NEW YORK, April 27 (Bernama-GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq:NDAQ) today reported financial results for the first quarter of 2017.  First quarter net revenues were $583 million, up $49 million or 9% from $534 million in the prior year period.  The first quarter increase in net revenues included a $50 million positive impact from acquisitions and $15 million, or 5%, organic growth in non-trading segments, partially offset by a $12 million organic decline in Market Services net revenues driven by lower industry trading volumes, as well as an overall $4 million impact from unfavorable changes in foreign exchange rates.

“I'm pleased Nasdaq was able to set new highs in terms of operating income and EPS, and deliver continued strong organic revenue growth across the non-transactional businesses, despite a challenging trading volume environment,” said Adena T. Friedman, President and CEO, Nasdaq. “Importantly, we are seeing growth in areas where we've invested materially to innovate for the benefit of our clients, bringing them new or enhanced capabilities and efficiencies, in particular in the Market Technology, Information Services and Corporate Solutions businesses.”

Ms. Friedman continued, “We have made significant early progress towards our 2017 execution priorities.  We have improved our competitive position, as evidenced by higher market share in several key trading markets, progressed on our acquisition integrations, and continued our efforts to commercialize key disruptive technologies, as illustrated by early sales success of the Nasdaq Financial Framework, our next generation Market Technology offering."

GAAP operating expenses were $335 million in the first quarter of 2017, up $20 million from $315 million in the first quarter of 2016. The increase primarily reflects incremental operating expenses from the acquisitions closed in 2016.

Non-GAAP operating expenses were $306 million in the first quarter of 2017, up $26 million from $280 million in the first quarter of 2016. This increase reflects $22 million of incremental operating expenses from the acquisitions closed in 2016 as well as $7 million due to organic growth, partially offset by a $3 million favorable impact from foreign exchange rate changes.

“We are making significant progress executing against our acquisition integration plans, and we remain on pace to hit our synergy target of $60 million by the end of 2017,” said Michael Ptasznik, Executive Vice President and Chief Financial Officer, Nasdaq.

Mr. Ptasznik continued, “We are continuing Nasdaq's strong track record on capital returns to shareholders with the announced 19% increase in our quarterly dividend and material first quarter share repurchases, the latter expected to largely offset the dilutive impact of equity-based compensation and other commitments in 2017.”

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 (loss), diluted earnings (loss) per share, operating income and operating expenses, and total variance impact analysis included in the attached schedules.
⁴ Represents revenues from our Corporate Services, Information Services and Market Technology segments.

On a GAAP basis, net income attributable to Nasdaq for the first quarter of 2017 was $169 million, or $0.99 per diluted share, compared with net income of $132 million, or $0.78 per diluted share, in the first quarter of 2016.

On a non-GAAP basis, net income attributable to Nasdaq for the first quarter of 2017 was $187 million, or $1.10 per diluted share, compared with $153 million, or $0.91 per diluted share, in the first quarter of 2016.

As discussed on our prior quarterly call, both GAAP and non-GAAP net income and EPS comparisons to the prior year period benefited from the 2017 adoption of ASU 2016-09¹, which in the first quarter of 2017 reduced the effective tax rate on our income statement, adding $0.13 to diluted EPS for the first quarter of 2017.  Cash tax payments were not affected by the change.

During the first quarter of 2017, the company repurchased 2.2 million shares of common stock for a total cost of $156 million.  As of March 31, 2017, there was $273 million remaining under the board authorized share repurchase program.

At March 31, 2017, the company had cash and cash equivalents of $386 million and total debt of $3,621 million, resulting in net debt of $3,235 million. This compares to net debt of $3,200 million at December 31, 2016.

DEBT RESTRUCTURING - Nasdaq announced it will redeem all of its outstanding 5.25% senior notes maturing January 2018 on May 26, 2017.  The notes will be redeemed using a combination of cash on hand and proceeds from the sale of commercial paper issued through Nasdaq's newly established commercial paper program.  Additionally, the company entered into an agreement for a $1 billion five-year revolving credit facility, which replaces its existing $750 million revolving credit facility.  Nasdaq intends to use funds available under the revolving credit facility for general corporate purposes and to provide liquidity support for the repayment of commercial paper issued through its commercial paper program.

2017 EXPENSE GUIDANCE² - The company is lowering its 2017 non-GAAP operating expense guidance to $1,260 to $1,300 million, versus prior 2017 guidance of $1,260 to $1,310 million.

¹ In the first quarter of 2017, we adopted new accounting guidance which requires us to recognize the tax effect related to the vesting of share-based awards in income tax expense in the statements of income rather than in equity.
² 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 $218 million in the first quarter of 2017, up $17 million when compared to the first quarter of 2016.

Equity Derivatives (12% of total net revenues) - Net equity derivative trading and clearing revenues were $68 million in the first quarter of 2017, up $20 million compared to the first quarter of 2016. The increase is primarily due to the inclusion of revenues from the acquisition of ISE in June 2016.

Cash Equities (10% of total net revenues) - Net cash equity trading revenues were $61 million in the first quarter of 2017, down $9 million from the first quarter of 2016. This decrease primarily reflects lower industry trading volumes, partially offset by the inclusion of net revenues associated with the acquisition of Nasdaq CXC in February 2016.

Fixed Income and Commodities Trading and Clearing (3% of total net revenues) - Net fixed income and commodities trading and clearing (FICC) revenues were $19 million in the first quarter of 2017, down $1 million from the first quarter of 2016.

Trade Management Services (12% of total net revenues) - Trade management services revenues were
$70 million in the first quarter of 2017, up $7 million compared to the first quarter of 2016, due to the inclusion of revenue from the acquisition of ISE and an increase in customer demand for network connectivity.


Corporate Services (27% of total net revenues) - Revenues were $160 million in the first quarter of 2017, up $17 million compared to the first quarter of 2016.

Corporate Solutions (16% of total net revenues) - Corporate solutions revenues were $95 million in the first quarter of 2017, up $18 million from the first quarter of 2016. The increase was due to the inclusion of $16 million of revenues from the Marketwired and Boardvantage acquisitions and $2 million of organic revenue growth, primarily in public and investor relations.

Listing Services (11% of total net revenues) - Listing services revenues were $65 million in the first quarter of 2017, down $1 million from the first quarter of 2016.  The revenue decrease was primarily due to a $1 million negative impact from foreign exchange rate changes.


Information Services (24% of total net revenues) - Revenues were $138 million in the first quarter of 2017, up $5 million from the first quarter of 2016.

Data Products (19% of total net revenues) - Data products revenues were $108 million in the first quarter of 2017, up $3 million compared to the first quarter of 2016 primarily due to growth in proprietary data products revenues and the inclusion of revenues from the acquisition of ISE.

Index Licensing and Services (5% of total net revenues) - Index licensing and services revenues were $30 million in the first quarter of 2017, up $2 million from the first quarter of 2016.  The revenue increase is due to the inclusion of revenues from the ISE acquisition and higher assets under management in exchange traded products linked to Nasdaq indexes, partially offset by lower revenue from derivative products licensing Nasdaq indexes due to lower trading volumes.


Market Technology (12% of total net revenues) - Revenues were $67 million in the first quarter of 2017, up $10 million from the first quarter of 2016.  The increase primarily reflects organic revenue growth during the period from software licensing and support, surveillance, and BWise advisory.  New order intake totaled $47 million in the first quarter of 2017, up $25 million from the first quarter of 2016, while total order value was $777 million at March 31, 2017, down 1% from March 31, 2016.

CORPORATE HIGHLIGHTS

¹ For the first quarter of 2017, the combined matched market share consisted of 17.1% at Nasdaq PHLX, 9.5% at The Nasdaq Options Market, 0.7% at Nasdaq BX, 9.5% at Nasdaq ISE, 5.6% at Nasdaq GEMX and 0.1% at Nasdaq MRX. For the fourth quarter of 2016, the combined matched market share consisted of 15.7% at Nasdaq PHLX, 8.6% at The Nasdaq Options Market, 0.7% at Nasdaq BX, 11.2% at Nasdaq ISE, 2.8% at Nasdaq GEMX and 0.2% at Nasdaq MRX.

² For the first quarter of 2017, the combined matched market share consisted of 14.0% at The Nasdaq Stock Market, 2.7% at Nasdaq BX and 0.9% at Nasdaq PSX. For the fourth quarter of 2016, the combined matched market share consisted of 13.6% at The Nasdaq Stock Market, 2.6% at Nasdaq BX and 1.0% at Nasdaq PSX

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 89 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to 3,800 total listings with a market value of $11.0 trillion. To learn more, visit: nasdaq.com/ambition or 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 March 31, 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.

Asset impairment charges: Intangible assets that have indefinite lives are reviewed for impairment at least annually, or when indicators of impairment are present. For the quarter ended December 31, 2016, we recorded a pre-tax, non-cash asset impairment charge of $578 million related to the eSpeed trade name. The impairment charge was the result of a decline in operating performance and the rebranding of the trade name due to a strategic change in the direction of our Fixed Income business.

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 2016, other significant items primarily included accelerated expense due to the retirement of the company’s former CEO for equity awards previously granted, a regulatory fine received by our exchange in Stockholm and Nasdaq Clearing, a sublease loss reserve on space we currently occupy due to excess capacity, and the impact of the write-off of an equity method investment, partially offset by a gain resulting from the sale of a percentage of a separate equity method investment.

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 (Loss)(in millions, except per share amounts)(unaudited) 

Nasdaq, Inc. Revenue Detail (in millions)(unaudited)  

Nasdaq, Inc. Condensed Consolidated Balance Sheets (in millions)  

Nasdaq, Inc. Reconciliation of U.S. GAAP Net Income (Loss), Diluted Earnings (Loss) 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)  

Nasdaq, Inc. Reconciliation of U.S. GAAP Net Income (Loss), Diluted Earnings (Loss) Per Share, Operating Income and Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses (in millions)(unaudited)  

Nasdaq, Inc. Reconciliation of U.S. GAAP Net Income (Loss), Diluted Earnings (Loss) Per Share, Operating Income and Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses (in millions)(unaudited)  

Nasdaq, Inc. Total Variance Impact Analysis (in millions)(unaudited)  

Nasdaq, Inc. Quarterly Key Drivers Detail (unaudited)