Nasdaq, Inc. (Nasdaq:NDAQ) today reported record results for the
first quarter of 2016. First quarter net revenues were $534
million, up 5% from $507 million in the prior year period, driven
by a $29 million positive impact from operations, partially offset
by a $2 million negative impact from changes in foreign exchange
rates. On an organic basis, excluding the impact of changes
in foreign exchange rates and acquisitions, total first quarter net
revenues were up 4% from the prior year period.
“Our relentless focus on applied technology, innovation, and
resiliency continues to strengthen our competitive position,
deliver value to our clients, and produce record results for
shareholders,” said Bob Greifeld, CEO,
Nasdaq. “In addition, we expect our recently
announced acquisitions, which are strategically aligned with our
vision and business direction, to significantly enhance the
effectiveness of our value proposition to serve our corporate and
capital markets clients, while creating significant value for our
shareholders.”
Mr. Greifeld continued, “We remained encouraged
by the progress within key new growth initiatives, including our IR
Insight platform, where we have migrated 1,200 users in the first
three months since launch, in serving the private market through
The NASDAQ Private Market, LLC, which served 122 companies in the
first quarter of 2016, more than twice the number of the prior year
period, and our U.S. commodities platform which saw open interest
grow to over 800 thousand contracts last week. These
initiatives are a key demonstration of Nasdaq investing in our
future.”
On a non-GAAP basis, first quarter 2016 operating expenses were
$280 million, up 3% as compared to the prior year quarter, due to
higher organic spend and the acquisitions of Dorsey, Wright &
Associates, LLC, or DWA (January 2015), Chi-X Canada ATS Limited
(February 2016), and Marketwired (February 2016), partially offset
by the favorable impact of changes in foreign exchange rates.
On a GAAP basis, operating expenses were $315 million in the first
quarter of 2016, compared to $480 million in the prior year
quarter, which included restructuring charges of $150 million.2
1 Represents revenues less transaction-based expenses.
2 Please refer to our reconciliation of GAAP to non-GAAP
net income, diluted earnings per share, operating income and
operating expenses included in the attached schedules.
“The first quarter of 2016 was very strong in terms of cash flow
generation, and we continued to apply our return on invested
capital based discipline to direct capital deployment, while also
furthering our strong capital return track record with our recent
announcement of a 28% increase in the quarterly dividend,” said
Ron Hassen, Interim CFO, Nasdaq.
Mr. Hassen continued, “The 14% increase in our non-GAAP earnings
per share year-over-year, combined with our common stock’s dividend
yield, serves as evidence of our total shareholder return
potential.”
On a non-GAAP basis, net income attributable to Nasdaq for the
first quarter of 2016 was $153 million, or $0.91 per diluted share,
compared with $138 million or $0.80 in the first quarter of 2015,
an increase of $15 million, or $0.11 per diluted share. On a
GAAP basis, net income attributable to Nasdaq for the first quarter
of 2016 was $132 million, or $0.78 per diluted share, compared with
$9 million, or $0.05 per diluted share, in the prior year
quarter.
Please refer to our reconciliation of GAAP to non-GAAP net
income, diluted earnings per share, operating income and operating
expenses included in the attached schedules.
The company repurchased 490,032 shares for $29 million in the
first quarter of 2016 at an average price of $59.37. At March
31, 2016, there is $500 million remaining under the board
authorized share repurchase program, which includes a $370 million
increase in authorized value.
At March 31, 2016, the company had cash and cash equivalents of
$331 million and total debt of $2,565 million, resulting in net
debt of $2,234 million. This compares to net debt of $2,063
million at December 31, 2015.
BUSINESS HIGHLIGHTS
Market Services (38% of total net
revenues) - Net revenues were $201 million in the first
quarter of 2016, up $13 million when compared to $188 million in
the first quarter of 2015. The $13 million year-over-year
increase reflects a $12 million organic increase and $2 million
increase from the Chi-X Canada acquisition, partially offset by a
$1 million decrease due to the negative impact of changes in
foreign exchange rates.
Equity Derivatives (9% of total net revenues) –
Net equity derivative trading and clearing revenues were $48
million in the first quarter of 2016, up $2 million compared to the
first quarter of 2015. The increase in equity derivatives
revenues was primarily driven by higher U.S. industry trading
volumes and higher U.S. average net capture, partially offset by
lower U.S. market share.
Cash Equities (13% of total net revenues) – Net
cash equity trading revenues were $70 million in the first quarter
of 2016, up $11 million compared to the first quarter of
2015. The increase in cash equity revenues resulted primarily
from higher industry trading volumes as well as higher average net
capture, partially offset by lower market share and the negative
impact of changes in foreign exchange rates. In addition, the
increase reflects the inclusion of revenues associated with our
acquisition of Chi-X Canada.
Fixed Income, Currency and Commodities (4% of total net
revenues) – Net FICC trading and clearing revenues were
$20 million in the first quarter of 2016, down $4 million from the
first quarter of 2015, due to the negative impact of NFX trading
incentives and a decline in U.S. fixed income revenues, partially
offset by higher European fixed income and commodities
revenues.
Access and Broker Services (12% of total net revenues)
– Access and broker services revenues were $63 million in
the first quarter of 2016, up $4 million compared to the first
quarter of 2015, driven by an increase in customer demand for
network connectivity.
Information Services (25% of total net revenues)
– Revenues were $133 million in the first quarter of 2016,
up $8 million from the first quarter of 2015. The $8 million
year-over-year increase reflects a $5 million organic increase
primarily from index data, proprietary data, and growth in DWA
subsequent to the January 2015 close, and a $4 million increase
from the acquisitions of DWA, which included one additional month
in first quarter of 2016, and Chi-X Canada. In addition, the
increase was partially offset by a $1 million decrease due to the
negative impact of changes in foreign exchange rates.
Data Products (20% of total net revenues) –
Data products revenues were $105 million in the first quarter of
2016, up $5 million compared to the first quarter of 2015, as
increased revenues from index and proprietary data products as well
as the inclusion of revenues associated with the DWA and Chi-X
Canada acquisitions were partially offset by the negative impact of
changes in foreign exchange rates.
Index Licensing and Services (5% of total net revenues)
– Index licensing and services revenues were $28 million
in the first quarter of 2016, up $3 million from the first quarter
of 2015. The revenue growth was primarily driven by organic
growth in DWA.
Technology Solutions (25% of total net revenues)
– Revenues were $134 million in the first quarter of 2016,
up $4 million from the first quarter of 2015. The $4 million
year-over-year increase primarily reflects the inclusion of revenue
from the acquisition of Marketwired and organic growth in
surveillance products.
Corporate Solutions (14% of total net revenues)
– Corporate solutions revenues were $77 million in the
first quarter of 2016, up $2 million from the first quarter of
2015. The corporate solutions revenue increase reflects a
contribution from the Marketwired acquisition and growth in
Directors Desk, partially offset by the negative impact of changes
in foreign exchange rates and lower multimedia related
revenues. Directors Desk delivered record revenue.
Market Technology (11% of total net revenues) –
Market technology revenues were $57 million in the first quarter of
2016, up $2 million from the first quarter of 2015. The
increase was driven primarily by organic growth in surveillance
products. New order intake was $22 million for the first
quarter of 2016, and the total order value at March 31, 2016 was
$783 million, up 8% from the prior year period and near the
all-time record of $788 million at December 31, 2015.
Listing Services (12% of total net
revenues) – Revenues were $66 million in the first
quarter of 2016, up $2 million compared to the first quarter of
2015. The $2 million year-over-year increase reflects an
increase in the number of U.S. and European listed companies.
UPDATING 2016 NON-GAAP EXPENSE GUIDANCE – The
company has revised 2016 non-GAAP operating expense guidance to
$1,180-$1,230 million from $1,110-$1,160M to reflect the impact of
the acquisitions of Chi-X Canada and Marketwired, which closed
during the first quarter of 2016, as well as the pending
acquisition of Boardvantage, which is expected to close in the
second quarter of 2016.
CORPORATE HIGHLIGHTS
- Nasdaq Futures Market shows consistent
growth. Nasdaq Futures, or NFX, a U.S.-based futures
and options market for key energy benchmarks, has seen consistent
growth and marketplace traction since launch in late July
2015. NFX has gained support from multiple sectors of the
energy trading community, including 17 prominent global Futures
Commission Merchants, with open interest rising to over 800,000
contracts last week. Over ten million contracts have traded
since launch and NFX has registered greater than 20% daily market
share in natural gas options on several occasions.
- Nasdaq launches a new innovative Investor Relations
platform known as Nasdaq IR Insight. Nasdaq
officially launched its next generation Investor Relations platform
known as Nasdaq IR Insight, a platform specifically designed for
financial executives, especially Investor Relations officers.
Nasdaq IR Insight was designed with extensive client collaboration
to capture the Investor Relations work stream, improve data
intelligence, and enhance decision making through a single
product.
- The Nasdaq Stock Market (Nasdaq) Led U.S. Exchanges for
IPOs and ETPs listings in 1Q16. Nasdaq welcomed 47
new listings in the first quarter of 2016, including 10 IPOs.
100% of all U.S. IPOs listed with Nasdaq in the first quarter of
2016. Among U.S. ETPs, Nasdaq led U.S. listing exchanges with
42% of new ETP listings and switches in the first quarter of
2016.
- First Trust AlphaDEX smart beta ETFs switch index
provider and listing venue to Nasdaq. First Trust
announced the switch of the index provider and listing venue for 12
smart beta AlphaDEX ETFs effective Friday, April 8, 2016, which
contain approximately $6 billion in assets under management.
Last year, Nasdaq partnered with First Trust to switch 17 First
Trust global, regional and country AlphaDEX ETF benchmarks to track
Nasdaq branded AlphaDEX indexes.
- Nasdaq and Digital Reasoning establish exclusive
alliance to deliver holistic next generation surveillance and
compliance technology. Nasdaq and Digital Reasoning,
a leader in cognitive computing, announced a strategic alliance to
offer surveillance technology to global capital markets
participants, including the buy-side, brokers, regulators, and
exchanges. The combination of Digital Reasoning’s eComms
compliance and Nasdaq’s SMARTS surveillance solutions will offer a
unified interface to take a holistic approach to surveillance and
compliance across structured and unstructured data.
- Nasdaq completes acquisitions of Chi-X Canada and
Marketwired. On February 1st, 2016, Nasdaq completed
the acquisition of Chi-X Canada, a leading alternative market in
Canada. The deal expands Nasdaq’s equities trading business
beyond the Nordics and the U.S., and enhances the trading
experience for customers by promoting greater uniformity in
technology and functionality across these trading venues. On
February 25th, 2016, Nasdaq announced the completion of its
acquisition of Marketwired, a leading global provider of news
distribution services and analytics for communications
professionals. Nasdaq customers will benefit from an enhanced
offering including Marketwired’s leading social media targeting
tools and analytics.
- Nasdaq announces agreements to acquire International
Securities Exchange and Boardvantage. In March 2016,
Nasdaq announced it will acquire International Securities Exchange,
or ISE, an operator of three electronic U.S. options exchanges,
from Deutsche Börse Group. Nasdaq will build on its robust
offerings by providing greater breadth and depth of products and
services to participants, and the acquisition is expected to allow
Nasdaq to offer efficiencies for clients. In March 2016,
Nasdaq announced that it will acquire Boardvantage, Inc., a leading
board portal solution provider which also specializes in leadership
collaboration and meeting productivity.
ABOUT NASDAQ
Nasdaq (Nasdaq:NDAQ) is a leading provider of trading, clearing,
exchange technology, listing, information and public company
services across six continents. Through its diverse portfolio of
solutions, Nasdaq enables customers to plan, optimize and execute
their business vision with confidence, using proven technologies
that provide transparency and insight for navigating today's global
capital markets. As the creator of the world's first electronic
stock market, its technology powers more than 70 marketplaces in 50
countries, and 1 in 10 of the world's securities transactions.
Nasdaq is home to nearly 3,700 listed companies with a market value
of $9.3 trillion and over 17,000 corporate clients. To learn more,
visit: nasdaq.com/ambition or business.nasdaq.com.
NON-GAAP INFORMATION
In addition to disclosing results determined in accordance with
GAAP, Nasdaq also discloses certain non-GAAP results of operations,
including, but not limited to, net income attributable to Nasdaq,
diluted earnings per share, operating income, and operating
expenses, that include certain adjustments or exclude certain
charges and gains that are described in the reconciliation table of
GAAP to non-GAAP information provided at the end of this
release. Management believes that this non-GAAP information
provides investors with additional information to assess Nasdaq's
operating performance and assists investors in comparing our
operating performance to prior periods. Management uses this
non-GAAP information, along with GAAP information, in evaluating
its historical operating performance.
The non-GAAP information is not prepared in accordance with GAAP
and may not be comparable to non-GAAP information used by other
companies. The non-GAAP information should not be viewed as a
substitute for, or superior to, other data prepared in accordance
with GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Information set forth in this communication contains
forward-looking statements that involve a number of risks and
uncertainties. Nasdaq cautions readers that any
forward-looking information is not a guarantee of future
performance and that actual results could differ materially from
those contained in the forward-looking information. Such
forward-looking statements include, but are not limited to (i)
projections relating to our future financial results, growth,
trading volumes, products and services, order backlog, taxes and
achievement of synergy targets, (ii) statements about the closing
or implementation dates and benefits of certain acquisitions and
other strategic, restructuring, technology, de-leveraging and
capital return initiatives, (iii) statements about our integrations
of our recent acquisitions, (iv) statements relating to any
litigation or regulatory or government investigation or action to
which we are or could become a party, and (v) other statements that
are not historical facts. Forward-looking statements involve
a number of risks, uncertainties or other factors beyond Nasdaq’s
control. These factors include, but are not limited to,
Nasdaq’s ability to implement its strategic initiatives, economic,
political and market conditions and fluctuations, government and
industry regulation, interest rate risk, U.S. and global
competition, and other factors detailed in Nasdaq’s filings with
the U.S. Securities and Exchange Commission, including its annual
reports on Form 10-K and quarterly reports on Form 10-Q which are
available on Nasdaq’s investor relations website at
http://ir.nasdaq.com and the SEC’s website at www.sec.gov.
Nasdaq undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise.
NDAQF
Nasdaq,
Inc. |
Condensed Consolidated
Statements of Income |
(in millions, except
per share amounts) |
(unaudited) |
|
|
Three Months
Ended |
|
March 31, |
|
December 31, |
|
March 31, |
|
2016 |
|
2015 |
|
2015 |
Revenues: |
|
|
|
|
|
Market
Services |
$ |
572 |
|
|
$ |
524 |
|
|
$ |
539 |
|
Transaction-based
expenses: |
|
|
|
|
|
Transaction
rebates |
|
(283 |
) |
|
|
(249 |
) |
|
|
(261 |
) |
Brokerage, clearance
and exchange fees |
|
(88 |
) |
|
|
(80 |
) |
|
|
(90 |
) |
Total Market Services
revenues less transaction-based expenses |
|
201 |
|
|
|
195 |
|
|
|
188 |
|
|
|
|
|
|
|
Listing
Services |
|
66 |
|
|
|
68 |
|
|
|
64 |
|
Information
Services |
|
133 |
|
|
|
127 |
|
|
|
125 |
|
Technology
Solutions |
|
134 |
|
|
|
146 |
|
|
|
130 |
|
|
|
|
|
|
|
Revenues less
transaction-based expenses |
|
534 |
|
|
|
536 |
|
|
|
507 |
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
Compensation and
benefits |
|
152 |
|
|
|
149 |
|
|
|
147 |
|
Marketing and
advertising |
|
6 |
|
|
|
9 |
|
|
|
7 |
|
Depreciation and
amortization |
|
38 |
|
|
|
35 |
|
|
|
34 |
|
Professional and
contract services |
|
35 |
|
|
|
39 |
|
|
|
33 |
|
Computer operations and
data communications |
|
25 |
|
|
|
26 |
|
|
|
35 |
|
Occupancy |
|
20 |
|
|
|
22 |
|
|
|
21 |
|
Regulatory |
|
7 |
|
|
|
6 |
|
|
|
7 |
|
Merger and strategic
initiatives |
|
9 |
|
|
|
4 |
|
|
|
- |
|
General, administrative
and other |
|
14 |
|
|
|
(12 |
) |
|
|
46 |
|
Restructuring
charges |
|
9 |
|
|
|
12 |
|
|
|
150 |
|
Total operating
expenses |
|
315 |
|
|
|
290 |
|
|
|
480 |
|
|
|
|
|
|
|
Operating
income |
|
219 |
|
|
|
246 |
|
|
|
27 |
|
|
|
|
|
|
|
Interest
income |
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Interest
expense |
|
(28 |
) |
|
|
(28 |
) |
|
|
(28 |
) |
Other investment
income |
|
1 |
|
|
|
- |
|
|
|
- |
|
Net income from
unconsolidated investees |
|
2 |
|
|
|
- |
|
|
|
14 |
|
|
|
|
|
|
|
Income before
income taxes |
|
195 |
|
|
|
219 |
|
|
|
14 |
|
Income tax
provision |
|
63 |
|
|
|
71 |
|
|
|
5 |
|
|
|
|
|
|
|
Net income
attributable to Nasdaq |
$ |
132 |
|
|
$ |
148 |
|
|
$ |
9 |
|
|
|
|
|
|
|
Per share
information: |
|
|
|
|
|
Basic earnings per
share |
$ |
0.80 |
|
|
$ |
0.90 |
|
|
$ |
0.05 |
|
Diluted earnings per
share |
$ |
0.78 |
|
|
$ |
0.88 |
|
|
$ |
0.05 |
|
Cash dividends declared
per common share |
$ |
0.57 |
|
|
$ |
0.25 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
Weighted-average common shares
outstanding for earnings per
share: |
|
|
|
|
|
Basic |
|
164.3 |
|
|
|
164.6 |
|
|
|
169.0 |
|
Diluted |
|
168.4 |
|
|
|
168.9 |
|
|
|
172.7 |
|
|
Nasdaq, Inc. |
Revenue Detail |
(in millions) |
(unaudited) |
|
|
Three
Months Ended |
|
March 31, |
|
December 31, |
|
March 31, |
|
2016 |
|
2015 |
|
2015 |
MARKET SERVICES
REVENUES |
|
|
|
|
|
Equity Derivative Trading
and Clearing Revenues |
$ |
101 |
|
|
$ |
109 |
|
|
$ |
116 |
|
Transaction-based expenses: |
|
|
|
|
|
Transaction rebates |
|
(48 |
) |
|
|
(56 |
) |
|
|
(64 |
) |
Brokerage, clearance and exchange
fees |
|
(5 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
Total net equity derivative
trading and clearing revenues |
|
48 |
|
|
|
48 |
|
|
|
46 |
|
|
|
|
|
|
|
Cash Equity Trading
Revenues |
|
382 |
|
|
|
331 |
|
|
|
339 |
|
Transaction-based
expenses: |
|
|
|
|
|
Transaction rebates |
|
(230 |
) |
|
|
(191 |
) |
|
|
(197 |
) |
Brokerage, clearance and exchange
fees |
|
(82 |
) |
|
|
(74 |
) |
|
|
(83 |
) |
Total net cash equity
trading revenues |
|
70 |
|
|
|
66 |
|
|
|
59 |
|
|
|
|
|
|
|
Fixed Income, Currency and
Commodities Trading and Clearing
Revenues |
|
26 |
|
|
|
23 |
|
|
|
25 |
|
Transaction-based expenses: |
|
|
|
|
|
Transaction rebates |
|
(5 |
) |
|
|
(2 |
) |
|
|
- |
|
Brokerage, clearance and exchange
fees |
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Total net fixed income,
currency and commodities trading and clearing
revenues |
|
20 |
|
|
|
20 |
|
|
|
24 |
|
|
|
|
|
|
|
Access and Broker Services
Revenues |
|
63 |
|
|
|
61 |
|
|
|
59 |
|
|
|
|
|
|
|
Total Net Market Services
revenues |
|
201 |
|
|
|
195 |
|
|
|
188 |
|
|
|
|
|
|
|
LISTING
SERVICES REVENUES |
|
66 |
|
|
|
68 |
|
|
|
64 |
|
|
|
|
|
|
|
INFORMATION
SERVICES REVENUES |
|
|
|
|
|
Data Products
revenues |
|
105 |
|
|
|
98 |
|
|
|
100 |
|
Index Licensing and
Services revenues |
|
28 |
|
|
|
29 |
|
|
|
25 |
|
|
|
|
|
|
|
Total Information Services
revenues |
|
133 |
|
|
|
127 |
|
|
|
125 |
|
|
|
|
|
|
|
TECHNOLOGY
SOLUTIONS REVENUES |
|
|
|
|
|
Corporate Solutions
revenues |
|
77 |
|
|
|
75 |
|
|
|
75 |
|
Market Technology
revenues |
|
57 |
|
|
|
71 |
|
|
|
55 |
|
|
|
|
|
|
|
Total Technology Solutions
revenues |
|
134 |
|
|
|
146 |
|
|
|
130 |
|
|
|
|
|
|
|
Revenues less
transaction-based expenses |
$ |
534 |
|
|
$ |
536 |
|
|
$ |
507 |
|
|
Nasdaq, Inc. |
Condensed Consolidated Balance
Sheets |
(in millions) |
|
|
|
March 31, |
|
December 31, |
|
|
2016 |
|
2015 |
Assets |
|
(unaudited) |
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
331 |
|
|
$ |
301 |
|
Restricted cash |
|
|
21 |
|
|
|
56 |
|
Financial investments, at fair
value |
|
|
259 |
|
|
|
201 |
|
Receivables, net |
|
|
333 |
|
|
|
316 |
|
Default funds and margin
deposits |
|
|
3,614 |
|
|
|
2,228 |
|
Other current assets |
|
|
164 |
|
|
|
158 |
|
Total current
assets |
|
|
4,722 |
|
|
|
3,260 |
|
Property and equipment,
net |
|
|
326 |
|
|
|
323 |
|
Deferred tax
assets |
|
|
604 |
|
|
|
643 |
|
Goodwill |
|
|
5,663 |
|
|
|
5,395 |
|
Intangible assets,
net |
|
|
2,085 |
|
|
|
1,959 |
|
Other non-current
assets |
|
|
317 |
|
|
|
281 |
|
Total assets |
|
$ |
13,717 |
|
|
$ |
11,861 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
175 |
|
|
$ |
158 |
|
Section 31 fees payable to SEC |
|
|
80 |
|
|
|
98 |
|
Accrued personnel costs |
|
|
87 |
|
|
|
171 |
|
Deferred revenue |
|
|
304 |
|
|
|
127 |
|
Other current liabilities |
|
|
169 |
|
|
|
138 |
|
Default funds and margin
deposits |
|
|
3,614 |
|
|
|
2,228 |
|
Total current
liabilities |
|
|
4,429 |
|
|
|
2,920 |
|
Debt obligations |
|
|
2,565 |
|
|
|
2,364 |
|
Deferred tax
liabilities |
|
|
678 |
|
|
|
626 |
|
Non-current deferred
revenue |
|
|
188 |
|
|
|
200 |
|
Other non-current
liabilities |
|
|
160 |
|
|
|
142 |
|
Total liabilities |
|
|
8,020 |
|
|
|
6,252 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
Equity |
|
|
|
|
Nasdaq stockholders'
equity: |
|
|
|
|
Common stock |
|
|
2 |
|
|
|
2 |
|
Additional paid-in capital |
|
|
3,001 |
|
|
|
3,011 |
|
Common stock in treasury, at
cost |
|
|
(145 |
) |
|
|
(111 |
) |
Accumulated other comprehensive
loss |
|
|
(770 |
) |
|
|
(864 |
) |
Retained earnings |
|
|
3,609 |
|
|
|
3,571 |
|
Total equity |
|
|
5,697 |
|
|
|
5,609 |
|
Total liabilities and
equity |
|
$ |
13,717 |
|
|
$ |
11,861 |
|
|
Nasdaq, Inc. |
Reconciliation of GAAP Net Income, Diluted
Earnings Per Share, Operating Income
and |
Operating Expenses to Non-GAAP Net Income,
Diluted Earnings Per Share, Operating Income, and Operating
Expenses |
(in millions, except per share
amounts) |
(unaudited) |
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2016 |
|
2015 |
|
2015 |
|
|
|
|
|
|
|
GAAP net income
attributable to Nasdaq |
|
$ |
132 |
|
|
$ |
148 |
|
|
$ |
9 |
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of acquired
intangible assets (1) |
|
|
17 |
|
|
|
15 |
|
|
|
15 |
|
Restructuring charges (2) |
|
|
9 |
|
|
|
12 |
|
|
|
150 |
|
Merger and strategic initiatives
(3) |
|
|
9 |
|
|
|
4 |
|
|
|
- |
|
Loss reserve and insurance recovery
(4) |
|
|
- |
|
|
|
(26 |
) |
|
|
31 |
|
Income from OCC equity investment
(5) |
|
|
- |
|
|
|
- |
|
|
|
(13 |
) |
Reversal of value added tax
refund (6) |
|
|
- |
|
|
|
- |
|
|
|
12 |
|
Total non-GAAP adjustments |
|
|
35 |
|
|
|
5 |
|
|
|
195 |
|
|
|
|
|
|
|
|
Non-GAAP adjustment to the income
tax provision |
|
|
(14 |
) |
|
|
(3 |
) |
|
|
(66 |
) |
Total non-GAAP adjustments, net of
tax |
|
|
21 |
|
|
|
2 |
|
|
|
129 |
|
|
|
|
|
|
|
|
Non-GAAP net
income attributable to Nasdaq |
|
$ |
153 |
|
|
$ |
150 |
|
|
$ |
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted
earnings per share |
|
$ |
0.78 |
|
|
$ |
0.88 |
|
|
$ |
0.05 |
|
Total adjustments from non-GAAP net
income above |
|
|
0.13 |
|
|
|
0.01 |
|
|
|
0.75 |
|
|
|
|
|
|
|
|
Non-GAAP
diluted earnings per share |
|
$ |
0.91 |
|
|
$ |
0.89 |
|
|
$ |
0.80 |
|
|
|
(1) Amortization expense of acquired intangible assets results
primarily from business combinations. These non-cash expenses are
fixed and amortized over the estimated useful life of the
intangible asset acquired. These expenses generally cannot be
changed or influenced by management after the acquisition.
Management does not consider these expenses for the purpose of
evaluating the performance of the business, its managers or when
making decisions to allocate resources. Therefore, such expenses
are shown as a non-GAAP adjustment. |
|
(2) During the first quarter of 2015 as part of our 2015
restructuring plan, we performed a comprehensive review of our
processes, businesses and systems in a company-wide effort to
improve performance, cut costs, and reduce spending. In the first
quarter of 2015, we also decided to change our company name from
The NASDAQ OMX Group, Inc., to Nasdaq, Inc., which became effective
in the third quarter of 2015. We currently estimate that we will
recognize net pre-tax restructuring charges of $196 million,
consisting of the rebranding of our trade name, severance, asset
impairments, facility-related and other costs. We recognized
restructuring charges of $9 million for the three months ended
March 31, 2016, $12 million for the three months ended December 31,
2015 and $150 million for the three months ended March 31,
2015. Since the beginning of the program, we have recognized
a total of $181 million, with the remaining amount to be recognized
through the program completion date of June 2016.
Restructuring charges are recorded on restructuring plans that have
been committed to by management and are, in part, based upon
management's best estimates of future events. Changes to the
estimates may require future adjustments to the restructuring
liabilities. |
|
(3) For the three months ended March 31, 2016 merger and
strategic initiatives expense primarily related to our acquisitions
of Marketwired and Chi-X Canada as well as costs incurred related
to our previously announced pending acquisitions of International
Securities Exchange (ISE) and Boardvantage. For the three
months ended December 31, 2015, merger and strategic initiatives
expense primarily related to certain strategic initiatives and our
acquisition of Dorsey, Wright & Associates, LLC. |
|
(4) In March 2015, we established a loss reserve of $31
million for litigation arising from the Facebook IPO in May 2012,
which was recorded in general, administrative and other
expense. The reserve was intended to cover the estimated
amount of a settlement of class-action litigation initiated on
behalf of investors in Facebook common stock on the date of its
IPO. The reserve also covered the cost of re-opening Nasdaq’s
voluntary accommodation program to allow any Nasdaq member that did
not file for compensation in 2013 to submit a claim during the
second quarter of 2015, subject to the conditions and limitations
that were applicable to claims filed in 2013. The re-opened
accommodation program is now closed. During the second half
of 2015, we recorded an insurance recovery which offset the loss
reserve that was recorded in March 2015. The insurance
recovery recognized during the three months ended December 31, 2015
was $26 million. |
|
(5) We record our investment in The Options Clearing
Corporation, or OCC, as an equity method investment. Under the
equity method of accounting, we recognize our share of earnings or
losses of an equity method investee based on our ownership
percentage. As a result of a new capital plan implemented by
OCC, we were not able to determine what our share of OCC’s income
was for the year ended December 31, 2014 until the first quarter of
2015, when OCC financial statements were made available to us.
Therefore, we recorded other income of $13 million in the first
quarter of 2015 relating to our share of OCC’s income for the year
ended December 31, 2014. |
|
(6) We previously recorded receivables for expected value
added tax, or VAT, refunds based on an approach that had been
accepted by the tax authorities in prior years. The tax
authorities have since challenged our approach, and the revised
position of the tax authorities was upheld in court during the
first quarter of 2015. As a result, in the first quarter of
2015, we recorded a charge of $12 million for previously recorded
receivables based on the court decision. |
|
Nasdaq, Inc. |
Reconciliation of GAAP Net Income, Diluted
Earnings Per Share, Operating Income
and |
Operating Expenses to Non-GAAP Net Income,
Diluted Earnings Per Share, Operating Income, and Operating
Expenses |
(in millions) |
(unaudited) |
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2016 |
|
2015 |
|
2015 |
|
|
|
|
|
|
|
GAAP operating
income |
|
$ |
219 |
|
|
$ |
246 |
|
|
$ |
27 |
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of acquired
intangible assets (1) |
|
|
17 |
|
|
|
15 |
|
|
|
15 |
|
Restructuring charges (2) |
|
|
9 |
|
|
|
12 |
|
|
|
150 |
|
Merger and strategic initiatives
(3) |
|
|
9 |
|
|
|
4 |
|
|
|
- |
|
Loss reserve and insurance recovery
(4) |
|
|
- |
|
|
|
(26 |
) |
|
|
31 |
|
Reversal of value added tax
refund (5) |
|
|
- |
|
|
|
- |
|
|
|
12 |
|
Total non-GAAP
adjustments |
|
|
35 |
|
|
|
5 |
|
|
|
208 |
|
|
|
|
|
|
|
|
Non-GAAP
operating income |
|
$ |
254 |
|
|
$ |
251 |
|
|
$ |
235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues less
transaction-based expenses |
|
$ |
534 |
|
|
$ |
536 |
|
|
$ |
507 |
|
|
|
|
|
|
|
|
Non-GAAP
operating margin (6) |
|
|
48 |
% |
|
|
47 |
% |
|
|
46 |
% |
|
|
(1) Amortization expense of acquired intangible assets results
primarily from business combinations. These non-cash expenses are
fixed and amortized over the estimated useful life of the
intangible asset acquired. These expenses generally cannot be
changed or influenced by management after the acquisition.
Management does not consider these expenses for the purpose of
evaluating the performance of the business, its managers or when
making decisions to allocate resources. Therefore, such expenses
are shown as a non-GAAP adjustment. |
|
(2) During the first quarter of 2015 as part of our 2015
restructuring plan, we performed a comprehensive review of our
processes, businesses and systems in a company-wide effort to
improve performance, cut costs, and reduce spending. In the first
quarter of 2015, we also decided to change our company name from
The NASDAQ OMX Group, Inc., to Nasdaq, Inc., which became effective
in the third quarter of 2015. We currently estimate that we will
recognize net pre-tax restructuring charges of $196 million,
consisting of the rebranding of our trade name, severance, asset
impairments, facility-related and other costs. We recognized
restructuring charges of $9 million for the three months ended
March 31, 2016, $12 million for the three months ended December 31,
2015 and $150 million for the three months ended March 31,
2015. Since the beginning of the program, we have recognized
a total of $181 million, with the remaining amount to be recognized
through the program completion date of June 2016.
Restructuring charges are recorded on restructuring plans that have
been committed to by management and are, in part, based upon
management's best estimates of future events. Changes to the
estimates may require future adjustments to the restructuring
liabilities. |
|
(3) For the three months ended March 31, 2016 merger and
strategic initiatives expense primarily related to our acquisitions
of Marketwired and Chi-X Canada as well as costs incurred related
to our previously announced pending acquisitions of International
Securities Exchange (ISE) and Boardvantage. For the three
months ended December 31, 2015, merger and strategic initiatives
expense primarily related to certain strategic initiatives and our
acquisition of Dorsey, Wright & Associates, LLC. |
|
(4) In March 2015, we established a loss reserve of $31
million for litigation arising from the Facebook IPO in May 2012,
which was recorded in general, administrative and other
expense. The reserve was intended to cover the estimated
amount of a settlement of class-action litigation initiated on
behalf of investors in Facebook common stock on the date of its
IPO. The reserve also covered the cost of re-opening Nasdaq’s
voluntary accommodation program to allow any Nasdaq member that did
not file for compensation in 2013 to submit a claim during the
second quarter of 2015, subject to the conditions and limitations
that were applicable to claims filed in 2013. The re-opened
accommodation program is now closed. During the second half
of 2015, we recorded an insurance recovery which offset the loss
reserve that was recorded in March 2015. The insurance
recovery recognized during the three months ended December 31, 2015
was $26 million. |
|
(5) We previously recorded receivables for expected VAT
refunds based on an approach that had been accepted by the tax
authorities in prior years. The tax authorities have since
challenged our approach, and the revised position of the tax
authorities was upheld in court during the first quarter of
2015. As a result, in the first quarter of 2015, we recorded
a charge of $12 million for previously recorded receivables based
on the court decision. |
|
(6) Non-GAAP operating margin equals non-GAAP operating income
divided by total revenues less transaction-based expenses. |
|
Nasdaq, Inc. |
Reconciliation of GAAP Net Income, Diluted
Earnings Per Share, Operating Income
and |
Operating Expenses to Non-GAAP Net Income,
Diluted Earnings Per Share, Operating Income, and Operating
Expenses |
(in millions) |
(unaudited) |
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2016 |
|
2015 |
|
2015 |
|
|
|
|
|
|
|
GAAP operating
expenses |
|
$ |
315 |
|
|
$ |
290 |
|
|
$ |
480 |
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of acquired
intangible assets (1) |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
Restructuring charges (2) |
|
|
(9 |
) |
|
|
(12 |
) |
|
|
(150 |
) |
Merger and strategic initiatives
(3) |
|
|
(9 |
) |
|
|
(4 |
) |
|
|
- |
|
Loss reserve and insurance recovery
(4) |
|
|
- |
|
|
|
26 |
|
|
|
(31 |
) |
Reversal of value added tax
refund (5) |
|
|
- |
|
|
|
- |
|
|
|
(12 |
) |
Total non-GAAP adjustments |
|
|
(35 |
) |
|
|
(5 |
) |
|
|
(208 |
) |
|
|
|
|
|
|
|
Non-GAAP
operating expenses |
|
$ |
280 |
|
|
$ |
285 |
|
|
$ |
272 |
|
|
|
(1) Amortization expense of acquired intangible assets results
primarily from business combinations. These non-cash expenses are
fixed and amortized over the estimated useful life of the
intangible asset acquired. These expenses generally cannot be
changed or influenced by management after the acquisition.
Management does not consider these expenses for the purpose of
evaluating the performance of the business, its managers or when
making decisions to allocate resources. Therefore, such expenses
are shown as a non-GAAP adjustment. |
|
(2) During the first quarter of 2015 as part of our 2015
restructuring plan, we performed a comprehensive review of our
processes, businesses and systems in a company-wide effort to
improve performance, cut costs, and reduce spending. In the first
quarter of 2015, we also decided to change our company name from
The NASDAQ OMX Group, Inc., to Nasdaq, Inc., which became effective
in the third quarter of 2015. We currently estimate that we will
recognize net pre-tax restructuring charges of $196 million,
consisting of the rebranding of our trade name, severance, asset
impairments, facility-related and other costs. We recognized
restructuring charges of $9 million for the three months ended
March 31, 2016, $12 million for the three months ended December 31,
2015 and $150 million for the three months ended March 31,
2015. Since the beginning of the program, we have recognized
a total of $181 million, with the remaining amount to be recognized
through the program completion date of June 2016.
Restructuring charges are recorded on restructuring plans that have
been committed to by management and are, in part, based upon
management's best estimates of future events. Changes to the
estimates may require future adjustments to the restructuring
liabilities. |
|
(3) For the three months ended March 31, 2016 merger and
strategic initiatives expense primarily related to our acquisitions
of Marketwired and Chi-X Canada as well as costs incurred related
to our previously announced pending acquisitions of International
Securities Exchange (ISE) and Boardvantage. For the three
months ended December 31, 2015, merger and strategic initiatives
expense primarily related to certain strategic initiatives and our
acquisition of Dorsey, Wright & Associates, LLC. |
|
(4) In March 2015, we established a loss reserve of $31
million for litigation arising from the Facebook IPO in May 2012,
which was recorded in general, administrative and other
expense. The reserve was intended to cover the estimated
amount of a settlement of class-action litigation initiated on
behalf of investors in Facebook common stock on the date of its
IPO. The reserve also covered the cost of re-opening Nasdaq’s
voluntary accommodation program to allow any Nasdaq member that did
not file for compensation in 2013 to submit a claim during the
second quarter of 2015, subject to the conditions and limitations
that were applicable to claims filed in 2013. The re-opened
accommodation program is now closed. During the second half
of 2015, we recorded an insurance recovery which offset the loss
reserve that was recorded in March 2015. The insurance
recovery recognized during the three months ended December 31, 2015
was $26 million. |
|
(5) We previously recorded receivables for expected VAT
refunds based on an approach that had been accepted by the tax
authorities in prior years. The tax authorities have since
challenged our approach, and the revised position of the tax
authorities was upheld in court during the first quarter of
2015. As a result, in the first quarter of 2015, we recorded
a charge of $12 million for previously recorded receivables based
on the court decision. |
|
Nasdaq, Inc. |
Quarterly Key Drivers Detail |
(unaudited) |
|
|
Three Months Ended |
|
March 31, |
|
December 31, |
|
March 31, |
|
2016 |
|
2015 |
|
2015 |
Market
Services |
|
|
|
|
|
Equity Derivative Trading
and Clearing |
|
|
|
|
|
U.S. Equity Options |
|
|
|
|
|
Total industry average daily volume
(in millions) |
|
15.3 |
|
|
|
14.4 |
|
|
|
14.8 |
|
Nasdaq PHLX matched market
share |
|
16.1 |
% |
|
|
17.0 |
% |
|
|
17.6 |
% |
The NASDAQ Options Market matched
market share |
|
7.1 |
% |
|
|
7.8 |
% |
|
|
9.5 |
% |
Nasdaq BX Options Market matched
market share |
|
0.9 |
% |
|
|
1.0 |
% |
|
|
0.7 |
% |
Total matched market share executed
on Nasdaq's exchanges |
|
24.1 |
% |
|
|
25.8 |
% |
|
|
27.8 |
% |
|
|
|
|
|
|
Nasdaq Nordic and Nasdaq Baltic
options and futures |
|
|
|
|
|
Total average daily volume options
and futures contracts(1) |
|
452,178 |
|
|
|
445,660 |
|
|
|
402,421 |
|
|
|
|
|
|
|
Cash Equity
Trading |
|
|
|
|
|
Total U.S.-listed securities |
|
|
|
|
|
Total industry average daily share
volume (in billions) |
|
8.56 |
|
|
|
7.05 |
|
|
|
6.92 |
|
Matched share volume (in
billions) |
|
93.7 |
|
|
|
82.2 |
|
|
|
83.1 |
|
Matched market share executed on
NASDAQ |
|
14.9 |
% |
|
|
15.2 |
% |
|
|
16.9 |
% |
Matched market share executed on
Nasdaq BX |
|
2.0 |
% |
|
|
2.1 |
% |
|
|
1.8 |
% |
Matched market share executed on
Nasdaq PSX |
|
1.0 |
% |
|
|
0.9 |
% |
|
|
1.0 |
% |
Total matched market share executed
on Nasdaq's exchanges |
|
17.9 |
% |
|
|
18.2 |
% |
|
|
19.7 |
% |
Market share reported to the
FINRA/NASDAQ Trade Reporting Facility |
|
31.9 |
% |
|
|
32.0 |
% |
|
|
31.4 |
% |
Total market share(2) |
|
49.8 |
% |
|
|
50.2 |
% |
|
|
51.1 |
% |
|
|
|
|
|
|
Nasdaq Nordic and Nasdaq Baltic
securities |
|
|
|
|
|
Average daily number of equity
trades |
|
506,790 |
|
|
|
388,433 |
|
|
|
439,938 |
|
Total average daily value of shares
traded (in billions) |
$ |
5.7 |
|
|
$ |
5.0 |
|
|
$ |
5.5 |
|
Total market share executed on
Nasdaq's exchanges |
|
62.5 |
% |
|
|
67.7 |
% |
|
|
68.8 |
% |
|
|
|
|
|
|
Fixed Income, Currency and
Commodities Trading and Clearing |
|
|
|
|
|
Total U.S. Fixed Income |
|
|
|
|
|
U.S. fixed income notional trading
volume (in billions) |
$ |
5,968 |
|
|
$ |
5,191 |
|
|
$ |
8,365 |
|
|
|
|
|
|
|
Nasdaq Nordic and Nasdaq Baltic
fixed income |
|
|
|
|
|
Total average daily volume fixed
income contracts |
|
101,470 |
|
|
|
105,248 |
|
|
|
107,031 |
|
|
|
|
|
|
|
Nasdaq Commodities |
|
|
|
|
|
Power contracts cleared
(TWh)(3) |
|
420 |
|
|
|
419 |
|
|
|
363 |
|
|
|
|
|
|
|
Listing
Services |
|
|
|
|
|
Initial public offerings |
|
|
|
|
|
NASDAQ |
|
10 |
|
|
|
32 |
|
|
|
27 |
|
Exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic |
|
8 |
|
|
|
22 |
|
|
|
17 |
|
|
|
|
|
|
|
New listings |
|
|
|
|
|
NASDAQ(4) |
|
47 |
|
|
|
72 |
|
|
|
43 |
|
Exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic(5) |
|
14 |
|
|
|
26 |
|
|
|
18 |
|
|
|
|
|
|
|
Number of listed companies |
|
|
|
|
|
NASDAQ(6) |
|
2,852 |
|
|
|
2,859 |
|
|
|
2,779 |
|
Exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic(7) |
|
847 |
|
|
|
852 |
|
|
|
804 |
|
|
|
|
|
|
|
Information
Services |
|
|
|
|
|
Number of licensed exchange traded
products |
|
226 |
|
|
|
222 |
|
|
|
187 |
|
ETP assets under management (AUM)
tracking Nasdaq indexes (in billions)(8) |
$ |
105 |
|
|
$ |
114 |
|
|
$ |
105 |
|
|
|
|
|
|
|
Technology
Solutions |
|
|
|
|
|
Market
Technology |
|
|
|
|
|
Order intake (in millions)(9) |
$ |
22 |
|
|
$ |
116 |
|
|
$ |
40 |
|
Total order value (in
millions)(10) |
$ |
783 |
|
|
$ |
788 |
|
|
$ |
728 |
|
|
|
(1) Includes Finnish
option contracts traded on EUREX Group. |
(2) Includes
transactions executed on NASDAQ's, Nasdaq BX's and Nasdaq PSX's
systems plus trades reported through the Financial Industry
Regulatory Authority/NASDAQ Trade Reporting Facility. |
(3) Transactions
executed on Nasdaq Commodities or OTC and reported for clearing to
Nasdaq Commodities measured by Terawatt hours (TWh). |
(4) New listings
include IPOs, including those completed on a best efforts basis,
issuers that switched from other listing venues, closed-end funds
and separately listed exchange traded products, or ETPs. |
(5) New listings
include IPOs and represent companies listed on the Nasdaq Nordic
and Nasdaq Baltic exchanges and companies on the alternative
markets of Nasdaq First North. |
(6) Number of listed
companies for NASDAQ at period end, including separately listed
ETPs. |
(7) Represents
companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges
and companies on the alternative markets of Nasdaq First North at
period end. |
(8) Represents assets
under management in licensed ETPs. |
(9) Total contract
value of orders signed during the period. |
(10) Represents total
contract value of orders signed that are yet to be recognized as
revenue. |
MEDIA RELATIONS CONTACT:
Joseph Christinat
+1.646.441.5121
joseph.christinat@nasdaq.com
INVESTOR RELATIONS CONTACT:
Ed Ditmire, CFA
+1.212.401.8737
ed.ditmire@nasdaq.com
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