Good day and thank you for standing by. Welcome to Nasdaq's Second Quarter 2024 Results Conference Call. At this time, all participants are in the listen-only mode. After the speakers' presentation, there'll 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, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss Nasdaq's Second Quarter 2024 Financial Results. On the line are Adena Friedman, our Chair and Chief Executive Officer; Sarah Youngwood, our Chief Financial Officer; and other members of the management team. After prepared remarks, we will open the line for Q&A. The press release and earnings presentation accompanying this call can be found on our Investor Relations website. I would like to remind you that we will be making forward-looking statements on this call that involve risks. A summary of these risks is contained in our press release and a more complete description in our annual report on Form 10-K. Also, please note that we will discuss our financial results on a pro forma basis and with year-on-year growth rates, which means that we are showing results versus the prior year period as if we owned Calypso and AxiomSL for all of 2023 and excluding the impact of FX. References to organic growth exclude the impact of FX, acquisitions and divestitures. Reconciliations of US 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 now turn the call over to Adena.

Thank you, Ato, and good morning, everyone. Thank you for joining us. On the call this morning, I'll provide some perspective on the external environment, discuss our strong quarterly performance highlights as well as our progress against our strategic priorities, and then I'll hand the call to Sarah to walk through the financial results in more detail. Turning to the economy in the US, we're continuing to see solid, but slowing GDP growth, along with cooling inflation and slightly rising unemployment. These data points support the potential for easing monetary policy in the coming months as the Fed continues to strive for an economic soft landing. The general stability in the US economy and the potential for a lower cost of capital going forward is resulting in modest improvements in the IPO landscape as we progress through 2024, including solid activity this week. However, investors continue to contend with external uncertainties and the timing of monetary policy shifts as well as our dynamic macro political environment. As a result, we continue to expect modestly improving IPO activity for the remainder of 2024, and our current US IPO pipeline indicates that stronger momentum is likely to manifest starting in the first half of 2025. We're also seeing stronger economic underpinnings in Europe, aided by the ECB's easing monetary policy, including improving economic prospects in the Nordics. The improvement is not yet translating into a material increase in new public issuances, but our European IPO pipeline is healthy and growing, particularly for 2025. As investors and industry participants navigate the dynamic market environment, we continue to see sustained robust trading activity in the markets as well as strong demand for mission-critical technology solutions from financial institutions globally. As a result, our markets continue to experience strong volumes, and client demand for our FinTech solutions remains consistent with trends we have seen through the cycle, which provides a healthy backdrop for continued revenue growth across our solutions suite. Now let me turn to our financial results, which demonstrate the power and resilience of our diversified business model and our ability to succeed through economic cycles. We delivered a strong quarter with $1.2 billion in net revenues, an increase of 10% year-over-year, with solutions revenues at a 13% growth. Our overall annualized recurring revenue, or ARR, grew 7% to $2.7 billion. I'm particularly pleased with the strength of the performance across our business, which is a testament to the power of our platform. We're integrating the Adenza acquisition ahead of schedule and are realizing the investment thesis that underpin the transaction as we demonstrate its value for clients, shareholders and employees. Our expenses for the quarter increased 7% year-over-year, within our guidance. Our operating income grew approximately 14%. And importantly, our operating margin increased to 53%, representing over one percentage point of operating leverage while we continue to invest to support growth in our business and deliver on synergies. Turning now to a discussion of the business highlights, starting with capital access platforms. While ARR growth in the division remained at 1%, our index revenue grew 29%, resulting in overall revenue growth for capital access platforms of 10%. In Listings, we welcomed 31 operating company IPOs maintaining our strong win rate of 72% based on Nasdaq eligible listings. While the slower IPO environment remains a headwind, we're encouraged by signs of improvement, as supported by our most recent IPO Pulse Index, which is near a three-year high. Overall growth in data and listings continue to experience challenges as modest growth in market data and the slowly improving IPO environment were offset by the impact of prior year delistings. Growth in our analytics business benefited from continued demand across the investment community for actionable intelligence and increased efficiency. However, that growth was partially offset by continued headwinds in corporate solutions, resulting in more muted growth for workflow and insights. Our index business delivered another exceptional quarter with $17 billion of net inflows during the quarter, totaling $53 billion over the last 12 months. We also achieved another record in Index ETP AUM exiting the quarter at $569 billion. Turning next to Financial Technology. ARR growth across the division was 13%, including 25% in Financial Crime Management Technology, 14% in the combined AxiomSL and Calypso solutions and 9% in the combined Market Technology and Trade Management Services. The division had 69 new client signings, 96 upsells and 4 cross-sells. We also saw continued cloud adoption as 68% of AxiomSL and Calypso's combined bookings in the quarter were cloud-based with a strong pipeline for future quarters. Turning to the specific subdivisions. Financial Crime Management Technology continued its strong momentum. We signed over 50 new clients in the SMB space, and we continue to make progress in the Upmarket segment focused on Tier 1 and Tier 2 banks. In July, we signed a new international Tier 1 bank, which is also an exciting cross-sell. Going forward, we continue to maintain a strong sales pipeline within the core SMB segment, and we have a growing pipeline of new clients and upsells among Tier 1 and Tier 2 banks. Across Regulatory Technology, we see sustained demand across both existing and new clients as financial institutions face increasingly dynamic regulatory environments, including changes in regulation globally related to asset thresholds. Among the many regulatory trends that are driving sales demand, we're pleased with our progress in signing clients around the world as they focus on implementing Basel IV and preparing to implement Basel III end game. In Capital Markets Technology, we continue to see strong demand for mission-critical technology as many of our clients focused on modernizing their infrastructure to enhance resilience and performance. For Calypso, we see robust new demand, especially in the Treasury segment in addition to cloud transformation of large-scale clients. In our Market Services division, we delivered revenue growth of 3%. We experienced healthy volumes across North America and Europe, and we achieved a sequential increase in North American options market share as well as growth in Nasdaq US equities on-exchange market share and capture. Our US index options achieved record revenues, more than doubling versus last year, due to higher capture and volumes. In our US Cash Equities business, we executed successful Russell, MSCI, and S&P rebalances during the quarter, which showcased the strength and resiliency of our markets. During the Russell event, for instance, nearly 2.9 billion shares, representing a record notional value of over $95 billion, were executed in the Closing Cross, representing the largest liquidity event on the Nasdaq Stock Exchange or the Russell Reconstitution. In our European markets, the strength of our market ecosystem, as evidenced by the depth of book, breadth of participants, and product innovation continues to drive market share gains. Overall, we're pleased to report a solid quarter of market services and remain focused on retaining our leading position across all of our markets. I now want to spend a few minutes updating you on how we're executing against our 2024 strategic priorities of integrate, innovate and accelerate. Starting with integrate, we have actioned over 70% of the $80 million of net expense synergies, and our leverage ratio reached 3.9 times at quarter-end, both ahead of plan. Both AxiomSL and Calypso are fully integrated into the Financial Technology division and we've established strong leadership, a well-structured operating model, and a One Nasdaq go-to-market approach to ensure we're delivering for our clients with the highest level of efficiency and effectiveness. Our CRM's integration for the Calypso and Axiom solutions is now completed ahead of schedule, and this supports divisional sales coordination as well as the sales incentive program established at the beginning of the year. Importantly, across AxiomSL, Calypso and Verafin, we've been highly focused on cultural integration into the broader Nasdaq enterprise. And internal surveys continue to show that our employees are highly engaged and energized to deliver for our clients. We're also making strong progress advancing our innovate priority. We currently have approximately 50% of our employee base working with AI tools focused on enhancing productivity as well as driving our product roadmap. By the end of Q3, 100% of our developers will have access to AI copilot tools, and we recently had over 650 employees participate in several AI hackathons across Nasdaq. During the quarter, we continued to introduce new AI capabilities within our client-facing solutions. Consistent with other Gen AI capabilities recently launched in our Verafin and Boardvantage solutions, with an investment, we have deployed a new AI-powered feature for the Market Lens module called Pension Meeting Minute Summarization. The feature provides asset managers with key insights on current and future pension fund strategies to help inform their business development and engagement priorities with top pension decision makers. We also have a strong pipeline of AI features scheduled to launch in the coming quarters, including in Market Surveillance and IR Insight. And we're seeing strong early traction in client adoption and effectiveness related to the capabilities that are already on the market. Specifically, Dynamic M-ELO, the first SEC-approved AI order type, which we launched in April, is driving a 20% increase in both volumes for this order type and improvement in fill rates compared to the prior static version. Verafin's integrated Gen AI feature, Entity Research Copilot, is now deployed at more than 250 clients and we expect to complete our rollout in the third quarter. Client feedback has been positive, demonstrating that the integrated copilot functionality can reduce alert research time by up to 90% compared to banks that do not use Verafin. Beyond AI, we continue to drive innovation towards key growth priorities. For example, in our Index business, innovation is at the heart of our growth strategy as we extend the franchise to new markets globally, drive institutional adoption and introduce new products beyond the NASDAQ 100. During the quarter, 50% of index product launches were outside of the United States, and we're quickly gaining traction in investor adoption. In total, we launched 18 new products with our partners, including 12 ETPs and three insurance annuity vehicles geared towards our institutional clients. Additionally, we're pleased that our AI-themed ETP saw more than $1 billion of inflows over the last 12 months. Wrapping up with our Accelerate priority. The addition of AxiomSL and Calypso has significantly elevated the dialogue we have with our clients as a strategic partner. There's no better evidence of that than the early traction we're seeing in our cross-sell efforts. Since closing the transaction, we have executed on 11 FinTech cross-sells. We had four this quarter, including two cross-sells of our AxiomSL solution and two Calypso clients. This is a great start, but it's only the beginning on our journey to exceed $100 million in cross-sells by the end of 2027. Just eight months since the acquisition closed, 10% of the opportunities in our pipeline are cross-sells, and we expect this to grow sequentially. The division has several strategic cross-sell campaigns underway, which are generating strong top-of-funnel interest and underpins our continued confidence in our ability to grow cross-sell bookings over the coming years. To wrap up, we're pleased to deliver a quarter of strong results, driven by continued momentum in solutions and the power of our diversified platform to drive scalable, profitable and durable growth. Importantly, we're delivering on the Adenza acquisition thesis as our clients increasingly see Nasdaq as a strategic partner that can help solve their largest, most complex challenges. We look forward to leveraging this momentum to unlock our next phase of growth. And with that I'll now turn the call over to Sarah to review the financial details.

Thank you, and good morning, everyone. In the second quarter, we made excellent progress in both the integration of Adenza and the accelerated paydown of debt. We actioned over 70% of net expense synergies six months ahead of schedule. We have also come in ahead of our accelerated deleveraging plans ending the quarter at 3.9 leverage. Turning to our second quarter results on Slide 10. We reported net revenue of $1.2 billion, up 10%, with solutions revenue up 13%. Operating expense was $539 million, up 7% within our guidance with an operating margin of 53% and an EBITDA margin of 56%. Overall, this resulted in net income of $397 million and diluted EPS of $0.69. Slide 11 shows the drivers of our 10% pro forma revenue growth for the quarter. We generated 8% outside growth on a net basis, driven by new and existing clients as well as our focus on product innovation. Overall, beta factors were 2% this quarter, driven by higher valuations in Nasdaq indexes as well as higher overall volumes in market services. On Slide 12, we had 7% ARR growth, and as part of that, we had 17% SaaS revenue growth, resulting in SaaS as a percent of ARR now at 37%, up four percentage points. Let's review division results for the quarter, starting on Slide 13. In capital assets platforms, we delivered revenue of $481 million, reflecting growth of 10%. We had another exceptional quarter for our Index business with revenue up 29%, driven by $53 billion of organic inflows in the last 12 months, including $17 billion this quarter and market performance both resulting in average ETP AUM of $531 billion. In addition, future volumes were up 25%. Data and Listings revenue was up 1%, while ARR was down 1%. The difference was driven by small one-time revenue benefits primarily related to listings. Revenue from higher data sales and usage, new listings and pricing offset the impact of delisting, downgrades, and lower amortization of prior period initial listing fees. We expect the quarterly headwind from lower amortization of prior period listing fees to increase from an immaterial impact in 1Q '24 and approximately $1 million in 2Q '24 to about $3 million in each of the next four quarters. However, we have seen roughly 25% fewer delistings in the first half of the year versus the prior year period, suggesting that delistings should be less of a revenue headwind in 2025. Lastly, Workflow and Insights revenue was up 4%, in line with ARR growth of 4%. This was driven by continued growth in innovative analytics products, mainly Datalink and eVestment. This was partially offset by continued headwinds in Corporate Solutions. Analytics had a strong quarter with both revenue and ARR in high-single digits. Operating margin was 56%, up one percentage point. Looking forward, we expect full year revenue growth for capital access platforms to exceed our medium-term growth outlook range with index expected to come in above its range. Workflow and Insights expected to come in below its range and with Data and Listings essentially flat year-on-year. Moving to Financial Technology on Slide 14. We had another quarter of strong growth with division revenue of $420 million, a 16% increase and with ARR growth of 13%. This performance reflects double-digit revenue and ARR growth across our three subdivisions. Financial Client Management Technology delivered 24% revenue growth and 25% ARR growth with 53 new clients in the quarter. Capital Markets Technology had revenue growth of 14% and ARR growth of 11%, on the back of seven new clients and 38 upsells in the quarter. The difference between revenue and ARR growth is driven by the timing of on-prem renewals and professional services fees. Together, Trade Management Services and Market Tech grew revenues 2%. We experienced strong subscription revenue and ARR growth, up 9% for both businesses and up three percentage points sequentially. The lower growth in revenue was due to year-over-year decline in Professional Services revenues. As we mentioned last quarter, in Market Tech, we had a very large implementation in 2023, which created a $27 million revenue benefit in the full year of 2023. And this year has resulted in subscription revenue or ARR of $11 million. We expect this year-over-year headwind to persist in Q3 and abate in Q4. Calypso had revenue growth of 34% and ARR growth of 13%. Revenue was higher than the expectation we provided in the first quarter call due to broad strength in sales activity, including a strategic early renewal, 29 upsells, and five new clients. As we look forward, we continue to see solid momentum in the business and expect Capital Markets Technology revenue growth for 2024 to remain in line with our medium-term outlook. Overall, for the second half of 2024, we expect more normalized growth across the products within the division versus the first half of the year with consistent growth across quarters. Regulatory Technology had revenue growth of 16% and ARR growth of 10%, with seven new clients and 58 upsells in the quarter. The difference between revenue and ARR growth is driven by AxiomSL, which had 23% revenue growth and 14% ARR growth. The 23% revenue growth was primarily due to strong subscription revenue, including a large on-prem renewal, 29 upsells, and one new client in the quarter, partially offset by a decline in professional services fees due to the timing of client deliveries. The FinTech operating margin was 47% in the second quarter, up three percentage points, including the benefit of synergy realization. As we finalize the business combination accounting for Adenza during the measurement period, let me update you on a change we are evaluating on AxiomSL. As part of this potential accounting change, we would recognize on-prem subscription-based revenue on a ratable basis over the contract term, whereas we currently recognize approximately 50% upfront. This is due to the frequency of critical mandatory regulatory updates that we implement and embed in the AxiomSL software throughout the contract term. We believe this change would enhance our financial reporting and would not change the Adenza medium-term outlook we had provided nor our ability to achieve it this year. If an adjustment is made, it would not have a material impact on Nasdaq overall, and 2Q would remain a strong quarter with FinTech revenue growth near the top of its medium-term outlook range, solutions revenue growth at the high end of its medium-term outlook range and AxiomSL and Calypso combined revenue growth above 20%. Importantly, combined ARR growth of 14% and net revenue retention of 111% would be unchanged. Specifically at the AxiomSL level, we expect subscription revenue growth to be more consistent going forward and remain in line with our medium-term outlook. AxiomSL's 2Q '24 subscription revenue growth would have been generally in line with ARR. However, the timing-related decline in professional services fees I mentioned earlier would have driven total AxiomSL revenue growth for the quarter to the low to mid-single digits. We expect to receive additional information to finalize our analysis in 3Q. And if we make the change, we will provide updated historical information by quarter for 2023 and the first half of 2024, during 3Q and ahead of reporting our 3Q earnings. Now wrapping up the divisions with Market Services. Net revenue was $250 million for the quarter, up 3%. Growth was driven by higher volumes in cash equities in both North America and Europe as well as in US options, increased capture in North America equities, US index options high growth, share gains in European equities from a very strong base, and one additional trading day. This was partially offset by lower share in US options and equities, though share for options was stronger sequentially and increased over the course of the quarter. We also had lower US state revenue. Market Services second quarter operating margin was 58%, a one percentage point decline from the prior year, primarily due to continued investments in market monetization and regulatory obligations. Moving on to non-GAAP operating expense on Slide 16. This quarter was $539 million, reflecting pro forma growth of 7% or $15 million sequentially. This is within the guidance we provided on our first quarter earnings call. And as a reminder, second quarter included the impact of annual merit adjustments and equity grants. All-in, we generated positive operating leverage with an increase in both operating and EBITDA margin of over one percentage point. This included the benefit of synergies this quarter and the funding of additional revenue-related expense. We originally targeted $80 million of net expense synergies through the end of 2025. As of Q2, we have already actioned over 70% of that amount, six months ahead of schedule. The P&L benefit of the actions already taken represent approximately one percentage point reduction in expense growth in the first half of this year. Please note that the actions of 2Q and 3Q have a longer timeline to expense recognition. And as such, we expect the full impact of synergies to moderate expense growth by approximately 1.5 percentage points for 2024. For the full year, we expect non-GAAP operating expense of $2.145 billion to $2.185 billion, reflecting an increase to the bottom end of the range to account for strong revenue generation, which increases variable compensation and enables us to invest in growth initiatives while also accounting for the synergy benefits realized in the year. Additionally, we continue to expect a full year tax rate of 24.5% to 26.5% on a non-GAAP basis. Turning to our capital allocation on Slide 17. Nasdaq continued its track record of strong free cash flow generation with $328 million in the second quarter, representing a conversion ratio of approximately 100% over the trailing 12 months. This takes into consideration specific one-time costs associated with the Adenza acquisition and integration. This quarter, we continued to prioritize debt reduction and are ahead of our accelerated deleveraging plan. We paid down net $174 million of commercial paper and ended the quarter at 3.9 times gross leverage versus 4.1 times last quarter. This was achieved while also increasing our quarterly dividend 9% to $0.24 per share or $138 million, reflecting a 37% annualized payout ratio, and repurchasing approximately $60 million of our shares to opportunistically take advantage of the attractiveness of our stock and start to offset 2024 employee dilution. Looking ahead, we remain focused on deleveraging and expect to pay down the remaining commercial paper balance near term while remaining opportunistic and flexible. We also remain committed to offsetting employee dilution. In closing, we are thrilled with the pace at which we are delivering and the results of our integration. We are executing on our plans with focus and discipline, building a financial technology powerhouse, driving durable growth and profitability for our shareholders.

Thank you. And I show our first question comes from the line of Dan Fannon from Jefferies. Please go ahead.

Great. Thank you. So within Financial Crime Management, you highlighted price increases as a contributor to growth. I was hoping you could talk about pricing more generally across your businesses and specifically what maybe price contributed to the strong growth in the quarter across the various segments.

Sure. I would say that, as we've mentioned before, price increases vary by product and are also influenced by how we structure contracts with our FinTech clients. Therefore, I can't provide a precise answer to that question. However, regarding our AxiomSL and Calypso products, we have stated in the past that around half of the revenue growth in any quarter comes from client upgrades and upsells, while the other half comes from new sales and price increases. The price adjustments within the contracts can include CPI increases, and in some cases, we upsell our clients or adjust prices during contract renewals. This means we maintain the same price for a certain period and then raise it at renewal. We base these changes on the increased value for clients or the growth of the clients themselves, which results in them deriving more value from the product. It really varies by product.

Understood. You noted that 10% of the pipeline consists of cross-sell opportunities. It seems that upsells and momentum are well established across many of the businesses you mentioned. Could you discuss the early use cases you are observing within cross-selling and how the conversations are evolving based on your current experiences and where you see the momentum regarding the actual products?

Sure. During the quarter, we achieved four cross-sells, including two where we provided AxiomSL solutions to Calypso clients. This success stems from our strong relationships with clients. Calypso clients are facing new regulatory requirements and have chosen to partner with us. One advantage we offer is a data API connector that allows direct data transfer from Calypso to AxiomSL, simplifying the implementation of our solutions for compliance. This capability is driving demand. Additionally, we have a cross-sell campaign targeted at our exchange clients, combining our clearing technology with Calypso’s excellent collateral management features, demonstrating the value of integrating these services. We are also engaging with our Verafin clients across the U.S. to offer both treasury management and AxiomSL regulatory reporting solutions to a wider banking audience. These strategic campaigns are clearly contributing to our sales funnel. Moreover, as noted in July, one of our major Tier 1 clients for AxiomSL and Calypso has now committed to using Verafin, highlighting the strength of our overall relationships and their trust in us for their anti-financial crime solutions.

And I show our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead.

Good morning, everyone. Thank you for the question. I wanted to begin by discussing the momentum at Adenza. You provided several key performance indicators regarding upsells, new client signings, and cross-selling. Could you help clarify what these KPIs indicate regarding the revenue opportunities that arise from these successes? I'm interested in understanding how they relate to potential revenue pipeline or backlog and what this could imply for revenue growth. Thank you.

I believe the most effective way to assess this is through Annual Recurring Revenue (ARR). The contract values from new sales contribute to ARR in terms of annualized contract value. Currently, the ARR across all of FinTech is 13%. We have also provided the ARR growth figures for each of the subdivisions, which offers a predictive insight into the subscription revenue expected from these businesses in the future. We have shared numerous ARR figures in both the script and the release and presentation. This is how we evaluate the overall health of the business and the forward potential of subscription revenue. Additionally, we monitor professional services revenues and provide insights into those dynamics. As we previously mentioned, for the combined AxiomSL and Calypso properties, the overall revenue outlook is slightly below our ARR expectations, as professional services fees traditionally grow at a slower pace than subscription revenues over time. This is how we recommend evaluating the business.

Great. Awesome. Helpful. So, and then on Verafin, you highlighted the Tier 1 international bank, which is I know is an important market for the firm. Can we maybe spend a little more time on sort of how you see an opportunity set and the revenue contribution from international markets shaping out for Verafin as you kind of push further into that market?

Yes, great. Well, first of all, today, the Tier 1, Tier 2 banks, the revenue contribution is still very small because we're still signing new clients, we're implementing them. We don't start recognizing the revenue until we implement in terms of making sure that we have them up and running. And the implementation times are ranging from, I would say, six months to a year depending on the complexity of implementation. So and most of the new sales that we've had in the Tier 1, Tier 2 space have focused on payments fraud. We also have this new consortia-based check fraud solution that's really exciting that we're definitely driving demand. And as we go into the international banks, one of the things that we've been focused on, both in Canada and the UK, is looking at payments fraud across kind of what I'll call international payments fraud into their US operations in other parts of the world. But that's where we really have this incredible strength in our business and in our solution. We can cut down false positives anywhere from, frankly, 20% to 40% depending on how they implement it. We can increase fraud found, and that's been really exciting for the banks to see. We run these proof-of-concepts to prove out the solution, and it's pretty remarkable actually as to the benefit they get. Taking that proof-of-concept and turning to a contract takes time. So we are super excited to see our latest Tier 1 signed in July. The proof-of-concept was done probably by April or so, just to give you a sense.

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

All right. Good morning. Maybe just the first question on the deleveraging that's coming in ahead of expectations. You noted that repaying the additional CP is a priority, but I think there's only $50 million left on that, and I think you're generating close to $250 million plus of free cash flow for dividends. So can you just help us frame what's the preference here in terms of enacting further repurchases opportunistically on a go-forward basis after you repay the $50 million remaining or should we think about the priority really getting that net leverage lower and simply letting the cash build up on the balance sheet near term?

Thank you very much, Kyle. So we remain focused on the capital priorities that we have outlined at Investor Day. So of course, always the organic growth first and then the deleveraging remains very important. So you are right that we would start with the CP and the balance that you mentioned is approximately correct. And then after that, we would be opportunistic. We, first of all, have done about half of the employee dilution-related share repurchases. So I think you would expect us to continue to do that. And we use the word opportunistic, flexible because there are other things we could be doing, which is around either debt or equity.

Okay. Understood. And then just a follow-up, and I hate to use this as a question, but I just wanted to clarify something specifically that you said, Sarah, on the Listings business. And I know you said $3 million of initial listings amortization headwind starting in the third quarter and the fourth quarter. Just can I clarify, is that on a year-over-year basis? Or are you talking about an incremental $3 million headwind on a sequential basis in 3Q and then another $3 million sequentially in 4Q?

So what I gave is that in 2Q, it's $1 million year-on-year. And then in 3Q and after for the following three also, it would be $3 million. So you could add two on the sequential, but it's year-on-year. So $3 million year-on-year, $1 million becomes $3 million between 2Q and 3Q.

Thank you. And I show our next question comes from the line of Michael Cho from JPMorgan. Please go ahead.

Hi. Good morning. Thanks for taking my question. I just wanted to follow up on Verafin as well. Just Adena you talked through kind of the proof-of-concepts going and kind of the, it seems like it would seem like a pretty quick turnaround for the most recent Tier 1 from April and to planning in July. I mean, can you just give any more color around the pipeline and the additional proof-of-concepts you're undertaking right now for the Tier 1 and Tier 2 clients? And then just like broader, longer term, like what do you think the right pace of new client additions should be for this cohort of Tier 1, Tier 2 clients as we look further down the road as that sales force scale as well?

Yes, we have seen an increasing number of proof-of-concepts, and while we don’t disclose specific figures, the number of clients exploring our solution is quite robust. Over time, we hope to reduce the need for such evaluations as our solution becomes well-understood by clients. Currently, this number is growing as we sign more clients who are eager to understand the benefits we offer. Ideally, we envision this becoming a regular part of our operations. Presently, we anticipate a modest number of new clients over a year—not necessarily in every quarter—but we expect to build momentum and see more consistent signings in the coming years. This process is self-reinforcing, as demonstrated by Verafin's experience when entering new segments of the banking industry, where initial clients slowly increase until a consistent rhythm is established, supported by their consortium data. While I cannot provide a specific timeline, we are focused on measuring our progress over several years to enhance our client acquisition. That’s the best insight I can provide at this moment.

Thank you. For a follow-up, could you provide more insight into the revenue trends within Capital Markets Tech in FinTech? You've mentioned some factors contributing to the revenue growth, but can you clarify the quarter-to-quarter revenue increases and whether there are any one-time large contributions from clients? Additionally, you referred to more normalized year-over-year growth in the second half compared to the first half. Could you elaborate on that as well? Thank you.

Sure. So basically, what we had is really a broad momentum across our businesses, but specifically here also in the Calypso where we had one of strategic early renewal, but also 29 upsells and several new clients. And so as you look forward, you are going to continue to see solid momentum in the business. And we told you also that 2024 would remain in line with our medium-term outlook. But of course given the type of first half we have had, I think, it was not a surprise that we mentioned that we would expect more normalized growth across the products within the division versus the first half of the year. And also we pointed out consistent growth across quarters. And so this is what we said at the Capital Markets Technology revenue level.

Yes. And I just want to make sure, it was actually within the subdivision, which is the Capital Markets subdivision.

Thank you. And I show our last question comes from the line of Patrick Moley from Piper Sandler. Please go ahead.

Yes. So I just wanted to go back Adena to your comments on the IPO environment. It sounded like you said that you expected the landscape to sort of improve throughout the remainder of the year, but you didn't expect it to manifest until the first half of 2025. So could you maybe just clarify your expectations for the rest of this year and when you expect that to show up in the financials?

I believe we've noticed a slight improvement compared to last year. It's somewhat surprising that while the market is performing well overall, the IPO environment remains subdued. This week has been positive, with the largest IPO of the year taking place today and another successful one yesterday. However, we still see IPOs coming in gradually rather than a continuous flow of substantial IPOs. When we examine the pipeline and talk to clients, we anticipate ongoing modest improvement in the IPO landscape, especially since last year was weak. Many discussions, especially in the tech sector, have shifted focus to the first half of 2025. This could change, though. If we see some positive momentum in the economy over the fall, it may open up opportunities as more companies prepare to launch their IPOs. Nevertheless, I believe many are still considering waiting until next year to enter the market in 2025.

Okay. Great. And then just a follow-up on index options, you're seeing really strong momentum there. I think you mentioned that revenues have doubled versus last year. Volumes were up, I think, 50% year-over-year. So it does seem like you're taking price there. Could you maybe just update us on the broader vision for index options in Nasdaq and maybe your approach to pricing potentially at the expense of not picking up as much market share as you'd like? Just kind of how you think about that.

We are really excited about the development of the index options business. The trading ecosystem and investors are recognizing the advantages of hedging their index exposure through the options market. We've seen positive trends with other index franchises, and now with the NASDAQ 100, we are building momentum and taking advantage of futures, where volumes increased by 25% year-over-year in the last quarter, as well as in the options sector. We are keen on this direction because we have positioned it as a premium segment of our options franchise, given the significant benefits clients receive from our hedging capabilities. This justifies the fees we charge, and it has not negatively affected demand, which remains strong and continues to grow. We have invested considerable effort over the past several years to enhance understanding of options and hedging. We provide data and analytics to clients to guide them in effectively utilizing options. This educational initiative has been in place for about three years and is now yielding positive results. We anticipate ongoing growth and are exploring additional indexes to incorporate into our index options franchise. Additionally, the index and options teams are collaborating closely, which creates a positive feedback loop benefiting the institutional community by offering improved hedging tools and enhancing adoption of our index products.

Very helpful. Thanks, Adena.

Sure. 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, everyone.

Good morning, Craig.

So we had a question on Solovis. Back in May, Bloomberg reported that you're considering a sale of Solovis and while this could help you reach your financial leverage target faster and maybe the next deal. We were just curious, given the news because Solovis is strategic fits pretty well within your objective to provide software data and other services in the financial service ecosystem. And arguably, there's other businesses, maybe like the Nordic Exchange, which doesn't fit as well. So I was just wondering if you could comment on the potential for Nasdaq to sell existing businesses. Thank you.

Yes. So I won't comment on any particular rumor that's out there. But I would just say this, we do a very detailed review every year of our capital allocation. We look at our businesses strategically, financially across several different factors and evaluate how each one of them fits into our overall client experience and making sure that we're always the right owner for the businesses. And as you've known since I became CEO, many years ago now, 7.5 years ago, we've made decisions to divest of certain businesses where either we're just not the right owner of the business because our clients are not seeing us as a strategic owner. They might see us as an owner. They definitely understand that we own the business, but they might not necessarily strategic to our franchise or we have capital allocation priorities that really skewed towards different parts of our business. In terms of you know you did mention areas of our business. I would say, I do want to say one thing. We view our Nordic business to be very strategic to Nasdaq. And I've said this on prior calls, the Nordic Exchange business, they are the best exchanges in Europe. The innovation ecosystem that exists in the Nordic is incredible and very consistent with the US. And I would say that we do a great job of operating those markets and we're really proud to be the operator of the Nordic market. The other thing is the team there is really contributes a lot to our broader technology business. So we deploy members of the Nordic team out to work and help our market tech clients around the world. We have a great set of clients in the Nordics that are now wonderful clients in our FinTech solutions. So there's a lot of strategic intersection with our Nordic business. I do want to provide a defense of that. But generally, Craig, we do this work, and we make these decisions over time because that we look at it as in terms of the long-term strategic fit to Nasdaq.

Thank you, Adena. And just I had a follow-up on the response to the last question on index options and specifically the NASDAQ 100 Index. What is your desire and ability to expand NDX with zero DT options? And then also with rising retail engagement and there's a lot of interest around tech overall, so it fits perfectly in here. I was curious on your comment about launching other indexes. I'm just curious in terms of what you could do there.

Yes, we are always evaluating our index products that have strong appeal to both retail and institutional investors. These products are substantial enough to provide liquidity for future or options products, particularly from a hedging standpoint. Beyond the NASDAQ 100, we have a diverse range of index products, including thematic indexes that focus on various technology trends like cloud computing, IT security, and artificial intelligence. We also have thematic indexes based on different investment strategies such as momentum and dividend strategies. If we believe there is potential to create a trading ecosystem around these products, we will explore it. Currently, there isn't a specific index product we are targeting, but we conduct thorough analysis on this matter. When it comes to structuring options and determining option duration, we will evaluate investor interest and collaborate with the SEC when necessary.

Thank you.

Thank you. And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead.

Yes. Hey, good morning, everyone. Just wanted to come back to what you called out on Calypso or Capital Markets with that early strategic renewal. Can you just explain what exactly happened there? Why? And is that something that we should expect more often? And then maybe related to that, on the impact side, looks like ARR up $25 million quarter-over-quarter in that segment. Can you dimensionalize how big that renewal specifically was? Also on the transactional side, you beat me pretty handily, so maybe more than $10 million. Is it all related to that? So just trying to understand how big some of these individual renewals could be. Thank you.

Having early renewals is not entirely uncommon. We're particularly excited about a strategic client that opted to renew early and extend their contract, which we take pride in. Regarding Calypso revenue, it’s important to remember that ARR serves as a solid indicator of the overall health and stability of the business. This is due to the structure of license fees, where half of the revenue is recognized upfront and the other half over the life of the contract. Our cash revenue, how we receive cash, and the overall ACV value of contracts are more accurately reflected in ARR. We continue to observe ARR as very stable and healthy, which we find fantastic. Events like this early renewal will happen occasionally. Additionally, we had five new clients and 29 upsells, all contributing to strong revenue this quarter. As Sarah mentioned, looking at ARR over time provides a better understanding of the business's overall growth characteristics, rather than focusing on a single quarter.

Yes. The only thing I would add is, by definition, ARR impact of a renewal is not as much as a new client or an upsell. And then so if you were focused on why we had a good performance on ARR at Calypso or in Capital Markets deck, it was really because of the breadth of everything that has happened.

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

Hi. Good morning. Thank you for answering my questions. You have several initiatives related to AI, and regarding Dynamic M-ELO, you mentioned a 20% increase in both volumes and the fill rate. Could you discuss the potential impact on your market share and financials over time, as well as the challenges your competitors might face in launching similar products? Thank you.

Thank you, Owen. Regarding the first question, this is a specialized type of order. It won’t significantly impact market share, but it is a premium product that provides substantial value to our clients. It allows for a higher fill rate in size at the midpoint, making it more of an opportunity for revenue rather than market share. We do explain in our filing how we achieve this, but it took us several years to refine the process with our AI and data science teams. The structuring required is quite complicated to ensure we achieve the desired outcomes. We are continually adjusting various data points and their significance in relation to the product's timer. Therefore, while the formula may be accessible, effectively managing it reflects the excellence of our technology division, making it extremely difficult to replicate.

Got it. And then for Financial Crime Management Technology, we heard that some other enterprise software companies had to lower the ARR guidance because of some uncertainty in the macro environment, but the momentum in your business seems to be quite robust. And you highlighted the new Tier 1 clients signed in July. Could you please remind us how Verafin could fare or grow in different macro environments? Is there any reason we should be worried about if the macro environment turn? Thanks.

Sure. Let's discuss our FinTech level and delve into specifics. We view our FinTech solutions as mission-critical technology that assists clients in managing risk, fulfilling regulatory obligations, and keeping criminals out of their networks, while also offering essential capital markets technology to the entire exchange ecosystem. To us, these are strong and sustainable demand drivers. As the world becomes increasingly complicated and risky, our capability to aid clients in managing risk within their trading books, treasury operations, and capital obligations, as well as in the markets, is significant. This has been a strong driver of demand. Regulatory obligations are consistently durable globally. Although different regulators move at varying paces, there are always changes in regulations which drive demand and growth. As banks expand their operations into new countries, this also generates substantial demand. Regarding anti-financial crime, we've noted that this is a $3.5 trillion issue related to anti-money laundering and fraud, and we are just beginning to tap into this market. It's not only about the large total addressable market but also the uniqueness of our solution. Our approach to integrating data, analyzing consortium data, and applying AI and workflow automation enhances efficiency, presenting a significant opportunity for us. Currently, we primarily operate in North America, which leaves much global potential untapped. Owen, we've entered this business with clear ambitions to be the solutions provider for the most complex challenges banks face in all economic conditions, and we believe this will foster sustainable growth for us.

Got it. Thanks a lot.

Thank you. That concludes our Q&A session. At this time, I would like to turn the call back over to Adena Friedman for closing remarks.

Thank you. Well, as you heard this morning, Nasdaq continues to make progress on our three key priorities of integrate, innovate and accelerate. And through our complementary and integrated solutions, Nasdaq is delivering consistent growth, and the One Nasdaq strategy is accelerating our evolution as a trusted technology provider to the financial services industry. We look forward to updating you on our strategic progress in the quarters to come. And thank you all for joining and have a great day.

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