01—Abstract
Summary
Summary of the 10-Q filed August 3, 2016. Cited figures are marked; the original filing is the authoritative source.
Nasdaq, Inc. reported solid financial results for the second quarter and first half of 2016, characterized by revenue growth across multiple segments, particularly Technology Solutions and Corporate Solutions.
The company's strategic acquisitions, including ISE, Boardvantage, Marketwired, and Nasdaq CXC, are contributing to this growth, as evidenced by the significant increase in goodwill and intangible assets on the balance sheet. Despite a challenging market environment, Nasdaq demonstrated resilience. While operating income saw a decrease in the second quarter due to higher merger and strategic initiatives and restructuring costs, the first half showed a substantial increase driven by operational improvements and lower restructuring charges compared to the prior year.
The company also successfully managed its debt obligations, issuing new notes to fund acquisitions and maintaining compliance with covenants. Investors should note the impact of the unfavorable Finnish tax ruling, which significantly increased the effective tax rate in the current periods.
Nasdaq's focus on expanding its technology and data offerings, coupled with its core market services, positions it to navigate evolving market dynamics. The company continues to return value to shareholders through dividends and share repurchases, reflecting a commitment to financial health and shareholder returns.
02—Key points
Key Highlights
- Total revenues less transaction-based expenses increased by 7.9% to $559 million for Q2 2016 and 6.6% to $1,093 million for H1 2016, driven by growth in Corporate Solutions, Market Technology, and Data Products.
- Operating income for H1 2016 saw a significant increase of 61.1% to $393 million, primarily due to a decrease in operating expenses, notably lower restructuring charges compared to the prior year.
- Net income attributable to Nasdaq decreased by 47.4% to $70 million in Q2 2016 but increased by 42.3% to $202 million in H1 2016.
- Diluted EPS decreased by 45.5% to $0.42 in Q2 2016 but increased by 46.3% to $1.20 in H1 2016.
- The company completed several significant acquisitions in early 2016, including ISE, Boardvantage, Marketwired, and Nasdaq CXC, which contributed to a substantial increase in goodwill and intangible assets.
- Total debt obligations increased significantly from $2,364 million at year-end 2015 to $3,731 million at June 30, 2016, largely due to financing the ISE acquisition.
- The effective tax rate increased significantly to 52.1% in Q2 2016 and 40.8% in H1 2016, primarily due to an unfavorable Finnish tax ruling.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Nasdaq, Inc. kept $0.08.
- Revenue$897.0M100.0%
- Cost of revenue−$338.0M37.7%
- Gross profit$559.0M62.3%
- Operating costs−$385.0M42.9%
- Operating income$174.0M19.4%
- Interest, other & tax−$104.0M11.6%
- Net income$70.0M7.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 3, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $897.00M$807.00M | +11.2% |
| Cost of Revenue | $338.00M$289.00M | +17.0% |
| Gross Profit | $559.00M$518.00M | +7.9% |
| Operating Expenses | $385.00M$301.00M | +27.9% |
| Operating Income | $174.00M$217.00M | −19.8% |
| Interest Expense | $32.00M$27.00M | +18.5% |
| Net Income | $70.00M$133.00M | −47.4% |
| EPS (Basic) | $0.14$0.26 | −46.8% |
| EPS (Diluted) | $0.14$0.26 | −45.5% |
| Shares Outstanding (Basic) | 495.06M506.15M | −2.2% |
| Shares Outstanding (Diluted) | 504.62M516.42M | −2.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the second quarter and first half of 2016?
Revenue growth was primarily driven by increases in the Technology Solutions segment (especially Corporate Solutions and Market Technology revenues) and Information Services (Data Products revenues). Market Services also saw growth, particularly in Cash Equity Trading and Access and Broker Services, partly offset by a decline in FICC revenues.
How did the recent acquisitions impact the company's financial position?
The acquisitions of ISE, Boardvantage, Marketwired, and Nasdaq CXC in early 2016 significantly increased goodwill and intangible assets on the balance sheet. These acquisitions are contributing to revenue growth, particularly in the Technology Solutions segment, and are being financed through a combination of debt issuance and credit facilities.
What is the reason for the significant increase in the effective tax rate in 2016?
The effective tax rate increased substantially due to an unfavorable tax ruling from the Finnish Supreme Administrative Court, which resulted in additional tax expense and the reversal of previously recorded tax benefits. This significantly impacted both the second quarter and the first six months of 2016 results.
How has Nasdaq's debt situation changed during this period?
Nasdaq's total debt obligations increased significantly from $2,364 million at the end of 2015 to $3,731 million by June 30, 2016. This increase was mainly due to the issuance of new senior unsecured notes (€600 million and $500 million) and a term loan facility ($400 million) to fund strategic acquisitions, notably the acquisition of ISE.
06—Continue