Nasdaq Reports First Quarter 2020 Results, Adapts to COVID-19 While Delivering for Clients

• Nasdaq thanks all front-line workers who are committed to providing essential services to those impacted by the COVID-19 pandemic. The company’s relief efforts will support small businesses, food provisioning to vulnerable communities, and the safety of healthcare workers.
• First quarter 2020 net revenues¹ were $701 million, an increase of 11% over the first quarter of 2019. Compared to the prior year period, revenues in the non-trading segments² increased 7%, primarily due to organic growth, while Market Services revenues rose 21%, due to historic trading volumes primarily in the second half of the first quarter.
• The GAAP operating margin was 39% in the first quarter of 2020, down from 43% in the prior year period, due to bond refinancing costs, while the non-GAAP operating margin³ of 52% increased from 49% in the prior year.
• First quarter 2020 GAAP diluted earnings per share was $1.22, down from $1.48 in the first quarter of 2019, with the decrease largely due to bond refinancing costs in the first quarter of 2020, and a gain on the sale of a business and income from our equity interest in an equity method investment in the first quarter of 2019. First quarter 2020 non-GAAP earnings per share was $1.50, compared to $1.22 in the first quarter of 2019.
• During the first quarter of 2020, the company strengthened its balance sheet by increasing cash reserves to address any potential short-term funding risks due to the effects of COVID-19. Additionally, Nasdaq refinanced all of its 3.875% senior notes due 2021, extending our nearest bond maturity to May 2023.

NEW YORK, April 22, 2020 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the first quarter of 2020. 

First quarter 2020 net revenues were $701 million, an increase of $67 million, or 11%, from $634 million in the prior year period. Net revenues reflected a $51 million positive impact from organic growth in the Market Services segment, a $30 million positive impact from organic growth in the non-trading segments and a $2 million increase from the inclusion of revenues from acquisitions, partially offset by a $10 million negative impact from divestitures and a $6 million unfavorable impact from changes in exchange rates.

“The COVID-19 pandemic’s human, health, societal, and economic costs have been severe and will have lasting implications on our global community,” said Adena Friedman, President and CEO, Nasdaq. “At the same time the crisis has highlighted how humanity manifests itself in inspirational, powerful responses. The unflinching resolve of healthcare and other essential workers, meal delivery efforts and support of small businesses, coupled with the overarching creativity of the human spirit in identifying new ways of working, supporting and caring for each other has been truly awe-inspiring."

Ms. Friedman continued: "I am incredibly proud of the way our Nasdaq team has worked diligently under such unique conditions to sustain uninterrupted access to capital for issuers and investors, as well as supporting our technology clients and their respective economies. Our ability to scale reliably to meet unprecedented trading activity around the world, while effectively serving thousands of clients in our non-trading segments, demonstrates the strength of our business, operating, and financial models. While we continue to evaluate the evolving challenges of the COVID-19 pandemic, we are focused on delivering for all of our stakeholders and investing deliberately and carefully to ensure the company is best positioned to serve our clients’ evolving long-term needs."

GAAP operating expenses were $426 million in the first quarter of 2020, an increase of $67 million from $359 million in the first quarter of 2019. The increase primarily reflects higher general, administrative and other expense, higher compensation expense and higher restructuring charges, partially offset by lower professional fees compared to the first quarter of 2019. The increase in general, administrative and other expense primarily reflects costs related to bond refinancing costs.

Non-GAAP operating expenses were $336 million in the first quarter of 2020, an increase of $14 million, or 4%, compared to the first quarter of 2019. This reflects a $23 million organic expense increase, partially offset by a $5 million decline from the net impact of acquisitions and a divestiture and a $4 million favorable impact from changes in foreign exchange rates. The $23 million organic expense increase primarily reflects higher achievement within our performance-based compensation programs.

"Early in the first quarter, Nasdaq began adapting how and where we work to protect our people and ensure we are well positioned to meet our clients' needs. Effective continuity planning positioned us to realize the benefits of our financial model, with not only record net revenues and net income, but also strong operating leverage and cash flow generation," said Michael Ptasznik, Executive Vice President and Chief Financial Officer, Nasdaq. "Additionally, to prudently address COVID-19 crisis risks, the company took steps to strengthen its balance sheet. Specifically, Nasdaq refinanced certain bonds to lower interest costs and eliminated near-term bond maturities, and we increased cash on the balance sheet by drawing from our existing revolving credit facility to ensure short-term funding needs were insulated from volatile money markets. These prudent steps combined with Nasdaq's highly cash-generative business enabled the company to continue executing on our capital deployment plan, including investing for the future and returning capital to shareholders."

On a GAAP basis, net income in the first quarter of 2020 was $203 million, or diluted earnings per share of $1.22, compared to $247 million, or $1.48 per diluted share, in the first quarter of 2019.

On a non-GAAP basis, net income in the first quarter of 2020 was $251 million, or $1.50 per diluted share, compared to $204 million, or $1.22 per diluted share, in the first quarter of 2019.

At March 31, 2020, the company had cash and cash equivalents of $1,015 million and total debt of $4,108 million, resulting in net debt of $3,093 million. This compares to total debt of $3,387 million and net debt of $3,055 million at December 31, 2019. As of March 31, 2020, there was $510 million remaining under the board authorized share repurchase program.

UPDATING 2020 NON-GAAP EXPENSE AND TAX GUIDANCE¹

The company is updating its 2020 non-GAAP operating expense guidance to the range of $1,320 to $1,370 million, principally to reflect the acquisitions of Solovis and OneReport during the first quarter of 2020. Nasdaq continues to expect its 2020 non-GAAP tax rate to be in the range of 25.5% to 27.5%.

BUSINESS HIGHLIGHTS

Market Services (40% of total net revenues) - Net revenues were $281 million in the first quarter of 2020, an increase of $48 million, or 21%, when compared to the first quarter of 2019.

Equity Derivative Trading and Clearing (13% of total net revenues) - Net equity derivative trading and clearing revenues were $94 million in the first quarter of 2020, up $22 million from the first quarter of 2019. The increase primarily reflects higher U.S. industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq’s exchanges and a lower U.S. net capture rate.

Cash Equity Trading (14% of total net revenues) - Net cash equity trading revenues were $98 million in the first quarter of 2020, up $29 million from the first quarter of 2019. The increase primarily reflects higher U.S. and European industry trading volumes and a higher U.S capture rate, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges. 

Fixed Income and Commodities Trading and Clearing (3% of total net revenues) - Net fixed income and commodities trading and clearing revenues were $17 million in the first quarter of 2020, down $2 million from the first quarter of 2019. The decrease was driven by the sale of the core assets of our NFX business and lower fixed income revenues, partially offset by higher European commodity products revenues.

Trade Management Services (10% of total net revenues) - Trade management services revenues were $72 million in the first quarter of 2020, down $1 million compared to the first quarter of 2019.

Corporate Services (18% of total net revenues) - Revenues were $128 million in the first quarter of 2020, up $7 million, or 6%, compared to the first quarter of 2019.

Listing Services (11% of total net revenues) - Listing services revenues were $75 million in the first quarter of 2020, up $4 million from the first quarter of 2019. The change primarily reflects higher listing revenues due to an increase in the total number of listed companies and annual renewal fees.

Corporate Solutions (7% of total net revenues) - Corporate solutions revenues were $53 million in the first quarter of 2020, an increase of $3 million from the first quarter of 2019 primarily due to an increase in governance solutions revenues and IR intelligence revenues.

Information Services (30% of total net revenues) - Revenues were $211 million in the first quarter of 2020, up $18 million, or 9%, from the first quarter of 2019.

Market Data (14% of total net revenues) - Market data revenues were $97 million in the first quarter of 2020, down $3 million from the first quarter of 2019, due to $5 million lower collections from under reported usage partially offset by organic growth in U.S. proprietary products.

Index (10% of total net revenues) - Index revenues were $73 million in the first quarter of 2020, up $19 million from the first quarter of 2019, primarily driven by higher licensing revenue from higher average assets under management (AUM) in exchange traded products (ETPs) linked to Nasdaq indexes, higher licensing revenue from futures trading linked to the Nasdaq 100 Index, and a $5 million collection related to prior period usage.

Investment Data & Analytics (6% of total net revenues) - Investment data & analytics revenues were $41 million in the first quarter of 2020, up $2 million from the first quarter of 2019, primarily due to growth in eVestment.

Market Technology (12% of total net revenues) - Revenues were $81 million in the first quarter of 2020, up $4 million, or 5%, from the first quarter of 2019. The increase is due to higher SaaS surveillance revenues and an increase in software delivery and support projects, partially offset by a decrease in change request revenues and an unfavorable impact from foreign exchange of $2 million.

CORPORATE HIGHLIGHTS

• Nasdaq pledges business and philanthropic support in response to COVID-19. In the first quarter of 2020, Nasdaq committed cash and in-kind donations totaling $6 million to COVID-19 response and relief efforts to help provide assistance to those who are most at risk. As part of Nasdaq's $6 million philanthropic commitment, a total cash donation of $5 million will be provided to the following programs: the Opportunity Fund’s Small Business Relief Fund to support small business owners; the World Central Kitchen’s #ChefsForAmerica relief efforts; and the World Health Organization’s COVID-19 Solidarity Response Fund. To support local health care providers, Nasdaq donated 12,000 face masks to the Greater New York Hospital Association. Additionally, approximately $1 million of advertising time on the Nasdaq MarketSite Tower in Times Square is reserved for public service address messages.
   
• Nasdaq's exchanges delivered resilient performance as market activity and net revenue each set new highs. Nasdaq is committed to resilient markets and maintains an operational excellence program to ensure capacity, performance and reliability of the company's trading systems. All of Nasdaq's electronically operated equities, options and fixed income markets operated at high performance levels during the surge of trading volume related to the COVID-19 pandemic. During March 2020, message traffic increased approximately two times versus March 2019 in Nasdaq's U.S. equities marketplaces and increased approximately three times in Nasdaq's U.S. options markets compared to the prior year period. Additionally, Nasdaq's combined U.S. equities and options markets as well as its Nordic equities marketplaces set monthly company records for trading volumes in March 2020.  Net revenue of $281 million in the first quarter of 2020 set a new record in Market Services.
   
• Nasdaq's organic growth in non-trading segments was broad based, driven by gains in each of the Market Technology, Information Services and Corporate Services segments in the first quarter of 2020. Market Technology grew Annualized Recurring Revenue¹ (ARR) to $257 million, up 9% compared to the prior year period. Information Services set a new quarterly high in revenues, due to year over year growth in AUM in licensed ETPs, as well as record volumes in licensed index futures. Corporate Services welcomed 27 U.S. IPOs in the first quarter of 2020, representing 69% of U.S. IPOs, the majority of U.S. IPO capital raised at 58%, and the largest IPO this year to date: PPD, Inc.
   
• Nasdaq expands client offering through the acquisitions of investment data firm Solovis and ESG specialist OneReport. Nasdaq announced the acquisition of Solovis, which offers multi-asset class, public and private market portfolio management, analytics and reporting tools used by institutional investors and consultants. Solovis solutions expand on the capabilities of Nasdaq's eVestment group, a leading data and analytics solution facilitating institutional asset allocation research and decisions. Nasdaq also announced the acquisition of OneReport, a privately-held provider of corporate responsibility and environmental, social and governance (ESG) data management and report services. OneReport brings efficient, effective reporting tools to the expanding set of ESG expertise and solutions Nasdaq delivers to corporate issuers and other investment community stakeholders.

ABOUT NASDAQ

Nasdaq (Nasdaq: NDAQ) is a global technology company serving the capital markets and other industries. Our diverse offering of data, analytics, software and services enables clients to optimize and execute their business vision with confidence. To learn more about the company, technology solutions and career opportunities, visit us on LinkedIn, on Twitter @Nasdaq, or at www.nasdaq.com.

NON-GAAP INFORMATION

In addition to disclosing results determined in accordance with U.S. GAAP, Nasdaq also discloses certain non-GAAP results of operations, including, but not limited to, net income attributable to Nasdaq, diluted earnings per share, operating income, and operating expenses, that include certain adjustments or exclude certain charges and gains that are described in the reconciliation table of U.S. GAAP to non-GAAP information provided at the end of this release. Management uses this non-GAAP information internally, along with U.S. GAAP information, in evaluating our performance and in making financial and operational decisions. We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of results as the items described below in the reconciliation tables do not reflect ongoing operating performance.

These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces its usefulness as a comparative measure. Investors should not rely on any single financial measure when evaluating our business. This information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this earnings release. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliations, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.

We understand that analysts and investors regularly rely on non-GAAP financial measures, such as non-GAAP net income attributable to Nasdaq, non-GAAP diluted earnings per share, non-GAAP operating income and non-GAAP operating expenses to assess operating performance. We use these measures because they highlight trends more clearly in our business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance.

Foreign exchange impact: In countries with currencies other than the U.S. dollar, revenues and expenses are translated using monthly average exchange rates. Certain discussions in this release isolate the impact of year-over-year foreign currency fluctuations to better measure the comparability of operating results between periods. Operating results excluding the impact of foreign currency fluctuations are calculated by translating the current period’s results by the prior period’s exchange rates.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
                       
Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties.  Nasdaq cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information.  Such forward-looking statements include, but are not limited to (i) projections relating to our future financial results, total shareholder returns, growth, trading volumes, products and services, ability to transition to new business models, order backlog, taxes and achievement of synergy targets, (ii) statements about the closing or implementation dates and benefits of certain acquisitions and other strategic, restructuring, technology, de-leveraging and capital allocation initiatives, (iii) statements about our integrations of our recent acquisitions, (iv) statements relating to any litigation or regulatory or government investigation or action to which we are or could become a party, (v) the potential impact of the COVID-19 pandemic on our business, operations, results of operations, financial condition, workforce or the operations or decisions of our customers, suppliers or business partners, and (vi) other statements that are not historical facts.  Forward-looking statements involve a number of risks, uncertainties or other factors beyond Nasdaq’s control.  These factors include, but are not limited to, Nasdaq’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in Nasdaq’s filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on Nasdaq’s investor relations website at http://ir.nasdaq.com and the SEC’s website at www.sec.gov.  Nasdaq undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

WEBSITE DISCLOSURE

Nasdaq intends to use its website, ir.nasdaq.com, as a means for disclosing material non-public information and for complying with SEC Regulation FD and other disclosure obligations.

-NDAQF-

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¹Represents revenues less transaction-based expenses.  
²Constitutes revenues from Market Technology, Information Services and Corporate Services segments.
³Refer to our reconciliations of U.S. GAAP to non-GAAP net income, diluted earnings per share, operating income and operating expenses, included in the attached schedules.
⁴U.S. GAAP operating expense and tax rate guidance are not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors including the unpredictability in the movement in foreign currency rates, as well as future charges or reversals outside of the normal course of business.
⁵Annualized Recurring Revenue (ARR) for a given period is the annualized revenue of active Market Technology support and SaaS subscription contracts. ARR is currently one of our key performance metrics to assess the health and trajectory of our business. ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.