10-QPeriod: Q3 FY2016

NASDAQ, INC. Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 8, 2016For Securities:NDAQ

Summary

Nasdaq, Inc. (NDAQ) reported its third-quarter and nine-month results ending September 30, 2016. The company demonstrated solid revenue growth, driven by increases across its Listing Services, Information Services, and Technology Solutions segments, notably from recent acquisitions. Operating income saw a slight increase in the quarter and a significant jump year-to-date, reflecting strong performance despite increased operating expenses, partly due to integration costs from acquisitions. Diluted Earnings Per Share (EPS) showed a slight decrease in the quarter but a notable increase for the year-to-date period, demonstrating the company's ability to grow profitability. The company also actively managed its capital structure through debt issuance and repayment, and share repurchases, indicating a focus on shareholder returns and financial flexibility. Overall, the filing highlights Nasdaq's strategic acquisitions and their positive impact on revenue and segment diversification. While increased operating expenses and interest expenses are noted, the company's ability to generate increased operating income and manage its debt levels suggest a robust financial position. Investors should monitor the integration of recent acquisitions and the company's continued ability to navigate competitive market dynamics and regulatory landscapes.

Financial Highlights

56 data points
Beta

Revenue

$929.00M

63.0% Gross Margin

Net Income

$131.00M

14.1% Net Margin

EPS (Diluted)

$0.26

Total Assets

$14.81B

Cash & Equivalents

$257.00M

Free Cash Flow

$29.00M

Financial Statements
Beta
Revenue$929.00M
Cost of Revenue$344.00M
Gross Profit$585.00M
Operating Expenses$352.00M
Operating Income$233.00M
Interest Expense$37.00M
Net Income$131.00M
EPS (Basic)$0.26
EPS (Diluted)$0.26
Shares Outstanding (Basic)496.82M
Shares Outstanding (Diluted)508.49M

Key Highlights

  • 1Revenue less transaction-based expenses increased by 10.6% to $585 million in Q3 2016 and by 8.0% to $1,678 million for the nine months ended September 30, 2016, driven by growth in Corporate Solutions, Market Technology, and Information Services.
  • 2Operating income increased by 0.9% to $233 million in Q3 2016 and significantly by 31.8% to $626 million for the nine months ended September 30, 2016, indicating improved operational efficiency and acquisition integration.
  • 3Diluted Earnings Per Share (EPS) was $0.77 for Q3 2016, a decrease from $0.80 in Q3 2015, but for the nine months ended September 30, 2016, EPS increased to $1.97 from $1.63 in the prior year period.
  • 4The company completed several significant acquisitions in 2016, including ISE, Boardvantage, Marketwired, and Nasdaq CXC, which contributed to revenue growth and expanded service offerings.
  • 5Total debt obligations increased significantly to $3,709 million at September 30, 2016, primarily due to new debt issuances to fund acquisitions, but the company remained in compliance with all debt covenants.
  • 6Nasdaq returned capital to shareholders through $147 million in cash dividends and $100 million in share repurchases during the first nine months of 2016.

Frequently Asked Questions

Nasdaq completed several significant acquisitions in 2016, including ISE, Boardvantage, Marketwired, and Nasdaq CXC. These acquisitions contributed to the increase in 'Revenues less transaction-based expenses' across multiple segments, particularly in Corporate Solutions, Market Services, and Information Services, as their results were consolidated from their respective acquisition dates.

Nasdaq's total debt obligations increased significantly from $2,364 million at December 31, 2015, to $3,709 million at September 30, 2016. This increase was primarily due to new debt issuances, including €600 million in 1.75% senior unsecured notes and $500 million in 3.85% senior unsecured notes, as well as a $400 million term loan facility. These funds were largely used to finance the acquisition of ISE and other strategic initiatives.

Net income attributable to Nasdaq decreased slightly by 5.1% to $131 million in the third quarter of 2016 compared to $138 million in the prior year. However, for the nine months ended September 30, 2016, net income increased by 18.9% to $333 million from $280 million in the same period of 2015. Diluted EPS showed a similar trend, decreasing from $0.80 to $0.77 in the third quarter but increasing from $1.63 to $1.97 year-to-date.

Nasdaq is actively managing its capital through debt issuance and repayment, as well as share repurchases and dividends. During the first nine months of 2016, the company paid $147 million in cash dividends and repurchased $100 million of its common stock. The board also declared a regular quarterly cash dividend of $0.32 per share, representing a 28% increase from the prior year's quarterly dividends.