Nasdaq Reports Second Quarter 2023 Results; Consistent Execution Drives Solid Revenue Growth

NEW YORK, July 19, 2023 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the second quarter of 2023.

• Second quarter 2023 net revenues¹ increased 4% compared to the second quarter of 2022. Solutions businesses² revenues increased 6% with organic growth³ also at 6%.
  
• Annualized Recurring Revenue (ARR)⁴ increased 6% compared to the second quarter of 2022. Annualized SaaS revenues increased 11% and represented 36% of ARR.
  
• Anti-Financial Crime revenue increased 19% compared to the second quarter of 2022. Large financial institutions are accelerating their adoption of Verafin’s fraud detection and anti-money laundering solutions, including the previously announced signing of two Tier 1 clients and two Tier 2 clients in the second quarter.
  
• Second quarter 2023 GAAP diluted earnings per share decreased 13% compared to the second quarter of 2022. Second quarter 2023 non-GAAP³ diluted earnings per share increased 3% compared to the second quarter of 2022.
  
• The company returned $109 million to shareholders in the second quarter of 2023 through dividends.

Second Quarter 2023 Highlights

    ^{*Net revenues include Other revenues of $1 million in the second quarter of 2023 and $4 million in the second quarter 2022.}

Adena Friedman, Chair and CEO said, “Nasdaq achieved another quarter of solid financial results in an uncertain environment as we took a significant step to expand our ability to serve our financial clients in solving their most complex operational challenges.

Our planned acquisition of Adenza represents another critical step in our multi-year transformation to become a leading technology partner to the financial system, with a specific focus on managing liquidity and capital risk, reducing financial crime, and meeting regulatory obligations. Our goal is to deliver mission-critical platforms that enhance liquidity, transparency, and integrity of the global financial system.”

Ann Dennison, Executive Vice President and CFO said, “Our solid financial performance in the second quarter reflects the durability and recurring nature of our business and the resilient demand for our diversified set of client solutions.

In June, we secured $5 billion in bond financing for the Adenza acquisition at favorable rates and saw exceptional demand for our multi-currency global debt offerings. Our consistent cash flow generation makes Nasdaq well positioned to execute our deleveraging plan while making focused, organic investments that advance our strategy, while executing our dividend growth and share repurchase strategies.”

FINANCIAL REVIEW

• Second quarter 2023 net revenues were $925 million, an increase of $32 million, or 4%, from $893 million in the prior year period. Net revenues reflected a $36 million, or 4%, positive impact from organic growth, including positive contributions from all segments, partially offset by a $2 million decrease from the impact of changes in FX rates and a $2 million decrease from the net impact of an acquisition and divestiture.

• Solutions Businesses revenues were $674 million in the second quarter of 2023, an increase of $37 million, or 6% with organic growth also of 6%. ARR, which reflects the majority of the Solutions Businesses revenues and excludes the AUM and transaction licensing components of Index, increased 6% from the prior year period.

• Trading Services net revenues were $250 million in the second quarter of 2023, a decrease of $2 million, or 1%. The decrease reflects flat organic growth and a $2 million negative impact from changes in FX rates.

• Second quarter 2023 GAAP operating expenses increased $62 million, or 13%, versus the prior year period. The increase primarily reflects higher merger and strategic initiatives expense related to the Adenza acquisition, higher restructuring expenses associated with the launch of our divisional alignment program in the fourth quarter of 2022, and higher employee compensation costs, partially offset by lower general and administrative expense.

• Second quarter 2023 non-GAAP operating expenses increased $28 million, or 7% versus the prior year period. The increase primarily reflects increased expenses associated with the continued investment in our people and our businesses to drive long term growth, partially offset by changes in FX rates.

• The company did not repurchase any of its common stock during the second quarter of 2023. As of June 30, 2023, there was $491 million remaining under the board authorized share repurchase program.
  

2023 EXPENSE AND TAX GUIDANCE UPDATE⁵

• The company is updating its 2023 non-GAAP operating expense guidance to a range of $1,785 million to $1,815 million. Nasdaq expects its 2023 non-GAAP tax rate to be in the range of 24% to 26%.
  

STRATEGIC AND BUSINESS UPDATES

• Nasdaq announced the acquisition of Adenza. In June, Nasdaq announced it entered into a definitive agreement to acquire Adenza for $10.5 billion in cash and stock. The transaction supercharges Nasdaq’s ability to become a leading provider of capital markets risk and regulatory technology. Adenza operates two leading software platforms: Calypso’s front-to-back suite of capital markets risk management, treasury, cash, collateral management, and post-trade solutions; and AxiomSL’s regulatory reporting, global shareholder disclosure, capital and liquidity management, transaction and ESG reporting solutions. Adenza expands Nasdaq’s serviceable addressable market by approximately 40% by adding a solidly expanding market opportunity with powerful secular growth drivers across regulatory and market reforms, digitization and modernization, and vendor simplification as financial institutions move from in-house to trusted-partner solutions.
  
• Nasdaq secured approximately $5 billion in financing for the proposed acquisition of Adenza through an oversubscribed debt offering. Nasdaq secured financing through a successful bond issuance of $4.25 billion in US dollar denominated debt across 2, 5, 10, 30 and 40 year terms and a 750 million Euro denominated 8-year bond with an attractive weighted average interest rate of just under 5.5%.
  
• In Marketplace Technology, two leading Latin American exchanges, DCV and B3, adopted Nasdaq’s post-trade technology. Chile’s central securities depository, Depósito Central de Valores (DCV), has launched Nasdaq Central Security Depository platform for issuing and settling digital securities. Separately, Nasdaq signed a 10-plus year partnership with Brazil’s largest stock exchange, Brasil, Bolsa, Balcão (B3), to build a next generation clearing solution under which B3 will migrate to Nasdaq’s real-time clearing platform and work as a product roadmap development partner.
  
• Nasdaq announced its plan to sell its European energy trading and clearing business. As part of its focus on prioritizing high value opportunities, Nasdaq entered into an agreement to sell its European energy trading and clearing business, subject to regulatory approval, but remains committed to being a leading European market operator.
  
• Verafin accelerated its large customer momentum signing four significant new bank clients in the second quarter. As we previously announced, Verafin signed two Tier 1 bank customers and signed two additional Tier 2 banks to its anti-fraud solutions. Verafin’s continuing growth with large financial institutions reflects the differentiated value of its SaaS enabled anti-money laundering and fraud prevention solutions data consortium.
  
• Nasdaq executed second-highest ever one-day Closing Cross volume in June. During the annual Russell U.S. indexes reconstitution, which occurred in late June, Nasdaq successfully executed approximately 2.6 billion shares representing $62 billion dollars in market value in 0.86 seconds across Nasdaq-listed securities. This represented the second highest volume of shares crossed since implementing the Closing Cross in 2004, demonstrating Nasdaq’s robust and resilient market infrastructure.
  
• Nasdaq maintained listings leadership in the U.S. The Nasdaq Stock Market led U.S. exchanges for operating company IPOs with a 77% total win rate during the first half of 2023. The Nasdaq Stock Market featured two of the three largest U.S. operating company IPOs by capital raised, with a strong pipeline of companies on file and committed to list with Nasdaq.
  

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¹ Represents revenues less transaction-based expenses.
² Constitutes revenues from our Capital Access Platforms and Anti-Financial Crime segments and Marketplace Technology business within Market Platforms.
³ Refer to our reconciliations of U.S. GAAP to non-GAAP net income, diluted earnings per share, operating income, operating expenses and organic impacts included in the attached schedules.
⁴ Annualized Recurring Revenue (ARR) for a given period is the annualized revenue derived from subscription contracts with a defined contract value. This excludes contracts that are not recurring, are one-time in nature or where the contract value fluctuates based on defined metrics. ARR is currently one of our key performance metrics to assess the health and trajectory of our recurring 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.
⁵ U.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.

ABOUT NASDAQ

Nasdaq (Nasdaq: NDAQ) is a global technology company serving corporate clients, investment managers, banks, brokers, and exchange operators as they navigate and interact with the global capital markets and the broader financial system. We aspire to deliver world-leading platforms that improve the liquidity, transparency, and integrity of the global economy. Our diverse offering of data, analytics, software, exchange capabilities, and client-centric 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, non-GAAP net income attributable to Nasdaq, non-GAAP diluted earnings per share, non-GAAP operating income, and non-GAAP 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 their 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 those noted above, 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.

Organic revenue and expense growth, organic change and organic impact are non-GAAP measures that reflect adjustments for: (i) the impact of period-over-period changes in foreign currency exchange rates, and (ii) the revenues, expenses and operating income associated with acquisitions and divestitures for the twelve month period following the date of the acquisition or divestiture. Reconciliations of these measures are described within the body of this release.

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.

Divisional alignment program: In October 2022, following our September announcement to realign our segments and leadership, we initiated a divisional alignment program with a focus on realizing the full potential of this structure. In connection with the program, we expect to incur pre-tax charges principally related to employee-related costs, consulting, asset impairments and contract terminations over a two-year period. We expect to achieve benefits in the form of both increased customer engagement and operating efficiencies. Costs related to the divisional alignment program will be recorded as “restructuring” in our consolidated statements of income. We will exclude charges associated with this program for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq's performance between periods.

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, dividend program, trading volumes, products and services, ability to transition to new business models or implement our new corporate structure, taxes and achievement of synergy targets, (ii) statements about the closing or implementation dates and benefits of certain acquisitions, divestitures and other strategic, restructuring, technology, environmental, 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, geopolitical instability, government and industry regulation, interest rate risk, U.S. and global competition. Additionally, with respect to Nasdaq’s proposed acquisition of Adenza, these risks and uncertainties include Nasdaq’s ability to secure regulatory approvals on the terms expected, in a timely manner or at all, Nasdaq’s ability to successfully integrate Adenza’s operations, Nasdaq’s ability to implement its plans, forecasts and other expectations with respect to Adenza’s business after the completion of the transaction and realize expected synergies, the ability to realize the anticipated benefits of the proposed transaction, including the possibility that the expected benefits from the proposed transaction will not be realized or will not be realized within the expected time period, the impact of Adenza’s business model on Nasdaq’s ability to forecast revenue results, disruption from the transaction making it more difficult to maintain business and operational relationships, risks related to diverting management’s attention from Nasdaq’s ongoing business operations, the negative effects of the announcement or the consummation of the proposed transaction on the market price of Nasdaq’s common stock or on Nasdaq’s operating results, significant transaction costs, unknown liabilities, the risk of litigation or regulatory actions related to the proposed transaction, future levels of Nasdaq’s indebtedness, including additional indebtedness that will be incurred in connection with the proposed transaction, and the effect of the announcement or pendency of the transaction on Adenza’s business relationships, operating results, and business generally. Further information on these and other factors are 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.

Media Relations Contacts

Will Briganti
+1.646.964.8169
William.Briganti@Nasdaq.com

David Lurie
+1.914.538.0533
David.Lurie@Nasdaq.com

Investor Relations Contact

Ato Garrett
+1.212.401.8737
Ato.Garrett@Nasdaq.com

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