Nasdaq, Inc.

Good day and thank you for standing by. Welcome to the NASDAQ fourth quarter 2021 results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star then one on your telephone keypad. Please be advised today's conference may be recorded. If you require operator assistance during the call, please press star then zero. I'd now like to hand the conference over to your host today, Ed Dittmeier, Senior Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss NASDAQ's fourth quarter and full year 2021 financial results. On the line are Adina Friedman, our CEO, Ann Dennison, our CFO, John Zecca, our Chief Legal and Regulatory Officer, and other members of the management team. After prepared remarks, we'll open up the line to Q&A. This press release and presentation are on our website. We intend to use the website as a means of disclosing material, nonpublic information, and complying with disclosure obligations under SEC Regulation FD. I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections and information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC. I'll now turn the call over to Adina.

Thank you, Ed, and good morning, everyone. Thank you for joining us. Let me first note how proud I am of the resilience of NASDAQ's business, the nimbleness and dedication of our global team, and the trusted relationships we have with our clients. We are certainly familiar with how unpredictable today's operating environment can be as we continue to navigate a dynamic pandemic and economic landscape. Before I turn to our performance, I would briefly like to address the current market environment. While the markets have experienced increased levels of volatility since the start of the year, we maintain a positive overall economic outlook going into 2022 as the underlying economy continues to have the ingredients for continued growth. Notably, consumer demand for products and services remains high. The ongoing digital transformation of industry continues to drive long-term demand for advanced software and other technology and market innovations, and the resulting employment environment is very strong. That said, there are several factors driving the current market volatility. Notably, due to the cyclical and structural issues, we are entering 2022 with a tight labor market and supply chain challenges, both of which are contributing to inflationary pressures. Those pressures are then creating uncertainty around the pace and rate of monetary policy adjustments. Additionally, there are broader geopolitical challenges and continued pandemic impacts that are adding to the macro uncertainty. So while our overall outlook remains positive, we expect the confluence of market-driven factors and macroeconomic and political factors to continue to drive volatility over the near term. Within that context, we also remain confident in the strength and resilience of our business. For example, we've seen significantly higher trading volumes, and within the last week, the industry processed and NASDAQ processed a new record number of messages in a single trading day. We continue to have a healthy pipeline of companies expecting to tap the public markets during 2022. In fact, we have more than double the number of S1s on file with the SEC compared to the prior year period, although market volatility could cause some delays to IPO timing, something we're monitoring closely. And in our index business, we expect index asset values to experience some impact associated with various market levels and investor appetite for products tracking our indexes, but also the benefit from higher futures trading volume due to the use of our core indexes in market hedging strategies. The diversification of our business over the past number of years has created a flywheel effect between our foundational US and European marketplaces and the technology solutions we deliver to thousands of clients across public companies, investment managers, and banks, as well as the 100-plus market infrastructure operators, all of whom rely on our mission-critical software to navigate the financial system successfully. This is especially the case during these periods of heightened market turbulence. We help asset owners rebalance their portfolios and manage asset allocation decisions. We enable banks and brokers to prevent financial crime while handling increased investor activity. We provide critical investor relations insights to corporate clients to understand changes in their investor base. And we empower exchanges around the world to handle the market volumes and volatility. NASDAQ is there as a critical partner across the financial markets. And our business has demonstrated time and again that we can achieve success in the face of these types of backdrops. I'm confident this time will be no different. Let's now turn to our results. My remarks today will focus on the following areas. NASDAQ's full year 2021 and fourth quarter 2021 financial and business performance. The progress we've made to drive NASDAQ forward along our strategic direction and an update on NASDAQ's cloud journey, as well as our ambitions for 2022 and beyond. I'll then turn the call over to Anne, who will provide further details about our results, as well as give updates on our guidance, capital deployment, and sustainability efforts before we move to Q&A. Let's begin with our results. I'm very pleased to report NASDAQ's strong financial performance for the fourth quarter and full year of 2021. First, on the fourth quarter, we achieved $885 million in net revenues, a 12% increase compared to the prior year period. while non-GAAP earnings per share of $1.93 rose 21% compared to the fourth quarter of 2020. For the full year of 2021, net revenues of $3.4 billion increased 18% from the prior year. We achieved 14% organic growth with double-digit contributions from both the solution segments and market services. Our annualized recurring revenue, or ARR, ended the year at $1.87 billion, an increase of 19% year-over-year. This underscores our continued progress across key secular growth opportunities, including building out our anti-financial crime technology, as well as our analytics and workflow solutions for asset owners. Within our recurring revenue businesses, we see some of our best performances from our SaaS-based solutions. Annualized SaaS revenues totaled $640 million in the fourth quarter of 2021, representing 34% of total company ARR, up from 28% in the fourth quarter of 2020. The 43% year-over-year increase in annualized SaaS revenues primarily reflects the inclusion of Verifin, as well as strong organic growth in our market surveillance and investment analytics businesses. Because of our 2021 performance, we enter 2022 with solid momentum, And we intend to lean into our success as we operate our advanced client-led technology solutions and our foundational marketplace businesses diligently in the months ahead. Now I'm going to turn to specific highlights from our businesses, focusing mainly on fourth quarter results. Our solution segments businesses delivered combined total revenues of $581 million during the fourth quarter, a 19% increase from the prior year period. driven most notably by standout performances from index and listing services, exciting momentum in our investment analytics offerings, and strong performance in our anti-financial crime offerings, including the impact of the acquisition of Verifin. In our investment intelligence segment, we delivered $288 million in total net revenues in the fourth quarter, an 18% increase from the prior year period, with contributions from across the business. We continue to invest in product innovation to meet the evolving needs of our clients. During the quarter, we brought to market several new products that are seeing encouraging initial demand. Let me highlight a few. Data Fabric, which is our new enhanced cloud-based offering, is a powerful new feature inside of Nasdaq DataLink that allows clients to bring their own data to the platform and have it securely managed as a service. The early traction we observed with Data Fabric is encouraging, and this offering is quickly becoming a critical part of our clients' investment workflows. And in our index franchise, we saw demand grow for the new offerings in our expanded NASDAQ 100-related and ESG-focused indexes, including two new sustainability-focused ETFs tracking the NASDAQ 100 ESG and the NASDAQ NextGen 100 ESG indexes. In total, 61 ETFs tracking NASDAQ indexes launched in 2021, accumulating $2.9 billion in assets through the end of the fourth quarter. Notably, 67% of ETF launches in the year were outside the U.S., demonstrating the strong international demand for NASDAQ's index franchise. Turning to investment analytics, building upon our successful partnerships with leading investment consultants that were announced during 2021, NASDAQ's Asset Owner Solutions now distributes investment research and insights from Mercer and Aon, among others, to our growing community of asset owners and asset managers on the investment platform. This is just one of several ways we're increasing the value of investment and the broader asset owner solutions offering to our clients. And I'm incredibly pleased to see the tremendous sales growth from new clients reported by investment and Syllabus for the full year of 2021. Combined new sales in 2021 totaled $26 million, an increase of 41% over the prior year, driven in large part by 79% new sales growth in the asset owner business. And Sylovis' new sales grew 145% across all applying groups. Turning next to our market technology segment, we delivered $131 million in total net revenues in the fourth quarter, a 24% increase from the prior year period. This was primarily driven by the inclusion of revenues from Verifin in our results. More broadly, we saw continued growth in demand for our SaaS-based offerings, both fraud detection and anti-money laundering solutions, which we call Framel, and from the market and trade surveillance areas of our anti-financial crime technology, as well as a growing number of market operators utilizing our cloud-native marketplace solutions. Over the course of 2021, I'm pleased to report that in addition to 197 new banks, credit unions, and fintech companies that adopted Verifin, our other market technology businesses welcomed 31 new customers, of which 26 chose our SaaS solutions. Though market technology overall had a transformational year in 2021, in particular as we grow NASDAQ into an anti-financial crime leader with related shifts in revenue composition, We have an equal focus on catalyzing a recovery in the growth of our solutions business for our market infrastructure operators. Revenues recognized in that business decreased in the fourth quarter on a year-over-year basis due to factors including lower non-recurring professional services revenue caused in part by pandemic-related logistical challenge that we've previously disclosed. However, we're seeing some encouraging trends that bring us incrementally closer to a positive inflection in revenue. First, we're making progress on some of the larger, more complex implementations that have been more exposed to the pandemic-related challenges of travel and restrictions to on-site collaboration. In particular, two key projects are approaching their first go-live and acceptance phases in the first quarter of 2022. And in a third, the collaboration with the client resulted in its scope and timeline adjusted to reflect both expanding customer needs balanced against evolving delivery timeline realities. Second, in the fourth quarter of 2021, we achieved strong new order intake of $142 million, capping a record full year of $378 million, excluding Verifin, which constitutes a very substantial 58% increase in new order intake from a 2020 that was highly impacted by the onset of the pandemic. Further, we have seen a substantial uptick in early stage discussions with clients who want to learn more about our progress bringing the benefits of the cloud and managed services to their own markets. We are excited to see how that can play out, not only in driving further growth in new contracts down the line, but also because SaaS and managed service projects entail simpler delivery processes versus our legacy on-premises installation. Obviously, the duration of the pandemic has exceeded everyone's expectations. However, we are encouraged by the growing interest in our next-gen capabilities and the future opportunities to increase the way we serve market infrastructure operators to complement the strong growth that we see today in our larger anti-financial crime offerings. Moving to our foundational marketplace businesses, our market services segment delivered net revenues of $303 million during the fourth quarter of 2021, an increase of 5% from the prior year period. We maintained our strong competitive performance amidst a dynamic trading backdrop as the retail and institutional investment communities found new opportunities across equities and options to drive their strategies. Our U.S. options business set a new annual record for trading volumes in 2021, and we are starting 2022 with new records being set in volumes and message traffic. In early December, we announced our decision to begin the migration of our options markets to the cloud beginning in 2022, starting with our NASDAQ MRX options market. This innovation in the infrastructure that underpins our markets will create more elasticity in our capacity while maintaining or improving the performance of our clients that our clients have come to expect from us. This will be made possible with the build out of the broader cloud infrastructure within the Carteret data center supported by AWS and our local partner Equinix. I will cover this topic in more details in a few minutes. Turning to US cash equities, the increase of our volumes as compared to the fourth quarter of 2020 mirrored the industry volume increase at approximately 3%. And in the Nordic markets, we continue to experience strong trading performance, including a matched equity market share among lit venues of over 75%. The European equities value traded per day also increased 23% in the fourth quarter versus the prior year. Finally, our corporate platform segment delivered net revenues of $162 million in the fourth quarter, a 17% increase driven primarily by our continued leadership in new listings across our US and European markets, as well as growth and demand for our complimentary IR and ESG services. For the ninth consecutive year, NASDAQ led U.S. exchanges for IPOs in 2021 with 752, capitalizing on one of the strongest years for new issuances over the last two decades, and with a 73% overall IPO win rate. NASDAQ also ranked number one in the U.S. in terms of IPO capital raised for the third quarter with... Oh, I'm sorry, for the third year. So let me read that again. NASDAQ also ranked number one in the U.S. in terms of IPO capital raised for the third year with $181 billion, and listed nine of the top 10 U.S.-based IPOs in terms of proceeds raised. We also had 33 new companies switch their corporate listings to NASDAQ in 2021, including Honeywell, Palo Alto Networks, and Baker Hughes, representing an aggregate $361 billion in global equity market capitalization. The total market value of all companies transferring to NASDAQ in the last decade has exceeded $1.7 trillion. In Europe, our Nordic, Baltic, and First North exchanges also experienced a record year for new listings, with 207 companies raising over $15 billion. And for the first time ever, NASDAQ Stockholm facilitated more capital raised than any other country in the EU, while our combined Nordic exchanges had more IPOs than any other market operator in Europe. Demand for our IR intelligence and governance solutions drove 4% year-over-year revenue growth for the fourth quarter within the IR and ESG business. We continue to see deepened client engagement across NASDAQ IR Insight and Advisory and have also invested in the expansion of our ESG advisory and reporting services to corporate clients. We now provide those services in our portfolio solutions offered to companies who list on our U.S. market. Next, I'd like to provide an update on the important progress we made in 2021 to advance our cloud journey and how these milestones support our broader strategic vision to unlock potential growth, growth potential, sorry, and accelerate our transition to a SaaS business model in our technology, data, and investment analytics businesses. Our move to the cloud began over a decade ago, and we have used its innovation capabilities to deliver client-driven solutions while evolving our own infrastructure for a digital future. In fact, a wide range of NASDAQ solutions are already in the cloud today. We've also advanced our market ecosystem by migrating several of our market surrounding systems that have greatly benefited from the hyperscaling that the cloud affords us to manage elevated volumes in the world's markets. We were therefore very excited to announce in December a multi-year partnership with Amazon Web Services to build the next generation of cloud-enabled infrastructure for the world's capital markets. committing to move one of our markets to the cloud this year. The partnership with AWS will accelerate the migration of our North American markets to the cloud through a phased approach. Specifically this year, we plan to move our MRX options market to our next generation trading technology, and as part of that migration, we also plan to move MRX into AWS's cloud environment within the Carteret data center. The new edge computing solutions that we co-designed with AWS may also be used by other market infrastructure operators and market participants to move their trading systems to the cloud, and we look forward to engaging with our market technology clients on this future-oriented approach to managing market infrastructure. In addition, the partnership will include opportunities to explore new ways to leverage AWS's cloud capabilities across NASDAQ's anti-financial crime data and investment analytics, as well as our market infrastructure software businesses. Now, as I mentioned at the beginning of my remarks today, NASDAQ made notable progress against our broader strategic journey in 2021. As we continue that path, we would like to share our core ambitions and execution priorities for 2022 and beyond, which we detail on page 10 of the presentation. First, we want to reinforce a culture of inclusive growth and prosperity within our own organization. We want to continue increasing collaboration across our entire enterprise to deliver more through our deep client relationships, to further increase our value proposition as an employer, and to continue to advance our sustainability practices. Second, we want to advance our client-first approach to serving the financial ecosystem. We will continue to deliver our core marketplace solutions with superior client service, utmost integrity, and technological excellence. We will also continue to listen to our clients' needs as we expand our offerings in index, investment analytics, anti-financial crime, and ESG solutions. Third, we are accelerating our technology modernization. Our AWS partnership and how we're marching forward on the cloud is an incredible example of this. But we have additional opportunities to increasingly leverage machine and learning within our offerings as well as our agile development within more of our innovation areas. We look forward to updating you on our progress on these ambitions in the quarters to come. As I wrap up, I will summarize by saying our fourth quarter produced solid results for NASDAQ, completing a very successful 2021 for our company. We remain relentlessly focused on advancing our strategic position as a technology company that is advancing the financial system as we move forward into 2022, capitalizing on the strong momentum generated last year. With that, I'll now turn the call over to Anne to review our financial details.