Nasdaq Reports Fourth Quarter and Full Year 2018 Results; Delivers Strong Revenue Growth in 2018

• 2018 net revenues¹ were $2,526 million, an increase of 5% compared to 2017, resulting from 8% organic growth partially offset by a 3% reduction from the net impact of the divestiture and acquisition of businesses.
• Fourth quarter 2018 net revenues were $645 million, an increase of 2% compared to the prior year period, with 11% organic revenue growth partially offset by a 7% reduction from the net impact of the divestiture and acquisition of businesses and a 2% reduction from unfavorable changes in foreign exchange rates.
• 2018 GAAP diluted EPS was $2.73, compared to $4.30 in 2017, while fourth quarter of 2018 GAAP diluted loss per share was $0.27 compared to diluted EPS of $1.45 in the fourth quarter of 2017.  In the fourth quarter of 2018, we finalized the provisional tax estimate related to the Tax Cuts and Jobs Act, resulting in a $289 million non-cash charge.
• 2018 non-GAAP diluted EPS² was $4.84, a 20% increase compared to the prior year, while fourth quarter non-GAAP diluted EPS was $1.26, an increase of 21% compared to $1.04 in the fourth quarter of 2017.
• The company is announcing an offer to acquire Oslo Børs VPS and combine it with Nasdaq's leading Nordic markets.
• During 2018, the company returned $674 million to shareholders, including repurchases of common shares valued at $394 million and $280 million in dividends.

NEW YORK, Jan. 30, 2019 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the fourth quarter and full year 2018.

2018 net revenues were $2,526 million, an increase of $115 million, or 5%, from $2,411 million in the prior year period.  The full year increase in net revenues included a $188 million increase due to organic growth, a $59 million positive impact from the inclusion of revenues from the acquisition of eVestment net of a purchase price adjustment on deferred revenue, and a $7 million favorable impact from changes in foreign exchange rates, partially offset by $139 million negative impact from the divestiture of the Public Relations Solutions and Digital Media Services businesses.  Fourth quarter 2018 net revenues were $645 million, up $15 million from $630 million in the prior year period.  The fourth quarter increase in net revenues included a positive $67 million, or 11%, impact from organic growth, and a positive $6 million impact from the inclusion of revenues from the acquisition of eVestment, partially offset by a $50 million negative impact from the divestiture of the Public Relations Solutions and Digital Media Services businesses and a $8 million unfavorable impact from changes in foreign exchange rates.

“We are pleased by our progress this year, especially the strong organic revenue growth we achieved across all our business segments.  Importantly, our strategic direction coupled with a renewed client focus, has resulted in materially higher client engagement across all of our businesses,” said Adena Friedman, President and CEO, Nasdaq.

“As we begin 2019, we are continuing to execute on our strategy, first with the pivot to maximize opportunities as a technology and analytics provider through our acquisitions of Cinnober and Quandl and second by enhancing our marketplace core through our offer to combine Oslo Børs VPS’ leading Norwegian exchange and depository capabilities with our leading Nordic marketplace complex.  We believe these strategic acquisitions will be additive to our organic growth efforts and important drivers of the value we deliver to our clients and shareholders.”

GAAP operating expenses were $404 million in the fourth quarter of 2018, an increase of $14 million from $390 million in the fourth quarter of 2017.  The increase primarily reflects higher general, administrative and other expense, partially offset by lower merger and strategic initiatives expense and professional and contract services expense.

Non-GAAP operating expenses were $330 million in the fourth quarter of 2018, a decrease of $9 million, or 3%, compared to the fourth quarter of 2017.  This reflects a $5 million increase from the acquisition of eVestment and a $25 million organic expense increase, more than offset by a $32 million decrease due to the divestiture of the Public Relations Solutions and Digital Media Services businesses and a $7 million favorable impact from changes in foreign exchange rates.

"As we ended 2018 and began 2019, we have continued the deliberate strategic reallocation of our resources to support our largest growth opportunities, as evidenced by the acquisitions of Cinnober and Quandl, and the sale of our ownership stake in LCH Group Holdings Limited in the fourth quarter of 2018," said Michael Ptasznik, Executive Vice President and Chief Financial Officer, Nasdaq.  "While the acquisition of Oslo Børs VPS would require a temporary, moderate increase in leverage, it will not change our capital allocation priorities.  We remain dedicated to maintaining our investment grade rating, growing the dividend as our earnings increase, while continuing our share repurchase program and return on investment capital requirement target.”

On a GAAP basis, net loss for the fourth quarter of 2018 was $44 million, or a diluted loss per share of $0.27, compared with net income of $246 million, or $1.45 per diluted share, in the fourth quarter of 2017.  In the fourth quarter of 2017, we recorded an $89 million benefit for our provisional estimate of the impact of the Tax Cuts and Jobs Act.  We finalized the impact in the fourth quarter of 2018 based on updated information, including subsequent guidance issued by the U.S. Internal Revenue Service, and recorded a $289 million non-cash tax charge, reducing deferred tax assets relating to foreign currency translation.  This tax charge impacted GAAP diluted EPS by $1.76 per share.  Additionally, for the three months ended December 2018, we recorded a $23 million charge associated with the capital relief program relating to our Nordic clearing business, where we will allocate capital back to default fund participants. The capital relief program is in addition to any funds to be recovered from the defaulting member.

On a non-GAAP basis, net income for the fourth quarter of 2018 was $211 million, or $1.26 per diluted share, compared to $177 million, or $1.04 per diluted share, in the fourth quarter of 2017, representing a 21% increase in non-GAAP diluted earnings per share year over year.

At December 31, 2018, the company had cash and cash equivalents of $545 million and total debt of $3,831 million, resulting in net debt of $3,286 million.  This compares to total debt of $4,207 million and net debt of $3,830 million at December 31, 2017.

Repurchases of common stock totaled $394 million during 2018.  As of December 31, 2018, there was $332 million remaining under the board authorized share repurchase program.

INITIATING 2019 NON-GAAP EXPENSE AND TAX GUIDANCE³

The company is initiating its 2019 non-GAAP operating expense guidance of $1,325 to $1,375 million.  The guidance includes expenses associated with the acquisitions of Cinnober and Quandl.  Nasdaq expects its 2019 non-GAAP tax rate to be in the range of 25% to 27%.

BUSINESS HIGHLIGHTS

Market Services (39% of total net revenues) - Net revenues were $249 million in the fourth quarter of 2018, up $27 million, or 12%, when compared to the fourth quarter of 2017.

Corporate Services (20% of total net revenues) - Revenues were $133 million in the fourth quarter of 2018, up $2 million, or 2%, compared to the fourth quarter of 2017.

Information Services (29% of total net revenues) - Revenues were $187 million in the fourth quarter of 2018, up $31 million, or 20%, from the fourth quarter of 2017.

Market Technology (12% of total net revenues) - Revenues were $76 million in the fourth quarter of 2018, up $5 million, or 7%, from the fourth quarter of 2017.  The change reflects 8% organic growth due to increases in software delivery and support revenues and higher software as a service revenues, partially offset by lower change requests and advisory revenues and an unfavorable impact from changes in foreign exchange rates of 1%. In 2018, Market Technology revenues increased 9% compared to 2017, resulting from 10% organic growth partially offset by a 1% reduction from unfavorable impact from changes in foreign exchange rates.

CORPORATE HIGHLIGHTS

Nasdaq to make offer to acquire Oslo Børs VPS with commitment of unanimous support from Oslo Børs VPS board of directors.  Nasdaq AB, a subsidiary of Nasdaq Inc., announced today that it will make a public offer to acquire all of the issued shares of Oslo Børs VPS Holding ASA at NOK 152 per share.  Oslo Børs VPS’ board of directors has committed to unanimously recommend that its shareholders accept the offer.  The proposed transaction is expected to achieve Nasdaq’s stated return on invested capital requirement of at least 10% within 3-5 years, and is expected to be accretive to non-GAAP EPS within 12 months of closing.  The proposed transaction is consistent with Nasdaq’s existing capital deployment priorities including its organic business investment, shareholder capital return, and leverage objectives.

• Nasdaq's advances its strategic pivot with the acquisitions of Cinnober and Quandl.  In January 2019, Nasdaq completed its public cash offer to acquire the shares of Cinnober, a Swedish financial technology provider to brokers, exchanges and clearinghouse.  The acquisition strengthens Nasdaq's position as one of the world's leading market infrastructure providers.  Additionally, during the fourth quarter of 2018, Nasdaq acquired Quandl, a leading provider of alternative and core data to more than 30,000 active users.  Quandl offers a global database of alternative, financial and other types of data, which are being used in increasingly sophisticated, technology enabled investment decision processes.  Nasdaq is integrating Quandl with its Analytics Hub alternative business.
   
• The Nasdaq Stock Market led U.S. exchanges for IPOs in a busy 2018, while Nasdaq's European listings grew to over 1,000 issuers for the first time.The Nasdaq Stock Market welcomed 67 new listings in the fourth quarter of 2018, including 41 IPOs, a 73% win rate in the quarter.  Highlights from the quarter included the IPOs of StoneCo Ltd, Upwork and Moderna, the largest VC-backed biotech IPO in U.S. history, as well as listing switches to The Nasdaq Stock Market by Regency Centers, Alliant Energy, Teradyne and WeightWatchers.  Over the course of 2018, The Nasdaq Stock Market welcomed 186 IPOs, a 72% win rate, resulting in the sixth consecutive year of leadership in the number of IPOs in the U.S.  During 2018, The Nasdaq Stock Market welcomed 17 corporate listings switches representing $111 billion in market capitalization.  Nasdaq's Nordic, Baltic and First North exchanges added 73 new listings, ending the year with over 1,000 listings for the first time.
   
• Market Services delivered record net revenue in 2018 through a combination of strong competitive positioning and improved industry volumes.  Market Services set a new annual record with net revenues of $958 million in 2018 including all-time highs in both cash equities and equity derivatives.  In 2018, Nasdaq’s Market Services segment maximized the opportunity of multi-year industry market volume highs in U.S. equity options in part because of the successful 2016-2017 integration of the ISE options exchange, and in U.S. equities through increases in market share to 19.5%⁴.  On the innovation side, Market Services clients in 2018 benefited from new functionality such as M-ELO order types and a refined closing cross to provide more flexibility in the U.S. equity market, Auction on Demand functionality in the Nordic equities market, and the upgrade of the Nasdaq Fixed Income (NFI) platform to the Nasdaq Financial Framework.
   
• Market Technology continues seeing strong client traction as it implements the next-generation Nasdaq Financial Framework technology platform.  In 2018, Nasdaq signed 12 new market infrastructure operator clients for its core trade matching, risk management and post trade systems, and surveillance, as well as 20 new buy and sell side surveillance customers.  New contracts signed during the fourth quarter of 2018 included an agreement with The Nigerian Stock Exchange to extend the licensing of Nasdaq’s matching engine and surveillance technology, and agreements with the Jamaica Stock Exchange and the Cyberdyne Tech Exchange in Singapore for both matching and surveillance solutions.  Among non-financial markets customers, Nasdaq signed a deal with ATG, a Swedish race and gaming operator, to integrate our Longitude and new markets technology into their pari-mutuel betting platform.
   
• Index revenues reached a quarterly record on higher exchange traded product AUM and futures contracts tracking Nasdaq indexes, while Nasdaq announced the extension of the exclusive Nasdaq-100 futures license with CME Group through 2029.  Overall AUM in ETPs benchmarked to Nasdaq's proprietary index families totaled $172 billion as of December 31, 2018, up 3% compared to December 31, 2017.  The December 31, 2018 total AUM included $74 billion, or 43%, tracking smart beta indexes.  At December 31, 2018, the number of ETPs tracking Nasdaq-licensed indexes increased 13% to 365 compared to 324 at December 31, 2017.  During the fourth quarter of 2018, a record 45 million futures contracts tied to the Nasdaq-100 index traded, an increase of 137% versus the fourth quarter of 2017.

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¹ Represents revenues less transaction-based expenses.
² Refer to our reconciliations of U.S. GAAP to non-GAAP net income (loss), diluted earnings (loss) per share, operating income and operating expenses, included in the attached schedules.
³ U.S. GAAP operating expense is 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.
⁴ During 2018, the combined U.S. cash equities matched market share executed on Nasdaq's exchanges consisted of 15.9% at The Nasdaq Stock Market, 2.8% at Nasdaq BX and 0.8% at Nasdaq PSX.

ABOUT NASDAQ

Nasdaq (Nasdaq: NDAQ) is a leading global provider of trading, clearing, exchange technology, listing, information and public company services. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 100 marketplaces in 50 countries. Nasdaq is home to over 4,000 total listings with a market value of approximately $12 trillion. To learn more, visit business.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. Investors should not rely on any single financial measure when evaluating our business. 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, 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, and (v) 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. These disclosures will be included on Nasdaq’s website under “Investor Relations.”

MEDIA RELATIONS CONTACT:

Allan Schoenberg
+1.212.231.5534
allan.schoenberg@nasdaq.com

INVESTOR RELATIONS CONTACT:

Ed Ditmire, CFA
+1.212.401.8737
ed.ditmire@nasdaq.com

NDAQF

Source: Nasdaq, Inc.