Adena T. Friedman
Chair and Chief Executive Officer at Nasdaq
Thank you, Ato. And good morning, everyone. Thank you for joining us. Today, my remarks will cover the following areas: our outlook on the external environment as well as highlights from our first quarter financial and operational performance, including innovation milestones and key progress updates on our cross-sell efforts and synergies. I will then turn the call over to Sarah for a review of our financial results. I'll start with our outlook on current economic environment. Recent data, including sustained consumer spending and labor force strength, suggests that the U.S. economy remains resilient despite heightened geopolitical risks and a higher cost of capital. The U.S. markets are generally performing well, reflecting that economic resilience as well as the potential future productivity benefits that derive from the adoption of generative AI and other sector-specific performance trends. This strength in the U.S. economy has U.S. growth projected to outpace other advanced economies. As such, economists continue to expect a soft lending in the U.S. Although other advanced economies are seeing slower growth, recent data shows improvement in manufacturing and services, particularly in Europe. Global inflation has trended sharply lower over the last year, although it is starting to show some signs of persistence as it moderates globally. Markets are still expecting rates to begin to decline later this year in most major markets, which will be a positive for corporates and for the real estate sector, including new homebuyers. With the strength of -- in the markets, we've begun to experience an uptick in IPO activity. In the first quarter, the U.S. markets welcomed 39 operating company IPOs, the most in two years, highlighted by nine IPOs with market caps in excess of $1 billion.
Additionally, as we referenced in our most recent Nasdaq IPO Pulse Index, we're seeing five out of six leading indicators of future IPO activity continue to improve, suggesting an improvement in the U.S. public equity capital raising environment over the coming months. As we look towards the remainder of the year at Nasdaq, we see a healthy pipeline of exciting companies preparing to enter the public markets. But their time lines will be dependent upon continued strong economic and market performance. Taking a closer look at Nasdaq's business environment, we continue to capitalize on attractive opportunities for sustainable growth through our diversified business platform that is well positioned to succeed through economic cycles, as evidenced by our solid first quarter performance with double-digit growth in our Solutions revenues. We've aligned our business against key industry-shaping megatrends, the modernization of markets, the transformation of the investment landscape, the drive towards sustainability and increasing financial services investment in resilience and risk management, where we are uniquely positioned to capitalize on strong, sustained client demand, which we'll cover throughout our call today. Before we move on to our financial results, I want to mention Borse Dubai's recently completed secondary offering of Nasdaq common stock. Specifically, Borse Dubai sold a position of their stake representing approximately 5% of Nasdaq's total shares outstanding. The secondary transaction priced on March 19 and closed on March 22, with strong investor demand resulting in an oversubscribed transaction. Following the transaction, Borse Dubai continues to hold just over 10% of Nasdaq's total shares outstanding.
Additionally, Essa Kazim, the Chairman of Borse Dubai, will continue as a valued member of Nasdaq's Board of Directors. Our relationship with Borse Dubai is multifaceted, spanning many years, and Nasdaq continues to be a trusted technology provider and brand partner to Borse Dubai. We look forward to their continued support as a shareholder of Nasdaq, as their insights and contributions have and will continue to shape our path ahead. Turning now to our financial results. I'm pleased to share Nasdaq's solid financial performance for the first quarter of 2024 with strong double-digit growth in Solutions revenues. In the first quarter, we achieved $1.1 billion in net revenues, an increase of 7% compared to the prior year quarter on a pro forma basis. We delivered 13% pro forma revenue growth across our Solutions businesses during the quarter. In addition to strong performance across our Financial Technology division, our Index business had a stellar performance in the quarter. Our annualized recurring revenue, or ARR, increased 7% year-over-year on a pro forma basis to $2.6 billion. Across the company, we supported revenue growth and continued investments while delivering a 53% operating margin for the quarter. This represents a one percentage point of operating leverage against the prior year quarter both on a pro forma basis and when excluding Adenza. Our solid performance in the first quarter of 2024 illustrates our continued ability to execute against our strategic vision, delivering value and growth to our clients and shareholders amid a dynamic operating environment. Now let's review the highlights of our operational accomplishments and client successes by division, starting with Capital Access Platforms. In the Capital Access Platforms division, we delivered 15% growth highlighted by outstanding performance in our Index business. With the strong close to 2023 and subsequent market rally at the beginning of 2024, our Index business had an exceptional momentum in the first quarter. The Nasdaq-100 reached record highs multiple times during the quarter.
And we are pleased to announce that our Index business overall crossed the $500 billion threshold in ETP AUM for the first time during the quarter, finishing the period at $519 billion. Over the last 12 months, we saw $46 billion of net inflows, including $21 billion just this quarter alone. We also worked with clients to launch 29 new products tracking Nasdaq indices, demonstrating our steadfast focus on innovation and global distribution. This momentum contributed to our Index business delivering 53% growth, which represents 38% year-over-year core revenue growth in the quarter as well as a onetime item that Sarah will describe. This quarter also marked the 25th anniversary of the Invesco QQQ ETF, representing more than two decades of providing investors with access to some of the world's most innovative companies within our Nasdaq-100 index. In addition to this milestone, we were honored to be named the Index Provider of the Year by etf.com, which further validates our efforts to improve investor outcomes through product introductions, innovation, performance and support. Our Data and Listings business was up 1% year-over-year, as global growth in our data business was offset by headwinds from delistings and a muted IPO environment. In the first quarter, our U.S. listings business achieved a 69% win rate when considering Nasdaq-eligible operating company listings. In total, we welcomed 22 operating company IPOs, raising nearly $4 billion in proceeds, including Kaspi.kz, Astera Labs and BrightSpring Health. In addition, four companies, representing $9 billion in market value switched their listings to Nasdaq during the quarter, including SAIC. In our data business, we continue to make progress with the signing of new customers to enterprise agreements, with additional growth driven by our international expansion strategy, reflecting the importance of creating a frictionless data experience with multiple delivery capabilities for our global client base.
Turning to our Workflow and Insights business, which grew 4% year-over-year. We saw continued weakness in Corporate Solutions as lower sales in 2023 will continue to have an impact on our financial performance in 2024. While our sales cycles have been starting to improve over the last six months, they continue to be meaningfully longer than what we experienced in 2021 and the first half of 2022. New sales are also impacted by a persistent lower -- slower IPO environment. We are generally able to demonstrate the value of our IR and ESG solutions beyond the complementary IPO package to newly listed companies once they've had a few months to experience the rigor of the public markets. While we're encouraged by the early signs of an improving IPO environment, any IPO market improvements that we may experience in the coming quarters will take time to translate into improving sales and revenue results for our Corporate Solutions business. In our Analytics business, we achieved high single-digit growth in the quarter. And we continued to deepen our strategic alliance with Mercer, one of the largest global investment consultants. During the quarter, Mercer incorporated our new eVestment ESG Analytics for asset manager diligence and insights into their assessment process. We're excited about this expansion and see additional opportunity to deepen and expand our partnerships with the asset management community going forward. Across both Analytics and Corporate Solutions, our proprietary data remains a strategic differentiator. For example, in Analytics, we continue to develop innovative data products in our Data Link offerings that are attractive to traders and the investment community. And we have solid growth in our Market Lens product offered through our eVestment platform. We're also focused on enhancing our products through the use of AI. In Corporate Solutions, we're advancing Nasdaq Boardvantage with AI-powered workflow tools and are collaborating with Microsoft's ICONIC AI Incubation Lab on a series of planned AI-enabled features.
As part of this partnership, we're launching a new capability that creates executive summaries for Board members and supports corporate secretaries in preparing and summarizing Board documents. We're currently testing this feature with clients in a beta release. Turning next to the Financial Technology division. We delivered 10% growth in the quarter. Overall, we're encouraged with the very strong client response and engagement across the new division, which further reinforces our view that our clients are looking for strategic partners that can help them navigate the complexities across the financial system and operate more efficiently. As part of the transition of the Calypso and AxiomSL businesses to Nasdaq, we hosted our first-ever Financial Technology conference in New York City earlier this month. The event brought together more than 170 clients from over 80 accounts. Feedback from the clients was positive, highlighting their belief that Nasdaq is the right owner and a trusted partner that will invest in the Calypso and Axiom offerings to fuel both the next wave of modernization and help them mitigate, manage and capitalize on today's environment. Through the event, clients were educated on the Nasdaq organization, the product road map strategy for the AxiomSL and Calypso offerings and on Nasdaq's comprehensive suite of solutions. This has created new commercial conversations that the team is currently pursuing. Now let's turn to our performance highlights, starting with the Financial Crime Management Technology business, where we achieved 23% revenue growth and 24.5% ARR growth over the prior year quarter. We advanced our leadership position among small- and medium-sized financial institutions, signing 28 new clients during the quarter.
As a reminder, the fourth quarter is our biggest bookings quarter each year, and we have a strong pipeline of sales targets to execute on as we progress through the year. We also continue to fight -- to advance our fight against financial crime with the full production launch of our first -- of the first of our AI copilot tools that we're calling Entity Research Copilot. This tool, which is offered through the Bedrock platform at AWS, offers -- fully automates workflows with generative AI to improve investigator efficiency. By automating tasks related to research, summarization and documentation, Verafin offers significant efficiency gains that allow banks to scale their crime-fighting efforts without increasing headcount and enables them to shift resources and investment to higher-value activities and more complex investigations. We're encouraged by early user results, which showed these enhanced solutions -- through these enhanced solutions, Verafin delivers up to a 90% reduction in alert review time for investigators compared to legacy approaches. We rolled out this new capability in Verafin through a beta program in the second half of last year, and we announced this week that we're moving to full production and rolling out availability to all of our bank clients. Next, I'll discuss the Capital Markets Technology, which is comprised of our trade management services, market technology and Calypso businesses. Overall, Capital Markets Technology grew 6% year-over-year, with 9% growth in ARR. Calypso had a particularly strong performance, with total revenues and ARR growth both demonstrating strength in client demand for our solutions. Calypso had 25 upsells and one new client sale during the quarter. While we're early in our journey of unlocking the cross-sell opportunities across the division, we executed on an opportunity with a client who was looking to adopt a data connector between Calypso and AxiomSL, which highlights the synergies between these two products.
Now market technology had a more challenging quarter, largely due to a tough comparable quarter in 2023. We experienced solid growth in ARR but a decline in revenue from professional services primarily because of a significant delivery fee that we received in the first quarter of 2023. Within market technology, we accelerated our strategy to modernize markets by bringing leading technologies to our customers. We signed agreements to upgrade three matching engine clients to our next-generation platform during the quarter, and we launched a large global clearing and custody provider to the Nasdaq risk platform. Let's turn now to our Regulatory Technology business, which is comprised of our AxiomSL and surveillance businesses where we delivered 11% growth. Our AxiomSL business experienced strong sales and renewals throughout the first quarter. The product had 20 upsells during the quarter and one new client sale. With the upsells, we had three new ESG sales to G-SIB clients. In our surveillance business, we had 26 upsells and five new client sales during the quarter. Across the business, we saw continued cloud adoption, with 55% of total NTS clients now in the cloud at the end of the first quarter, which represents an increase from the end of last year. As we reflect on the Financial Technology division's first full quarter, we're very pleased with our financial and operational performance. We delivered revenue growth in line with the medium-term outlook that we announced at Investor Day, with strength across many areas of business as well as continued innovation in our product offerings. Since the formation of the Financial Technology division, we've executed on six cross-sells, including one this quarter, highlighting the strength of our One Nasdaq go-to-market approach. In addition, we have multiple cross-sell campaigns underway, and we're pleased with the growing share of cross-sell opportunities within our pipeline.
As such, we're showing early progress towards our 2027 $100 million-plus cross-sell target. Moving to Market Services, where we're navigating a complex market backdrop, particularly against a strong 2023 first quarter comp, we're experiencing 9% decline in revenue. The U.S. options business had a lower-revenue quarter due to lower volatility compared to the prior year quarter, which included turbulence in the banking system as well as increased competition in U.S. options from new entrants and shifts in retail activity resulting from the lower-volatility profile. Despite these headwinds, Nasdaq maintained its market share lead over the #2 operator in U.S. multi-listed equity options. And our proprietary U.S. index options products, notably NDX, continued to gain strength with record revenues, volume and share. In the Nasdaq Stock Market, we're also pleased to confirm the launch of Dynamic M-ELO, which commenced its rollout across symbols on April 15, with the rollout scheduled to be completed by mid-May. As we've discussed previously, Dynamic M-ELO is the first SEC-approved AI-powered order type designed to improve fill rates and create greater efficiency for our investors. In Europe, where overall market liquidity continues to be challenged, we were able to maintain strong share and capture across our equities, derivatives and fixed income markets as we continue to add value to our clients through our data analytics and new trading products. We also continue to advance our efforts to bring transparency to nascent markets. Early in the second quarter, Puro.earth released a new report tracking the rapid expansion of global carbon removal markets over the last -- over the past years. With Puro.earth as well as our carbon market technology, we experienced strong growth in volumes and revenues as the market continues to mature with greater supply coming online. And we remained well positioned to capitalize on growing demand for carbon removal credits by bringing much-needed transparency, standardization and registry services to this emerging space.
As we move forward, we are focused on retaining our leading market position across all of our markets and continue to build on the strong growth that we've seen in our proprietary NDX options products and in Puro.earth. To wrap up, we're pleased to deliver another quarter of solid results that were in line with the medium-term outlook we provided at Investor Day. In Nasdaq's core businesses, we delivered well in what we can control within a tougher market environment, including a continued muted IPO environment and lower market volatility. Across our Solutions businesses, we delivered double-digit revenue growth, including strong Financial Technology results and exceptional Index performance. Within Financial Technology, our recent acquisitions of AxiomSL and Calypso as well as Verafin continue to progress well and remain in line with expectations. With our top line performance, combined with continued expense discipline, we maintain our exceptional margin profile for the company. All told, our performance underscores the durability of our business model and our ability to deliver growth across uncertain environments. With that, I will now turn the call over to Sarah to review the financial details.
