Nasdaq, Inc. (NDAQ) Earnings Call Transcript & Summary

Your next presentation. Okay. So thanks, everyone, for joining us. So for our next presentation, we are delighted to have the CFO of Nasdaq here with us today, Ann Dennison. Ann became CFO in March of last year and has been with Nasdaq since 2015. And for those of you who don't know, she actually does a lot more than corporate finance and treasury. She also leads planning and analysis, IR, ESG reporting, procurement and real estate and facilities and securities. So thanks for taking the time out from all of these roles you have in your...

No, my pleasure. Thanks for having me.

She also has more than 20 years of experience in corporate finance, including a long run at Goldman Sachs, where she was the Head of Financial Reporting for Nasdaq. Anyway, so thanks for being with us today.

Thanks, Brian.

Yes. So I'm going to start off with some questions, but we can keep this an open conversation. And if anyone has questions any time, just feel free to raise your hand for a mic. So maybe, Ann, we can start out at a high level and talk about the business mix. I know that there's a lot of different businesses, and it's good for everyone to sort of get a base of understanding of the different components. So sometimes there's a perception that the business is heavily correlated to the Nasdaq Index, and so -- even though you've had this mix for a long time, people still sometimes have that perception. Of course, the company is a lot more than that. So just maybe for starters, can we just quickly review the 3 solutions businesses that account for about 2/3 of net revenue?

Yes, sure. So I -- even just as recently as a couple of weeks ago, a conversation with my father in law, who didn't realize Nasdaq was a public company. Yes. So it's a big brand, and I think that's part of why the perception is that. But we certainly are, like you said, much bigger than just an exchange business. And so the solutions segment, so we bucket them in solutions segment because they have a recurring revenue base. And so the 3 businesses that make that up are Market Technology, Investment Intelligence and Corporate Platforms. So I'll just talk a little bit briefly about each of those. So Market Technology is our business where we have our anti-financial crime solutions as well as our market infrastructure technology solutions. On the anti-financial crime side, we are providing SaaS solutions in the fraud, AML and on the surveillance side to over 2,000 banks and brokers worldwide. On the market infrastructure tech side, this is where we -- our technology powers over 130 markets exchanges across the globe, both the traditional exchanges and also new market exchanges like crypto exchanges. So that's Market Technology. Then we have Investment Intelligence, which this -- as part of this business segment, we are a trusted provider of data, index and analytics to the buy side and to asset owners. And so our analytics portion of the business and the index portion of the business are the higher-growing portions of the business where we're, on the analytics side, really providing solutions to both the buy side and to asset owners for managing their workflows, and then on the asset owner side, their portfolios. On the Corporate Platforms side, it's comprised of our listings and our IR and ESG products. They're -- and they're roughly balanced in terms of contribution to growth. That segment comprises our traditional core listings business as well as the products where we're serving the corporate community with tools to manage their investor relations journey and their governance journey and really focused -- we're really focused there on ESG and the needs of the corporates in the ESG space.

We'll touch on that a little bit later. I want to get into that in a little more detail. But -- and then maybe just rounding out the other 1/3 of your revenue, market services, maybe just provide a quick synopsis of what assets -- what areas you're trading in there. I think -- and I think U.S. cash equities, if I'm not mistaken, is less than 1/4 of that pie, so therefore less than 10% of overall Nasdaq revenue. Again, the perception is that U.S. equities are a bigger portion of your business, but maybe just talk about that contribution to your business on the U.S. side and what comprises market services.

Yes. The numbers you described are just about right. The 3 biggest pieces of our market services business, as we call it, are U.S. options or U.S. cash equities and then followed by Nordic equities business. And so when we think about one of the things that is very important to us is sort of the flywheel effect across the different businesses. And we've had over 1,000 new listings come in over 2020 and 2021 with the incredible years that we had in that space. We earn about 80% of our revenues in the U.S. cash equities space from trading in our listed companies, and so we have lots of tailwinds in our trading business given how much we've grown the listed issuer base.

Yes. And that's -- talk about a flywheel effect, right? So growing -- just growing that base of companies. And we'll talk about the IPO pipeline, too, a little bit later. But maybe just before we get into the businesses, let's just talk high level on your financial goals which are quite elaborate. You've got a lot of different granular metrics that you talk about frequently. So just to start with your goal for recurring revenue of 6% to 9% annually and the components of that. You've been ahead of this more often than not. And then talk about your targets for Software as a Service, or SaaS, portion of the annual subscription revenues and why that's an important goal.

Sure. So when we think about the solutions segments that we talked about, sort of starting off, as well as the Market Services business, a lot of beta factors go into market services. So when we think about our revenue ambitions, we think about it in the context of that 2/3 of our business is the solutions segment business. And so our ambition there is to grow 6% to 9%, on average, over the medium term. And so -- and then we think about expenses in the 3% to 6% range and really tied to the growth in the solutions segment, so being at the top end, if we're at the top end, lower end, if we're at the lower end on the revenue side. And as we think about sort of moving forward in scalability, one of the things as part of our strategic pivot that we did coming into 2017, we were investing in the higher-growth areas, but we are also expanding the portion of our business that is SaaS related, which, over time, is a more scalable model. So before we started the pivot, we were in the mid-20s SaaS revenues as a percentage of our annualized recurring revenues. Coming out of the first quarter, we were at 34%. Our ambition is to get to 40% to 50% by 2025. So what that means from a financial perspective is that we're creating the long-term opportunity for scalability over time.

And you can scale. I mean, how should we think -- and this is probably a tough question to personally answer, but the scalability of this -- of incremental SaaS revenue after you get to that 40% to 50% level across the businesses, are incremental margins coming into those subscription revenues extremely high? And then...

It really will vary business by business, depending on what we see as the growth opportunity and where you are in the investment stage. So when we think about like our Verafin business, which is growing or has been growing top line in the 30% range, we want to -- we're keeping margins steady there, continuing to invest because we see the long-term growth potential. And so I'm hopeful that we get to 2025, we still see a lot of long-term growth potential, and we'll continue to invest but to build scalability over time.

Unfortunately, financial crime is a growth industry.

Yes, it is. It's a growth industry.

So someone has to solve it. And just quickly on SaaS, that's mostly in the anti-financial crime business and the other market technology...

So our SaaS business is really are across all our solutions -- all of our solutions segments, so -- and anti-financial crime is 100% SaaS. We are, within Market Technology, migrating over time our infrastructure clients into SaaS products. We have a SaaS solution, but those are big contracts. That will take time. New clients that come in are all going on to SaaS products. We've got SaaS products within our IR and ESG suite and then also SaaS products within the analytics business, within Investment Intelligence. So our eVestment and Solovis products are software-based.

Right. Okay. Yes. And then just quick on that migration on the market. I know you've been doing that for a while. When do you think you'll be complete with the migrations over to SaaS and the...

Yes. I mean, when you think about some of these contracts, right, you're talking about the Singapore Stock Exchange. To move to a SaaS model, usually those contracts are long term. So we'll be having the discussions about cloud and SaaS as -- and I'm just using them as an example. I'm not suggesting we're in any conversations with them. But those are the types of contracts that -- and so it will take time. It will happen over time. But certainly, new markets that come in, they'll go first.

Yes. And we'll get more into the Market Tech businesses. So many businesses we'll talk about. So okay. So let's now shift into the solutions businesses in a little more detail. So maybe let's -- I think Market Tech is a great place to start. So maybe within Market Tech, which is -- again, that's the anti-financial crime and the technology infrastructure businesses. First, in anti-financial crime, let's get into that, given that Verafin is still relatively new. Can you update us on how the Verafin business is tracking, whether this is still growing at a revenue pace of about 30% annually, just on the Verafin side? And I realize for the entirety of the anti-financial crime, which includes the smart surveillance, it's obviously lower because margins -- I won't call it mature, but it's been -- you've been -- it's been in your mix for a long time. So maybe just talk about your confidence of why anti-financial crime could remain the fastest-growing business in Nasdaq for a while.

Sure. Yes. So you're 100% right. We've got -- coming into the Verafin deal, which we closed in February of 2021, we had ambitions. We obviously looked at sort of how they had performed. It had the ambitions of the continued growth trajectory in that sort of 30% range. We had sort of put an expectation out there of around $140 million coming out of 2021 when we did the deal, and we got closer to $150 million than $140 million. So they're tracking really well. They're continuing to grow. You mentioned earlier that it's a growth business because the market for financial crime is growing in the high teens every year, just given the increasing complexity of fraud and the expanding nature of it, whether it's different types of fraud due to stimulus or digital asset, the expanding market in the digital asset space. So I think there's an expanding market, and we're -- because it's a SaaS tool and we have deep connections with our clients that we're providing the services to, we have the ability of Verafin to do a few things within the existing client base to expand our relationship, providing them additional services and additional modules as part of the product. So that's one area of growth. And then we have our strategy coming into the deal, which was Verafin has served Tier 3, 4 and 5 banks and credit unions in North America. We are expanding with -- together, expanding to the Tier 1s and the Tier 2s and then geographically probably starting in Europe. And so we've already signed 3 clients in the Tier 1, Tier 2 space. We've got a number of proof of concepts going in progress right now, and I see the pathway is there. The conversations are very engaged, and we're really happy with the progress that we're making along the sort of strategic vision that we set out when we did the deal.

Right. I could say pretty much tracking in line, which is ambitious at the time, and you continue a 30% growth rate. So if you have a mid-teens type of growth rate in the industry, if you will, of trying to solve financial crime, on top of that, the penetration, especially the growth of Verafin itself and the software delivery model of helping the financial climate instead of manually doing it at the banks and then your relationship with the larger firms, that sort of perpetuates that 30% type of number...

Put all the pieces together, and that's the medium-term ambition.

Okay. Yes. That's great. Maybe shifting to market tech infrastructure, so a lot of different elements of this business. But just -- you talked about the longer-term growth opportunity there. You're already a leader, fairly dominant in this area, like you said, 130 clients that span -- I think it's exchanges and there's broker-dealers in there as well and other...

Yes, like dark pool.

Dark pool yes, yes. So is the growth in that business in the future, do you think, coming more from new trading markets? Like you mentioned, cryptocurrency, obviously, is a relatively new market. Or is it more like modernization of the existing trading platforms that haven't gotten around to going, let's say, moving over to SaaS.

Or SaaS switching to the cloud. It's definitely going to be a combination of all of those things. So expanding the client base for different types of markets. Crypto is one you mentioned. We have 9 crypto markets that are powered by our technology currently. I think there's opportunity, not so specifically in crypto, but broadly speaking, new markets that emerge and using our matching technology, expanding within the current client base, expanding the current relationships we have and then transitioning over time our clients to the cloud and partnering with them and then to SaaS products is part of that. So a combination of all of those things.

So I mean, just thinking about -- and I know you've made an effort in recent years to provide matching engine capabilities and sort of settlement reconciliation for markets outside of financial services, sort of Internet matching or airline ticket matching. Is that still a target growth area? Or is -- are you really thinking, well, there's a lot more opportunity in financial?

No. There's -- that's certainly -- there's certainly target markets we're exploring in that space. We did see sort of coming into the pandemic a bit of a pullback in spend related to new and emerging markets outside of the financial space. And so -- but certainly still our matching technology is perfect for a lot of things, and so I think probably less of an appetite to customize things for bespoke types of transactions. But we think there's a real opportunity for new markets to use our core technology, and we'll be pursuing those offers.

Sports betting, too, is growing.

Sports betting, yes. We have a couple of clients in that space already.

Yes. Just maybe just quickly on the crypto. You said 9 crypto markets now. I don't know how many crypto markets are out there.

There's a lot, yes.

Is there an opportunity to -- you already have 130 clients globally in a lot of different areas. Can 9 in crypto become 50 or something over time?

I don't know the answer to that question specifically and how much we're sort of pursuing targeting those. But I don't see -- if it -- if the -- I know there's at least over 300 crypto markets, for sure. So I'm sure there's opportunity there.

Okay. Yes. That's theoretically double your client base.

Yes.

But -- yes, I don't know. It's still the Wild, Wild West out there in a lot of ways. Maybe let's shift to Investment Intelligence. So lots to talk about here. But maybe just to start out with probably the bigger part of that business and the most -- the fastest growth part of it for at least recently, the index licensing part. We -- I just did a chat with Allison Dukes, CFO at Invesco, and she mentioned the innovation suite that uses Nasdaq licenses as a pretty good -- a relatively recent strong growth engine. Maybe if you can talk about what your view is on the -- maybe both the intermediate-term growth outlook for that, given we're seeing this rotation away from -- at least in market prices away from tech, although the flows are actually still pretty good in that business. And obviously, Nasdaq-listed products at CME are a major component of that. So maybe just talk about the near term in this type of market environment, that pullback. Is that something that's going to pressure the index licensing revenue near term? And then we can talk about the long term after that.

Sure. So I mean, certainly, we are sensitive to beta factors in both the future -- on the future side and on that the index licensing side. So from an overall market perspective, right, overall markets being down does impact our assets under management and obviously could have some short-term implications. However, we are really pleased with -- we have specialized in thematic indexes and smart beta indexes, and we continue to see, even through this year, positive flows, as you said, into the business. On the futures side, the volatility in the markets usually translates into increased activity as it relates to future transactions volumes. So there's a bit of a natural hedge when the market is correcting.

Right, right. Yes. That is helpful from just the transaction side. And then the longer term in that opportunity in that business, how do you view the product innovation side on creating indices that can be used, that can be indexed against in terms of the longer-term growth profile for that piece?

Yes. I mean, we're really excited for the opportunities in front of us. You talked about Invesco. Our QQQ Innovation Suite I think was launched October of 2020 and has over $5 billion in assets under management. And so we don't see -- the current market conditions are not putting pressure or hampering, I should say, our ability to innovate, work with our partners and introduce new products into the market.

That's great. Yes. And then maybe just switching to Corporate Platforms within the solutions segment. So maybe let's start with listings. Obviously, that's an area where, again, market perception is, oh, gosh, listings are going to dry up. Right now, it's moving a lot more slowly. But I believe you can talk about this, but I believe there's a strong pipeline. So -- and you said you brought 1,000 new companies over in the last basically 2 years.

2 years, yes.

And yet, there still continues -- so maybe just talk about the pipeline. And always tough to predict, people are trying to make predictions out there when the IPO market is going to come back, maybe your view of that?

Sure. I mean, so we obviously had a really strong 2020 and 2021. This -- the first quarter of this year was pretty solid in terms of activity. And then over the past few months, obviously, we've seen not a lot of companies coming to the market. But the pipeline that we had coming into the year was the strongest one we've ever had for companies that are sort of teeing up to go public, and that pipeline is still there. But companies are obviously just waiting for the markets to settle. And so I think it's very hard to tell. But until they see the market settle and stay settled for some period of time, the activity -- we wouldn't expect the activity to pick back up until we see that.

Right. Well, hopefully, I mean, I think we had it in the S&P, we had a bear market for all of -- half hour, one day last week. And hopefully, that's the end of it. But we'll see, of course. But -- okay. That is interesting. And then maybe on the other part of Corporate Platforms that you mentioned as well earlier in Investor Relations and ESG, we'll talk about ESG a little bit more in detail, but still good growth in that?

Yes. And of the -- one thing I'd like to highlight there, because we had 1,000 new companies coming to list on Nasdaq, many of those companies in 2020 and 2021 we give free services to for roughly around 3 years. And so as we look forward, what is the free services in the IR and ESG space. So as we sort of enter into '23, '24, '25, we'll have opportunity to convert those clients into paying clients. And so the business continues to grow in a solid way. And the opportunity, we've got some tailwinds as we look out to the future.

Is that uniform? Is that -- across those new IPOs that come on, they automatically get 3 years of -- or is it client by client?

If there's a bit -- it's client by client in terms of the level of services in the tiers. But for the larger operating companies, it's a bit standard.

But that's good. We have a nice pipeline of that given that they come out in 2021. So...

Yes, 2020, 2021. So starting in '23, yes. It's part of the flywheel effect.

Great. Yes. I was going to say that for the -- and then just -- I mean, while we're on it, so 80% of your cash -- I think you said 80% of your cash equities revenue comes from Nasdaq-listed stocks.

Nasdaq-listed stocks, yes.

Right, right. So that obviously -- and that's because more of the revenue, I think, is earned in the opening and closing and across the...

Exactly and across the [indiscernible]

What you do if you're listing, then you're a predominant trader on that area.

Exactly, exactly.

Okay. So maybe just on -- maybe just going to market services for a little bit, the regulatory landscape in the U.S. equities market structure, I mean, this has been a debate for decades back and forth. But maybe just to talk about what are you currently publicly in favor for regarding any changes to the current market structure? Or do you think everything is working pretty well, and there really doesn't need to be any changes? And then one issue I know is on the payment flow to flow side, which doesn't affect the exchanges that much. But one potential fix for that would be allowing the exchanges to sub-$0.01 price. There's been a talk about that. Are you in favor of that?

Sure. So I guess maybe sort of the overarching view that Nasdaq has is that we have the best markets in the world, and we want to keep them that way. And so as we engage with the SEC and Gary, what we're urging them to do is make incremental changes, so not to use a blunt instrument and potentially sort of, for lack of technical term, mess things up in the market. So we put a white paper out in February of this year. I think the title is optimizing markets for today and tomorrow. So I brought my legal notes here, but what we urged in that white paper was for the SEC to level the playing field. So that may -- could include things like tick size and allowing that on the lit markets. We also asked the SEC to clarify the duty of best execution, so when the brokers are coming into the market where they look for liquidity, so making that clear because it's a very sort of vague statement right now. We asked the SEC to consider making the NBBO more inclusive, so considering how odd lots are treated and then BBO. But overall -- so I think there's a lot of good things that could happen in there. But overall, what we're asking for is don't use harsh or blunt instrument, like removing payment for auto flow, which we think brings liquidity into the market and is completely transparent. And so we're urging them to make changes for the better but not to do it in a sort of...

So you're for inclusion the payment for order flow should not be banned because it creates liquid market, especially for retail. But the online brokers basically say that the execution for retail investors is -- far outpaces the level of payment for order flow that they get. And it does create a great deal of price improvement for retail investors. And other counties around the world don't really have -- most of the countries don't have that infrastructure.

Don't have that concept, yes.

So you're in favor of keeping at least that type of mechanism for retail investors.

Yes. We'd like to focus beyond improving the market to create a level and fair playing field in both lit and dark.

Yes. Great. And I know if you were allowed to sub-$0.01 price, is that also one of your recommendations at Nasdaq to allow exchanges to...

Yes. So that's something we think could help level the playing field.

Yes, yes, because that could bring more flow on to the exchanges, which I know Chair Gensler has wanted more price formation in the lit market as opposed to off markets. And if you were allowed to compete with that order flow...

That could help bring that -- bring things onto the lit exchange. So I think we're at one point last year, where 45% of the trading is happening off exchange, yes.

It's happening off exchange, yes, yes. That makes sense. Okay. Maybe switching over to financials quickly. So expense control has always been a hallmark of Nasdaq for as long as Nasdaq has been around basically, and Adena and you have continued that tradition. How do you feel about generating positive operating leverage? So now you talked about 6% to 9% recurring revenue growth goal and then about a 3% to 6% expense base against that. So that if everything goes to plan or if the volume part of the business is also growing. Maybe actually -- let me get the question. In that environment where you have, let's say, any kind of pullback for a prolonged period of time, like on an annual basis, would that influence your expense growth targets for that particular year so that you could still potentially generate operating leverage in a soft volume year, even if you're growing 6% to 9% on the...

Yes. I mean, I think we have -- coming off of last year, just as a reminder, we had record volumes in market services. And so coming off of a record year, what we said in the first quarter was, look, we have a framework that we operate under solutions segment, 6% to 9%. We're not going -- and we see a lot of growth potential for the solutions segments businesses. We're not going to pull back on our investment there because of short-term volatility in the markets. And so we still want to use our 3% to 6% range to make sure that we're investing for the future. I think if the landscape changes completely, we could change the way we think about it, but that's how we -- in terms of long -- sort of long-term depressed volumes or something, we haven't -- that's not part of how we're thinking about the framework currently, but we would maybe go back to the drawing board.

And you don't -- if you're investing in these businesses and you've got long-term investment plans that take a long time to build, you don't want to -- you can't possibly respond to just market...

To market -- to beta factors. We want to -- we will take everything into consideration, but we want to think about really investing for the long term. And ultimately, if we are successful, and I believe we have every right to be, we'll -- if we use that model, we'll build scale and leverage as we move along.

Well, that's another question. So the 6% to 9%, you've been actually ahead of that, sometimes substantially at any given quarter on an annualized basis. So if -- not to say that you'd be projecting that as your target, so it's not like your target is not like 15%. But if you are generating this recurring revenue growth fairly consistently above that range, would that change your spending plans? Or is that 3% to 6% expense growth still sort of makes sense, and therefore, we could see incremental positive operating leverage?

Yes. I mean, it's really going to come down to the opportunity we see for future growth. And so we have gone above that range. First quarter is just one example, but we did overall growth of 6%. Solutions segment was 13% growth for the quarter. And our expense growth, I think, was 8%. And so we were above the 6%. This year is a little special with inflation and some of the RTO, return to office, costs that are coming back in travel and things. But we -- if we see the opportunity for growth, we could -- but we will align sort of in terms of the top line growth for the solutions segment and the expense growth.

Yes, yes. That makes sense. And are you seeing pretty significant inflation pressures right now? Or...

I think it's pretty similar to probably what most people are seeing, sort of wage inflation pressure, just given how tight the labor market is. We -- modest, I would say, pressure on the supply chain type inflation, just given the nature of our business. But we are closely working with our suppliers and managing through it to make sure that we can contain it to the best extent possible, yes.

Because that's an issue for everybody, really.

Yes.

Maybe shifting gears to the business -- the set of businesses. I mean, so Nasdaq has a long history of not only going into new businesses that are tangent to what you've already done and where you see synergies to your current range of customer bases. But also on the other side, divesting businesses that where you don't see as much potential and you don't want to really invest in any more. ECB as sort of the more -- one of the more recent ones and the strategic pivot as well, which was the shift. As we think about those set of businesses now, are you comfortable with this current set of businesses? Or are there any obvious ones that maybe make less sense or maybe that's not -- I don't know if you can answer that one.

Yes. What I can say is, just as you said, right, when we entered into 2017 with the strategic pivot, we were really thinking about capital allocation and optimizing for where -- what business is aligned the best with our strategy and where we saw the most opportunity for growth, given our skill sets. And so I think we've done a really great job of sort of shifting -- and you mentioned a couple of the businesses we sold, but we sold also the PR and media business, as well as a handful of other smaller businesses that we've either shut down or sold the assets of. And so as we sit here today, we're not complacent, but we think we've got a great portfolio. Our trading business is making up 1/3 of our pie, are really important sort of core foundational business. We talked about the flywheel. They are also incredible cash-generator businesses that allow us to invest, like we've done over the past 5 years, and continues to drive growth. So...

Yes. So there's perception sometimes that you are moving through a more recurring revenue mix, all recurring, but those businesses are fantastic businesses.

They're awesome businesses, yes.

Yes, and they're high margin. You're already leveraging your core competency. So like an example would be when you bought International Securities Exchange, the options business, the complex order options business, and brought that over to the whole mechanism. We could still -- even within the future M&A landscape for Nasdaq, not anytime soon, but just in the distant future, 5 years, we could still see acquisitions of other exchange businesses. If something became available, that would be interesting, where really -- no, the shift really is more we want to really move it more towards recurring?

I think the way we think about it is we're going to be opportunistic about what we think is going to drive the best sort of long-term opportunities for our shareholders, and so I'm not ruling it out. There's nothing that we're considering currently. But I don't think we would close it out, just on the basis of it being an exchange. I think it's really -- where we look at the business mix and what the complements are. So we talked about the flywheel effect going from listings to trading, but sometimes why companies come to Nasdaq to list are because of our deep liquidity pool, because of our index business. And so the pieces have to fit together and complement one another, and so there may be opportunities that enhance that profile for us in the future.

Right, and which makes sense, yes, which is why the ISE think that didn't move well in that particular time. So maybe just getting back to the ESG services that you mentioned. And this is obviously a giant longer-term trend that I know you and Adena feel really strongly about as well. Maybe a couple of different parts of that. So let's start out with what services are you providing for listed companies? I think -- and maybe just talk about the revenue contribution. Last time, I think you updated that was -- I want to say it was like $5 million, I think, of -- that was a little while ago. But maybe just talk first about what services you're offering to companies and what you view as sort of the role of exchanges in helping steer or advance ESG agendas that companies...

Yes, sure. So I guess maybe to start, what we've -- we have a lot of corporate clients, given our existing businesses in IR and governance space, as well as listings. And so we have a very sort of special place in the ecosystem to provide services to the corporate community, which a lot of focus has been on the investment management community in terms of ESG services. And so we've got a great vantage point and some great products that we're already providing to the corporates. And so our goal over time is to expand that suite of products. So the types of products that we're currently providing, obviously, we've got our governance tools, but we are providing other Board support tools, ESG advisory products, as well as environmental reporting tools called OneReport, a company that we purchased not too long ago that has been broadly successful growing off a small base. So we are really engaged with the corporate client base and see the opportunity to expand with those tools, with our carbon removal market and really provide them the services that will help them sort of navigate through what are, I think, some challenging times as companies are sort of digesting as you see guidance and look at guidance coming out of Europe. So our tools are designed to help them through that process.

Can you talk about that a little bit, the guidance opportunity? The SEC, obviously, is making a bigger pressure in the U.S. We're seeing some advancement of reporting agenda for U.S. companies. But you said Europe, of course, is sort of as a leader...

It had, yes.

Yes. The super question maybe then just so, one, how you see that reporting requirement landscape playing out over the next several years and maybe just differentiate what you see in Europe versus the U.S. Does it depend on the administration that we have? Or do you think that's -- in the U.S.? Or do you think that's really a -- it's going to be a really long-term push there?

So Europe is a far -- is quite far ahead of us in terms of the reporting framework and just the level of maturity, even at corporates themselves. And so I think there'll maybe be some convergence, I think there's a desire for it. But we're so -- the U.S. is so far behind, I think, that it's going to take a while for us to catch up. I mean, I do think how -- it's just my personal opinion, how fast things move will depend on the administration. But I think putting that aside, I think it's going to sort of move in the direction of more disclosure and just a better framework for investors to understand what companies are doing in the space, regardless of the administration, but may take longer if there is a different agenda.

So -- I mean, if you have that through any future administration and however that plays out, but you actually have a pretty big opportunity because your listed companies, many of who just came on in the last 2 years, a lot of those companies are relatively young in their reporting life cycle, I think, is a huge runway, I guess, for ESG services to those companies, just in the U.S., even though they're...

Yes, for sure. I think many of these companies don't even know what they need to do next, and that's where we can come in and help them sort of set themselves up for success and then navigate through the changing reporting landscape and figure out their ESG strategy. There's many components to it. So there is -- I think there's a huge opportunity, and we're positioning ourselves to take advantage of that.

Could that also be a big investment area for you internally? Or do you feel like you have enough capacity to service that many...

We have been investing. So ESG is one of our strategic pillars of investment, and so we have been investing and allocating capital to those businesses. They are small rate in comparison but growing sort of exponential numbers, and so we'll continue to invest there and look for inorganic opportunities. There's just not a lot of big ones in the space.

Okay. Yes, yes. I know it could be a big deal. A couple more things in ESG. First, you mentioned carbon removal. Can you just talk about what -- I know you made an acquisition there. Talk about that market, what you may plan to do with that acquisition?

Yes, sure. So we made an acquisition of a company called Puro, which is a carbon removal market and high-quality carbon removal market because I do think the landscape is shifting towards less of an offset model, more of a high-quality removal model. And we are expanding in partnership with the Puro company, expanding that market and really sort of connecting the sellers to the buyers and sort of you can think about it as like an equities market but for carbon removal. It's an interesting space because the -- there's a lot more demand than there is supply. And so part of the putting the puzzle pieces together is finding the supply so that you have liquidity in your market. So our plan is to continue to invest there, and we see that as another service to corporates.

What market do you think could be -- this is just a random question, but it could be bigger -- crypto -- servicing crypto or servicing carbon removal?

Interesting. I don't know. They're both in play in a big way.

Right, right. Maybe just a couple of minutes left, if there's -- I don't see any questions yet. But maybe let's talk about Board diversity. I mean, that's been a big push at Nasdaq. Talk about the rule -- the Board diversity rule that you have and how you're seeing that advance diversification of Boards. How do you see that progressing over time?

Yes. I guess I do want to stress, so we were very engaged with our clients around helping them navigate through some of the required disclosures. So the Board diversity rule is about transparency, and it's about giving transparency to investors, so they can make the best informed decisions. And so we -- some of the requirements are phasing in over time in terms of the disclosures, and so we're working hand in hand with our clients to make sure there's an easy path there. So I think -- it wasn't a universal thank you for rolling it out. But I think, over time, we're having very healthy and positive conversations.

And do you think -- I mean, all of the -- NYSE is also doing this in a different way. But in general, do you -- over the next, say, 5 or 10 years, do you view exchanges, yourself and NYSE, as advancing this cause, so to speak? And do you see real change happening?

I mean, I'm of the view that transparency always sort of leads to change when it's crystal clear sort of how companies are setting themselves up, investors can make -- can sort of frame their decisions in the best way and if the investment community believes in the benefit of diversity that, that will just naturally drive change over time.

Right, right. Okay. I think we are out of time. So please join me in thanking Ann.

Thank you.