Nasdaq, Inc. (NDAQ) Q4 2021 Earnings Call Transcript

Nasdaq, Inc. (NASDAQ: NDAQ) Q4 2021 earnings call dated Jan. 26, 2022

Corporate Participants:

Ed Ditmire — Senior Vice President of Investor Relations

Adena T. Friedman — President and Chief Executive Officer

Ann Dennison — Executive Vice President, Chief Financial Officer

Analysts:

Richard Repetto — Piper Sandler — Analyst

Alex Kramm — UBS — Analyst

Daniel Fannon — Jefferies — Analyst

Owen Lau — Oppenheimer — Analyst

Alex Blostein — Goldman Sachs — Analyst

Craig Siegenthaler — Bank of America — Analyst

Kyle Voigt — Keefe, Bruyette & Woods — Analyst

Brian Bedell — Deutsche Bank — Analyst

Michael Cyprys — Morgan Stanley — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to the Nasdaq Fourth Quarter 2021 Results Conference Call. [Operator Instructions] Please be advised today’s conference may be recorded. [Operator Instructions]

I’d now like to hand the conference over to your host today, Ed Ditmire, Senior Vice President of Investor Relations. Please go ahead.

Ed Ditmire — Senior Vice President of Investor Relations

Good morning, everyone, and thank you for joining us today to discuss Nasdaq’s fourth quarter and full year 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’ll open up the line to Q&A.

This press release and presentation are on our website. We intend to use the website as a means of disclosing material, non-public information and complying with disclosure obligations under SEC Regulation FD. I’d like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections and 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’ll now turn the call over to Adena.

Adena T. Friedman — President and Chief Executive Officer

Thank you, Ed, and good morning, everyone. Thank you for joining us. Let me first note how proud I am of the resilience of Nasdaq’s business, the nimbleness and dedication of our global team, and the trusted relationships we have with our clients. We are certainly familiar with how unpredictable today’s operating environment can be as we continue to navigate a dynamic pandemic and economic landscape.

Before I turn to our performance, I would briefly like to address the current market environment. While the markets have experienced increased levels of volatility since the start of the year, we maintain a positive overall economic outlook going into 2022, as the underlying economy continues to have the ingredients for continued growth. Notably, consumer demand for products and services remains high, the ongoing digital transformation of industry continues to drive long-term demand for advanced software and other technology and market innovations, and the resulting employment environment is very strong. That said, there are several factors driving the current market volatility. Notably, due to the cyclical and structural issues, we are entering 2022 with a tight labor market and supply chain challenges, both of which are contributing to inflationary pressures. Those pressures are then creating uncertainty around the pace and rate of monetary policy adjustments. Additionally, there are broader geopolitical challenges and continued pandemic impacts that are adding to the macro uncertainty. So our overall — while our overall outlook remains positive, we expect the confluence of market-driven factors and macroeconomic and political factors to continue to drive volatility over the near term.

Within that context, we also remain confident in the strength and resilience of our business. For example, we’ve seen significantly higher trading volumes and within the last week, the industry processed and Nasdaq processed a new record number of messages in a single trading day. We continue to have a healthy pipeline of companies expecting to tap the public markets starting 2022. In fact, we have more than doubled the number of S1’s on file with the SEC compared to the prior year period, although market volatility could cause some delays — some delays to IPO timing, something we’re monitoring closely. And in our index business, we expect index asset values to experience some impact associated with various market levels and investor appetite for products tracking our indexes, but also the benefit from higher futures trading volume due to the use of our core indexes in market hedging strategies.

The diversification of our business over the past number of years has created a flywheel effect between our foundational U.S. and European marketplaces and the technology solutions we deliver to thousands of clients across public companies, investment managers and banks, as well as the 100 plus market infrastructure operators, all of whom rely on our mission-critical software to navigate the financial system successfully. This is especially the case during these periods of heightened market turbulence. We help asset owners rebalance their portfolios and manage asset allocation decisions. We enable banks and brokers to prevent financial crime, while handling increased investor activity. We provide critical Investor Relations insights to corporate clients to understand changes in our investor base, and we empower exchanges around the world to handle the market volumes and volatility. Nasdaq is there as a critical partner across the financial markets and our business has demonstrated time and again that we can achieve success in the face of these types of backdrops. I’m confident this time will be no different.

Let’s now turn to our results. My remarks today will focus on the following areas. Nasdaq’s full-year 2021 and fourth quarter 2021 financial and business performance, the progress we’ve made to drive Nasdaq forward along our strategic direction and an update on Nasdaq’s cloud journey, as well as our ambitions for 2022 and beyond, I’ll then turn the call over to Ann, who will provide further update — details about our results as well as give updates on our guidance, capital deployment and sustainability efforts before we move to Q&A.

Let’s begin with our results. I’m very pleased to report Nasdaq’s strong financial performance for the fourth quarter and full year of 2021. First, on the fourth quarter, we achieved $885 million in net revenues, a 12% increase compared to the prior year period, while non-GAAP earnings per share of $1.93 rose 21% compared to the fourth quarter of 2020. For the full year of 2021, net revenues of $3.4 billion increased 18% from the prior year. We achieved 14% organic growth with double-digit contributions from both the Solutions segments and Market Services.

Our annualized recurring revenue, or ARR, ended the year at $1.87 billion, an increase of 19% year-over-year. This underscores our continued progress across key secular growth opportunities, including building out our Anti Financial Crime Technology, as well as our analytics and workflow solutions for asset owners. Within our recurring revenue businesses, we see some of our best performances from our SaaS-based solutions. Annualized SaaS revenues totaled $640 million in the fourth quarter of 2021, representing a 34% — I’m sorry, representing 34% of total company IRR — ARR, up from 20% [Phonetic] in the fourth quarter of 2020. The 43% year-over-year increase in annualized SaaS revenues primarily reflects the inclusion of Verafin, as well as strong organic growth in our Market Surveillance and Investment Analytics businesses. Because of our 2021 performance, we entered 2022 with solid momentum and we intend to lean into our success as we operate our advanced client led technology solutions and our foundational marketplace businesses diligently in the months ahead.

Now, I’m going to turn to specific highlights from our businesses, focusing mainly on fourth quarter results. Our Solutions segments businesses delivered a combined total revenues of $581 million during the fourth quarter, a 19% increase from the prior year period, driven most notably by standout performances from index and listing services, exciting momentum in our investment analytics offerings and strong performance in our Anti Financial Crime offerings, including the impact of the acquisition of Verafin.

In our Investment Intelligence segment, we delivered $288 million in total net revenues in the fourth quarter, an 18% increase from the prior year period with contributions from across the business. We continue to invest in product innovation to meet the evolving needs of our clients. During the quarter, we brought to the market several new products that are seeing encouraging initial demand. Let me highlight a few.

Data Fabric, which is our new enhanced cloud-based offering is a powerful new feature inside of Nasdaq Data Link that allows clients to bring their own data to the platform and have it securely managed as a service. The early traction we observed with Data Fabric is encouraging and this offering is quickly becoming a critical part of our clients’ investment workflows. And in our index franchise, we saw demand growth for the new offerings in our expanded Nasdaq 100 related and ESG focus indexes, including two new sustainability focus ETFs tracking the Nasdaq-100 ESG and the Nasdaq Next Gen 100 ESG indexes. In total, 61 ETFs tracking Nasdaq indexes launched in 2021, accumulating $2.9 billion in assets through the end of the fourth quarter. Notably, 67% of ETF launches in the year were outside the U.S., thus demonstrating the strong international demand for Nasdaq’s index franchise.

Turning to Investment Analytics. Building upon our successful partnerships with leading investment consultants that were announced during 2021, Nasdaq’s Asset Owner Solutions now distributes investment research and insights for Mercer and Aon, among others, to our growing community of asset owners and asset managers on the investment platform. This is just one of several ways for increasing the value of investment and the broader in asset — in asset owner solutions offering to our clients, and I’m incredibly pleased to see the tremendous sales growth from new clients reported by eVestment and Solovis for the full year of 2021. Combined new sales in 2021 totaled $26 million, an increase of 41% over the prior year, driven in large part by 79% new sales growth in asset owner in the asset owner business. And Solovis’s new sales grew 145% across all client groups.

Turning next to our Market Technology segment. We delivered $131 million in total net revenues in the fourth quarter, a 24% increase from the prior year period. This was primarily driven by the inclusion of revenues from Verafin in our results. More broadly, we saw continued growth in demand for our SaaS-based offerings, both fraud detection and Anti-Money Laundering Solutions, which we call FRAML, and from the market and trade surveillance areas of our Anti Financial Crime Technology, as well as a growing number of market operators utilizing our cloud native marketplace solutions.

Over the course of 2021, I’m pleased to report that in addition to 197 new banks, credit unions and FinTech companies that adopted Verafin, our other market technology businesses welcomed 31 new customers, of which 26 chose our SaaS solutions. The Market Technology overall had a transformational year in 2021, in particular as we grow Nasdaq into an Anti Financial Crime leader with related shifts in revenue composition, we have an equal focus on capitalizing a recovery in the growth of our Solutions business for our market infrastructure operators. Revenues recognized in that business decreased in the fourth quarter on a year-over-year basis due to factors including low — lower non-recurring professional services revenue caused in part by pandemic related logistical challenge that we’ve previously disclosed. However, we’re seeing some encouraging trends that bring us incrementally closer to a positive inflection in revenue.

First, we’re making progress on some of the larger more complex implementations that have been more exposed to the pandemic related travel — challenges of travel and restrictions to onsite collaboration. In particular, two key projects are approaching their first go-live and acceptance phases in the first quarter of 2022. And in a third, the collaboration with the client resulting in its scope and timeline adjusted to reflect both expanding customer needs balanced against evolving delivery timeline realities.

Second, in the fourth quarter of 2021, we achieved strong new order intake of $142 million, capping a record full year of $378 million excluding Verafin, which constitutes a very substantial 58% increase in new order intake from a 2020 that was highly impacted by the the onset of the pandemic. Further, we have seen a substantial uptick in early stage discussions with clients who want to learn more about our progress, bringing the benefits of the cloud and managed services to their own markets. We are excited to see how they can — how that can play out not only in driving further growth in new contracts on the line, but also because SaaS and managed service projects entail simpler delivery processes versus our legacy on-premises installations. Obviously, the duration of the pandemic has exceeded everyone’s expectations, however, we are encouraged by the growing interest in our Next Gen capabilities and the future opportunities to increase the way we serve market infrastructure operators to complement the strong growth that we see today in our larger Anti Financial Crime offerings.

Moving to our foundational marketplace businesses. Our Market Services segment delivered net revenues of $303 million during the fourth quarter of 2021, an increase of 5% from the prior year period. We maintained our strong competitive performance amidst a dynamic trading backdrop as the retail and institutional investment communities saw new opportunities across equities and options to drive their strategies. Our U.S. options business set a new annual record for trading volumes in 2021, and we are starting 2022 with new records being set in volumes and message traffic.

In early December, we announced our decision to begin the migration of our options markets to the cloud beginning in 2022, starting with our Nasdaq MRX options market. This innovation in the infrastructure that underpins our markets will create more elasticity in our capacity, while maintaining or improving the performance of our clients that our clients have come to expect from us. This will — this will be made possible with the build-out of the broader cloud infrastructure within the Carteret Data Center, supported by AWS and our local partner Equinix. I will cover this topic in more details in a few minutes.

Turning to U.S. cash equities, the increase of our volumes as compared to the fourth quarter of 2020 mirrored the industry volume increase at approximately 3%. And in the Nordic markets, we continued to experience strong trading performance, including a matched equity market share among lit venues of over 75%. The European equities value traded per day also increased 23% in the fourth quarter versus the prior year.

Finally, our Corporate Platforms segment delivered net revenues of $162 million in the fourth quarter, a 17% increase, driven primarily by our continued leadership in new listings across our U.S. and European markets, as well as growth in demand for our complementary IR and ESG Services. For the ninth consecutive year, Nasdaq led U.S. exchanges for IPOs in 2021 was 752, capitalizing on one of the strongest years for new issuances over the last two decades and with a 73% overall IPO win rate. Nasdaq also ranked number one in the U.S. in terms of IPO capital raise for the third quarter with, I’m sorry, for the third year, so let me read that again. Nasdaq also ranked number one in the U.S. in terms of IPO capital raised for the third year with $181 billion and listed nine of the top 10 US-based IPOs in terms of proceeds raised.

We also had 33 new companies switch their corporate listings to Nasdaq in 2021, including Honeywell, Palo Alto Networks and Baker Hughes, representing an aggregate $361 billion in global equity market capitalization. The total market value of all companies transferring to Nasdaq in the last decade has exceeded $1.7 trillion. In Europe, our Nordic, Baltic and First North exchanges also experienced a record year for new listings with 207 companies raising over $15 billion. And for the first time ever, Nasdaq Stockholm facilitated more capital raised in any other country in the EU, while our combined Nordic exchanges had more IPOs than any other market operator in Europe.

Demand for our IR Intelligence and Governance solutions drove 4% year-over-year revenue growth for the fourth quarter within the IR and ESG business. We continue to see deepened client engagement across Nasdaq IR Insight and Advisory, and have also invested in the expansion of our ESG advisory and reporting services to corporate clients. We now provide the services in our portfolio solutions to offered companies who list on our U.S. market.

Next, I’d like to provide an update on the important progress we made in 2021 to advance our cloud journey and how these milestones support our broader strategic vision to unlock potential growth — growth potential, sorry, and accelerate our transition to a SaaS business model in our technology, data and investment analytics businesses. Our move to the cloud began over a decade ago and we have used its innovation capabilities to deliver client driven solutions while evolving our own infrastructure for a digital future. In fact, a wide range of Nasdaq solutions are already in the cloud today. We’ve also advanced our markets ecosystem by migrating several of our market surrounding systems that have greatly benefited from the hyper scaling that the cloud affords us to manage elevated volumes in the world’s markets. We were therefore very excited to announce in December a multi-year partnership with Amazon Web Services to build the next generation of cloud enabled infrastructure for the world’s capital markets, committing to move one of our markets to the cloud this year. The partnership with AWS will accelerate the migration of our North American market to the cloud for a phased approach. Specifically this year we plan to move our MRX options market to our next generation trading technology and as part of that migration, we also plan to move MRX into AWS’s cloud environment within the Carteret Data Center.

The new edge computing solutions that we co-designed with AWS may also they used by other market infrastructure operators and by participants to move their trading systems to the cloud and we look forward to engaging with our market technology clients on this future oriented approach to managing market infrastructure. In addition, the partnership will include opportunities to explore new ways to leverage AWS cloud capabilities across Nasdaq’s Anti Financial Crime, Data and Investment Analytics, as well as our market infrastructure software businesses.

Now, as I mentioned at the beginning of my remarks today, Nasdaq made notable progress against our broader strategic journey in 2021. As we continue that path, we would like to share our core ambitions and execution priorities for 2022 and beyond, which we detail on Page 10 of the presentation. First, we want to reinforce a culture of inclusive growth and prosperity within our own organization. We want to continue increasing collaboration across our entire enterprise to deliver more — more through our deep client relationships to further increase our value proposition as an employer and to continue to advance our sustainability practices.

Second, we want to advance our client first approach to serving the financial ecosystem. We will continue to deliver our core marketplace solutions with superior client service, utmost integrity and technological excellence. We will also continue to listen to our clients’ needs as we expand our offerings in Index, Investment Analytics, Anti Financial Crime and ESG solutions.

Third, we are accelerating our technology modernization, our AWS partnership and how we are marching forward on the cloud is an incredible example of this. But we have additional opportunities to increasingly leverage machine learning — machine and learning within our offerings as well as our agile development within more of our innovation areas. We look forward to updating you on our progress on these ambitions in the quarters to come.

As I wrap up, I will summarize by saying our fourth quarter produced solid results for Nasdaq, completing a very successful 2021 for our company. We remain relentlessly focused on advancing our strategic position as a technology company that is advancing the financial system as we move forward into 2022, capitalizing on the strong momentum generated last year.

With that, I’ll now turn the call over to Ann to review our financial details.

Ann Dennison — Executive Vice President, Chief Financial Officer

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 fourth quarter performance beginning on Slide 12 of the presentation. The 12% increase in reported net revenue of $885 million is a net result of organic growth of 10%, including 12% organic increase in the Solutions segments and a 6% organic increase in Market Services, and the contribution from Verafin, as well as the impact from divestitures, partially offset by the negative impact from changes in FX rates.

Moving to operating profit and margins. Non-GAAP operating income increased 18%, while the non-GAAP operating margin of 51% increased 3 percentage points compared to the prior year period. Non-GAAP net income attributable to Nasdaq for the fourth quarter of 2021 was $328 million or $1.93 per diluted share compared to $268 million or $1.60 per diluted share in the prior year period.

Turning to Alide 13. As Adena mentioned earlier, annualized recurring revenue or ARR totaled $1.87 billion, an increase of 19% from the prior year period. While annualized SaaS revenues totaled $640 million, an increase of 43%. Excluding the impact of Verafin, ARR increased 9% year-over-year.

I will now review quarterly segment results on Slides 14 through 17. Starting with Market Technology, revenue increased $25 million or 24%. The increase reflects the positive $35 million impact from the acquisition of Verafin and a $3 million increase in our existing Anti Financial Crime Technology business, partially offset by an organic revenue decline of $10 million in our Market Infrastructure Technology business. Excluding a $4 million purchase price adjustment on deferred revenue associated with the closing of the Verafin transaction, Verafin revenues would have been $39 million in the fourth quarter, an increase of 30% year-over-year, and Anti Financial Crime Technology would have been $76 million with both our existing surveillance and Verafin FRAML solutions continuing to exhibit strong momentum. On a sequential basis and excluding the impact of the purchase price adjustment on deferred revenue, Verafin revenues of $39 million in the fourth quarter compares to $36 million in the third quarter.

As we discussed last quarter, the revenue decline within the Market Infrastructure Technology business was impacted primarily by the successful completion of mid-year of a significant long-term maintenance and support licensing contract with a customer who will continue to use our technology, as well as a decrease more broadly and change requests in installation revenues, mostly due to capacity constraints we are working through as a result of logistical implications of the pandemic. That said, as Adena discussed a few minutes ago, we see some encouraging signs, including the $142 million of order intake during the quarter.

ARR from Market Technology was $428 million in the fourth quarter of 2021, an increase of 51% compared to the prior year. The Market Technology segment operating margin was 15% in the period and increased compared to the prior year quarter, primarily due to a $25 million reserve related to an unexpected loss on an implementation project taken in the fourth quarter of 2020. Excluding the impact of the previously mentioned $4 million purchase price adjustment related to Verafin, the operating margin would have been 18% in the fourth quarter of 2021.

Investment Intelligence revenue increased $43 million or 18%, reflecting organic revenue growth of $44 million. Organic revenue growth during the period reflects very strong growth in our Index business as well as a meaningful contribution from Analytics. ARR was $567 million, an increase of 10% compared to the prior year period. AUM in ETPs license to Nasdaq indices rose 18% compared to the prior year period to $424 billion, including $74 billion from net inflows and an $83 billion net increase from market appreciation, partially offset by $92 billion in net negative impact related to the ETP sponsored switches that we have discussed earlier in 2021. The Investment Intelligence segment operating margin of 64% is down 1 percentage point compared to the prior year period as we continue to make strategic investments in Index and Analytics to support sustained growth.

One note looking forward to the first quarter of 2022. Trading activity of instruments licensed to our indexes achieved certain annual thresholds mid year that resulted in an increase in licensing economics in the second half of the year. Similar to what we described in the call one year ago, as we begin 2022, the economics of certain agreements reset for the new year. We estimate that this will lead to approximately $7 million of lower revenue in the first quarter of 2022 compared to the fourth quarter of 2021, assuming similar trading activity and product mix in the two periods.

Corporate Platforms revenues increased $23 million or 17%, reflecting organic growth. The increase was primarily driven by higher U.S. listings revenues due to the 23% expansion in our listed corporate issuer base, primarily due to a higher number of IPOs, as well as higher adoption across the breadth of Investor Relations and newer ESG and reporting offerings. Corporate Platforms ARR was $546 million and increased 16% compared to the prior year period. The Corporate Platforms segment operating margin of 37% increased 7 percentage points compared to the prior year period, primarily driven by the continued increase in the listed issuer base.

Market Services net revenues increased $15 million or 5%. The organic revenue increase was $17 million or 6% and there was a $2 million negative impact from changes in FX rates. The organic increase primarily reflects higher equity derivatives and trade management services revenues. The segment operating margin of 61% was unchanged from the prior year period.

Turning to Page 18 to review both expenses and guidance. Non-GAAP operating expenses increased $28 million to $430 million. The increase reflects a $6 million or 1% organic increase and a $24 million increase from the net impact of the acquisition and divestitures, partially offset by a $2 million decrease from the impact of changes in FX rates due to a stronger U.S. dollar. Excluding the $25 million reserve in the Market Technology segment taken in the fourth quarter of 2020, the organic expense increased [Indecipherable]. The organic expense increase has two main drivers. First, higher compensation expense reflecting our continued investment to drive growth as well as an increase in variable performance linked compensation due to our outstanding results. And second, marketing and advertising expense, driven by higher level of new listing activity.

We are initiating our 2022 non-GAAP operating expense guidance to a range of $1.68 billion to $1.76 billion. The expense guidance range at the midpoint has three components. First, a core increase compared to 2021 at approximately the mid point of our medium term expense growth objective of 3% to 6%, the majority of which is being allocated to our highest growth product areas, Anti Fin Crime Index, Analytics and ESG. Second is a roughly 2% additional increase reflecting certain shorter-term factors, including costs related to the heightened competition for talent in today’s market and inflationary pressures, as well as some budgeted rebounding costs associated with return to office and travel and entertainment. Third, there is also the full year impact of the 2021 M&A activity and the impact of changes in foreign exchange rates, which together net to a decrease of under 1%.

Our expense philosophy in budget is driven by our strong growth opportunities and our willingness to invest to properly support execution against them. And as Adena went over earlier in her remarks, our positioning versus these large and growing opportunities has never been better. We expect the 2022 non-GAAP tax rate to be in the range of 24% to 26%.

Turning to Slide 19, debt decreased by $97 million versus 3Q ’21, primarily due to a net payment of $60 million of commercial paper and a $39 million decrease in Eurobond book values caused by a weaker euro. Our total debt to trailing 12 months non-GAAP EBITDA ratio ended the period at 3.1 times, down from 3.2 times in the third quarter of 2021.

Let me take a moment now to update you on stock repurchases. During the fourth quarter of 2021, in addition to retiring 0.4 million shares of stock representing the final 20% of the $475 million accelerated share repurchase — share repurchase program or ASR agreement we entered into in July of 2021, the company also repurchased an additional $58 million in shares in 4Q ’21. Moving to the first quarter of 2022, thus far in January, we have repurchased $142 million in stock and later this week we plan to execute a second ASR for $325 million, which we expect to fully complete in the first quarter of 2022. These repurchase plans are consistent with our desire as part of our capital plan to maintain a stable share count and with our intention to materially offset the dilutive impact of the NFI divestiture beyond the first 12 months of that transaction closing.

Turning to Slide 20, I want to touch on Nasdaq’s unique set of opportunities in terms of our sustainability and external impact and the strong momentum we have been executing against them. In terms of what makes our ESG opportunities unique, we’re committed to the highest level of sustainability in terms of how we run our businesses and serve all of our stakeholders, but we have also positioned ourselves to deliver high impact outside the organization through our Anti Fin Crime Solutions and ESG products and services, our position as a marketplace operator to advance standard — standards and practices and our efforts to further financial inclusion through focused charitable activities and volunteerism. As we look back at 2021, we have made significant progress across all pillars of the ESG. We meaningfully expanded our disclosures and commitments, including our first ever Task Force on Climate-Related Financial Disclosures report. We enhanced our suppliers sustainability program, received SEC approval on our Board Diversity rule and added Puro.Earth, a provider of carbon removal solutions to our growing suite of ESG product offerings. We are pleased to see several third party ESG research and ratings firms recognize our meaningful progress over the year, including Sustainalytics, ISS, CDP, the Dow Jones Sustainability Index, the Human Rights Equality index, and that just capital ranking of 100 companies to provide critical business — who prioritize critical business behaviors.

We’re also moving farther in 2022. Earlier this month, Nasdaq announced its partnership with Tribe Freedom Foundation, a charity focused on finding human trafficking and modern slavery. Nasdaq will support drive in the creation of a survivor financial impairment program, a centralized portal, including content, practical tools and educational, financial, literacy material tailored to support survivors of the human trafficking. We look forward to updating you on a regular basis as we progress our ESG initiatives going forward.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Rich Repetto with Piper Sandler.

Richard Repetto — Piper Sandler — Analyst

Yeah, good morning, Adena. Good morning, Ann.

Adena T. Friedman — President and Chief Executive Officer

Hey, Rich.

Richard Repetto — Piper Sandler — Analyst

Hey, Adena. First, congrats on the AWS partnership because just shows the market trends continue to move in your favor, which is by no means an accident, I don’t think either. But anyway, I got a question, given this technology focus, I got a question on market technology, you’re going to kill me for this question. But it — we’ve had a record quarter, revenue increased 15%, high order intake, increase in SaaS, the margin expanded, but the ARR stayed flat quarter-to-quarter, it was the only segment where the ARR did stay flat. So can you give us some insight into the incremental, I guess revenue composition in the pick up in the revenues in Market Technology?

Adena T. Friedman — President and Chief Executive Officer

Well, first of all, Rich, we welcome all of your questions. So thank you for that, and thanks for the mention on AWS. But Ann is going to go ahead and give you some color on that.

Ann Dennison — Executive Vice President, Chief Financial Officer

Sure, so thanks for the question, Rich. We were flat in ARR for Market Tech overall and so there is a couple of different pieces to it, but I would say is we saw growth in the Anti Financial Crime portion of ARR and some slight decline in the Market Infrastructure Technology. A piece of ARR as we had, a contract that was — there was a duplicate contract that we were serving a client in transition that rolled off. So a minor thing there. What we’re also seeing when you see the revenue growth in the Market Technology business, a lot of that growth is in this quarter is coming from additional change requests in the seasonal type items we see in the fourth quarter. Those things don’t contribute to ARR.

But I will want to just point on the positive side that we had a very strong order intake quarter in the fourth quarter and also a record order intake number for the year in market — Marketplace Infrastructure Tech. And so when you think about the future, while we won’t see that coming into ARR right away because there is an implementation phase in many of those projects, we will see the benefits in ARR over time.

Adena T. Friedman — President and Chief Executive Officer

Yeah, and I think one other just piece of color on the order intake for the year, when we look at it, well more than 50% of the order intake is from either expansions of our relationships with existing clients or from new clients. So it’s a net new revenue opportunity for us as we execute against those contracts.

Richard Repetto — Piper Sandler — Analyst

Yeah, see, the positive thing is you get us focused on ARR, so.

Adena T. Friedman — President and Chief Executive Officer

I agree. That’s a great thing. Thank you.

Richard Repetto — Piper Sandler — Analyst

Thanks.

Ann Dennison — Executive Vice President, Chief Financial Officer

Thanks.

Operator

Our next question comes from Alex Kramm with UBS.

Alex Kramm — UBS — Analyst

Yeah, hey, good morning, everyone. Just want to talk about the 2022 outlook a little bit more in terms of organic growth. I know you have your medium-term guide here at 6% to 9% starting this year, obviously last year was great. And I know some of the things that impacted number like the index business obviously had a bad start of the year, I think AUM is down 12% or so year-to-date, if my numbers are right. But I think even with that and looking at some of the exit rates in some of the other businesses that 6% to 9% seems fairly safe. So just wondering if you could give us any commentary on — on how you feel about that 6% to 9% for fiscal year ’22? And yeah, any other color would be great. Thanks.

Adena T. Friedman — President and Chief Executive Officer

Okay, great, thanks. Hey, Alex. So first of all, we continue to support our medium to long-term outlook on our Solutions segment revenues in terms of the outlook that we provided you around that 6% to 9%. I think that all of the businesses have slightly different dynamics, but the one thing I would agree with you on is that the entry rate for those businesses is quite strong. So we had a really strong end to 2021. We said, of course, with ARR, annual recurring revenue, it kind of pertains [Phonetic] to a strong entry rate for for 2022. But as we look at kind of the longer, medium to long-term trends of the business, we continue to support that 6% to 9%, and as we continue to perform and execute and grow and expand the businesses like we did when we announced the Verafin deal, we will certainly make the appropriate adjustments there. But, but I think, Alex, that as you know, it’s always — it’s a very dynamic environment. So we feel — we feel very comfortable with that outlook and we will see how we execute against it this year.

Alex Kramm — UBS — Analyst

Fantastic, thank you.

Operator

Our next question comes from Dan Fannon with Jefferies.

Daniel Fannon — Jefferies — Analyst

Thanks, good morning. I wanted to also talk about just kind of the outlook for Market Services and understanding that volumes are going to come in — be what they are. But thinking about capture rates within both options and equities, whether that’s because of mix or any competitive factors? How you’re thinking about those into 2022?

Adena T. Friedman — President and Chief Executive Officer

Yeah, you actually pointed out a lot of key contributors, Dan. So capture is really — is definitely mix, mixes that make — plays a big role in that, the types of — the types of instruments that are also more heavily traded in any given period of time, and then both also deliberate actions what we might want to take in order to attract certain volumes into our markets from a competitive perspective. So as you know with more retail, particularly in options just to point out and more — and heavier volumes in what I’ll call the price time markets in options during turbulent times, those venues carry with them a lower capture, whereas our — in our PHLX and our ISC marketplaces that have — support more complex transactions have a higher capture. So, so any time where you see more retail and more volumes coming in to the price time venues, you’re going to see capture change. But then at the same time we do try to manage our capture quite actively in terms of attracting certain order flow into our market stand. So that said, there is a lot of — a lot of dynamics underpinning that. But what we look at is the mix of capture and market share and volumes to try to make sure we’re optimizing the results for our shareholders, and I think we’ve done an excellent job of that, really maintaining, I think a really strong marketplace across all of our businesses, all of our markets in a highly competitive time for the marketplace.

Daniel Fannon — Jefferies — Analyst

Great, thank you.

Operator

Our next question comes from Owen Lau with Oppenheimer.

Owen Lau — Oppenheimer — Analyst

Good morning, and thank you for taking my question. I have a question about your partnership with AWS. When people saw these news, this news about this partnership, I think many of them understand this partnership from the cost perspective. But could you please explain a little bit more about, like if you have an example, if there is any revenue opportunity here? And, Adena, you mentioned the migration, I think option market first and then your target over the next 12 months, but could you please talk about the pace of when do you expect to complete all the migrations? Thank you.

Adena T. Friedman — President and Chief Executive Officer

Sure. Thanks, Owen. So yeah, our AWS partnership actually I think is really unique because there are few things. First of all, we do have a lot of our technology services today that are already cloud-based in AWS and also in Azure, and so we have already have a, I think a lot of experience in working in the cloud. So as we start to really focus in on the marketplace businesses and we start to bring our markets into the cloud environment, I think we’re doing it in a really, really thoughtful way. But what’s really cool and unique about the relationship that we’ve developed here is that we’re bringing AWS into the Carteret Data Center and then Equinix has committed to expanding the data center very significantly. We’re doubling size of the datacenter, doubling the power into the data center. So as we create this kind of, this private — this private local zone for AWS in Carteret; number one, it makes it much easier for our clients to migrate to the cloud environment that they’re going to create inside the data center. And number two, it gives us more space, more power to offer additional services to our clients and to give our clients the chance, actually to bring more of their surrounding systems, more of their trading systems into a cloud environment, but in a very controlled way. So it gives us expansion opportunities within Carteret and ways to expand our client relationships there.

And then with — with the go-to-market plans that we have with AWS with our Market Technology clients around the world, this private local and construct and the ultra-low latency edge compute system that we co-designed with them, we can then deploy that to other major markets around the world and help them with their cloud journeys, and that gives us the chance to be more of a; number one, to deploy our cloud — cloud-based Marketplace Solutions, which we also are implementing for MRX. And then number two, to — to become more of a managed service provider to our Market Tech clients, which then builds our bigger relationship with them that accrues to our benefit. So a lot of revenue opportunity there in the coming years. I just want to say these are all long-term kind of, think about the data center for instance, it’s going to take a couple of years to build out the data center. It will take some time for us to deploy our cloud solutions to our Market Tech clients, but we see a really nice medium to long term journey that we can have with AWS on that.

In terms of our own markets and moving our markets, we are starting with MRX in 2022. We want to gain some experience with it. We want to hear from our clients as we — as we manage the migration and complete it, and then we will set it more of a target and the timeline for how we’ll continue the migration of our markets in the U.S. But I just, I want to say we want to start with the first one before we commit to a very specific schedule for the rest.

Owen Lau — Oppenheimer — Analyst

Got it. Thank you.

Operator

Our next question comes from Alex Blostein with Goldman Sachs.

Alex Blostein — Goldman Sachs — Analyst

Great, good morning. Thanks for taking the question. I had a follow-up with respect to the Market Tech business, with particularly the comment around the order intake. So 50% plus expansion with existing clients and new clients that were encouraging. Can we get the breakdown between the Infrastructure business and then the Financial Crime Services business within that? And then, Adena, to your point around accelerating momentum in some of the conversations you’re seeing on the infrastructure side, can you help contextualize that a little more in terms of what that means for revenue growth for 2022? And that’s part of them all [Phonetic]

Adena T. Friedman — President and Chief Executive Officer

Sure. Yeah, so first of all, the order intake numbers that we provide still do not include Verafin. So it’s only includes our trade and market surveillance business, in addition to the market infrastructure operator business. And I just want to say that the majority of, I would say the large majority of order intake is related to our market infrastructure operator clients because of the fact that they tend to be longer-term contracts. Our trade and market surveillance contracts tend to be shorter in duration and smaller in size, so — so I think that you should assume that the large majority of ARR is related to market infrastructure operators.

Ann Dennison — Executive Vice President, Chief Financial Officer

And you’re saying [Indecipherable]

Adena T. Friedman — President and Chief Executive Officer

So about 20 million [Phonetic] of the — of the order intake is related to our our market and trade surveillance business, just to give you a sense of the size. In terms of the — in terms of, as we look into 2022, I think it’s important to note a few things. Ann mentioned the fact that in the latter half of last year we had a longstanding client who will continue to license our software, but it was always planned that they would come off our service and maintenance agreement, which is of a recurring revenue part of the contract. So that happened in the — in the second half of last year. I think in the third quarter we announced that. That has to flow through the full year, so that will impact the first half of 2022.

Then we also have two of our larger implementations going live with their first phase in the first half of 2022, which obviously gets us then into a different and a stronger revenue mode with them going into the latter half of 2022. And then we have this big set of new order intake that we took in during 2021, and that will take a while for that to flow into the revenue as we complete the implementations of that. So you should assume that you’re going to see more momentum as we go through the year of 2022 and digest that order intake, as well as turn to some of our clients into production clients and get through that full-year impact from that one contract. So I think you’ll assume — you can just assume more momentum going through the latter half of the year.

Alex Blostein — Goldman Sachs — Analyst

Got it. Thanks very much.

Operator

Our next question comes from Craig Siegenthaler with Bank of America.

Craig Siegenthaler — Bank of America — Analyst

Thank you. Good morning, everyone.

Adena T. Friedman — President and Chief Executive Officer

Good morning.

Craig Siegenthaler — Bank of America — Analyst

So, I had a follow-up on Market Technologym but I want to isolate it around Verafin. And I appreciate Ann’s comments that revenues are still growing quickly at 30% year-over-year. But as you leverage the network effect of Nasdaq’s Tier 1 and Tier 2 financial services relationships, do you expect this revenue growth rate to remain robust or could there be some deceleration just as the larger revenue base affects it through the large numbers?

Adena T. Friedman — President and Chief Executive Officer

Well, I mean we continue to see massive opportunity for the Verafin organization in three areas. One is, as you mentioned moving up to the larger banks and we are — we have signed some really great clients getting into some of the Tier 1 and Tier 2 banks, and we actually have several POCs running with some of the largest banks as they’re looking at our fraud — our Fraud Solutions and really trying to evaluate that. So, those sales cycles are longer, but obviously the contracts are bigger. So — so we definitely see a lot of momentum there.

The second is, as we look at global expansion and going into Europe, we do have one client that’s fully live and working with us and we’re building out a pipeline now to help support more clients in Europe and making sure solutions are geared towards the European landscape, and so that’s an area of focus for us. But that — if that door opens well and we execute well there, that’s just a huge growth area for us over the long term.

And then the third is actually in the digital asset space. We actually are coming out and we’ve been in a beta mode with a solution that’s geared towards providing traditional banks who want to offer digital wallet to their clients, as well as VASTS [Phonetic] who need really stronger Anti Financial Crime Solutions with — with specific solutions that are geared towards the digital asset ecosystem and we plan to launch that more fully this quarter, which we also see as just a big growth runway for us, in addition to fintech. So I would have to say, if anything, it’s, there are so many great avenues for growth and these avenues are long-term in nature in terms of the growth opportunity that we are very excited to continue momentum of Verafin business. The product is superb. And I think it’s proving itself out really well.

Craig Siegenthaler — Bank of America — Analyst

Thank you. Adena.

Adena T. Friedman — President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Kyle Voigt with KBW. Hi, good morning. Ann, you mentioned some inflationary pressures being felt, I mean, those are short term. Just wondering if you could speak about those pressures in a bit more detail? Is that entirely going to be felt in wages or are there other areas to note? And looking forward to 2023, I guess why you’re comfortable that this 2% increase is more of a one-off item? And then lastly, sorry for the multipart question. If you’re seeing more of the modest inflation on the expense side, are there any opportunities we could pass along some of those inflationary pressures and take more price on the top line side? Thank you.

Adena T. Friedman — President and Chief Executive Officer

Ann is going to — going ahead on the cost side.

Ann Dennison — Executive Vice President, Chief Financial Officer

Sure, so on the cost side. So we talked about there is incremental 2% within the expenses, maybe 1.5%. We see that as being inflationary pressure. Most of that is on the wage side. I do think that there is — there are some inflationary pressure across our supplier contracts which we’ll manage through, but the vast majority is on the, on the wage side. And as we think about managing through that, our ultimate goal here is attracting and retaining the best talent to continue to support the long-term growth of the business. And so while we see the pressure right now here being short term in nature, we’re expecting to continue to invest over the long-term against those — against those needs.

Adena T. Friedman — President and Chief Executive Officer

Yeah, I think, I think it’s important to recognize, it’s hard to know what the world seems to be like in 2023. But in 2022 right now, we are, we’re frankly managing our talent really well. I think our, our attrition has stayed very consistent to our historical expectations, but at the same time waded the tight labor market. We want to compete for the best talent. We have, we have amazing talent in Nasdaq that we want to retain and reward. So I think that as we look at 2022 in terms of the, in terms of labor market right now, I think we feel good about that increase that we mentioned to be able to manage through that situation. It’s hard for us to know what 2023 might come, what might hold for that.

I think in terms of the revenue side, we do make price increases, CPI adjustments to our prices and we do that. I mean, during certain periods of time during the year, we did some adjustments like that going into 2022. But we also tend to take. Number one, we have a lot of long-term contracts that really don’t lend themselves to year-over-year pricing — price increases. And secondly, we take a long-term view of our clients. We really want to make sure that we’re managing to a long-term relationship that they’re getting value for every dollar their spending, and so we do, do some CPI adjustments, but we generally try to manage our prices based on incremental value that we’re providing to them.

Kyle Voigt — Keefe, Bruyette & Woods — Analyst

Very helpful, thank you.

Operator

Our next question comes from Brian Bedell with Deutsche Bank.

Brian Bedell — Deutsche Bank — Analyst

Great, thanks. Good morning, folks.

Adena T. Friedman — President and Chief Executive Officer

Good morning.

Brian Bedell — Deutsche Bank — Analyst

With respect — good morning. With respect on the topic of the day, the Amazon Web Services partnership. Another question on that. How are you thinking about the scalability of of that migration over time? I realize it’s still very early, but on the — in terms of the impact Nasdaq’s expense base, maybe first of all, can you frame out what sort of the build might, the components of the builds in the 2022 guidance might be and then how should we think about the ability of this partnership to either reduce the long-term expense growth of Nasdaq or become more scalable? And then longer term, do you view this partnership as more of a revenue opportunity or more of a cost reduction opportunity for Nasdaq?

Adena T. Friedman — President and Chief Executive Officer

Sure. Yeah, so I think — the good news is that we’ve been working over the last five years with AWS to move a lot of our surrounding systems around the markets into the AWS cloud, which has actually occurred greatly to our benefit over the last five years because, for instance, just with these record volumes we’re experiencing, the surrounding systems which are like trade management solutions, all of the things that happened right after the trade, we have hyper-scalability of our solutions today that otherwise we would have had to buy hardware to support. So that’s been a real benefit to us and allows for us to have both scalable, scalability for our clients, but also a definitely moderation for in terms of our capex expenses.

I think as we go forward, a few things. We also have spent the last five years building out our next generation trade lifecycle solution to be a cloud ready, cloud native solution. So we are deploying that. We deployed that for our BX options market in 2020. We are now deploying that for MRX in 2022. We’re also also deploying that for our derivatives markets in the Nordics, early — right at the beginning of 2022, and in fact, in the next month or so. And we’re deploying that out to our Market Tech clients in terms of our clearing solutions and our trading solutions. So, so we have already been making the investments that we have needed to make to make sure that we are building out our solutions to support an AWS environment. Now, it’s really the partnership with Equinix and AWS, where they’re going to be making their investments in our infrastructure to make it so that we can execute against what we’ve been discussing. So we see this is very much part of our, our 3% to 6% expense growth really factors in the investments we have been making and we’ll continue to make in this area.

So that also, in terms of, once we get to scale and we have fully deployed, everything is fully deployed, we do have the opportunity to look at lower capex expenses more, more scalability in our expense base. But also I think that the bigger opportunity for us is in the revenue side because we have a bigger footprint in order to support our clients here in the U.S., and we have the ability to deploy this very — differently to our clients around the world. So that to us is definitely the bigger opportunity in the long run.

Brian Bedell — Deutsche Bank — Analyst

That’s very comprehensive. And then three to five year period is what you would describe as the long run?

Adena T. Friedman — President and Chief Executive Officer

I think that we actually look at this as — these things always happen in slower motion than you think. So we have, we have six options markets in the U.S. and three equities in the U.S., and so we’re starting with one. As I said, we’ll gain some experience before we set a timeline for the rest. And as we deal with our Market Tech clients, those have limitations [Phonetic], especially when you’re changing out infrastructure you’re looking at probably a two-year to three-year type of implementation once we’ve actually come to an agreement. So this is more like a, I would say five years to seven years. But I think that’s the better timeline to consider.

Brian Bedell — Deutsche Bank — Analyst

Got it. Thank you so much. Great color.

Adena T. Friedman — President and Chief Executive Officer

Okay, thank you.

Operator

Our next question comes from Michael Cyprys with Morgan Stanley.

Michael Cyprys — Morgan Stanley — Analyst

Hey, good morning. Thanks for taking the question. Just wanted to go back to the Nasdaq Data Link. You mentioned the new Data Fabric offering. I guess just a bigger picture question here is how do you see the data link of offering evolving over the next couple of years? I guess, what’s your vision for that looking out five years and maybe talk about what’s on your to do list in terms of next steps as you look out 2022?

Adena T. Friedman — President and Chief Executive Officer

Sure. Yeah, I mean, I think that’s one of the things we hear from our investment management clients is their biggest challenge is managing their data. They’re dealing with all of this data, both the traditional financial data that they’ve always have, but then alternative data and other — other new data points that they think that might be relevant to making investment decisions or managing their portfolio risk. So what we, what data fabric does is we — Data Link in general is there as a container for alternative data as well as financial data, our traditional market data, other exchanges data,etc. It’s a kind of make it, so it’s really, really easy to implement and it’s a, it’s a cloud-based solution that is really ultra light in terms for clients to be able to access the data.

Then with Data Fabric, what that does is almost create a data management layer for our clients so they can put their own data, their own research into the same platform and make it so that it’s all there in one container available to investment professionals, to the traders, to the research analysts, and it just — it creates a little bit of order out of the chaos that they’re dealing with right now in terms of management of data. So that’s the — that’ s the whole, that’s vision or that’s what we’ve felt.

In terms of implementation and the five-year plan. I mean, I think that obviously the cloud is there to support more and more real-time workflows. The cloud is there to be able to offer you much better ability to create analytics offset data, to do machine learning algorithms on the back of the data, and that’s where I think over the next five years we need to continue to enable our clients to leverage the benefits of the cloud as well as kind of the order and the capabilities that we can, we can supplement the data with. So that’s our view, Mike. But it’s, that’s a longer term view as to how we, how we help our clients manage through this.

Michael Cyprys — Morgan Stanley — Analyst

Great, thank you.

Adena T. Friedman — President and Chief Executive Officer

Thank you.

Operator

That concludes today’s question-and-answer session. I’d like to turn the call back to Adena Friedman for closing remarks.

Adena T. Friedman — President and Chief Executive Officer

Great, thank you very much. Well, thank you so much for your time today. In closing, Nasdaq’s fourth quarter and full-year 2021 performance was solid and we are starting off 2022 with really strong momentum. Our leadership team remains very focused on executing our strategy to deliver for all of our stakeholders, and we look forward to continuing our discussions throughout the year on the progress that we make as we continue to advance our strategic priorities and ambitions. So thank you very much and have a great day.

Operator

[Operator Closing Remarks]