NDAQ - Nasdaq Reports First Quarter 2024 Results; Strong Execution Delivers Double-Digit Solutions Revenue Growth

NEW YORK, April 25, 2024 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the first quarter of 2024.

• First quarter 2024 net revenues ¹ were $1.1 billion , an increase of 22% over the first quarter of 2023, up 6% organically ² or 7% on a pro forma ³ basis, including Adenza in the first quarter of 2023 results for Nasdaq. This included Solutions ⁴ revenue increasing 35% , with organic growth of 11% or 13% on a pro forma basis.
• Annualized Recurring Revenue (ARR) ⁵ of $2.6 billion increased 29% compared to the first quarter of 2023, up 5% organically or up 7% on a pro forma basis.
• Financial Technology revenue of $392 million increased 71% over the first quarter of 2023, up 4% organically or 10% on a pro forma basis.
• Index revenue of $168 million increased 53% and experienced $46 billion of net inflows over the trailing twelve months and $21 billion in the first quarter, with ETP AUM surpassing $500 billion in the quarter.
• GAAP diluted earnings per share decreased 34% in the first quarter of 2024. Non-GAAP diluted earnings per share decreased 9% in the first quarter of 2024, but increased 6% organically.
• The company returned $127 million to shareholders in the first quarter of 2024 through dividends and repaid the $340 million remaining balance of our term loan. There were no share repurchases in the first quarter of 2024.

First Quarter 2024 Highlights

*Pro forma results are presented assuming AxiomSL and Calypso were included in the prior year quarterly results. Pro forma growth excludes the impacts of foreign currency except for AxiomSL and Calypso, which are not yet calculated on an organic basis.
**Net revenues includes $9 million of Other Revenues which primarily reflect revenues associated with the European power trading and clearing business which is pending sale.

Adena Friedman, Chair and CEO said, “Nasdaq delivered another quarter of solid results, with double digit revenue growth in our Solutions businesses including strong Financial Technology results and exceptional Index performance. We continue to make progress on our Integrate, Innovate, and Accelerate strategic priorities with ongoing momentum across our integration work streams and the One Nasdaq go-to-market strategy.

As we look toward the remainder of the year, we are well positioned to deliver on our next phase of scalable, profitable, and durable growth.”

Sarah Youngwood, Executive Vice President and CFO said, “Nasdaq’s financial performance in the first quarter underscores the growth profile and durability of our business model. We are making disciplined investments while achieving meaningful progress executing on our expense synergy target and our deleveraging plan.”

FINANCIAL REVIEW

• First quarter 2024 net revenues were $1.1 billion, an increase of $203 million, or 22%, versus the prior year period with 6% organic growth or 7% growth on a pro forma basis. Revenue growth includes a $150 million net benefit primarily related to the acquisition of Adenza and a $2 million increase from the impact of changes in FX rates.
• Solutions revenue was $871 million in the first quarter of 2024, an increase of $227 million, or 35%, versus the prior year period with organic growth of 11% or 13% growth on a pro forma basis, reflecting strong growth from Index and Financial Technology.
• ARR grew 29% year over year, 5% organically, or 7% on a pro forma basis in the first quarter with 12% pro forma ARR growth for Financial Technology and 1% ARR growth for Capital Access Platforms.
• Market Services net revenues were $237 million in the first quarter of 2024, a decrease of $23 million, or 9%, versus the prior year period. The $23 million organic decrease was primarily driven by an $11 million decrease in U.S. equity derivatives revenue, an $8 million decline in U.S. tape plan revenue, and a $3 million decline in U.S. cash equities revenue.
• First quarter 2024 GAAP operating expenses were $707 million, an increase of $205 million, or 41%, versus the prior year period. The increase for the first quarter of 2024 is due to the inclusion of $86 million in amortization expense of acquired intangible assets, $68 million of other AxiomSL and Calypso operating expenses, a one-time charge of $23 million associated with the settlement of our pension plan, and organic growth driven by increased investments in technology and our people to drive innovation and long-term growth. The increase also reflected $8 million of restructuring charges associated with the programs we initiated to optimize our efficiencies as a combined organization as well as integrating the Adenza acquisition.
• First quarter 2024 non-GAAP operating expenses were $524 million, an increase of $88 million, or 20%, versus the prior year period with 4% organic growth or 5% on a pro forma basis. The increase for the first quarter of 2024 is primarily due to the inclusion of $68 million of AxiomSL and Calypso non-GAAP operating expenses. The organic and pro forma increases reflect growth driven by increased investments in technology and our people to drive innovation and long-term growth.
• First quarter 2024 cash flow from operations was $530 million, enabling the company to continue to make meaningful progress on its deleveraging plan. The company returned $127 million to shareholders through dividends and repaid the remaining $340 million term loan balance and a net $67 million in commercial paper. We did not repurchase shares during the first quarter of 2024. As of March 31, 2024, there was $1.9 billion remaining under the board authorized share repurchase program.

2024 EXPENSE AND TAX GUIDANCE UPDATE ⁶

• The company is updating its 2024 non-GAAP operating expense guidance to a range of $2,125 million to $2,185 million, and maintaining its 2024 non-GAAP tax rate guidance to be in the range of 24.5% to 26.5%.

STRATEGIC AND BUSINESS UPDATES

• March 5th Investor Day highlighted Nasdaq’s strategy to deliver its next phase of resilient and scalable growth. Approximately 500 investors and analysts participated in Nasdaq’s 2024 Investor Day, where Nasdaq highlighted its strategic initiatives of Integrate, Innovate, and Accelerate, introduced the One Nasdaq go-to-market strategy, and outlined its capital allocation priorities to support organic revenue growth and leverage reduction.
• AxiomSL and Calypso achieved 15% combined pro forma ARR growth. AxiomSL and Calypso had 45 upsells and signed 2 new clients. Combined gross revenue retention ⁷ was 96% and net revenue retention ⁸ was 111%. Excluding the impact of a significant 2023 bankruptcy first noted last quarter, gross revenue retention was 98% and net revenue retention was 113%.
• Verafin had solid growth in SMB customers while launching a new AI-based copilot capability. Within Financial Crime Management Technology, Verafin had 24% ARR growth in the first quarter. This included the addition of 28 new SMB clients, underscoring the continued growth within its core client base. Additionally, after an extensive Beta program, the business rolled out its first copilot feature, the integrated Entity Research Copilot, to its customer base of more than 2,500 financial institutions. Verafin’s solutions, combined with the integrated copilot, significantly improve investigator efficiency with up to a 90% reduction in alert review time compared to legacy approaches.
• Exchange-traded product ( ETP) assets under management (AUM) linked to Nasdaq indices reached record levels, surpassing $500 billion at quarter-end, with growth in derivatives volumes. Market performance and $46 billion in net inflows in the trailing twelve-month period, including $21 billion in the first quarter, resulted in record quarter-end ETP AUM linked to Nasdaq indices at $519 billion. This quarter also marked the 25th anniversary of the launch of the Invesco QQQ Exchange Traded Fund, which tracks the Nasdaq-100, highlighting the longstanding relationship between Nasdaq and Invesco. Nasdaq futures and options volumes increased 5% year-over-year, also contributing to revenue growth.
• Launched Dynamic Midpoint Extended Life Order (M-ELO) for U.S. cash equities on April 15th. Nasdaq launched Dynamic M-ELO, the first SEC approved AI-powered order type designed to improve fill rates and create greater efficiency in equities markets. This new order type analyzes more than 140 data points every 30 seconds on a symbol-by-symbol basis to detect market conditions and optimize the holding period prior to which a trade is eligible to execute.
• Nasdaq maintained its leadership among exchanges in U.S. multi-listed options. In the first quarter of 2024, Nasdaq led all exchanges during the period in total volume traded for U.S. multi-listed equity options. Nasdaq also achieved record revenue in its proprietary index options franchise, driven by record trading volumes.
• Investor demand underpinned the success of the Borse Dubai secondary offering. Nasdaq successfully coordinated the secondary offering of 31 million shares offered by Borse Dubai. Borse Dubai remains a strategic shareholder of Nasdaq with over 10% ownership and representation on Nasdaq’s board. The transaction priced on March 19th and closed on March 22nd with strong investor demand resulting in an oversubscribed transaction.

____________
¹ Represents revenues less transaction-based expenses.
² Refer to our reconciliations of U.S. GAAP to non-GAAP net income, diluted earnings per share, operating income, operating expenses and organic impacts included in the attached schedules.
³ Pro forma results are presented assuming AxiomSL and Calypso were included in the prior year quarterly results. These results are not calculated in a manner consistent with the pro forma requirements in Article 11 of Regulation S-X. Pro forma growth excludes the impacts of foreign currency except for AxiomSL and Calypso, which are not yet calculated on an organic basis.
⁴ Constitutes revenues from our Capital Access Platforms and Financial Technology segments.
⁵ Annualized Recurring Revenue (ARR) for a given period is the current annualized value 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 recurring 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. For AxiomSL and Calypso recurring revenue contracts, the amount included in ARR is consistent with the amount that we invoice the customer during the current period. Additionally, for AxiomSL and Calypso recurring revenue contracts that include annual values that increase over time, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include the future committed increases in the contract value as of the date of the ARR calculation. 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.
⁶ 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.
⁷ Gross Retention: As used herein for AxiomSL and Calypso, ARR in the current period over ARR in the prior year period for existing customers excluding price increases and upsells and excluding new customers.
⁸ Net Retention: As used herein for AxiomSL and Calypso, ARR in the current period over ARR in the prior year period for existing customers including price increases and upsells and excluding new customers.

ABOUT NASDAQ

Nasdaq (Nasdaq: NDAQ) is a global technology company serving corporate clients, investment managers, banks, brokers, and exchange operators as they navigate and interact with the global capital markets and the broader financial system. We aspire to deliver world-leading platforms that improve the liquidity, transparency, and integrity of the global economy. Our diverse offering of data, analytics, software, exchange capabilities, and client-centric 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 their 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 those noted above, 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.

Organic revenue and expense growth, organic change and organic impact are non-GAAP measures that reflect adjustments for: (i) the impact of period-over-period changes in foreign currency exchange rates, and (ii) the revenues, expenses and operating income associated with acquisitions and divestitures for the twelve month period following the date of the acquisition or divestiture. Reconciliations of these measures are described within the body of this release or in the reconciliation tables at the end of this release.

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.

Restructuring programs : In the fourth quarter of 2023, following the closing of the Adenza acquisition, our management approved, committed to and initiated a restructuring program, “Adenza Restructuring” to optimize our efficiencies as a combined organization. In connection with this program, we expect to incur pre-tax charges principally related to employee-related costs, contract terminations, real estate impairments and other related costs. We expect to achieve benefits primarily in the form of expense and revenue synergies. In October 2022, following our September announcement to realign our segments and leadership, we initiated a divisional alignment program with a focus on realizing the full potential of this structure. In connection with the program, we expect to incur pre-tax charges principally related to employee-related costs, consulting, asset impairments and contract terminations over a two-year period. We expect to achieve benefits in the form of both increased customer engagement and operating efficiencies. Costs related to the Adenza restructuring and the divisional alignment programs will be recorded as “restructuring charges” in our consolidated statements of income. We will exclude charges associated with this program for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq's performance between periods.

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, dividend program, trading volumes, products and services, ability to transition to new business models or implement our new corporate structure, 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, environmental, 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, geopolitical instability, government and industry regulation, interest rate risk, U.S. and global competition. Further information on these and other factors are 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 Contacts

Nick Jannuzzi
+1.973.760.1741
Nicholas.Jannuzzi@Nasdaq.com

David Lurie
+1.914.538.0533
David.Lurie@Nasdaq.com

Investor Relations Contact

Ato Garrett
+1.212.401.8737
Ato.Garrett@Nasdaq.com

NDAQF