01—Abstract
Summary
Summary of the 10-Q filed May 6, 2015. Cited figures are marked; the original filing is the authoritative source.
NASDAQ, INC. (NDAQ) reported its first quarter 2015 financial results, showing a significant decrease in net income attributable to shareholders, falling to $9 milliona ($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 millionb 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 millionc, 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.
02—Key points
Key Highlights
- Net 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.
- Revenues 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.
- Operating 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.
- The company completed the acquisition of Dorsey, Wright & Associates, LLC for $226 million, strengthening its Information Services segment with data analytics and indexing capabilities.
- Listing 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.
- The 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.
- Cash and cash equivalents decreased by $99 million to $328 million, reflecting cash used in investing activities, including the DWA acquisition, and financing activities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2015, Nasdaq, Inc. kept $0.01.
- Revenue$858.0M100.0%
- Cost of revenue−$351.0M40.9%
- Gross profit$507.0M59.1%
- Operating costs−$480.0M55.9%
- Operating income$27.0M3.1%
- Interest, other & tax−$18.0M2.1%
- Net income$9.0M1.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2015filed May 6, 2015Financial Statements
Q1 FY2015 against Q1 FY2014
| Line item | Q1 FY2015Q1 FY2014 | Change |
|---|---|---|
| Revenue | $858.00M$898.00M | −4.5% |
| Cost of Revenue | $351.00M$369.00M | −4.9% |
| Gross Profit | $507.00M$529.00M | −4.2% |
| Operating Expenses | $480.00M$345.00M | +39.1% |
| Operating Income | $27.00M$184.00M | −85.3% |
| Interest Expense | $28.00M$30.00M | −6.7% |
| Net Income | $9.00M$103.00M | −91.3% |
| EPS (Basic) | $0.02$0.20 | −91.8% |
| EPS (Diluted) | $0.02$0.20 | −91.5% |
| Shares Outstanding (Basic) | 506.96M508.79M | −0.4% |
| Shares Outstanding (Diluted) | 518.03M521.00M | −0.6% |
05—Questions
Frequently Asked Questions
What was the primary reason for the significant drop in net income during the first quarter of 2015?
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.
How did the acquisition of Dorsey, Wright & Associates, LLC impact the company's financial performance in the first quarter?
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.
What is the company's outlook on its various business segments based on this report?
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.
How did foreign currency fluctuations affect the company's results?
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.
06—Continue