Ann M. Dennison
Executive Vice President and Chief Financial Officer at Nasdaq
Thank you, Adena, and good morning, everyone. Before getting to our second quarter results, I would like to comment on strategic activities across the company. Starting with the divestiture of our power trading business in Europe, we do not expect the recently announced sale of the business to have a material impact on our financials, and we plan to include historical results for this business in the corporate and other portion of our financials, starting next quarter. Once all open interest is transferred, we expect the sale to reduce annual revenues and expenses by approximately $35 million and $20 million, respectively.
Turning now to Adenza. We have seen Adenza continue its strong execution across both new customer wins and cross-selling activity. These new customer wins and expansion contributed to Adenza achieving year-over-year ARR growth in the high-teens, with both Calypso and Axiom each delivering solid double-digit ARR growth over the past year. We have provided a supplemental information deck that includes information about Adenza's business and recent performance to help further illustrate Adenza's continued strong momentum.
As we embark on our integration planning with the Adenza team, we remain confident in our ability to deliver on the $80 million in net cost synergies by the end of year two, post closing, in order to provide our shareholders transparency into our progress in achieving our Adenza-related expense synergies, we will disclose the one-time costs related to achieving our synergies separately from our existing restructuring program that we announced at the start of 2023 related to our divisional realignment.
To finance the Adenza acquisition, we have secured financing for the transaction through a successful bond issuance in June, issuing $4.25 billion in US dollar-denominated debt across two, five, 10, 30 and 40-year terms as well as the EUR750 million denominated eight-year bond. To enable us to manage our deleveraging plan, we expect to fund the remainder of the cash component of the transaction with the $600 million term-loan that we plan to issue just prior to closing, as well as commercial paper. The estimated weighted-average cost of this debt is just under 5.5%. To minimize the carrying cost of the debt prior to closing, we are investing the proceeds of the bond issuances in highly liquid and low-risk investments, and we expect the net carry to be less than 50 basis points at current market rates, which will be excluded from our non-GAAP results.
With regards to our capital allocation priorities moving forward, as we work to integrate Adenza and optimize our business to achieve the full benefits of the acquisition after the closing, we will be focused on using our free cash flow to generate return for our shareholders. Specifically, looking back to 2022, Nasdaq generated approximately $1.45 billion in operating free cash flow. In 2022, Nasdaq returned approximately $380 million in dividends, which was 26% of free cash flow and we extended approximately $230 million to offset employee-related dilution. That left us with over $800 million in free cash flow to use for other strategic and investor return activities.
With the addition of the shares that will be issued to acquire Adenza, if all else stays the same, our dividend payment at the current payout of $0.22 per share will increase to approximately $510 million annually. We have also stated our plans to increase the dividend to achieve a 35% to 38% payout ratio over the next three or four years, which implies an approximately 10% CAGR in the dividend payout ratio over the period. We expect Adenza to generate approximately $300 million in unlevered pre-tax cash flow in 2023. We expect the debt financing for our planned acquisition of Adenza to result in annual interest payments of approximately $325 million, which is more than [Indecipherable] for our free cash flow. However, as Adenza grows and we and as we pay down debt, we expect incremental free cash flow from the addition of Adenza to fund incremental debt repayment and share buybacks.
In sum, the 2022 results combined with the full year 2023 estimates for Adenza, we will have approximately $700 million in excess annual free cash flow beyond our dividends and employee-related buybacks, and we expect that amount to grow commensurately with our earnings growth over the next three years. With the remainder of the free cash flows over the next three years, our priority is to delever and bring our leverage ratio to 4.0 times within 18 months and 3.3 times within three years. Achieving our ratios reflect the combination of business growth that drives increases in EBITDA as well as debt paydown. Therefore, we will not provide a specific paydown schedule. However, based on our debt maturity profile and the nature of our debt, we will have the flexibility to paydown approximately $2 million between now and year end 2026 without any prepayment penalties or other restrictions. While we don't anticipate needing that full amount to support our path to 3.3 times, we want to have the flexibility to accelerate and/or exceed our paydown expectations if we believe is the best use of capital to drive shareholder returns.
We will execute share buybacks to help offset the acquisition-related share issuance and support EPS accretion. After our debt paydown, we will focus on using the vast majority of our remaining free cash flows to execute share buybacks. Our focus over the coming years will be to maximize the client and shareholder benefit we receive from the Adenza acquisition. Therefore, as Adena mentioned earlier, we do not anticipate making any significant acquisition-related capital allocation decisions that would deter us from sizable stock buybacks over the coming years.
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 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 start by reviewing second quarter 2023 performance, beginning on Slide 11 of the presentation.
The 4% increase in reported net revenue of $925 million is the net result of organic growth of 4%, including a 6% organic increase in the Solutions Businesses and stable Trading Services revenue, and $4 million in net negative impact from changes in FX rates and in acquisition and divestiture. Moving to operating profit and margins. Non-GAAP operating income increased 1%, while the non-GAAP operating margin of 52% was down approximately 140 basis points from the prior year period. Non-GAAP net income attributable to Nasdaq was $350 million, or $0.71 per diluted share compared to $342 million or $0.69 per diluted share in the prior year period.
Turning to Slide 12. As Adena mentioned earlier, ARR totaled $2.1 billion, an increase of 6.5% from the prior year period. While annualized SaaS revenues totaled $755 million, an increase of 11%. We are delivering solid performance despite low IPO volumes and elongated sales cycles in certain areas of the Capital Access Platforms division, which had a modest impact on the rate of ARR and SaaS growth this quarter. We are well-positioned to deliver improving revenue growth as sales cycles normalize and capital markets activity increases.
I will now review quarterly division results on Slide 13 through 15. Starting with the Market Platforms division, revenues increased $5 million or 1% with an organic increase of 2%. Trading Services organic revenue was flat with higher US revenues driven by strong US equity capture and continued options volume, offset by lower trading revenue -- European trading revenue due to lower volumes despite better share.
In Marketplace Technology, we delivered 5% revenue growth, driven by strong results in both trade management services and market technology. As a reminder, trade management services revenue growth in the first half of the year benefited from testing revenue that we do not expect to recur in the second half of the year. Additionally, we will face tougher comps in the back half of the year as we cycle through strong revenue growth we had in 3Q and 4Q last year, and therefore we continue to expect full year revenue growth for Marketplace Technology to be at the upper end of our medium term outlook.
ARR totaled $516 million, an increase of 5% compared to the prior year period. The division operating margin of 53% in the second quarter of 2023 reflects a 200 basis point decrease from the prior year period due to lower revenue resulting from lower European trading activity with ongoing investments related to migrating US markets to the cloud and investments in new growth opportunities in Marketplace Technology.
Capital Access Platforms revenue increased $16 million or 4% with organic revenue growth of $15 million, excluding $1 million related to an acquisition. Growth in the division was broad-based for the quarter. Specifically, Index revenue returned to growth, delivering a 4% increase compared to the second quarter of 2022, primarily driven by a 9% increase in average AUM over the last year. Licensing revenues for future contracts linked to the Nasdaq 100 Index declined 9%, reflecting a 28% decline in treating volumes, which was partially offset by higher pricing per contract. Second quarter revenues also benefited from improving futures revenue share related to meeting certain contractual milestones in the quarter. Additionally, we saw net inflows over the trailing 12 months of $25 billion, including $10 million in the quarter.
In Data, revenue grew by 5% due to continued strong demand from enterprise and international customer strategies with growth in recurring data sales driving solid revenue growth. Listings revenue was flat year-over-year due to continued weak IPO environment coupled with slightly elevated delisting, including SPACs.
Workflow and Insights revenue increased 5% organically compared to the second quarter of 2022, reflecting growth across our ESG, IR and Analytics businesses despite ongoing elongated sales cycles among corporate and asset owners affecting revenue growth in the second quarter. ARR for Capital Access platforms totaled $1.2 billion, an increase of 4% compared to the prior year period, which reflected a significant slowdown in new listings and the impact of continuing elongated sales cycles. Division operating margin was 55% in the second quarter of 2023, a decrease of 200 basis points from the prior year period.
Anti-Financial Crime revenue increased $14 [Phonetic] million or 19% compared to the second quarter of 2022. Organic growth was 19% in the period. The growth reflects robust demand for fraud detection and anti-money laundering exclusions, as well as our SaaS-based surveillance solutions. Specifically, our fraud detection and AML solutions revenues grew 23% compared to the second quarter of '22. Surveillance revenues grew 13% compared to the second quarter of 2022, with solid growth in subscription revenues from new and existing customers, partially offset by softer professional fees. ARR for Anti-Financial Crime totaled $339 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 $365 million, an increase of 20% versus the prior year period. The Anti-Financial Crime division operating margin was 36% in the second quarter of 2023 versus 27% in the prior year period, with approximately one-half of the margin growth resulting from the benefit in our expenses due to a one-time adjustment to the incentive compensation program.
Turning to Page 15 to review both expenses and guidance. Non-GAAP operating expenses increased $28 million to $441 million. The increase primarily reflects a $34 million organic increase or 8%, partially offset by a $6 million decrease from the impact of changes in FX rates. The organic expense increase was primarily driven by higher compensation and benefits expense, reflecting higher headcount and technology spend as we continue making growth investments across the platform. Compared to the first quarter of 2023, expenses increased due to the timing of our annual merit adjustments and equity grants. However, the sequential increase was less than we expected due to the previously mentioned one-time adjustment to the AFC incentive compensation program, as well as lower-than-expected hiring and client incentive marketing spend.
We are narrowing our 2023 non-GAAP operating expense guidance by $30 million to a range of $1.785 billion to $1.815 billion. The midpoint of the expense guidance range now represents an annual expense increase of just below 5% for 2023. The decrease in our expense growth expectations primarily reflects the impact of our decision related to the redesign of our digital assets offering as well as the adjustment to the AFC incentive compensation program. Assuming stable performance and exchange rates, we currently expect 2023 expenses to be near the middle of the updated guidance range. Additionally, due to the timing of expected expenses, we expect a greater sequential increase in expenses in the third quarter than in the fourth quarter. Our full-year non-GAAP tax rate is expected to be in the range of 24% to 26%.
Turning to Slide 17. Excluding Adenza related debt, our adjusted total debt to trailing 12 months non-GAAP EBITDA ratio ended the period at 2.6 times, consistent with the first-quarter of 2023, and there are no long-term debt maturities until 2026. With our strong balance sheet and cash flow generation, including $1.5 billion of free cash flow on a trailing 12-month basis, we continue to be well-positioned to support growth in a variety of macroeconomic backdrops. During the second quarter of 2023, the company paid common stock dividends in the aggregate of $109 million. As of June 30, 2023, there was an aggregate $491 million remaining under the Board authorized share repurchase program.
In closing today, Nasdaq's second 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 the operator for Q&A.
