01—Abstract
Summary
Summary of the 10-Q filed August 5, 2020. Cited figures are marked; the original filing is the authoritative source.
Nasdaq, Inc. reported strong financial performance for the second quarter and first half of 2020, with significant revenue growth driven by robust trading volumes in its Market Services segment.
Revenues less transaction-based expenses increased by 12.2%a and 11.4% for the three and six months ended June 30, 2020, respectively, compared to the prior year. This growth was primarily fueled by increased equity derivative and cash equity trading volumes, benefiting from market volatility and sector rotations related to the COVID-19 pandemic. The company also saw positive contributions from its Information Services and Market Technology segments.
Despite operating expenses rising by 4.6%b and 11.6% for the respective periods, largely due to increased compensation and benefits and higher computer operations costs, Nasdaq's operating income saw a substantial increase of 23.0% and 11.1%. Net income attributable to Nasdaq grew by 38.5% and 5.5% for the three and six months, respectively. The company's balance sheet remains strong, with significant improvements in working capital and substantial cash and cash equivalents.
Nasdaq also actively managed its debt, repurchasing commercial paper and repaying portions of its credit facility, while maintaining a consistent dividend payout. The company anticipates continued elevated trading volumes, though acknowledges potential headwinds from ongoing economic uncertainty.
02—Key points
Key Highlights
- Revenue growth driven by strong Market Services performance, with revenues less transaction-based expenses up 12.2% and 11.4% for the three and six months ended June 30, 2020, respectively.
- Operating income increased significantly by 23.0% and 11.1% for the three and six months ended June 30, 2020, respectively, indicating improved profitability.
- Net income attributable to Nasdaq saw a substantial increase of 38.5% for the quarter and 5.5% for the six-month period, showcasing strong bottom-line performance.
- The company's balance sheet strengthened, with cash and cash equivalents increasing to $711 million as of June 30, 2020, and working capital significantly improved.
- Nasdaq actively managed its debt, repaying commercial paper and strengthening its liquidity position amidst COVID-19 uncertainties.
- The Information Services segment showed resilience, with Index revenues up 23.6% and Investment Data & Analytics revenues up 12.8% in the second quarter.
- Market Technology segment revenue increased by 6.3% in the quarter, driven by SaaS surveillance revenues and software delivery projects.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Nasdaq, Inc. kept $0.17.
- Revenue$1.40B100.0%
- Cost of revenue−$699.0M50.0%
- Gross profit$699.0M50.0%
- Operating costs−$384.0M27.5%
- Operating income$315.0M22.5%
- Interest, other & tax−$74.0M5.3%
- Net income$241.0M17.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed August 5, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $1.40B$1.06B | +31.8% |
| Cost of Revenue | $699.00M$438.00M | +59.6% |
| Gross Profit | $699.00M$623.00M | +12.2% |
| Operating Expenses | $384.00M$367.00M | +4.6% |
| Operating Income | $315.00M$256.00M | +23.0% |
| Interest Expense | $26.00M$31.00M | −16.1% |
| Net Income | $241.00M$174.00M | +38.5% |
| EPS (Basic) | $0.49$0.35 | +40.0% |
| EPS (Diluted) | $0.48$0.35 | +39.4% |
| Shares Outstanding (Basic) | 492.30M496.79M | −0.9% |
| Shares Outstanding (Diluted) | 498.22M501.12M | −0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of Nasdaq's revenue growth in Q2 2020?
The primary driver of Nasdaq's revenue growth in the second quarter of 2020 was the strong performance of its Market Services segment, which benefited from significantly higher trading volumes in both equity derivatives and cash equities. This surge in activity was attributed to market volatility and sector rotations influenced by the COVID-19 pandemic.
How did COVID-19 impact Nasdaq's financial results for the period?
While the pandemic created economic uncertainty, Nasdaq reported that its operations experienced minimal disruption. Unusually high trading volumes in the Market Services segment positively impacted results. However, the company noted that extended economic downturns could potentially impact demand for some services in the Corporate Services and Market Technology segments, and sales cycles have lengthened due to the virtual operating environment. Nasdaq also took proactive steps to strengthen its liquidity by borrowing under its credit facility and issuing new debt.
What is the status of Nasdaq's debt and liquidity?
Nasdaq has a healthy liquidity position, with cash and cash equivalents of $711 million as of June 30, 2020. The company actively managed its debt obligations, including repaying commercial paper and portions of its credit facility. It also issued new long-term debt. Nasdaq remains in compliance with its debt covenants and has sufficient resources to fund its operations, capital expenditures, and shareholder returns.
How did the different business segments perform?
Market Services was the strongest performer, driven by high trading volumes. Information Services showed resilience, with notable growth in Index and Investment Data & Analytics revenues. Corporate Services saw modest growth, with Listing Services revenues stable and Corporate Solutions revenues increasing. The Market Technology segment also reported revenue growth, supported by SaaS surveillance and software projects.
06—Continue