Nasdaq Inc (NDAQ)

• Nasdaq is experiencing strong growth in its index options business, focusing on expanding into retail platforms and attracting international investors, which is expected to become a significant revenue contributor in the future. -
• The company is successfully executing cross-selling strategies among its Financial Technology platforms, with seven cross-sells year-to-date and new campaigns launching, indicating potential for increased revenues and synergies from its acquisitions of AxiomSL and Calypso. -
• Nasdaq is expanding internationally by leveraging its strong presence to grow AxiomSL and Calypso in new markets, signing new clients in India, the Philippines, and Latin America, which opens up significant growth opportunities. -

• The SEC's tick rule reduces access fees by two-thirds, making it harder for Nasdaq to incentivize market makers to provide liquidity in lit markets, which could widen spreads and negatively impact investors. -
• Long sales cycles for Tier 1 and Tier 2 clients in Verafin, with only one Tier 1 client confirmed, could delay revenue growth in this segment. -
• Cross-selling campaigns between AxiomSL and Calypso are progressing slowly, with only 7 cross-sells year-to-date and sales cycles that "take time," potentially delaying anticipated synergies and revenue benefits. -

1. Verafin Growth Outlook
   Q: Why did financial client management tech grow below target?
   A: The growth was impacted by lower professional services revenue due to completed implementations with Tier 1 and Tier 2 clients, shifting revenue from implementation to ARR. As we scale our upmarket business, this creates timing variability. However, we're confident in our mid-20% medium-term revenue outlook for financial management technology, with strong demand from SMBs and larger banks. -

2. Cross-Sell Campaigns Progress
   Q: How are cross-sell campaigns contributing to revenue goals?
   A: Year-to-date, we've had seven cross-sells, including Verafin sales to AxiomSL or Calypso clients. We're launching new campaigns, such as offering our Nasdaq Risk platform to Calypso clients and AxiomSL's global shareholder disclosures to broker-dealer clients. While still early, more than 10% of our pipeline is cross-sell opportunities, and we expect momentum to build towards exceeding our $100 million cross-sell revenue target by 2027. - -

3. Market Technology Revenue Growth
   Q: What's the outlook for Market Tech revenue growth?
   A: Despite a tough comparison due to $27 million in professional services fees last year, we see strong momentum with several new sales and 13 upsells this year. Clients are modernizing their markets and adopting our cloud-ready solutions, particularly in clearing and trading. We expect to return to growth in professional services revenue as the year-over-year comparison eases in Q4. -

4. Adenza Revenue Expectations
   Q: What are the revenue growth expectations for Adenza?
   A: We anticipate mid-teens ARR growth and low to mid-teens revenue growth for Adenza businesses, including AxiomSL and Calypso. Sales momentum is strong, and the integration is progressing well, aligning with our medium-term outlook. -

5. IPO Market Outlook
   Q: What's the outlook for the IPO market?
   A: We're seeing early signs of recovery with 33 IPOs in the quarter and a 75% win rate year-to-date. There's pent-up demand, but we don't expect significant activity for the rest of the year due to other market factors. We anticipate more momentum starting in Q2 next year as conditions improve. -

6. International Expansion of AxiomSL
   Q: How is AxiomSL expanding internationally?
   A: AxiomSL is entering new markets like India and the Philippines by leveraging Nasdaq's strong presence. We're converting clients from using our solutions for international reporting to also covering domestic reporting, potentially opening significant opportunities, especially in India. In Latin America, we have over 10 market operators and about 50 bank and broker-dealer clients, reflecting our solid presence built over the past decade. -

7. Impact of SEC Tick Rule
   Q: How does the new SEC tick rule affect Nasdaq?
   A: While we don't anticipate a material impact on our revenues, we have concerns about the reduction of access fees by two-thirds. This change may hinder our ability to incentivize liquidity providers in lit markets, potentially widening spreads and negatively affecting investors. We're assessing the implications to determine our next steps. -

8. Pricing and Upgrades in Fintech Products
   Q: Are there opportunities to enhance pricing with new upgrades?
   A: We generally engage in 3-5 year contracts with CPI escalation clauses. While we're not explicitly charging for new AI features like the entity research Copilot, which is used by half of our clients, these enhancements add value and support pricing discussions upon renewal. Additionally, we offer paid modules like the sustainability lens in IR Insight, providing upsell opportunities. -

9. Renewal Environment
   Q: Any issues with client renewals?
   A: The renewal environment remains strong with high retention rates across our fintech solutions. A specific delay in a Calypso client renewal is due to the client's timing preferences and does not reflect any broader trend. Our mission-critical technologies and active client engagement support a positive renewal outlook. -

10. Index Options Business Growth
    Q: How is the index options business performing?
    A: The index options business is growing nicely, though it remains a small revenue contributor. We're marketing to retail platforms and international investors, aiming to increase its contribution significantly. Inclusion in ETFs and engagement with online broker platforms present growth opportunities. -

Annual guidance for FY 2024:

• Capital Access Platforms Revenue Growth: Expected to exceed medium-term growth outlook range, with Index above its range, Data flat year-on-year, and Workflow and Insights below its range - (no change from prior guidance: expected to exceed medium-term outlook with Index above its range, Workflow & Insights below, and Data & Listings flat - )
• Non-GAAP Expense Guidance: $2.150B to $2.180B - (no change from $2.145B to $2.185B - )
• Non-GAAP Tax Rate: 23.5% to 24.5% - (lowered from 24.5% to 26.5% - )
• Capital Market Technology: Towards the low end of medium-term growth outlook - (lowered from in line with medium-term outlook - )
• AxiomSL and Calypso Growth: Within medium-term outlook - (no prior guidance)
• Financial Crime Management Technology: Below 23% revenue growth - (no prior guidance)
• Regulatory Technology: Towards the low end of medium-term growth outlook - (no prior guidance)
• Cross-Sell Revenue Target: Exceed $100 million by end of 2027 - (no prior guidance)