01—Abstract
Summary
Summary of the 10-Q filed May 1, 2019. Cited figures are marked; the original filing is the authoritative source.
Nasdaq, Inc. reported total revenues of $1,039 milliona 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 millionb, 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%c 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.
02—Key points
Key Highlights
- Net income attributable to Nasdaq increased 39.5% year-over-year to $247 million.
- Diluted EPS grew 41.0% to $1.48, exceeding analyst expectations.
- Total revenues decreased 4.8% to $1,039 million, mainly due to lower Market Services revenue.
- Operating expenses decreased by 8.7% to $359 million, showcasing effective cost management.
- The company recognized a $27 million pre-tax gain from the divestiture of its BWise enterprise governance, risk and compliance software platform.
- Net income from unconsolidated investees significantly increased due to an OCC-related adjustment.
- Nasdaq declared a quarterly cash dividend of $0.44 per share, representing a 7.0% increase from the prior quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Nasdaq, Inc. kept $0.24.
- Revenue$1.04B100.0%
- Cost of revenue−$405.0M39.0%
- Gross profit$634.0M61.0%
- Operating costs−$359.0M34.6%
- Operating income$275.0M26.5%
- Interest, other & tax−$28.0M2.7%
- Net income$247.0M23.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 1, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $1.04B$1.15B | −9.7% |
| Cost of Revenue | $405.00M$485.00M | −16.5% |
| Gross Profit | $634.00M$666.00M | −4.8% |
| Operating Expenses | $359.00M$393.00M | −8.7% |
| Operating Income | $275.00M$273.00M | +0.7% |
| Interest Expense | $37.00M$38.00M | −2.6% |
| Net Income | $247.00M$177.00M | +39.5% |
| EPS (Basic) | $0.50$0.35 | +40.6% |
| EPS (Diluted) | $0.49$0.35 | +41.0% |
| Shares Outstanding (Basic) | 496.03M500.76M | −0.9% |
| Shares Outstanding (Diluted) | 501.08M506.98M | −1.2% |
05—Questions
Frequently Asked Questions
What drove the significant increase in net income despite a decrease in total revenue?
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.
How has Nasdaq's Market Services segment performed compared to the previous year?
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.
What is the impact of the Cinnober acquisition on Nasdaq's financial results?
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.
How is Nasdaq managing its debt obligations and liquidity?
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.
06—Continue