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Nasdaq Inc (NDAQ) Q1 2023 Earnings Call Transcript

NDAQ Earnings Call - Final Transcript

Nasdaq Inc (NASDAQ: NDAQ) Q1 2023 earnings call dated Apr. 19, 2023

Corporate Participants:

Ato Garrett — Senior Vice President, Investor Relations

Adena Friedman — Chair and Chief Executive Officer

Ann Dennison — Executive Vice President and Chief Financial Officer

Analysts:

Richard Repetto — Piper Sandler — Analyst

Michael Cho — J.P. Morgan — Analyst

Alex Kramm — UBS — Analyst

Owen Lau — Oppenheimer — Analyst

Michael Cyprys — Morgan Stanley — Analyst

Brian Bedell — Deutsche Bank. — Analyst

Kyle Voigt — KBW — Analyst

Craig Siegenthaler — Bank of America — Analyst

Alexander Blostein — Goldman Sachs — Analyst

Simon Clinch — Atlantic Equities — Analyst

Andrew Bond — Rosenblatt Securities — Analyst

Joon — Jefferies — Analyst

Presentation:

Operator

Good day and thank you for standing by. Welcome to Nasdaq’s First Quarter 2023 Results Conference call. [Operator Instructions]. Please be advised that today’s conference is being recorded.

I’d now like to hand the conference over to Ato Garrett, Senior Vice President, Investor Relations. Please go ahead.

Ato Garrett — Senior Vice President, Investor Relations

Good morning, everyone, and thank you for joining us today to discuss Nasdaq’s first quarter 2023 financial results. On the line are Adena Friedman, our Chair and Chief Executive Officer; Ann Dennison, our Chief Financial Officer; John Zecca, our Chief Legal, Risk and Regulatory Officer, and other members of the management team. After the prepared remarks, we’ll open up the line 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 the 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, constitutes 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 in periodic reports filed with the SEC.

I will now turn the call over to Adena.

Adena Friedman — Chair and Chief Executive Officer

Thank you, Ato, and good morning, everyone. Thanks for joining us. Before I start, I would like to welcome Ato Garrett to the Nasdaq team as our new Investor Relations Officer. I know he’s looking forward to meeting each of you very soon.

I will now turn to my remarks today which will focus on Nasdaq’s first quarter performance and the solid progress we are making to deliver on our strategic objective. I will then turn the call over to Ann for a review of our financial results.

Let’s begin with the current market landscape. Nasdaq continued to performed well in what was clearly a very dynamic operating environment with a shock to the banking sector happening amid an already uncertain macro backdrop. During this challenging period, we delivered solid financial performance, while demonstrating operating and strategic momentum across each of our divisions.

We achieved a new milestone for our Anti-Financial Crime division with the signing in April of our first Tier-1 client with over $1 trillion in assets for our fraud solutions, including the comprehensive fraud detection capabilities across wires, ACH and checks as well as case management and reporting functionality. We maintained our leading position in U.S. cash equities and equity derivatives trading, while seeing strong demand for both our ESG services and our SaaS-based Market Technology solutions. Overall, the current uncertain financial backdrop highlights the value of our diverse platform of mission-critical solutions.

In the first quarter, we also saw a generational technology breakthrough with the emergence of new artificial intelligence tools called Generative AI. While the debate surrounding use cases for Generative AI needs time to evolve, it is clear to us that companies that have invested in modern technologies, including cloud architecture and deployment, modern APIs and machine learning are poised to take advantage of this new era of technological advancement.

At Nasdaq, we’ve been focused on investments to modernize our technology across our businesses and therefore, we are well-positioned to incorporate more advanced AI capabilities in the future. Against this evolving economic and technological backdrop, our team remained hyper-focused on delivering for our clients. Our results underscore our ability to navigate successfully amid a dynamic market environment and to deliver on our long-term commitment to provide world-leading platforms that improve the liquidity, transparency and integrity of the global economy.

Now let’s turn to our results. I’m very pleased to report Nasdaq’s solid financial performance for the first quarter of 2023. We achieved $914 million in net revenues, an increase of 2% compared to the prior year period, and an increase of 4% on an organic basis excluding the impacts of changes in FX and an acquisition divestiture. Revenues across our Solutions businesses were $646 million, up 4% from the prior year period, driven by organic growth of 5%, partially offset by the impact of changes in FX. Excluding the Index business, which declined by 10% due to a continued weak beta backdrop, revenues in our Solutions businesses increased 8% organically compared to the prior year period. Our total annualized recurring revenue or ARR increased 7% to $2 billion. Annualized SaaS revenues totaled $729 million for the first quarter, which represents an annual growth rate of 11%. Our SaaS revenues now comprise 36% of total company ARR.

Across each of our divisions, we delivered well for our clients during the quarter. In our Capital Access Platforms division, we delivered $416 million in total revenue in the first quarter. Despite growth in Data, as well as in Workflow and Insights, headwinds across our Listings and Index businesses resulted in flat organic revenue for Capital Access Platforms year-over-year.

Index experienced a 10% revenue decline and Listings was stable year-over-year. While our Index business continues to show year-over-year declines due to higher market levels last year, during the first quarter, we did experience a 5% improvement in average AUM from the fourth quarter of 2022. If the markets continue to demonstrate some level of recovery from last year, we should experience an improving year-over-year Index performance as we continue through 2023.

Data and Listing Services revenues grew 4% organically, driven largely by higher international demand for our proprietary data during the period. Our Workflow and Insights business revenue grew 5% organically which reflects continued demand for our IR, ESG and Analytics Solutions as clients navigate a dynamic and challenging market environment.

Turning next to our Market Platforms division, we delivered $413 million in total revenues during the first quarter, a 6% organic increase from prior year period. Amid a volatile capital markets environment, our core Trading Services business experienced strong performance in North American markets where we saw double-digit revenue growth, partially offset by a decline in our European markets revenues, primarily reflecting lower value traded in cash equities due to market declines and a softer volume environment. In the U.S., we continue to provide our clients with a premier trading experience while optimizing the revenue and capture mix for both U.S. cash equities and multiply-listed equity options.

In Marketplace Technology, we delivered 11% revenue growth, driven by strong results in both Trade Management Services and Market Technology. During the quarter, we signed a Marketplace Services Platform agreement with an innovative carbon trading platform in — sorry, carbon trading marketplace in Latin America as well as a new European risk modeling customer. We also signed a multi year extension and expansion with a Tier-1 bank for our trading platform.

Finally, turning to our Anti-Financial Crime division, we delivered $84 million in total revenue in the first quarter, an 18% organic increase from the prior year period and a 16% increase, excluding the impact of the deferred revenue write-down in the first quarter of 2022. Revenues in our Fraud Detection and Anti-Money Laundering Solutions or what we call our FRAML Solutions grew 30% compared to the first quarter of 2022, or 27% excluding the impact of the deferred revenue write-down. The overall Anti-Financial Crime business saw continued growth with 42 new AFC clients during the period.

Our first quarter financial performance also illustrates the progress we’ve made to capitalize on certain growth opportunities that are aligned with three key trends that we believe are shaping the financial system. First, the modernization of markets where we can deliver innovation that powers the world’s economies and hence enhances the underlying market infrastructure; second, the development of the ESG ecosystem, where we help companies and investors successfully navigate increasingly complex reporting frameworks, access more seamless risk-to-capital and achieve their net zero or sustainability objectives; and third, the increasing need for advanced anti-financial crime technology where we can enhance the integrity of the financial systems through emerging technologies, including cloud and AI, coupled with end-to-end workflow solutions for our clients.

In this regard, I’d like to provide two highlights for the quarter. First, our focus on markets modernization continues to deliver innovation that enhances the liquidity and the underlying market infrastructure that powers the world’s economies. From the successful migration of Nasdaq MRX which was one of our six options markets to the cloud infrastructure in the fourth quarter of last year in partnership with AWS, we announced during the first quarter, our plans to migrate our second options market to the AWS edge cloud by the end of 2023. Second, as financial institutions make investments in technologies to detect and fight financial crime, in early April, we are very pleased to sign our first global Tier-1 client with over $1 trillion in assets to our fraud solution, including comprehensive fraud detection capabilities across wires, ACH and checks as well as case management and regulatory reporting functionality. Additionally, we signed another Tier-2 client to our enterprise Anti-Money Laundering Solutions during the period. These signings further demonstrate our ability to displace legacy providers and manual processes through our cloud-based and market-proven solutions.

As we look ahead, I want to take a moment here to discuss in more detail the breakthrough developments in the field of artificial intelligence, which have captivated businesses across all industries concerning its applicability and impact. As a result of our years of investment in our cloud-architected market solutions and SaaS applications, coupled with our recent acquisitions of advanced cloud-based investment analytics and anti-financial crime solutions, I believe Nasdaq is uniquely-positioned within our sector to play a leading role with this technology in the future through the responsible deployment of AI to drive meaningful impact to our business, products and clients.

To date, we’ve been very intentional in migrating critical workloads and capabilities into a cloud environment with modern APIs to support client connectivity and functionality. We’ve also built unique datasets across various areas of our business. Both are foundational to our ability to leverage this generational shift in the technology. While we’re just beginning the process of evaluating specific ideas for the use of Generative AI in our products and across our business operations, we see compelling opportunities to lever broader AI models, including deep reinforcement learning, predictive control and computer vision across our business divisions to support our strategic efforts to enhance the liquidity, transparency and integrity of the financial ecosystem.

This is already happening in various elements of our business today. For example, in our Anti-Financial Crime business, Verafin has integrated AI and machine learning into their solutions and capabilities since our founding 20 years ago. The combination of the advanced datasets combined with the self-learning capabilities of the AI machine learning models is a key differentiator for the product. This improves the efficiency in the banking industry’s daily compliance processes and achieves a step change in their ability to detect and stop money laundering, fraud and market abuse across their networks, as well as to reduce false-positives.

In our Market Platforms division, we’re in advanced stages of new product developments that incorporate AI, including new dynamic order types that improve our clients’ fill rates while minimizing market impact. In fact, we have submitted for regulatory approval our first AI-based market order type, which is context-aware, meaning that it is designed to incorporate awareness of market conditions on a real-time basis. As we seek out more ways to leverage AI across other parts of our business, we intend to take a principled approach to leveraging Generative AI for the right purpose. Our data scientists and agile development teams will continue their research and development responsibly so that our regulated and unregulated businesses can deploy this technology to create and maintain fairness across markets and develop more advanced solutions to fight crime. We look forward to updating you on our progress with these opportunities in the quarters to come as we continue our journey to become the trusted fabric of the global financial system.

Before I turn the call over to Ann, I’d like to offer some final comments on the operating environment as we move further into 2023. When we gathered in January for our fourth quarter results call, we discussed some of the impacts and market-driven headwinds that we were beginning to see related to the market environment and the uncertainty in the global economy. As we progressed through the first quarter, as we expected, we saw a decrease in the total number of operating company IPOs versus the prior year period as companies put their IPO plans on pause, while investors closely monitored interest rates and correlated inflation figures.

Despite the slower start to the year, we maintained our track record for winning new operating company listings across our U.S. and European markets in the first quarter. In the U.S., we welcomed 30 new operating company IPOs during the period for a 91% win rate, bringing seven of the Top 10 IPOs by proceeds raised. In addition, there is a significant backlog of operating companies in the pipeline with 147 active operating companies on file with the SEC to go public and committed to Nasdaq, which is a 10% increase versus the fourth quarter of 2022 and a 25% increase versus the prior year period. Our team continues to be in close contact with these companies and we believe that we are well-positioned to capture future listing activity once the IPO window reopens.

Beyond listings, we’re still seeing elongated sales cycles in our Workflow and Insights businesses. As we previously observed, while overall interest in client demand for our Workflow and Insight Solutions remains healthy, the process for some clients is taking longer as they escalate buying decisions through more levels of approval.

Demand for our strategic focus areas, including our Anti-Financial Crime Solutions, our ESG solutions for corporates, and our modern market solutions for established exchanges continues to be strong and largely unaffected by the market environment at this stage.

Overall, we’re very fortunate to have deep and trusted relationships with our clients who rely on us even more during complex operating environments. For example, during periods of heightened volatility, pensions and endowments often needs swift asset allocation decisions to manage their portfolios, which can increase their reliance on our analytic solutions. Similarly, for our public company clients, these cycles can drive demand for our Investor Relations solutions as company leaders seek shareholder activity insights in real-time.

As the global market demonstrates sustained volatility, our Market Technology clients are focused on modernizing their market infrastructure to improve their agility and addressing client needs, while improving — also improving the resiliency and scalability of their markets. And within our Anti-Financial Crime business, the disruption caused by the banking crisis has caused — has resulted in clients moving deposits at unprecedented rates. Because of our cloud-based consortium data models, our fraud and AML solutions are instrumental in helping banks monitor payments and behavioral changes.

These patterns underscore how our diverse pattern — our diverse platform of mission-critical solutions allows us to maintain our competitive strength through dynamic periods of uncertainty like we’ve experienced during the quarter. With our continued client engagement, coupled with the long-term investments we’re making in our future, we remain confident in our medium-term revenue growth outlook for our Solutions businesses.

And with that, I will now turn it over — turn the call over to Ann to review the financial details.

Ann Dennison — Executive Vice President and Chief Financial Officer

Thank you, Adena, and good morning everyone. I also want to extend a warm welcome to Ato Garrett as Nasdaq’s Investor Relations Officer. 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 Financials section of our Investor Relations website at ir.nasdaq.com.

I will start by reviewing first quarter 2023 performance, beginning on Slide 10 of the presentation. The 2% increase in reported net revenue of $914 million is the net result of organic growth of 4% including a 5% organic increase in the Solutions businesses and a 3% organic increase in Trading Services, partially offset by a 2% net negative impact from changes in FX rates and acquisitions and divestitures.

Moving to operating profit and margins, non-GAAP operating income increased 3%, while the non-GAAP operating margin of 52% was unchanged from the prior year period. Non-GAAP net income attributable to Nasdaq was $339 million or $0.69 per diluted share compared to $329 million or $0.66 per diluted share in the prior year period.

Turning to Slide 11, as Adena mentioned earlier, ARR totaled $2 billion, an increase of 7% from the prior year period, while annualized SaaS revenues totaled $729 million, an increase of 11%.

I will now review quarterly division results on slides 12 through 14. Starting with the Market Platforms division, revenues increased $17 million or 4% with an organic increase of 6%. Trading Services organic growth totaled 3% with the increase primarily due to higher U.S. cash equity capture rate and higher U.S. equity derivatives volumes and capture rate, partially offset by lower European cash equities revenues due to lower industry volumes and market share and lower U.S. tape plan revenues due to lower collections from under-reported usage. In Marketplace Technology, we delivered 11% revenue growth, driven by strong results in both Trade Management Services and Market Technology, which benefited from testing revenue and a large project delivery during the quarter. ARR totaled $510 million, an increase of 8% compared to the prior year period. The division operating margin of 55% in the first quarter 2023 reflects a 1 percentage point increase from the prior year period.

Capital Access Platforms revenues decreased $3 million or 1%, primarily due to the negative impact from changes in FX rates with organic revenue growth of $1 million. Growth in the division was mixed for the quarter with a decline in Index revenues significantly impacting the overall growth of the division. Specifically, Index revenue declined by 10% compared to the first quarter of 2022, primarily driven by an 11% decline in average AUM from near-record levels last year.

Transactional licensing revenues were flat as a 20% decline in trading volumes in futures contracts linked to the Nasdaq 100 Index was offset by higher pricing per contract and favorable mix. Additionally, we saw net inflows over the trailing 12 months up $23 billion.

In Listings, we maintained our leadership position with a 91% IPO win rate for U.S. operating companies. The Nasdaq stock market welcomed seven of the 10 largest U.S. operating company IPOs by capital raised in the first quarter of 2023, including Nextracker, which raised over $600 million in proceeds, as well as the spin switch of GE Healthcare. In Data, we have seen an increase in proprietary data revenues, driven largely by higher international demand.

Workflow and Insights revenue increased 5% organically compared to the first quarter of 2022, reflecting growth in our ESG, IR and analytics businesses. ARR for Capital Access Platforms totaled $1.2 billion, an increase of 5% compared to the prior year period. The division operating margin was 54% in the first quarter of 2023, a decrease of 1 percentage point from the prior year period.

Anti-Financial Crime revenue increased $12 million or 17% compared to the first quarter of 2022. Organic growth was 18% in the period or 16% when excluding the impact of the deferred revenue write-down of $1 million in the prior year period. The growth reflects healthy demand for Fraud Detection and Anti-Money Laundering Solutions, as well as our SaaS-based Surveillance Solutions. Specifically, our Fraud Detection and AML solutions revenues grew 27% compared to the first quarter of 2022, excluding the impact of the deferred revenue write-down. Surveillance revenues grew modestly compared to the first quarter of 2022 as growth in subscription revenues was partially offset by lower professional fees.

ARR for Anti-Financial Crime totaled $321 million, an increase of 15% compared to the prior year period. Signed ARR, which also includes ARR for new contracts signed but not yet commenced, totaled $354 million, an increase of 20% versus the prior year period. The Anti-Financial Crime division operating margin was 27% in the first quarter of 2023 versus 21% in the prior year period.

Turning to Page 15 to review both expenses and guidance. Non-GAAP operating expenses increased $8 million to $436 million. The increase primarily reflects a $20 million organic increase, partially offset by a $13 million decrease from the impact of changes in FX rates. The organic expense increase is primarily driven by higher compensation and benefits expense and computer operations and data expense as we invest in our businesses. The higher compensation largely reflects our 2022 investment in new employees to drive long-term growth. Compared to the fourth quarter of 2022, which featured higher sales activity to finish the year, expenses declined primarily due to lower marketing, travel, and professional services expense.

During the quarter, we completed the first phase of a review of our real-estate and facility capacity requirements due to our new and evolving work models. We reduced our footprint and recorded an impairment charge of $17 million related to our leased assets and related leasehold improvements.

We are updating our 2023 non-GAAP operating expense guidance to a range of $1.78 billion to $1.84 billion. The midpoint of the expense guidance range is unchanged and still represents an increase of just over 5%, including 1% related to our digital asset strategy. The increase primarily reflects our continued investments to drive growth across ESG, Anti-Financial Crime and market modernization. The second quarter will reflect our annual merit adjustments and equity grants and therefore, we expect expenses to increase about $20 million from the first quarter of 2023. Assuming stable performance and exchange rates, we currently expect 2023 expenses to be near the middle of the guidance range.

Turning to slide 16. Debt decreased by $290 million versus 4Q ’22 primarily due to a net paydown of $317 million of commercial paper, partially offset by a $26 million increase in euro bonds book values caused by a stronger euro. Our total debt to trailing 12 months non-GAAP EBITDA ratio ended the period at 2.6 times, down from 2.7 times in the fourth quarter of 2022, and there are no long-term debt maturities until 2026. With our strong balance sheet and cash flow generation, including $1.5 billion of free cash flow on a trailing 12-month basis, we continue to be well-positioned to support growth in a variety of macroeconomic backdrop.

During the first quarter of 2023, the company paid common stock dividends in the aggregate of $98 million and repurchased shares for $159 million. The repurchases completes our objective to offset employee share dilution for the year. As of March 31st, 2023, there was an aggregate $491 million remaining under the Board-authorized share repurchase program. Additionally, we are announcing today a 10% increase in the quarterly dividend to $0.22 per share.

In closing today, Nasdaq’s first quarter results reflect the continuation of the company’s ability to consistently perform well across a wide range of operating environments.

Thank you for your time, and I will turn it back over to the operator for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And I show our first question comes from the line of Rich Repetto from Piper Sandler. Please go ahead.

Richard Repetto — Piper Sandler — Analyst

Yeah, good morning, Adena, and good morning, Ann. I guess…

Adena Friedman — Chair and Chief Executive Officer

Hey, Rich.

Richard Repetto — Piper Sandler — Analyst

Thank you, Adena, for giving us sort of a lot of info on the outlook of the business in the prepared remarks. But, I guess, if I was to zone in on the outlook and sort of the sales cycle businesses, the Anti-Financial Crime and market infrastructure, you talked about in AFC that there’s a lot of deposit movement, but would that — is that going to — the deposit movement appears to go to the large banks. How’re you doing? And what’s the outlook for the Tier-2 banks? And just a little bit more color, I guess, on the sales cycle with market infrastructure, if that’s [Phonetic] been impacted at all, I guess, by market volatility.

Adena Friedman — Chair and Chief Executive Officer

Sure, thanks, Rich. So with regard to our AFC solutions, we generally are seeing a continuation of a normal sales cycle environment. As I said, we did sign 42 new clients into our AFC business in the first quarter and we do a lot of work across actually all of our solutions to look at what is our normal time to close, how do we engage with the clients, what does our pipeline look like. And as we’ve been looking across AFC, market tech and as well as other parts of our Solutions segments, I think that we’re finding a relatively normalized environment. Where we are seeing more elongated sales cycles are in our Workflow and Insights businesses which really cover kind of our IR, governance and analytics businesses.

But within AFC, we actually have a really healthy pipeline of opportunities in both Tier-2 and Tier-1 banks. We’re really pleased to sign our first Tier-1 bank in April and we signed another Tier-2 bank, as we mentioned, in March. And I think that what we’re finding is that we can really prove the value of our solutions very easily when we do proof-of-concepts with our clients. So in both cases, with the Tier-2 client, we did a proof-of-concept in our AML capabilities, and in the Tier-1 client, we did a proof-of-concept with our fraud capabilities and in both cases, they saw very significant value improvement in terms of reducing false-positives and improving their ability to find real bad actors, whether it’s fraud or AML.

And so I think that because we have this really strong return on investment thesis that we can prove out, it makes it easier for the banks to make the buying decision in frankly any economic environment. And so therefore, we continue to see really strong demand there. And the same within our trade surveillance business as well. We did have certain revenues in the first quarter of last year that helped to amplify the revenues though the growth year-over-year wasn’t as strong, but the overall demand for surveillance clients also continues to be quite healthy. And in fact, we’ve been actually — folks are moving downmarket with our trade surveillance, because they’re learning from [Indecipherable] in that way. And we did sign our first Tier-3 bank — our first Tier-3 brokerage firm, I should say, to our surveillance solutions in the quarter.

When it comes to market tech, we actually see very healthy demand across established exchanges. I think we’re — we definitely have seen a change in the demand characteristics for new markets and we’ve been reporting on that since the beginning of COVID really, where new markets have not been as much of a growth opportunity for us as we — as thought before COVID started. But honestly, the established exchanges, we’re seeing really good demand, particularly in post-trade. Our post-trade infrastructure has been a real focus for market modernization as well as risk management tools for both exchanges and brokers, and that’s where we’ve actually seen a really, really healthy pipeline of opportunity. And we’ve been really able to demonstrate strong growth in market tech in the first quarter. Again, we did have some revenues as I think our overall ARR grew 8%, but the business itself grew 11% in the quarter. So we continue to see really healthy demand there.

Richard Repetto — Piper Sandler — Analyst

Thank you. Thanks.

Adena Friedman — Chair and Chief Executive Officer

Sure.

Operator

Thank you. And I show our next question comes from the line of Michael Cho from J.P. Morgan. Please go ahead.

Michael Cho — J.P. Morgan — Analyst

Hi, good morning, Adena and Ann. Thanks for taking my question. I just wanted to touch on the AFC business as well. I mean, and Adena, you’ve talked about as still seeing a normal sales cycle in the AFC business — in the Verafin business. But just curious, longer-term, again, just kind of given the banking situation in the U.S. and just given that most of Verafin’s current clients are SMB banks, I’m just trying to get a better sense of if you’re changing kind of the longer-term focus from here. Meaning, is there going to be an increased focus on Tier-1’s and Tier-2’s or is that still kind of normal course of business?

And then just kind of related to that, just in the quarter, revenues accelerated in the AFC business but margins kind of took a step back quarter-over-quarter. I’m just curious if there’s any seasonal nuances and maybe you can remind us kind of the interplay margins between the surveillance and Verafin businesses. Thanks.

Adena Friedman — Chair and Chief Executive Officer

Sure, well, I’ll answer the first question and Ann will focus on the second one. With regard to the overall environment with the banks, I think, first of all, I would just say, we have about 2,500 banks and credit unions that rely on us today, but there are over 5,000 overall banks and credit unions across the U.S. and Canada. So we still have lots of opportunity for growth and to find and land new clients. And so even if there are some unfortunate situations with banks, as they’re managing through a very really big change in the operating environment, we do feel like we have plenty of opportunity to continue to grow and expand the business. And so far, we have an amazing team that supports the small-to-medium banks and they are seeing a very normalized environment, both in terms of new sales and in terms of renewals. So we’re not seeing a disruption in the cadence of our business in that regard. And as I mentioned before, we did — we had 39 new clients in the first quarter of last year and 42 this year. So we’re continuing to show some good — some really strong demand characteristics there.

But the focus on Tier-1’s and Tier-2’s, there’s a whole team just focused on that. So we’ve kind of — we’ve done a really nice job of segmenting the team. One team supports the small-to-medium banks, one team supports the enterprise banks, which are the larger banks, and then we have a team, obviously, that supports surveillance, etc. And on the Tier-1 and Tier-2’s, as I mentioned, the pipeline is really strong. So we have kind of an equal focus, I would say, on continuing to grow the SMBs while we focus on moving up market.

And in terms of the margin quarter-over-quarter, I don’t know if you have any comments, Ann.

Ann Dennison — Executive Vice President and Chief Financial Officer

Yeah, sure. If we look at the margins quarter-over-quarter there’s the timing of how expenses come in. I think the better sort of way to look at it is look at the full year margins. If you look at full year ’21, we were roughly 28% and full year ’22 was roughly 26% and you can think about that as sort of how the margins will evolve over the full year for 2023, consistent with 2022.

Adena Friedman — Chair and Chief Executive Officer

Yeah, and I think we’ve also said that we are really focused in this business on optimizing for growth. And so we want to make sure that as we’re taking in more revenue, we’re reinvesting that revenue to continue to really amplify the growth of the business. So the margins is wonderful but it’s also something where really we are focused on making sure that we’re investing in our growth there.

Michael Cho — J.P. Morgan — Analyst

Okay, great, thank you so much.

Operator

Thank you. And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead.

Alex Kramm — UBS — Analyst

Yeah, hey, good morning, everyone. Just staying on the Verafin, surprise, surprise, but you mentioned that Tier-1 win. I think, Adena, you gave a lot of detail on the scope already, but maybe you can expand a little bit in terms of how much of the solution that you’re providing is — I mean — I guess, how much more upsell there potentially is, like how much of the potential capabilities are you selling. Can you give us a little bit of the — can you give us some color on the size of this deal and again, how that could grow over time? And then you obviously didn’t disclose the win but what we’ve seen in the past is once a firm like you gets like a big win like this, you’re using it as a marketing opportunity. So just, I guess, just how do you think or how have the conversations already maybe changed now that you finally have one of those big banks because obviously all of them talk to each other? So is — should that potentially drive the acceleration from here? Thanks.

Adena Friedman — Chair and Chief Executive Officer

Okay. Thanks, Alex. So actually, it is interesting to see the opportunity here. So we went in having a conversation specifically on fraud detection and they did a POC with us on that. And once they saw the quality of the outcomes, then they started to say, well, let’s look at the rest of the platform. And so they didn’t just take the detection capabilities and plug it into their platform, they actually have a collection or they have a collection of smaller platforms and they said, let’s actually replace everything we do as fraud to — with the Verafin solutions. So that means that we have fraud detection across all of their payment types, as well as their workflows — our workflows solutions, so our investigations tools, our case management tools, as well as our regulatory reporting tools.

So it ended up being a bigger opportunity, but even with that, it was only for the U.S. portion of the bank. So we do have an opportunity over time to move internationally and they don’t actually — they are not using any of the AML capabilities that we have. So we also have an ability to continue to expand as they think more broadly about their anti-fin crime needs to take on more of our capabilities as we continue to work with them. We obviously have to prove ourselves to them that we are really great, as great as we’ve been able to show so far and that we have a smooth implementation. And those will be the key proof points, but we’re already having conversations about how they can think about a broader use case.

And that’s actually what’s exciting about going into the larger banks, both Tier-1’s and Tier-2’s, is that their needs are very expensive. We’re going in with modules that really show like clear ROI. But as these engage with them and they start to see the broader platform, they start to think about how we can — they can use us more. And so there is a really good land-and-expand approach that we can take here.

And you’re right about breaking through a barrier. Getting to that first Tier-1 win has been a very important milestone for us because now that we can prove ourselves there, it will make it easier for other banks to say, okay, I’m not taking a risk here, I’m actually taking a proven solution. And as you said, they do talk to each other. So we do see it as a way to help accelerate other conversations.

I would just say though that it is — it’s not something where we have — we’re going to have the lining up to have every single quarter we’re going to have a great — a big announcement, but I think that we are starting to have a really good pipeline that will give us more of a regular cadence as we go further. And lastly, in terms of size, we don’t disclose that, but I would remind everyone that it is not included in the Q1 signed ARR because it was signed in April, so it will be included in Q2.

Alex Kramm — UBS — Analyst

Very good. Thank you.

Adena Friedman — Chair and Chief Executive Officer

Thank you.

Operator

Thank you. And I show our next question comes from the line of Owen Lau from Oppenheimer. Please go ahead.

Owen Lau — Oppenheimer — Analyst

Hey, good morning, and thank you for taking my question. I mean, I really want to ask about AFC, but there are lots of questions already. But maybe we can switch gear a little bit to AI. So, Adena, you talked about there are many benefits of AI and Nasdaq has been leveraging this technology in many different areas. Maybe can you talk — please talk about any additional area other than AFC and maybe modernization of the market, you can further leverage AI? And then I think, more importantly, can you also talk about, do we need some kind of regulations around AI so that bad actors are held accountable for using this technology? Thank you.

Adena Friedman — Chair and Chief Executive Officer

Sure, yeah. It’s been a big topic of conversation internally. We’ve had some fun with ChatGPT internally by the way with — let’s say, we’ve had a good time like learning about it. But at the same time, it is quite serious in terms of where we see opportunities to leverage the AI across the business. So as I mentioned, we already are leveraging AI in AFC and that’s a very known use case for us. We have real opportunities also to bring more of AI into our surveillance capabilities. And so that’s been a really fun collaboration across Verafin and the surveillance team.

We also have — and I mentioned that we are starting to work with AI in our markets and I would point to a couple of things, first, actually on just managing our market infrastructure. We’re using some of the predictive AI tools to be able to make sure that we’re managing our — doing capacity planning and managing our servers in a really, really dynamic way and I think that’s been really helpful to our infrastructure team in thinking about just managing infrastructure in general, but also on the markets. And in the markets, we have our AI-driven order type, which is called Dynamic M-ELO, Midpoint Extended Life Order, that we have on file with the SEC. So — and then we also use machine learning for strike optimization in our options markets already. So that’s already a known program, it’s in production that helps manage and manage the strikes across the options market because it’s kind of a growing pile of strikes and you have to think about which ones are actually being used and optimized.

But the other areas where we’re just starting to leverage the technology and find use cases is in the, what we call — in the Capital Access Platforms business. We’ve been doing some intelligent data scraping for our ESG business to help bring more information to corporates and to provide them more insights into the ESG characteristics for them and their peers. We also have just an incredibly rich dataset across all of our insights and workflow tools and so we want to find new ways that we can provide insights to investors and corporates and help them manage their business. So we’re just starting to figure out how we can use that there. And then we do already use natural language processing to help our analysts write reports for clients. So that’s an area that we’ve been using it for quite some time.

Lastly, on the point of regulation, I think this next generation of AI has — as you know, AI is a technology, it’s a tool, it doesn’t have a personality, even though people like to say it does. It’s really the people who use the tool that creates the personality for good or bad, and we definitely see the opportunity for bad actors to use these tools and they don’t have regulators. So just criminals are not subject — they don’t subject themselves, at least, to regulation. So it’s really important that the regulators make sure that the good actors like Nasdaq and those who are trying to protect the system also have access to the same tools so that we can actually use the most advanced technology available to protect the markets and to protect the financial system. And we do think that smart regulation is appropriate here. But also just really thinking about it proactively and embracing the technology for the right purposes I think is the right starting point for regulators to use and we’re already engaging with regulators and legislators on this topic.

Owen Lau — Oppenheimer — Analyst

Got it, thank you very much.

Adena Friedman — Chair and Chief Executive Officer

Thank you.

Operator

Thank you. And I show our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Michael Cyprys — Morgan Stanley — Analyst

Hey, good morning and thanks for taking the question. Maybe just on the cloud migration and your AWS partnership, I was hoping maybe you can update us on the progress there, moving the market to the cloud. It sounded like you’re looking to move another options market by year end. Maybe you could just elaborate a bit on that, some of the milestones you’re looking out over the next 12, 24 months. Maybe you could talk about some of the lessons learned from the journey so far and what sort of benefits you’re seeing to revenues and expenses. And if not much so far, what do you anticipate in the coming years?

Adena Friedman — Chair and Chief Executive Officer

Sure. Great, thanks, Michael. The partnership with AWS is going extremely well and we’ve been really pleased with our first market, which is MRX, going to the cloud. So what we did experience is a 10% improvement in latency as we moved MRX to the cloud. And so — and we can do — we can look at that as a direct comparison because we have one of our options markets already on our Next-Gen trading platform which we call Fusion. And then — but it’s on-prem. And then we have a second options market in Fusion but on AWS and we can see that there is a 10% improvement in latency on the AWS implementations. So really pleased with that.

But both of those markets, as we moved them on to Fusion and with one of them into AWS, we are actually seeing better market share because of the fact that we have a more deterministic trading experience and across both of those platforms. And then — so we have seen a growth in market share across those exchanges and I think that, that is highly related to the fact that the technology is as good as it is.

And so we are really, really encouraged. So now we’re moving our second market — our third market on to Fusion and then moving it into the cloud and then we also have a plan, over the next several years, to continue that progress. It’s giving us confidence that we’re moving in the right direction and our clients are highly engaged with us. So we feel very good about it.

We’re not kind of trying to ascribe specific revenue to it, but rather knowing that this market modernization opens up opportunities for us. You pointed out, like new order types, new capabilities as well as a more scalable infrastructure and over time, we will not have to do server refreshes, right? So that will start to show some real cost savings to us over time as we continue to bring the markets into the clouds.

Michael Cyprys — Morgan Stanley — Analyst

Great, thank you.

Operator

Thank you. And our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Brian Bedell — Deutsche Bank. — Analyst

Great, thanks for taking my question. Maybe just to zoom in a little bit on the recurring revenue growth outlooks as you sort of move through the rest of this year and into next year and three businesses. It sounds like the Workflow and Insights, obviously with the slower sales cycles, is going to remain well below the medium-term target outlook of high single-digit to low double-digit. But at the same time, marketplace tech is well above that at least year-over-year in 1Q of that sort of low to mid single-digit pace. So question there is, are we going to — or is it your view that we’ll be tracking well ahead of that medium target in marketplace tech, given the momentum you had in 1Q? And then similarly, for Verafin, or Anti-Financial Crime, right now, you’re sort of at the lower end of that medium-term target, but with the Tier-1 and Tier-2 implementations, maybe if you could talk about how that might work its way into the revenue stream this year and including all the other new business that you’re getting in that segment and whether we’ll move back into that medium-term 18% to 23% target growth rate this year.

Adena Friedman — Chair and Chief Executive Officer

Thank you, Brian. Well, as you know, we don’t give specific in-year guidance. So — but I can give you some color or commentary. I think that when it comes to the Workflow and Insights business, I think that we definitely are seeing, as we’ve said before, have a mixed environment there and longer sales cycles. We are very engaged with clients, but the fact is that they have to go through more gates to get approvals and, of course, it’s particularly in our governance area where we do find really good sales opportunities with IPOs. We don’t have as many IPOs. So that also is hindering some of the growth across governance. But, I would also say, we are continuing to manage the pipeline, we’re continuing to engage and we are hopeful that as the markets start to improve a bit, hopefully, the IPO environment gets more healthy, that gives us more opportunity and the sales cycles starts to improve there. So we have some hope, but we also have to recognize the fact that it is a different environment right now and we’re calibrating to that.

With regard to the market infrastructure or marketplace tech, we are very happy with the growth that we are demonstrating in the first quarter. I would mention that there are two things that are happening in that business that are creating some opportunities. I mentioned there’s 8% overall ARR growth in Market Platforms, which really reflects marketplace tech, whereas we had 11% growth in the business and the 11%, that delta really comes from some testing revenue we got in our — on trade management solutions business and a delivery fee that we got in our market tech business. So I would kind of calibrate a little bit on that as you think about the rest of the year.

And then the last on AFC, we — we’re — every single quarter is going to be a little bit of a different answer, but I think that we feel very good about our overall growth prospects. Clearly, as we do move upmarket, it gives us higher TAM, right? There is a bigger TAM that we’re going after, as well as the fact that the contract values are higher. So it does give us an edge, hence, to continue to demonstrate really strong growth there going forward.

Brian Bedell — Deutsche Bank. — Analyst

Yeah. That’s great color. Thank you.

Adena Friedman — Chair and Chief Executive Officer

Sure.

Operator

Thank you. And our next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Kyle Voigt — KBW — Analyst

Hi, good morning. You delevered significantly, you now have a fair amount of balance sheet flexibility. And just given that, I’m just wondering if you could provide an update on M&A. I guess, broadly speaking, it seems to be challenging to get deals announced still given the macro volatility, but I guess, are you starting to see seller expectations come in or normalized at all or do you feel the environment is turning more constructive to getting deals done versus where we were in the second half of last year? And then just any color you can provide on certain segments of the business where you’re seeing the most interesting M&A opportunities right now.

Adena Friedman — Chair and Chief Executive Officer

I’ll actually start with the last question. I think, generally speaking, the way that we’re thinking about on the — well, first of all, as you know, we spend the vast majority of our time on organic growth and I think that — I think because of that focus, we’ve been able to show continued stronger performance across the business. But as we do consider ways to expand our business, we have these three key themes that we’re really focused on: modernization and how can we bring more advanced technology to exchanges, banks and brokers to support their activity in the capital markets; I think the second is in ESG as we continue to grow and expand the capabilities we offer to corporates and investors and helping them manage the ESG landscape; and then the third is in Anti-Financial Crime. And that’s an area that we’re always looking to expand. It’s such a wonderful area of the business and it’s a high-growth area.

But with regard to just overall environment around M&A, I would always say this, great assets will always command a premium. I think we should just recognize that. I mean in good times and bad, great assets will always do well in the M&A market. But I also think that as the market calibrates to a world where money costs money and the cost of capital has gone up, obviously, we are calibrating our thinking on how we look at the financial profiles of acquisition targets to reflect our higher cost of capital and we also want to make sure we’re calibrating our expectations for the businesses that we would evaluate on that basis. And that can create some tempering of expectations but I also would — we have a great balance sheet, we have done a lot to manage our debt, we’ve got really good — really great cash flows. So we are in a strong position to consider M&A if and when we find something that we find particularly compelling.

Kyle Voigt — KBW — Analyst

Thanks, Adena.

Operator

Thank you. And I show our next question comes from the line of Craig Siegenthaler from Bank of America. Please go ahead.

Craig Siegenthaler — Bank of America — Analyst

Hey, guys. Adena, congrats on the Tier-1 bank signing, but actually all my questions have been asked. So I think I’m good right now.

Adena Friedman — Chair and Chief Executive Officer

Okay, great, thanks, Craig.

Operator

Thank you. And our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead.

Alexander Blostein — Goldman Sachs — Analyst

Hi, good morning, everybody. I was hoping we can talk maybe a little bit about pricing. We’ve seen, obviously, inflation for a persistent period of time now, expenses are rising across the board and a number of your peers on the exchange side but also on the data side have been trying to flex the pricing muscle where they can. So what are the opportunities on price that you see across the enterprise? Are there areas where you feel you’re sort of below the market relative to the value proposition that you’re providing to your clients where you could increase pricing over the next, call it, 12 to 18 months?

Adena Friedman — Chair and Chief Executive Officer

Sure. So first of all, we do take a long-term view as to how we manage the prices of our capabilities and solutions, and so we do think that way. But at the same time, we also have, in our contracts, particularly with our non-regulated businesses, we do have the ability to increase price to reflect the overall inflationary environment around us and we do leverage that. So we have — but we also tend to — if it’s a service where there’s kind of an annual type of cadence, we tend to look at those price increases at the end of the year, that then get effective at the beginning of the year. And so you’re going to — you’re seeing that already flowing through the financials for 2023.

I think that as — in the regulated businesses, it’s a little bit of a different environment just because it’s not only that we do want to make sure we get paid for our value, but we also have to go through a regulatory process to do that. And so that’s just a little bit of a different dynamic. I would say, Alex, that we’re doing — making the right decisions there. Where we feel that we have the ability to price up to reflect the value we’re serving, we’re doing it, but we’re not overdoing it, we’re not being as aggressive as we possibly can because we want to make sure that we’re thinking about it over the long-term and not the short-term.

Alexander Blostein — Goldman Sachs — Analyst

I got you, thanks.

Operator

Thank you. And I show our next question comes from the line of Simon Clinch from Atlantic Equities. Please go ahead.

Simon Clinch — Atlantic Equities — Analyst

Hi, Adena, thanks for taking my question. I was wondering if we could just explore the Index business this quarter, and just how to think about things going forward. And maybe you could give us a sense then of, I guess, what you’re seeing in terms of flows across the different product lines, where the real opportunities lie, and I’m particularly interested in the franchise outside of the straight QQQs as well?

Adena Friedman — Chair and Chief Executive Officer

Sure, great, thank you. Well, we do provide information on flows at a — in an aggregate level, so we did have $6 billion of inflows in the quarter versus last — from the end of the year through the end of the first quarter. We also had $23 billion of inflows year-over-year. So we definitely are seeing good, strong demand from investors for our Index products. And that’s not just the QQQs but also other thematic indexes or smart beta index on franchise. So we feel really good about overall client interest — investor interest, but obviously, the market dynamics have been what’s really driven the downward trend in the revenues.

I think also, we’re still out there creating products, launching products, we’re primarily focused on thematic indexes which really mean things that could be leaning into innovative technologies, leaning into specific trends in the industry. And so we tend to kind of put a lot of our new product development focus on those areas. And then we also have a smart beta environment like our momentum index franchise and some of the other smart beta indexes where we definitely put time and attention there too, but I would say the thematic indexes have been more an area of new product focus for us right now.

Simon Clinch — Atlantic Equities — Analyst

Okay, great, thank you. Thank you for that.

Adena Friedman — Chair and Chief Executive Officer

Sure.

Operator

Thank you. And I show our next question comes from the line of Andrew Bond from Rosenblatt Securities. Please go ahead.

Andrew Bond — Rosenblatt Securities — Analyst

Hey, good morning. Just in regards to the crypto business, did you see any impact from the recent banking crisis in terms of interest from potential customers? And thinking about the broader space, there are a number of players currently there and seems to be some commoditization in terms of pricing. How does Nasdaq differentiate in terms of its offering, Custody? And finally, is the launch still planned for this quarter? Thanks.

Adena Friedman — Chair and Chief Executive Officer

Great, thanks, Andrew. So starting with the last question first, again, on timing, I think that the way that we’re positioning ourselves is that we want to get regulatory approval and we’re having constructive conversations with the Department of — New York Department of Finance. And so we’re hopeful, we’ll get that approval this quarter and we want to get product-ready by the end of the quarter. And with that, we’re moving — we’re — I think by May, we’ll be moving into user testing on our platform. I mean, we’ll be able to show kind of an end-to-end demo in production, which I think is going to be really helpful to curating our client prospects.

And so — but whether or not we launch is going to be more dependent on definitely whether or not we have regulatory approval and whether or not the product is a go. And also just making sure that we engage the clients so that we feel really good about how we’re going to grow the business over time. And so that launch is not set in stone, it’s more a matter of making sure the other parts are ready first.

In terms of the client engagements and the institutional interests, I do think Nasdaq has an interesting right to win here in terms of just getting engaged more generally in the crypto space as regulations starts to come into the market and certainly, as the regulators get a lot more engaged in crypto. I think we do have an ability to come in with a fair, resilient and very scalable solution. Our Crypto Custody is actually, we would say, a real improvement in the technology, we are using MPC, but we’re also using some really interesting techniques to make it so that we don’t have this kind of hard, hot, cold wallet construct, but rather a continuous wallet that’s available, but hyper-secure. And I think that — we feel like that will be more attractive to institutional users to make it so they don’t have a lot of their value stored somewhere that’s really inaccessible for, let’s say, a 24-hour period.

And so we do think that we have kind of a unique value proposition to offer and we are having really great engagement with clients, but it is dynamic. I mean it is a very dynamic environment, so we’re calibrating our expectations to that, we’re making sure that we’re being very prudent in how we’re managing our expenses in this area — in this environment, but we are quite excited about what we have to offer. So we’re excited to be able to launch it.

Andrew Bond — Rosenblatt Securities — Analyst

Great, thanks.

Operator

Thank you. And I show our next question comes from the line of Dan Fannon from Jefferies. Please go ahead.

Joon — Jefferies — Analyst

Hi, this is Joon [Phonetic] on behalf of Dan, thanks for taking my question. I just want to quickly ask about ESG. Just given some of the slowdown in the ESG investment strategies, are you seeing any impact from that on the demand for ESG service at all?

Adena Friedman — Chair and Chief Executive Officer

No, so most of our services that we offer in the ESG area right now are really offered to corporates and there we’re seeing very continued engagement from corporates. We have both an advisory practice, which helps advise companies on how to make sure that they’re thinking about their overall ESG program, how they’re reporting on their program and communicating it to investors, how they’re making sure that they’re being compliant with different taxonomies so that they can get credit for the work they’re doing. And that’s — the demand for those is very healthy and then we also have our reporting tools that allow them to put all of that information into one container, and then we go and we map it out to all the taxonomies and all the rating agencies, etc. And that also continues to have really nice growth in client engagement.

So the corporates are wanting to make sure that they are there to engage with the investors the right way. I would say that overall though, while ESG is going to have ebbs and flows in terms of kind of the environment that it sits in, it is I think a lasting change in how we — how companies think about engaging with investors and how investors are making investment decisions. I mean the next generation of investors do care in not only what returns they’re getting, but how those companies are generating those returns and I think that we’re going to find that that’s a lasting trend. So we continue to be very, very optimistic about how we can engage clients in this area.

Joon — Jefferies — Analyst

Helpful. Thank you.

Adena Friedman — Chair and Chief Executive Officer

Sure.

Operator

Thank you. And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead.

Alex Kramm — UBS — Analyst

Oh, hey, thanks. Yeah, just wanted to squeeze a couple of follow-ups here, since we went over time. So thanks for the [Speech Overlap] again. So two things, one is a quick one. I think this is for Ann, back on financial crime. I mean, you’ve been giving the signed ARR metric and we only have limited history, but obviously, I think you can use that to back into net sales, which I think was $16 million this quarter, it was $6 million a year ago, so almost triple. So I’m not sure how meaningful those numbers are, but it sounds like you signed less Verafin clients, maybe it’s Tier-2 is bigger. But like just maybe foot how that — why the number was so big, because I think the first quarter is actually a seasonally slow quarter. So maybe help us a little bit understand the numbers.

And then just bigger picture, you have answered some questions around the operating environment and what’s out there, but the one thing you didn’t touch upon is that clearly, there is a sizable bulge bracket [Phonetic] firm looking to go away. So just wondering how you think about that exposure there, because clearly their client Credit Suisse across a ton of different businesses of yours. So just wondering how we should be thinking about that. Thanks.

Adena Friedman — Chair and Chief Executive Officer

Okay, so on the AFC side, we actually did — I have — I remember that the Q1 of last year was particularly, I would say, a slower quarter than normal for AFC, but we did have 39 new clients then, this year we have 42. So we do have more new clients signing up this year than last year. And as you said, the ARR associated with larger clients is going to be higher. So I think that, that helps also. I can’t give you a complete bridge from the $6 million to $16 million, we’re going have to go back and look at that, but generally speaking, we are — I think that we are seeing some strong revenue tailwinds as we continue to engage with clients and upsell and sell to new customers. So I think that’s really — and you should also recognize that when we do renew contracts with clients, we don’t charge — we don’t do annual increases, but we actually charge on renewal and that also could gives us an opportunity to upsell to clients. So that’s been a pretty active environment on that as well this year. So I think that gives you hopefully, Alex, some more color there.

On Credit Suisse, the impacts of Credit Suisse — first of all, it’s going to take a while for us to fully understand how the two organizations are going to come together and how that — what kind of impact that has on our capital markets business. But I would say that, if Credit Suisse receipts trading are moving away from Credit Suisse, it’s going somewhere. And so we are continuing to see healthy volumes, healthy liquidity, it’s just that, that volume will probably move to other players. And then it’s a matter of us making sure we’re engaging with those players to get the flow.

With regard to other solutions like our Anti-Financial Crime solutions, namely our surveillance solutions, that will be up to how they organize themselves to understand, how we will continue to manage that contract going-forward. We don’t have a line of sight into that at this point. And I think those are — probably are bigger areas of exposure to Credit Suisse right now. Right, Ann?

Ann Dennison — Executive Vice President and Chief Financial Officer

Agreed, yeah.

Adena Friedman — Chair and Chief Executive Officer

Yeah.

Alex Kramm — UBS — Analyst

Excellent, thank you very much.

Adena Friedman — Chair and Chief Executive Officer

Okay, great, thank you.

Operator

Thank you. And I show our last question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Brian Bedell — Deutsche Bank. — Analyst

Great, thanks for taking my follow-up and appreciate you going over on time here. And also, Adena, great comments on the AI strategy. It really sounds compelling longer-term. I just wanted to understand on AI. How do you view that from an economic perspective? Is it — are the innovations something that you can actually charge for across the businesses or is it more of the fact that it really enhances the product and therefore improve the sales cycle and then capability? And similarly, on the expense side, do you view AI as creating better internal expense efficiencies?

Adena Friedman — Chair and Chief Executive Officer

Yeah. I would say kind of all of the above. So it kind of depends on the solutions. So there are going to be areas where we might be able to offer a specific bespoke solution at a premium price, there might be some areas where we — like with AFC, where it just creates a better product, and that gives us better sales opportunities and we do — we are very focused with our AFC solutions on being a premium provider of that. So — and we see that because of the value — that value proposition is higher. So we try to embed that into the overall price of the service.

And then in terms of efficiency, particularly with Generative AI, you start to have — we’ve had some brainstorming sessions internally and we say, looking at Generative AI in the business, meaning in our products offered to clients and then Generative AI on the business in terms of how we manage it into our operations and we see a lot of opportunities in both and ways to create more scale and efficiency. But we also — it’s so early. So we have to also make sure that we’re putting the technology into an environment that we feel is secure and safe and that allows us in kind of ring-fencing it and allowing us to make sure we manage our IP and our data.

So we’ll take some time to do it the right way and to find ways that we can be efficient, but also provide more premium product to our clients and that’s how we’re focused on it right now. We also have a governance — I should mention, we do have a governance committee that vets all the AI use cases inside of Nasdaq and I think that’s really important. We have to make sure we’re doing this in a responsible way, that we’re thinking through the risks and as well as the benefits. And so our governance committee is led by John Zecca, who is our Chief Regulatory, Risk and Legal Officer but also includes members from technology, as well as other parts of our organization to make sure we’re doing it in a responsible way.

Brian Bedell — Deutsche Bank. — Analyst

Yeah, that’s great. Super helpful. Thank you.

Adena Friedman — Chair and Chief Executive Officer

Thank you.

Operator

Thank you. I’m showing no further questions in the queue. This concludes our Q&A session. At this time, I’d like to turn the conference back to Adena Friedman for closing remarks.

Adena Friedman — Chair and Chief Executive Officer

Great, well, thank you very much for your time today and we look forward to continuing our discussions throughout the year on the progress that we aim to make against our strategic priorities and thanks a lot for your questions. Talk to you later. Have a great day.

Operator

[Operator Closing Remarks]

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