Globe Newswire – NEW YORK – Nasdaq, Inc. (Nasdaq:NDAQ) today reported strong financial results for the third quarter of 2016. Third quarter net revenues were $585 million, up $56 million or 11% from $529 million in the prior year period, driven primarily by a $58 million positive impact from acquisitions. Organic revenue growth in the non-trading segments4 in the third quarter of 2016 was offset by a contraction in trading revenues when compared to an especially volatile trading environment in the prior-year period.
“The third quarter’s strong financial results showcase how the complementary nature of Nasdaq’s business mix can deliver against a variety of macro backdrops. While our marketplaces were subject to lower volatility and industry volumes compared to the prior year period, the company’s non-trading segments expanded to new record levels,” said Bob Greifeld
, CEO, Nasdaq.
Mr. Greifeld continued, “The Information Services, Technology Solutions, and Listing Services segments were especially strong in the third quarter, but more importantly they each represent areas where we have found attractive opportunities to invest and where our technology leadership can be leveraged effectively to benefit our clients and create new opportunities for growth.”
Operating expenses were $352 million in the third quarter of 2016, up $54 million from $298 million in the third quarter of 2015. The increase primarily reflects incremental expenses from the acquisitions of Nasdaq CXC, formerly Chi-X Canada (February 2016), Marketwired (February 2016), Boardvantage (May 2016), and ISE (June 2016).
Non-GAAP operating expenses were $317 million in the third quarter of 2016, up $41 million from $276 million in the third quarter of 2015. This increase primarily reflects $29 million in incremental operating expenses from the acquisitions closed in 2016 as well as $13 million due to organic growth.
“During the third quarter, the company made significant progress integrating our recent acquisitions, moving the synergy achievement up to $23 million on a run rate basis, which contributed to meaningful accretion to our non-GAAP results,” said Michael Ptasznik
, Chief Financial Officer and Executive Vice President, Nasdaq.
Mr. Ptasznik continued, “We also saw an attractive opportunity to return $55 million to shareholders through the share buyback program in the third quarter. I’m pleased to say that in addition to executing on several acquisition opportunities this year, the company has returned 54% of our non-GAAP net income year-to-date to shareholders through dividends and buybacks.”
Net income attributable to Nasdaq for the third quarter of 2016 was $131 million, or $0.77 per diluted share, compared with $138 million, or $0.80 per diluted share, in the prior year quarter. On a non-GAAP basis, net income attributable to Nasdaq for the third quarter of 2016 was $154 million, or $0.91 per diluted share, compared with $151 million, or $0.88 per diluted share, in the third quarter of 2015.
The company repurchased 800,938 shares for $55 million in the third quarter of 2016 at an average price of $68.19. As of September 30, 2016, there was $429 million remaining under the board authorized share repurchase program.
At September 30, 2016, the company had cash and cash equivalents of $257 million and total debt of $3,709 million, resulting in net debt of $3,452 million. This compares to net debt of $2,063 million at December 31, 2015.
1 Represents revenues from our Information Services, Technology Solutions, and Listing Services segments, as well as our Trade Management Services business, formerly referred to as Access and Broker Services.
2 Represents revenues less transaction-based expenses.
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 Represents revenues from our Information Services, Technology Solutions, and Listing Services segments.
BUSINESS HIGHLIGHTS
Market Services(36% of total net revenues) – Net revenues were $213 million in the third quarter of 2016, up $13 million when compared to the third quarter of 2015. The increase primarily reflects an increase in revenues from the ISE and Nasdaq CXC acquisitions, partially offset by declines in trading volumes as compared to multi-year high industry trading volumes experienced in the third quarter of 2015.
Equity Derivatives (11% of total net revenues) – Net equity derivative trading and clearing revenues were $67 million in the third quarter of 2016, up $16 million compared to the third quarter of 2015. The increase is primarily due to the inclusion of revenues from our acquisition of ISE in June 2016 and higher market share at The NASDAQ Options Market and Nasdaq PHLX, partially offset by lower industry trading volumes.
Cash Equities (10% of total net revenues) – Net cash equity trading revenues were $59 million in the third quarter of 2016, down $8 million compared to the third quarter of 2015. This decrease reflects lower matched market share, lower industry trading volumes and lower U.S. average net capture, partially offset by the inclusion of net revenues associated with the acquisition of Nasdaq CXC.
Fixed Income and Commodities Trading and Clearing1 (3% of total net revenues) – Net fixed income and commodities trading and clearing (FICC) revenues were $18 million in the third quarter of 2016, down $5 million from the third quarter of 2015, due to declines in commodities and U.S. fixed income revenues and the impact of trading incentives on Nasdaq Futures (NFX) revenues.
Trade Management Services (12% of total net revenues) – Trade management services revenues were $69 million in the third quarter of 2016, up $10 million compared to the third quarter of 2015, due to the inclusion of revenue from the acquisition of ISE and an increase in customer demand for network connectivity.
1 Our FICC business was formerly referred to as fixed income, currency and commodities trading and clearing.
Information Services (23% of total net revenues) – Revenues were $137 million in the third quarter of 2016, up $5 million from the third quarter of 2015.
Data Products (18% of total net revenues) – Data products revenues were $109 million in the third quarter of 2016, up $6 million compared to the third quarter of 2015 primarily due to growth in proprietary data products revenues, the inclusion of revenues from the acquisitions of ISE and Nasdaq CXC, as well as higher audit collections.
Index Licensing and Services (5% of total net revenues) – Index licensing and services revenues were $28 million in the third quarter of 2016, down $1 million from the third quarter of 2015. The revenue decline was primarily due to a decrease in the value of underlying assets associated with non-ETP Nasdaq-licensed products and lower fees associated with derivative products licensing Nasdaq indices, due to lower volumes.
Technology Solutions (29% of total net revenues) – Revenues were $167 million in the third quarter of 2016, up $36 million from the third quarter of 2015. The increase primarily reflects the inclusion of revenues from the acquisitions of Marketwired and Boardvantage, as well as $13 million in organic revenue growth in our Market Technology business.
Corporate Solutions (16% of total net revenues) – Corporate solutions revenues were $94 million in the third quarter of 2016, up $22 million from the third quarter of 2015. The increase was due to the inclusion of revenues from the Marketwired and Boardvantage acquisitions.
Market Technology (13% of total net revenues) – Market technology revenues were $73 million in the third quarter of 2016, up $14 million from the third quarter of 2015. The increase was driven primarily by growth in revenues from software licensing and support as well as surveillance products.
Listing Services (12% of total net revenues) – Revenues were $68 million in the third quarter of 2016, up $2 million compared to the third quarter of 2015 primarily due to higher revenues in the Nordics due to new company listings.
CORPORATE HIGHLIGHTS
- NFX growth continues Nasdaq’s commodities expansion. NFX, a U.S.-based derivatives market for key energy benchmarks, has seen increasing traction since launch in July 2015. During the month of September 2016, open interest in NFX products reached a record 1.2 million contracts, and during the third quarter of 2016, trading volume of 8.9 million contracts increased 16% from 7.7 million contracts in the second quarter of 2016. Since its July 2015 inception, 118 firms have traded on NFX.
- The Nasdaq Stock Market leads U.S. exchanges for IPOs and switches. In the U.S. market, The Nasdaq Stock Market welcomed 79 new listings in the third quarter of 2016, including 31 IPOs such as Trade Desk, Apptio and Nutanix. During the third quarter of 2016, 74% of all U.S. IPOs were listed on Nasdaq. In addition, The Nasdaq Stock Market welcomed 16 switches thus far in 2016 with an aggregate market capitalization of $42 billion, including IHS Markit. Nasdaq announced 24 new exchange-traded products (ETP) listings and one switch in the third quarter, bringing Nasdaq’s total ETP listings to 295, up 48% from the third quarter of 2015.
- Corporate Solutions launches Nasdaq Influencers while Nasdaq IR Insight sees continued strong adoption. Nasdaq has seen strong adoption of the next generation IR platform with 86% of companies upgraded since January. Additionally, Nasdaq’s Corporate Solutions business launched Nasdaq Influencers, a new solution for communications and marketing professionals to discover and connect with the most relevant thought leaders in their industry and uncover new opportunities to share their news and information, insights and recommendations as well as drive brand identity and awareness.
- Nasdaq sees strong growth in number of ETPs and assets tracking Nasdaq indexes. The number of ETPs licensed to Nasdaq indexes increased to 289 at September 30, 2016 versus 267 at June 30, 2016, including several non-U.S. product launches in China, Taiwan, and Australia. Two new Nasdaq-100 ETPs were listed in Hong Kong with BMO and BlackRock and one in Taiwan with Fubon Asset Management. Additionally, BetaShares launched a series of Global Ex-Australia hedged ETPs based on Nasdaq indexes. Overall AUM in exchange traded products (ETPs) benchmarked to all Nasdaq indexes increased 15% to $118 billion as of September 30, 2016 compared to September 30, 2015.
