10-QPeriod: Q1 FY2015

NASDAQ, INC. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 6, 2015For Securities:NDAQ

Summary

NASDAQ, INC. (NDAQ) reported its first quarter 2015 financial results, showing a significant decrease in net income attributable to shareholders, falling to $9 million ($0.05 per diluted share) from $103 million ($0.59 per diluted share) in the prior year period. This decline was largely driven by substantial restructuring charges of $150 million related to a company-wide review and rebranding initiative, as well as increased legal expenses. Despite the drop in net income, the company's revenues less transaction-based expenses saw a modest decline of 4.2% to $507 million, impacted by foreign exchange headwinds and lower trading volumes in certain segments. However, the company completed a strategic acquisition of Dorsey, Wright & Associates, LLC for $226 million, which is expected to bolster its Information Services segment with data analytics and passive indexing capabilities. Management highlighted a positive outlook for non-transactional businesses and a focus on cost control.

Financial Highlights

56 data points
Beta

Revenue

$858.00M

59.1% Gross Margin

Net Income

$9.00M

1.0% Net Margin

EPS (Diluted)

$0.02

Total Assets

$12.24B

Cash & Equivalents

$328.00M

Free Cash Flow

$207.00M

Financial Statements
Beta
Revenue$858.00M
Cost of Revenue$351.00M
Gross Profit$507.00M
Operating Expenses$480.00M
Operating Income$27.00M
Interest Expense$28.00M
Net Income$9.00M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)506.96M
Shares Outstanding (Diluted)518.03M

Key Highlights

  • 1Net income attributable to Nasdaq decreased significantly by 91.3% to $9 million ($0.05 per diluted share) in Q1 2015, compared to $103 million ($0.59 per diluted share) in Q1 2014.
  • 2Revenues less transaction-based expenses declined by 4.2% to $507 million in Q1 2015, primarily due to foreign currency fluctuations and lower trading volumes in equity derivatives and fixed income.
  • 3Operating expenses increased substantially by 39.1% to $480 million in Q1 2015, largely due to $150 million in restructuring charges and $31 million in special legal expenses related to the Facebook IPO.
  • 4The company completed the acquisition of Dorsey, Wright & Associates, LLC for $226 million, strengthening its Information Services segment with data analytics and indexing capabilities.
  • 5Listing Services revenue increased by 10.3% to $64 million, driven by higher annual listing fees and an increase in listed companies on The NASDAQ Stock Market.
  • 6The company declared a quarterly cash dividend of $0.15 per share, and subsequently announced a 67% increase to $0.25 per share in April 2015.
  • 7Cash and cash equivalents decreased by $99 million to $328 million, reflecting cash used in investing activities, including the DWA acquisition, and financing activities.

Frequently Asked Questions

The primary reason for the significant drop in net income was the substantial restructuring charges of $150 million, related to a company-wide review and rebranding initiative, coupled with increased special legal expenses of $31 million associated with the Facebook IPO litigation.

The acquisition of Dorsey, Wright & Associates, LLC for $226 million was completed in January 2015. While it contributed to cash used in investing activities, its financial results are included in the Information Services segment from the acquisition date. The company did not present pro forma results as the acquisition was not considered material to overall financial results for the quarter. The acquisition is expected to enhance the company's capabilities in data analytics and passive indexing.

The company noted a cautious optimism for the global economy. While transactional businesses experienced mixed results (decreases in U.S. equity options and FICC, increases in Nordic/Baltic cash equity), non-transactional businesses like Listing Services (up 10.3%) and Information Services (up 1.6%) showed growth or stability. Technology Solutions saw a decline, attributed partly to foreign exchange impacts and project delivery.

Foreign currency fluctuations had an unfavorable impact on the company's financial results. For instance, revenues less transaction-based expenses were negatively impacted by $29 million. Operating expenses also saw a favorable impact from foreign exchange of $19 million, which partially offset operational increases. The company provided non-GAAP operating income figures to better reflect ongoing exposure to foreign currency risk, excluding significant restructuring and legal charges.