Nasdaq, Inc.
Jul 26, 2017

Nasdaq Reports Second Quarter 2017 Results; Achieves Record Quarterly Net Revenues

NEW YORK, July 26, 2017 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq:NDAQ) today reported financial results for the second quarter of 2017.  Second quarter 2017 net revenues were $602 million, up $43 million or 8% from $559 million in the prior year period.  The second quarter increase in net revenues included a $34 million positive impact from acquisitions and $15 million, or 3%, organic growth, partially offset by a $6 million unfavorable impact due to changes in foreign exchange rates.

"In addition to achieving a new quarterly net revenue record, we are making significant progress against our 2017 execution priorities, by commercializing key technologies with new products available through the Nasdaq Financial Framework and Analytics Hub, achieving our merger synergies ahead of our original timeline, and raising our market share in our largest trading categories significantly above prior year levels," said Adena T. Friedman, President and CEO, Nasdaq.

Mrs. Friedman continued, "At the same time, we have taken a leadership role supporting current and potential corporate issuers through our blueprint to revitalize the U.S. capital markets,4 which champions reforms and initiatives that we believe improve the public company experience to the benefit of stakeholders throughout and even beyond the broader investment community."

1 Represents revenues less transaction-based expenses.
2 Represents revenues from our Corporate Services, Information Services and Market Technology segments, as well as our Trade Management Services business.
3 Refer 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.
4 For more information, please see http://business.nasdaq.com/revitalize

GAAP operating expenses were $358 million in the second quarter of 2017, down $27 million from $385 million in the second quarter of 2016.  The decrease primarily reflects lower restructuring and merger and strategic initiatives expense, partially offset by incremental operating expenses from the acquisitions closed in the prior year period and additional costs associated with the early extinguishment of debt.

Non-GAAP operating expenses were $315 million in the second quarter of 2017, up $15 million from $300 million in the second quarter of 2016.  This increase reflects $11 million of incremental operating expenses net of synergies from the acquisitions closed in the second quarter of 2016 and a $9 million organic expense increase, partially offset by a $5 million favorable impact from changes in foreign exchange rates.

"Reflecting the significant progress achieved on our integrations and identification of additional opportunities, the company is raising its total synergy target.  Despite the headwinds that today's low volatility environment presents, our consistent application of the company's expense and efficiency discipline is delivering margin improvement and contributing to EPS growth consistent with our aspiration to deliver double-digit total shareholder returns," said Michael Ptasznik, Executive Vice President and Chief Financial Officer, Nasdaq.

Mr. Ptasznik continued, "On the capital front, in the second quarter of 2017 we initiated the company's first commercial paper program and began paying down borrowings consistent with our stated objectives, following significant buyback activity and a 19% dividend increase announced in the first quarter of 2017.  We plan to continue deploying and returning capital in a thoughtful and balanced approach over time."

On a GAAP basis, net income attributable to Nasdaq for the second quarter of 2017 was $147 million, or $0.87 per diluted share, compared with net income of $70 million, or $0.42 per diluted share, in the second quarter of 2016.

On a non-GAAP basis, net income attributable to Nasdaq for the second quarter of 2017 was $172 million, or $1.02 per diluted share, compared with $153 million, or $0.91 per diluted share, in the second quarter of 2016.

At June 30, 2017 , the company had cash and cash equivalents of $356 million and total debt of $3,552 million, resulting in net debt of $3,196 million. This compares to net debt of $3,200 million at December 31, 2016.  Included in total debt of $3,552 million is $494 million outstanding from the recently established commercial paper program.  As of June 30, 2017, there was $273 million remaining under the board authorized share repurchase program.  There were no share repurchases during the second quarter of 2017.

2017 EXPENSE GUIDANCE1 - The company is lowering its 2017 non-GAAP operating expense guidance to $1,260 to $1,290 million, versus prior 2017 expense guidance of $1,260 to $1,300 million.

1 U.S. GAAP operating expense guidance 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.

BUSINESS HIGHLIGHTS

Market Services (37% of total net revenues) - Net revenues were $222 million in the second quarter of 2017, up $28 million when compared to the second quarter of 2016.

Equity Derivatives (11% of total net revenues) - Net equity derivative trading and clearing revenues were $67 million in the second quarter of 2017, up $21 million compared to the second quarter of 2016.  The increase is primarily due to the inclusion of revenues from the acquisition of ISE in June 2016.

Cash Equities (11% of total net revenues) - Net cash equity trading revenues were $64 million in the second quarter of 2017, up $1 million from the second quarter of 2016.  This increase primarily reflects higher European cash equities revenues, partially offset by an unfavorable impact from changes in foreign exchange rates.

Fixed Income and Commodities Trading and Clearing (3% of total net revenues) - Net fixed income and commodities trading and clearing revenues were $19 million in the second quarter of 2017, down $2 million from the second quarter of 2016.  The decrease primarily reflects lower industry volumes in our European commodities products.

Trade Management Services (12% of total net revenues) - Trade management services revenues were $72 million in the second quarter of 2017, up $8 million compared to the second quarter of 2016, due to the inclusion of revenues from the acquisition of ISE and an increase in customer demand for network connectivity.

Corporate Services (27% of total net revenues) - Revenues were $164 million in the second quarter of 2017, up $2 million compared to the second quarter of 2016.

Corporate Solutions (16% of total net revenues) - Corporate solutions revenues were $97 million in the second quarter of 2017, up $3 million from the second quarter of 2016.  The increase is primarily due to the inclusion of revenues from the acquisition of Boardvantage completed in May 2016.

Listing Services (11% of total net revenues) - Listing services revenues were $67 million in the second quarter of 2017, down $1 million from the second quarter of 2016, as an increase in European listing services revenues were more than offset by lower U.S. revenues from the run-off of listing of additional shares fees as a result of the implementation of our all-inclusive annual fee, and an unfavorable impact due to changes in foreign exchange rates.

Information Services (24% of total net revenues) - Revenues were $144 million in the second quarter of 2017, up $10 million from the second quarter of 2016.

Data Products (18% of total net revenues) - Data products revenues were $111 million in the second quarter of 2017, up $4 million compared to the second quarter of 2016 primarily due to growth in proprietary data products revenues.

Index Licensing and Services (6% of total net revenues) - Index licensing and services revenues were $33 million in the second quarter of 2017, up $6 million from the second quarter of 2016 primarily due to higher assets under management in exchange traded products linked to Nasdaq indexes.

Market Technology (12% of total net revenues) - Revenues were $72 million in the second quarter of 2017, up $3 million from the second quarter of 2016.  The increase primarily reflects organic revenue growth from software, licensing and support, software as a service, particularly growth in SMARTS surveillance subscriptions, as well as higher change request revenues.  New order intake totaled $64 million in the second quarter of 2017 while total order value was a record $799 million at June 30, 2017, up 4% from June 30, 2016.

CORPORATE HIGHLIGHTS

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 90 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to approximately 3,900 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 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, such as those described below, that have less bearing on our ongoing operating performance.

Amortization expense of acquired intangible assets: We amortize intangible assets acquired in connection with various acquisitions. Intangible asset amortization expense can vary from period to period due to episodic acquisitions completed, rather than from our ongoing business operations. As such, if intangible asset amortization is included in performance measures, it is more difficult to assess the day-to-day operating performance of the businesses, the relative operating performance of the businesses between periods and the earnings power of Nasdaq. Management does not consider intangible asset amortization expense for the purpose of evaluating the performance of our business or its managers or when making decisions to allocate resources. Therefore, we believe performance measures excluding intangible asset amortization expense provide investors with a more useful representation of our businesses' ongoing activity in each period.

Restructuring charges: Restructuring charges are associated with our 2015 restructuring plan to improve performance, cut costs and reduce spending and as of June 30, 2016 are primarily related to (i) severance and other termination benefits, (ii) asset impairment charges, and (iii) other charges. We exclude these restructuring costs because these costs do not reflect future operating expenses and do not contribute to a meaningful evaluation of Nasdaq's ongoing operating performance or comparison of Nasdaq's performance between periods.

Merger and strategic initiatives expense: We have pursued various strategic initiatives and completed a number of acquisitions in recent years which have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs. The frequency and the amount of such expenses vary significantly based on the size, timing and complexity of the transaction. Accordingly, we exclude these costs for purposes of calculating non-GAAP measures which provide a more meaningful analysis of Nasdaq's ongoing operating performance or comparisons in Nasdaq's performance between periods.

Other significant items: We have excluded certain other charges or gains that are the result of other non-comparable events to measure operating performance. For the three months ended June 30, 2017, other significant items include loss on extinguishment of debt, wind down costs associated with an equity method investment which was previously written off, and the recognition of previously unrecognized tax benefits associated with positions taken in prior years. For the three months ended June 30, 2016, other significant items primarily include tax expense due to an unfavorable tax ruling received during the three months ended June 30, 2016, the impact of which related to prior periods, and the release of a sublease loss reserve due to the early exit of a facility. We believe the exclusion of such amounts allows management and investors to better understand the financial results of Nasdaq.

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 return 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."

NDAQF

 

 Nasdaq, Inc.   
 Condensed Consolidated Statements of Income   
 (in millions, except per share amounts)   
(unaudited)  
   
   Three Months Ended   
   June 30,     March 31,     June 30,   
   2017    2017    2016  
Revenues:             
Market Services  $   620     $   606     $   532    
Transaction-based expenses:             
Transaction rebates      (304 )       (301 )       (256 )  
Brokerage, clearance and exchange fees      (94 )       (87 )       (82 )  
Total Market Services revenues less transaction-based expenses      222         218         194    
             
Corporate Services      164         160         162    
Information Services      144         138         134    
Market Technology      72         67         69    
             
Revenues less transaction-based expenses      602         583         559    
             
Operating Expenses:             
Compensation and benefits      163         161         164    
Professional and contract services      38         36         35    
Computer operations and data communications      30         30         27    
Occupancy      23         23         19    
General, administrative and other      30         19         17    
Marketing and advertising      8         7         8    
Depreciation and amortization      47         45         41    
Regulatory      8         8         6    
Merger and strategic initiatives      11         6         35    
Restructuring charges      -          -          33    
Total operating expenses      358         335         385    
             
Operating income      244         248         174    
             
Interest income      2         2         1    
Interest expense      (36 )       (37 )       (32 )  
Other investment income      1         -          2    
Net income from unconsolidated investees      2         4         1    
             
Income before income taxes      213         217         146    
Income tax provision      66         48         76    
             
Net income attributable to Nasdaq $   147     $   169     $   70    
             
Per share information:             
Basic earnings per share  $   0.89     $   1.02     $   0.42    
Diluted earnings per share  $   0.87     $   0.99     $   0.42    
Cash dividends declared per common share  $   0.38     $   0.32     $   -     
             
Weighted-average common shares outstanding for earnings per share:            
Basic      165.4         166.5         165.0    
Diluted     168.5         170.2         168.2    
             

 

Nasdaq, Inc.
Revenue Detail
(in millions)
(unaudited)
 
   Three Months Ended   
   June 30,     March 31,     June 30,   
   2017    2017    2016  
MARKET SERVICES REVENUES            
Equity Derivative Trading and Clearing Revenues $   191     $   191     $   103    
Transaction-based expenses:             
Transaction rebates      (115 )       (113 )       (53 )  
Brokerage, clearance and exchange fees      (9 )       (10 )       (4 )  
Total net equity derivative trading and clearing revenues     67         68         46    
             
Cash Equity Trading Revenues     333         320         339    
Transaction-based expenses:             
Transaction rebates      (185 )       (183 )       (198 )  
Brokerage, clearance and exchange fees      (84 )       (76 )       (78 )  
Total net cash equity trading revenues     64         61         63    
             
Fixed Income and Commodities Trading and Clearing Revenues      24         25         26    
Transaction-based expenses:             
Transaction rebates      (4 )       (5 )       (5 )  
Brokerage, clearance and exchange fees      (1 )       (1 )       -     
Total net fixed income and commodities trading and clearing revenues     19         19         21    
             
Trade Management Services Revenues     72         70         64    
             
Total Net Market Services revenues     222         218         194    
             
CORPORATE SERVICES REVENUES            
Corporate Solutions revenues     97         95         94    
Listings Services revenues     67         65         68    
             
Total Corporate Services revenues     164         160         162    
             
INFORMATION SERVICES REVENUES            
Data Products revenues     111         108         107    
Index Licensing and Services revenues     33         30         27    
             
Total Information Services revenues     144         138         134    
             
MARKET TECHNOLOGY REVENUES     72         67         69    
             
Revenues less transaction-based expenses $   602     $   583     $   559    
             

 

Nasdaq, Inc.
Condensed Consolidated Balance Sheets 
(in millions)
 
  June 30,   December 31,  
   2017    2016  
Assets (unaudited)      
Current assets:        
Cash and cash equivalents $   356     $   403    
Restricted cash     18         15    
Financial investments, at fair value     300         245    
Receivables, net     392         429    
Default funds and margin deposits     3,671         3,301    
Other current assets     184         167    
Total current assets     4,921         4,560    
Property and equipment, net     384         362    
Deferred tax assets     633         717    
Goodwill     6,237         6,027    
Intangible assets, net     2,102         2,094    
Other non-current assets     383         390    
Total assets $   14,660     $   14,150    
         
Liabilities         
Current liabilities:        
Accounts payable and accrued expenses $   149     $   175    
Section 31 fees payable to SEC     169         108    
Accrued personnel costs     124         207    
Deferred revenue     265         162    
Other current liabilities     115         129    
Default funds and margin deposits     3,671         3,301    
Short-term debt     494         -     
Total current liabilities     4,987         4,082    
Long-term debt   3,058       3,603    
Deferred tax liabilities   732       720    
Non-current deferred revenue   161       171    
Other non-current liabilities   146       144    
Total liabilities     9,084         8,720    
         
Commitments and contingencies         
Equity        
Nasdaq stockholders' equity:        
Common stock     2         2    
Additional paid-in capital     3,011         3,104    
Common stock in treasury, at cost     (225 )       (176 )  
Accumulated other comprehensive loss     (892 )       (979 )  
Retained earnings     3,680         3,479    
Total Nasdaq stockholders' equity     5,576         5,430    
Total liabilities and equity $   14,660     $   14,150    
         

 

Nasdaq, Inc.
Reconciliation of U.S. GAAP Net Income, Diluted Earnings Per Share, Operating Income and 
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses
(in millions, except per share amounts)
(unaudited)
 
 
   Three Months Ended   
   June 30,     March 31,     June 30,   
   2017    2017    2016  
             
U.S. GAAP net income attributable to Nasdaq $   147     $   169     $   70    
             
Non-GAAP adjustments:            
             
Amortization expense of acquired intangible assets (1)     22         23         19    
Merger and strategic initiatives (2)     11         6         35    
Extinguishment of debt (3)     10         -          -     
Restructuring charges (4)     -          -          33    
Sublease loss reserve (5)     -          -          (2 )  
Other (6)     2         -          -     
Total non-GAAP adjustments     45         29         85    
             
Non-GAAP adjustment to the income tax provision (7)     (20 )       (11 )       (2 )  
Total non-GAAP adjustments, net of tax     25         18         83    
             
Non-GAAP net income attributable to Nasdaq $   172     $   187     $   153    
             
             
U.S. GAAP diluted earnings per share $   0.87     $   0.99     $   0.42    
Total adjustments from non-GAAP net income above     0.15         0.11         0.49    
             
Non-GAAP diluted earnings per share $   1.02     $   1.10     $   0.91    
             
Weighted-average diluted common shares outstanding for earnings per share:      168.5         170.2         168.2    
             
(1) Refer to the non-GAAP information section of the earnings release for further discussion of why we consider amortization expense of acquired intangible assets to be a non-GAAP adjustment.  
   
(2) For the three months ended June 30, 2017 and 2016, merger and strategic initiatives expense primarily related to our acquisition of International Securities Exchange, or ISE. For the three months ended March 31, 2017, merger and strategic initiatives expense primarily related to our acquisitions of ISE, Boardvantage, Inc. and other strategic initiatives. Refer to the non-GAAP information section of the earnings release for further discussion on why we consider merger and strategic initiatives expense to be a non-GAAP adjustment.  
   
(3) During the three months ended June 30, 2017, in connection with the early extinguishment of our 5.25% senior unsecured notes issued in December 2010 and the $300 million repayment on our $400 million senior unsecured term loan facility due November 25, 2019, we recorded a charge of $10 million primarily related to a premium paid for early redemption.  
   
(4) Restructuring charges for the three months ended June 30, 2016 are associated with our 2015 restructuring plan to improve performance, cut costs, and reduce spending and are primarily related to severance and other termination benefits, asset impairment charges and other charges. In June 2016, we completed our 2015 restructuring plan. Refer to the non-GAAP information section of the earnings release for further discussion of why we consider restructuring charges to be a non-GAAP adjustment.  
   
(5) For the three months ended June 30, 2016, the credit of $2 million pertains to the release of a previously recorded sublease loss reserve due to the early exit of a facility.  
   
(6) Other charge relates to wind down costs associated with an equity method investment that was previously written off, which is included in net income from unconsolidated investees in the Condensed Consolidated Statements of Income for the three months ended June 30, 2017.  
   
(7) For the three months ended June 30, 2017, the non-GAAP adjustment to the income tax provision primarily reflects the tax impact of each non-GAAP adjustment and the recognition of previously unrecognized tax benefits of $4 million associated with positions taken in prior years. For the three months ended March 31, 2017, the amount primarily reflects the tax impact of the above adjustments. For the three months ended June 30, 2016, the amount includes the tax impact of the above adjustments as well as $27 million in tax expense due to an unfavorable tax ruling received during the three months ended June 30, 2016, the impact of which related to prior periods.  
   

 

Nasdaq, Inc.
Reconciliation of U.S. GAAP Net Income, Diluted Earnings Per Share, Operating Income and 
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses
(in millions)
(unaudited)
   
   
   Three Months Ended   
   June 30,     March 31,     June 30,   
  2017   2017   2016  
             
U.S. GAAP operating income $   244     $   248     $   174    
             
Non-GAAP adjustments:            
             
Amortization expense of acquired intangible assets (1)     22         23         19    
Merger and strategic initiatives (2)     11         6         35    
Extinguishment of debt (3)     10         -          -     
Restructuring charges (4)     -          -          33    
Sublease loss reserve (5)     -          -          (2 )  
Total non-GAAP adjustments      43         29         85    
             
Non-GAAP operating income $   287     $   277     $   259    
             
             
Revenues less transaction-based expenses  $   602     $   583     $   559    
             
U.S. GAAP operating margin (6)   41 %     43 %     31 %  
             
Non-GAAP operating margin (7)   48 %     48 %     46 %  
             
(1) Refer to the non-GAAP information section of the earnings release for further discussion of why we consider amortization expense of acquired intangible assets to be a non-GAAP adjustment.  
   
(2) For the three months ended June 30, 2017 and 2016, merger and strategic initiatives expense primarily related to our acquisition of ISE. For the three months ended March 31, 2017, merger and strategic initiatives expense primarily related to our acquisitions of ISE, Boardvantage, Inc. and other strategic initiatives. Refer to the non-GAAP information section of the earnings release for further discussion on why we consider merger and strategic initiatives expense to be a non-GAAP adjustment.  
   
(3) During the three months ended June 30, 2017, in connection with the early extinguishment of our 5.25% senior unsecured notes issued in December 2010 and the $300 million repayment on our $400 million senior unsecured term loan facility due November 25, 2019, we recorded a charge of $10 million primarily related to a premium paid for early redemption.  
   
(4) Restructuring charges for the three months ended June 30, 2016 are associated with our 2015 restructuring plan to improve performance, cut costs, and reduce spending and are primarily related to severance and other termination benefits, asset impairment charges and other charges. In June 2016, we completed our 2015 restructuring plan. Refer to the non-GAAP information section of the earnings release for further discussion of why we consider restructuring charges to be a non-GAAP adjustment.  
   
(5) For the three months ended June 30, 2016, the credit of $2 million pertains to the release of a previously recorded sublease loss reserve due to the early exit of a facility.  
   
(6) U.S. GAAP operating margin equals U.S. GAAP operating income divided by total revenues less transaction-based expenses.  
   
(7) Non-GAAP operating margin equals non-GAAP operating income divided by total revenues less transaction-based expenses.  
   

 

Nasdaq, Inc.
Reconciliation of U.S. GAAP Net Income, Diluted Earnings Per Share, Operating Income and 
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses
(in millions)
(unaudited)
   
   
   Three Months Ended   
   June 30,     March 31,     June 30,   
   2017    2017    2016  
             
U.S. GAAP operating expenses $   358     $   335     $   385    
             
Non-GAAP adjustments:            
             
Amortization expense of acquired intangible assets (1)     (22 )       (23 )       (19 )  
Merger and strategic initiatives (2)     (11 )       (6 )       (35 )  
Extinguishment of debt (3)     (10 )       -          -     
Restructuring charges (4)     -          -          (33 )  
Sublease loss reserve (5)     -          -          2    
Total non-GAAP adjustments     (43 )       (29 )       (85 )  
             
Non-GAAP operating expenses $   315     $   306     $   300    
             
(1) Refer to the non-GAAP information section of the earnings release for further discussion of why we consider amortization expense of acquired intangible assets to be a non-GAAP adjustment.  
   
(2) For the three months ended June 30, 2017 and 2016, merger and strategic initiatives expense primarily related to our acquisition of ISE. For the three months ended March 31, 2017, merger and strategic initiatives expense primarily related to our acquisitions of ISE, Boardvantage, Inc. and other strategic initiatives. Refer to the non-GAAP information section of the earnings release for further discussion on why we consider merger and strategic initiatives expense to be a non-GAAP adjustment.  
   
(3) During the three months ended June 30, 2017, in connection with the early extinguishment of our 5.25% senior unsecured notes issued in December 2010 and the $300 million repayment on our $400 million senior unsecured term loan facility due November 25, 2019, we recorded a charge of $10 million primarily related to a premium paid for early redemption.  
   
(4) Restructuring charges for the three months ended June 30, 2016 are associated with our 2015 restructuring plan to improve performance, cut costs, and reduce spending and are primarily related to severance and other termination benefits, asset impairment charges and other charges. In June 2016, we completed our 2015 restructuring plan. Refer to the non-GAAP information section of the earnings release for further discussion of why we consider restructuring charges to be a non-GAAP adjustment.  
   
(5) For the three months ended June 30, 2016, the credit of $2 million pertains to the release of a previously recorded sublease loss reserve due to the early exit of a facility.  
   

 

Nasdaq, Inc.  
Quarterly Key Drivers Detail  
(unaudited)  
   
  Three Months Ended  
   June 30,     March 31,     June 30,   
   2017    2017    2016  
Market Services            
Equity Derivative Trading and Clearing            
U.S. Equity Options            
Total industry average daily volume (in millions)   14.8       14.6       14.1    
Nasdaq PHLX Options Market matched market share   16.8 %     17.1 %     16.2 %  
The Nasdaq Options Market matched market share   9.8 %     9.5 %     7.1 %  
Nasdaq BX Options Market matched market share   0.7 %     0.7 %     1.0 %  
Nasdaq ISE Options Market matched market share (1)   9.0 %     9.5 %     0.2 %  
Nasdaq GEMX Options Market matched market share (1)   4.9 %     5.6 %       -     
Nasdaq MRX Options Market matched market share (1)   0.2 %     0.1 %       -     
Total matched market share executed on Nasdaq's exchanges   41.4 %     42.5 %     24.5 %  
             
Nasdaq Nordic and Nasdaq Baltic options and futures            
Total average daily volume options and futures contracts (2)   376,280       338,463       439,520    
             
Cash Equity Trading            
Total U.S.-listed securities            
Total industry average daily share volume (in billions)     6.85         6.84         7.25    
Matched share volume (in billions)     79.4         74.7         80.6    
The Nasdaq Stock Market matched market share   14.4 %     14.0 %     14.0 %  
Nasdaq BX matched market share   3.2 %     2.7 %     2.3 %  
Nasdaq PSX matched market share   0.8 %     0.9 %     1.1 %  
Total matched market share executed on Nasdaq's exchanges   18.4 %     17.6 %     17.4 %  
Market share reported to the FINRA/Nasdaq Trade Reporting Facility   33.9 %     34.9 %     33.0 %  
Total market share (3)   52.3 %     52.5 %     50.4 %  
             
Nasdaq Nordic and Nasdaq Baltic securities            
Average daily number of equity trades   594,901       507,647       447,231    
Total average daily value of shares traded (in billions) $   5.7     $   4.8     $   5.2    
Total market share executed on Nasdaq's exchanges   65.7 %     65.0 %     63.0 %  
             
Fixed Income and Commodities Trading and Clearing            
Total U.S. Fixed Income            
U.S. fixed income notional trading volume (in billions)  $   4,755     $   5,041     $   5,255    
Total average daily volume of Nasdaq Nordic and Nasdaq Basic fixed income contracts     118,234         112,004         91,107    
             
Commodities            
Power contracts cleared (TWh) (4)   268       379       455    
             
Corporate Services            
Initial public offerings            
The Nasdaq Stock Market   36       17       25    
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic   39       11       25    
             
New listings            
The Nasdaq Stock Market (5)   64       42       73    
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic (6)   45       16       33    
             
Number of listed companies            
The Nasdaq Stock Market (7)     2,912         2,890         2,868    
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic (8)     945         910         873    
             
Information Services            
Number of licensed ETPs   316       306       267    
ETP assets under management (AUM) tracking Nasdaq indexes (in billions) $   147     $   138     $   108    
             
Market Technology            
Order intake (in millions) (9) $   64     $   47     $   69    
Total order value (in millions) (10) $   799     $   777     $   769    
             
(1) For the three months ended June 30, 2016, Nasdaq ISE, Nasdaq GEMX and Nasdaq MRX matched market share represents one day of trading volume.  
(2) Includes Finnish option contracts traded on EUREX Group.  
(3) Includes transactions executed on The Nasdaq Stock Market's, Nasdaq BX's and Nasdaq PSX's systems plus trades reported through the Financial Industry Regulatory Authority/Nasdaq Trade Reporting Facility.  
(4) Transactions executed on Nasdaq Commodities or OTC and reported for clearing to Nasdaq Commodities measured by Terawatt hours (TWh).  
(5) New listings include IPOs, including those completed on a best efforts basis, issuers that switched from other listing venues, closed-end funds and separately listed exchange traded products, or ETPs.  
(6) New listings include IPOs and represent companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North.  
(7) Number of total listings on Nasdaq at period end, including 345 separately listed ETPs at June 30, 2017, 332 at March 31, 2017 and 277 at June 30, 2016.  
(8) Represents companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North at period end.  
(9) Total contract value of orders signed during the period.  
(10) Represents total contract value of orders signed that are yet to be recognized as revenue.  

 

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

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Source: NASDAQ, Inc.

 

 

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