Sarah Youngwood
Executive Vice President and Chief Financial Officer at Nasdaq
Thank you, Adena, and good morning, everyone. I am thrilled to be here for my first earnings call at Nasdaq. I could not be more excited to join the firm at such a transformational time, and I look forward to seeing many of you at Investor Day.
Now, I will turn to our financial results. I conventionally will be focused on non-GAAP results and the year-on-year growth rates will be provided on an organic basis. Similarly, operating margins will be discussed ex-Adenza for comparability purposes. I will discuss the Adenza's standalone [Phonetic] results at the end of the fintech section.
Before we move to the quarter, I would like to give you the highlights for the full year 2023, starting on Slide 12 of the earnings presentation. In an uncertain environment, we delivered solid financial performance and strong cash flow generation. Revenue of $3.9 billion was up 5% with Solutions revenue of $2.9 billion, an increase of 7%. Non-GAAP expense was $1.8 billion, up 5% in line with guidance for 52% operating margin, which was flat versus the prior year. This resulted in diluted EPS of $2.82, reflecting organic growth of 6%. We had $1.6 billion of free cash flow ex-Adenza, a growth rate of 11%.
Moving on to the fourth quarter on Slide 13. We reported revenue of $1.1 billion, up 7% with Solutions revenue of $860 million, an increase of 9%. Non-GAAP expense was $504 million, up 2% and with an operating margin of 52%, up 3 percentage points. Overall, this resulted in diluted EPS of $0.72, reflecting organic growth of 11%.
Turning to Slide 14. ARR totaled $2.6 billion, up 6% organically. The annualized SaaS revenue totaled $910 million, representing organic growth of 12%. Excluding Adenza, SaaS was 38% of ARR, an improvement of 2 percentage points. Including Adenza, that number is 35%, which will improve as the cloud portion of their revenue increases. As a reminder, we only consider the cloud portion of their revenue to be SaaS.
Let's review division results for the quarter, starting on Slide 15. For Capital Access Platforms, revenue of $461 million increased 10%, driven by excellent performance in Index. In Data and Listing Services we saw 3% growth. In Data, we have seen a continued increase in proprietary data revenues, driven largely by higher international demand. In Listings, the positive impact of pricing was partially offset by the combined impact of delistings and muted IPO environment and the rollout of prior year's initial listings revenue.
Workflow and Insights revenue increased 3%. Analytics delivered high-single-digit growth, reflecting our ability to monetize the value of our data to the buy-side with new business and increased pricing across traditional and alternative asset managers. The strength in Analytics was partially offset by a weaker capital raising markets and the impact of elongated sales cycle in Corporate Solutions.
Index revenue increased 26% and overall AUM grew 34%. Over the last 12 months, our net inflows were $31 billion, $10 billion of which occurred during the fourth quarter. Licensing revenues for futures contracts linked to the Nasdaq 100 Index increased as well, driven by higher capture, partially offset by a decline in trading volumes. As a reminder, our capturing increases once we cross a volume threshold and then resets at the beginning of each year. Whilst smaller in size, Index revenue also benefited from Index data revenue growth.
ARR for Capital Access Platforms was $1.2 billion, up 3%. ARR growth was largely driven by Analytics and to a lesser extent Data and Listings. The muted IPO environment impacted ARR growth. However, we are cautiously optimistic that we could see a recovery in IPOs combined with more normalized sales cycles as we progressed through 2024. As a reminder, substantially all of Index revenue is excluded from ARR. The division's operating margin was 54% for the quarter, an increase of 4 percentage points due to higher revenues. For the full year, it was 55%, up roughly 50 basis points. The increase was driven by higher revenues, partially offset by inflation, revenue-related expense and investments, in particular across Data and Index.
Moving to Financial Technology on Slide 16. The division delivered revenue of $399 million for the quarter, up 8%. Regulatory Technology grew 17% with Verafin at 25%. Verafin added 100 new clients this quarter, including a third Tier 1 bank. While we are excited about this addition, as we have previously discussed, the contracting and implementation with these larger, more complex institutions is longer. We will start recognizing subscription revenue in 2024, but we believe that the effect will only accelerate as we expand relationships with these clients.
This strong performance of Verafin along with 6% growth in surveillance led to the 17% growth of Regulatory Technology. For Surveillance, the fourth quarter growth was impacted by the timing of bookings in 2023 versus 2022. But the fundamentals remained strong for the year with six new clients in the fourth quarter and 27 for the full year. We also made inroads with the Tier 3 brokerage client cohort, which reflects progress beyond our leadership position with large banks. Cloud for Trade Surveillance is now above 50% deployment, which is an important driver of client stickiness with the speed and efficiency it enables us to provide.
Moving on to Capital Markets Technology. We saw 3% growth, driven by data center connectivity demand. We had new market tech contract signings in Latin America and with one of our U.S. Tier 1 clients. We expect this contract to start to accrue in 2024. As Adena mentioned, we continued to increase our Market Technology presence in Latin America and to have a leading role in the modernization of markets in the region. ARR for FinTech totaled $1.35 billion, an increase of 10% due to continued customer wins at Verafin as well as growth in trade management services and Market Technology revenue.
The division's operating margin in the fourth quarter was 40%, up 4 percentage points. The organic margin expansion reflects solid top-line growth and expense control with a novel increase in revenue-related costs, offset by efficiencies and lower professional fees. We are progressing on our journey to improve the efficiencies in Market Technology, while continuing to support the growth of Verafin and surveillance. For the full year, the operating margin was 40%, up 5 percentage points with a story which mirrors that of the quarter, including strong operating leverage and investments.
Before closing on FinTech, a few additional words on Adenza. For November and December, Adenza contributed $129 [Phonetic] million in revenue, $458 million of ARR, of which $98 million was in SaaS and $35 million in non-GAAP operating expense. A strong finish to the year, grew over 77% operating margin for our two months' ownership. On a full year basis, Adenza had an adjusted EBITDA margin of 59%, ahead of our initial 58% outlook for the year.
Let me now talk about Adenza's full year revenue and ARR. Revenue was $583 million in 2023, up 14%. ARR of $458 million was 16% excluding a significant bankruptcy that occurred during the year or 14% net of it. Both metrics are on a constant currency basis. We had nearly 50% of new ACV coming from cloud this year. The strong cloud take-up by our clients supports our growth and efficiencies. Revenue growth benefited from a large portion of ARR up for renewal in the quarter and in the year.
Going forward, we expect Adenza's revenue growth to be in the low-to-mid-teens consistent with the medium to long-term outlook we provided when we announced the acquisition. The timing of contracts being up for renewal and the mix of revenue between cloud and on-premise delivery will have an impact on revenue growth in any given quarter and year. This is why we are focused on ARR growth, which is not as impacted by annual renewable and delivery method. We will provide more details on the revenue dynamics of our FinTech division at Investor Day.
And ramping up our divisional overview with Market Services. Net revenue was $247 million for the quarter, roughly flat with growth in U.S. cash equities offset by decreases in U.S. options. U.S. cash equities growth was driven by higher capture, partially offset by lower share. In a very competitive U.S. options environment, we are defending our strong market share lead and our attractive capture. Meanwhile, in Europe, tepid exchange volumes were positively offset by a $7 million non-recurring payment and by the benefits of diversification between fixed income and equity.
The investments we have made in leveraging our technology and data to provide our European markets clients with transparency helps them to generate [Indecipherable]. This has enabled us to help our clients improve their execution quality and has been key to our ability to reclaim our 72% market share, a 2 percentage point increase. The division's operating margin was 57% in the fourth quarter 2023 compared to 60% in the prior year quarter as a result of higher compensation costs as we continue to invest in our people and higher technology costs due to ongoing investments related to both capacity and migrating U.S. markets to the cloud. The full year operating margin for the division totaled 59% with the same drivers as recorded history.
Turning to Slide 19. This quarter's non-GAAP operating expense was $504 million, an organic increase of $8 million or 2% versus our organic revenue growth of 7%. I went through the story in the businesses and it reflects good expense discipline as well as the timing of marketing and professional fees. Overall, this reflects a 52% operating margin, up 3 percentage points.
For the full year, our non-GAAP operating expense was $1.83 billion in line with guidance. We were up 5% consistent with revenue growth for flat operating margin at 52%. The increase is due to investments in key growth areas, inflation and higher revenue-related expense. We also achieved efficiencies during the year as we continue to optimize our location footprint and bringing the divisions together as part of our divisional realignment. If you include Adenza for the full year, operating expense totaled $2.05 billion.
Now on to guidance. We are initiating 2024 non-GAAP operating expense guidance of $2.105 billion to $2.185 billion, the midpoint of which reflects pro forma growth of 5%. This includes a full year of Adenza and the in-year expense benefit of net synergies. On an organic basis, excluding Adenza, Nasdaq's expense growth will be just under 4.5%. We will spend more time on synergies at Investor Day.
Let me reiterate. The net $80 million synergy target by the end of 2025 and $80 million cost to achieve as set forth in the restructuring program we just initiated. Additionally, we are guiding for full year tax rate of 24.5% to 26.5% on a non-GAAP basis, slightly higher than 2023 due to lower expected tax benefit on equity awards.
Turning to Slide 20. Strong free cash flow continues to be the hallmark of Nasdaq. For the year, we had $1.6 billion of free cash flow, ex-Adenza. And Adenza had $306 million in unlevered pre-tax free cash flow. Our gross leverage ratio was expected to be at 4.7 at the time of deal close. But we are pleased to share that at year end we are at 4.3 despite 0.1 headwind from euro strength.
Let's go to the details on the chart. At the end of the third quarter, our adjusted leverage ratio was 2.4. We added the leverage to acquire Adenza. At the beginning of December, we paused share repurchases and repaid $260 million of term loan. The ratio benefited from the incremental EBITDA from Adenza's full year and Nasdaq's growth. We expect to continue deleveraging in the first quarter of 2024. And to wrap up on free cash flow utilization, we have repurchased $269 million of our common stock this year, including a $110 million in the fourth quarter. And we paid a quarterly dividend of $0.22 per share for 35% annualized payout ratio.
In closing today, this quarter and this year's performance shows Nasdaq's ability to deliver consistent gross margin and free cash flow in a range of environments. We are committed to disciplined execution and continued innovation. The investments we have made in our resilience, our technology and our data over the years, coupled with our reach and track record, position us for sustainable growth as we power our clients' success.
Thank you for your time. And I will turn it back to the operator for Q&A.
