Q1 2025 Nasdaq Inc Earnings Call
Good day and thank you for standing by. Welcome to Nasdaq First Quarter 2025 Results Conference call. At this time, all participants are in the listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session, you will need to first start 1-1 on your telephone, you will then hear an automated message advising your hand as raised. To withdraw your question, please first start 1-1 again. Please be advised that today's conference has been recorded.
I would not like to hand a conference over to your first speaker, Ato Garrett, Senior Vice President, and Investor Relations Officer. Please go ahead.
Ato Garrett: Good morning, everyone, and thank you for joining us today to discuss Nasdaq's first quarter 2025 financial results.
Speaker Change: On the line are Adena Friedman, our Chair and Chief Executive Officer, Sarah Youngwood, our Chief Financial Officer, and other members of the Management team.
Speaker Change: At your prepared remarks, we'll open line for Q&A. The press release and earnings presentation accompanying this call can be found on our Investor Relations website.
Speaker Change: I would like to remind you that we will be making forward-looking statements in this call that involve risks. A summary of these risks is contained in our press release and a more complete description in our annual report on Form 10K.
Speaker Change: We will discuss our financial performance on a non-get basis and adjust it for the prior year impact on AxiomSL, as if we recognize Revenue Ratability for on-prem contracts and excluding the impact of FX and the previously announced one-time revenue benefit and index in the first quarter of 2024.
Speaker Change: Definitions and reconciliations of US gap to non-GAAP plus adjustments can be found in our earnings presentation as well as in a file located in the financial section of our investor relations website at ir.nazdaq.com. I will now turn the call over to Adina.
Adena Friedman: Thank you, Ato, and good morning, everyone. Thank you for joining us.
Adena Friedman: This morning I will start with a review of Nasdaq's financial and operating operational performance for the quarter. I'll then provide an update on our outlook on the current operating environment before handing the call to Sarah to walk through the financial result in more detail.
Adena Friedman: The year began with favorable business conditions as the global economy maintained solid performance.
Adena Friedman: However, as the quarter progressed, we experienced a market increase in uncertainty driven by changing trade policies and heightened geopolitical tensions
Adena Friedman: Nasdaq entered the year in a position of strength, and we remained laser focused on delivering for clients despite the dynamic nature of the operating environment.
Adena Friedman: The trust that we have built with our clients, the mission critical nature of our solutions, and the diversification of our platform has served as well and these times of heightened uncertainty and volatility.
Adena Friedman: As a result, we've been able to enhance our competitive position, execute our strategy, and create value for our clients and for our shareholders . . .
Adena Friedman: We delivered double-digit growth across all three divisions with net revenues of $1.2 billion representing a 12.5% increase from the prior year period.
Adena Friedman: Solutions revenues were $947 million, representing 11% growth year-to-year, and ARR rose to $2.8 million, up 9% year-to-year.
Adena Friedman: First quarter operating income rose 17%, and EPS agreed 24%, benefiting from strong revenue performance and expense management while we continue to invest in our products and capabilities to serve our clients over the long term.
Adena Friedman: As a divisional level, capital-access platforms generated 5% ARR brews and 11% revenue brews during by continued strength in both net inflows and new product innovation in our index business.
Adena Friedman: Financial technology delivered 10% revenue growth. ARR growth was 12%, which included 21% growth for financial crime management technology, 11% growth for regulatory technology, and 9% growth for capital markets technology. [inaudible]
Adena Friedman: Market Services delivered 19% net revenue growth driven by record U.S. cash equities and derivatives revenue and growth in European equity derivatives volumes in
Adena Friedman: Beyond our excellent financial results, we continue to make progress in our strategic priorities [inaudible]
Adena Friedman: After achieving our target of $80 million in Net Synergies from the Identity Transaction, we expanded our efficiency program to target $140 million, inclusive of our original Synergy program. And we're on pace to achieve it by year end with over $100 million action as of the end of the first quarter.
Adena Friedman: Our strong free cash flow of $674 million in the first quarter supported continued de-leveraging and share repurchases to offset delusion from employee vesting.
Adena Friedman: Finally, we will remain on track to surpass $100 million in run rate revenue from cross-cells by the end of 2027 as we've delivered 19 cross-cells since the Adena acquisition, including two in the first quarter.
Adena Friedman: Turning to our operational highlights, starting with capital access platforms, we continue to execute on the growing opportunity in front of us as you build new products to help our clients navigate market complexity.
Adena Friedman: Our solutions take on increasing importance in periods of uncertainty and market volatility. For example, our analytics platform provides actionable portfolio and fund level insights to help institutional investment clients manage their investment strategies and dynamic markets.
Adena Friedman: In addition, our IR and governance solutions provide market-driven analysis to help corporate clients connect more successfully with their boards and investors as they manage their businesses through a fast-changing environment.
Adena Friedman: Moving down to a review of the capital access platform subdivisions starting with the data and listings in the first quarter, Nasdaq welcomed 45 operating companies, raising approximately $5 billion in total proceeds.
Adena Friedman: Overall, Nasdaq had an 82% win rate for Nasdaq eligible operating companies, featuring three of the top five largest IPOs in CoreWeave's sales point at Smithfield Food.
Adena Friedman: Beyond IPOs, we have sustained our listing transfer momentum with several marquee switches in the first quarter, including Shopify, Thompson Raiders, and Domino's Pizza
Adena Friedman: After celebrating our 500th switch last year, during the first quarter, we officially crossed the $3 trillion threshold and combined market value for listing transfers to Nasdaq since the first launch our switch program in 2005.
Adena Friedman: This tremendous milestone further reinforces our role as the premier venue for listings in the United States.
Adena Friedman: Building on our listings leadership, we launched a new research and advocacy program to engage the new US administration on a set of policy recommendations that promote capital formation, enhance the public company model, and ultimately reinforce the position of the US capital market.
Adena Friedman: In our data business, we benefited from new sales, upgrades, and higher usage across the business as well as strong traction across our new products and geographies
Adena Friedman: The index business delivered another outstanding quarter as we achieved 26% revenue growth in a record and average ETP AUM for the quarter
Adena Friedman: Net inflows remained robust, and we continued to see strong increase in derivatives volumes, including a record quarter.
Adena Friedman: Nasdaq's index franchise has multiple vectors for growth and index's performance reflects the ongoing execution of our growth strategy of new product innovation, international diversification, and institutional client expansion.
Adena Friedman: In fact, the new products that we've launched since 2020 have accounted for 33% of net inflows over the last five years [inaudible]
Adena Friedman: We built on this success in the first quarter as we launched 30 new index products, including 10 outside the United States and seven insurance and new-woody vehicles.
Adena Friedman: Within workflow and insights, analytics experience salad growth among the investor community as we continue to engage our data more deeply in client, I'm sorry integrate our data more deeply in client workflows and applications.
Adena Friedman: In corporate solutions, we continue to focus on strengthening our offerings through product enhancements, including AI features while we manage our corporate clientele for a continued period of elongated sales cycles.
Adena Friedman: Turning to our Financial Technology Division, we signed 40 new clients, 92 upsells and two cross-cells.
Adena Friedman: In today's environment of heightened market activity and complexity financial institutions and market operators faced an increasing range of challenges. The Nasdaq is uniquely positioned to help solve. [inaudible]
Adena Friedman: Our trade life cycle solutions are designed to support our market operator clients around the world during significant burst in trading activity while maintaining a hyper resilient infrastructure.
Adena Friedman: As we partner with banks to fight financial crime, a shifting macroeconomic and global political conditions tend to motivate an increase in criminal behavior.
Adena Friedman: We are also focused on advancing that exhibition to be the trusted fabric of the world's financial system.
Adena Friedman: This morning, we announced an enhanced partnership with AWS that is designed to benefit both our market services and financial technology division.
Adena Friedman: Through our expanded partnership with AWS, we plan to leverage the learnings and expertise gained from our transition as we continue to modernize the global financial ecosystem.
Adena Friedman: Over the coming years, AWS and Nasdaq intend to progress in phases to serve the full range of our financial services clients.
Adena Friedman: It will start with a focus on our market operator clientele through package public cloud and hybrid cloud infrastructure, software and services that build on Nasdaq's successful modernization of its own options markets.
Adena Friedman: The combined power of AWS and Nasdaq will enable market operators to modernize and cost effective manner while mitigating transformation risk, retaining data sovereignty, and maintaining the highest levels of performance security and resilience.
Adena Friedman: Now, turning to a review of our Fintech subdivisions, beginning with Financial Crime Management Technology
Adena Friedman: NASA's on-going client growth is contributing to the growth and power of its data consortium, which now includes clients holding more than $10 trillion in total assets.
Adena Friedman: The business has often made progress on its land and expand strategy, signing an expansion deal with an existing Tier 2 network-driven client.
Adena Friedman: The upsell was negotiated and signed in six months, marking approximately a 50% reduction in sales cycle when compared to the original contract.
Adena Friedman: More broadly, we continue to drive enhanced party functionality across the financial prime portfolio.
Adena Friedman: Nasak Berffin's Gen AI-powered entity research co-pilot has seen a 20% increase in client usage compared to the fourth quarter showcasing the value and efficiencies that this platform delivers for our clients. Currently, more than 1200 clients are leveraging the co-pilot to expedite their alert reviews.
Adena Friedman: This feature, which is currently in beta with clients, will help automate and expedite case investigations and documentation.
Adena Friedman: Looking forward to the rest of 2025, we expect to introduce new capabilities that go beyond task automation with the use of a Genetic AI, which will enable banks to automate entire workloads, allowing for significant efficiency gains and compliance operations like due diligence and sanctions screening.
Adena Friedman: Turning next to regulatory technology, XMSL signed a large digital bank as a new client and delivered 22 upsells, including a deal with a large tier 1 US financial institution.
Adena Friedman: The Tier I client expanded its suite of XMSL services by incorporating a broker-dealer solution alongside their existing US, European, and Asian reporting modules.
Adena Friedman: Surveillance signs for new clients during the quarter, including a regulator in Europe , a crypto marketplace, an energy trading firm, and a broker dealer, representing the diverse client set that our solutions serve.
Adena Friedman: surveillance continues to see strong demand as clients seek to reduce operational complexity, particularly in the midst of elevated market activity.
Adena Friedman: Moving to the Capital Market Technology Subdivision, our market technology business continued to advance its international strategy, helping to modernize capital markets infrastructure across emerging economies with 17 upsells.
Adena Friedman: Nasdaq delivered an upsell with an Asian exchange and a cross-sell with Nuam, the consolidation of the marketplaces across Peru, Chile, and Colombia.
Adena Friedman: Importantly, the new on-deal demonstrates how we've become a trusted partner to an existing client that's signed on for two additional solutions since its initial signing in 2023.
Now turning to our Market Services Division.
Adena Friedman: The volatile market conditions across the first quarter showcase the depth and quality of our markets.
Adena Friedman: Nasdaq is the leading platform across the US and European markets and we delivered another quarter of double digit growth with record net revenues and volumes.
Adena Friedman: In the U.S., we generated net revenues for U.S. options, including index options and U.S. cash equities, and we were pleased to increase our on-exchange market share in U.S. cash equities in the first quarter.
Adena Friedman: These results represent the exceptional performance of our systems, supported by the consistent investments that we've made over the years, the strength of our closing cross, our superior liquidity and the trust that we've built with our clients.
Adena Friedman: In Europe , we saw strong results across both cash equities and equity derivatives. Within equity derivatives, we saw a year-over-year increase in both volumes and capture. [inaudible]
Adena Friedman: The U.S. Cash Equity's Marcus experienced five of the six highest trading days in industry history, and the U.S. options markets had four of the six highest trading days.
Adena Friedman: During this period, Nasdaq's markets performed extremely well as we managed enormous volumes and inbound in that bound message traffic, including Nasdaq's most active day ever on April 7th, which exceeded 550 billion messages.
Adena Friedman: I'm proud to say that our teams seamlessly navigated this heightened demand and remained prepared for an environment marked by elevated volatility.
Adena Friedman: Now I'd like to take a moment to discuss the current macro environment.
Adena Friedman: Recent policy shifts and ongoing talks about potential tariffs have created significant short-term volatility and that uncertainty is at this point weighing on global GDP growth expectations.
Adena Friedman: We provide corporate issuers with critical access to funding, while providing banks, brokers and investors with transparent and efficient mechanisms to adjust their strategies and comprehensively manage risk.
Adena Friedman: Further, the current volatility in U.S. trading has illustrated the critical nature of our markets and the resilience of their underlying infrastructure. Thank you very much sir.
Adena Friedman: Nasdaq is a global business and we have teams across the world that serve our clients at a local and regional level which allows us to understand the specific dynamics of our client space and insurance Nasdaq's decision to help solve them, help them solve their problems as they evolve.
Adena Friedman: Against this backdrop, the power of Nasdaq's platform and diversified business positions us for resilient growth as demonstrated by our outstanding first quarters performance.
Adena Friedman: With that, I will now turn the call over to Sarah to provide more details on our financial results
Sarah Youngwood: Thank you, Adena, and good morning, everyone. In the first quarter of 2025, Nasdaq delivered one of our strongest quarters on record with 24% APS growth and record pre-cash growth.
Starting with cordony results on side 11. [inaudible]
Sarah Youngwood: We reported net revenue of $1.2 billion up 12.5% with solutions revenue of $947 million up 11%.
Sarah Youngwood: Operating expense was $555 million up 7%, leading to an operating margin of 55%, and maybe that margin of 58%, both up 2% points.
Sarah Youngwood: This resulted in net income of $456 million and deal you to the death of $0.79 up 24%.
Sarah Youngwood: Slide 12 shows the drivers of about 12.5 percent net revenue goals for the quarter. We generated 9.5 percentage points of alpha, driven by new and existing clients, product innovation, as well as excellent market services execution in these volatile markets.
Sarah Youngwood: Meanwhile, beta factors contributed 3 percentage points of gold to this quarter, driven by higher valuation in Nasdaq indices and higher overall volumes in both index derivatives and market
Sarah Youngwood: As shown on slide 13, we had AR of worth of 9% above all quarters of last year, which were between 7 and 8%
Sarah Youngwood: Saas as a percentage of AR, increased 2 percentage points to 37% compared to the first quarter of 2024 2024.
Let's review division results, starting on slide 14.
Sarah Youngwood: In capital access platforms, we delivered revenue of $515 million up 11% and with 8 hour growth of 5%.
Sarah Youngwood: Data and listings revenue was up 4% with ARR up 6%. Revenue growth was primarily driven by data due to the positive impact of new sales, higher usage and pricing.
Sarah Youngwood: Within listing, the benefit of new listings and pricing was offset by deal listings and lower amortization of prior period initial listing fees.
Sarah Youngwood: The revenue headwing from the listings and amortization of initial listing fees in the first quarter was consistent with our previous comments.
Sarah Youngwood: Index revenue was up 26% in the quarter, mainly driven by record average ETA UM of $662 billion.
Sarah Youngwood: This is due in large part to strong net inflows with more than half of the quarterly revenue growth driven by alpha factors
Sarah Youngwood: ETPIUM included 86 billion dollars of net inflows in the last 12 months.
including 27 billion in the first quarter. [inaudible]
Sarah Youngwood: which reflects tremendous recognition and resiliency in the context of the Nalda Q1 00 market performance down 8% during the first quarter.
Sarah Youngwood: Volume based license revenue was also a strong contributor to revenue growth, given the high level of volatility, with record derivative contract volumes up 28%.
Sarah Youngwood: And we serve as the revenue share threshold we have in place with our partner CME in March, earlier in the year than we have historically.
Sarah Youngwood: In work to an insight, revenue and AR awards were both up 4% for the quarter.
Sarah Youngwood: Dean Chris was driven primarily by analytics, mainly investment in data link, with continued demand from hedge funds, asset managers, asset owners and consultants, and a focus on differentiated data as our clients seek offer.
Sarah Youngwood: Corporate solutions of the group modestly due to the pricing and input cost retention.
Sarah Youngwood: Corolley operating margin for the division was 60% of 2% edge points.
Sarah Youngwood: As we look to the four year 2025, we continue to expect capital access platforms to deliver 2025 revenue goals within its medium-term growth output range of 5 to 8 percent, with subdivision revenue goals expected to be consistent with our prior comments provided in January .
Moving to financial technology on slide 15. [inaudible]
Sarah Youngwood: Revenue was 432 million dollars up 10% with AR growth of 12%.
Sarah Youngwood: The difference between quarterly revenue growth and AI growth in Fintech and capital market technology is driven by the impact of lower calipso on-prem subscription revenue due to the tough comp of 23% revenue growth in the first quarter of 2024.
Sarah Youngwood: Meanwhile, AR Awards remain solid across the subdivisions with the benefit of 40 new clients, 92 upsells and two cross-dells in the quarter.
with strength across all three subdivisions.
Thank you. Thank you. Thank you.
Speaker Change: Financial Crime Management Technology Revenue and ARGOs both increased 21% for the quarter, with 35 new SM clients and one quad cell with a tier of the client, as well as enough cell with an existing tier 2 client.
Speaker Change: Net revenue retention was 113 percent, reflecting strong client engagement, including the continued adoption of the Gen A INTT Research Co-Pilot and targeted typology analytics.
Speaker Change: Regulatory Technology Revenue, increased 10% for the quarter with AR of worth of 11% as well as five new clients and 49 upsells.
Speaker Change: Capital Market Technology, Delhi with 7% revenue goes for the quarter with AR up 9% and with 42 of sales and one cross-selling the quarter.
Speaker Change: Financial technology operating margin was 46% plus versus the prior year quarter.
Speaker Change: Looking ahead to our 2025 Revenue Growth Expectations for Financial Technology
Speaker Change: The uncertainty in the global macro and regulatory environment is causing some delays in
Speaker Change: These delays will likely have some effect on revenue and AR goals in Q2. Additionally, as a reminder, Calypso benefited from a strategic renewal in Q224, which created a difficult towards growth comparison for the upcoming quarter.
Speaker Change: That being said, we are seeing continued strong demand for our fintech solutions which is showing up in a solid 2025 pipeline
Speaker Change: Clients continue to engage with us, underscoring the mission-critical nature of our solutions, and we continue to be the partner of choice in competitive situations.
Speaker Change: Therefore, we remain confident in our ability to deliver for years 2025 revenue growth within the medium-term outlook for both the division and the subdivision.
Speaker Change: with financial crime management tech and capital market tech are the low end of their ranges and with direct tech well within its range.
Wrapping up the divisions with market services on slide 16. [inaudible]
Speaker Change: We had record net revenue of $281 million, affecting growth of 19%.
Speaker Change: This included record quarterly net revenues in US options, including index options, as well as in US cash equities.
Speaker Change: Voigt was primarily driven by the increase in market-wide volumes across all asset classes, but also included higher capture in both US cash equities and European equity derivatives. [inaudible]
Speaker Change: Higher market share in available on exchange trading volumes in U.S. cash equities, and higher U.S. state plan revenue.
Speaker Change: Or trading businesses have executed well during the period of significant market activity.
Speaker Change: In North America, we reached a record of more than 430 billion messages in a signal day in Q1. This compared to around 200 billion messages per day which we referenced at Inverter Day in early 2024.
Speaker Change: All clients increasingly rely on us during periods of extraordinary market conditions and as such give us persistent market share leadership and premium capture.
Speaker Change: This is only possible because of the major investments we've made to modernize and scale our trading infrastructure.
Speaker Change: To normalize the alpha-beta computations for market volatility in new security options and US cash equities, we're including an average daily volume provision to our methodology, in which half of the net revenue generated from above threshold volumes is attributed to alpha.
Speaker Change: These thresholds are set 10% above the 13-year industry average daily volumes.
Speaker Change: As noted on page 12, the addition of this new provision to a Oscar beta methodology would not have matured changed any Oscar beta fits in the projects we have reported.
Speaker Change: Market Services operating margin was 62% of five percentage points highlighting the strong operating leverage of this platform.
and Adena Friedman.
Speaker Change: Moving to expenses on slide 17, we had operating expenses of $555 million up 7%, driven by strong investments in technology and people to support revenue and drive innovation and growth, and flowy related cost increases and other increases largely due to inflation.
Speaker Change: This resulted in an operating margin and EBITDA margin both of two percentage points are 55 and 58% respectively.
Speaker Change: We are narrowing our non-GAAP expense guidance for the year to a range of $226.5 to $232.5 billion from $224.5 to $232.5 billion.
Speaker Change: FX was a very small benefit this quarter, but given current volatility and FX rates, we are once again treating it as a neutral versus 2024 rates in the narrowed guidance range.
Speaker Change: As Adena noted, we have actioned over $100 million of our efficiency programs at the end of the first quarter, and we remain on track to action the $440 million by the end of the year, as well as realize a two percentage point benefit to a full year 2025 expense growth.
Speaker Change: As we look to Q2, we expect slightly higher expense growth than the first quarter due to the timing of our annual compensation cycle
Speaker Change: We maintain our 2025 non-GAAP tax rate guidance of 22.5% to 24.5%.
Turning to capital allocation, on slide 18.
Speaker Change: Nasdaq generated free cash flow of $674 million in the first quarter.
Speaker Change: This high level of cash flow enables us to support deleverting our dividends and share
Speaker Change: We paid a dividend of 24 cents per share, or $138 million in a quarter, representing a 32% annualized payout ratio.
Speaker Change: And this morning, we announced a 13% increase to a quarterly dividend to 27 cents per share, which will be payable in June .
Speaker Change: In our continued commitment towards deleveraging, we re-purchased $279 million in the national value of debt for a net cash purchase price of $257 million.
Speaker Change: Resolving in the gold leverage ratio of 3.4 times at the end of the quarter, down from 3.6 times at the end of 2024 4.
Speaker Change: are the result of a focused sea leveraging, where we recently received a one-nouch upgrade to a credit rating by Moody's to BAA1.
Speaker Change: Given the attractive buying opportunity in our stock, we repurchased 1.6 million shares of our common stock for roughly $115 million in the first quarter and we have since completed the employee-related repurchases in April .
Speaker Change: As we continue to execute against our compelling organic gold strategy, we remain focused on reducing our leverage and now expect to reach a 3.3 times gold leverage ratio in 2Q or 3Q depending
Speaker Change: We intend to pay down the $400 million remaining on the June 2025 bond as maturity, primarily with
Speaker Change: Beyond that, we will remain opportunistic regarding any additional debt or share repurchases.
Speaker Change: Our capital priorities remain unchanged since the close of the Adena transaction.
Speaker Change: We are focused on delivering what we committed to shareholders, which is investing for organic wealth, delivering, expanding the dividend and repurchasing shares. We have an incredible organic wealth path in front of us, and that is where we are focused.
Inclosing
Speaker Change: Nasdaq delivered a standout first quarter marked by double digit revenue for the course of all three divisions and are highest to over your AR increase since the first quarter of 2022.
Speaker Change: We demonstrated strong operating leverage and made meaningful progress on our capital strategy, including reinvesting in the business, reducing debt and buying back shares.
Adena Friedman: As we move into Q2, I echo Adena's comments on a dynamic macroeconomic environment and a critical role Nasdaq plays in sustaining market resilience.
Speaker Change: In times like this, financial institutions around the world rely on us for our mission, critical technology and actionable insights [inaudible]
Speaker Change: Our central role in the global financial ecosystem and the trust our clients place in us, reinforced our ability to continue delivering sustainable roles and long-term shuffle the value.
With that, let's open the line to Q&A.
Thank you
Speaker Change: As a reminder, to ask a question, you would need to press star 1-1 on your telephone
So with your question, please first all one one again.
Speaker Change: We ask that you please limit your questions to no more than one, but feel free to go back into the queue and if time permits will be happy to take your fellow questions at that time. Please stand by while we compile the Q&A roster.
Speaker Change: And I show our first question comes from the line of Simon Clinch from Redburn Atlantic. Please go ahead.
Hi everyone, thanks for taking my question.
Simon Clinch: Maybe Adena, as one of you could reflect on the strength that you've seen in the index business you have and with the building of this next-generation platform.
Speaker Change: And if you could perhaps talk about how the business and the structural drivers are different today versus the last time we went through a market downturn in 2022 when your growth was still very resilient. I was just kind of curious is what differences might be this time round and how you might therefore think about the resiliency of that index segment today versus that last
Thanks.
Speaker Change: Thanks, Simon. Yeah, this is a reminder to everyone. In 2022, we saw a decline in market values of the 1100 of around 33 percent, but the index business in that year grew 6 percent.
Speaker Change: So it does really, I think that year was a good testament, as he said, to the resilience of the business, but as we look at how we've expanded that business
Speaker Change: bringing new products to market and really expanding the index franchise beyond the Nasdaq and 100, which-
I think we're continue to do quite successfully.
Speaker Change: growing our international clientele and also expanding into the institutional clientele. And that, I think, is continuing to accrue our benefit. So Simon, I think it's a great question because...
Simon Clinch: 50% of the inflows in the quarter, the $27 billion of inflows in the quarter, were from non-NASDA Q1 00 products.
So, I should say we're into non-nasek 100 products.
Simon Clinch: and I think that that shows that we're really continuing to diversify the business.
Simon Clinch: And as we also talked about, there are three really key levers that you should look at in the index business series of course market values and
Simon Clinch: And I think that that does create basically is one of the key drivers and that's really going to show us up in the beta that we show in our alpha beta comparison.
Simon Clinch: But we also have new product launches and inflows into those products [inaudible]
Simon Clinch: as well as our derivatives volume, as well as data revenue. So I think that because of the fact we do have multiple vectors of performance and drivers in the business, it allows us to continue to perform even when market values might be swinging one way or the other. And so that obviously showed up on the 26% growth in the business even with an 8% decline in market values in the first quarter. And so that's what we're going to do today.
Simon Clinch: But of course, as we go forward, it is a very dynamic environment. We are still seeing inflows in April , so we're very excited about that. But the market will perform, and we'll have to see how that drives the business forward. But the ballast that we have there now and the size and scale of it is really exciting to us.
Let's go. Thank you very much.
Speaker Change: Thank you, and I show next question comes from the line of Craig Siegenthaler from Bank of America. Please go ahead.
Good morning, Adina. Sarah, hope everyone's doing well.
Speaker Change: So, we saw the announcement last month that Nasdaq plans to open an office where I think effectively...
A regional headquarters in Dallas, Texas. Yes.
Speaker Change: This looks like a reaction of the BlackRock-Citadel-backed Texas Stock Exchange and a similar announcement from ICE, which I think already went live three weeks ago. So, I'm really curious, what do you expect to accomplish from this move?
Speaker Change: How will this link up also with your Nasdaq exchanges in New York, or actually, Sokalkis and Carterette?
Speaker Change: Sure, thanks, Craig. Well, first of all, just to ground everyone, we have 700 clients across Nasdaq in Texas. And that includes banks, brokers, investors, corporate clients. That does include 200 or so listed clients.
Speaker Change: So as we are thinking about expanding our presence in Texas, it's really because frankly that the clientele we have has really expanded through all the work that we've done in the Fintech Division and the growth of that business.
Speaker Change: in addition to, of course, our listings business. So that the regional headquarters is really a reflection of making sure we have a great local presence in Texas to serve that broad base of clientele.
Speaker Change: And when we think about our illicit companies there, we have, I mean just amazing companies that really they they want to have of course a local presence that they can come to and people that they can interact with in Texas and we have a great team in Texas to support them. But they also want to have access to global capital flows and they want to have access to the really unique benefits that we provide. Thank you very much.
Speaker Change: as a listing exchange. And I think that, you know, those unique benefits are really driving the fact we have an overall win rate of over 80% and we've continued to really expand our switch program.
Speaker Change: Seven Switches in the Quarter. So our view is that companies that are public companies that are based in Texas, they want to have that great local presence.
Speaker Change: but they also want to have access to a global market and we can provide both and so that's really the driver of our decision to expand our presence there. But at the end of the day, we take every competitor seriously but we do think we have an incredible, incredible value proposition to offer any company including all of our clients in Texas.
Thank you. Thank you.
Thank you [inaudible]
Speaker Change: And I show a next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead
Speaker Change: Hey, good morning. Thank you for the question as well. I was hoping we could touch in your acquisition priorities from here. The balance sheet is delivered generally nicely. You guys made great progress since that dense acquisition. I think at one of the recent conferences you talked about, maybe a little bit more openness to pursuing growth in organically again, so maybe expand on that a bit. What is the probability of deals you're seeing out there? Obviously macro uncertainty could present, you know, pretty compelling valuation opportunities, but the balance is still relatively levered relative to that you're seeing out there.
Speaker Change: to kind of where you guys want to be. So just brought a question on M&A and as part of that just remind us your sort of earnings accretion targets when you're pursuing deals. Thanks.
Speaker Change: Sure. Well, so Alex, we're not evaluating deals. We're really focusing on organic growth. I think that as Sarah said, we have an incredible growth story
Speaker Change: We have great opportunities for continuing to sustain organic roads within the business.
Speaker Change: We have work to do to continue to drive to the returns and the accretions that we committed to our shareholders with the Adena deal. So, the de-leveraging, the shared buybacks, those are things that we're going to be committed to doing in our capital plan. In addition to continuing to increase our dividends. Thank you very much.
Speaker Change: as we did in us today as well. So, I think that that's really our focus. I mean, our team is laser focus on delivering for our clients, laser focus on driving the organic growth, and we really haven't been evaluating M&A.
Loud and clear. Thank you. Thank you.
Speaker Change: Thank you and I show our next question comes from the line of Patrick Moley from Piper Sandler. Please go ahead
Yes, good morning. Thanks for taking the question.
Patrick Molle: So, I just had one on the overall sales cycle environment. You mentioned the macro headwinds that you're seeing and how that's driving delays in customer decision making, but you did not, you know, adjust down any of the revenue guidance ranges, particularly in financial technology.
Patrick Molle: So I just hope that you can walk us through the dynamic there and what specifically you're seeing that gives you confidence that you're going to be able to come in within the guidance ranges that you laid out at the beginning of the year.
Patrick Molle: Sure, sure, yeah, I'll take it by e to the subdivisions within contact .
You're starting with financial crime management technology.
Patrick Molle: We're having great robust conversations with clients. We actually showed an acceleration of sales to the SMB clientele on the first quarter of this year versus last year
Patrick Molle: We're not seeing any changes in the way that our clients are engaging with us [inaudible]
Patrick Molle: as they're considering solutions. And we're continuing to move up market. We're just having a lot of progress there in driving towards deals and concluding those deals. So that business remains very robust and it feels very, very healthy. I think within the red tech business. Yes.
Patrick Molle: The surveillance products, honestly, are very high demand with four new clients in the quarter, but generally we've had we've had really good sales for the last year there and we're continuing to have a lot of active dialogue.
Patrick Molle: If you think about it, you know, higher activity levels and frankly more regulatory scrutiny,
Patrick Molle: on on market performance. And I would say, you know, making sure that we we are helping our clients manage through any sort of
Patrick Molle: Market Risks from a Markman Aprilation Perspective is really accruing to the benefit of that business globally. And I think it within XAMSL we are seeing some changes in how clients are implementing the technology. I'll quickly they're doing it just because some regulatory requirements are shifting back in time. And but are we continue to have a lot of opportunities in our pipeline continues to be very, very healthy as we've been engaging with clients on the needs that they have to expand their their regulatory needs over time.
Simon Clinch,
Patrick Molle: I think within the Capital Markets Tech, that market modernization megatrend is something that is really driving a lot of benefit to us. We've really been able to show the scalability of our platform, the modern way that people can implement that platform. And we just announced an expansion of our AWS partnership today.
Patrick Molle: to really drive our clients into that modernization for a complete suite of infrastructure capabilities to support that modernization, to that trend feels very strong. And then with trade management services in terms of connectivity services. [inaudible]
Patrick Molle: That business because of all the market activities has continued to be a great grower, and we did double the size of our data center last year, which is also helping us grow there.
Patrick Molle: And then within Clifso, I think we mentioned back in early March, we're seeing some decisions have to go further up the chain inside the companies and it's causing some delays, but the overall demand characteristics within Clifso remain strong. And just a reminder, some of the things we do within that platform are incredibly important.
Patrick Molle: especially during times like this one, like our collateral management moduleā¦
Patrick Molle: which really we really believe is like the best in the world. [inaudible]
Patrick Molle: is something that is of such high demand. I mean, everyone needs to be able to move collateral as efficiently and effectively as possible. Manage risk, the risk calculations are so important within that platform.
Patrick Molle: So I think clients really understand why Clifto is a differentiated solution, why they really need to have that kind of technology to manage risk. It's just a matter of sometimes the larger decisions have to go further up the chain and that's what we've been experiencing with our clients.
Okay, thank you.
Thank you [inaudible]
Speaker Change: And our next question comes from the line of Benjamin Budish from Barclays. Please go ahead.
Benjamin Budish: Hi, good morning, and thank you for taking the question. I wanted to ask about the Verifin growth algorithm. During the pre-head remarks, you talked about expanded use of AI features, I think co-pilot features. In the presentation, you talked about prices, partly a driver. Just curious as we think through the next year or two, how much of the growth is coming from?
Speaker Change: S&B Sales, Moving Up Market, and can you comment on the European opportunity, any signs of anti-US sentiment, anything like that, so I'm curious how those pieces fit in and price in terms of the next few years.
Speaker Change: Sure. Yeah, so the AI features are really helping us show how valuable the platform is to our clients. We don't specifically charge for those features. They're embedded in the solution, but they really just add to the value and ROI that we can deliver to our clients. So as we, as we talk to them about the value of the solution or, you know, the increased value of the solution as we do contract renewals, we definitely will demonstrate that the automation that they're going to be able to bring to their workflows helps them be able to be able to do so. So that's all for now. Thank you.
Speaker Change: All of these problems with fewer resources over time. That's really kind of the way that we would communicate that to them. And in general though, if we think about the business and the growth drivers of the business, the strongest part of our business has always been the SMB space.
Speaker Change: where we're really gaining strength is in the Tier 1 and Tier 2 clients and we're continuing to show progress there. Really happy to see the upsell that we gave to, we were able to secure with one of our Tier 2 clients. Thank you very much.
Speaker Change: because I think it just shows that that land and expand strategy is something that we really believe is something you know something that will prove our benefit over time. But that upsell movement will continue to be a slow moving train just because the sales cycles are generally longer and we also don't. So let's move on.
Speaker Change: Start showing the ARR until we actually implement the implementation cycles are longer, but it has been, you know, the demand there continues to be very, very high. As you move to Europe , we are engaging very constructively. We've had engagements with our clients throughout the first quarter and in April , or I should say client prospect, and they are signing up with us to start to run POC so we can show that our solution is differentiated. [inaudible]
Speaker Change: We have found that they're as interested as ever, frankly, in just finding a solution that works.
Speaker Change: I think that and that really can drive down their criminal behaviors but also deliver the ROI that I mentioned and so the engagement has been really healthy, but that's going to take time. I do want to say, again, fail cycles are long, so we don't anticipate that being a real contributor this year, but we're hoping that we can start to show some contribution. Thank you very much.
Great. Thank you so much. Thank you Thank you.
Speaker Change: Thank you. And I show our next question comes from the line of Ashish Sabadra from RBC. Please go ahead.
Speaker Change: Thanks for taking my question. I just wanted to build down further on the prior comments around delays and I was just wondering how should we think about like the impact to revenues in 2Q if you could provide any further detail by segment. And then in terms of trajectory, it should we expect a group to improve into 3Q or is it going to be more back and loaded. Thanks. Thanks.
Speaker Change: Sure. But we don't provide specific outlook by quarter. I think we wanted to make sure, though, that we just reminded people that we had...
Speaker Change: A very strong growth in our capital markets technology and particularly in Eclipseville last year because of
Speaker Change: some strategic renewals, particularly a large strategic renewal on the second quarter of last year that's creating kind of a year-over-year comp concern or changing in the comp, you know, the, I would say challenging comp for Q2, and then as we're looking at the way that we've been engaging with clients.
Speaker Change: You know, the clients, because they're going up, particularly for larger decisions [inaudible]
Speaker Change: because they're going up further up the chain and getting approval of some of those sales are taking a bit longer. So we think that that could impact some growth in Q2. But generally speaking for the year, as you said, we continue to believe that and feel strongly that we have great growth lovers across the fintech division. And...
Speaker Change: that were confident in our meetings from Outlook and being able to achieve that within the year and we also believe that the clients at the end of the day they need us to help them manage through these uncertain times.
Speaker Change: and they trust us to be a partner to them through all economic cycles and so we continue to have very, very healthy engagement with our clients.
That's when you're full color. Thank you. Thank you.
Thank you [inaudible]
Speaker Change: And I show our next question comes from the line of Kyle Voigt from KB Delhi. Please go ahead.
Kyle Voigt: Hi, good morning. So you mentioned it a few times in the call already, but wondering if you could expand upon the AWS partnership or enhanced partnership, I guess that was announced this morning.
Speaker Change: and hoping you could help us understand if your infrastructure users migrate to this newer offering over time, what that would functionally mean for the composition of your marketplace technology revenues, the length of sales cycles and the kind of overall revenue pie or just a market that you're targeting. [inaudible]
Speaker Change: Great, thank you. This is as you're pointing out, it is a long-term relationship and as we're working with market infrastructure providers around the world.
Speaker Change: They have a few challenges, they're really trying to address. One is the fact that they have to have incredible scalability, right? I mean, obviously the mark of lines have come up across all many markets around the world. So that scalability is something that they're really focused on. Second, they want to be able to organize their data in a way that allows them to bring more functionality and AI capabilities into their markets over time. They know that that's going to be a driver of growth for them. So that's what we're going to do. So that's what we're going to do right now. So that's what we're going to do.
Speaker Change: I think third, they obviously have to maintain hyper-resilient, hyper-secure infrastructure.
Speaker Change: and they want to be able to be adaptable, right? So, and they want to be able to bring in foreign investors, so they have to be adaptable in terms of their technology and the way that their markets work.
Speaker Change: Having it be more standardized, having it be more, you know, having connectivity, be more streamlined, and being more adaptable. And then you would have to bring new products or new asset classes or new capabilities into their market. Okay, so...
Speaker Change: We can help them from a solutions provider in that adaptability in the modernization and also in driving more standardization across markets.
Speaker Change: and they want to have a really highly functional system, but they also have data sovereignty needs, they're highly regulated.
and they have to really think about that resilience. So...
Speaker Change: So what we're working with AWS on is really creating an infrastructure that has a hybrid cloud component for those latency sensitive, data sensitive workloads where they can bring AWS into their existing data centers. [inaudible]
Speaker Change: through a hybrid cloud capability with high speed connectivity to an availability zone.
Speaker Change: that allows them then to do a lot of the other workloads outside their data centers in a much more scalable, much more efficient and effective.
Send capital flows more efficiently and effectively and faster
Speaker Change: across markets. So it really creates a much more of an interwoven market ecosystem over the long term and that really becomes more of like kind of a managed service offering to our clients as opposed to a deployed software solution is which is what we primarily provide today.
Speaker Change: But it will take time, these are big decisions, these are big moves. Let's move on.
Speaker Change: We are engaged and we announced this part of our announcement this morning that we have two clients already with Johannesburg Exchange and BNV in Mexico engaging with us on how to install and implement this technology as fast as they can to really get the benefits of the connectivity, the scalability. [inaudible]
Speaker Change: security, etc. And so we are very excited about that. And we're also going to be moving our Nordic markets into this infrastructure subject to regulatory approval as kind of a first market to go in in this kind of new construct. So excited about it, long term though. Thank you very much.
Speaker Change: And it is a partnership, so we are looking at this as how do we, how does everyone win as we are implementing it from a financial perspective as well.
Thank you.
Speaker Change: And I show our next question comes from the line of Ben Fannon from Jeffrey's LLC. Please go ahead.
Ben Fannin: Thanks. Good morning. A question on expenses. Sarah, you raised the low end of the guide after I think first quarter came in, you know, better than expected. The curiousest what drove the change. I think you mentioned FX, but just other things that might have driven the low end to move up that amount.
Ben Fannin: And we actually are continuing to have a very strong rigor on the extent that as you know, we continue to also recognize that we have very strong performance in the first quarter and therefore we certainly yielded a lot to the shareholders there, but there was a little piece there and that was added to the extent.
Thank you [inaudible]
Speaker Change: And I show our next question, comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.
Brian Bedell: Great. Thanks. Good morning. Thanks for taking my question. Maybe just go back to the question on the uncertainty and the delay and decision making. Maybe just focusing though on axiom.
and I think Adina you mentioned, obviously on the U.S. regulatory side, some...
Brian Bedell: and potential rollback of regulations, but if you can talk about
maybe potentially offsetting some of those headwinds. [inaudible]
Brian Bedell: and also maybe just pivoting beyond the right tech, but just your view on crypto market growth globally and
Brian Bedell: and to what extent you see that as an incremental growth driver for both Rectake and Clipstone and also Verifen.
Brian Bedell: versus where you've used work before the change in the administration and potentially a higher regulatory
Okay, great, thanks [inaudible]
Brian Bedell: Yeah, so I'll start with the first question on axiom of self.
Brian Bedell: So, as you said, it is really a global business and I was talking to the team and I said, well, how many changes do we, regulatory changes do we process within the system every year?
Brian Bedell: and they say it's literally thousands of regulatory changes we process, meaning that we are so diversified and so broad, and we manage across more than a hundred regulators of everything.
Brian Bedell: Thousands of rules. It's incredible, actually. But you're right that within, you know, there are some changes to the timing of certain regulations, new regulations that are coming out. There is still some indecision on Basil 3N game here in the United States. [inaudible]
Brian Bedell: And so those are the types of things where we have clients who've signed up to make sure that they're ready for basil outside the United States, but some of those have pushed out, they're required to push out in time so they're taking a little longer to do the implementations themselves. But generally I would say every client knows they have to get ready.
Brian Bedell: for this regulatory change, whether they're here outside the United States, it's just they're waiting to see some of what the clarity is here in the US.
Brian Bedell: as we're working with them. But beyond that one regulation, that one regulatory change, it is a consistent engagement with clients in a few ways. One.
Brian Bedell: They might use us for some of their markets or some of the geographies, but not all of them, and we've been able to work with them just to expand across all their geographies. [inaudible]
Brian Bedell: and also, as you said, with moving over to crypto, as we think about a new regulatory paradigm for crypto, it really is an interesting opportunity for us.
Brian Bedell: We already provide market tech to crypto markets, right, to trading, clearing, selling, technology, surveillance. I mentioned that we had a crypto market, take our sales platform, but crypto is definitely a growth driver for surveillance.
Brian Bedell: and as we get into more of a regulated market and banks potentially having crypto to be bankable.
Brian Bedell: That becomes an opportunity, as you mentioned, for Verifin, it becomes an opportunity for actually myself, Calypso. One thing that we really are thinking about is how do we actually also create even more efficiency in collateral management with using new tokenized capabilities?
Brian Bedell: In an environment where crypto becomes a regulated asset that can be actually adopted by more of the industry and we do see that as a good potential for us but that's still something that still needs to play out in the US regulatory landscape here. This is a great opportunity for us to be able to work with the industry in the future.
That's great, great color, thank you.
Speaker Change: Thank you, and I show next question comes from the line of Alex Kramm from UBS, please go ahead
Alex Cram: Yes, hey, good morning, everyone. Just just a quick one on Capitol Market specifically in the first quarter. Obviously...
Alex Cram: You had Meitos Comas and Marjorade Calipso, but if I look at the ARR the ARRRRRRRRRRRRRRRRRRRRRRRRRRR
Speaker Change: Maybe flush out a little bit what else happened in the quarter? Was it really strength in the legacy businesses or did Phillips actually still have a pretty good showing and you're more worried about what's to come versus what actually happened in the one queue? So maybe just a little bit more color there. Thank you
Speaker Change: Yeah, I think the comments that we made in the beginning of March were really about ongoing sales conversations with clients that wouldn't have had a big effect on Q1. Really more of a fact on kind of looking at timing of signings of certain deals that are really getting close to getting signed.
Speaker Change: The modernization markets that I've been mentioning, and the second trend, more cute trend is really the need for connectivity services, connections, cabinets. [inaudible]
Speaker Change: capabilities that our Mark participants have as they're managing their experience here in the US markets.
Speaker Change: So I think both of those were good growth drivers. Also, we did, as I mentioned, we expanded our data center in the middle of last year. So that's also given us a chance to meet some latent demand that has been sitting with our clients for quite some time and just expanding their presence.
Speaker Change: with us. And so I think that's also helping. But frankly, we feel good, Alex, that the pipeline for Calypso, the pipeline for our market tech businesses remains very robust. And we're very excited about the fact that they see us as a great partner. But there has been some small number of conversations where people are just taking time longer to make decisions.
Thank you. Thank you.
Speaker Change: Thank you, and I share a last question comes from the line of Owen Lau from Oppenheimer. Please go ahead.
Hi, good morning. Thank you for taking my question [inaudible]
Speaker Change: Could you please give us more color on the IPO and Bauman so far? Additionally, have you started hearing that foreign companies are more inclined to list on foreign exchanges versus US exchanges, given what's going on with tariff and some of the recent capital flight to non-US markets? Thanks.
Speaker Change: Great, thanks, Owen. Well, first of all, we had more IPOs, I think we doubled a number of IPOs in the first quarter as we had in the first quarter of last year.
but it is still an environment. [inaudible]
Speaker Change: where people are the larger deals in particular, where there were some companies that were really looking forward to coming out in the second quarter are now waiting. And for good reasons, there's a lot of volatility and investors need to have an appetite for risk in order to be able to underwrite the risk of a new listing. Thank you.
Speaker Change: So I think that we are seeing a lot of companies ready.
Speaker Change: You have a lot of pictures, a lot of great conversations. [inaudible]
Speaker Change: But at the same time, I think companies will be patient to make sure they're walking into the right market environment.
Speaker Change: So we're hopeful that if, you know, we can see a little more uncertain, I mean, some of this uncertainty be resolved and have a little bit more of a certain environment going to the second half of the year that we could have this company's feel more confident coming out.
in terms of global companies. [inaudible]
Speaker Change: We're not seeing changes in the conversations with global companies, Owen. You know, I do think they understand the power of the US markets, the power of US retail in the long run, you know, in terms of thinking about how they want to have an opportunity, at least to maximize their market values, but those conversations, it's not like we're having those conversations with hundreds of companies. It's really with a small number of companies that are thinking about diversifying or thinking about coming to market [inaudible]
in the US instead of elsewhere.
Speaker Change: But I also want to point out that our Swedish market and our Nordic markets are also experiencing really good demand.
Speaker Change: We had a good quarter in terms of new listings in our Nordic markets as well. I think that every market has a unique value proposition.
Speaker Change: It's really going to be up to the companies to say, you know, where are clients? How does our brand resonate around the world? How do we want to think about the US investor base? And they're making those decisions over the long term, not the short term. [inaudible]
Garlic, thanks a lot [inaudible]
Speaker Change: Thank you. That concludes our Q&A session. I would now like to turn the conference back to Adena Friedman, Chair and CEO for closing remarks.
Adena Friedman: Great, thank you. Well, as we continue to execute in a dynamic environment, our diversified business model, the role we play with our, with two our clients as a trusted partner, and the mission critical nature of our solutions, physicians as well, to deliver growth, profitability and free cash flow generation. Well, thank you all very much for joining and have a great day. Thank you all very much for joining us today.
Adena Friedman: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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Michael Kramm, Sarah Youngwood, Michael Kramm, Sarah Youngwood, Michael