01—Abstract
Summary
Summary of the 10-Q filed May 6, 2020. Cited figures are marked; the original filing is the authoritative source.
Nasdaq, Inc. reported solid revenue growth for the first quarter of 2020, with revenues less transaction-based expenses increasing by 10.6% year-over-year to $701 milliona.
This growth was primarily driven by a significant surge in the Market Services segment, which saw revenues increase by 46.2% to $933 millionb, largely due to heightened trading volumes in cash equities and equity derivatives amidst market volatility. Despite the revenue growth, net income attributable to Nasdaq decreased by 17.8% to $203 million, or $1.22 per diluted share, primarily impacted by higher operating expenses, including restructuring charges and a loss on early debt extinguishment, as well as a decrease in net income from unconsolidated investees. The company also highlighted its strong liquidity position, with cash and cash equivalents significantly increasing to $1,015 million, bolstered by debt issuances and credit facility utilization in response to COVID-19 uncertainties.
02—Key points
Key Highlights
- Total revenues less transaction-based expenses grew 10.6% to $701 million, driven by strong performance in Market Services.
- Market Services segment revenue increased 46.2% to $933 million, fueled by higher trading volumes in equity derivatives and cash equities.
- Net income attributable to Nasdaq decreased by 17.8% to $203 million, impacted by increased operating expenses and lower equity method investment income.
- Diluted Earnings Per Share (EPS) declined to $1.22 from $1.48 in the prior year period.
- Cash and cash equivalents significantly increased to $1,015 million, indicating a strong liquidity position.
- The company incurred $12 million in restructuring charges related to technology platform transitions and business realignments.
- Nasdaq experienced an increase in operating expenses, up 18.7% to $426 million, primarily due to higher compensation, general administrative costs, and restructuring charges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Nasdaq, Inc. kept $0.15.
- Revenue$1.35B100.0%
- Cost of revenue−$652.0M48.2%
- Gross profit$701.0M51.8%
- Operating costs−$426.0M31.5%
- Operating income$275.0M20.3%
- Interest, other & tax−$72.0M5.3%
- Net income$203.0M15.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 6, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $1.35B$1.04B | +30.2% |
| Cost of Revenue | $652.00M$405.00M | +61.0% |
| Gross Profit | $701.00M$634.00M | +10.6% |
| Operating Expenses | $426.00M$359.00M | +18.7% |
| Operating Income | $275.00M$275.00M | 0.0% |
| Interest Expense | $26.00M$37.00M | −29.7% |
| Net Income | $203.00M$247.00M | −17.8% |
| EPS (Basic) | $0.41$0.50 | −17.4% |
| EPS (Diluted) | $0.41$0.49 | −17.6% |
| Shares Outstanding (Basic) | 494.59M496.03M | −0.3% |
| Shares Outstanding (Diluted) | 500.33M501.08M | −0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Nasdaq's revenue growth in Q1 2020?
The primary driver of Nasdaq's revenue growth in Q1 2020 was the Market Services segment, which benefited from significantly higher trading volumes in U.S. equity derivative and cash equity markets due to increased market volatility.
Why did net income decrease despite revenue growth?
Net income decreased due to a combination of factors including a substantial increase in operating expenses, which were higher by 18.7% year-over-year. This increase was driven by compensation and benefits, general, administrative and other expenses (including a loss on early debt extinguishment and charitable contributions), and restructuring charges. Additionally, net income from unconsolidated investees decreased significantly.
How did the company manage its liquidity in light of COVID-19 uncertainties?
Nasdaq strengthened its liquidity by borrowing $799 million under its revolving credit facility and issuing new long-term debt. The company also managed its cash and cash equivalents, which increased substantially to $1,015 million as of March 31, 2020.
What is the impact of the restructuring charges?
Nasdaq incurred $12 million in restructuring charges during the quarter, primarily related to asset impairments, accelerated depreciation, and consulting services associated with transitioning technology platforms and realigning business areas. These charges are part of a larger restructuring plan expected to incur $90-$100 million over two years.
06—Continue