Headline: Nasdaq Reports Robust Q3 Growth Fueled by Strategic Integrations
Nasdaq (NDAQ) reported a strong performance in Q3 2024, marking its fourth consecutive quarter of double-digit growth. The company highlighted a 10% increase in both net revenues and solution revenues, with total annual recurring revenue (ARR) rising 8% year-over-year to $2.7 billion. The integration of AxiomSL and Calypso contributed to this growth, and Nasdaq achieved over 80% of its net expense synergy target. Despite a 5% rise in operating expenses, the operating margin increased to 54%. Nasdaq's CEO Adena Friedman and CFO Sarah Youngwood discussed the company's strategic initiatives and outlook, emphasizing the strength of Nasdaq's diversified business model and its positioning for sustainable growth.
Key Highlights Nasdaq reported a 10% year-over-year increase in net revenues and solution revenues. The company's ARR rose 8% to $2.7 billion. The integration of AxiomSL and Calypso is progressing well with significant net expense synergies achieved. Despite a 5% rise in operating expenses, the operating margin rose to 54%. Nasdaq expects an increase in trading activity and IPOs in 2025 due to a stable macroeconomic environment.
Company Outlook Nasdaq expects continued revenue growth and has narrowed its non-GAAP expense guidance for the year. The company is well-positioned for sustainable growth with a focus on accelerating integration, innovation, and operations. Nasdaq aims to achieve over $100 million in cross-sell by the end of 2027.
Negative Highlights Regulatory technology growth is expected to be at the lower end of expectations. Growth in Capital Markets Technology is anticipated to be below forecast due to a timing shift in a Calypso renewal.
Positive Highlights Market Services achieved a record Q3 with 13% revenue growth. Index income rose 26% thanks to significant organic inflows. The Financial Technology segment reported strong ARR growth across sub-segments.
Underperformance The Financial Crime Management Technology segment is expected to be slightly below the anticipated 23% growth for the year.
Q&A Highlights Implementation timelines for new customers are expected to be between 6 to 12 months. Nasdaq reported 33 IPOs in the quarter and anticipates increased activity in the second quarter of next year. The company is actively working on cross-sell opportunities, particularly between AxiomSL and Calypso.
In Q3, Nasdaq reported $1.2 billion in net revenues and $904 million in solution revenues, both up 10%. Operating expenses rose to $543 million, contributing to a 54% operating margin. Net income reached $429 million, with diluted earnings per share at $0.74. The company also reported 10% growth in fintech and a 9% increase in capital access revenue. Looking ahead, Nasdaq remains optimistic about its revenue growth trajectory and is narrowing its non-GAAP expense guidance. The company generated approximately $300 million in free cash flow in Q3 and reduced gross leverage to 3.8 times. Nasdaq paid a dividend of $0.24 per share and repurchased 1.4 million shares for $88 million. Nasdaq's commitment to leveraging its diversified business model for sustainable growth was evident throughout the discussion, positioning the company for future success amid changing market dynamics.
InvestingPro Insights
Nasdaq's strong performance in Q3 2024 is reflected in its current market position and financial metrics. According to InvestingPro data, Nasdaq has a significant market capitalization of $42.57 billion, highlighting its substantial presence in financial markets. The 16.97% revenue growth over the last twelve months aligns with the reported 10% increase in net revenues for Q3, demonstrating consistent top-line expansion. InvestingPro Tips highlight Nasdaq's strong financial health and market performance. The company increased its dividend for 12 consecutive years, showcasing its commitment to shareholder returns. This is particularly notable given the 9.09% dividend growth reported over the last twelve months. Additionally, Nasdaq is trading close to its 52-week high, at 99.55% of the peak price, indicating strong investor confidence. The company's profitability is evident from positive earnings over the last twelve months, and analysts expect profitability to continue this year. This aligns with Nasdaq's optimistic outlook on revenue growth and improved operating margins mentioned in the earnings call. It's worth noting that Nasdaq's P/E ratio stands at 43.55, indicating it is trading at a high earnings multiple. This can be justified by the company's strong market position and growth prospects, including expected increases in trading activity and IPOs in 2025. For investors seeking more detailed insights, InvestingPro offers additional tips and in-depth analyses on Nasdaq's financial performance and market position. With 11 additional tips available on the InvestingPro platform, subscribers can gain a more comprehensive understanding of Nasdaq's investment potential.