unk> launched a new module within IR insight that is a paid module, let's call. It sustainability lens that allows companies to compare their sustainability disclosures to other peers.
Speaker Change: And so those are the types of things, where we might charge explicitly for but not in every way. So we're doing forward summarization in our for our portal tool and Thats. Just an added feature of that that will not be explicitly charge for but we see that as a way to enhance retention and also get new sales. So sorry, it's a long answer, but that's how we kind of approach it.
Speaker Change: No that's great. Thanks for all the color.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Dan Fannon from Jefferies. Please go ahead.
Dan Fannon: Hi, Thanks, Good morning wanted to follow up on some of the comments on the market Tech business sounds like momentum is building I think you said professional services should build into next year, but you still have the tough comp going into <unk>. So hoping to just contextualize that a bit more just in terms of how we think about <unk> revenues and maybe the growth into next year.
Speaker Change: Putting those the momentum versus the kind of roll off of certain contracts and professional fees that are still kind of rolling through the system. Yeah sure well first of all so I think it's important to note that we've given a fair amount of disclosure that we had that one client where we were doing we had really gotten to I would say a peak level of.
Speaker Change: Implementation with them last year in 2023 in terms of resources against that project and that resulted in $27 million of professional services fees last year that that year over year comparison kind of abate starts to abate in the fourth quarter of this year, meaning we won't have as tougher year over year comp.
Speaker Change: In that in that regard in the starting in the fourth quarter and also as you pointed out we've had a lot of sales. This year. So we've had a couple of new clients, but also just in the quarter 13 up sell so we are actually we do have really great momentum there and it's exciting to see.
Speaker Change: Quarter over quarter year over year in revenue, but thats why we tend to really focus on the IRR. There because that gives you the consistency of how are we doing and just driving demand and delivering.
Speaker Change: And again.
Speaker Change: That also can have year over year differences and implementations, but right. Now you are seeing really strong sales there really good momentum and we are.
Speaker Change: Really comfortable with how that business is progressing.
Speaker Change: Understood. Thank you very much sure.
Speaker Change: Thank you Anna.
Speaker Change: Our next question comes from the line of Bill Katz from TD Cowen. Please go ahead.
Bill Katz: Great. Thanks for taking the questions, maybe I could sneak in a two parter.
Bill Katz: I was curious I always talked about it love to get your perspective on the recently passed Chick rule by the FCC and what might be the implications either intended or unintended for the platform and then Sarah I'm sort of curious maybe you covered in your prepared remarks, it's been a busy morning.
Bill Katz: You gave a relatively wide range for fourth quarter.
Bill Katz: non-GAAP adjusted expenses I was wondering what would frame the high end versus the low end. Thank you very much.
Speaker Change: Sure Yeah, I'll answer the SEC rule and I'll hand over Sarah.
Speaker Change: So the the tick size rule, it's been an interesting process with the SEC and we see the rule is having some benefits and then some concerns now in terms from a financial performance perspective, we do not anticipate that the rule will have any material impact on our revenues in our market services business, but when.
Speaker Change: We evaluate a rule like that we really focus on two key.
Speaker Change: Parameters.
Speaker Change: One is just how does it improve the market for investors and making sure that it really is something that will improve the experience and investors have and then as part of that how does it tighten the NASDAQ best bid and offer so how does it make it so that the lit markets have a better ability to reflect supply and demand in the national best bid and offer and so.
Speaker Change: If we unpack the contents of the rule there are three things one is the ticket sizes. So there.
Speaker Change: [music].
Speaker Change: [music].