Nasdaq, Inc.
Jan 28, 2016

Nasdaq Reports Record Fourth Quarter and Full Year 2015 Results


NEW YORK, Jan. 28, 2016 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq:NDAQ) today reported record results for the fourth quarter and full year of 2015.  Fourth quarter net revenues were $536 million, up 4% from $517 million in the prior year period, driven by a $37 million positive impact from operations, partially offset by a $18 million negative impact of changes in foreign exchange rates.  On an organic basis, excluding the impact of changes in foreign exchange rates and acquisitions, total fourth quarter net revenues were up 5%, while across the non-trading segments, organic revenue growth was 8%.

"Over the last several years, we have built a strategic portfolio of businesses that provide a level of resiliency through significant non-transaction revenue streams and scale potential through a strong global trading franchise," said Bob Greifeld, CEO, Nasdaq.  "In the fourth quarter of 2015, market volatility and macro uncertainty have risen at the same time our non-transaction businesses have produced strong organic growth.  These factors combined with our inherent operating leverage and disciplined capital deployment have delivered record results and attractive earnings growth to our shareholders."  

Mr. Greifeld continued, "Our performance is a reflection of a relentless focus on better serving our corporate issuer and investment community customers across a broad offering of products and solutions.  Through our commodities platform we are working to create more efficient trading opportunities in key U.S. energy products, our new investor relations platform is working to transform the workflow and productivity of corporate officers, and in the private market we are looking to expand and enhance the equity management and liquidity offerings of private companies.  Executing against this wide-ranging set of opportunities advances our clients' objectives and improves our competitive position."

On a non-GAAP basis, fourth quarter 2015 operating expenses were $285 million, up 2% as compared to the prior year quarter, due to higher organic spend and the impact of the Dorsey Wright Associates, LLC, or DWA, acquisition partially offset by the favorable impact of changes in foreign exchange rates.  On a GAAP basis, operating expenses were $290 million in the fourth quarter of 2015, compared to $344 million in the prior year quarter. 

"The fourth quarter capped a year of significant cash flow generation, and we continued to apply our return on invested capital based discipline to directing capital deployment," said Lee Shavel, EVP and CFO, Nasdaq.  "I'm pleased we were able to deliver the majority of non-GAAP income back to shareholders, in both the fourth quarter and the full-year, while simultaneously finding opportunities to deploy very meaningful levels of capital towards internal investments like NFX and our blockchain initiatives, as well as on selected acquisitions, such as the DWA index and analytics business, all while remaining within our targeted leverage profile."

1 Represents revenues less transaction-based expenses.

On a non-GAAP basis, net income attributable to Nasdaq for the fourth quarter of 2015 was $150 million, or $0.89 per diluted share, up $0.08 compared to $0.81 in the fourth quarter of 2014.  On a GAAP basis, net income attributable to Nasdaq for the fourth quarter of 2015 was $148 million, or $0.88 per diluted share, compared with $87 million, or $0.50 per diluted share, in the prior year quarter.   

Please refer to our reconciliation of GAAP to non-GAAP net income, diluted earnings per share, operating income and operating expenses included in the attached schedules.

The company repurchased 1.2 million shares, or $67 million of common stock, in the fourth quarter of 2015 at an average price of $56.58.  At December 31, 2015, there is $159 million remaining under the board authorized share repurchase program.

At December 31, 2015, the company had cash and cash equivalents of $301 million and total debt of $2,364 million, resulting in net debt of $2,063 million.  This compares to net debt of $1,870 million at December 31, 2014.

BUSINESS HIGHLIGHTS

Market Services (36% of total net revenues) - Net revenues were $195 million in the fourth quarter of 2015, down $6 million when compared to $201 million in the fourth quarter of 2014.  The $6 million year-over-year decrease reflects a $2 million operational increase, which was more than offset by an $8 million decrease due to changes in foreign exchange rates.

Equity Derivatives (9% of total net revenues) - Net equity derivative trading and clearing revenues were $48 million in the fourth quarter of 2015, down $5 million compared to the fourth quarter of 2014.  The decrease in equity derivatives revenue was driven by lower industry trading volumes, lower U.S. market share, and foreign exchange impact.

Cash Equities (12% of total net revenues) - Net cash equity trading revenues were $66 million in the fourth quarter of 2015, up $7 million compared to the fourth quarter of 2014.  The increase in cash equity revenue resulted from higher U.S. average net capture, partially offset by lower U.S. market share and foreign exchange impact.

Fixed Income, Currency and Commodities (4% of total net revenues) - Net FICC trading and clearing revenues were $20 million in the fourth quarter of 2015, down $9 million from the fourth quarter of 2014, due to volume declines in U.S. fixed income and commodities products, and foreign exchange impact.

Access and Broker Services (11% of total net revenues) - Access and broker services revenues were $61 million in the fourth quarter of 2015, up $1 million compared to the fourth quarter of 2014, as organic revenue increases were partially offset by foreign exchange impact. 

Information Services (24% of total net revenues) - Revenues were $127 million in the fourth quarter of 2015, up $14 million from the fourth quarter of 2014.  The $14 million year-over-year increase reflects an $8 million organic increase and a $9 million increase from the acquisition of DWA, which was partially offset by a $3 million decrease due to changes in foreign exchange rates.

Data Products (18% of total net revenues) - Data products revenues were $98 million in the fourth quarter of 2015, up $7 million compared to the fourth quarter of 2014, as increased revenue from proprietary and shared tape revenue plans as well as the inclusion of revenue associated with the DWA acquisition were partially offset by the negative impact of changes in foreign exchange rates.

Index Licensing and Services (6% of total net revenues) - Index licensing and services revenues were $29 million in the fourth quarter of 2015, up $7 million from the fourth quarter of 2014.  The revenue growth was primarily driven by the DWA acquisition, including subsequent growth since closing the transaction.

Technology Solutions (27% of total net revenues) - Revenues were $146 million in the fourth quarter of 2015, up $4 million from the fourth quarter of 2014.  The $4 million year-over-year increase reflects a $9 million operational increase, partially offset by a $5 million decrease due to changes in foreign exchange rates.

Corporate Solutions (14% of total net revenues) - Corporate solutions revenues were $75 million in the fourth quarter of 2015, down $3 million from the fourth quarter of 2014.  The corporate solutions revenue decline was primarily due to the impact of changes in foreign exchange rates. 

Market Technology (13% of total net revenues) - Market technology revenues were $71 million in the fourth quarter of 2015, up $7 million from the fourth quarter of 2014.  The increase was driven by organic growth in surveillance products and higher change request revenue, partially offset by changes in foreign exchange rates.  New order intake was $116 million for the fourth quarter of 2015, and the order backlog at December 31, 2015 was $788 million, up 10% from the prior year period and an all-time record.

Listing Services (13% of total net revenues) - Revenues were $68 million in the fourth quarter of 2015, up $7 million compared to the fourth quarter of 2014.  The $7 million year-over-year increase reflects a $9 million operational increase partially offset by a $2 million decrease due to changes in foreign exchange rates.  The operational improvement is due to certain pricing actions and increases in the number of both U.S. and European listed companies.

INITIATING 2016 NON-GAAP EXPENSE GUIDANCE - The company has initiated 2016 non-GAAP operating expense guidance of $1,110-$1,160 million.  Included in this non-GAAP operating expense guidance is an expected $35-$45 million in R&D spending.   

CORPORATE HIGHLIGHTS


ABOUT NASDAQ

Nasdaq (Nasdaq:NDAQ) is a leading provider of trading, clearing, exchange technology, listing, information and public company services across six continents. 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 70 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to more than 3,700 listed companies with a market value of approximately $9.6 trillion and nearly 10,000 corporate clients.  To learn more, visit: nasdaq.com/ambition or business.nasdaq.com.

NON-GAAP INFORMATION

In addition to disclosing results determined in accordance with 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 GAAP to non-GAAP information provided at the end of this release.  Management believes that this non-GAAP information provides investors with additional information to assess Nasdaq's operating performance and assists investors in comparing our operating performance to prior periods.  Management uses this non-GAAP information, along with GAAP information, in evaluating its historical operating performance.

The non-GAAP information is not prepared in accordance with GAAP and may not be comparable to non-GAAP information used by other companies.  The non-GAAP information should not be viewed as a substitute for, or superior to, other data prepared in accordance with GAAP.

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, 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 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. 

NDAQF  

 
 Nasdaq, Inc. 
 Condensed Consolidated Statements of Income 
 (in millions, except per share amounts) 
 
          
  Three Months Ended  Year Ended
  December 31,   September 30,   December 31,   December 31,   December 31, 
   2015     2015     2014     2015     2014  
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   
Revenues:          
Market Services$  524  $  542  $  603  $  2,084  $  2,229 
Transaction-based expenses:         
Transaction rebates   (249)    (256)    (294)    (983)    (1,065)
Brokerage, clearance and exchange fees   (80)    (86)    (108)    (330)    (368)
Total Market Services revenues less transaction-based expenses   195     200     201     771     796 
          
Listing Services   68     66     61     264     238 
Information Services   127     132     113     512     473 
Technology Solutions   146     131     142     543     560 
          
Revenues less transaction-based expenses    536     529     517     2,090     2,067 
          
Operating Expenses:          
Compensation and benefits   149     150     149      590     588 
Marketing and advertising   9     6     8     28     32 
Depreciation and amortization   35     34     33      138     137 
Professional and contract services   39     33     40     148     157 
Computer operations and data communications   26      23     24     107     92 
Occupancy   22     22     34     85     110 
Regulatory   6     7     6     27     27 
Merger and strategic initiatives   4     4     35     10     81 
General, administrative and other   (12)    11     15     65      89 
Restructuring charges   12     8     -      172     -  
Total operating expenses    290     298     344     1,370     1,313  
          
Operating income    246     231     173      720     754 
          
Interest income   1     1     2     4     6 
Interest expense   (28)    (28)    (28)    (111)    (117)
Net income from unconsolidated investees   -      2     -      17     -  
Asset impairment charges   -      -      (49)    -      (49)
Income before income taxes    219     206      98     630     594 
Income tax provision   71     68     11     203     181 
          
Net income    148     138     87     427     413 
          
Net loss attributable to noncontrolling interests   -      -      -      1     1 
          
Net income attributable to Nasdaq $  148  $  138  $  87  $  428  $  414 
          
Per share information:          
Basic earnings per share$  0.90  $  0.83  $  0.52  $  2.56  $  2.45 
Diluted earnings per share$  0.88  $  0.80  $  0.50  $  2.50  $  2.39 
Cash dividends declared per common share$  0.25  $  0.25  $  0.15  $  0.90  $  0.58 
          
Weighted-average common shares outstanding for earnings per share:           
Basic   164.6     166.9     168.2     167.3     168.9 
Diluted   168.9     171.5     172.5     171.3     173.0 

  

Nasdaq, Inc.
Revenue Detail
(in millions)
 
          
  Three Months Ended  Year Ended
  December 31,   September 30,   December 31,   December 31,   December 31, 
   2015     2015     2014     2015     2014  
  (unaudited)   (unaudited)    (unaudited)   (unaudited)   
MARKET SERVICES REVENUES          
Equity Derivative Trading and Clearing Revenues$  109  $  109  $  135  $  432  $  525 
Transaction-based expenses:           
Transaction rebates    (56)    (53)     (73)    (223)    (285)
Brokerage, clearance and exchange fees    (5)    (5)     (9)    (21)    (32)
Total net equity derivative trading and clearing revenues   48      51      53      188      208  
          
Cash Equity Trading Revenues   331     349     378     1,315      1,335 
Transaction-based expenses:          
Transaction rebates    (191)    (202)    (221)    (756)    (780)
Brokerage, clearance and exchange fees    (74)    (80)    (98)    (306)    (332)
Total net cash equity trading revenues   66      67      59      253      223  
          
Fixed Income, Currency and Commodities Trading and Clearing Revenues    23     25      30     98     130 
Transaction-based expenses:          
Transaction rebates    (2)    (1)    -      (4)    -  
Brokerage, clearance and exchange fees    (1)    (1)    (1)    (3)    (4)
Total net fixed income, currency and commodities trading and clearing revenues   20      23      29      91      126  
          
Access and Broker Services Revenues   61      59      60      239      239  
          
Total Net Market Services revenues    195      200      201      771      796  
          
LISTING SERVICES REVENUES    68      66      61      264      238  
          
INFORMATION SERVICES REVENUES          
Data Products revenues   98     103     91     399     384 
Index Licensing and Services revenues   29     29     22     113     89 
          
 Total Information Services revenues    127      132      113      512      473  
          
TECHNOLOGY SOLUTIONS REVENUES          
Corporate Solutions revenues   75     72     78     298     314 
Market Technology revenues   71     59     64     245     246 
          
Total Technology Solutions revenues    146      131      142      543      560  
          
Total revenues less transaction-based expenses $   536   $   529    $   517   $   2,090   $   2,067  

  

Nasdaq, Inc. 
Condensed Consolidated Balance Sheets  
(in millions) 
     
 December 31, December 31, 
   2015   2014  
Assets(unaudited)    
Current assets:    
Cash and cash equivalents$  301  $  427  
Restricted cash   56     49  
Financial investments, at fair value   201     174  
Receivables, net   316     389  
Deferred tax assets   24     16  
Default funds and margin deposits   2,228     2,194  
Other current assets   158     151  
Total current assets   3,284     3,400  
Property and equipment, net   323     292  
Non-current deferred tax assets   619   536  
Goodwill   5,395     5,538  
Intangible assets, net   1,959     2,077  
Other non-current assets   281     228  
Total assets$  11,861  $  12,071  
     
Liabilities     
Current liabilities:    
Accounts payable and accrued expenses$  158  $  189  
Section 31 fees payable to SEC   98     124  
Accrued personnel costs   171     143  
Deferred revenue   127     177  
Other current liabilities   138     116  
Deferred tax liabilities   24     37  
Default funds and margin deposits   2,228     2,194   
Total current liabilities   2,944     2,980  
Debt obligations    2,364     2,297  
Non-current deferred tax liabilities   602     626  
Non-current deferred revenue   200     215  
Other non-current liabilities   142     159  
Total liabilities   6,252     6,277  
     
Commitments and contingencies      
Equity    
Nasdaq stockholders' equity:    
Common stock   2     2  
Additional paid-in capital   3,011     3,222  
Common stock in treasury, at cost   (111)    (41) 
Accumulated other comprehensive loss   (864)    (682) 
Retained earnings   3,571     3,292  
Total Nasdaq stockholders' equity   5,609     5,793  
Noncontrolling interests   -      1  
Total equity   5,609     5,794  
Total liabilities and equity$  11,861  $  12,071  

 

Nasdaq, Inc. 
Reconciliation of 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  Year Ended 
   December 31,   September 30,   December 31,   December 31,   December 31,  
    2015     2015     2014     2015      2014   
            
GAAP net income attributable to Nasdaq $  148  $  138  $  87  $  428  $  414  
            
Non-GAAP adjustments:           
            
Loss reserve and insurance recovery (1)    (26)    (5)    -      -      -   
Amortization expense of acquired intangible assets (2)    15     15     16     62     69  
Restructuring charges (3)    12     8     -      172     -   
Merger and strategic initiatives (4)    4     4     35     10     81  
Asset impairment charges (5)    -      -      49     -      49  
Income from OCC equity investment (6)    -      -      -      (13)    -   
Reversal of value added tax refund  (7)    -      -      -      12     -   
Sublease loss reserves    -      -      11     -      11  
Extinguishment of debt    -      -      2     -      11  
Special legal expenses    -      -      -      -      2  
Other    -      -      -      -      2  
Total non-GAAP adjustments    5     22     113     243     225  
            
Non-GAAP adjustment to the income tax provision (8)    (3)    (9)    (61)    (90)    (97) 
Total non-GAAP adjustments, net of tax    2     13     52     153     128  
             
Non-GAAP net income attributable to Nasdaq $  150  $  151  $  139  $  581  $  542  
            
            
GAAP diluted earnings per share $  0.88  $  0.80  $  0.50  $  2.50   $  2.39  
Total adjustments from non-GAAP net income above    0.01     0.08     0.31     0.89     0.74  
             
Non-GAAP diluted earnings per share $   0.89  $  0.88  $  0.81  $  3.39  $  3.13  
            
(1) In March 2015, we established a loss reserve of $31 million for litigation arising from the Facebook IPO in May 2012, which was recorded in general, administrative and other expense.  The reserve was intended to cover the estimated amount of a settlement of class-action litigation initiated on behalf of investors in Facebook common stock on the date of its IPO.  The reserve also covered the cost of re-opening Nasdaq's voluntary accommodation program to allow any Nasdaq member that did not file for compensation in 2013 to submit a claim during the second quarter of 2015, subject to the conditions and limitations that were applicable to claims filed in 2013.  The re-opened accommodation program is now closed.  The insurance recovery recognized during the three months ended December 31, 2015 and September 30, 2015 represents amounts reimbursed by applicable insurance coverage which offsets the loss reserve that was recorded in March 2015.
 
            
(2) Amortization expense related to intangible assets results primarily from business combinations. These non-cash expenses are fixed and amortized over the estimated useful life of the intangible asset acquired.  These expenses generally cannot be changed or influenced by management after the acquisition. Management does not consider these expenses for the purpose of evaluating the performance of the business or its managers or when making decisions to allocate resources. Therefore, such expenses are shown as a non-GAAP adjustment.
 
            
(3) During the first quarter of 2015, we performed a comprehensive review of our processes, businesses and systems in a company-wide effort to improve performance, cut costs, and reduce spending. In the first quarter of 2015, we also decided to change our company name from The NASDAQ OMX Group, Inc., to Nasdaq, Inc., which became effective in the third quarter of 2015. We currently estimate that we will recognize net pre-tax restructuring charges of $190 million, consisting of the rebranding of our trade name, severance, asset impairments, facility-related and other costs.  We recognized restructuring charges of $12 million for the three months ended December 31, 2015, $8 million for the three months ended September 30, 2015, $2 million for the three months ended June 30, 2015 and $150 million for the three months ended March 31, 2015 for a total of $172 million for the year ended December 31, 2015.  The remaining amount will be recognized through June 2016.  Restructuring charges are recorded on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.
 
            
(4) For the three months and year ended December 31, 2015 and the three months ended September 30, 2015, merger and strategic initiatives expense primarily related to certain strategic initiatives and our acquisition of Dorsey, Wright & Associates, LLC.  For the three months and year ended December 31, 2014, merger and strategic initiatives expense primarily related to our acquisition of the Investor Relations, Public Relations and Multimedia Solutions businesses of Thomson Reuters, or the TR Corporate businesses, and eSpeed and a charge of $23 million related to the reversal of a receivable under a tax sharing agreement with an unrelated party.  The $23 million charge is offset by a tax benefit as described in note 8 below.
 
            
(5) For the three months and year ended December 31, 2014, asset impairment charges of $49 million related to certain acquired intangible assets associated with customer relationships ($38 million) and certain technology assets ($11 million). 
 
            
(6) We record our investment in The Options Clearing Corporation, or OCC, as an equity method investment. Under the equity method of accounting, we recognize our share of earnings or losses of an equity method investee based on our ownership percentage.  As a result of a new capital plan implemented by OCC, we were not able to determine what our share of OCC's income was for the year ended December 31, 2014 until the first quarter of 2015, when OCC financial statements were made available to us. Therefore, we recorded other income of $13 million in the first quarter of 2015 relating to our share of OCC's income for the year ended December 31, 2014.
 
            
(7) We previously recorded receivables for expected value added tax, or VAT, refunds based on an approach that had been accepted by the tax authorities in prior years.  The tax authorities have since challenged our approach, and the revised position of the tax authorities was upheld in court during the first quarter of 2015.  As a result, in the first quarter of 2015, we recorded a charge of $12 million for previously recorded receivables based on the court decision.
 
            
(8) For the three months and year ended December 31, 2014, amount includes $23 million associated with the recognition of a previously unrecognized tax benefit.  This amount is offset by the reversal of the receivable described in note 4 above. 
 

 

Nasdaq, Inc.
Reconciliation of 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  Year Ended
  December 31,   September 30,    December 31,   December 31,   December 31, 
   2015     2015     2014     2015     2014  
          
GAAP operating income$  246  $  231  $  173  $  720  $  754 
          
Non-GAAP adjustments:         
          
Loss reserve and insurance recovery (1)   (26)    (5)    -      -      -  
Amortization expense of acquired intangible assets (2)   15     15     16     62     69 
Restructuring charges (3)   12     8     -      172     -  
Merger and strategic initiatives (4)   4     4     35     10   81 
Reversal of value added tax refund  (5)    -      -      -      12     -  
Sublease loss reserves    -      -      11     -      11 
Extinguishment of debt   -      -      2      -      11 
Special legal expenses   -       -      -      -      2 
Other   -      -      -      -      2 
Total non-GAAP adjustments    5     22     64     256     176 
          
Non-GAAP operating income$  251  $  253  $  237  $  976  $  930 
          
          
Revenues less transaction-based expenses $  536   $  529  $  517  $  2,090  $  2,067 
          
Non-GAAP operating margin (6) 47%  48%  46%  47%  45%
          
(1) In March 2015, we established a loss reserve of $31 million for litigation arising from the Facebook IPO in May 2012, which was recorded in general, administrative and other expense.  The reserve was intended to cover the estimated amount of a settlement of class-action litigation initiated on behalf of investors in Facebook common stock on the date of its IPO.  The reserve also covered the cost of re-opening Nasdaq's voluntary accommodation program to allow any Nasdaq member that did not file for compensation in 2013 to submit a claim during the second quarter of 2015, subject to the conditions and limitations that were applicable to claims filed in 2013.  The re-opened accommodation program is now closed.  The insurance recovery recognized during the three months ended December 31, 2015 and September 30, 2015 represents amounts reimbursed by applicable insurance coverage which offsets the loss reserve that was recorded in March 2015.
 
(2) Amortization expense related to intangible assets results primarily from business combinations. These non-cash expenses are fixed and amortized over the estimated useful life of the intangible asset acquired.  These expenses generally cannot be changed or influenced by management after the acquisition. Management does not consider these expenses for the purpose of evaluating the performance of the business or its managers or when making decisions to allocate resources. Therefore, such expenses are shown as a non-GAAP adjustment.
 
(3) During the first quarter of 2015, we performed a comprehensive review of our processes, businesses and systems in a company-wide effort to improve performance, cut costs, and reduce spending. In the first quarter of 2015, we also decided to change our company name from The NASDAQ OMX Group, Inc., to Nasdaq, Inc., which became effective in the third quarter of 2015. We currently estimate that we will recognize net pre-tax restructuring charges of $190 million, consisting of the rebranding of our trade name, severance, asset impairments, facility-related and other costs.  We recognized restructuring charges of $12 million for the three months ended December 31, 2015, $8 million for the three months ended September 30, 2015, $2 million for the three months ended June 30, 2015 and $150 million for the three months ended March 31, 2015 for a total of $172 million for the year ended December 31, 2015.  The remaining amount will be recognized through June 2016.  Restructuring charges are recorded on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.
 
(4) For the three months and year ended December 31, 2015 and the three months ended September 30, 2015, merger and strategic initiatives expense primarily related to certain strategic initiatives and our acquisition of Dorsey, Wright & Associates, LLC.  For the three months and year ended December 31, 2014, merger and strategic initiatives expense primarily related to our acquisition of the TR Corporate businesses, and eSpeed and a charge of $23 million related to the reversal of a receivable under a tax sharing agreement with an unrelated party.
 
(5) We previously recorded receivables for expected VAT, refunds based on an approach that had been accepted by the tax authorities in prior years.  The tax authorities have since challenged our approach, and the revised position of the tax authorities was upheld in court during the first quarter of 2015.  As a result, in the first quarter of 2015, we recorded a charge of $12 million for previously recorded receivables based on the court decision. 
 
(6) Non-GAAP operating margin equals non-GAAP operating income divided by total revenues less transaction-based expenses.

 

Nasdaq, Inc. 
Reconciliation of 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  Year Ended 
  December 31,   September 30,    December 31,   December 31,   December 31,  
   2015      2015     2014     2015     2014   
           
GAAP operating expenses$  290  $  298  $  344  $  1,370  $  1,313  
           
Non-GAAP adjustments:           
           
Loss reserve and insurance recovery (1)   26     5     -      -      -   
Amortization expense of acquired intangible assets (2)   (15)    (15)    (16)    (62)    (69) 
Restructuring charges (3)   (12)    (8)    -      (172)     -   
Merger and strategic initiatives (4)   (4)    (4)    (35)    (10)     (81) 
Reversal of value added tax refund  (5)   -      -      -      (12)     -   
Sublease loss reserves   -      -      (11)    -      (11) 
Extinguishment of debt   -      -      (2)    -      (11) 
Special legal expenses   -      -      -      -      (2) 
Other   -      -      -      -      (2) 
Total non-GAAP adjustments   (5)    (22)    (64)    (256)    (176) 
           
Non-GAAP operating expenses$  285  $  276  $  280  $  1,114  $  1,137  
           
(1) In March 2015, we established a loss reserve of $31 million for litigation arising from the Facebook IPO in May 2012, which was recorded in general, administrative and other expense.  The reserve was intended to cover the estimated amount of a settlement of class-action litigation initiated on behalf of investors in Facebook common stock on the date of its IPO.  The reserve also covered the cost of re-opening Nasdaq's voluntary accommodation program to allow any Nasdaq member that did not file for compensation in 2013 to submit a claim during the second quarter of 2015, subject to the conditions and limitations that were applicable to claims filed in 2013.  The re-opened accommodation program is now closed.  The insurance recovery recognized during the three months ended December 31, 2015 and September 30, 2015 represents amounts reimbursed by applicable insurance coverage which offsets the loss reserve that was recorded in March 2015.
 
            
(2) Amortization expense related to intangible assets results primarily from business combinations. These non-cash expenses are fixed and amortized over the estimated useful life of the intangible asset acquired.  These expenses generally cannot be changed or influenced by management after the acquisition. Management does not consider these expenses for the purpose of evaluating the performance of the business or its managers or when making decisions to allocate resources. Therefore, such expenses are shown as a non-GAAP adjustment.
 
            
(3) During the first quarter of 2015, we performed a comprehensive review of our processes, businesses and systems in a company-wide effort to improve performance, cut costs, and reduce spending. In the first quarter of 2015, we also decided to change our company name from The NASDAQ OMX Group, Inc., to Nasdaq, Inc., which became effective in the third quarter of 2015. We currently estimate that we will recognize net pre-tax restructuring charges of $190 million, consisting of the rebranding of our trade name, severance, asset impairments, facility-related and other costs.  We recognized restructuring charges of $12 million for the three months ended December 31, 2015, $8 million for the three months ended September 30, 2015, $2 million for the three months ended June 30, 2015 and $150 million for the three months ended March 31, 2015 for a total of $172 million for the year ended December 31, 2015.  The remaining amount will be recognized through June 2016.  Restructuring charges are recorded on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.
 
           
(4) For the three months and year ended December 31, 2015 and the three months ended September 30, 2015, merger and strategic initiatives expense primarily related to certain strategic initiatives and our acquisition of Dorsey, Wright & Associates, LLC.  For the three months and year ended December 31, 2014, merger and strategic initiatives expense primarily related to our acquisition of the TR Corporate businesses, and eSpeed and a charge of $23 million related to the reversal of a receivable under a tax sharing agreement with an unrelated party.
 
           
(5) We previously recorded receivables for expected VAT, refunds based on an approach that had been accepted by the tax authorities in prior years.  The tax authorities have since challenged our approach, and the revised position of the tax authorities was upheld in court during the first quarter of 2015.  As a result, in the first quarter of 2015, we recorded a charge of $12 million for previously recorded receivables based on the court decision. 
 

  

Nasdaq, Inc.
Quarterly Key Drivers Detail
(unaudited)
      
 Three Months Ended
  December 31,   September 30,   December 31, 
   2015     2015     2014  
Market Services     
Equity Derivative Trading and Clearing      
U.S. Equity Options     
Total industry average daily volume (in millions) 14.4   16.0   16.1 
Nasdaq PHLX matched market share 17.0%  15.8%  16.2%
The NASDAQ Options Market matched market share 7.8%  6.7%  9.7%
Nasdaq BX Options Market matched market share 1.0%  0.9%  0.7%
Total matched market share executed on Nasdaq's exchanges 25.8%  23.4%  26.6%
      
Nasdaq Nordic and Nasdaq Baltic options and futures      
Total average daily volume options and futures contracts(1) 445,660   336,392   379,604 
      
Cash Equity Trading     
Total U.S.-listed securities     
Total industry average daily share volume (in billions)   7.05     7.32     7.00 
Matched share volume (in billions)   82.2     88.2     90.8 
Matched market share executed on NASDAQ 15.2%  15.7%  17.6%
Matched market share executed on Nasdaq BX 2.1%  2.1%  2.0%
Matched market share executed on Nasdaq PSX 0.9%   1.0%  0.7%
Total matched market share executed on Nasdaq's exchanges 18.2%  18.8%  20.3%
Market share reported to the FINRA/NASDAQ Trade Reporting Facility 32.0%  30.2%  30.2%
Total market share(2) 50.2%  49.0%   50.5%
      
Nasdaq Nordic and Nasdaq Baltic securities     
Average daily number of equity trades 388,433   405,614   390,302 
Total average daily value of shares traded (in billions)$  5.0  $  4.4  $  4.8 
Total market share executed on Nasdaq's exchanges 67.7%  69.7%  69.6%
      
Fixed Income, Currency and Commodities Trading and Clearing     
Total U.S. Fixed Income     
U.S. fixed income notional trading volume (in billions) $  5,191  $  7,397  $  8,627 
      
Nasdaq Nordic and Nasdaq Baltic fixed income     
Total average daily volume fixed income contracts   105,248     116,563     98,284 
      
Nasdaq Commodities     
Power contracts cleared (TWh)(3) 419   385   413 
       
Listing Services     
Initial public offerings     
NASDAQ 32   35   49 
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic 22   7   20 
      
New listings      
NASDAQ(4) 72   80   95 
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic(5) 26   9   23 
       
Number of listed companies     
NASDAQ(6)   2,859     2,850     2,782 
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic(7)   852     835     792 
       
Information Services     
Number of licensed exchange traded products 222   210   166 
ETP Assets under management (AUM) tracking Nasdaq indexes (in billions)(8)$  114  $  103  $  99 
      
Technology Solutions     
Market Technology     
Order intake (in millions)(9)$  116   $  83  $  194 
Total order value (in millions)(10)$  788  $  738  $  716 
      
(1) Includes Finnish option contracts traded on EUREX Group.
(2) Includes transactions executed on NASDAQ's, Nasdaq BX's and Nasdaq PSX's systems plus trades reported through the Financial Industry Regulatory Authority/NASDAQ Trade Reporting Facility. 
(3) Transactions executed on Nasdaq Commodities or OTC and reported for clearing to Nasdaq Commodities measured by Terawatt hours (TWh).
(4) 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 funds, or ETFs.
(5) 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.
(6) Number of listed companies for NASDAQ at period end, including separately listed ETFs.
(7) Represents companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North at period end.
(8) Represents assets under management in licensed exchange traded products, or ETPs.
(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:

Joseph Christinat

+1.646.441.5121

joseph.christinat@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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