Nasdaq Reports First Quarter 2021 Results; Delivers 21% Increase In Revenue Compared To Prior Year

  • First quarter 2021 net revenues1 were $851 million, an increase of 21% over the first quarter of 2020. Compared to the prior year period, Solutions segments2 revenues increased 22% while Market Services revenues increased 20%.
  • Annualized Recurring Revenue (ARR)3 was $1,760 million in the first quarter of 2021, an increase of 21% from the prior year period.
  • First quarter 2021 GAAP diluted earnings per share of $1.78 increased 46% compared to $1.22 in the first quarter of 2020. First quarter 2021 non-GAAP4 diluted earnings per share of $1.96 increased 31% from $1.50 in the first quarter of 2020.
  • Nasdaq advanced its strategic positioning by completing the acquisition of Verafin, establishing the company as a leading anti-financial crime technology provider.
  • Also in the first quarter of 2021, Nasdaq agreed to sell its U.S. Fixed Income business, which will allow the company to concentrate resources on its technology, analytics and ESG opportunities.
  • The company is announcing a 10% increase to the quarterly dividend, to $0.54 per share, and returned $243 million of cash to investors in the first quarter of 2021, including $162 million in share repurchases.

NEW YORK, April 21, 2021 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the first quarter of 2021.

First quarter 2021 net revenues were $851 million, an increase of $150 million, or 21%, from $701 million in the prior year period. Net revenues reflected a $118 million, or 17%, positive impact from organic growth, an $18 million increase from the impact of favorable changes in FX rates and a $14 million increase from the inclusion of revenues from acquisitions.

“I am pleased with how our team delivered for clients against an incredibly dynamic capital markets backdrop, reflecting record trading and listing results as well as strong growth across our solutions segments," said Adena Friedman, President and CEO, Nasdaq. "We continue to execute against key secular growth opportunities, as illustrated by strong momentum in our institutional investor analytics solutions, as well as by the broad-based growth in total company ARR compared to the prior year period. We are also making fundamental progress in Nasdaq's strategic repositioning this year, with the close of the Verafin acquisition, and the consequent expansion of our addressable market and long-term performance potential.”   

GAAP operating expenses were $486 million in the first quarter of 2021, an increase of $60 million from $426 million in the first quarter of 2020. The increase of $60 million primarily relates to an $18 million increase from acquisitions and a $15 million increase from changes in FX rates. In addition, the increase reflects higher compensation and benefits expense, higher merger and strategic initiatives expense, and higher depreciation and amortization expense, partially offset by lower general, administrative and other expense. The lower general, administrative and other expense primarily reflects bond refinancing costs that were incurred in the first quarter of 2020, higher charitable donations made to COVID-19 response and relief efforts in the first quarter of 2020, and reduced corporate travel expenses.

Non-GAAP operating expenses were $393 million in the first quarter of 2021, an increase of $57 million, or 17%, compared to the first quarter of 2020. This increase reflects a $24 million, or 7%, organic increase over the prior-year period, an $18 million increase from acquisitions and a $15 million increase from changes in FX rates. The organic increase was primarily driven by higher performance-linked compensation expenses.

"I am incredibly excited to become Nasdaq's CFO at such an interesting time, in particular, to have the opportunity to support our evolution as a technology and analytics provider," said Ann Dennison, Executive Vice President, and Chief Financial Officer, Nasdaq. "During the first quarter, we completed the Verafin acquisition, which we financed at attractive interest rates. In addition, we reached an agreement to divest our U.S. Fixed Income business and announced an increase to our existing share repurchase program authorization to, over time, neutralize the impact of the divestiture on our EPS."

On a GAAP basis, net income in the first quarter of 2021 was $298 million, an increase of 47% compared to $203 million in the first quarter of 2020. GAAP diluted EPS was $1.78, an increase of 46% compared $1.22 in the first quarter of 2020.

On a non-GAAP basis, net income in the first quarter of 2021 was $327 million, an increase of 30% compared to $251 million in the first quarter of 2020. Non-GAAP diluted EPS totaled $1.96, an increase of 31% from $1.50 in the first quarter of 2020.

As of March 31, 2021, the company had cash and cash equivalents of $774 million and total debt of $5,890 million, resulting in net debt of $5,116 million. This compares to total debt of $5,541 million and net debt of $2,796 million at December 31, 2020. The increase in net debt reflects closing the acquisition of Verafin. As of March 31, 2021, there was $248 million remaining under the board authorized share repurchase program (excluding the additional $1 billion authorized subject to the closing of the divestiture of our U.S. Fixed Income business and the resulting share issuance upon the consummation of that transaction).

UPDATING 2021 NON-GAAP EXPENSE AND TAX GUIDANCE5

The company is updating its 2021 non-GAAP operating expense guidance to a range of $1,570 to $1,620 million. Nasdaq expects its 2021 non-GAAP tax rate to be in the range of 25% to 27%.

BUSINESS HIGHLIGHTS

Market Services - Net revenues were a record $338 million in the first quarter of 2021, an increase of $57 million, or 20%, compared to the first quarter of 2020.

Equity Derivative Trading and Clearing - Net revenues increased $12 million, or 13%, in the first quarter of 2021 compared to the first quarter of 2020. The increase primarily reflects higher U.S. industry trading volumes, partially offset by a lower U.S. net capture rate.

Cash Equity Trading - Net revenues increased $35 million, or 36%, in the first quarter of 2021 compared to the first quarter of 2020. The increase primarily reflects higher U.S. industry trading volumes, net capture rates, and the impact from changes in FX rates, partially offset by lower U.S. market share.

Fixed Income and Commodities Trading and Clearing - Net revenues increased $2 million, or 12%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to the impact from changes in FX rates.

Trade Management Services - Revenues increased $8 million, or 11%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to increased demand for connectivity services.

Corporate Platforms - Revenues were $155 million in the first quarter of 2021, up $27 million, or 21%, compared to the first quarter of 2020.

Listing Services - Revenues increased $23 million, or 31%, in the first quarter of 2021 compared to the first quarter of 2020. The increase was primarily driven by higher U.S. listing revenues due to an increase in the overall number of listed companies and higher Nasdaq Private Market revenues.

IR & ESG Services - Revenues increased $4 million, or 8%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to an increase in both IR and ESG advisory services revenues.

Investment Intelligence - Revenues were $258 million in the first quarter of 2021, up $47 million, or 22%, compared to the first quarter of 2020.

Market Data - Revenues increased $11 million, or 11%, in the first quarter of 2021 compared to the first quarter of 2020. The increase reflects organic growth in proprietary data products from new sales, including continued expansion geographically and an increase in shared tape plan revenues.

Index - Revenues increased $29 million, or 40%, in the first quarter of 2021 compared to the first quarter of 2020. The increase was primarily driven by higher licensing revenues from higher average assets under management (AUM) in exchange-traded products (ETPs) linked to Nasdaq indexes and higher licensing revenues from futures trading linked to the Nasdaq-100 Index.

Analytics - Revenues increased $7 million, or 17%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to growth in eVestment and Solovis clients.

Market Technology - Revenues were $100 million in the first quarter of 2021, up $19 million, or 23% compared to the first quarter of 2020.

Marketplace Infrastructure Technology - Revenues increased $2 million, or 4%, in the first quarter of 2021 compared to the first quarter of 2020, primary due to the impact from changes in FX rates.

Anti Financial Crime Technology - Revenues increased $17 million, or 59%, in the first quarter of 2021 compared to the first quarter of 2020. The increase is due to continued growth in surveillance solutions, the inclusion of revenues from our acquisition of Verafin, and the impact from changes in FX rates.
 

CORPORATE HIGHLIGHTS

  • Nasdaq accelerates the company's evolution as a leading SaaS technology provider of anti-financial crime solutions by completing the acquisition of Verafin. In February 2021, Nasdaq completed the acquisition of Verafin, an industry pioneer in anti-financial crime technology solutions. The acquisition strengthens Nasdaq's existing regulatory and anti-financial crime solutions while expanding Verafin's reach to serve a global ecosystem of Tier-1 and Tier-2 banks and broker-dealers.
     
  • ETP assets under management tracking Nasdaq indexes and derivative product volume tracking Nasdaq indexes each set new quarterly records. Overall AUM in ETPs benchmarked to Nasdaq's proprietary indexes totaled $385 billion as of March 31, 2021, an increase of 87% compared to March 31, 2020. Additionally, the number of futures and options on futures contracts tracking Nasdaq indexes set a quarterly record with 105 million contracts traded, an increase of 31% from 80 million in the first quarter of 2020. There are 17 products tracking Nasdaq indexes which launched in the first quarter of 2021, including 13 outside of the U.S.
     
  • Nasdaq's analytics business led by eVestment and Solovis delivered strong retention and sales growth during the first quarter of 2021. The eVestment and Solovis analytics businesses continue to see increased growth, not only due to increased number of users, but also in both new sales and retention compared to the prior-year period. On a sequential basis, new sales were up 23% from the fourth quarter of 2020, reflecting both a rebound in institutional investment industry demand following some temporary contraction in 2020, as well as increasing realization of synergies across the suite of solutions. These synergies helped to drive 28 new accounts to Solovis in the first quarter of 2021.
     
  • The Nasdaq Stock Market led U.S. exchanges for IPOs during the first quarter of 2021. The Nasdaq Stock Market led U.S. exchanges with a 69% total IPO win rate, including a 77% win rate among operating companies6 and a 66% win rate among special purpose acquisition companies. In the first quarter of 2021, The Nasdaq Stock Market welcomed 275 IPOs representing $74 billion in capital raised, including 79 operating company IPOs such as Bumble, Qualtrics, Affirm, Playtika, and Petco, as well as 196 IPOs from special purpose acquisition companies.
     
  • Nasdaq's Market Services segment sets new quarterly trading volume records in U.S. options and U.S. equities in the first quarter of 2021. In the first quarter of 2021, Nasdaq's U.S. options market set a quarterly record of 892 million contracts traded, an increase of 57% year over year. Additionally, Nasdaq led all exchanges during the period in total volume traded for options inclusive of both multiply-listed equity options and index options products. Nasdaq's U.S. equities markets set a quarterly record of 153 billion shares traded, an increase of 20% year over year.
     
  • Nasdaq agrees to sell its U.S. Fixed Income business to Tradeweb Markets. Nasdaq's decision to sell its U.S. Fixed Income business aligns with its corporate strategy to concentrate its resources and capital to maximize its potential as a major technology and analytics provider to the global capital markets. The transaction is expected to close later in 2021 subject to satisfaction of customary closing conditions, including the receipt of required regulatory approvals.

____________
Represents revenues less transaction-based expenses.  
Constitutes revenues from Market Technology, Investment Intelligence, and Corporate Platforms segments.
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 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.
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.
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.
Operating companies exclude special purpose acquisition companies and when a special purpose acquisition company completes an acquisition.

ABOUT NASDAQ

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

NON-GAAP INFORMATION

In addition to disclosing results determined in accordance with U.S. GAAP, Nasdaq also discloses certain non-GAAP results of operations, including, but not limited to, 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 its usefulness as a comparative measure. Investors should not rely on any single financial measure when evaluating our business. This information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this earnings release. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliations, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.

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

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
           
Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties.  Nasdaq cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information.  Such forward-looking statements include, but are not limited to (i) projections relating to our future financial results, total shareholder returns, growth, trading volumes, products and services, ability to transition to new business models, 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, de-leveraging and capital allocation initiatives, (iii) statements about our integrations of our recent acquisitions, (iv) statements relating to any litigation or regulatory or government investigation or action to which we are or could become a party, and (v) other statements that are not historical facts.  Forward-looking statements involve a number of risks, uncertainties, or other factors beyond Nasdaq’s control.  These factors include, but are not limited to, Nasdaq’s ability to implement its strategic initiatives, economic, political, and market conditions and fluctuations, government and industry regulation, interest rate risk, the U.S. and global competition, the impact of the COVID-19 pandemic on our business, operations, results of operations, financial condition, workforce or the operations or decisions of our customers, suppliers or business partners, and 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.

Media Relations Contact:

Will Briganti
+1.646.964.8169
william.briganti@nasdaq.com

Investor Relations Contact:

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

-NDAQF-

Nasdaq, Inc.
Condensed Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
 
  Three Months Ended
  March 31,     December 31,     March 31,  
  2021     2020     2020  
Revenues:                
Market Services $                     1,139     $                        966     $                        933  
Transaction-based expenses:                
Transaction rebates                        (654 )                          (503 )                          (479 )
Brokerage, clearance and exchange fees                        (147 )                          (172 )                          (173 )
Total Market Services revenues less transaction-based expenses                          338                              291                              281  
Corporate Platforms                          155                              144                              128  
Investment Intelligence                          258                              247                              211  
Market Technology                          100                              106                                81  
    Revenues less transaction-based expenses                          851                              788                              701  
                 
Operating Expenses:                
Compensation and benefits                          239                              205                              195  
Professional and contract services                            27                                40                                27  
Computer operations and data communications                            44                                42                                35  
Occupancy                            28                                26                                25  
General, administrative and other                            13                                43                                61  
Marketing and advertising                            10                                19                                  9  
Depreciation and amortization                            63                                53                                48  
Regulatory                              7                                  8                                  7  
Merger and strategic initiatives                            45                                22                                  7  
Restructuring charges                            10                                12                                12  
    Total operating expenses                          486                              470                              426  
Operating income                          365                              318                              275  
Interest income                              1                                   -                                  2  
Interest expense                          (29 )                            (24 )                            (26 )
Other income                              1                                   -                                  5  
Net income (loss) from unconsolidated investees                            57                              (27 )                              17  
Income before income taxes                          395                              267                              273  
Income tax provision                            97                                43                                70  
Net income attributable to Nasdaq $                        298     $                        224     $                        203  
                 
Per share information:                
Basic earnings per share $                       1.81     $                       1.36     $                       1.23  
Diluted earnings per share $                       1.78     $                       1.34     $                       1.22  
Cash dividends declared per common share $                       0.49     $                       0.49     $                       0.47  
                 
Weighted-average common shares outstanding                
for earnings per share:                
Basic                        164.7                            164.5                            164.9  
Diluted                        167.1                            167.3                            166.8  
                 
1 2 3 4
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and ...

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