Nasdaq, Inc.

Good day, and thank you for standing by. Welcome to the NASDAQ second quarter 2022 results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ed Dittmeier, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss NASDAQ's second quarter 2022 financial results. On the line are Idina Friedman, our CEO, Anne Dennison, our CFO, John Zecca, our Chief Legal, Risk, and Regulatory Officer, and other members of the management team. After prepared remarks, we'll open up the line to Q&A. The 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. 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 will now turn the call over to Adina.

Thank you, Ed, and good morning, everyone, and thank you for joining us. My remarks today will focus on NASDAQ's second quarter 2022 financial and business performance, as well as the progress we've made to drive forward our strategic priorities for the year. I'd like to begin by acknowledging that we continue to find ourselves amid an uncertain macroeconomic and geopolitical environment. Yet while markets, investors, and corporate clients all experienced increased levels of volatility during the second quarter, NASDAQ's strategic vision and our ability to execute on it remains clear. The strength and quality of our businesses puts us in an excellent position to navigate these dynamics. Our record net revenue and non-GAAP EPS results demonstrate our ability to capture new opportunities in different operating environments, even as we continue to strengthen our positioning for longer-term growth through focused investments. I'm proud of our team's focus on delivering consistent results to our clients against this dynamic backdrop. Let's turn to our results. I'm very pleased to report NASDAQ's strong financial performance for the second quarter of 2022. We achieved a record $893 million in net revenues, a 6% increase compared to the prior year period, and 9% on an organic basis, excluding the impacts and changes in FX rates and acquisitions and divestitures. Our total annualized recurring revenue, or ARR, increased 9% to $1.97 billion. Annualized SAS revenues totaled $679 million in the second quarter of 2022, growing at an even faster rate of 12%, which reflects strong demand for our anti-financial crime solutions and investment analytics offerings. SAS revenue now comprises 35% of total company ARR, a new high. The consistent growth we're seeing in our recurring revenue segments provides a powerful starting point for our overall performance, but we also delivered strong results across with our index licensing and trading revenues. Turning next to specific highlights from our business segments, our solution segments delivered combined total revenue of $582 million during the second quarter, a 10% increase from the prior year period, or 12% excluding the impact of FX. The growth was driven from activity across several of our businesses, including our index and analytics offerings, the expansion of our listed issuer base, our anti-financial crime offerings, as well as strong demand for our IR and ESG services. In our investment intelligence segment, we delivered $283 million in total revenue in the second quarter, an 8% overall increase from the prior year period, and 10% excluding the impact of FX, with growth contributions from across the businesses during the quarter. Revenue in our market data business increased by 1% from the prior year period and 3% excluding the impact of FX, primarily due to an increase in proprietary data revenues from international clients. In our index business, we saw revenue growth of $17 million, or 16%, versus the prior year period, driven by positive net flows of $71 billion over the last 12 months, including $25 billion of inflows during the especially challenging beta environment experienced in the first half of 2022. We also saw especially strong results from licensed futures activities, which, together with inflows, more than offset the negative impact of market data. And in our analytics business, revenues grew 8% from the prior year period and 10%, excluding the impact of FX. Our flagship investment analytics offerings saw continued strong user adoption, both across our asset owners and asset managers, and drove annualized SaaS revenues for the investment intelligence segment to increase 12% versus the prior year period to $215 million. Turning next to our market technology segment, we delivered $131 million in total revenues in the second quarter, a 12% increase in the prior year period. This is primarily driven by continued growth in our broader anti-financial crime technology solutions business. Our anti-financial crime technology business had a strong second quarter with a 29% increase in revenues versus the prior year period. Growth was driven by sales in our fraud and anti-money laundering, or what we call FRAML solutions, as well as the impact of the Verifin acquisition deferred revenue adjustment recorded in the prior year period. We welcomed 37 new clients during the quarter. We continue to gain momentum with our efforts to expand Verifin's presence with larger Tier 1 and Tier 2 banks through our proof-of-concept trials. These are active evaluations within a prospective client's compliance infrastructures. While this diligence process results in a relatively long technology purchasing cycle, it is an important step to drive our success in extending our solutions to this area of the market. Moving next to our market infrastructure technology business, we generated $56 million in net revenues during the second quarter. Importantly, we made continued progress on the deliverables within a group of particularly large client projects that we have discussed in recent quarters, reflecting our increased ability to work with clients on site. Specifically, we completed phase one deliveries for all four of our largest implementations by the end of the quarter. While some of the projects have follow-on phases, we are pleased to have met these important milestones so far this year. Market infrastructure technology also had some exciting new relationships that were announced during the period. In May, XP, a provider of financial products and services in Brazil, announced the development of their new trading platform for digital assets, which is leveraging NASDAQ's next-gen technology. deployed as a SaaS solution in the cloud. In June, Climate Impact X, a Singapore-based marketplace for carbon credits, announced their decision to leverage NASDAQ's SaaS-based marketplace services platform to power their new spot exchange for carbon credits, which is slated for launch in early 2023. As I noted earlier, we are actively engaging in person with our clients again, and the team recently welcomed over 100 officials from 50 global marketplaces to our annual Technology of the Future industry conference. The overall sentiment from clients there was incredibly encouraging, particularly as the market infrastructure operators see the advantages that our technology, including our cloud deployed solutions, can bring to their respective customers as they contemplate shifts in their operating models and look for new ways to differentiate their offerings. We remain confident in our ability to improve our organic growth through the remainder of 2022 and into 2023. Moving to our foundational marketplace businesses, our market services segments delivered net revenues of $310 million during the second quarter. We maximized opportunities presented by robust levels of activity through strong market share and consistent pricing strategies. The share volume traded on NASDAQ exchanges grew by 22% compared to the prior year quarter, and trade management services revenues hit a new quarterly high of $87 million, up 7% versus the prior year, reflecting an increase in demand for connectivity and infrastructure services. At the end of June, NASDAQ's closing cross set a record for the number of shares traded during the 2022 Russell U.S. Index's reconstitution. 3.3 billion shares, representing nearly $64 billion, were executed in two seconds across NASDAQ-listed securities, a 40% increase in shares crossed from last year's event. I'm incredibly proud of our market services team on achieving yet this important milestone. The new closing cross-record is a testament to the investments we've made in our technology and a result of the trust the team has worked diligently to build with all investors, including through some of the most volatile market periods on record. NASDAQ's Nordic equities markets also saw strong volumes as well. The value of shares traded on NASDAQ's Nordic and Baltic markets for the first half of 2022 was the second highest since 2008. Finally, our corporate platform segment delivered revenue of $168 million in the second quarter, a 13% increase from the prior year period, driven primarily by our expanded listed issuer bases across both our U.S. and Nordic listing franchises, as well as growth and demand for our IR and ESG services. Revenues in our IR and ESG services business increased 9%, underscoring the strong demand for our consultative and technology-based solutions during the period. The number of corporate clients using NASDAQ's IR and ESG services solutions increased 6% from the prior year period, while we've also been expanding relationships of existing clients. In addition, during the second quarter, we acquired METRIO, a provider of corporate sustainability, sustainability data, analytics, and reporting services to corporates. METRIO's SaaS-based platform is complementary to our existing suite of ESG reporting solutions and will accelerate our ability to support corporate clients and their expanding sustainability management and reporting needs. Our growing expertise in all components of E, S, and G enable us to help our corporate clients confidently navigate the complexity of the modern capital markets, including managing their investor relationships more successfully. Turning to our listing services business, revenue increased 15% to $107 million as the number of NASDAQ-listed corporate issuers, excluding SPACs, increased 9% compared to the prior year period. NASDAQ continued its competitive leadership in attracting the majority of new U.S. listings for the 34th consecutive quarter, with 38 IPOs raising a combined $2.8 billion for an 88% win rate. In Europe, our Nordic, Baltic, and First North exchanges also welcomed 25 new listings. As I wrap up, I will summarize by saying that our second quarter results demonstrate how NASDAQ's client-centric culture and diversified business model provides us the stability to perform well in different market environments. As we enter the second half of 2022, We continue to focus on broadening opportunities within three major areas that align with our strategic evolution. First, under the pillar of liquidity, we are a leader in the modernization of marketplaces through our world class technology. This includes the progress we're making as we migrate our own markets to a cloud enabled state, including the planned migration of our MRX options market in the fourth quarter of this year, as well as our efforts to enable more of our market infrastructure technology clients to maximize cloud and other powerful technologies within their offerings. Second, under the pillar of transparency, we believe that we are incredibly well positioned to execute on our unique and substantial opportunity to be a leading ESG solutions provider. We are centered first on a foundation of serving the specific needs of corporate clients by providing advisory services, along with SaaS-based data aggregation and reporting capabilities to facilitate their ability to communicate their ESG and climate strategies and progress to the investment community. And third, under the pillar of integrity, we play an important role in seeking to make the entire financial system more safe and fair for savers and investors through our powerful and diverse anti-financial crime offerings, combined with our network of bank and brokerage clients. We remain relentlessly focused on advancing our strategy, and we believe that NASDAQ is well positioned to navigate the geopolitical and macroeconomic uncertainties that may persist as we move forward into the latter half of this year. And with that, I'll now turn the call over to Anne to review our financial details.