10-QPeriod: Q1 FY2019

NASDAQ, INC. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 1, 2019For Securities:NDAQ

Summary

Nasdaq, Inc. reported total revenues of $1,039 million for the first quarter of 2019, a decrease from $1,151 million in the same period of the prior year. Net income attributable to Nasdaq increased significantly by 39.5% to $247 million, or $1.48 per diluted share, compared to $177 million, or $1.05 per diluted share, in Q1 2018. This growth was largely driven by a substantial increase in net income from unconsolidated investees, primarily due to an adjustment related to their investment in OCC. The company also recognized a $27 million pre-tax gain from the divestiture of its BWise platform. Despite a decline in revenues, particularly in Market Services, Nasdaq demonstrated operational efficiency with a 8.7% reduction in total operating expenses. This cost management, combined with the favorable impact of equity method investments and the divestiture gain, led to a robust increase in net income and earnings per share. The company also announced a 7.0% increase in its quarterly cash dividend, signaling confidence in its financial performance and commitment to returning value to shareholders.

Financial Highlights

55 data points
Beta

Revenue

$1.04B

61.0% Gross Margin

Net Income

$247.00M

23.8% Net Margin

EPS (Diluted)

$0.49

Total Assets

$14.50B

Cash & Equivalents

$472.00M

Free Cash Flow

$317.00M

Financial Statements
Beta
Revenue$1.04B
Cost of Revenue$405.00M
Gross Profit$634.00M
Operating Expenses$359.00M
Operating Income$275.00M
Interest Expense$37.00M
Net Income$247.00M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)496.03M
Shares Outstanding (Diluted)501.08M

Key Highlights

  • 1Net income attributable to Nasdaq increased 39.5% year-over-year to $247 million.
  • 2Diluted EPS grew 41.0% to $1.48, exceeding analyst expectations.
  • 3Total revenues decreased 4.8% to $1,039 million, mainly due to lower Market Services revenue.
  • 4Operating expenses decreased by 8.7% to $359 million, showcasing effective cost management.
  • 5The company recognized a $27 million pre-tax gain from the divestiture of its BWise enterprise governance, risk and compliance software platform.
  • 6Net income from unconsolidated investees significantly increased due to an OCC-related adjustment.
  • 7Nasdaq declared a quarterly cash dividend of $0.44 per share, representing a 7.0% increase from the prior quarter.

Frequently Asked Questions

The increase in net income was primarily driven by a substantial rise in net income from unconsolidated investees, largely due to an adjustment related to Nasdaq's investment in OCC. Additionally, the company recognized a $27 million pre-tax gain from the divestiture of its BWise platform. These factors, combined with effective cost management leading to lower operating expenses, more than offset the decline in revenues.

The Market Services segment experienced a revenue decrease of 13.2% year-over-year, with revenues less transaction-based expenses declining by 6.8%. This was primarily due to lower U.S. industry trading volumes in equity derivatives and cash equities, reduced Section 31 pass-through fee revenue, and a lower European net capture rate in equity derivative trading and clearing. FICC revenues also declined due to lower U.S. fixed income trading volume.

Nasdaq acquired Cinnober in January 2019 for $219 million. The acquisition contributed to the 28.3% increase in Market Technology revenues, driven by an increase in software delivery projects, SaaS surveillance revenues, and the addition of Cinnober's operations. However, it also led to higher compensation and benefits expenses.

Nasdaq's debt obligations decreased by approximately $264 million sequentially, primarily due to repayments of long-term debt and commercial paper. The company had $1,239 million in short-term debt and $2,328 million in long-term debt as of March 31, 2019. Nasdaq has a $1 billion revolving credit facility, of which $459 million was available as of the reporting date, indicating a healthy liquidity position to fund operations, capital expenditures, and dividends.