Nasdaq, Inc. (Nasdaq:NDAQ) today reported strong financial results
for the third quarter of 2016. Third quarter net revenues
were $585 million, up $56 million or 11% from $529 million in the
prior year period, driven primarily by a $58 million positive
impact from acquisitions. Organic revenue growth in the
non-trading segments4 in the third quarter of 2016 was offset by a
contraction in trading revenues when compared to an especially
volatile trading environment in the prior-year period.
“The third quarter’s strong financial results showcase how the
complementary nature of Nasdaq’s business mix can deliver against a
variety of macro backdrops. While our marketplaces were
subject to lower volatility and industry volumes compared to the
prior year period, the company’s non-trading segments expanded to
new record levels,” said Bob Greifeld, CEO,
Nasdaq.
Mr. Greifeld continued, “The Information
Services, Technology Solutions, and Listing Services segments were
especially strong in the third quarter, but more importantly they
each represent areas where we have found attractive opportunities
to invest and where our technology leadership can be leveraged
effectively to benefit our clients and create new opportunities for
growth.”
Operating expenses were $352 million in the third quarter of
2016, up $54 million from $298 million in the third quarter of
2015. The increase primarily reflects incremental expenses
from the acquisitions of Nasdaq CXC, formerly Chi-X Canada
(February 2016), Marketwired (February 2016), Boardvantage (May
2016), and ISE (June 2016).
Non-GAAP operating expenses were $317 million in the third
quarter of 2016, up $41 million from $276 million in the third
quarter of 2015. This increase primarily reflects $29 million
in incremental operating expenses from the acquisitions closed in
2016 as well as $13 million due to organic growth.
“During the third quarter, the company made significant progress
integrating our recent acquisitions, moving the synergy achievement
up to $23 million on a run rate basis, which contributed to
meaningful accretion to our non-GAAP results,” said Michael
Ptasznik, Chief Financial Officer and Executive Vice President,
Nasdaq.
Mr. Ptasznik continued, “We also saw an
attractive opportunity to return $55 million to shareholders
through the share buyback program in the third quarter. I’m
pleased to say that in addition to executing on several acquisition
opportunities this year, the company has returned 54% of our
non-GAAP net income year-to-date to shareholders through dividends
and buybacks.”
Net income attributable to Nasdaq for the third quarter of 2016
was $131 million, or $0.77 per diluted share, compared with $138
million, or $0.80 per diluted share, in the prior year quarter.
On a non-GAAP basis, net income attributable to Nasdaq for
the third quarter of 2016 was $154 million, or $0.91 per diluted
share, compared with $151 million, or $0.88 per diluted share, in
the third quarter of 2015.
The company repurchased 800,938 shares for $55 million in the
third quarter of 2016 at an average price of $68.19. As of
September 30, 2016, there was $429 million remaining under the
board authorized share repurchase program.
At September 30, 2016, the company had cash and cash equivalents
of $257 million and total debt of $3,709 million, resulting in net
debt of $3,452 million. This compares to net debt of $2,063
million at December 31, 2015.
1 Represents revenues from our Information Services, Technology
Solutions, and Listing Services segments, as well as our Trade
Management Services business, formerly referred to as Access and
Broker Services.
2 Represents revenues less transaction-based expenses.
3 Refer to our reconciliations of U.S. GAAP to non-GAAP net
income, diluted earnings per share, operating income and operating
expenses included in the attached schedules.
4 Represents revenues from our Information Services, Technology
Solutions, and Listing Services segments.
BUSINESS HIGHLIGHTS
Market Services (36%
of total net revenues) - Net revenues were $213 million in
the third quarter of 2016, up $13 million when compared to the
third quarter of 2015. The increase primarily reflects an
increase in revenues from the ISE and Nasdaq CXC acquisitions,
partially offset by declines in trading volumes as compared to
multi-year high industry trading volumes experienced in the third
quarter of 2015.
Equity Derivatives
(11% of total net revenues)
– Net equity derivative trading and clearing revenues were
$67 million in the third quarter of 2016, up $16 million compared
to the third quarter of 2015. The increase is primarily due
to the inclusion of revenues from our acquisition of ISE in June
2016 and higher market share at The NASDAQ Options Market and
Nasdaq PHLX, partially offset by lower industry trading
volumes.
Cash Equities (10% of
total net revenues) – Net cash
equity trading revenues were $59 million in the third quarter of
2016, down $8 million compared to the third quarter of 2015.
This decrease reflects lower matched market share, lower industry
trading volumes and lower U.S. average net capture, partially
offset by the inclusion of net revenues associated with the
acquisition of Nasdaq CXC.
Fixed Income and Commodities Trading and
Clearing1 (3% of total net revenues) – Net fixed
income and commodities trading and clearing (FICC) revenues were
$18 million in the third quarter of 2016, down $5 million from the
third quarter of 2015, due to declines in commodities and U.S.
fixed income revenues and the impact of trading incentives on
Nasdaq Futures (NFX) revenues.
Trade Management Services (12%
of total net revenues) – Trade
management services revenues were $69 million in the third quarter
of 2016, up $10 million compared to the third quarter of 2015, due
to the inclusion of revenue from the acquisition of ISE and an
increase in customer demand for network connectivity.
1 Our FICC business was formerly referred to as fixed income,
currency and commodities trading and clearing.
Information Services (23% of total net revenues)
– Revenues were $137 million in the third quarter of 2016,
up $5 million from the third quarter of 2015.
Data Products (18% of total net
revenues) – Data products revenues were
$109 million in the third quarter of 2016, up $6 million compared
to the third quarter of 2015 primarily due to growth in proprietary
data products revenues, the inclusion of revenues from the
acquisitions of ISE and Nasdaq CXC, as well as higher audit
collections.
Index Licensing and Services (5% of total net revenues)
– Index licensing and services revenues were $28 million
in the third quarter of 2016, down $1 million from the third
quarter of 2015. The revenue decline was primarily due to a
decrease in the value of underlying assets associated with non-ETP
Nasdaq-licensed products and lower fees associated with derivative
products licensing Nasdaq indices, due to lower volumes.
Technology Solutions (29%
of total net revenues) – Revenues
were $167 million in the third quarter of 2016, up $36 million from
the third quarter of 2015. The increase primarily reflects
the inclusion of revenues from the acquisitions of Marketwired and
Boardvantage, as well as $13 million in organic revenue growth in
our Market Technology business.
Corporate Solutions (16% of total net revenues)
– Corporate solutions revenues were $94 million in the
third quarter of 2016, up $22 million from the third quarter of
2015. The increase was due to the inclusion of revenues from
the Marketwired and Boardvantage acquisitions.
Market Technology (13% of total net revenues) –
Market technology revenues were $73 million in the third quarter of
2016, up $14 million from the third quarter of 2015. The
increase was driven primarily by growth in revenues from software
licensing and support as well as surveillance products.
Listing Services (12% of
total net revenues) – Revenues
were $68 million in the third quarter of 2016, up $2 million
compared to the third quarter of 2015 primarily due to higher
revenues in the Nordics due to new company listings.
CORPORATE HIGHLIGHTS
- NFX growth continues Nasdaq’s commodities
expansion. NFX, a U.S.-based derivatives market for
key energy benchmarks, has seen increasing traction since launch in
July 2015. During the month of September 2016, open interest
in NFX products reached a record 1.2 million contracts, and during
the third quarter of 2016, trading volume of 8.9 million contracts
increased 16% from 7.7 million contracts in the second quarter of
2016. Since its July 2015 inception, 118 firms have traded on
NFX.
- The Nasdaq Stock Market leads U.S. exchanges for IPOs
and switches. In the U.S. market, The Nasdaq Stock
Market welcomed 79 new listings in the third quarter of 2016,
including 31 IPOs such as Trade Desk, Apptio and Nutanix.
During the third quarter of 2016, 74% of all U.S. IPOs were listed
on Nasdaq. In addition, The Nasdaq Stock Market welcomed 16
switches thus far in 2016 with an aggregate market capitalization
of $42 billion, including IHS Markit. Nasdaq announced 24 new
exchange-traded products (ETP) listings and one switch in the third
quarter, bringing Nasdaq’s total ETP listings to 295, up 48% from
the third quarter of 2015.
- Corporate Solutions launches Nasdaq Influencers while
Nasdaq IR Insight sees continued strong adoption.
Nasdaq has seen strong adoption of the next generation IR platform
with 86% of companies upgraded since January. Additionally,
Nasdaq’s Corporate Solutions business launched Nasdaq Influencers,
a new solution for communications and marketing professionals to
discover and connect with the most relevant thought leaders in
their industry and uncover new opportunities to share their news
and information, insights and recommendations as well as drive
brand identity and awareness.
- Nasdaq sees strong growth in number of ETPs and assets
tracking Nasdaq indexes. The number of ETPs licensed
to Nasdaq indexes increased to 289 at September 30, 2016 versus 267
at June 30, 2016, including several non-U.S. product launches in
China, Taiwan, and Australia. Two new Nasdaq-100 ETPs were
listed in Hong Kong with BMO and BlackRock and one in Taiwan with
Fubon Asset Management. Additionally, BetaShares launched a
series of Global Ex-Australia hedged ETPs based on Nasdaq indexes.
Overall AUM in exchange traded products (ETPs) benchmarked to
all Nasdaq indexes increased 15% to $118 billion as of September
30, 2016 compared to September 30, 2015.
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 more than 3,700 listed companies with a market
value of $10.0 trillion and approximately 18,000 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
U.S. 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 U.S. GAAP to non-GAAP information provided at the end of
this release. Management uses this non-GAAP information
internally, along with U.S. GAAP information, in evaluating our
performance and in making financial and operational decisions. We
believe our presentation of these measures provides investors with
greater transparency and supplemental data relating to our
financial condition and results of operations. In addition, we
believe the presentation of these measures is useful to investors
for period-to-period comparisons of results as the items described
below do not reflect ongoing operating performance.
These measures are not in accordance with, or an alternative to,
U.S. GAAP, and may be different from non-GAAP measures used by
other companies. Investors should not rely on any single financial
measure when evaluating our business. We recommend investors review
the U.S. GAAP financial measures included in this earnings release.
When viewed in conjunction with our U.S. GAAP results and the
accompanying reconciliations, we believe these non-GAAP measures
provide greater transparency and a more complete understanding of
factors affecting our business than U.S. GAAP measures alone.
We understand that analysts and investors regularly rely on
non-GAAP financial measures, such as non-GAAP net income
attributable to Nasdaq, non-GAAP diluted earnings per share,
non-GAAP operating income and non-GAAP operating expenses to assess
operating performance. We use these measures because they highlight
trends more clearly in our business that may not otherwise be
apparent when relying solely on U.S. GAAP financial measures, since
these measures eliminate from our results specific financial items,
such as those described below, that have less bearing on our
ongoing operating performance.
Amortization expense of acquired intangible assets: We amortize
intangible assets acquired in connection with various acquisitions.
Intangible asset amortization expense can vary from period to
period due to episodic acquisitions completed, rather than from our
ongoing business operations. As such, if intangible asset
amortization is included in performance measures, it is more
difficult to assess the day-to-day operating performance of the
businesses, the relative operating performance of the businesses
between periods and the earnings power of Nasdaq. Management does
not consider intangible asset amortization expense for the purpose
of evaluating the performance of our business or its managers or
when making decisions to allocate resources. Therefore, we
believe performance measures excluding intangible asset
amortization expense provide investors with a more useful
representation of our businesses’ ongoing activity in each
period.
Restructuring charges: Restructuring charges are associated with
our 2015 restructuring plan to improve performance, cut costs and
reduce spending and are primarily related to (i) the rebranding of
our company name from The NASDAQ OMX Group, Inc. to Nasdaq,
Inc., (ii) severance and other termination benefits, (iii)
costs to vacate duplicate facilities, and (iv) asset impairment
charges. We exclude these restructuring costs because these costs
do not reflect future operating expenses and do not contribute to a
meaningful evaluation of Nasdaq’s ongoing operating performance or
a comparison of Nasdaq’s performance between periods.
Merger and strategic initiatives expense: We have pursued
various strategic initiatives and completed a number of
acquisitions in recent years which have resulted in expenses which
would not have otherwise been incurred. These expenses
include integration costs, as well as legal, due diligence and
other third party transaction costs. The frequency and the amount
of such expenses vary significantly based on the size, timing and
complexity of the transaction. Accordingly, we exclude these costs
for purposes of calculating non-GAAP measures which provide a more
meaningful analysis of Nasdaq’s ongoing operating performance or
comparisons of Nasdaq’s performance between periods.
Other significant items: We have excluded certain other charges
or gains that are the result of other non-comparable events to
measure operating performance. For the three months ended
June 30, 2016, other significant items include tax expense due to
an unfavorable tax ruling received during the three months ended
June 30, 2016, the impact of which related to prior periods, and
the release of a sublease loss reserve due to the early exit of a
facility. For the three months ended September 30, 2015, other
significant items include an insurance recovery for litigation
arising from the Facebook IPO in May 2012. We believe the exclusion
of such amounts, which arise outside of the normal course of
business, allow management and investors to better understand the
financial results of Nasdaq.
Foreign exchange impact on revenue: In countries with
currencies other than the U.S. dollar, revenues and expenses are
translated using monthly average exchange rates. Certain
discussions in this release isolate the impact of year-over-year
foreign currency fluctuations to better measure the comparability
of operating results between periods. Operating results excluding
the impact of foreign currency fluctuations are calculated by
translating the current period’s results by the prior period’s
exchange rates.
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.
WEBSITE DISCLOSURE
Nasdaq intends to use its website, ir.nasdaq.com, as a means for
disclosing material non-public information and for complying with
SEC Regulation FD and other disclosure obligations. These
disclosures will be included on Nasdaq’s website under “Investor
Relations.”
NDAQF
Nasdaq,
Inc. |
Condensed Consolidated
Statements of Income |
(in millions, except
per share amounts) |
(unaudited) |
|
|
|
|
|
|
|
Three Months
Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
2016 |
|
2016 |
|
2015 |
Revenues: |
|
|
|
|
|
Market
Services |
$ |
557 |
|
|
$ |
532 |
|
|
$ |
542 |
|
Transaction-based
expenses: |
|
|
|
|
|
Transaction
rebates |
|
(265 |
) |
|
|
(256 |
) |
|
|
(256 |
) |
Brokerage, clearance
and exchange fees |
|
(79 |
) |
|
|
(82 |
) |
|
|
(86 |
) |
Total Market Services
revenues less transaction-based expenses |
|
213 |
|
|
|
194 |
|
|
|
200 |
|
|
|
|
|
|
|
Listing
Services |
|
68 |
|
|
|
68 |
|
|
|
66 |
|
Information
Services |
|
137 |
|
|
|
134 |
|
|
|
132 |
|
Technology
Solutions |
|
167 |
|
|
|
163 |
|
|
|
131 |
|
|
|
|
|
|
|
Revenues less
transaction-based expenses |
|
585 |
|
|
|
559 |
|
|
|
529 |
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
Compensation and
benefits |
|
168 |
|
|
|
164 |
|
|
|
150 |
|
Marketing and
advertising |
|
8 |
|
|
|
8 |
|
|
|
6 |
|
Depreciation and
amortization |
|
46 |
|
|
|
41 |
|
|
|
34 |
|
Professional and
contract services |
|
40 |
|
|
|
35 |
|
|
|
33 |
|
Computer operations and
data communications |
|
28 |
|
|
|
27 |
|
|
|
23 |
|
Occupancy |
|
23 |
|
|
|
19 |
|
|
|
22 |
|
Regulatory |
|
8 |
|
|
|
6 |
|
|
|
7 |
|
Merger and strategic
initiatives |
|
12 |
|
|
|
35 |
|
|
|
4 |
|
General, administrative
and other |
|
19 |
|
|
|
17 |
|
|
|
11 |
|
Restructuring
charges |
|
- |
|
|
|
33 |
|
|
|
8 |
|
Total operating
expenses |
|
352 |
|
|
|
385 |
|
|
|
298 |
|
|
|
|
|
|
|
Operating
income |
|
233 |
|
|
|
174 |
|
|
|
231 |
|
|
|
|
|
|
|
Interest
income |
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Interest
expense |
|
(37 |
) |
|
|
(32 |
) |
|
|
(28 |
) |
Other investment
income |
|
- |
|
|
|
2 |
|
|
|
- |
|
Net income from
unconsolidated investees |
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income taxes |
|
199 |
|
|
|
146 |
|
|
|
206 |
|
Income tax
provision |
|
68 |
|
|
|
76 |
|
|
|
68 |
|
|
|
|
|
|
|
Net income
attributable to Nasdaq |
$ |
131 |
|
|
$ |
70 |
|
|
$ |
138 |
|
|
|
|
|
|
|
Per share
information: |
|
|
|
|
|
Basic earnings per
share |
$ |
0.79 |
|
|
$ |
0.42 |
|
|
$ |
0.83 |
|
Diluted earnings per
share |
$ |
0.77 |
|
|
$ |
0.42 |
|
|
$ |
0.80 |
|
Cash dividends declared
per common share |
$ |
0.32 |
|
|
$ |
- |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
Weighted-average common shares
outstanding for earnings per
share: |
|
|
|
|
|
Basic |
|
165.6 |
|
|
|
165.0 |
|
|
|
166.9 |
|
Diluted |
|
169.5 |
|
|
|
168.2 |
|
|
|
171.5 |
|
|
|
|
|
|
|
Nasdaq, Inc. |
Revenue Detail |
(in millions) |
(unaudited) |
|
|
|
|
|
|
|
Three Months
Ended |
|
September
30, |
|
June
30, |
|
September
30, |
|
2016 |
|
2016 |
|
2015 |
MARKET SERVICES
REVENUES |
|
|
|
|
|
Equity Derivative Trading
and Clearing Revenues |
$ |
164 |
|
|
$ |
103 |
|
|
$ |
109 |
|
Transaction-based
expenses: |
|
|
|
|
|
Transaction rebates |
|
(90 |
) |
|
|
(53 |
) |
|
|
(53 |
) |
Brokerage, clearance and exchange
fees |
|
(7 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
Total net equity derivative
trading and clearing revenues |
|
67 |
|
|
|
46 |
|
|
|
51 |
|
|
|
|
|
|
|
Cash Equity Trading
Revenues |
|
302 |
|
|
|
339 |
|
|
|
349 |
|
Transaction-based
expenses: |
|
|
|
|
|
Transaction rebates |
|
(171 |
) |
|
|
(198 |
) |
|
|
(202 |
) |
Brokerage, clearance and exchange
fees |
|
(72 |
) |
|
|
(78 |
) |
|
|
(80 |
) |
Total net cash equity
trading revenues |
|
59 |
|
|
|
63 |
|
|
|
67 |
|
|
|
|
|
|
|
Fixed Income and
Commodities Trading and Clearing
Revenues |
|
22 |
|
|
|
26 |
|
|
|
25 |
|
Transaction-based
expenses: |
|
|
|
|
|
Transaction rebates |
|
(4 |
) |
|
|
(5 |
) |
|
|
(1 |
) |
Brokerage, clearance and exchange
fees |
|
- |
|
|
|
- |
|
|
|
(1 |
) |
Total net fixed income and
commodities trading and clearing revenues |
|
18 |
|
|
|
21 |
|
|
|
23 |
|
|
|
|
|
|
|
Trade Management Services
Revenues |
|
69 |
|
|
|
64 |
|
|
|
59 |
|
|
|
|
|
|
|
Total Net Market Services
revenues |
|
213 |
|
|
|
194 |
|
|
|
200 |
|
|
|
|
|
|
|
LISTING
SERVICES REVENUES |
|
68 |
|
|
|
68 |
|
|
|
66 |
|
|
|
|
|
|
|
INFORMATION SERVICES REVENUES |
|
|
|
|
|
Data Products
revenues |
|
109 |
|
|
|
107 |
|
|
|
103 |
|
Index Licensing and
Services revenues |
|
28 |
|
|
|
27 |
|
|
|
29 |
|
|
|
|
|
|
|
Total Information Services
revenues |
|
137 |
|
|
|
134 |
|
|
|
132 |
|
|
|
|
|
|
|
TECHNOLOGY SOLUTIONS REVENUES |
|
|
|
|
|
Corporate Solutions
revenues |
|
94 |
|
|
|
94 |
|
|
|
72 |
|
Market Technology
revenues |
|
73 |
|
|
|
69 |
|
|
|
59 |
|
|
|
|
|
|
|
Total Technology Solutions
revenues |
|
167 |
|
|
|
163 |
|
|
|
131 |
|
|
|
|
|
|
|
Revenues less
transaction-based expenses |
$ |
585 |
|
|
$ |
559 |
|
|
$ |
529 |
|
|
|
|
|
|
|
Nasdaq, Inc. |
Condensed Consolidated Balance
Sheets |
(in millions) |
|
|
|
|
|
September 30, |
|
December 31, |
|
2016 |
|
2015 |
Assets |
(unaudited) |
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
257 |
|
|
$ |
301 |
|
Restricted cash |
|
19 |
|
|
|
56 |
|
Financial investments, at fair
value |
|
238 |
|
|
|
201 |
|
Receivables, net |
|
349 |
|
|
|
316 |
|
Default funds and margin
deposits |
|
3,323 |
|
|
|
2,228 |
|
Other current assets |
|
160 |
|
|
|
158 |
|
Total current
assets |
|
4,346 |
|
|
|
3,260 |
|
Property and equipment,
net |
|
342 |
|
|
|
323 |
|
Deferred tax
assets |
|
768 |
|
|
|
643 |
|
Goodwill |
|
6,206 |
|
|
|
5,395 |
|
Intangible assets,
net |
|
2,740 |
|
|
|
1,959 |
|
Other non-current
assets |
|
406 |
|
|
|
281 |
|
Total assets |
$ |
14,808 |
|
|
$ |
11,861 |
|
|
|
|
|
Liabilities |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable and accrued
expenses |
$ |
159 |
|
|
$ |
158 |
|
Section 31 fees payable to SEC |
|
27 |
|
|
|
98 |
|
Accrued personnel costs |
|
175 |
|
|
|
171 |
|
Deferred revenue |
|
216 |
|
|
|
127 |
|
Other current liabilities |
|
134 |
|
|
|
138 |
|
Current portion of debt
obligations |
|
20 |
|
|
|
- |
|
Default funds and margin
deposits |
|
3,323 |
|
|
|
2,228 |
|
Total current
liabilities |
|
4,054 |
|
|
|
2,920 |
|
Debt obligations |
|
3,689 |
|
|
|
2,364 |
|
Deferred tax
liabilities |
|
980 |
|
|
|
626 |
|
Non-current deferred
revenue |
|
191 |
|
|
|
200 |
|
Other non-current
liabilities |
|
140 |
|
|
|
142 |
|
Total liabilities |
|
9,054 |
|
|
|
6,252 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
Equity |
|
|
|
Nasdaq stockholders'
equity: |
|
|
|
Common stock |
|
2 |
|
|
|
2 |
|
Additional paid-in capital |
|
3,046 |
|
|
|
3,011 |
|
Common stock in treasury, at
cost |
|
(169 |
) |
|
|
(111 |
) |
Accumulated other comprehensive
loss |
|
(882 |
) |
|
|
(864 |
) |
Retained earnings |
|
3,757 |
|
|
|
3,571 |
|
Total equity |
|
5,754 |
|
|
|
5,609 |
|
Total liabilities and
equity |
$ |
14,808 |
|
|
$ |
11,861 |
|
|
|
|
|
Nasdaq, Inc. |
Reconciliation of U.S. 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 |
|
|
September
30, |
|
June
30, |
|
September
30, |
|
|
2016 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
U.S. GAAP net
income attributable to Nasdaq |
|
$ |
131 |
|
|
$ |
70 |
|
|
$ |
138 |
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of acquired
intangible assets (1) |
|
|
23 |
|
|
|
19 |
|
|
|
15 |
|
Merger and strategic initiatives
(2) |
|
|
12 |
|
|
|
35 |
|
|
|
4 |
|
Restructuring charges (3) |
|
|
- |
|
|
|
33 |
|
|
|
8 |
|
Sublease loss reserve (4) |
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
Insurance recovery (5) |
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
Total non-GAAP adjustments |
|
|
35 |
|
|
|
85 |
|
|
|
22 |
|
|
|
|
|
|
|
|
Non-GAAP adjustment to the income
tax provision (6) |
|
|
(12 |
) |
|
|
(2 |
) |
|
|
(9 |
) |
Total non-GAAP adjustments, net of
tax |
|
|
23 |
|
|
|
83 |
|
|
|
13 |
|
|
|
|
|
|
|
|
Non-GAAP net
income attributable to Nasdaq |
|
$ |
154 |
|
|
$ |
153 |
|
|
$ |
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
diluted earnings per share |
|
$ |
0.77 |
|
|
$ |
0.42 |
|
|
$ |
0.80 |
|
Total adjustments from non-GAAP net
income above |
|
|
0.14 |
|
|
|
0.49 |
|
|
|
0.08 |
|
|
|
|
|
|
|
|
Non-GAAP
diluted earnings per share |
|
$ |
0.91 |
|
|
$ |
0.91 |
|
|
$ |
0.88 |
|
|
|
|
|
|
|
|
(1) Refer
to the non-GAAP information section of the earnings release for
further discussion of why we consider amortization expense of
acquired intangible assets to be a non-GAAP adjustment. |
|
(2)
For the three months ended September 30, 2016 and June 30, 2016,
merger and strategic initiatives expense primarily related to our
acquisition of ISE. For the three months ended September 30,
2015, merger and strategic initiatives expense primarily related to
certain strategic initiatives and our acquisition of Dorsey, Wright
& Associates, LLC. Refer to the non-GAAP information
section of the earnings release for further discussion on why we
consider merger and strategic initiatives expense to be a
non-GAAP adjustment. |
|
(3) During
the first quarter of 2015, 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 June 2016,
we completed our 2015 restructuring plan. For the three months
ended June 30, 2016, restructuring charges primarily related to
severance costs, asset impairment charges and other charges. For
the three months ended September 30, 2015, restructuring charges
primarily related to facility-related costs associated with the
consolidation of leased facilities, severance costs and other
charges. 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. Refer to the non-GAAP information section of the
earnings release for further discussion of why we consider
restructuring charges to be a non-GAAP adjustment. |
|
(4) The
credit of $2 million pertains to the release of a previously
recorded sublease loss reserve due to the early exit of a
facility. |
|
(5) 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. The insurance recovery
recognized during the three months ended September 30, 2015
primarily represented amounts reimbursed by applicable insurance
coverage. |
|
(6)
Includes the tax impact of each non-GAAP adjustment. In addition,
in June 2016 we recorded a $27 million tax expense due to an
unfavorable tax ruling received during the three months ended June
30, 2016, the impact of which related to prior periods. |
|
Nasdaq, Inc. |
Reconciliation of U.S. 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 |
|
|
September
30, |
|
June
30, |
|
September
30, |
|
|
2016 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
U.S. GAAP
operating income |
|
$ |
233 |
|
|
$ |
174 |
|
|
$ |
231 |
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of acquired
intangible assets (1) |
|
|
23 |
|
|
|
19 |
|
|
|
15 |
|
Merger and strategic initiatives
(2) |
|
|
12 |
|
|
|
35 |
|
|
|
4 |
|
Restructuring charges (3) |
|
|
- |
|
|
|
33 |
|
|
|
8 |
|
Sublease loss reserve (4) |
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
Insurance recovery (5) |
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
Total non-GAAP
adjustments |
|
|
35 |
|
|
|
85 |
|
|
|
22 |
|
|
|
|
|
|
|
|
Non-GAAP
operating income |
|
$ |
268 |
|
|
$ |
259 |
|
|
$ |
253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues less
transaction-based expenses |
|
$ |
585 |
|
|
$ |
559 |
|
|
$ |
529 |
|
|
|
|
|
|
|
|
U.S. GAAP
Operating margin (6) |
|
|
40 |
% |
|
|
31 |
% |
|
|
44 |
% |
|
|
|
|
|
|
|
Non-GAAP
operating margin (7) |
|
|
46 |
% |
|
|
46 |
% |
|
|
48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer
to the non-GAAP information section of the earnings release
for further discussion of why we consider amortization expense of
acquired intangible assets to be a non-GAAP adjustment. |
|
(2)
For the three months ended September 30, 2016 and June 30, 2016,
merger and strategic initiatives expense primarily related to our
acquisition of ISE. For the three months ended September 30,
2015, merger and strategic initiatives expense primarily related to
certain strategic initiatives and our acquisition of Dorsey, Wright
& Associates, LLC. Refer to the non-GAAP information
section of the earnings release for further discussion on why we
consider merger and strategic initiatives expense to be a non-GAAP
adjustment. |
|
(3) During
the first quarter of 2015, 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 June 2016,
we completed our 2015 restructuring plan. For the three months
ended June 30, 2016, restructuring charges primarily related to
severance costs, asset impairment charges and other charges. For
the three months ended September 30, 2015, restructuring charges
primarily related to facility-related costs associated with the
consolidation of leased facilities, severance costs and other
charges. 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. Refer to the non-GAAP information section of the
earnings release for further discussion of why we consider
restructuring charges to be a non-GAAP adjustment. |
|
(4)
The credit of $2 million pertains to the release of a previously
recorded sublease loss reserve due to the early exit of a
facility. |
|
(5) 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. The insurance recovery
recognized during the three months ended September 30, 2015
primarily represented amounts reimbursed by applicable insurance
coverage. |
|
(6) U.S.
GAAP operating margin equals U.S. GAAP operating income divided by
total revenues less transaction-based expenses. |
|
(7)
Non-GAAP operating margin equals non-GAAP operating income divided
by total revenues less transaction-based expenses. |
|
Nasdaq, Inc. |
Reconciliation of U.S. 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 |
|
|
September
30, |
|
June
30, |
|
September
30, |
|
|
2016 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
U.S. GAAP
operating expenses |
|
$ |
352 |
|
|
$ |
385 |
|
|
$ |
298 |
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of acquired
intangible assets (1) |
|
|
(23 |
) |
|
|
(19 |
) |
|
|
(15 |
) |
Merger and strategic initiatives
(2) |
|
|
(12 |
) |
|
|
(35 |
) |
|
|
(4 |
) |
Restructuring charges (3) |
|
|
- |
|
|
|
(33 |
) |
|
|
(8 |
) |
Sublease loss reserve (4) |
|
|
- |
|
|
|
2 |
|
|
|
- |
|
Insurance recovery (5) |
|
|
- |
|
|
|
- |
|
|
|
5 |
|
Total non-GAAP adjustments |
|
|
(35 |
) |
|
|
(85 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
Non-GAAP
operating expenses |
|
$ |
317 |
|
|
$ |
300 |
|
|
$ |
276 |
|
|
|
|
|
|
|
|
(1) Refer
to the non-GAAP information section of the earnings release
for further discussion of why we consider amortization expense of
acquired intangible assets to be a non-GAAP adjustment. |
|
(2)
For the three months ended September 30, 2016 and June 30, 2016,
merger and strategic initiatives expense primarily related to our
acquisition of ISE. For the three months ended September 30,
2015, merger and strategic initiatives expense primarily related to
certain strategic initiatives and our acquisition of Dorsey, Wright
& Associates, LLC. Refer to the non-GAAP information
section of the earnings release for further discussion on why we
consider merger and strategic initiatives expense to be a non-GAAP
adjustment. |
|
(3) During
the first quarter of 2015, 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 June 2016,
we completed our 2015 restructuring plan. For the three months
ended June 30, 2016, restructuring charges primarily related to
severance costs, asset impairment charges and other charges. For
the three months ended September 30, 2015, restructuring charges
primarily related to facility-related costs associated with the
consolidation of leased facilities, severance costs and other
charges. 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. Refer to the non-GAAP information section of the
earnings release for further discussion of why we consider
restructuring charges to be a non-GAAP adjustment. |
|
(4)
The credit of $2 million pertains to the release of a previously
recorded sublease loss reserve due to the early exit of a
facility. |
|
(5) 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. The insurance recovery
recognized during the three months ended September 30, 2015
primarily represented amounts reimbursed by applicable insurance
coverage. |
|
Nasdaq, Inc. |
Quarterly Key Drivers Detail |
(unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
September
30, |
|
June
30, |
|
September
30, |
|
2016 |
|
2016 |
|
2015 |
Market
Services |
|
|
|
|
|
Equity Derivative Trading
and Clearing |
|
|
|
|
|
U.S. Equity Options |
|
|
|
|
|
Total industry average daily volume
(in millions) |
|
13.8 |
|
|
|
14.1 |
|
|
|
16.0 |
|
Nasdaq PHLX Options Market matched
market share |
|
16.0 |
% |
|
|
16.2 |
% |
|
|
15.8 |
% |
The NASDAQ Options Market matched
market share |
|
8.5 |
% |
|
|
7.1 |
% |
|
|
6.7 |
% |
Nasdaq BX Options Market matched
market share |
|
0.8 |
% |
|
|
1.0 |
% |
|
|
0.9 |
% |
Nasdaq ISE Options Market matched
market share(1) |
|
12.0 |
% |
|
|
0.2 |
% |
|
|
- |
|
Nasdaq GMNI Options Market matched
market share(1) |
|
1.8 |
% |
|
|
0.0 |
% |
|
|
- |
|
Nasdaq MCRY Options Market matched
market share(1) |
|
0.2 |
% |
|
|
0.0 |
% |
|
|
- |
|
Total matched market share executed
on Nasdaq's exchanges |
|
39.3 |
% |
|
|
24.5 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
Nasdaq Nordic and Nasdaq Baltic
options and futures |
|
|
|
|
|
Total average daily volume options
and futures contracts(2) |
|
291,410 |
|
|
|
439,520 |
|
|
|
335,361 |
|
|
|
|
|
|
|
Cash Equity
Trading |
|
|
|
|
|
Total U.S.-listed securities |
|
|
|
|
|
Total industry average daily share
volume (in billions) |
|
6.59 |
|
|
|
7.25 |
|
|
|
7.32 |
|
Matched share volume (in
billions) |
|
71.0 |
|
|
|
80.6 |
|
|
|
88.2 |
|
Matched market share executed on
NASDAQ |
|
13.4 |
% |
|
|
14.0 |
% |
|
|
15.7 |
% |
Matched market share executed on
Nasdaq BX |
|
2.6 |
% |
|
|
2.3 |
% |
|
|
2.1 |
% |
Matched market share executed on
Nasdaq PSX |
|
0.9 |
% |
|
|
1.1 |
% |
|
|
1.0 |
% |
Total matched market share executed
on Nasdaq's exchanges |
|
16.9 |
% |
|
|
17.4 |
% |
|
|
18.8 |
% |
Market share reported to the
FINRA/NASDAQ Trade Reporting Facility |
|
33.5 |
% |
|
|
33.0 |
% |
|
|
31.0 |
% |
Total market share(3) |
|
50.4 |
% |
|
|
50.4 |
% |
|
|
49.8 |
% |
|
|
|
|
|
|
Nasdaq Nordic and Nasdaq Baltic
securities |
|
|
|
|
|
Average daily number of equity
trades |
|
394,181 |
|
|
|
447,231 |
|
|
|
405,614 |
|
Total average daily value of shares
traded (in billions) |
$ |
4.4 |
|
|
$ |
5.2 |
|
|
$ |
4.4 |
|
Total market share executed on
Nasdaq's exchanges |
|
62.4 |
% |
|
|
63.7 |
% |
|
|
69.7 |
% |
|
|
|
|
|
|
Fixed Income and
Commodities Trading and Clearing |
|
|
|
|
|
Total U.S. Fixed Income |
|
|
|
|
|
U.S. fixed income notional trading
volume (in billions) |
$ |
4,816 |
|
|
$ |
5,255 |
|
|
$ |
7,397 |
|
|
|
|
|
|
|
Nasdaq Nordic and Nasdaq Baltic
fixed income |
|
|
|
|
|
Total average daily volume fixed
income contracts |
|
73,422 |
|
|
|
91,107 |
|
|
|
116,563 |
|
|
|
|
|
|
|
Nasdaq Commodities |
|
|
|
|
|
Power contracts cleared
(TWh)(4) |
|
321 |
|
|
|
455 |
|
|
|
385 |
|
|
|
|
|
|
|
Listing Services |
|
|
|
|
|
Initial public offerings |
|
|
|
|
|
NASDAQ |
|
31 |
|
|
|
25 |
|
|
|
35 |
|
Exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic |
|
5 |
|
|
|
25 |
|
|
|
7 |
|
|
|
|
|
|
|
New listings |
|
|
|
|
|
NASDAQ(5) |
|
79 |
|
|
|
73 |
|
|
|
80 |
|
Exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic(6) |
|
10 |
|
|
|
33 |
|
|
|
9 |
|
|
|
|
|
|
|
Number of listed companies |
|
|
|
|
|
NASDAQ(7) |
|
2,872 |
|
|
|
2,868 |
|
|
|
2,850 |
|
Exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic(8) |
|
875 |
|
|
|
873 |
|
|
|
835 |
|
|
|
|
|
|
|
Information Services |
|
|
|
|
|
Number of licensed exchange traded
products |
|
289 |
|
|
|
267 |
|
|
|
210 |
|
ETP assets under management (AUM)
tracking Nasdaq indexes (in billions)(9) |
$ |
118 |
|
|
$ |
108 |
|
|
$ |
103 |
|
|
|
|
|
|
|
Technology Solutions |
|
|
|
|
|
Market
Technology |
|
|
|
|
|
Order intake (in millions)(10) |
$ |
49 |
|
|
$ |
69 |
|
|
$ |
83 |
|
Total order value (in
millions)(11) |
$ |
738 |
|
|
$ |
769 |
|
|
$ |
738 |
|
|
|
|
|
|
|
(1) For the
three months ended June 30, 2016, Nasdaq ISE Options Market, Nasdaq
GMNI Options Market, and Nasdaq MCRY Options Market matched market
share represents trading volume which commenced on June 30,
2016. |
(2) Includes
Finnish option contracts traded on EUREX Group. |
(3) 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. |
(4)
Transactions executed on Nasdaq Commodities or OTC and reported for
clearing to Nasdaq Commodities measured by Terawatt hours
(TWh). |
(5) 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. |
(6) 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. |
(7) Number of
listed companies for NASDAQ at period end, including separately
listed ETPs. |
(8)
Represents companies listed on the Nasdaq Nordic and Nasdaq Baltic
exchanges and companies on the alternative markets of Nasdaq First
North at period end. |
(9)
Represents AUM in licensed ETPs. |
(10) Total
contract value of orders signed during the period. |
(11)
Represents total contract value of orders signed that are yet to be
recognized as revenue. |
MEDIA RELATIONS CONTACT:
Allan Schoenberg
+1.212.231.5534
allan.schoenberg@nasdaq.com
INVESTOR RELATIONS CONTACT:
Ed Ditmire, CFA
+1.212.401.8737
ed.ditmire@nasdaq.com
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