Nasdaq Updates Revenue Recognition for AxiomSL
Today, Nasdaq, Inc. (Nasdaq: NDAQ) announced a significant update regarding how it will account for revenues associated with AxiomSL’s on-premises subscription contracts. This change follows Nasdaq's previous mentions in its earnings report and coincides with the recent finalization of U.S. GAAP purchase accounting related to the Adenza acquisition.
Details of the Change
The updated accounting method considers the ongoing mandatory updates necessary for AxiomSL’s regulatory reporting software. These updates are crucial for maintaining the product's value and ensuring client satisfaction. Going forward, Nasdaq will recognize 100% of the revenue from AxiomSL's on-premises subscriptions evenly throughout the contract's duration. In the past, Adenza recorded about 50% of the total revenue upfront, with the remaining amount allocated over the contract period.
Effects on Financial Reporting
This change is expected to have a notable impact on Nasdaq's financial performance starting in the third quarter of 2024. Nasdaq projects a one-time, non-cash GAAP revenue reduction of $32 million for the period from November 1, 2023, to June 30, 2024. This adjustment reflects how the accounting change affects AxiomSL’s subscription revenues since the acquisition was finalized. Specifically, the $32 million reduction is attributed to a $34 million decrease for November and December 2023, slightly offset by a $2 million increase from January to June 2024.
Aligning Revenue with Business Objectives
The new revenue recognition approach for AxiomSL helps Nasdaq better align its revenues with the annualized recurring revenue (ARR) and the cash economics of on-premises subscription contracts. Importantly, this change does not impact AxiomSL's professional services revenues or cloud-based license revenues, which are already recorded on a ratable basis over the contract’s term. Furthermore, AxiomSL's historical ARR and cash flows will remain unchanged.
Projections and Growth Outlook for 2024
Nasdaq continues to maintain a positive medium-term growth outlook across all its divisions, including AxiomSL and Calypso. The company reaffirms its 2024 guidance provided during the second quarter of 2024, expecting growth in its Regulatory Technology sub-division within its medium-term revenue projections for the year. More specific details will be shared during the accompanying presentation and a scheduled conference call.
Details of the Upcoming Conference Call
As previously mentioned, Nasdaq will conduct a conference call today at 8:00 AM ET to provide more insights into this announcement. Participants can join the call through the Nasdaq Investor Relations platform.
About Nasdaq
Nasdaq (Nasdaq: NDAQ) is a leading global technology company that serves corporate clients, investment managers, banks, brokers, and exchange operators. The company is dedicated to enhancing liquidity, transparency, and integrity in the global financial landscape by offering a wide range of platforms and services. Nasdaq is committed to delivering high-quality data, analytics, software, and client services designed to help clients achieve their business goals. To learn more about Nasdaq's offerings, technology solutions, and career opportunities, 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.
