Nasdaq Introduces New Revenue Recognition for AxiomSL

Nasdaq Adjusts Revenue Recognition for AxiomSL

Today, Nasdaq, Inc. (Nasdaq: NDAQ) has announced an important update regarding the accounting treatment of revenues tied to AxiomSL on-premises subscription contracts. This change follows Nasdaq's earlier references in its earnings report and aligns with the recent finalization of U.S. GAAP purchase accounting concerning the Adenza acquisition.

Understanding the Change

The revised accounting approach takes into consideration the continuous mandatory updates required for AxiomSL’s regulatory reporting software. These updates are vital for maintaining the product’s value and ensuring client satisfaction. Moving forward, Nasdaq will recognize 100% of the revenue from AxiomSL's on-premises subscriptions evenly over the life of the contract. Previously, Adenza recorded around 50% of the total revenue upfront, with the remainder distributed over the contract term.

Impact on Financial Reporting

Starting from the third quarter of 2024, this change is expected to influence Nasdaq's financial performance significantly. Nasdaq anticipates a one-time, non-cash GAAP revenue reduction of $32 million for the period commencing on November 1, 2023, through June 30, 2024. This adjustment reflects the accounting change's impact on AxiomSL’s subscription revenues since the acquisition closure. Specifically, this $32 million reduction arises from a $34 million decrease linked to November and December 2023, offset slightly by a $2 million increase from January to June 2024.

Aligning Revenue with Business Needs

This new revenue recognition method of AxiomSL aids Nasdaq in better aligning its revenues with the annualized recurring revenue (ARR) and the cash economics associated with on-premises subscription contracts. It's noteworthy that this change does not affect AxiomSL's professional services revenues or cloud-based license revenues, which are already recorded on a ratable basis over the contract’s duration. Additionally, AxiomSL's historical ARR and cash flows remain unchanged.

2024 Projections and Growth Insights

Nasdaq maintains a steady medium-term growth outlook across all divisions, including AxiomSL and Calypso. The company reaffirms its 2024 guidance provided during the second quarter of 2024, with expectations for its Regulatory Technology sub-division to experience growth within its medium-term revenue projections for the year. Specific details will be discussed in the accompanying presentation and during a scheduled conference call.

Upcoming Conference Call Details

As communicated earlier, Nasdaq will hold a conference call today at 8:00 AM ET to delve deeper into this announcement. Participants can access the conference through the Nasdaq Investor Relations platform.

About Nasdaq

Nasdaq (Nasdaq: NDAQ) stands as a premier global technology entity that caters to corporate clients, investment managers, banks, brokers, and exchange operators. The company aims to enhance fluidity, transparency, and integrity within the global financial landscape by providing an array of platforms and services. Nasdaq is committed to offering top-notch data, analytics, software, and client services tailored to help clients achieve their business ambitions. To explore more about Nasdaq's offerings, technology solutions, and career prospects, visit their website.

Frequently Asked Questions

What is the main focus of Nasdaq's recent announcement?

Nasdaq is adjusting its revenue recognition practices for AxiomSL subscription contracts, effective from the third quarter of 2024.

How does this change impact AxiomSL's revenue recognition?

The new practice allows Nasdaq to recognize all AxiomSL on-premises subscription revenue evenly over the contract term, enhancing financial reporting.

Will this change affect AxiomSL's historical financials?

No, the historical ARR and cash flows of AxiomSL will remain unaffected by this change.

When will Nasdaq discuss further details of this change?

A conference call is scheduled for today at 8:00 AM ET to discuss the changes in detail.

Where can investors find more information about Nasdaq?

Investors can find more information about Nasdaq on their Investor Relations website.

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