Craig Siegenthaler: Good morning, everyone. So I had a question on the pretax charges from the divisional alignment. I was wondering if you could provide more detail behind the employee-related costs. And what does this really mean in sort of simple terms? Is it layoffs, new hires? And where are you increasing headcount and where are you potentially reducing headcount?
Ann Dennison: Okay. Thanks, Craig. I can get started on that question. So if we think about just overall the realignment program that we’ve launched, the objective of the program is really tied very, very closely to our restructure of the — and realignment of the divisions themselves. So when you think about the employee costs that are embedded in that range of 115 to 145, they’re really complementing our divisional realignment and not broad-based. We’re not looking at anything sort of from a broad-based company perspective, but really the effect of looking at location and functional strategy within the alignment of the divisions. And then also migrating some of our tech to optimize the power of the combined divisions. And we think about those costs coming in over the next two years and with an expected return on those costs of an annualized run rate savings and revenue synergies of about $30 million a year sort of fully baked in by 2025.
And I’d say that $30 million estimate, right now, the majority of that is on the expense side.
Operator: And I show our next question comes from the line of Dan Fannon from Jefferies. Please go ahead.
DanFannon: Thanks, good morning. I wanted to follow up on the Anti-Fin Crime. The 14% growth ex the deferred revenue this quarter, trying to bridge that to the 3 to 5-year outlook of 18% to 23%, and you’ve clearly talked about a lot of momentum. But is in the — but the long sales cycles, do you need — should we think about 2023 as being within this, the higher end? Or is it going to ramp as we kind of get and maybe exiting that — exiting ’23 or beyond to get to those higher numbers?
Adena Friedman: Sure. Well, I think that as we look at our kind of our medium- to long-term outlook, that 18% to 23%, we feel is well supported by the sales opportunities, the pipeline and the overall continued investment in the actual products so that we can continue to expand our capabilities. I thought I’d give you just a little bit more detail on how we look at the dynamics. And I mentioned — as I mentioned before, we have our FRAML solutions. And that obviously, that’s our Verafin asset, and that was delivering more than 20% growth in the quarter and continues to have really strong growth potential even as it continues to scale. And so I think there, Dan, we definitely think that the Tier 1, Tier 2 — we’re not dependent on Tier 2 and Tier 1 banks to support that growth rate in the short term.
But as we continue — as we move upmarket and we are able to attract this Tier 1 and Tier 2 banks, the ticket sizes are much, much higher. So over the longer term, showing momentum across that will be important to continue to maintain the strong growth trends that we’re showing in that business. The other two parts of the business, trade surveillance, that continues to have kind of high single-digit, low double-digit growth, and it has for a long time. That’s providing surveillance solutions to trading firms. And there, we’re continuing to drive that growth by expanding the types of modules that we offer, like our crypto modules as well as more — bringing more asset classes onto the platform and really continue to globalize the clientele there.
We have gotten to the point where we become an enterprise provider of surveillance across large banks, and that continues to be a good growth opportunity to support that kind of high single digit, low double digits. The one area that is actually has a low — I would say flat to low growth profile is our market surveillance business where it’s the smallest part of the division. But it’s a harder one to grow a lot because the overall base of client opportunities is smaller. That’s where we provide surveillance to markets and regulators. And there, that business was largely flat for the year and continues to have a low growth profile. So that’s — I think certainly in 2022, that has created a little bit of kind of a lower growth view. And as we go into ’23 and ’25 or ’23 to ’24, ’25, ’26, we hope to find new ways to catalyze some growth there, but we will expect that to be a low grower in the years to come.
So hopefully, that just gives you a little more context.
Operator: And I show our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.
Brian Bedell: Good morning. Thanks for taking my question. Maybe just one confirmation just on the divisional alignment program, the 115 to 145. I just want to make sure that’s those expenses are not included in the non-GAAP guidance. So just a clarification on that. And then more broadly, just in terms of the Solutions growth for this year, I realize 7% to 10% remains your longer-term target. But given the headwinds that you’re describing this year from the elongated sales cycles and of course, the pressure on index licensing, should we be thinking of a near-term 2023 as being sort of lower than that? And then the initiatives that you’re investing in would potentially then raise that in ’24? So kind of a slowdown and then a reramp of that Solutions revenue.
Ann Dennison: Sure, Brian. So on the first part of your question, the divisional alignment program, the cost associated with those will be booked on the restructuring line, and they will not be included as part of — they are not part of our non-GAAP expense guidance that we released for 2023, yes.
Adena Friedman: Yes. And then with regard to the overall outlook for the business, I think that — I would say it this way, I think, Brian, that in general, we feel really good about how we’re delivering on the growth of our Solutions businesses across, as we mentioned, AFC as well as the investment analytics, so insights and workflows for the corporates and I know market tech business. And I think we continue to see really good client demand. There are some elongated sales cycles and that could bring the growth down a little bit for the year. But I think the one area that we do have some dependence on the market backdrop is in our listings business and our Index business. And there, we are hopeful that we’ll see some improvement across index values, market values, which will then, of course, support bringing more companies to market, and that will help us manage through the year and be consistent with how we are looking at our targets.
But those areas could create more of a challenge if we don’t see an improvement in the overall market environment for this year. I think that’s why we like to keep those targets as kind of medium to long term as we look at an average over multiple years just because of the fact that there are years where you have a tougher market backdrop. I would point out, though, that even with the tough market backdrop that we had in 2022, we were able to deliver 10% organic growth across our Solutions businesses. And we had 8% improvement — increase in our ARR and 13% increase in our SaaS. So even with a really challenging market environment from last year, I think we were able to show a consistent story across Nasdaq.
Operator: And I show our next question comes from the line of Gautam Sawant from Credit Suisse. Please go ahead.
