NEW YORK, Oct. 18, 2023 — Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the third quarter of 2023.
-- Third quarter 2023 net revenues1 increased 6% compared to the third
quarter of 2022. Solutions Businesses2 revenues increased 9%, with
organic growth3 of 8%.
-- Annualized Recurring Revenue (ARR)4 increased 6% compared to the third
quarter of 2022. Annualized SaaS revenues increased 11% and represented
37% of ARR.
-- Anti-Financial Crime revenue increased 21% compared to the third quarter
of 2022. Growth reflects continued Verafin adoption by small and medium
banks, an expansion with an existing Tier 2 financial institution, and
Surveillance solutions customer growth including Tier 3 banks and retail
brokers.
-- Third quarter 2023 GAAP diluted earnings per share increased 2% compared
to the third quarter of 2022. Third quarter 2023 non-GAAP3 diluted
earnings per share increased 4% compared to the third quarter of 2022.
-- Nasdaq generated more than $1.6 billion of free cash flow over the
trailing twelve month period.
-- The company returned $108 million to shareholders in the third quarter of
2023 through dividends.
Third Quarter 2023 Highlights
% Change Organic % Change
(US$ millions, except per share) 3Q23 (YoY) (YoY)
--------------------------------- ------ -------- ----------------
Solutions Businesses Revenues $694 9% 8%
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Trading Services Net Revenues $236 (1)% (2)%
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Net Revenues* $940 6% 5%
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ARR $2,081 6%
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GAAP Diluted EPS $0.60 2%
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Non-GAAP Diluted EPS $0.71 4%
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(*Net revenues include Other revenues of $10 million in the third quarter of 2023 and $12 million in the third quarter of 2022. Other revenues include revenues associated with the European power trading and clearing business which is pending sale.)
Adena Friedman, Chair and CEO said, “Our third quarter 2023 results reflect Nasdaq’s solid execution amid a continued dynamic economic and capital markets backdrop. We experienced some improvement in the IPO environment by welcoming marquee IPOs, we continued to broaden our Anti-Financial Crime clientele, and we introduced new innovations to our products and services.
We have completed the antitrust review process for our announced acquisition of Adenza and we expect to close the transaction in the fourth quarter of 2023. With Adenza, we are excited to deepen our client relationships as we expand our role as a leading financial technology provider to the global financial system.”
Ann Dennison, Executive Vice President and CFO said, “We delivered broad-based revenue growth in the third quarter and had particularly strong performance in our Index and Anti-Financial Crime businesses.
With our continued strong cash flows, we are fully prepared to execute our capital plan to pay down debt, continue to increase our dividend, and repurchase shares in the coming quarters to achieve our financial goals with the announced Adenza acquisition.”
FINANCIAL REVIEW
-- Third quarter 2023 net revenues were $940 million, an increase of $50
million, or 6%, from $890 million in the prior year period. Net revenues
reflected a $47 million, or 5%, positive impact from organic growth,
including positive contributions from all Solutions Businesses and a $4
million increase from the impact of changes in FX rates, partially offset
by a $1 million decrease from the impact of a divestiture.
-- Solutions Businesses revenues were $694 million in the third quarter of
2023, an increase of $55 million, or 9% with organic growth of 8%. ARR,
which reflects the majority of the Solutions Businesses revenues and
excludes the AUM and transaction licensing components of our Index
business, increased 6% from the prior year period.
-- Trading Services net revenues were $236 million in the third quarter of
2023, a decrease of $3 million, or 1%. The decrease reflects a 2% organic
decline, partially offset by a positive impact from changes in FX rates.
-- Third quarter 2023 GAAP operating expenses increased $17 million, or 3%,
versus the prior year period. The year-over-year increase primarily
reflects higher restructuring expenses associated with the launch of our
divisional alignment program in the fourth quarter of 2022, higher
employee compensation costs, and an increase in computer operations and
data expense partially offset by lower general and administrative expense
and a decline in merger and strategic initiatives costs.
-- Third quarter 2023 non-GAAP operating expenses increased $32 million, or
8% versus the prior year period. The increase primarily reflects
increased expenses associated with the continued investment in our people
and our businesses to drive long term growth, higher computer operations
and data costs and increased general and administrative expense.
-- The company returned $108 million to shareholders through dividends, and
did not repurchase any shares in the third quarter of 2023. As of
September 30, 2023, there was $2.0 billion remaining under the board
authorized share repurchase program, following an approval by Nasdaq's
board of directors in September 2023 to increase the authorized amount of
the share repurchase program to an aggregate of $2.0 billion.
2023 EXPENSE AND TAX GUIDANCE UPDATE(5)
-- The company is updating its 2023 non-GAAP operating expense guidance to a
range of $1,785 million to $1,805 million and its 2023 non-GAAP tax rate
guidance to be in the range of 24.5% to 25.5%.
STRATEGIC AND BUSINESS UPDATES
-- Nasdaq made strong progress in completing the acquisition of Adenza.
Nasdaq reached an important milestone in the acquisition of Adenza with
the completion of the antitrust review process for the transaction.
Nasdaq expects to close the deal in the fourth quarter of 2023 as it
expands its capabilities in solving its customers largest challenges.
-- Nasdaq expanded its portfolio of market-based solutions to support
clients' ability to execute on their environmental sustainability
strategies. Nasdaq launched Nasdaq Metrio and Nasdaq eVestment ESG
Analytics, designed to enable greater visibility in environmental
sustainability metrics and disclosure for corporates, asset owners, and
asset managers. Nasdaq's majority-owned Puro.earth platform, a leading
platform for engineered carbon removal, announced a partnership with
Xpansiv, in which Puro.earth's CO2 removal certificates (CORCs) would be
listed for trading on Xpansiv's spot marketplace , CBL.
-- Anti-Financial Crime achieves continued strong revenue growth. Nasdaq is
partnering with a growing number of financial institutions to manage the
increasing risks and complexity of financial crime. Surveillance
solutions delivered solid growth in new Trade Surveillance customers
while Verafin signed 47 new small and medium customers and had an
expansion with an existing Tier 2 customer who adopted our complex
investigations solution.
-- Index performance a primary contributor to top-line growth in the
quarter. Index revenues increased 15% year-over-year and reflect growth
in average AUM in products linked to Nasdaq-100 Indexes and options-based
strategies. AUM growth resulted from the combination of strong market
performance and $24 billion in net inflows in the trailing-twelve-month
period, including $5 billion in net inflows in the third quarter.
-- Nasdaq achieved a new record for third quarter U.S. cash equities closing
cross volumes. U.S. cash equities revenue and revenue capture benefited
from third quarter closing cross volumes, including a special rebalance
of Nasdaq-100 that had approximately 500 million shares and $70 billion
notional traded.
-- Nasdaq maintained its listings leadership in the U.S and launched a
revamped MarketSite. Nasdaq led U.S. exchanges for operating company IPOs
with a 84% total win rate during the first nine months of 2023 and has a
growing pipeline of companies on file to list on Nasdaq. Year to date
through the third quarter, four of the five largest U.S. operating
company IPOs by capital raised chose to list with Nasdaq. Seven companies
switched to Nasdaq in the third quarter, including Roper Technologies and
DoorDash. Nasdaq hosted these leading company listing events at its newly
revamped MarketSite in Times Square. The new space includes a
state-of-the-art broadcast and production studio and a dedicated IPO
Center for first trade celebrations.
-- Nasdaq continued its innovation in AI and received regulatory approval
for its first AI-powered order type . In September, Nasdaq received SEC
approval to launch Dynamic Midpoint Extended Life Order (M-ELO). Dynamic
M-ELO uses an AI model to monitor real-time changes to holding periods
for M-ELO participants and in testing has achieved an over 30%