NASDAQ, INC.

NASDAQ, INC. – Annual Report Summary

NASDAQ, INC., the force behind the iconic stock exchange, showcased its strength as a diversified global technology company powering financial markets this past year. This summary provides investors with key insights into NASDAQ's operations, financial health, and strategic direction, drawn directly from its annual report.

Business Overview and Performance Highlights

NASDAQ, Inc. operates across three primary segments:

• Capital Access Platforms: This core segment facilitates company listings, provides market data, and offers investor relations solutions. It serves as the gateway for companies seeking to raise capital and gain visibility.
• Financial Technology: This segment delivers critical technology solutions to banks, brokers, and other financial institutions, helping them manage trading, risk, and compliance.
• Market Services: This covers NASDAQ's extensive trading services, including equities, options, and fixed income, providing the infrastructure for market participants.

A pivotal strategic move this year was the acquisition of Adenza in November 2023 for approximately $10.5 billion. This significant transaction aimed to substantially boost NASDAQ's Financial Technology segment by integrating Adenza's leading software for risk management and regulatory reporting. Management expects this acquisition to contribute significantly to recurring revenue streams and enhance NASDAQ's comprehensive offerings to financial institutions, projecting approximately $100 million in annual run-rate synergies by 2026.

Overall, NASDAQ, Inc. achieved strong financial results. Total revenue for the year reached $6.5 billion, an 8% increase from $6.0 billion last year. Net income also grew healthily, rising to $1.2 billion from $1.0 billion previously. Strategic expansion of its Financial Technology segment and consistent demand across its Capital Access Platforms primarily drove this growth.

Detailed Financial Performance

Breaking down revenue by segment:

• Capital Access Platforms contributed approximately 40% of total revenue, growing 7% year-over-year. This reflects strong demand for listing services and market data.
• Financial Technology revenue surged 25%, now accounting for 35% of total revenue. The Adenza acquisition's initial impact and organic growth in software solutions largely drove this increase.
• Market Services grew 5%, making up the remaining 25% of revenue, supported by stable trading volumes and derivatives activity.

The company maintained a healthy 25% operating margin, improving from 23% last year. This indicates effective cost management alongside revenue expansion. Earnings per share (EPS) reached $7.50 for the year, up from $6.20 last year, reflecting solid profitability.

Management's Discussion: Wins and Challenges

Major Wins:

• Adenza Acquisition: Beyond its strategic fit, the acquisition significantly diversifies NASDAQ's revenue mix toward higher-growth, recurring software-as-a-service (SaaS) offerings. This strengthens its position as a critical technology provider to the financial industry.
• Record Listing Activity: NASDAQ continued to attract a high volume of new company listings, particularly in the technology and biotech sectors. This underscores its appeal as a premier global listing venue.
• Innovation in Market Infrastructure: The company successfully rolled out several enhancements to its trading and surveillance technologies, improving market efficiency and resilience.

Challenges:

• Integration Risks: Successfully integrating Adenza's operations, technology, and culture remains a key focus and potential challenge. It requires careful execution to realize anticipated synergies.
• Regulatory Scrutiny: Increased global regulatory oversight, particularly concerning market data pricing and digital assets, could impact future revenue streams and increase compliance costs.
• Macroeconomic Headwinds: Persistent inflation and interest rate volatility could impact trading volumes and corporate capital-raising activities, potentially affecting Market Services and Capital Access Platforms.

Financial Health

NASDAQ maintains a strong financial position. At year-end, the company held $1.5 billion in cash and cash equivalents, providing ample liquidity for operations and strategic investments. Total long-term debt stands at $8.0 billion, primarily comprising senior notes with an average interest rate of 3.5% and staggered maturity dates from 2025 to 2063. This structured debt profile reflects a prudent approach to capital management.

The company's debt-to-EBITDA ratio remains manageable at 2.5x. NASDAQ also has access to a $1.25 billion five-year revolving credit facility, which remains largely undrawn. This offers significant financial flexibility for unforeseen needs or growth opportunities.

Key Risks

Investors should consider several key risks:

• Cybersecurity Threats: As a critical financial infrastructure provider, NASDAQ faces persistent and evolving cybersecurity risks. While the company continuously invests in robust defenses, a significant breach could lead to operational disruptions, reputational damage, and financial losses.
• Regulatory and Legal Risks: Changes in financial regulations, increased enforcement actions, or new legal challenges could impact NASDAQ's business model, increase compliance costs, or limit its ability to innovate.
• Competition: NASDAQ operates in highly competitive markets, facing established exchanges, alternative trading systems, data providers, and emerging fintech companies.
• Technology and Operational Risks: The company relies heavily on complex technology systems. System failures, outages, or delays could disrupt market operations and harm customer confidence.
• Integration of Acquisitions: Successfully integrating Adenza and future acquisitions is crucial. Failure to achieve expected synergies or manage integration challenges could negatively impact financial performance.

Competitive Positioning

NASDAQ maintains a strong competitive position, leveraging its globally recognized brand, advanced technology, and diversified revenue streams. Its competitive advantages include:

• Global Reach and Brand Recognition: A leading global exchange and technology provider with a strong reputation.
• Technological Leadership: Continuous investment in cutting-edge market technology, data analytics, and AI.
• Diversified Business Model: A balanced portfolio across listings, market data, trading, and financial technology solutions reduces reliance on any single revenue source.
• Sticky Customer Relationships: Deep integration with financial institutions and corporations creates high switching costs for clients.

NASDAQ competes with other major global exchanges (e.g., NYSE, LSE Group), alternative trading venues, and a growing number of data and technology providers (e.g., Refinitiv, Bloomberg, various fintech firms).

Leadership and Strategy

NASDAQ's executive leadership team saw no significant changes this year, ensuring continuity in strategic execution. The company's strategy focuses on:

• Expanding its Technology and Data Solutions: Leveraging the Adenza acquisition to accelerate growth in its Financial Technology segment and further monetize its extensive market data.
• Driving Innovation: Investing in emerging technologies like AI, machine learning, and blockchain to enhance market efficiency, surveillance, and product offerings.
• Global Expansion: Identifying opportunities to expand its market infrastructure and technology solutions into new geographies.
• Shareholder Returns: Maintaining a balanced approach to capital allocation, including strategic investments, debt reduction, and consistent shareholder returns through dividends and share repurchases.

Future Outlook

Management projects continued revenue growth of 7-9% for the upcoming fiscal year. This growth will be driven by the full-year impact of the Adenza acquisition and sustained demand for its market technology and data solutions. They anticipate maintaining strong operating margins and committing to disciplined capital allocation. Key focus areas include successfully integrating Adenza, further innovating market infrastructure, and forming strategic partnerships to expand its ecosystem.

Market Trends and Regulatory Changes

NASDAQ operates within a dynamic environment shaped by several key trends and potential regulatory shifts:

• Digital Asset Evolution: Increasing institutional adoption and regulatory development around digital assets and blockchain technology present both opportunities and challenges for market infrastructure providers.
• AI and Machine Learning: The rapid advancement of AI is transforming financial services. It offers potential for enhanced market surveillance, data analytics, and automated trading, which NASDAQ actively integrates.
• ESG Investing Growth: The rising importance of Environmental, Social, and Governance (ESG) factors in investment decisions drives demand for new data products and listing services.
• Regulatory Harmonization and Fragmentation: While a push for global regulatory harmonization exists in some areas, increasing nationalistic approaches to data privacy and market structure could create complexities. The ongoing debate around market data pricing and access also remains a significant regulatory focus.