Good morning, and welcome to Nasdaq Third Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker, Ato Garrett, Senior Vice President and Investor Relations Officer. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today to discuss Nasdaq's third quarter 2023 financial results. On the line are Adena Friedman, our Chair and Chief Executive Officer; Ann Dennison, our Chief Financial Officer; John Zecca, our Chief Legal, Risk and Regulatory Officer, and other members of the management team. After prepared remarks, we will open up the line to Q&A. The press release and earnings presentation are available on our website. We intend to use the website as a means of disclosing material non-public information and complying with the disclosure obligations under SEC Regulation FD. I would 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 Adena.

Thank you, Ato, and good morning, everyone. Thank you for joining us for Nasdaq's third quarter earnings call. Before I begin, I would like to offer a brief comment on the situation in the Middle East. We were horrified by the acts of terrorist violence that occurred in Israel last week, and we were deeply saddened by the subsequent loss of innocent lives in Israel, Gaza, and the wider region. Our focus has been on supporting our people and our clients with connections in the region. We will continue to monitor the situation closely and stay engaged with them throughout this emerging crisis. Turning now to my remarks about the quarter. I will start by covering Nasdaq's performance and how our strategy is unfolding in the context of the current operating environment, as well as provide key business highlights. I'm pleased to share that Nasdaq continues to make solid progress in our strategic objectives to capitalize on the key megatrends shaping the financial system. Nasdaq continues to execute against the strategic vision to become the trusted fabric of the global financial system, delivering broad-based growth across our businesses, including 6% overall net revenue growth and 8% year-over-year organic revenue growth in our Solutions Businesses. I'm proud of the team's efforts to continue to serve our clients and I'm pleased to see our revenue growth improving in the third quarter, aided by strong performance in our Capital Access Platforms division, particularly in our Index business. In addition, our Anti-Financial Crime division continued to deliver strong results with solid growth in our Surveillance business and Verafin continuing to demonstrate strong new customer growth, as well as an expansion contract with Tier 2 clients. With respect to the market backdrop, during the quarter, we saw a variety of crosscurrents, including increasing market volatility, fluctuating equity markets, and rising long-term interest rates. Nevertheless, we experienced modestly improving momentum in our Listings business amid a gradual re-emergence of U.S. IPO activity, with 35 operating companies choosing to list on Nasdaq during the quarter. Based on our client conversations and our growing IPO pipeline, we remain cautiously optimistic on the outlook for the upcoming year. Across the company, as we've discussed before, Nasdaq is well-positioned to thrive by capitalizing on three key megatrends that are shaping the financial system: the modernization of markets, the development of the corporate and investor ecosystem for environmental sustainability, and the increasing need for integrity solutions across the financial system, including risk management, surveillance, regulatory compliance, and anti-financial crime technology. By aligning our business to these key megatrends, we're unlocking attractive opportunities for sustainable growth and we're building a diversified business that's well-positioned to succeed through economic cycles. In this regard, I'd like to provide a few highlights from the quarter that illustrate the progress we're making to capitalize on these growth opportunities. First, our focus on market modernization continues to deliver innovation that enhances the liquidity and underlying market infrastructure that powers the world's economies. A major driver of that innovation has been our ability to adopt and leverage technologies, including cloud and artificial intelligence across our markets and in our products. In the third quarter, we are pleased to announce the approval by the SEC of the first exchange AI-powered order type, which we call Dynamic Midpoint Extended Life Order or Dynamic M-ELO. For the last several years, we've offered an order type called the Midpoint Extended Life Order for clients seeking larger trade sizes at the midpoint. The order introduces a fixed holding period together with order interest before execution. Through extensive testing and consultation, we determined that our clients' trade execution could be improved under certain market conditions by applying adaptable holding periods. This led to the creation of Dynamic M-ELO, which leverages AI to adjust the length of holding periods throughout the trading day on a stock-by-stock basis to improve fill rates and reduce market friction. We're very excited to roll out this enhanced order type to our clients in the coming months. And we see significant opportunity ahead to drive the application of AI and other emerging technologies across our markets. Next, regarding the development of the environmental sustainable ecosystem, during the quarter, we were proud to launch two new offerings designed to help corporates and investors streamline their sustainability journeys. Following the acquisition of Metrio last year, we have integrated Nasdaq's OneReport and Metrio's sustainability reporting and workflow offerings into a single solution called Nasdaq Metrio, which was officially launched during the quarter. Nasdaq Metrio is a SaaS-based end-to-end solution that helps corporates better collect, measure, and report sustainability data on a single platform. In addition, in our Investment Intelligence business, we announced the launch of Nasdaq eVestment ESG Analytics, which is designed to help asset managers better quantify and showcase the environmental, social, and/or governance impact of their portfolio's position in the market. It enables asset managers to demonstrate their portfolio's sustainability strategies to asset owners, including pension funds, sovereign wealth funds, and endowments. These two solutions underscore our role as a bridge between corporates and investors by creating market-based demand-driven solutions that help bring clarity to a rapidly evolving environment for sustainability reporting. Lastly, looking at the increasing need for integrity solutions, including risk management and anti-financial crime technology, we're developing innovations that make our clients' anti-money laundering or AML programs more efficient. Specifically, in October, we launched the beta version of an AML workflow co-pilot tool that will leverage generative AI to automate portions of our clients' AML processes. We look forward to updating you on our progress with these opportunities in the quarters to come as we continue our journey to leverage technology to advance our clients' evolving needs. Turning next to our results. I'm pleased to report Nasdaq's continued solid financial performance in the third quarter of 2023. We achieved $940 million in net revenues, an increase of 6% compared to the prior year period, and an increase of 5% on an organic basis. Revenues across our Solutions businesses were $694 million, up 9% from the prior year period and 8% on an organic basis. Our total ARR increased 6% to $2.1 billion. Annualized SaaS revenues totaled $773 million in the third quarter, representing an annual growth rate of 11%. Our SaaS revenues now comprise 37% of total company ARR. In our Capital Access Platforms division, we delivered $456 million in total revenue in the third quarter, an 8% increase from the prior year period. Our Index revenues grew 15% from the prior year period. The performance in our Index business reflects strong year-over-year market performance, $24 billion in net inflows over the past 12 months, including $5 billion in the third quarter, and strong feature capture, partially offset by lower derivatives volumes. Our Workflow and Insights revenues grew 5% over the prior year period, reflecting sustained demand for project work in our ESG Solutions and steady analytics solutions sales to asset managers. While we continue to see elongated sales cycles for certain products in this business, we've not seen a material improvement or worsening of sales cycles from the second quarter of 2023. Our Data and Listing Services revenues grew 5%. Our Listings revenues were largely unchanged due to continued muted IPO activity and heightened de-listings, while our Data business delivered continued strong revenue growth, driven by demand from international data clients. We maintained our track record for winning new operating company listings, ending the quarter with strong momentum from some of the year's biggest IPOs by proceeds raised. Year-to-date, Nasdaq welcomed 83 new operating company IPOs for an 84% win rate. As of the end of the third quarter, we welcomed four of the five top IPOs by capital raised. In the third quarter, we achieved an overall win rate of 95% and welcomed several marquee IPOs including Arm Holdings and Instacart. This momentum was also bolstered by several notable listing switches to Nasdaq in the quarter, including DoorDash and Roper Technologies. Overall, 11 companies had transferred to Nasdaq year-to-date, representing a total market value of $184 billion. The September listing success coincides with the launch of our new IPO and Broadcast Center at the Nasdaq MarketSite in Times Square, further establishing Nasdaq as the world's premier venue for listings. The reimagined space reflects our commitment to showcasing our clients and elevating their IPO experience and enables us to create more visibility for first trade celebrations through increased access to global media outlets. Looking ahead, we remain well-positioned to capture new listings activity. We have a strong pipeline of companies who are committed to Nasdaq and are in close contact with these companies as they evaluate their IPO timelines. Turning next to our Market Platforms division. We delivered $381 million in total revenues during the third quarter, a 1% increase over the prior year period. In our Trading business, revenues declined 1% compared to the prior year due to lower European revenue, partially offset by modest growth in U.S. equities revenue due to higher revenue capture and a small FX benefit. In our Marketplace Technology business, revenue grew 4%, with growth in both trade management services and market technology solutions. During the period, we completed delivery of a major CSD project for a Latin American central securities depository and signed a contract extension, including an upgrade to our next-gen trading system with one of the largest stock exchanges in Southeast Asia. Turning next to a brief update on Adenza. We're progressing well towards the closing of the Adenza transaction. We have completed the anti-trust review, and Thoma Bravo is on track to obtain the remaining approvals from the Nordic and Baltic financial regulators to become a major shareholder in Nasdaq. Therefore, we expect to close the transaction in the fourth quarter of 2023. As previously disclosed, this business will be reported as part of the newly created Financial Technology division, alongside our Marketplace Technology and Anti-Financial Crime businesses. In the third quarter, Adenza continued its strong performance, delivering constant currency ARR growth in the high-teens. Year-to-date through the third quarter, they added 17 new clients and three total cross-sells, which compares to seven new clients and three cross-sells over the same period last year. Additionally, Adenza maintains solid growth in net revenue retention at 97.4% to 113%, respectively. We're also pleased with the momentum of Adenza's journey towards the cloud-based delivery of its solutions across both existing and new clients. Through the first three quarters of 2023, 55% of bookings have been for cloud delivery solutions versus 27% over the same period last year. Since the transaction was announced in June, we've held extensive integration and planning discussions with the leadership team at Adenza, and we're very excited about the opportunities ahead. As a result of our early interactions, we have developed a clear path and process for integration that we intend to execute successfully starting on day one post-close. Finally, turning to our Anti-Financial Crime division. We delivered $93 million in total revenue during the third quarter, a 21% increase compared to the prior year period. Nasdaq Verafin grew 29%, primarily driven by growth in the adoption of our Fraud and Anti-Money Laundering or FRAML solutions by small and medium-sized banks, as well as an expansion of wallet share among existing clients. We continue to expand client relationships with 47 new small and medium-sized financial institutions adopting our FRAML solutions. Additionally, we continue to have momentum in our move-up market. This quarter, we signed an expansion agreement with an existing Tier 2 bank client. Specifically, this is a bank client that signed on to our Fraud Detection and Workflow solution in the first quarter of 2023 and has now expanded their relationship with us to include our complex investigations solution. We view this expansion as a strong proof point of our ability to land and expand our relationships with large bank clients. We continue to be actively engaged in contract negotiations and proof-of-concepts with several Tier 1 and Tier 2 banks and remain on track with our plans to sign additional large banks in the coming quarters. Our Surveillance business delivered 9% organic revenue growth with continued new customer growth, including Tier 3 banks and retail brokers, as we expanded our leadership position with large customers. And lastly, I'm pleased to announce that we've formally named Brendan Brothers, Executive Vice President of our Anti-Financial Crime division. As you may recall, Brendan was named to the role on an interim basis earlier this year, and we're thrilled to welcome him formally as a member of our leadership team, continuing to report directly to me. To wrap up, our third-quarter results demonstrate the strength of our diversified business and reflect our strong position going into year-end with the closing of the Adenza transaction in view. And with that, I'll now turn the call over to Ann to review our financial details.

Thank you, Adena, and good morning, everyone. Turning to this quarter's results. My commentary will primarily focus on our non-GAAP results, and all comparisons will be to the prior year period unless otherwise noted. Reconciliations of U.S. GAAP to non-GAAP results can be found in our press release, as well as in a file located in the financials section of our Investor Relations website at ir.nasdaq.com. I will start by reviewing third quarter 2023 performance, beginning on Slide 11 of the presentation. The 6% increase in reported net revenue of $940 million is the net result of organic growth of 5%, including an 8% organic increase in the Solutions Businesses and slightly lower Trading Services revenue, and $3 million in net positive impact from changes in FX rates and acquisitions and divestitures. Moving to operating profit and margins. Non-GAAP operating income increased 4%, while the non-GAAP operating margin of 52% was down approximately 90 basis points from the prior year period. Non-GAAP net income attributable to Nasdaq was $349 million or $0.71 per diluted share compared to $335 million, or $0.68 per diluted share in the prior year period. Turning to Slide 12, as Adena mentioned earlier, ARR totaled $2.1 billion, an increase of 6% from the prior year period, while annualized SaaS revenues totaled $773 million, an increase of 11%. ARR and SaaS revenue growth in the quarter reflect broad-based growth led by continued bookings strength in our Anti-Financial Crime division. We are delivering solid performance despite ongoing elongated sales cycles in certain areas of our Workflow and Insights business, similar to recent quarters. We are working closely with our customers in the current uncertain macroeconomic environment and are executing well on our strategic pillars of bringing liquidity, transparency, and integrity to financial markets. I will now review quarterly division results on Slides 13 through 15. Starting with the Market Platforms division, revenues increased $2 million or 1%, driven by a positive impact from changes in FX rates. Trading Services organic revenue was down 2%, driven by lower European trading revenues due to lower volumes. Despite better cash equity revenue capture that offset largely flat U.S. revenues. While we have seen an increase in off-exchange trading, which is common in a lower volatility environment, Nasdaq share of available volume has remained steady. In Marketplace Technology, we delivered 3% organic revenue growth, reflecting solid revenue growth in our Market Technology business. As a reminder, Marketplace Technology revenue growth in the first half of the year benefited from testing revenue and a large project delivery that we don't expect to recur in the second half of the year. We continue to expect full year revenue growth for Marketplace Technology to be at the upper end of our medium-term outlook. ARR totaled $511 million, an increase of 2% compared to the prior year period. This growth rate is lower compared to prior periods due to slower Trade Management Services growth resulting from near-term market conditions. The Market Platforms operating margin was 52% in the third quarter of 2023, representing a 370 basis point decrease from the prior year period due to lower revenue resulting from lower European trading activity, as well as higher compensation costs, ongoing investments related to migrating U.S. markets to the cloud, and investments in new growth opportunities in Marketplace Technology. Turning to Capital Access Platforms. Revenues increased $34 million or 8%, reflecting organic revenue growth of $32 million and a $2 million positive impact from changes in FX rates. We delivered broad-based organic growth in the third quarter, driven by strong performance in Index. Index revenue increased 15% compared to the third quarter of 2022, primarily driven by a 22% increase in average AUM over the prior year quarter. Licensing revenues for futures contracts linked to the Nasdaq 100 Index increased 14%, reflecting higher pricing per contract, partially offset by a decline in trading volume. Additionally, we saw net inflows over the trailing 12 months of $24 billion, including $5 billion in the quarter. While AUM has benefited from strong year-to-date market performance, we saw AUM impacted by overall markets trending lower in the last two months of the quarter. Moving to Data and Listing Services. Our revenue grew 5%; excluding the positive impact from changes in FX rates, our organic growth was 4%. Revenue growth reflects continued strength in our Data business and the combined impact of de-listings and a more muted IPO environment on Listings revenue growth. However, as Adena mentioned, we have seen several high-profile initial listings and 11 switches year-to-date. Workflow and Insights revenue increased 5% organically compared to the third quarter of '22, reflecting growth across our ESG and Analytics businesses despite ongoing elongated sales cycles with corporates, particularly for our IR tools and for our asset owner portfolio management solutions, affecting revenue growth in the third quarter. ARR for Capital Access Platforms totaled $1.2 billion, an increase of 4% compared to the prior year period. While ARR growth related to our data products remained solid, the Capital Access Platforms ARR growth rate has been impacted by slower listings growth and the impacts of continuing elongated sales cycles on parts of our Corporate Solutions and Analytics businesses. The division operating margin was 56% in the third quarter of 2023, an increase of roughly 50 basis points from the prior year period. Anti-Financial Crime revenue increased $16 million or 21% compared to the third quarter of 2022. Growth reflects robust demand for Fraud Detection and Anti-Money Laundering solutions, as well as our SaaS-based Surveillance Solutions. Our Fraud Detection and AML solutions revenues grew 29% compared to the third quarter of 2022. Surveillance revenues grew 9% compared to the third quarter of '22 with continued customer growth, including Tier 3 banks and retail brokers. These new customer wins reflect our ability to drive growth beyond our leadership position with large banks and expand into new customer segments. ARR for Anti-Financial Crime totaled $348 million, an increase of 18% compared to the prior year period. Signed ARR, which also includes ARR for new contracts signed but not yet commenced, totaled $381 million, an increase of 19% versus the prior year period. The Anti-Financial Crime division operating margin was 33% in the third quarter of 2023 versus 27% in the prior year period, with approximately one half of the margin growth resulting from the timing of recognition of incentive compensation. Turning to Page 16 to review both expenses and guidance. Non-GAAP operating expenses increased $32 million to $449 million. The increase primarily reflects a $32 million organic increase or 8%. The organic year-over-year increase reflects increased compensation and benefits expenses due primarily to increased headcount and the impact of merit increases, higher technology spend attributable to continued investment in our business, and higher G&A expense. We are narrowing our 2023 non-GAAP operating expense guidance to $1.785 billion to $1.805 billion, which is a $10 million reduction at the top end of the guidance range. As a result, the midpoint of the updated expense guidance range is $5 million lower than our prior guidance, which reflects an annual expense increase of approximately 4.5% for 2023. Assuming stable performance and exchange rates, we currently expect 2023 expenses to be near the middle of the updated guidance range. Additionally, we narrowed our full year non-GAAP tax rate guidance range from 24% to 26% to a range of 24.5% to 25.5%. We expect to come in at or around the midpoint of this updated range for the full year. Turning to Slide 17. Excluding Adenza related debt, our adjusted total debt to trailing 12 months non-GAAP EBITDA ratio ended the period at 2.4 times, down from 2.6 times at the end of the second quarter of 2023. During the quarter, we paid common stock dividends in the aggregate of $108 million. In September, our Board approved an increase to our share repurchase authorization to a total of $2 billion. Our balance sheet remains solid and our cash flow generation is strong, including $1.6 billion of free cash flow on a trailing 12-month basis. We remain well-positioned to support organic growth, execute on the deleveraging plan we announced with the Adenza acquisition, increase our dividend payout ratio over time, and repurchase shares to minimize dilution. In closing today, Nasdaq's third quarter results reflect the continuation of the Company's ability to perform consistently well across a wide range of operating environments. Thank you for your time, and I will turn it back over to Adena.

Thank you, Ann. And before we turn to Q&A, I would like to take a moment to acknowledge Ann Dennison. After eight years at Nasdaq, Ann will be stepping down from her role as CFO at the end of this year. Ann has been a guiding voice to the market on our financial performance, a leader in enhancing our Investor Relations and ESG reporting efforts, and as steward of our company's transformation, most recently, through our announced acquisition of Adenza. In conjunction with Ann's upcoming departure from Nasdaq, we're pleased to welcome Sarah Youngwood as our next EVP and CFO. Sarah will join us from UBS Group, where she served as CFO and a Group Executive Board member. Sarah will officially join us on December 1, and will work closely with Ann and the team to ensure a seamless transition. I want to thank Ann personally for her many contributions to Nasdaq. She has been a phenomenal partner to me and the company and we wish her the very best. And now, I'll turn the call back over to the operator for Q&A.

Thank you. Our first question comes from Michael Cho from JPMorgan. Please go ahead.

Hi. Good morning. Thanks for taking my question. I wanted to ask about Adenza for my first question. Adena, you mentioned the update and the ARR. Could you also discuss the year-to-date revenue growth trends for both Axiom and Calypso? Additionally, I would like to understand the revenue growth opportunity as clients transition from on-prem to the cloud solution for Adenza. Thank you.

Thank you for your question. While we don’t disclose the specific financial differences in revenue between Axiom and Calypso, I can share some insights. So far in 2023, we have acquired 17 new clients and completed three cross-sells. Breaking this down, Calypso gained nine new clients and one cross-sell, while Axiom had eight new clients and two cross-sells. Regarding upsells, we recorded a total of 95, with a 55% upsell rate for Calypso and 40% for Axiom. This indicates a balanced growth and opportunity across both solutions. The demand for advanced risk management solutions across various asset classes, along with improved regulatory reporting, contributes to this trend. Notably, Calypso and Axiom are well-positioned in this space. The increase in new sales is significant, going from seven new clients last year to 17 this year, driven by regulatory obligations in the U.S. and the Basel III framework affecting both the U.S. and Europe. Additionally, Axiom has successfully attracted more banks and brokers to their offerings. Overall, we are pleased with the ongoing momentum in our business. In terms of cloud services, 55% of our new bookings have been for cloud delivery solutions, up from 27% last year. This shift is largely due to banks becoming more accepting of cloud solutions and a trend towards moving away from traditional data centers. Cloud-based solutions offer modern, modular, and flexible options, which our team has effectively highlighted to showcase their advantages. There is an increase in revenue when we offer a cloud module since we become a managed service provider, which reduces clients' costs of managing on-premises solutions. Though we haven't detailed the revenue uplift yet, it’s important to note that cloud revenue is recognized evenly over the contract's lifespan, in contrast to the upfront recognition of on-premises revenue. This approach will enhance revenue stability moving forward.

Okay. No. Great. Thanks for all the color there. If I could just switch gears a little bit for my second question. I just want to touch on Verafin. I mean, it seems like revenue growth is accelerating there. I'm just curious the types of conversations that Nasdaq’s had with clients there. I mean, do you get the sense that the SMB clients are tightening budgets or expanding budgets for these types of solutions in Verafin?

Every bank is increasingly challenged by fraud and anti-money laundering issues. The fraud aspect presents a clear return on investment because banks are losing money to fraud and are obligated to compensate clients for incidents affecting their accounts. Leveraging our solutions offers a straightforward return on invested capital. Furthermore, since our solution is cloud-based, banks have lower upfront infrastructure investments, making their commitment to us more manageable. Additionally, we excel at onboarding clients, particularly small to medium-sized banks, allowing us to quickly integrate them into our system. For larger banks, we are collaborating effectively to implement and integrate these solutions. We recently secured an expansion contract with a client that signed on at the start of the year, and they were quick to request additional capabilities for complex investigations. This indicates strong opportunities for expansion. On the anti-money laundering front, there's considerable regulatory pressure, and banks are genuinely interested in preventing money laundering activities. The threat has intensified, but our advanced systems, utilizing AI algorithms, are more effective at identifying criminals with fewer false positives compared to our competitors. This is generating meaningful discussions and increasing demand. Lastly, I often hear from representatives of small banks at conferences expressing that Verafin is their preferred partner, indicating satisfaction with the exceptional service our team provides.

Great. Thank you so much, Adena.

Thank you. And I show our next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Hi. Good morning. So now that you have line of sight to deal closure and you have a bit more clarity on the interest rate environment and where your stock is trading, just wanted to revisit the topic of capital allocation after the deal closure. How should we think about capital priorities, specifically on deleveraging versus buyback, post-deal closure? And is there any framework you could provide for maybe a level of buybacks anticipated for a specific period post-deal closure that could kind of help frame the mix there?

Ann?

Sure. Hi, Kyle. Absolutely. So, as we think about post-deal closure, obviously, we will evaluate the market conditions from a share repurchase perspective. But in terms of our capital priorities, first and foremost, we are going to continue to invest to drive the business organically. But after that, our priority is to deleverage and to meet the deleveraging targets that we set out when we announced the Adenza acquisition. And then beyond that, our next priority will be to increase our dividends to get our payout ratio up to the 35% to 38% ratio over the next three to five years. And then beyond that, what's left over, we're going to use to offset the dilution, both from our employee share issuances and then also from the issuance related to the Adenza deal. And our cash flows remain very strong. I mentioned we had $1.6 billion in free cash flow on a trailing 12-month basis. So we feel really well positioned to do all of those things in the priority order that I listed.

Thank you for that clarification. Adena, you mentioned some of the factors contributing to the strong high-teens growth in Adenza's ARR. Considering the nature of the Adenza business and the duration of the sales cycle, along with the progress made since the deal announcement in June, could you provide an update on your confidence regarding the medium-term revenue growth target for Adenza, specifically in the low to mid-teens for 2024?

We don't provide specific annual guidance, but we are confident in our medium-term outlook for low to mid-teens revenue growth across the Adenza business, which includes both ARR and customer delivery revenue, once Adenza integrates with Nasdaq. There is strong demand for our solutions, and we have seen an increase in upselling to clients. This year, we are signing more new clients than we did last year, which enhances our upsell potential. The solutions we offer are essential for banks, especially as they navigate a more complex regulatory landscape and increased risks. Given these factors, our medium-term outlook of low to mid-teens overall revenue growth remains unchanged.

Thanks, Adena.

Thank you. And I show our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Hey. Good morning. Thanks for taking the question. I wanted to ask about Verafin. I was hoping you could speak to the competitive environment today for Verafin, how you see that evolving. Understand there's big tech companies, such as Google, that have introduced some AML solutions. So maybe you could speak to how your solution differs, talk about some of the steps you're taking to stay ahead of the big tech competitors that have deep pockets in AI expertise?

There is a distinction between our approach and what Google is doing. Google is collaborating with a specific bank, providing AI algorithms to support that bank's internal operations, which can be viewed as a tailored build utilizing Google’s infrastructure. The bank contributes specific algorithms and patterns they seek, which we refer to as agents. This results in a facilitated custom build that leverages Google's technology and AI capabilities. In contrast, we offer a complete software solution specifically designed for fraud and AML detection, investigation, and reporting. Our solution is end-to-end, and because we have transaction data from 2,500 banks and operate as a cloud-based solution, we can integrate all that data effectively. We utilize AWS as our cloud provider and benefit from their AI technologies, including the bedrock solution for the Gen AI capabilities we are implementing. This collaboration allows us to create a tailored solution that spans across 2,500 banks, meaning that banks do not need to create their own custom builds. We gain insights from these banks to continuously enhance our services. Additionally, we have weekly releases, maintaining close communication with the banks to incorporate their feedback, which benefits all our clients collectively. This approach is markedly different from the model Google has with their single bank partnership. Finally, we are gaining market share and replacing internal builds due to our access to consortium data and our effective workflow solution, while also outpacing competitors. We are very pleased with our progress.

Great. And just a follow-up question, if I could, just on Verafin. FedNow just launched in July a new real-time payments rail. But there are some concerns around fraud that might limit the uptake by institutions. So can you just speak to Verafin's real-time payment solution, how you see the opportunity set evolving there? And any sorts of lessons learned from the clearing houses real-time payment service that's been in place for some time and I believe you have a solution there as well?

Yes, we do connect with FedNow and the clearing house. We are in the process of rolling out a real-time payment solution and have been in discussions with the Fed regarding their rollout. We are collaborating with major banks and core banking system providers, as they offer essential infrastructure for integrating FedNow and other real-time payment solutions. Our aim is to ensure we are seamlessly integrated into their systems, making it easier for banks to adopt our fraud detection services. This is definitely a specific growth area we are actively pursuing with our small to medium-sized banks.

Great. Thank you.

Thank you. And I show our next question comes from the line of Craig Siegenthaler from Bank of America. Please go ahead.

Thanks. Good morning, and thanks for taking my question. I wanted to first touch on the pickup in IPO activity. So it was really nice to see a high win rate at Nasdaq this quarter, including several big IPOs. But since then, we've seen the markets pull back, rates rise. Now I know you mentioned you have a robust pipeline, but how has the recent macro, including the conflict in Israel impacted the near-term pipeline?

It's a great question, Craig. It has impacted the situation. I would characterize 2022 and 2023 as a transition from a very significant free money environment to one marked by rising interest rates, creating unpredictability for the future. The economy shows resilience but is also slowing down, leading to uncertainty that investors are grappling with. They need to assess the future earnings of a company, and if they can't grasp the overall economic landscape, it's difficult to evaluate that risk. The beginning of 2023 was quite challenging. However, we began to notice some positive signs as we moved through spring and the interest rate situation became clearer. But growth has been inconsistent. There were windows of opportunity, and we had some exciting companies emerge in September. Now, we are seeing changes again in the macro environment and increased geopolitical instability, leading investors to reconsider their risk strategies. Nonetheless, we have a strong pipeline of companies, and our team is doing an excellent job working with clients. Most of our discussions with clients are focused on the first half of next year rather than the fourth quarter of this year.

Thanks, Adena. And just for my follow-up, also on a similar topic, can you remind us what percentage of your data and listings revenue is coming from initial listings? And can you quantify the headwinds from roll-offs from accrued revenue from that strong 2021 and '20 IPO period?

Yeah, that's a good question to understand the dynamics in the listings business. I don't have the exact percentage of revenue coming from new listings. To remind everyone, we have our annual listing fees and initial listing fees. Our initial listing fees are spread out over a two to six-year period, depending on the type and size of the listing. There is some initial listing revenue rolling off from the 2021 listings, not all of it, but some as the amortization proceeds, and that will be accounted for in 2024. The answer is around 10% of our overall listing revenues.

Year-to-date, $300 million.

Yeah, $300 million. So that revenue will have some fluctuation as you go into 2024. And so you've got to look at the combination of the new listings and as well as from an annual listing fee revenue perspective, the de-listings that we're experiencing; we do provide you with that data every quarter, as we think about what the billing cycle is going to look like in January for the annual fees. So those are the big factors to consider in '24.

Thanks, Adena.

Thank you. And I show our next question comes from the line of Owen Lau from Oppenheimer. Please go ahead.

Good morning. Thank you for taking my question. So your organic growth of the Solution Businesses accelerated and come back to your medium to long-term outlook. You talked about the strength in Index and anti-fin crime business. I'm just wondering if the equity market, Verafin, and other business remain stable in the near term and the IPO market remain muted, how should investors think about your organic growth over the next few quarters excluding Adenza? Thank you.

Sure. I appreciate your question. While we don't provide specific quarter-by-quarter or year-over-year guidance, we're pleased to see the revenue growth in our Solutions Businesses returning to the medium-term outlook we've communicated for some time. If the IPO market becomes healthy and starts to pick up in 2024, we expect that the main benefits will be seen in 2025 as it impacts our annual listing fees. Additionally, a stable trading environment will likely boost index flows and data demand, encouraging corporates and investors to invest in new solutions that automate manual processes. This could lead to greater interest and more straightforward sales decisions in this area. For Market Tech and Anti-Fin Crime, we have solid demand in businesses where exchanges are focused on advancing their technology. We've made significant progress in maturing our CSD, next-gen clearing, and trading solutions, as well as our risk management offerings. Therefore, we believe the demand in these areas is generally stable. Anti-fin crime technology, which is essential, also has strong demand, and we believe ours is the best in the market. While I can't specify how this impacts the growth of our Solutions Business, a generally healthy market environment would certainly create more opportunities for us.

Got it. That's helpful. And a quick one on the sales cycle on Adenza. I mean, we have been talking about the elongated sales cycle. I'm just wondering, is there any sales cycle impact on Adenza? I mean, you talked about high-teens growth, I think, for Adenza in the third quarter. I'm just wondering, if there's no elongated sales cycle, the budget gets hiked in release or things like that, how high it could have gone? Thanks.

I believe that there are numerous barriers that larger institutions face. Our Anti-Fin Crime business is making progress in overcoming these barriers, but there are still many to navigate. We draw on our experience from our Surveillance business to help us understand this process. Adenza is also facing additional hurdles when it comes to closing sales, especially with larger institutions, unless there is a regulatory requirement. This is a key area of focus for us. We have seen some regional banks quickly adopt Axiom, with sales cycles taking only three to four months when regulatory demands are present. However, in the absence of immediate regulatory urgency, these sales cycles tend to be longer. I believe Adenza experienced longer sales cycles in 2022 than they are currently in 2023. Overall, if the macroeconomic environment were healthier and more predictable, it would undoubtedly benefit Adenza in the long run.

Got it. Thank you very much.

Sure.

Thank you. And I show our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Great. Thanks. Good morning, folks. Thanks for taking my question. Maybe just back on Verafin. Just in terms of the normal seasonality we have seen in the last couple of years in that business, or I should say Anti-Financial Crime broadly, do you expect that also to represent the past pattern over the last two years in the fourth quarter? And then just sort of confidence around that 20% plus type of growth rate that you've been able to achieve in that going into 2024?

Generally, about 40% of bookings for our Anti-Financial Crime business occur in the fourth quarter. This trend is consistent with what we've observed. However, when we upsell to the largest banks, the pattern is less seasonal, and we have limited experience in that area, so we can't guarantee that we will see a different outcome every fourth quarter. For small and medium banks, which are central to our anti-financial crime operations, the fourth quarter is significant for sales. This situation is also true for Adenza, where 40% to 45% of bookings typically happen in the fourth quarter. Overall, we are pleased with the growth characteristics of the anti-financial crime business and believe we can maintain an 18% to 23% growth rate moving forward.

No. Good to see the progress there. And then, Adena, maybe if you could just update us on the status of the SEC market structure proposals. I know it's a big debate in the industry and there's a lot of back and forth on that. But do you see anything being potentially implemented in 2024, or do you think the debate will sort of linger on at least into '25?

I expect that we'll see some action on the four proposals from the SEC as we move through 2024, although the specifics are still unclear. There have been numerous comments regarding these proposals. Generally, the two that appear more certain are the tick sizes and the 605 proposal, which seem to have a clearer path forward. In contrast, the proposals related to best execution and the order competition rule have sparked much more debate within the industry, making their outcomes less predictable.

Thank you. And I show our next question comes from the line of Simon Clinch from Redburn Atlantic. Please go ahead.

Hi, Adena. Thanks for taking my call. I wanted to revisit Adenza and your comments on your integration preparations. Since this is a significant transaction that will be fully integrated into the business, could you provide us with an update on the benefits and challenges of this plan? Additionally, how should we consider the technology stack and the implications of integrating Adenza into your existing cloud infrastructure in terms of expenses and margins for that business moving forward?

Thank you. I can say that Tal and the entire team have been highly focused on developing a strong integration plan. We’ve been collaborating with the Adenza team for several months, maintaining regular communication to ensure we are well-prepared for the integration from day one. We've added more detail to the plan, but since we don’t own them yet, we’ll need to deepen our understanding of their operations before fully expanding on the details. We are very committed to achieving the integration as we outlined during the announcement. We also see advantages in our existing cloud infrastructure, which is part of our integration plans. Unfortunately, we haven’t done extensive work on this yet since we still don’t own them. We possess significant proprietary capabilities in our cloud technology, and we want to finalize our ownership before delving deeply into the technical aspects. However, we believe our relationship with AWS will be beneficial. Our expertise in building efficient cloud infrastructure, especially regarding data management, will be advantageous. We look forward to further enhancing our cloud capabilities. My vision for the next five years includes how we want to deliver these services, the balance between single-tenant and multi-tenant setups, and the overall environment we wish to create for our clients so they view us as a strategic partner in risk management, regulatory technology, anti-financial crime, and capital markets. There is much to explore, but we need to secure ownership and become more engaged with them to provide better insights in the upcoming months and quarters.

That's great. Thanks, Adena. I guess just a second question here and just changing tack a little bit. Just on the cash equities business, I've noticed that the revenue capture has been rising quite substantially while the market volumes have stagnated or fallen. And I know some of this has to do with mix, but I was wondering, if you could expand a little bit on sort of what the dynamics are there. And is this a deliberate sort of management on your part to, I guess, smooth out revenue by taking a bit more pricing when times slow down or how should we think about that strategy going forward?

Well, I think one of the things we've always said is that we like to make sure that we have a good balance between share and capture. And one of the things we've been focused on is, what is our share of available liquidity? And one of the things we've maintained a steady share of available liquidity. And what do we mean by that? In times when volatility goes down, there tends to be more trading that occurs off exchange. So the off-exchange trading percentage tends to go up. So then we look at it and say, well, what can we actually achieve and bring into the exchange and how are we competing with other exchanges? And there, we look at what we call available liquidity. And I think we've maintained a pretty stable share of about 30%. And then within that, we then said, hey, what kind of volumes are we trying to attract into our solution? We want to attract volumes that are additive to overall volumes in the platform. So one, certain orders that come into the market feed other orders, and we're going to work hard to get those orders in. The other thing is we provide a lot of really interesting, as we mentioned, specialized order types that also allow us to charge different rates for these services because they're specialized execution capabilities, and that allows us to have a higher capture. But the one thing we don't do is just chase share that just is fleeting, that if you chase that share, you can really have a significant negative impact on capture, and frankly, not get share that's additive to the NBBO, not get share that brings other on their volume in. So we're very, very intentional about that, and that's why you're seeing some capture go up because more of the volumes moving towards our specialized capabilities, and we're not doing what others of our competitors are doing in terms of chasing fleeting share.

That’s great. Thanks so much.

Sure.

Thank you. I'm showing no further questions in the queue at this time. I'd like to turn the call back to Adena Friedman, Chair and CEO for closing remarks.

Great. Thank you. Well, we are excited to continue to update all of you in the coming quarters as we approach the closing of the Adenza transaction and we continue to advance along our journey to become the trusted fabric of the world's financial system. And so thank you very much, and have a great day. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.