Nasdaq’s Q3 Results Show It Dominates IPO Listings in 2023

by Damian Chmiel
  • Nasdaq's report for Q3 2023 shows a YoY increase of 6% in net revenues.
  • The company also returned $108 million to shareholders through dividends.
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Nasdaq, Inc. today (Wednesday) published its financial performance for the third quarter of 2023, revealing significant growth in multiple sectors. The report of the publicly-listed company (Nasdaq: NDAQ) detailed broad-based increases in revenue, a strong performance in anti-financial crime solutions, and more than $1.6 billion of free cash flow generated over the past year. On top of that, the exchange operator reinforced its listings leadership in the US.

Broad-Based Revenue Growth Drives Nasdaq's Q3 Performance

The company experienced an improvement of 6% in net revenue in the third quarter of 2023 compared to the third quarter of 2022. Solutions Businesses, a significant contributor, saw their revenues climb 9% with an organic growth rate of 8%. The Annualized Recurring Revenue (ARR) also grew 6%, with annualized SaaS revenues showing growth of 11%. This represents 37% of ARR.

Nasdaq's Anti-Financial Crime was another arm that reported higher numbers, with revenues increasing 21% compared to last year. This rise is attributed to smaller financial institutions' growing adoption of Verafin, a financial crime management solution. The overall GAAP diluted earnings per share rose 2%, and the non-GAAP version showed an uptick of 4%.

"Our third quarter 2023 results reflect Nasdaq's solid execution amid a continued dynamic economic and capital markets backdrop," said Adena Friedman, the Chairwoman and CEO of Nasdaq. "We experienced some improvement in the IPO environment by welcoming marquee IPOs, we continued to broaden our Anti-Financial Crime clientele, and we introduced new innovations to our products and services."

During this quarter, Nasdaq generated more than $1.6 billion in free cash flow over the trailing twelve months. In terms of giving back to shareholders, Nasdaq returned $108 million through dividends. No share repurchases were made in this period. As of 30 September 2023, the company has $2.0 billion available under its board-authorized share repurchase program.

Strategic Advancements

The company updated its 2023 non-GAAP operating expense guidance to a range of $1,785 million to $1,805 million. In terms of strategic updates, Nasdaq has been making headway in acquiring Adenza and has launched new environmental sustainability solutions. Notably, the firm is partnering with a growing number of financial institutions to manage increasing risks related to financial crimes.

"We delivered broad-based revenue growth in the third quarter and had particularly strong performance in our Index and Anti-Financial Crime businesses," Ann Dennison, the Executive Vice President and CFO, added.

In the first three quarters of 2023, Nasdaq reinforced its listings leadership in the US, capturing 84% of operating company IPOs and unveiling a modernized MarketSite in Times Square for high-profile listing events. The exchange additionally received SEC approval for its AI-powered order type, Dynamic Midpoint Extended Life Order, which has been shown to improve order fill rates by over 30% in testing.

In the meantime, the company shelved its crypto custody plan, citing a "shifting regulatory environment" in the USA.

Nasdaq, Inc. today (Wednesday) published its financial performance for the third quarter of 2023, revealing significant growth in multiple sectors. The report of the publicly-listed company (Nasdaq: NDAQ) detailed broad-based increases in revenue, a strong performance in anti-financial crime solutions, and more than $1.6 billion of free cash flow generated over the past year. On top of that, the exchange operator reinforced its listings leadership in the US.

Broad-Based Revenue Growth Drives Nasdaq's Q3 Performance

The company experienced an improvement of 6% in net revenue in the third quarter of 2023 compared to the third quarter of 2022. Solutions Businesses, a significant contributor, saw their revenues climb 9% with an organic growth rate of 8%. The Annualized Recurring Revenue (ARR) also grew 6%, with annualized SaaS revenues showing growth of 11%. This represents 37% of ARR.

Nasdaq's Anti-Financial Crime was another arm that reported higher numbers, with revenues increasing 21% compared to last year. This rise is attributed to smaller financial institutions' growing adoption of Verafin, a financial crime management solution. The overall GAAP diluted earnings per share rose 2%, and the non-GAAP version showed an uptick of 4%.

"Our third quarter 2023 results reflect Nasdaq's solid execution amid a continued dynamic economic and capital markets backdrop," said Adena Friedman, the Chairwoman and CEO of Nasdaq. "We experienced some improvement in the IPO environment by welcoming marquee IPOs, we continued to broaden our Anti-Financial Crime clientele, and we introduced new innovations to our products and services."

During this quarter, Nasdaq generated more than $1.6 billion in free cash flow over the trailing twelve months. In terms of giving back to shareholders, Nasdaq returned $108 million through dividends. No share repurchases were made in this period. As of 30 September 2023, the company has $2.0 billion available under its board-authorized share repurchase program.

Strategic Advancements

The company updated its 2023 non-GAAP operating expense guidance to a range of $1,785 million to $1,805 million. In terms of strategic updates, Nasdaq has been making headway in acquiring Adenza and has launched new environmental sustainability solutions. Notably, the firm is partnering with a growing number of financial institutions to manage increasing risks related to financial crimes.

"We delivered broad-based revenue growth in the third quarter and had particularly strong performance in our Index and Anti-Financial Crime businesses," Ann Dennison, the Executive Vice President and CFO, added.

In the first three quarters of 2023, Nasdaq reinforced its listings leadership in the US, capturing 84% of operating company IPOs and unveiling a modernized MarketSite in Times Square for high-profile listing events. The exchange additionally received SEC approval for its AI-powered order type, Dynamic Midpoint Extended Life Order, which has been shown to improve order fill rates by over 30% in testing.

In the meantime, the company shelved its crypto custody plan, citing a "shifting regulatory environment" in the USA.

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