10-QPeriod: Q1 FY2020

NASDAQ, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 6, 2020For Securities:NDAQ

Summary

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 million. This growth was primarily driven by a significant surge in the Market Services segment, which saw revenues increase by 46.2% to $933 million, 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.

Financial Highlights

57 data points
Beta

Revenue

$1.35B

51.8% Gross Margin

Net Income

$203.00M

15.0% Net Margin

EPS (Diluted)

$0.41

Total Assets

$14.80B

Cash & Equivalents

$1.01B

Free Cash Flow

$354.00M

Financial Statements
Beta
Revenue$1.35B
Cost of Revenue$652.00M
Gross Profit$701.00M
Operating Expenses$426.00M
Operating Income$275.00M
Interest Expense$26.00M
Net Income$203.00M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)494.59M
Shares Outstanding (Diluted)500.33M

Key Highlights

  • 1Total revenues less transaction-based expenses grew 10.6% to $701 million, driven by strong performance in Market Services.
  • 2Market Services segment revenue increased 46.2% to $933 million, fueled by higher trading volumes in equity derivatives and cash equities.
  • 3Net income attributable to Nasdaq decreased by 17.8% to $203 million, impacted by increased operating expenses and lower equity method investment income.
  • 4Diluted Earnings Per Share (EPS) declined to $1.22 from $1.48 in the prior year period.
  • 5Cash and cash equivalents significantly increased to $1,015 million, indicating a strong liquidity position.
  • 6The company incurred $12 million in restructuring charges related to technology platform transitions and business realignments.
  • 7Nasdaq experienced an increase in operating expenses, up 18.7% to $426 million, primarily due to higher compensation, general administrative costs, and restructuring charges.

Frequently Asked Questions

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.

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.

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.

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.