GuruFocus -
- Net Revenue: $1.2 billion, up 10% year-over-year.
- Solutions Revenue: $904 million, up 10% year-over-year.
- Annualized Recurring Revenue (ARR): Grew 8% to $2.7 billion.
- Operating Margin: Increased to 54%.
- Expenses: Increased 5% in the quarter.
- Free Cash Flow: Approximately $300 million in the third quarter.
- Leverage Ratio: Reduced to 3.8 times.
- Capital Access Platforms Revenue: $501 million, up 9%.
- Index Revenue: Up 26% in the third quarter.
- Financial Technology Revenue: $403 million, up 10%.
- Market Services Revenue: $266 million, up 13%.
- Dividend Per Share: $0.24, representing a 35% annualized payout ratio.
- Share Repurchase: 1.4 million shares for $88 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nasdaq Inc (NASDAQ:NDAQ) reported a strong quarter with 10% year-over-year growth in both net revenues and solutions revenue.
- The company achieved its fourth consecutive quarter of double-digit solutions growth.
- Nasdaq Inc (NASDAQ:NDAQ) successfully integrated AxiomSL and Calypso, achieving over 80% of its net expense synergies target.
- The Financial Technology division saw ARR growth of 14%, with significant contributions from financial crime management technology and market technology.
- Nasdaq Inc (NASDAQ:NDAQ) experienced a record third quarter in Market Services with 13% revenue growth, driven by higher volumes in US and European cash equities and options.
- Listings revenue declined due to lower listings activity and prior-year delistings.
- The financial client management technology growth was below the medium-term outlook due to timing of deliveries and professional services variability.
- Professional services fees in the Capital Market Technology division declined, impacting revenue growth.
- The IPO market remains subdued, with expectations for more momentum not until Q2 2025 and beyond.
- The SEC's tick size rule could potentially impact market dynamics, with concerns about incentivizing lit orders.
A: The difference is mainly due to professional services. As we move upmarket into Tier 1 and Tier 2 clients, there is more implementation revenue variability. We remain confident in our mid-20% medium-term revenue outlook for financial management technology, with strong demand from Tier 1 and Tier 2 banks.
Q: Regarding Verafin, you signed another Tier 1 client. Is this the same client announced last quarter, and are you upselling existing Tier 1 clients like Citi?
A: Yes, it is the same client, starting with payment fraud. We are actively working to upsell Tier 1 and Tier 2 clients, and have already upsold one Tier 2 client. Clients are happy with the implementations, which aids in further sales discussions.
Q: Can you elaborate on the cross-sales campaigns with Axiom and Calypso, and what success might look like?
A: Year to date, we've had seven cross-sells across the fintech division. We are launching new campaigns, such as cross-selling the Nasdaq Risk platform to Calypso clients and AxiomSL's global shareholder disclosures to broker-dealer and Calypso clients. These campaigns are progressing well.
Q: On the timing of onboarding new clients, is there a difference between new clients and cross-sells? Also, any insights on the IPO market and potential election impacts?
A: Implementation times vary; medium banks take 6-12 months, while Tier 1 and Tier 2 banks take 9-12 months. Upsells may be quicker. The IPO market shows green shoots, with 33 IPOs in the quarter and a 75% win rate. We expect more momentum in Q2 2025 and beyond.
Q: Regarding the international opportunity for Axiom, can you frame the market share or penetration rate in new markets like India and the Philippines? Are you displacing competitors or in-house solutions?
A: AxiomSL is expanding in regions where Nasdaq has a strong presence, like the Philippines and India, often upselling existing clients for domestic reporting. In Latin America, we have a strong presence with over 10 market operators and 50 bank clients. We are often displacing in-house solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.