Nasdaq, Inc. (NDAQ) Q1 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Nasdaq First Quarter 2021 Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ed Ditmire, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss Nasdaq's first quarter 2021 financial results. On the line are Adena Friedman, our CEO; Ann Dennison, our CFO; John Zecca, our Chief Legal and Regulatory Officer and other members of the management team. After prepared remarks, we will 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 would 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. Good morning, everyone and thank you for joining us. My remarks today will focus on Nasdaq's first quarter 2021 financial and business performance as well as the progress we have made executing on our strategy. I'd like to begin by acknowledging how deeply proud I'm of the Nasdaq team's continued commitment to our clients during this period. A full-year has now passed since our global workforce began working remotely and I could not be more pleased with the first quarter results that our team has delivered to our stakeholders today. Our relentless client focus and Nasdaq's nimbleness allowed us to generate strong financial results for the first quarter of 2021. We also made important progress against our corporate strategy during the quarter with the completion of our acquisition of Verafin in February, and the announced agreement to sell our U.S. Fixed Income business to Tradeweb Markets. Our performance during this period continues to underscore the resilience of Nasdaq's diversified product offering and business model as well as our ability to address the needs of our clients in a rapidly changing environment. Now I will turn to our strong financial results for the first quarter of 2021. Nasdaq delivered net revenues of $851 million, an increase of $150 million, or 21% from the prior-year period, driven by 17% organic growth in our Solutions segment businesses and 17% organic growth in our Market Services business. The acquisition of Verafin and the changes in FX rates drove the remainder of the growth for the business in the quarter. Across our exchange businesses, the incredibly dynamic capital markets environment during the period, combined with our strong competitive positioning, resulted in record U.S. equity and options volumes and a record quarter for new listings. I'm also extremely proud of the progress we've made to continue to grow our annualized recurring revenue or ARR which is up 21% compared to the prior-year period. This was driven by our continued focus on key secular growth opportunities that are powering our Solutions segments. We're seeing rising demand across our clientele for our solutions including from institutional investors for analytics and workflow tools, from corporate clients for our ESG and IR solutions, and from financial institutions and marketplaces for technology that helps reduce financial crime. Our ARR growth was also boosted by the acquisition of Verafin. The strong operating leverage of our model was evident in the results. Our non-GAAP operating margins increased to 54% up two percentage points compared to the prior-year. As a result, we experienced 25% increase in our non-GAAP operating income and a 31% increase in our non-GAAP diluted earnings per share in the period. Turning now to the specific highlights from the quarter, I'll begin with our foundational marketplace and corporate businesses. Our Market Services segments total net revenues of $338 million, a 20% increase from the prior-year period and a new quarterly revenue record for this business. This was primarily led by higher U.S. options and cash equities trading volumes. We're also seeing an increase in demand for Trade Management Services connectivity solutions, as clients adjust their capacity for a wider range of volume scenarios. Nasdaq U.S. Options market set a quarterly record of 892 million contracts traded during the period, an increase of 57%. While our U.S. equities markets set a quarterly record of 153 million shares traded an increase of 20% year-over-year. Additionally, during the period, we entered into a definitive agreement to sell our U.S. Fixed Income business NFI to an affiliate of Tradeweb Markets. The decision to sell NFI aligns with our strategy to maximize our potential as a major technology and analytics provider to the global capital markets. We expect the transaction to close later in 2021, subject to customary closing conditions. Next, our Corporate Platform segment delivered revenues of $155 million, a 21% increase with robust contributions across each of the product areas in that business. The business is boosted by record levels of new listing activity, material contribution from Nasdaq private market following a record first quarter for private company transactions and increased demand for our Investor Relations, Intelligence and ESG solutions. In our IR and ESG services business, we're seeing consistent and growing demand for our expanded suite of products, which has been carefully designed to help our clients' measure, analyze, collaborate and take positive actions regarding their respective Investor Relations, governance, and sustainability programs. For example, in our IR Intelligence unit, we saw six new client wins from our new expanded ESG advisory offering, a more in-depth solution that has lengthened and deepened our engagement with executive leadership teams as they seek to meet the demand from institutional investors and other stakeholders for greater clarity on their ESG strategies. And we're seeing this deeper client engagement results and continued sales momentum for our consultative IR advisory service and our Nasdaq IR insight workflow solutions, which saw a combined 36% increase in sales during the quarter. In our Listing segment, Nasdaq led U.S. exchanges for IPOs during the period welcoming 275 IPOs that raised $74.4 billion, including 79 operating company IPOs and 196 SPAC IPOs. The Nasdaq stock market led U.S. Exchanges with a 69% total win rate on IPOs, including a 77% win rate among operating companies, and a 66% win rate amongst SPACs. Listing highlights from the first quarter include the IPOs of Bumble, Qualtrics, Affirm, Playtika and Petco. During the quarter, Nasdaq listed seven of the top 10 largest IPOs by capital raised. Companies that responded positively to our virtual IPO experience during the pandemic period and we are excited and encouraged to see our iconic Bell ceremony and IPO day experienced come to life again in Times Square, and in cities across the country for our unique Remote Bell ceremony. Highlights include going on the road during the quarter to Bumble in Texas and to Qualtrics in Utah. We look forward to welcoming our clients and capital markets partners safely to the Nasdaq market site for these milestone celebrations as we start to prepare for a post-pandemic period. Of course, I also want to acknowledge the strong start to the second quarter in listings with in particular noting Nasdaq successful direct listing of Coinbase, a global leader in infrastructure and technology for the crypto economy. The Coinbase listing represents the largest direct listing in history, and was the largest ever Initial Public listing opening cross on Nasdaq. Now let me turn to our Market Technology and Investment Intelligence businesses. Our Market Technology segment delivered $100 million in revenues including a partial period contribution from the Verafin acquisition, which we completed in February. Our annualized recurring revenue for the quarter was a $416 million, a 62% increase year-over-year, including a 10% increase from our existing business and an additional $134 million representing the annualized total of Verafin's first quarter subscription revenues irrespective of the closing date, or the temporary impact of the write-down of deferred revenues. To give you more transparency and how different parts of Market Technology are operating and progressing going forward, we have started to report our revenues from this segment of our business in two groups. The first is called Marketplace Infrastructure Technology, which will comprise our solutions for the full trade lifecycle to market infrastructure operators, banks and brokers and non-financial market operators. And the second is called Anti Financial Crime Technology, our offerings providing surveillance, risk management, and Verafin's anti-money laundering and fraud detection solutions. As we stated in previous investor calls, there are certain areas of our Market Technology business that have been adversely impacted by the pandemic related factors largely in the Marketplace Infrastructure Technology business. And while the environment continues to be characterized by the logistical challenges to implementations and lengthened sales cycles, the actions we took last year to respond to those dynamics are resulting in stabilize but moderated revenue growth in the near-term, albeit with short-term impact to segment profitability. More importantly, our longer-term vision for Market Technology remains on track, as demonstrated by the progress we've been delivering in new sales and revenues from SaaS products and services, in particular, our Anti Financial Crime Technology Solutions. Excluding the impact of Verafin, SaaS revenues within all of Market Technology increased 15% year-over-year. Turning to our Investment Intelligence segment, we delivered net revenues of $258 million, up $47 million or 22% from the prior-year period. Overall assets under management in ETPs benchmark to Nasdaq's indexes totaled $385 billion at the end of the quarter, an increase of 87% from the prior-year period, and a new quarterly record. Additionally, trading at futures and options on futures contracts tracking Nasdaq indexes, increased 31% year-over-year. I'm also pleased to see increasing adoption of some of our recent product innovations. In particular, AUM in the Invesco innovation suite built on their strong debut in the fourth quarter of 2020, and now stands at approximately $2 billion in AUM in just five months after launch, making this one of the most successful new launches for Nasdaq's Index business. Our analytics business delivered revenues of $48 million, an increase of $7 million, or 17% from the prior-year period. Led by eVestment and Solovis, this business experienced strong increased growth in the first quarter, due to improvement in both new users and retention compared to the prior-year period. On a sequential basis, new sales were up 23% from the fourth quarter of 2020, reflecting growth for our rebound in institutional investment industry demand following some temporary contraction in 2020, as well as increased realizations of the synergies between eVestment and Solovis as the combination help drive 28 new accounts to Solovis in the first quarter. These results underscore our strategy to create comprehensive workflow solutions for investment managers and institutional asset owners from pre-commitment diligence to post-commitment portfolio tracking and secondary trades. Lastly, within Investment Intelligence, our market data revenues rose 11%, driven primarily by expanding international demand for our proprietary data products. As I wrap up, I’d like to reiterate that Nasdaq remains diligently focused on serving the unique needs of our clients, while we advance our strategic mission to capitalize on the opportunities that lie ahead of us. At our Investor Day in November, we articulated that our diversified business model was designed to provide us with the resiliency to drive disciplined growth across a variety of backdrops. Our recent success, especially in the first quarter, underscores the power of the Nasdaq platform and highlights that the strategy underpinning a repositioned franchise is resonating with our clients, as we continue to reallocate capital to higher growth opportunities, while maintaining leadership in our marketplace core. This focus has also resulted in many new instances of dynamic collaboration across our businesses be it new product innovations or bringing advanced technology solutions to help our clients solve major industry challenges. For example, in our Anti Financial Crime Technology segment, we're very excited about the work that we can do together with Verafin. This includes the potential for new client opportunities given our strong relationships with Tier 1 and Tier 2 banks, as the Verafin team continues to build out their solutions to increase confidence in the global financial system. Additionally, we're pleased to support their international expansion, especially into Europe where Verafin has just landed its first client. Another great example is the intersection of our listings and index businesses. Listing the next-generation of innovators, including many of the largest IPOs that have come to Nasdaq in the recent years, create strong synergies to drive new product development in collaboration with our Index business. For example, the strength and success of our Flagship Nasdaq 100 Index, and our partnership with Invesco, laid the groundwork for a recent launch of the Invesco Innovation Suite, including the Invesco Nasdaq Next Generation 100 ETF comprised of the 101st to the 200 largest non-financial companies listed on Nasdaq, the Nasdaq Next Gen 100 Index has been one of the fastest growing ETFs that we've ever launched with a partner and includes companies such as Etsy and Roku, as well as many of the fastest growing enterprise technology and healthcare companies listed on our market. As I look back at this quarter, I could not be prouder of the performance across the business. We officially celebrated Nasdaq's 50th anniversary in February and given our rich history as a technology pioneer, I remain confident that we are moving Nasdaq in the right direction for many years to come. And with that, I'll turn it over to Ann to review our financial results in greater detail.

Thank you, Adena, and 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 our press release as well as in a file located in the financial section of our Investor Relations website at ir.nasdaq.com. 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 $150 million increase in reported net revenue of $851 million is the net result of organic growth of $118 million including 17% organic increase in both Market Services and Solutions segments, a $14 million positive impact from acquisitions, and an $18 million impact from changes in FX rates. I will now review quarterly highlights within each of our reporting segments. I'll start with Investment Intelligence revenue which increased $47 million or 22%. Organic revenue growth during the period was 20%, reflecting very strong growth in our Index business, as well as strong contributions from both our market data and analytics businesses. Annualized recurring revenue or ARR was $542 million and increased 13% compared to the prior-year period. AUM and ETPs licensed to Nasdaq entities rose 87% year-over-year to $385 billion, including a 25% increase from net inflows and a 62% increase from changes in market impact. On Page 19 of the presentation you'll find our new disclosure on Net flow contribution to the year-over-year change in AUM. The segment operating margin of 65% increased one percentage point compared to the prior-year period. Market Technology revenue increased $19 million or 23%. The increase reflects organic revenue growth of $3 million or 4%, $12 million from the acquisition of Verafin which closed mid-quarter, and a $4 million impact from the changes in FX rates. Excluding a temporary $7 million purchase price adjustment on deferred revenue associated with the closing of the Verafin transaction, Verafin revenues would have totaled $19 million for the partial quarter period following the February 11, 2021 close. On 510, we showed a runoff of the remaining $23 million purchase price adjustments on Verafin's deferred revenue. The $3 million organic increase in Market Tech was driven primarily by higher SaaS based Anti Financial Crime Technology revenues, in particular from our Market and Trade Surveillance products. ARR for Market Technology was $416 million in the first quarter of 2021, an increase of 62% compared to the prior-year period, largely due to the Verafin acquisition. Excluding Verafin, Market Technology ARR increased 10% in the period. In addition to the new Market Technology reporting Adena mentioned earlier, we're supplementing this with another revenue breakdown, disclosing the recurring subscription SaaS and support licensing revenues, as well as the non-recurring professional services contributions to help investors and analysts track our progress as we continue to expand the SaaS contributions across both our Market Infrastructure Technology and Anti Financial Crime Technology businesses. The segment operating margin was a negative 2%, but would have been a positive 5% when excluding the non-cash purchase price adjustment related to Verafin deferred revenue. The 5% margin is not a level that we believe reflects the potential of the business and we continue to feel optimistic about our ambition for a margin that supports Market Technology being a Rule of 40 business in 2023 and beyond. While the impact of the Verafin purchase price adjustment on deferred revenue is temporary, and will be eliminated over the next four quarters, on a core basis, two main factors will drive our margin expansion over the coming years. First, our mix of SaaS subscription revenues within Market Technology is increasing significantly. Looking ahead, we expect it to continue to grow as we execute our strategy. This is critical because our SaaS businesses have approximately two to three times the average contribution margin of the on-premise solutions. Second, we accelerated hiring in certain areas of our Market Technology business in recent quarters and on a temporary basis allocated more of our existing resources to relatively low margin installation work, in particular, in the most complex on-premise clearing solutions. We expect the margin impact to gradually diminish over the coming years. Corporate Platform revenues increased $27 million, or 21%. Organic revenue growth totaled $24 million or 19%. And there was a $3 million impact from changes in FX rates. The organic revenue increase was primarily driven by higher U.S. listings revenues due to an increase in IPOs and higher Nasdaq private market revenues together with an increase in both IR and ESG advisory services revenues. Nasdaq private market revenues were about $6 million to $7 million higher than the average quarterly run rate of 2020. And while this business has averaged an over 40% bigger in the last three years, we would expect to see at least $5 million in sequential decline in 2Q 2021 from NTM's particularly strong first quarter. Corporate Platform's ARR was $487 million and increased 12% compared to the prior-year period. The segment operating margin of 42% increased seven percentage points compared to the prior-year period, and was driven by both the unusually strong activity on the Nasdaq private market, as well as from the substantial increase in the listed issuer bid. Market Services net revenues increased $57 million, or 20%. The organic revenue increase was $48 million or 17% and there was a $9 million impact from changes in FX rates. The organic increase during the period primarily reflects increases in cash equities and equity derivatives net revenues due to higher industry trading volumes and an increase in Trade Management Services revenues. The segment's operating margin of 67% increased four percentage points from the prior-year period, reflecting strong operating leverage on record trading revenues. Turning to Pages 9 and 14 to review expenses. Non-GAAP operating expenses increased $57 million to $393 million. The increase reflects a $24 million or 7% organic increase, an $18 million increase from the impact of acquisition, and a $15 million increase from the impact of changes in FX rates. The organic growth and expenses reflects the sum of one, relatively consistent low-single-digit percentage increase related to hiring and wage inflation; two, higher compensation expense as variable performance linked compensation increase reflecting the company's outstanding growth; and three, costs related to what has been an incredibly active capital markets backdrop. For example, costs related to increasing our trading capacity, as well as marketing commitments supporting the extraordinary number of IPO wins in recent periods. Turning to Slide 10, we're narrowing our 2021 non-GAAP operating expense guidance to a range of $1.57 billion to $1.62 billion to reflect strong and broad-based organic revenue growth in the first quarter and the impact that growth had on variable expenses like performance-based compensation and marketing commitments. As we look forward to the remainder of the year, overall as performance continues to be strong, we would expect to come in at the high-end of the expense guidance range. In addition, we expect the year-over-year organic growth and expenses to be elevated particularly in 2Q 2021 compared to 2Q 2020 as the prior-year period had a significant reduction in travel and other in-office activity due to the onset of the pandemic, as well as lower new listing activity and less performance-based compensation due to the uncertain financial environment in 2Q 2020. Moving to operating profit and margins, non-GAAP operating income increased $93 million in the first quarter of 2021. Our non-GAAP operating margin of 54% increased two percentage points year-over-year. Net interest expense was $28 million in the first quarter of 2021, an increase of $4 million compared to the prior-year period due to incremental interest expense related to the financing of the Verafin acquisition. Consistent with our reporting practice, interest expense related to acquisition financing that was incurred prior to the mid quarter close of the transaction was excluded from non-GAAP results for this quarter. And therefore, an incremental $3 million to $4 million of Verafin related interest expense will be reflected in the second quarter results. The non-GAAP effective tax rate was 24% for the first quarter of 2021, which includes a benefit related to the vesting of certain equity awards. For the full-year 2021, we still expect our non-GAAP effective tax rate to be in the range of 25% to 27% and barring any changes in the corporate tax landscape, we expect to come in near the bottom end of the range for the year. Non-GAAP net income attributable to Nasdaq for the first quarter of 2021 was $327 million, or $1.96 per diluted share, compared to $251 million, or $1.50 per diluted share in the prior-year period. Turning to Slide 11, debt increased by $349 million versus 4Q 2020, primarily due to net issuances of $435 million of commercial paper used to fund a portion of the Verafin acquisition, partially offset by an $87 million decrease in the book values of our Eurobonds caused by changes in FX rates. Our total debt to EBITDA ratio ended the period at 3.4 times, a decrease from 3.5 times in the fourth quarter of 2020. During the first quarter of 2021, the company paid common stock dividends in the aggregate of $81 million, and repurchased common stock in the amount of $162 million. Today, we're announcing a 10% increase in the regular quarterly dividend to $0.54 per share. Additionally, during the first quarter, the Board of Directors authorized an increase to the share repurchase program of an additional billion dollars, subject to the closing of the sale of our U.S. Fixed Income business, an acceleration of the issuance of Nasdaq common stock related to the sale. As previously communicated, we intend to use the proceeds from the sale as well as available tax benefits, working and clearing capital of the business and other sources to repurchase shares in order to offset EPS dilution. We continue to expect the sale to be temporarily 2% dilutive to non-GAAP EPS in the 12-month period following the close and we see immaterial dilution in periods thereafter. Overall, the actions taken during the first quarter support Nasdaq's accelerated evolution and allow the company to further concentrate its resources on technology, analytics and ESG opportunities. Thank you for your time, and I'll turn it back over to the operator for Q&A.

Thank you. [Operator Instructions]. Our first question comes from Rich Repetto with Piper Sandler. Your line is open.

Yes. Good morning, Adena. Good morning, Ann. And I guess, congrats on the strong quarter unique operating conditions. So my question has to do is broad, it has to do with the growth rates that we're experiencing. If you look at the overall growth rate, if you look at Corporate Platforms and Investment Intelligence, you're running three to 4X of the guidance rate. And given you still got probably the comparisons that another quarter or two were relatively stable comparisons. So when do you look at adjusting, I guess, and a lot of this is recurring revenues, as you highlighted. So when do you look at adjusting or the conservatism of the organic growth rate guidance?

Well, thank you. Well, I would say that we are -- we only changed our outlook for our growth rates or what I would say medium to long-term revenue growth rates about two quarters ago. So I'd say that, Rich, we're still -- we still believe that those are the appropriate way, the appropriate growth rates, at least based on a kind of a three to five year time horizon. But having said that, I do agree with you that we are performing well ahead of our outlook and we're obviously extremely pleased with that performance. I think that as we continue to gain more traction across our platforms, and particularly in the Solutions segment, we certainly can look to make those adjustments, but we're sticking with the outlook at this point.

Okay. And they're going to be increased by Verafin as well --?

And we'll make some adjustments to that. And when we announced the Verafin acquisition, so we did make those adjustments as part of that announcement.

Okay, congrats on the strong quarter. Thank you.

Yes, really appreciate it.

Thank you. Our next question comes from Dan Fannon with Jefferies. Your line is open.

Thank you. Good morning. My question is on the Market Tech segment. Ann, you might have said this, but what was the Verafin contribution of the revenues in the quarter? And then, as we look ahead, as you talk about the margin and reiterating the long-term outlook for the margin, could you help us in the short-term as you mentioned increased costs plus the backdrop from a revenue environment? Are we looking at, what are we looking forward to see this margin march higher? Is it kind of the normalization of expenses plus the revenue or could we just see the margins expand without based on where things sit and kind of the normal progression of the ARR and other portions of the business?

Sure. So on your first question about Verafin's contribution, so within the numbers for the partial quarter, we had $12 million of revenues related to Verafin and so -- and that included $7 million worth of deferred revenue write-down. So on a gross basis, it was $19 million for the partial quarter, which we closed the deal on Feb 11. On your -- Related to your question in Market Tech margins, as we look forward to 2023 and our ambitions of achieving the Rule of 40 for the overall Market Tech. We think the primary way we can get there is through revenue growth, part of that will be bringing Verafin on board. And then the other two things are going to, we should look to; we're going to continue to expand our SaaS offerings. We talked about the growth in our SaaS business, and the fact that our SaaS businesses come at higher contribution margins. So as we continue to expand there, we'll see an impact on the margins. And then the last thing that I've mentioned is just that, we have -- we do have some incremental costs now to deliver on some of our larger, more complex projects. We've added costs and we expect them to gradually decline over time. So when you put those three things together, we expect to achieve that Rule of 40 in 2023. And I think it just brings back, it is important to note that we're confident in the prospects of this business and our ability to be successful here.

Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.

Yes, hi, good morning, everyone. On the Listings business. Can you just describe a little bit more what happened in the first quarter? I know you dimensionalize the private market impact, I think $7 million but even without that, it was still a very, very strong quarter on a sequential basis. And I know you highlighted SPACs in particular and I know it was a very strong SPAC quarter. But usually the initial listing fees could amortize over many years. So just wondering is the accounting difference on SPAC listings or anything that that you could point out to kind of bridge the gap and how sustainable that should be going forward given that some of the SPAC enthusiasm seems to be waning a little bit? Thanks.

Thanks, Alex. Well, I think that really when you look at the revenue performance in the Listings business; it is on the back of three very strong years of new listings, which of course gets us to a new annualized recurring rate of Listing revenue. We had over I guess in 2019, we had a 189 IPOs. In 2020, we had over I think 314 IPOs. And then this year, already, we've had 275 IPOs. You are right though, with the SPAC Listings, it's a little different. They, first of all, they tend to come in at the capital market, because they want to pay the lowest possible fees. So contributions from SPAC if we look at an overall SPAC annual listing revenue is only about 5% of our total listing revenues. So it is a -- it's not a huge contributor. And of course, when they do combine with companies, then we have the opportunity to bring that company to Nasdaq as an operating company. And that tends to accrue to a higher fee rate. So there's a lot of opportunity from the SPACs as they make this combination to increase our revenue contribution. But it also is pretty limited risk in terms of if this SPACs are not able to find operating companies they want to combine with. But generally speaking, Alex, it's just I think it's kind of a compounding effect of multiple years where we've been -- we've been winning the majority of IPOs and frankly, the vast majority of operating company IPOs. And it's just been a favorable environment for us to be able to bring a lot of new companies to market. So I think it's a combination of all those things. And I should mention also, we had 32 new listings in the Nordics in the first quarter as well. And so that -- that -- that's really bucking the trend in Europe and we continue to see a lot of strength in our Nordics business as well.

Thank you. Our next question comes from Ari Ghosh with Credit Suisse. Your line is open.

So Adena or Ann, back on Market Tech. So just looking at the Anti Fin Crime bucket, including the four Verafin contribution that you called out, that looks stronger than what we expected just looking at that $46 million bucket for the quarter. Could you talk about either lumpiness or seasonal factors driving that during the quarter, is it anything that we should be thinking about or even as we think about the rest of the year. And related to that, you've noted that you continue to see a little bit of pressure within the Market Tech bucket as a result of the pandemic that hasn't entirely gone away. So just any color as to if I think about the Legacy business on X of Verafin, thinking about the 8% to 11% organic growth rate, if you think about 2021, is that still a feasible and reasonable kind of growth rate? Again, I know it's more of a medium term rate. So if we think about 2021, when we think about the legacy business, is that 8% to 11% still an achievable rate given some of the headwinds and pressures that you're seeing in the business? Thanks a lot.

Great. Sure. Yes, on the Anti Financial Crimes side, it is largely a SaaS oriented business. There are -- so we think about what we put into Anti Financial Crime Sub Segment are the surveillance solutions to market. Some of those are still on-prem, but they're long-term licensed or licensed revenues, not a lot of project-related costs, because that's a pretty a more standardized service. Then you have the SaaS business related to the surveillance for our trading firms and it's all SaaS. And then you have the risk management solutions to both markets and broker dealers, and there that has both the combination of on-prem and SaaS solutions. And then lastly, you have Verafin which is entirely a SaaS business with very low professional fees. So generally speaking it's -- what you're seeing in the quarters is a relatively recurring element of kind of what the potential of the business is. As I mentioned before, we did have 10% growth in our Anti Financial Crime business, absent Verafin. So we continue to see really strong demand for all of those solutions. I think that in terms of the overall growth rate for Market Tech absent Verafin, as we mentioned, the Market Infrastructure Technologies part of the business has been more materially impacted by the pandemic, and we're still in a pandemic. So, we're still not able to go visit clients. These are generally in oftentimes particularly for new clients, these are large scale decisions that they're making, to have us partner with them to build and support them, and their core business technologies. So they tend to be sales cycles that resulting from relationships and it's harder to establish and manage those relationships if we can't visit our clients. So that is still the case, because of the pandemic. However, having said that our existing clients, they really spent last year focusing on managing the very high volume environment in a pretty dynamic capital markets environment as well. As they come into 2021, we are having more constructive conversations with them around thinking longer-term again, thinking about how they want to continue to advance their technology. So we're certainly seeing encouraging signs of working with our clients. But as I said in my comments, we would expect that the short-term growth rates on that part of the business would be -- will be moderated. And but over time, we're not changing our medium to long-term outlook on the overall business because we have confidence that will recover.

Thank you. Our next question comes from Mike Carrier with Bank of America. Your line is open.

Hi, good morning, and thanks for taking the question. Adena, the organic growth has been great in some areas have benefited there from the favorable market backdrop that you mentioned for areas like Index and Listing. But is that moderate when you get past COVID. Do you highlight some of the areas may be negatively impacted by COVID, because you know over the last couple of quarters and talking about Tech that could have financial upside as to a more normal level and maybe offset some of those areas that eventually normalize at some point? Thanks.

Yes, sure. Thanks Mike. So I think that the there are two areas we've been highlighting that I think you're starting to see more of a recovery already in eVestment, but eVestment certainly in 2020 had more of an impact. And I would say eVestment and Solovis, I should say together. The Investment Management community and the asset owners were also dealing with a lot of change, a very dynamic environment; they weren't sure whether this is going to be a sustainable market trend. And so they were, they really pulled back on buying decisions around any sort of analytical tools. So, but what we are seeing, as we've mentioned in the first quarter is that we maintain these conversations and relationships, we definitely, I think through our all-in pricing model that we've shifted to in 2019, really, it helped us actually retain a lot of clients in 2020. And therefore, now going into 2021, we're seeing that investment managers and asset owners are back in the market to really find ways to frankly manage these very dynamic portfolios. So and we've also done more to create a more all-in solution, particularly for asset owners across Solovis and eVestment. So we're seeing a lot of nice upswing now coming into 2021 off the back of a pretty impacted 2020. I think Market Tech, as we've mentioned, particularly the market infrastructure technology is the other area that's been impacted. And then across the rest of it, I would say that it's and actually I would say somewhat in the governance area, on the governance platform solutions. We -- it's harder; we do a lot of work there. But again, I think a lot of corporates we're dealing with downturns; we're dealing with a lot of challenges. And so it was a harder sales environment for that team as well, last year and we're starting to see some recovery there as well, but that would be another area where we hope that we would have more pickup in 2021 and beyond.

Thank you. Our next question comes from Chris Harris with Wells Fargo. Your line is open.

Great, thank you. Can you update us on how you're feeling about Verafin's backlog and outlook now that the acquisition is closed? And I believe this was a business that was growing around 30% prior to the acquisition, and is that kind of like a good bogey to be thinking about going forward?

I can say that we ended 2020 on very much on plan and started 2021 very much on plan. So we're very pleased that I mean the business it's a great business, but it's also just a great team. And they're extremely focused. And I think that they're focused on the right path forward. So they're very much on plan with what we talked about when we announced the acquisition.

Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

All right. Great, thanks. Good morning, folks. Maybe also just on Verafin. Another one, just in terms of that revenue contribution run rate, I think you said, Ann, $19 million pro forma with the revenue recognition. So given that closed early to mid-February, should we be thinking about a core revenue number around that $35 million area for the second quarter just trying to gauge sort of the volatility or stability of that revenue stream. And then, Adena, if you talk about maybe thoughts around revenue synergies with being able to introduce the Verafin product and teams to the Tier 1 and Tier 2 banks, I know that's a long timeframe that will evolve over time, but maybe some thoughts about how you think that might progress and add to the Verafin revenue base?

Sure, go ahead, Ann.

Sure. So I'll start on your first question, Brian. If you think about Verafin as we shared as part of closing the transaction and announcing a transaction, and estimated about $140 million in revenues -- in gross revenues before the purchase price adjustment. So we've provided the details on how the purchase price adjustment is going to play out over the year. If you take that $140 million and back out the purchase price adjustment, and then apply a proration based on February 11 close date. That's how you can think about what our expectations are at this point --

For 2021.

For 2021, sorry.

For 2021, yes, okay.

Okay. With regard to the longer-term, I have to say that we've already gotten off to a really, really great start in working with them and collaborating with them on client introductions and understanding where they want to focus on their sales activities. But they also are really, really focused on continuing to invest in R&D, invest in the business so that we can really become the preeminent Anti Financial Crime Technology provider to banks of all sizes, right, so the largest banks and the smallest banks. As we mentioned, when we announced the deal, and at closing, we do -- we will be working with them on to support their investments and certain things that certain technology capabilities that we have that we think that can be additive to their capabilities that can really make it to that as we go into the Tier 1 and Tier 2 banks we have just a -- Tier 2 banks -- we have just a fantastic solution for them. But that is, as you mentioned multiyear strategy. And so we've gotten a lot of inbound demand from our Tier 1 and Tier 2 banks to understand what the solution is and how it works. We're actually able to go in with some point solution sales into particularly Tier 2 banks that we think that are going to be relevant and allow us to lend and expand. And then we had or I should say Verafin had their first client sign up for to help them with some Fraud detection in a European Bank. So we're pretty excited about the fact that even just right on the heels of the acquisition, we're already seeing opportunities there. So we see a lot of good opportunities for us to collaborate with them that will support their growth rate over the longer term.

It sounds great. Really good progress. Yes, thank you.

Thank you. Our next question comes from Simon Clinch with Atlantic Equities. Your line is open.

All right. Thanks for taking my question. And I wanted to carry on with the topic of Verafin here, just because I think you've mentioned before that you fully expect at some point to be able to accelerate the revenue growth as you penetrate Tier 1 to 2, but I understood that it was a case of getting the product right for a particular market. And I'm interested that you just mentioned that Verafin have signed their first European Bank, it wasn't long ago, where you're still trying to tweak that product for the right market. So could you give us a sense of where you are in terms of the product readiness for Tier 1 and Tier 2 as it stands today?

Yes. I think that they certainly have seen really nice demand pickup in the what I would say $50 billion plus in assets, kind of banks that they continue to penetrate that that sector quite successfully. And they have an all-in full solution that really supports kind of a full platform for those banks. As they've been going in and starting to engage with $100 billion and plus type of banks, and really the large, the very large banks, they are finding opportunities to come in with a specific solution like a part of their offering. And that that they do have part of their offerings are quite relevant to the needs of those banks in terms of what I would call more of a like point solutions approach. So what we want to be able to do is become that all-in platform partner to those banks over time. So there may be some shorter term opportunities like we have at the European company to have a nice specific sale of a specific capability now that we're very, very good at. But then overtime I think that the real revenue opportunity will come if we can really build that out to become more of a holistic platform partner. So I just wanted to know, it's obviously very early days, there's a lot of enthusiasm, a great sense of partnership. And the ability for us to open doors but it will be it'll take time for us to get the solution and investment that we want to make in the business so that we can get that solution to become the preeminent platform across the entire industry.

Okay. And just following on from that, could you walk us through sort of what the competitive environment looks like in that sort of fraud detection and financial crime space, it seems very fragmented to me. But I'm kind of curious, how are you just competing with really inefficient internal systems predominantly at the banks? Are there actually sort of legacy providers that you need to disclose?

It's a combination of things. It is quite, it is actually quite a fragmented market. It's also a huge market opportunity, right. So you're talking about $12 billion of potential TAM, I think that we're positioned to be able to serve at least $6 billion to $8 billion of that TAM. So it's a huge market opportunity. It's a huge and growing problem. So I kind of equated in some respects, well, first of all, I think that there will be certain platforms that kind of emerge as the ones that the banks rely upon for all of their core work. And then there'll be point solutions and other innovations that come in on top of that, that we should be in a position either to acquire or integrate or partner with to make it so that we can continue to manage the dynamic needs of our clients. So I think that is the case. But there are some incumbents and I would say many are on-prem solutions that are not nearly as nimble or flexible, which is what I think Verafin has been very successful displacing in recent years, as well as a lot of internal build, particularly for the larger banks, the internal builds. And then at the very smallest end, there are a lot of small point solutions, providers that Verafin also competes very successfully against. And they've done a nice job of working with a lot of the more core banking platform providers to integrate Verafin into this platform, so that as our client is taking one of these core platforms, the banking platforms, they know that they have the benefit of Verafin as part of that.

Thank you. Our next question comes from Ken Worthington with JP Morgan. Your line is open.

Hi, good morning. We've seen a steady increase in equity trading in dark markets in off exchange. Does moving volume back on exchange rank in your priorities when communicating with the new leadership at the SEC? And if so what tools and approaches do you think make the most sense for regulators to consider should moving trading from the dark markets to the lid emerged as a top priority for them?

Great. We're excited to have Gary Gensler coming to the role of Chairman, I think that it's great to have a leader within the SEC that really understands markets and market structure. So he is certainly a market structure expert. In terms of the priorities, I think on the back of some of the retail trading trends and hearings that happened in Washington, I do believe this will be a focus area for the SEC, and they're already working on a kind of a white paper, a thought piece around it, to go out and get comments and input from the industry. When it comes to part of that is, is a discussion of the dark trading, because when you look at the composition of the markets in the U.S., almost it's like 40% to 50% it's like I would say 45% or so of the trading today is done in the dark, and the vast majority of that is retail. So that means that the retail orders are not getting exposed to the lid exchanges, and they're not therefore contributing to price discovery. And therefore, then you have to sit there and say well, do we have the best reflection of price discovery if only half the market is being exposed and displayed? So I think, Ken, it is an area of focus for us. It's one of several things that we -- I think that the SEC and us and others will be focused on, as we look at how to continue to make market structure improvements. It's -- one of the great things about this business. Honestly, Ken, as you know, it's like an eternal learning curve. It's one of the things that keeps me so interested. And it's just fascinating to see how the markets evolve. But as we continue to evolve those markets, I think that some focused areas that we think will be important are to look at settlement cycles to see if we can go from two-plus-two to two-plus-one as well as to look at the margin calculation process and giving people a little bit more clarity as to the margin obligations. The second is on short sale disclosure. We do believe that that long positions are disclosed or positions are not and it just seems like an unfortunate asymmetry. And then the third is on market structure and trying to level the playing field between exchanges and off exchange players, but not in a way that's unnatural, but in a way that just allows us all to compete successfully. And, one of those examples would be tick size -- minimum tick sizes and minimum trade sizes and things like that. But that's one of several things that we would want to have the SEC consider.

Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Good morning and thank you for taking my question. I want to go back to Nasdaq private market. Could you please talk about how sustainable the activity is in NPM and then after Coinbase directly staying, how should we think about the role of NPM in the whole crypto space? Thank you.

Great, hey, Owen. So NPM did have an outstanding quarter. And frankly, we had a really, really strong year in NPM last year, too. It really picked up in the second half, like the first half, particularly as we got into the pandemic became really slow. And then suddenly in the second half, we had a whole range of programs coming out, and it really -- activity picked up and gave us a great fourth quarter and now a great first quarter. I think that we should recognize that more and more companies are seeing -- more and more private companies are seeing NPM as a good way for them to manage long-term liquidity needs of their employees and investors without having to bring themselves to the public markets, or ahead of bringing themselves to the public markets where as you mentioned, with Coinbase having some of that liquidity done in the private markets ahead of time, kind of position them really well for their direct listing and gave them an investor base that they could walk into their listing with, in a way that was very sustainable and strong. And so I think that would be a good example of how companies I think increasingly are using the private markets as a kind of a lead in into a direct listing. And we see that as a really encouraging sign for our business and for the relationships we have at our companies. I think their crypto space; it's a good question, Owen, as to whether more crypto-oriented companies will be coming into the public markets on the back of Coinbase. And whether or not they also would choose that path. And if that's the case, then I think the Nasdaq Private Market is a natural way for them to manage that private liquidity ahead of an IPO.

Thank you. Our next question comes from Kyle Voigt with KBW. Your line is open.

Hi, thanks for taking my question. Maybe just a follow-up related to crypto, we're seeing a significant increase in institutional adoption and some large traditional financial players stepping into the space for the first time. I know, I think your technology is powering some crypto exchanges today. But just curious to hear whether you think there's an opportunity to eventually more directly participate in that space?

Great, thanks. The way I look at the crypto markets and the overall cryptocurrency economy is that it's in a very -- it's still in a very early stage. And that's great, because I think we've seen this really elegant construct come into the ecosystem in terms of what the Blockchain and what you can do with it, you're seeing now some really interesting and tangible applications of it that have been more geared up until recently towards retail. But now you're starting to see institutional players recognizing that this is an construct that really could become part of mainstream commerce. So it's that classic product lifecycle that's really starting to develop and you're seeing where all the early experimentations turn to early businesses turned into proliferation of businesses now are turning into, I would say more concentrated but still very, very early, early lifecycle type of companies emerging. And so it does give us time for us to figure out the right path for us our -- as you mentioned, our initial involvement in crypto has been with our technology. And that's been really great. We are partners with several crypto markets on their surveillance and their technology bit and that's one of the big concerns with crypto has been around making sure that the markets are fair for all participants. And so our technology is highly relevant, they're managing trading and frankly, the scalability of trading that they've had to deal with. Our systems are designed for scale. So I think that that also really gives us some real advantage. And then we actually have launched with a partner, Crypto Index, and we've turned that into investable products outside the U.S. and we're hoping with a second partner to kind of hopefully bring that into the U.S. in coming months. So we do have some really interesting ways for us to participate in the crypto space. But we're still evaluating what should our long-term role be? And how will the markets evolve? And obviously, there are some great, great winners, including Coinbase, of course, in terms of developing the marketplaces of the future.

Thank you. Our next question comes from Ken Hill with Loop Capital. Your line is open.

Great, good morning. I had a question about ESG. Within your complex there, put up good 8% growth here, that seems to be above your targeted rate for corporate platforms. I know that's kind of overshadowed now, by the Listing services piece of it. But could you give maybe an outlook on ESG and how that's developing within Nasdaq and then maybe how that varies by geography as well, and what you would expect maybe here in the U.S. here over time? Thanks.

Sure. Yes, we're really encouraged by what we've been doing to develop at our ESG solutions. And again, it is early days. At the Investor Day, we gave a view that we would hope that these types of new ESG services that we've launched and products that we've launched would generate at least $50 million over five years. And so $50 million a year, five years later, sure, if you're clear. But I think that we obviously are quite encouraged by the fact that we've had some really great adoption of our ESG solutions by companies. We also have actually incorporated our ESG solutions into our IPO package now. So we'll get more and more companies adopting them and that gives us longer-term revenue opportunity with them as well. And we do obviously think that this is a trend that is here today. It's something that we believe will drive a lot of corporate decision making in the future, and we want to be that partner to the corporates to help them navigate this landscape. The business that we have launched and the services we offer are as popular in the U.S. as they are in Europe. So we already have, I would say we've had really good adoption of the products in the U.S. But in the Europe we've had, it's more mature. And so there's more. We've had more sustainable bond listings and other capital listings that also we support in Europe, in addition to helping our clients through standard setting and reporting, et cetera. So I think that it's an interesting dynamic space. And it's one we're quite encouraged by.

Thank you. And that's all the time we have for questions. I'd like to turn it back to Adena for closing remarks.

Great. Thank you. And thank you very much for your time today. We're very pleased to see our businesses delivering strong organic revenue growth in the quarter. You're guided by our strategic direction. We have a clear focus for the remainder of 2021, as we reimagine markets to realize the potential of tomorrow. I look forward to updating all of you on our progress in the months to come and thank you and have a great day.