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Nasdaq reports record quarterly earnings; announces 19% increase in quarterly dividend

A detailed financial report for the first quarter of 2017

Nasdaq, Inc. (Nasdaq:NDAQ) 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.”

  • Represents revenues less transaction-based expenses.
  • Represents revenues from our Corporate Services, Information Services and Market Technology segments, as well as our Trade Management Services business.
  • 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.
  • 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.

On 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.

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