Nasdaq reports Q4 profits uplift

Source: Nasdaq

Nasdaq, Inc. ( 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 . Im 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

The Nasdaq Stock Market (Nasdaq) Led U.S. Exchanges for IPOs in 4Q15 and 2015. Nasdaq welcomed 72 new listings in the fourth quarter of 2015, including 32 IPOs. Approximately 78% and 73% of all U.S. IPOs listed with Nasdaq in the fourth quarter of 2015 and full year 2015, respectively. IPOs in the fourth quarter of 2015 included companies from diverse industries including healthcare, financial services, and technology, including Match Group, NovoCure, CPI Card Group, Allegiance Bancshares and Atlassian.
Continued momentum at The NASDAQ Private Market (NPM). Nasdaq completed its acquisition of SecondMarket while growth continued across the client base in ExactEquity, outsourced administration, structured liquidity programs and NPM membership. NPM, including the partial-quarter impact of SecondMarket, served 107 private companies using subscription products like equity cap table administration or executing liquidity events in 2015, up from 61 in 2014.
Nasdaq Linq enables private securities issuance using blockchain technology. Nasdaq Linq successfully recorded a private securities transaction using blockchain technology, enabling the issuer to digitally represent a record of ownership while significantly reducing settlement time and eliminating the use of paper certificates. In November, Nasdaq announced that it is exploring the application of its blockchain technology to proxy voting in Estonia, a second application of blockchain technology.
Borsa Istanbuls initial technology implementation goes live. Borsa Istanbul went live in mid-December on nine of Nasdaqs market-leading technologies including trading and clearing, settlement, market data management, index calculation, market surveillance, business intelligence, and pre- and post-trade risk management. The initial implementation is for Borsa 0stanbul's equity market, and the exchange has also agreed to implement Nasdaq technology for its other markets, including derivatives, debt securities, and precious metals markets.
Nasdaq announces agreement to acquire Chi-X Canada . In December 2015, Nasdaq announced that it will acquire Chi-X Canada, an Alternative Trading System for Toronto Stock Exchange (TSX) and TSX Venture Securities, from Chi-X Global. The acquisition provides Nasdaq with direct access to the Canadian equities market and is expected to close in the first quarter of 2016. The deal expands Nasdaqs North American equities trading business and will ultimately enhance the trading experience for market participants across technology and functionality.
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