10-QPeriod: Q2 FY2017

NASDAQ, INC. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 2, 2017For Securities:NDAQ

Summary

Nasdaq, Inc. (NDAQ) reported solid financial results for the second quarter and first six months of 2017, demonstrating revenue growth and improved profitability. Total revenues less transaction-based expenses increased by 7.7% for the quarter and 8.4% year-to-date, driven by strong performance in the Market Services segment, largely due to the integration of the ISE acquisition. Other segments, including Corporate Services, Information Services, and Market Technology, also showed growth. Net income attributable to Nasdaq surged by 110.0% to $147 million ($0.87 per diluted share) for the quarter and by 56.9% to $317 million ($1.87 per diluted share) year-to-date. This significant increase in profitability was supported by a substantial reduction in operating expenses, particularly merger and strategic initiatives, and a more favorable tax provision compared to the prior year. The company also highlighted its robust cash flow generation and a strengthened balance sheet, with prudent management of debt obligations.

Financial Highlights

56 data points
Beta

Revenue

$1.00B

59.6% Gross Margin

Net Income

$146.00M

14.6% Net Margin

EPS (Diluted)

$0.29

Total Assets

$14.66B

Cash & Equivalents

$356.00M

Free Cash Flow

$242.00M

Financial Statements
Beta
Revenue$1.00B
Cost of Revenue$398.00M
Gross Profit$596.00M
Operating Expenses$354.00M
Operating Income$242.00M
Interest Expense$36.00M
Net Income$146.00M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)496.25M
Shares Outstanding (Diluted)505.46M

Key Highlights

  • 1Total revenues less transaction-based expenses increased by 7.7% to $602 million for Q2 2017 and by 8.4% to $1,185 million for the first six months of 2017.
  • 2Net income attributable to Nasdaq grew significantly, up 110.0% to $147 million in Q2 2017 and up 56.9% to $317 million for the first six months of 2017.
  • 3Diluted earnings per share (EPS) increased by 107.1% to $0.87 in Q2 2017 and by 55.8% to $1.87 for the first six months of 2017.
  • 4Market Services segment revenue less transaction-based expenses saw a strong increase of 14.4% to $222 million in Q2 2017, driven by the acquisition of ISE and increased equity derivative trading.
  • 5Operating expenses decreased by 7.0% to $358 million in Q2 2017, primarily due to reduced merger and strategic initiatives expenses compared to the prior year.
  • 6The company's effective tax rate decreased significantly to 31.0% in Q2 2017 from 52.1% in Q2 2016, contributing to improved net income.
  • 7Nasdaq declared a cash dividend of $0.38 per share for the second quarter, representing a 19.0% increase from the prior quarterly dividend.

Frequently Asked Questions

Revenue growth was primarily driven by the Market Services segment, specifically equity derivative trading and clearing, which benefited from the inclusion of revenues from the acquisition of ISE. Additionally, increased Section 31 pass-through fee revenue and growth in Trade Management Services also contributed positively.

Nasdaq successfully reduced its operating expenses by 7.0% in the second quarter of 2017. This reduction was mainly due to a significant decrease in merger and strategic initiatives expenses, as 2016 saw substantial acquisition-related costs. Restructuring charges also decreased significantly compared to the prior year.

Nasdaq maintained a healthy liquidity position and prudent debt management. The company entered into a new $1 billion revolving credit facility in April 2017 and a commercial paper program, providing flexibility. Debt repayments were made, and the company stated it expects its operations and credit facilities to provide sufficient cash for near-term needs.

The acquisitions completed in 2016, particularly ISE, Boardvantage, Marketwired, and Nasdaq CXC, contributed to revenue growth, especially in the Market Services and Corporate Services segments. However, they also increased operating expenses, particularly merger and strategic initiatives, which were lower in 2017 due to the timing of these expenses.