Nasdaq Inc (NDAQ) Q4 2024 Earnings Call Highlights: Strong Revenue Growth and Strategic Advancements

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Fri, Jan 31, 2025, 12:14 AM 4 min read

Net Revenue: $4.7 billion for the full year, up 9% from 2023; $1.2 billion for the fourth quarter, up 10% year over year.
Solutions Revenue: $3.6 billion for the full year, up 10%; $949 million for the fourth quarter, up 9%.
Operating Expense: $2.162 billion for the full year, up 6%.
Operating Margin: 54% for the full year, up over 1 percentage point; 55% for the fourth quarter, up 2 percentage points.
EBITDA Margin: 56% for the full year, up over 1 percentage point; 57% for the fourth quarter, up over 1 percentage point.
Net Income: $1.6 billion for the full year; $438 million for the fourth quarter.
Diluted EPS: $2.82 for the full year; $0.76 for the fourth quarter.
ARR (Annual Recurring Revenue): $2.8 billion, up 7.5% year over year.
Index Revenue Growth: 31% for the full year; 29% for the fourth quarter.
Free Cash Flow: Approximately $1.6 billion for the full year; $439 million for the fourth quarter.
Gross Leverage Ratio: Reduced from 4.3 times to 3.6 times by the end of 2024.
Dividends Paid: $0.94 per share or $541 million for the full year.
Share Repurchases: 2.3 million shares for roughly $145 million in the year.

Warning! GuruFocus has detected 7 Warning Sign with NDAQ.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Nasdaq Inc (NASDAQ:NDAQ) reported a 9% increase in net revenues for 2024, reaching $4.7 billion, with Solutions revenue growing by 10%.
The company achieved significant client engagement, signing 263 new clients, 424 upsells, and 11 cross-sells in 2024.
Nasdaq's Financial Technology division delivered strong performance, with 12% ARR growth and notable expansion in Financial Crime Management Technology.
The company successfully integrated acquisitions like AxiomSL and Calypso, enhancing its platform capabilities and achieving expense synergies ahead of schedule.
Nasdaq maintained its leadership in listings, with 180 IPOs in 2024, raising $23 billion in total proceeds, and achieved an 80% win rate among eligible operating company IPOs in the US.

Negative Points

The Workflow and Insights business has been growing slower than expected, impacted by a slower issuance environment and delistings.
Nasdaq faces challenges in the Corporate Solutions segment due to elongated corporate buying cycles and beta headwinds.
There is potential uncertainty in client demand for AxiomSL's offerings if there is a reversal in bank regulations under the new US administration.
The ARR growth for Capital Markets Technology decreased from 12% to 9%, driven by year-over-year comp differentials and timing of deal signings.
Professional services revenue faced downward pressure in 2024, particularly impacting AxiomSL solutions, though improvement is expected in 2025.

Q & A Highlights

Q: Can you explain the outlook for Workflow and Insights, and how it might improve with cross-selling and a better IPO environment? A: Adena Friedman, CEO: The Corporate Solutions business has been affected by a slower issuance environment and delistings. We're focusing on innovation within our suite to be well-positioned when buying behaviors normalize. As the IPO environment and broader economy improve, we expect more sales activity. In Analytics, particularly with our investment product, we're seeing high single-digit growth, which should help drive overall growth in the division.

Q: How might deregulation under the Trump administration impact AxiomSL and your Regtech growth? A: Adena Friedman, CEO: AxiomSL is a global business, serving banks worldwide, including new markets like India and France. Despite regulatory changes, there's strong demand for our solutions. Regulatory Technology is expected to be at the high end of our growth range in 2025. The US represents 31% of revenues for Calypso and AxiomSL, so we are confident in our global client engagements.

Q: What are the growth expectations for Financial Technology, particularly Financial Crime Management? A: Adena Friedman, CEO: Financial Crime Management is expected to grow at the low end of its mid-20s range due to early-stage expansion in Tier 1 and Tier 2 banks and global markets. We signed 211 new clients and have a healthy pipeline. Overall, Financial Technology is expected to grow within the 10% to 14% range.

Q: How does the IPO pipeline affect Workflow and Insights, and what is the impact of the new administration's policies on ESG solutions? A: Adena Friedman, CEO: Corporate Solutions is a lagging indicator of the IPO environment. As IPOs increase, we expect more conversions to paying clients. ESG demand is shifting towards Europe due to new disclosure obligations, but we still see opportunities globally.

Q: How is Nasdaq leveraging AI, and what are the plans for AI advancements in 2025? A: Adena Friedman, CEO: We use multiple AI models to enhance product capabilities efficiently. AI costs have decreased, and we're embedding AI into product roadmaps, such as in Anti-Financial Crime and surveillance. Internally, AI is improving efficiency in development and client success, contributing to our expanded efficiency program.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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