Nasdaq Inc - 144A (NDAQ) — Q1 2020 Earnings Call Transcript

Good morning, everyone and thank you for joining us today to discuss Nasdaq's first quarter 2020 financial results. On the line are Adena Friedman, our CEO; Michael Ptasznik, our CFO; John Zecca, our Chief Legal and Regulatory Officer; and other members of the management team. After prepared remarks, we'll open up to Q&A. The press release and presentation are on our website. We intend to use the website as a means of disclosing material, non-public information and complying with disclosure obligations under SEC Regulation FD. I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC. I will now turn the call over to Adena.

Thank you, Ed, and good morning, everyone. Thank you for joining us. My remarks today will focus on three areas: I will review Nasdaq's start to the year, in particular how we are adapting to the challenges of the COVID-19 pandemic and our results for the first quarter of 2020. I will discuss how we are seeing the potential for our business in 2020 to be impacted by the pandemic and I will discuss the secular trends that have informed our long-term strategy and how we see them developing through and after the current pandemic crisis. I would like to begin by acknowledging that we are all navigating through an unprecedented moment in history as our global community fights the spread of COVID-19 and prepares for what will be a lasting impact on our daily life. I speak for the entire Nasdaq family when I say our thoughts are with those who are battling this virus, the families who have lost loved ones and those who are on the front lines of our economy and our society putting themselves at risk every day to care for us and our well-being. They include the millions of people who work extremely hard to make sure that we have food, power and other necessities. They are the many who are keeping critical stores open and shipping goods to our homes. They are the healthcare workers, who are putting their health and their family's health at risk to care for the sick and handle the heartbreaking loss of life. There are not enough words that can express our deep gratitude to the millions around the world who are enabling us to stay home and stay safe. The crisis has highlighted how the human spirit manifests itself and it has been truly awe-inspiring. To provide immediate assistance to those in our communities who are most at risk, we took action last month and committed $6 million in cash and in-kind donations to the COVID-19 response and relief efforts. In addition Nasdaq employees have been engaged in our philanthropic response including our double matching program which has raised more than $400,000 so far for charitable organizations fighting the pandemic. Turning to the Nasdaq community specifically from the start of the pandemic, we have been committed to the safety and well-being of the Nasdaq team as well as the broader needs of the Nasdaq client community. As COVID-19 spread across the world we moved quickly to transition our global workforce to a remote operating environment through a combination of work from home and split teams for critical on-site employees. At this time 98% of our global team are working from home to support the various country or statewide measures to flatten the curve. For those few staff around the world who are performing critical on-site functions, we're deploying extra precautions to ensure their safety. We remain deeply committed to serving our clients seamlessly while keeping our employees as safe as possible. I am so proud and impressed with the entire Nasdaq team and their commitment to our mission. In fact, our role in the economy in which we serve as a critical market operator has never been in sharper focus as it has been in the past six weeks. Additionally, our clients across the world have turned to us for technology expertise as well as insights and analytics to support their decision-making in this period of extreme challenge. We have invested and prepared for many years to be ready for what has transpired around the globe in the past several weeks. Across our markets in the U.S. and Europe, our teams across technology, operations, legal and client service are collaborating extremely well to provide a high-quality trading experience for our broker-dealer and investor clients during a period of unprecedented volatility and volume. Our market technology team, who provide strategic technology solutions to other exchanges around the world has been supporting our exchange clients with our technology expertise to support their own spikes and trading activity. Across corporate services, we are providing our corporate clients with critical insights regarding the drastic changes in their investor base and what it means for their equity relationships going forward. And in information services we are providing institutional investors with key insights into their funds positioning in relation to their peers and now with the addition of Solovis with deeper insights into their portfolios across private and public assets. These times of stress and uncertainty test us and I'm extremely grateful to the entire Nasdaq team for rising so successfully to the challenge while they also balance their own personal situations throughout this period. Turning next to our financial results. During the first quarter of this year, we set new quarterly highs of $701 million in net revenues and non-GAAP earnings per share of $1.50, up 11% and 23% respectively compared to the first quarter of 2019. Our market services business rose 21% and our non-trading segments grew 7% from the prior year period. On an organic basis revenues in the non-trading segments increased 8% year-over-year. We also continue to make certain investments to advance our business acquiring ESG workflow provider OneReport and investments analytics firm Solovis during the quarter. These initiatives aligned with our disciplined strategy to maximize opportunities as a technology and analytics provider while sustaining our leadership position of our core marketplace franchise. Turning to the specific highlights in the first quarter, I will start first with our foundational marketplace businesses. Our Market Services segment saw net revenues of $281 million driven by higher cash equity and equity derivatives revenue as the business was able to handle the historic surge in quoting and execution volumes despite having to navigate the many business continuity challenges the health crisis posed. While I believe in aggregate, the exchange industry, our broker dealer intermediaries and our regulators have responded strongly and successfully to the significant challenges that came with the enormous rampant activity, I'm particularly proud of how Nasdaq's marketplaces were able to fulfill their mission to the investment community, all while we took proactive steps to protect the health and safety of our staff providing critical market functions. Our Corporate Services segment delivered revenue of $128 million in the first quarter, a 6% increase boosted by year-over-year growth in our issuer base, particularly from larger cap issuers and increased demand for our investor relations intelligence and governance offerings. Nasdaq was extremely busy in the earlier portions of the first quarter. Nasdaq led U.S. exchanges for IPOs during the period welcoming 27 IPOs, a 69% win rate. We listed six of the top 10 IPOs by dollars raised including PPD Inc. which provides drug and development services to the biopharmaceutical industry, the largest U.S. IPO year to date. Our acquisition of OneReport during the period will broaden our strategic engagement and collaboration with corporate clients who are seeking clarity and efficiency in their ESG reporting. We believe this solution will further strengthen our value with the thousands of clients who already rely on our team for counsel on a range of governance and sustainability-related issues through solutions like our ESG advisory service and our board assessment and collaboration technology. Now let me turn to our technology and analytics businesses. In the first quarter, our market technology segment delivered $81 million in revenues and signed $80 million in new order intake. Our annualized recurring revenue in the quarter was $257 million, an impressive increase year-over-year. I'm extremely impressed with how the multitude of exchange and broker-dealer customers of Nasdaq market technology business successfully responded to the challenges of running their franchises in the midst of both market turbulence and the human health crisis. And I'm proud that our resilient marketplace technology was able to support them meaningfully as they did so. Turning to our information services segment. We delivered net revenues of $211 million in the first quarter, up $18 million or 9% year-over-year. I would like to highlight that our index revenue saw double-digit growth as AUM in Nasdaq licensed ETPs rose 5% year-over-year meaningfully outperforming the declines in the broader market indices over the same period and volumes in Nasdaq license equity index futures set new highs in the quarter. The AUM was bolstered by continued inflows into our flagship index products. On the investment management side, despite the sharp declines from the market peak on February 19, through the bottom experienced on March 20 for the Nasdaq 100 over that time the largest ETF globally that tracks in Nasdaq 100 which is the Invesco QQQ ETF, experienced $5.2 billion in net inflows. In fact, total ETF industry AUM for the 12-month period ending March 31 was down 0.5% according to a research provider, while Nasdaq's ETF AUM increased by 5%. We are pleased with the resilience of our index products in a period of record volatility and extreme downward pressure in the broader market. Overall, we are proud of the resilient and diversified nature of our business with a coupling of volume driven revenue and more stable recurring revenues serving as our foundation. With our diversity, we benefit from certain segments bolstering our results when others face some short-term pressures. That has been the story of Nasdaq for many years now. And overall, it provides for more stability and predictability than many of our direct peers. As a result, while we remain a performance culture where individual employment decisions are still made on the basis of each of their efforts and contributions, we have made a commitment to our employees that we will not initiate any broad-based layoffs this year. We are proud to support our employees and help them feel secure in their professional lives, while they address the challenges of COVID-19 and its implications that they have on personal and family situations. While we actively address the particular challenges of the pandemic and related economic impacts in the near term, we're also paying close attention to what the changing world tells us about the most important long-term secular dynamics in our industry, the changes that are most impacting our clients and where we have the largest opportunities to grow as we deliver against the opportunities they create. What we are seeing overwhelmingly is that the pandemic is in many ways reinforcing these longer-term dynamics. For example, we recognized during our strategic review in 2017 that the investment management industry is going through profound change including an enlarging passive investing trend on one end of the spectrum, a private market on the other end of the spectrum and an increasingly pressured traditional active management industry in the middle. During the pandemic induced downturn, we're seeing continued positive flows into ETF despite the market pullback. Among our traditional asset management clients, it's an increasingly competitive world with certain firms outperforming the market and drawing new capital while others face significant outflows. We believe that how we partner with asset managers to launch new innovative ETFs that help them participate in the passive trends, how we assist private companies and private equity funds with the liquidity events through the private market and how we help active managers and private equity funds compete for flows will continue to be increasingly important. In market technology, with our next-generation trade lifecycle technology platform, we see the benefits of marketplace and surveillance solutions leveraging the cloud to be scalable to any level of activity and accessible by both users and operators from anywhere in the world. We view that to be even more critical in a world that likely considers a much wider spectrum of business continuity scenarios than it ever has before. And with our corporate issuers who are faced with increasing challenges that they have to meet to effectively navigate public ownership, we believe that the need for technology-enabled and highly specialized consultative partner to assist with activities such as managing buy side interaction and governance and sustainability matters will be even more essential. Over the past three years, we have set a course for transformation of our business without sacrificing the quality of service we provide to our clients and while remaining focused on value creation for our stakeholders. The results we have delivered is a rewarding indication that this strategy is working. Yet we recognize that to maintain our momentum against a business backdrop that is still digesting the shock of the COVID-19 pandemic we must continue to challenge ourselves each and every day. As I wrap up, I will summarize by saying our communities are adapting to the challenges of isolation and the uncertainty of what lies ahead. We are looking out for each other and we are continuing to get the job done for those who rely on us. We are also incredibly grateful for and inspired by the collective compassion that has surfaced as a result of this crisis particularly demonstrated by frontline healthcare and other essential workers. Moving forward in 2020, we remain focused on advancing our strategic mission. As our teams have adjusted to the remote nature of daily life, I'm reminded by one of Nasdaq's founding principles that people do not need to be in the same physical place to be part of the same community. This founding principle continues to drive us as we face the unexpected and I believe we are moving Nasdaq in the right direction this year. And with that I'll turn it over to Michael to review the financial details.

Thank you, Adena. Good morning everyone. 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 U.S. GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation that's available on our website. I will start by reviewing first quarter revenue performance as shown on page 3 of the presentation and organic revenue growth on pages 4 and 14. The $67 million increase in reported net revenue of $701 million is the net result for organic growth of $81 million including a 22% organic increase in market services and an 8% organic growth in the non-trading segments. An $8 million net negative impacts from acquisitions and divestitures and a $6 million unfavorable impacts from changes in foreign exchange rates. I will now review the quarterly highlights within each of our reporting segments. I'll start with Information Services revenues which as reflected on pages 5 and 14 increased $18 million or 9%. Organic revenue growth during the period was also 9% reflecting growth in the index and investment data and analytics businesses. Included in index revenues is a $5 million collection of previously unpaid license usage fees. Market Technology revenue as shown on pages 6 and 14 increased $4 million or 5% with organic growth of $5 million or 6%. The organic increase was partially offset by a negative $2 million impact from unfavorable changes in foreign exchange rates. Organic growth during the period primarily reflects an increase in software-as-a-service surveillance revenues and an increase in software delivery and support projects. Annualized recurring revenue rose 9% compared to the prior year period. This increase was the net of an adverse impact from changes in foreign exchange rates which also affected the comparison to the preceding fourth quarter of 2019. Without that impact the year-over-year growth in ARR was 11%. Turning to Corporate Services, revenues increased $7 million or 6%. Organic revenue growth was also 6% or $7 million reflecting an increase in the total number of listed companies and annual renewal fees as well as higher governance solutions revenues and IR intelligence revenues. Market Services net revenues saw a $48 million or 21% increase. Excluding the negative $3 million impact from unfavorable changes in foreign exchange, the organic revenue increases was $51 million or 22%. Organic increase during the period primarily reflects an increase in cash equities and equities derivatives net revenues due to the higher industry trading volumes. Now turning to pages 9 and 14 to review expenses. Non-GAAP operating expenses increased $14 million to $336 million. The change reflects a $23 million or 7% organic increase, most of which was due to the impact of higher achievement within our performance-based compensation programs in relation to the higher organic growth. This is partially offset by a $5 million decrease from the net impact of acquisitions and divestitures and a $4 million payroll impacts from changes in foreign exchange rates. Turning to slide 10. We are updating our 2020 non-GAAP operating expense guidance to a range of $1.32 billion to $1.37 billion. Adjusting largely for foreign exchange rates and the recent acquisitions of Solovis and OneReport, the midpoint of the expense range represents an approximate 3% organic increase year-over-year. This 3% organic increase is consistent with our medium-term 3% expectation and is unchanged from the three months ago when we reported fourth quarter results. Moving to operating profit and margins. Non-GAAP operating income increased $53 million in the first quarter of 2020 and the non-GAAP operating margin was 52% compared with 49% in the prior year period. The 300 basis point increase in the margin year-over-year reflects a strong operating leverage particularly in our Market Services business as well as multi-year efforts to enhance the company’s scalability. Though we would expect some near-term reversion should market volumes moderate. Net interest expense was $24 million in the first quarter 2020, a decrease of $10 million primarily due to our debt refinancing in the first half of 2019. The non-GAAP effective tax rate was 26.5% for the first quarter of 2020, for full year 2020 we expect a non-GAAP tax rate to be between 25.5% and 27.5%. Non-GAAP net income attributable to Nasdaq for the first quarter of 2020 was $251 million or $1.50 per diluted share compared to $204 million or $1.22 per diluted share in the prior year period. Excluding the impact of Section 31 fees, which are pass-through fees collected on behalf of the SEC, free cash flow in the first quarter of 2020 was $380 million. Now, let me turn to the balance sheet, where we've taken actions to strengthen our liquidity and cash position and address refinancing risks in response to the uncertainties posed by the COVID-19 and related economic impacts. First, in February we took advantage of relatively low rates in the Euro bond market to refinance the $600 million 2021 Euro bond with a new 10-year, $600 million 2030 Euro bond, reducing our borrowing costs from 3.875% to 0.875% annually. This also eliminated near-term bond maturities until May of 2023. Then starting in March, we observed conditions in the market for tier 2 commercial paper issuers were deteriorated impacting both costs and actionable duration of CP issues. And so we borrowed under a revolving credit line to eliminate funding uncertainties. Among Nasdaq funding sources our revolver serves the principal purpose to provide liquidity and act as a backstop on our commercial paper program so that if we encountered a time when issuing commercial paper was unavailable or unattractive, we would have the option of borrowing on a revolving credit line instead. We typically maintained around $400 million to $500 million in commercial paper and given the uncertainty in the debt market during March we decided to borrow approximately $800 million of our available liquidity on the revolver. The approximate $800 million provided the company the ability to repair commercial paper including the remaining $350 million as it comes due over the balance of Q2 plus create an additional cash cushion of approximately $300 million. Looking forward we expect to maintain this more conservative cash position in the near term and as always, we weigh funding alternatives which include utilizing our borrowings under the revolver, returning to the commercial paper markets if conditions are attractive or issuing long-term debt. The net of these actions is that at the end of Q1, 2020 debt increased by $721 million versus Q4 of 2019 primarily due to the net borrowing of approximately $800 million on revolver. This is partially offset by a net reduction in other debt instruments. Our total debt to EBITDA ratio ended the period at 3.0 times up 0.4 times versus the fourth quarter of 2019 but our net debt to EBITDA was 2.3 times unchanged from the fourth quarter of 2019. While adjusting our balance sheet positioning to enhance our liquidity brings slightly higher interest expense it has enabled us to have uninterrupted ability to continue executing our capital deployment plan. For example, during the first quarter of 2020 the company funded the two aforementioned tuck-in acquisitions Solovis and OneReport as well as continued funding of our important R&D initiatives such as our work to expand investment solutions set to serve private equity investors and the continued rollout of our SaaS market technology model. Also during the first quarter of 2020, the company paid a common dividend in the aggregate of $78 million and repurchased common stock in the amount of $122 million. With an additional $30 million of repurchases completed thus far in Q2, we have largely offset the dilution from our equity programs for 2020. Today the company also announced that our board has approved a 4% increase in the quarterly dividend to $0.49 per share which takes into account our growth in income and cash flow over the last year but also the heightened uncertainties around the magnitude and duration of the COVID-19 pandemic's future macroeconomic impacts. Looking forward, we plan to continue with our stated capital deployment priorities, of working to identify investment opportunities that meet our strategic and financial objectives, of maintaining our dividend policy with the intention to provide stockholders with regular and growing dividends over the long term as earnings and cash flow grow, of executing our buyback program to target a stable share count and to manage balance sheet leverage to maintaining an investment grade credit profile.

Good morning Adena and good morning Michael and Adena thanks for the review of the business segments and I guess the sensitivities to this, I guess changing and challenging environment. The one – and it helped very much. One question I'm getting from investors and sort of jumped out at me too was the new order intake in market technology. So it came down from the elevated levels for my 4Q but the ARR didn't materially change quarter-over-quarter. So I'm just trying to see that big number that you put up in 4Q. Could you review again how that could flow through and how you could see benefits in the market tech segment?

Sure. Thank you, Rich. In the fourth quarter, we experienced a high level of order intake, which affected the amount of order intake in the first quarter. Just to clarify, order intake can be categorized into three groups. First, we have renewing and sometimes expanding contracts with existing clients, which involves extending contract terms and expanding services. The second category includes acquiring new clients for trading and marketplace solutions. The third category is revenue that is more staff-oriented, primarily from our surveillance business that functions as SaaS. The order intake from the fourth quarter impacts ARR primarily through the SaaS surveillance business and any new SaaS markets that can quickly contribute to ARR in the following quarter. However, most of our order intake is based on expanding contracts that will start to flow into ARR as we extend our contracts, or from new clients, where we must first develop and deploy the solution. ARR won’t reflect until the solution is deployed since we don’t count billed costs and revenue as ARR. Therefore, the majority of the fourth-quarter order intake requires us to build out solutions before it will appear in ARR, resulting in a delay.

Got it, thank you very much and again thanks for the review of the business segments.

Thanks and just a question again on market tech, thinking about some of the forward-looking implications you highlighted. The 1Q results were slightly below, we were looking for, so curious if you started to already see that play out in margin in the 1Q revenues? Are there other things that may be impacted that kind of potential first quarter results in terms of the slowdown and then also last quarter you mentioned margins improving on a year-over-year basis and that segment going forward given the forward look for revenues, I assume that's maybe not a doable but maybe talk about the margin profile for that segment given the changes you've been implementing for a while and the transition to SaaS and those things and how that might still play out from a margin perspective?

Thank you. Regarding our first quarter results and their development throughout the year, we didn't observe significant effects from the COVID-19 situation, but there were some impacts, particularly since many of our clients are based in Asia and experienced the virus earlier than others. This led to some delays in our projects in that region. Now that the situation is more global, we want to share insights on what we are encountering to help you understand potential project delays. We are continuing to conduct design studies, but when these are done remotely, they take longer to complete. It's been beneficial to collaborate with our clients this way, but the process is slower due to the need for virtual meetings. Additionally, some new enhancements and upgrades to trading systems requested by clients are facing short-term delays as they adapt to a remote working setup. Overall, we are not seeing fundamental weakness in client relationships; rather, there are just temporary shifts in their focus, which may affect our ability to recognize revenue from project-related work, short-term change requests, and new deliveries. Regarding margins, we are equally focused on managing our business margins. We intend to continue advancing our next-generation technology stack and enhancing our SaaS capabilities. Our goal is to maintain this progress while addressing client workload expectations. We are also assessing team management to navigate short-term margin challenges, and while we strive for margin expansion, achieving this will be more difficult with the reduced growth anticipated this year.

Thank you.

Great, thank you for your comments, Adena. That was very helpful. To follow up on that, it seems that the slowdown related to COVID-19 primarily affects the market tech segment. Could you provide some insight into what you believe the base revenue run rate is on a quarterly basis that you can count on during this period? Additionally, could you comment on the index data, which appeared to be quite strong in relation to the actual metrics? I'm curious about how the index data might impact the second quarter, considering the current state of the markets.

Sure. So we don't communicate kind of that base revenue that you're looking for. We try to provide enough context for you to understand that we have a very broad and secure base of clients both across all of our businesses. So whether it's market technology, corporate solutions, information services and our markets business. We have active and engaged conversations and we have a very broad base of clients. So we have that the benefit of diversity and when I gave my comments I wanted you to see either what we're starting to see or what we could see as we understand this pandemic and its potential impact on our clients. But we don't provide a specific kind of revenue base number that you're looking for. We're just trying to make sure you understand how our growth could be impacted going forward through the year. In terms of our index business, the index business was impacted by three things. First, as Michael mentioned we did have a collection of unpaid invoices that we were able to secure in the quarter and that had a positive impact of $5 million but even without that we did have double-digit growth in the index business and that was driven by the fact that our AUM is up. So that's one. And that volumes in the futures of business as you know we have an agreement with CME on the futures volumes in the Nasdaq-100 index futures and those volumes were very, very high during the quarter which obviously helped supplement the growth in the business.

Got it. That makes sense. Okay. Thank you very much.

Yes. Hey, thanks. Sorry to jump back into the index business real quick but can you actually be a little bit more specific and maybe this is for Michael then, on the pieces on the quarter-to-quarter basis because I feel like there's still something missing. So AUM, I think average AUM was up 5% quarter-over-quarter in ETPs and I think the volumes you mentioned on CME I think we're up 109% quarter-over-quarter. So maybe just in terms of dollars what the contributions were and also maybe on the subscription side if there was a big increase there? It just seems like there's, you're either doing a lot better than we thought or something else going on. So just curious if you can flesh out the pieces looks better.

Sure. So I think that a couple things and I'll also send it over to Michael to see if I miss anything. So the first thing is recognizing that the AUM is 5% growth in AUM but then also depends on where the AUM is coming from and in this particular case we saw strong, pretty strong reflection of AUM in our benchmark indices that tend to carry a slightly higher fee rate. So that's one to consider and then the second thing is on the futures volumes when I looked at last year, I looked at like all of last year and the future is volume revenue contributed about 12% of the overall revenue in the index business whereas in the first quarter it was 19%. So hopefully that will give you a sense of the scale of the change in the futures revenue but I don't know Michael if you have anything else.

No, I think the futures revenue is primarily influenced by our new contract with CME. When comparing year-over-year, any additional volumes, along with the e-mini micros, contribute significantly when you consider the overall mix. This all adds to the results we are observing, in addition to the $5 million Adena mentioned earlier and that I discussed in my remarks.

Yes. Thanks. Those numbers from Adena were great. Thank you.

Yes. Morning everyone. I guess, I just want to ask quickly just on the taking down the revolver and maintaining the cash buffer. I get that you have to repay the CP in the second quarter, if the CP markets do not improve. I'm just wondering why you think it’s necessary to maintain a notable cash buffer right now, just given the cash generation capabilities of your businesses and just where you are from a kind of leverage standpoint at present.

Yes. Thanks Chris. I think the simple answer is it's really built in suspenders as we're going through an unprecedented time something that comes along once every hundred years and you're in a situation when we were in March with the markets were very volatile. The short-term funding markets obviously had have tightened up substantially and honestly in a position like this it's just a matter of having liquidity is a very good thing to have and it just allows us to sleep well at night. So there was no immediate need for that additional buffer. It honestly was just putting some additional cash on the balance sheet so that we had some protection for unforeseen circumstances again given just the uncertainty around the events. And as things settle down and things now with the government stimulus and the markets returning to normal we will take a look to see whether we need to maintain that additional $300 million or so and will pay down the revolver when we feel comfortable but it was really just like I said it built-in suspenders approach.

Good morning and thanks for your update and taking the questions. Questions around the organic growth and I think for all the updates I think that was helpful and would be cautious this year but when you think about the low end of the range like in terms of determining that is it like kind of the depth of the recession and the impact from the pandemic or is it more the duration meaning if it lasts a long time? And then Michael just on the expenses related to the non-transaction and the non-trading part of the business, like how flexible is that and Adena, I think you mentioned on the organic growth like the longer term but like you go through like if you like this and a lot of customers kind of rethink businesses. So are there any parts of the business that you think you can actually see more demand for outsourcing and some of the services that you provide to your customers?

Thank you. To begin, I want to address the organic growth range. We've been assessing 2020 and considering the long-term implications. We need to understand the immediate impacts and communicate what we know amid current uncertainties. Longer-term, we are evaluating if we're aligned with the right trends and whether these trends are either continuing or accelerating. Regarding 2020, we're striving to recognize the possibility of returning to a “new normal” sustainably as we move through this year. If that happens, we anticipate that IPOs will gradually return, though at a slower pace than during the first quarter of last year. Additionally, we expect to continue delivering valuable intelligence solutions to our investment management and corporate clients, and we have numerous projects and opportunities in market tech that we believe our clients will eagerly pursue as they stabilize their operations. However, we do anticipate a new normal. We don't expect all employees to return to the office immediately, nor do we expect our clients' employees to do so either. We hope for a gradual improvement as testing and contact tracing become more effective, enabling us to better support our employees in working safely. This new normal aligns with our strengths and capabilities, though we acknowledge that the future is uncertain. We aim to highlight the associated risks, as any ongoing challenges could hinder our ability to meet the lower end of our growth range this year. Looking further ahead, we remain optimistic about our investments and their significance. I agree with your observation that organizations will reevaluate their needs and seek partners for various tasks, whether on-site or in cloud environments, to reduce reliance on their data centers and staff. We see substantial opportunities to collaborate with our clients on technology solutions that can scale, be managed remotely, and support more resilient business continuity efforts. Regarding expenses, I’ll turn it over to Michael since I lost track of the initial question.

Yes. Thank Adena. The answer on the expenses and whether it's a trading or the non-trading expenses. I think Nasdaq has historically shown that it's very efficiency focused organization and we do look at our expenses on a very detailed basis across our different segments and depending on what's happening with respect to the nature of the business we do have some levers that we can affect. We obviously have some discretionary spend across our different programs. Number one we'll take a look at those and that includes things like marketing and travel and entertainment and other types of opportunities. In addition to that we do have our initiatives and there's – these initiatives that Adena referred to earlier in our R&D program but there's also a number of other underlying initiatives that as an organization you have the opportunity to either do faster or slow down depending on the nature of the environment that we're facing and then you can always continue to look at other elements within the cost space. We now have much more flexibility with respect to our working environment and so we'll take those things into account. So I think will be very cost-conscious and we will obviously observe the environment and adjust our expenses accordingly.

Thanks a lot.

Hey good morning everyone. Assuming this one for Adena, I appreciate all the color that you provided and apologies again but back to your comments around potential risk of hitting that 5% range in 2020. Just based on your early assessment and I know you've hit on this a little bit but again apologies if I missed it. Could you just talk about specific areas and segments that might be driving that? Because if I think about the trends that you saw early this quarter, info services, the solid trends there and then just overall in the business by those analytics surveillance, tech infrastructure those are sort of more essential and I imagine would be a little more sticky in the near term as well. So maybe can you just drill down by maybe high-level business and then specific either client segments or regions that you see right now that could potentially drive some of this weakness in the near term that could just help maybe sort of bring fences and brands for us to think about sort of how long this could last in terms of whether it's more near-term concern with the particular sub-client segment or maybe longer term nature? Thank you.

Sure. Okay. So I'll try to be brief but it's a big question. So the first thing I would say is you are correct that we have a sticky client base and I think that we should recognize that and I hopefully I conveyed that in my prepared remarks that we have, we do provide critical services, critical technologies, critical information that allow our clients to navigate the capital markets or operate capital markets successfully. So you are very correct we have a sticky client base and so that gives us great confidence in the overall base and foundation of our business. But when we look at growth it's driven by obviously in upgrading or even increasing the relationships we have a certain customers or finding new customers or making changes in pricing. And I think we've made our normal course changes in prices this year and those are already being reflected and through the results but when we look at the other two, I think that when it comes to our current client base whether it's corporate clients, investment management clients, broker-dealer clients or exchanges they're very busy right now. So they will look for us, to us for immediate needs and we will be able to provide them to them like we help them through the surge and traffic and volumes through their systems. We've helped corporate clients really try to understand and do some new targeting work to help them understand how to attract new investors into their names. We certainly have done a lot of work with our investment management clients and we're doing a lot of analysis now on, business continuity planning and other things that help our investment management clients. So we have a lot of really interesting short-term work and I think some of that was well reflected in the quarter but also will continue to benefit us. I think where we just want to make sure we recognize is that with our existing clients they are quite-quite busy and so decisions get slowed down and they are also dealing with their own uncertainties and so they want to make sure they kind of understand where the world might sit certainly before they make big decisions but also even with some of the smaller ones it just takes longer to get things through the process. I think that the other thing is with new customers we've had, we have a very good pipeline frankly and we continue to have a good pipeline across our business but those clients also are thinking through their own kind of how quickly can they get it to market, how quickly can they get their new customers to test the system for instance, how quickly do they want to switch over to a new service when everyone's working from home. So to me those are delays in decisions but generally speaking in our recurring revenue segments we do find that we have strong base but we have some clients who are either liking their decisions or deferring them and then or they might they haven't yet but they might so we want to make sure that you're aware of that. And then I would say that in certain places and I did mention this in my comments where we have particularly in corporate clients where we have a range of clients across multiple segments they are going through different phases as some of the segments are quite secure like healthcare and technology and other segments are managing through significant disruptions and can make different decisions around any sort of what they would consider discretionary spend. Again we haven't seen a lot of that yet but that's a risk that we recognize in our business particularly if this situation continues over a longer period of time. So that's all within our non-trading businesses that I mentioned. Within our trading businesses as I mentioned also we don't try to predict volume. We try to long ago but we don't. It's not an easy thing to predict. So we try to make sure we maintain our business and manage our business through cycles and we benefit our shareholders when we have a cycle of high volumes but we definitely try to make sure that we don't take it, we don't commit ourselves to thinking that there's going to be a high volume environment forever. We just are looking at the signals that we're seeing right now and seeing a healthy volume environment right now. So that was what I was basically trying to convey to you. I hope that helped.

Great. Thank you very much.

Great. Yes. Thanks and good morning everyone. I wanted to ask yesterday you guys announced the launch of Nasdaq cloud data services. I was hoping you provide a little bit more detail on kind of what the enhanced flexibility does there? I mean obviously it seems like it allows you to kind of update the product more often, have a more tailored data set but is there anything tangible we should be thinking about from maybe an expense footprint perspective or the ability on the revenue side maybe that's happened to new customers or new clients who might not use the legacy products in the past. So just kind of wondering how to think about that candidly? Thanks.

So you nailed it. So we are looking at that cloud data service first of all it's not for the ultra-low latency clients but it is for the broader investor base out there in the world and for clients who tailor to investors around the world and because it's delivered in a millisecond environment. So it is truly real-time and that's pretty exciting to be able to deliver that out through a cloud infrastructure and that's some engineering work we did with our cloud partner. The second thing is that it's a really light touch in terms of what the client needs to do to take it. It's a very easy API for them to ingest and to build out front-end capabilities against. So it's got this, it's a very modern language. It's very simple and it makes it so that they can ingest it and develop front-ends very quickly against it. So it's like a light, think of it as like a light development kit that allows them to take in the data a lot faster and have a lot less cost associated with managing the data and recognizing that since it is in a cloud infrastructure they're not having to take the data into and ingest it into their data centers. They can just ping it through and it'll flow through into their systems from the cloud and they can store it and they can manage it in the cloud. So our view is that it's a much lighter infrastructure as well and I would say that we are expecting to be able to see new customers. That's kind of one of the main reasons for doing it is to continue to expand our client base but we also are working with customers that we've had who might take it as a new feed like maybe they took our basic feed before and now they want to take our depth because it's a lot easier to take in. so for all those reasons we're excited but it's new. So we just launched it yesterday and we have a lot of work to do to make sure we build up that pipeline and make it a reality for us.

How does COVID-19 change how you guys are thinking about acquisitions, you want to potentially be a bit more opportunistic because I presume evaluations have come down or you want to be more cautious because we just don't know what the revenue outlook is going to look like?

A great question. So the first thing I would say is, I think it's a little early for companies to necessarily admit to themselves that their valuations have come down. So while I do think we are in, we have our resilient business, we have a strong cash orientation to our business, we have a lot of opportunities to grow and continue to manage our growth organically in the context of what I've been discussing this morning. And so we were there to be a really great opportunity out there that we really think is a great strategic fit and delivers a really good financial result and we have line of sight into the future of that business because that's the big thing that everyone's trying to grapple with. Then we may choose to continue to take that opportunistic approach but I think that will be more cautious in a couple areas. One is certainly making sure we're thinking about in the context of our own balance sheet and making sure we continue to have a very strong position there. And two is we really need to be able to model it successfully. And so these businesses they have to be able to see through the cycle and know it's on the other end and know that they're also growing into or managing into a trend that we believe in. So for that reason I think you're going to find that it's, I would say we're being more cautious but it certainly is something that we have, we will continue to evaluate. I think as we've said before the vast majority of our time and attention is focused on organic growth. We have the engines going and well some of them may have a little bit of a slower roll this year. I think we still feel highly excited about everything that we have going on organically. So we don't spend every minute thinking about that question but that is something that we'll consider if the opportunity is right.

Hi, good morning. Thank you for taking my question. Regarding the investment data business, I noticed that organic growth has slowed to 5% year-over-year. Could you provide some insight into what might have caused this specifically? Are we likely to see continued declines in that growth rate? Additionally, I was pleased to hear that there hasn’t been much change in client behavior and that you've maintained strong engagement across several of your non-transaction businesses. However, could you discuss the eVestment market and its significance moving forward, especially in relation to 2021?

Okay, great. I think I missed the end of your question. I heard you want to discuss eVestment, but I didn't fully catch the entire question. Could you please repeat it?

Yes. Sorry. I was just wondering.

I’ll provide some insights into eVestment. eVestment is clearly our largest revenue contributor, along with Quandl and the Nasdaq Fund Network. It's important to note that while eVestment is pivotal, we've focused on enhancing our relationships with clients as we moved into 2020, which I believe is yielding positive results. We decided to adjust our pricing structure for eVestment, moving away from a per-user fee to an enterprise charge per client. This change has led to a significant increase in eVestment usage among clients; however, it has also meant that we see fewer incremental per-user revenue increases. Nonetheless, this strategy creates greater opportunities to scale eVestment across our client base, fostering stronger engagement with our customers and allowing us to collaborate on developing new capabilities. As our technology and data become integrated beyond just the marketing department into senior management and fund management offices, we’re positioned for growth through these new capabilities. While this approach has slightly tempered our near-term revenue growth, it lays a strong foundation for sustained future growth. Additionally, we are investing in eVestment for the private market sector, developing capabilities for private investors similar to those for public market investors—this area is experiencing growth, which we expect to manifest as we progress through 2020 and into 2021. These strategies will foster strong, successful relationships with our customers, expand into private markets, and support our global business expansion, although it did result in a bit of slower growth during our transition to the new pricing model.

Thanks for the color. Sorry for the connectivity issues.

Great. Good morning. Thanks for taking the question. So back to the outlook for non-transaction business growth. Just slower growth dynamics in the current environment obviously make a lot of sense but I was hoping you could talk a little bit about areas where we could see actual costs rationalization from some of your clients? So I think you talked about corporate solutions as one of the areas and early responses you just talked about investments but any others that we need to be mindful of is obviously clients potentially might have to respond to their own revenue challenges and if you get hit on the kind of typical contract structure for those relationships are these annual renewals, could there be more near-term terminations just to kind of help us think about the path over the next couple of quarters? Thanks.

Sure. In the Corporate Services business, some of our corporate clients are currently facing immediate expense challenges. They might approach us to negotiate our fees or decide not to utilize our services. However, we have thousands of customers, so this won't significantly impact our overall client base. For those clients we've been actively engaging with, we've focused on their essential service needs, adapting our offerings accordingly. This allows us to maintain our relationships while providing more relevant support during these times. Contracts typically span one to three years and generally auto-renew, providing opportunities for discussions every few years. In the data and index business, the dynamics are slightly different. Many contracts, especially with eVestment, can last for one year or be multi-year, but our data services operate on a monthly fee basis without long-term contractual obligations. This model has proven resilient across market cycles, and we've had productive conversations with clients exploring ways to optimize their spending on our data versus other providers. Our new cloud service offers direct access to our data, eliminating extra costs associated with third parties. With market technology, contracts generally involve longer terms, ranging from three to five years for surveillance agreements, and five to ten years for transaction or execution systems. Our exchange clients are stable and resilient, and our discussions with them center on supporting their short-term needs while collaborating on long-term technology upgrades. These conversations have been very productive. I hope this information is helpful.

Great. Yes. Thanks very much.

Yes. Good morning. Thank you for taking my question. I have a question related to the Skytra trading venue and then more broadly how does the conversation change with other non-financial industries which may see the need to hedge revenue risk. So for Skytra it may be a little bit hard to gauge but how effective the Skytra exchange could have spread the risk from the travel industry to capital markets and then more broadly do you have more discussions about developing similar trading venue with other non-financial industries to hedge revenue risk? Thank you.

Thank you. I don't have any special knowledge of Skytra beyond our collaboration to develop their trading and clearing solutions. They have made some statements about their progress, and I can follow up to see if we can gain more clarity on that. They seem excited about launching and are focused on providing hedging capabilities, with a target launch for this year. They view this as highly relevant, but they would need to address your specific question. Regarding the broader new markets landscape, it has definitely opened our minds to collaborating with clients on similar hedging capabilities. The key to Skytra's potential success lies in the data they possess. While our trading solution is important, the comprehensive data they gather from an industry source allows them to assess a majority of tickets sold in the industry, providing a strong basis for an index that can underpin futures instruments. If we consider other industries with a large amount of data that enables the aggregation of buying and selling behaviors and pricing of goods and services, this could be a relevant strategy across various sectors, and it's something we've been exploring. We also conducted an internal initiative asking our teams to propose new market ideas, judges reviewed them, and some focused specifically on how to leverage our technology to support other industries.

Okay. Thank you.

All right. Well, thank you very much. I just want to say that we are really fortunate to have a particularly resilient operating and financial model at Nasdaq and that provides essential technology information and services across a diverse set of clients across the global capital markets. We also greatly benefit from our trading franchise which provides an increased revenue opportunities in times of uncertainty, while the balance of our non-trading segments prepares us well to manage our business successfully of a range of macroeconomic environments and we remain fully committed to our new long-term strategy. If anything recent events have bolstered our belief that continuing our journey as a leading technology and information services provider that operates world leading marketplaces is the best way to serve our clients and deliver returns to our shareholders over the long term. So I look forward to continuing our discussions throughout the year on our progress and what we continue to see as the situation evolves. And with that I want to thank you very much for your time today. Thank you.