01—Abstract
Summary
Summary of the 10-Q filed August 2, 2017. Cited figures are marked; the original filing is the authoritative source.
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 milliona ($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.
02—Key points
Key Highlights
- Total 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.
- Net 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.
- Diluted 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.
- Market 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.
- Operating 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.
- The company's effective tax rate decreased significantly to 31.0% in Q2 2017 from 52.1% in Q2 2016, contributing to improved net income.
- Nasdaq declared a cash dividend of $0.38 per share for the second quarter, representing a 19.0% increase from the prior quarterly dividend.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Nasdaq, Inc. kept $0.15.
- Revenue$1.00B100.0%
- Cost of revenue−$404.0M40.4%
- Gross profit$596.0M59.6%
- Operating costs−$354.0M35.4%
- Operating income$242.0M24.2%
- Interest, other & tax−$96.0M9.6%
- Net income$146.0M14.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed August 2, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $1.00B$897.00M | +11.5% |
| Cost of Revenue | $398.00M$338.00M | +17.8% |
| Gross Profit | $596.00M$559.00M | +6.6% |
| Operating Expenses | $354.00M$385.00M | −8.1% |
| Operating Income | $242.00M$174.00M | +39.1% |
| Interest Expense | $36.00M$32.00M | +12.5% |
| Net Income | $146.00M$70.00M | +108.6% |
| EPS (Basic) | $0.29$0.14 | +109.5% |
| EPS (Diluted) | $0.29$0.14 | +107.1% |
| Shares Outstanding (Basic) | 496.25M495.06M | +0.2% |
| Shares Outstanding (Diluted) | 505.46M504.62M | +0.2% |
05—Questions
Frequently Asked Questions
What were the primary drivers of revenue growth in the second quarter of 2017?
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.
How did Nasdaq manage its expenses during the quarter?
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.
What is the company's outlook on its debt and liquidity?
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.
How did the acquisitions made in 2016 impact the financial results?
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.
06—Continue