Nasdaq (NDAQ) Q3 Earnings call transcript Oct 24, 2024
2min read In a recent earnings call, Nasdaq Inc. showcased a robust third-quarter performance, highlighting a 10% year-over-year growth in net revenues and solutions revenue, marking the fourth consecutive quarter of double-digit solutions growth. The company's total annualized recurring revenue (ARR) reached $2.7 billion, with a strong operating margin of 54%. This growth was driven by the successful integration of AxiomSL and Calypso, enabling the action of over 80% of net expense synergies and strong free cash flow generation.
Macroeconomic Environment and Strategic Priorities
The macroeconomic environment is favorable for Nasdaq, with major central banks pivoting to lower interest rates to combat slowing economic growth. This has led to a stabilization of the European economy and a positive outlook for the U.S. market, which is currently trending towards a soft landing with additional rate cuts expected in the coming quarters. The constructive economic trends and outlook provide a positive backdrop for sustained trading activity across Nasdaq's markets and a potential rebound in the global IPO environment in 2025.
Nasdaq is well-positioned to deliver sustainable and durable growth across its diversified platforms. The company's strategic priorities include integrate, innovate, and accelerate, which are driving its growth and competitive advantage. The integration of AxiomSL and Calypso has been successful, with over 80% of net expense synergies achieved and a strong free cash flow generation that has allowed for deleveraging. This has resulted in a 3.8x leverage ratio in the quarter.
Business Highlights
Nasdaq's Capital Access Platforms division delivered 2% ARR growth and 9% revenue growth, fueled by strong index performance and a record 500th listing switch to Nasdaq from its primary listing competitor. The division celebrated a major milestone with the listing of 5 of the top 10 largest IPOs in the first 3 quarters of the year, including the year's largest listing to date, Lineage. The Financial Technology division also showed strong performance, with 14% ARR growth, driven by the debut of Calypso as the 1 provider for managed services and financial crime on Chartis Research's industry rankings.
Financial Performance and Outlook
Nasdaq reported net revenue of $1.2 billion, up 10%, with solutions revenue of $904 million, also up 10%. The company's operating margin increased to 54%, with an EBITDA margin of 56%, each up 2 percentage points. Looking ahead, Nasdaq expects to exceed its medium-term growth outlook, with the Index division expected to come in above its range, Data and essentially flat year-on-year, and Workflow and Insights expected to come in below its range.
Conclusion
Nasdaq's third-quarter performance and strategic initiatives underscore its strong position in the market. The successful integration of AxiomSL and Calypso, coupled with its diversified business model, has set the stage for sustainable growth. With a focus on innovation and expansion, Nasdaq is well-equipped to capitalize on the opportunities in the global financial markets, particularly in the areas of regulatory technology, data services, and indexing. As Nasdaq continues to execute on its strategic priorities and One Nasdaq strategy, it is poised for continued success and value creation for its clients, shareholders, and employees.
