- Fourth quarter 2020 net revenues were $788 million, an increase of 22% over the fourth quarter of 2019. Compared to the prior year period, Solutions segments revenues increased 18% while Market Services revenues increased 29%.
- Annualized Recurring Revenue (ARR)3 was $1,577 million in the fourth quarter of 2020, an increase of 9% from the prior year period, and the Solutions segments SaaS revenue increased 11% compared to the prior year period.
- 2020 GAAP diluted earnings per share was $5.59, an increase of 21% compared to $4.63 in 2019, while fourth quarter 2020 GAAP earnings per share was $1.34, an increase of 11% compared to $1.21 in the fourth quarter of 2019.
- 2020 non-GAAP4 diluted earnings per share was $6.18, an increase of 24% compared to $5.00 in 2019, while fourth quarter 2020 non-GAAP diluted earnings per share of $1.60 increased 24% from $1.29 in the fourth quarter of 2019.
- At Nasdaq's 2020 Investor Day, the company provided updates to its strategy, operations, and objectives.
- Nasdaq announced the pending acquisition of Verafin in the fourth quarter of 2020, which is expected to expand the company's anti-financial crime franchise while increasing growth potential.
NEW YORK, Jan. 27, 2021 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the fourth quarter of 2020 and full year 2020.
2020 net revenues were $2,903 million, an increase of $368 million, or 15%, from $2,535 million in the prior year period. The full year increase in net revenues included a $350 million positive impact from organic growth, a $14 million positive impact from changes in foreign exchange rates and a $4 million positive net impact from acquisitions and divestitures.
Fourth quarter 2020 net revenues were $788 million, an increase of $142 million, or 22%, from $646 million in the prior year period. Net revenues reflected a $126 million positive impact from organic growth, a $13 million increase from the impact of favorable changes in foreign exchange rates and a $3 million increase from the inclusion of revenues from acquisitions.
"Our record fourth quarter and full year results attest to Nasdaq's continuing ability to address the needs of our clients in a capital markets environment characterized by elevated trading, strong IPO activity and rising index valuations, made possible by both our resilient, scalable technology and the flexibility our team exhibited in effectively delivering for clients against a pandemic-impacted backdrop," said Adena Friedman, President and CEO, Nasdaq. "Despite meeting many near-term challenges in 2020, I am incredibly pleased that Nasdaq was also able to accelerate our progress as an advanced technology and analytics provider to the financial industry with our announced acquisition of Verafin, a SaaS technology provider specializing in combating fraud and money laundering. Together with Verafin, we believe that Nasdaq will become a leading provider of anti-financial crime technology, while also raising our long-term organic growth potential."
GAAP operating expenses were $470 million in the fourth quarter of 2020, an increase of $84 million from $386 million in the fourth quarter of 2019. The increase primarily reflects higher merger and strategic expense, higher compensation and benefits expense, higher general, administrative and other costs and higher professional fees. GAAP operating expense in the fourth quarter of 2020 also included a $25 million reserve in general, administrative and other costs related to an expected loss on a Market Technology implementation project.
Non-GAAP operating expenses were $406 million in the fourth quarter of 2020, an increase of $71 million, or 21%, compared to the fourth quarter of 2019. This increase reflects a $53 million, or 16%, organic increase over the prior year period. Excluding the reserve related to the Market Technology implementation project of $25 million, the organic increase was $28 million, or 8%. The $28 million increase was primarily driven by performance-linked compensation and other variable expenses resulting from higher than expected revenues during the period. The remainder of the $53 million increase reflects a $12 million increase from the impact of unfavorable changes in foreign exchange rates and a $6 million increase from the impact of acquisitions.
"As we look back on 2020, Nasdaq continued to demonstrate the resiliency of the business and our balance sheet," said Michael Ptasznik, Executive Vice President and Chief Financial Officer, Nasdaq. "The company generated over $1 billion of free cash flow, allowing us to continue to reinvest in our business and our people, increase the dividend and execute on our share repurchase plan. During the year, we also refinanced a portion of our debt at favorable interest rates and completed the majority of the funding for the upcoming closing of the acquisition of Verafin, which we expect to occur in the first quarter of 2021. From a personal standpoint, it has been a privilege to serve this iconic organization over the last five years and work with this outstanding team. As previously announced, Ann Dennison will become the CFO upon my retirement at the end of February, and I know Nasdaq and its stakeholders will be well-served by her considerable capabilities and dedication to the company's mission."
On a GAAP basis, net income in the fourth quarter of 2020 was $224 million, or diluted EPS of $1.34, compared to $202 million, or $1.21 per diluted share, in the fourth quarter of 2019.
On a non-GAAP basis, net income in the fourth quarter of 2020 was $268 million, or $1.60 per diluted share, compared to $215 million, or $1.29 per diluted share, in the fourth quarter of 2019.
At December 31, 2020, the company had cash and cash equivalents of $2,745 million and total debt of $5,541 million, resulting in net debt of $2,796 million. This compares to total debt of $3,387 million and net debt of $3,055 million at December 31, 2019. As of December 31, 2020, there was $410 million remaining under the board authorized share repurchase program.
INITIATING 2021 NON-GAAP EXPENSE AND TAX GUIDANCE5
The company is initiating its 2021 non-GAAP operating expense guidance to a range of $1,550 to $1,620 million. The 2021 guidance midpoint reflects a 3% increase due to organic growth, as well as the impacts of foreign exchange rates and merger and acquisition activity, including the Verafin acquisition, which is expected to close in the first quarter of 2021.
Nasdaq expects its 2021 non-GAAP tax rate to be in the range of 25.0% to 27.0%.
BUSINESS HIGHLIGHTS
Market Services - Net revenues were a record $291 million in the fourth quarter of 2020, an increase of $66 million, or 29%, compared to the fourth quarter of 2019.
Equity Derivative Trading and Clearing - Net revenues were $92 million in the fourth quarter of 2020, up $19 million from the fourth quarter of 2019. The increase reflects higher U.S. industry trading volumes, partially offset by a lower U.S. net capture rate.
Cash Equity Trading - Net revenues were $105 million in the fourth quarter of 2020, up $40 million from the fourth quarter of 2019. The increase primarily reflects higher U.S. industry trading volumes, a higher U.S. net capture rate, higher European value traded and higher European market share, partially offset by lower overall U.S. matched market share.
Fixed Income and Commodities Trading and Clearing - Net revenues were $16 million in the fourth quarter of 2020, an increase of $1 million from the fourth quarter of 2019. The increase was driven primarily by a $1 million favorable impact from changes in foreign exchange rates.
Trade Management Services - Revenues were $78 million in the fourth quarter of 2020, an increase of $6 million from the fourth quarter of 2019, primarily due to increased demand for connectivity services.
Corporate Platforms - Revenues were $144 million in the fourth quarter of 2020, up $15 million, or 12%, compared to the fourth quarter of 2019. Listing Services - Revenues were $88 million in the fourth quarter of 2020, an increase of $11 million from the fourth quarter of 2019. The increase was primarily driven by higher U.S. listing revenues due to an increase in the overall number of listed companies, higher Nasdaq Private Market revenues and a $2 million favorable impact from changes in foreign exchange rates.
IR & ESG Services - Revenues were $56 million in the fourth quarter of 2020, an increase of $4 million from the fourth quarter of 2019, primarily due to increases in demand for governance and advisory services.
Investment Intelligence - Revenues were $247 million in the fourth quarter of 2020, up $53 million, or 27%, compared to the fourth quarter of 2019. Market Data - Revenues were $104 million in the fourth quarter of 2020, up $8 million from the fourth quarter of 2019, with growth in U.S. proprietary products from new sales, including continued expansion geographically, and an increase in shared tape plan revenues.
Index - Revenues were $97 million in the fourth quarter of 2020, up $40 million, or 70%, from the fourth quarter of 2019. The increase was primarily driven by higher licensing revenues from higher average assets under management (AUM) in exchange traded products (ETPs) linked to Nasdaq indexes and higher licensing revenues from futures trading linked to the Nasdaq 100 Index.
Analytics - Revenues were $46 million in the fourth quarter of 2020, up $5 million from the fourth quarter of 2019, primarily due to the acquisition of Solovis and growth in eVestment.
Market Technology - Revenues were $106 million in the fourth quarter of 2020, up $8 million, compared to the fourth quarter of 2019. The increase is primarily due to higher SaaS revenues as well as a $4 million favorable impact from changes in foreign exchange rates.
CORPORATE HIGHLIGHTS
Nasdaq's Market Services segment sets new highs in U.S. option and European equity trading in 2020. In the fourth quarter of 2020, Nasdaq's U.S. options market set a quarterly record of 741 million contracts traded, an increase of 71% year over year. 2020 was also the first year Nasdaq led all exchanges in total volume traded for options (inclusive of both multiply-listed equity options and index option products), building upon what is now an 11th consecutive year leading in multiply-listed equity options market share. Nasdaq also established a new decade-high annual market share of 78% in Nordic equity trading during 2020, including 79% in the fourth quarter of 2020.
ETP assets under management tracking Nasdaq indexes and derivative product volume tracking Nasdaq indexes each set new quarterly records. Overall AUM in ETPs benchmarked to Nasdaq's proprietary indexes totaled $359 billion as of December 31, 2020, an increase of 54% compared to December 31, 2019, while the number of futures and options on futures contracts tracking Nasdaq indexes executed in the period totaled 90.2 million, an increase of 151% from 36.0 million in the fourth quarter of 2019. Net inflows into new products that launched in the fourth quarter of 2020 exceeded $1 billion, driven primarily by strong initial interest in the Invesco QQQ Innovation suite.
The Nasdaq Stock Market led U.S. exchanges for IPOs during 2020. During 2020, the Nasdaq Stock Market led U.S. exchanges with a 67% total win rate, including an 83% win rate among operating companies6 and a 53% win rate among special purpose acquisition companies. The Nasdaq Stock Market welcomed 316 IPOs in 2020 representing $81 billion in capital raised, first amongst U.S. exchanges, including 18 of the top 30 operating company IPOs by capital raised. New listings in 2020 included 20 companies switching their listings from NYSE to join Nasdaq, representing an aggregate of $282 billion in global equity market capitalization and included AstraZeneca, Keurig Dr Pepper, American Electric Power and Opendoor Technologies. In the fourth quarter of 2020, The Nasdaq Stock Market welcomed 199 new U.S. listings with 142 IPOs, including Airbnb, Wish and Array Technologies.
Nasdaq announces acquisition of Verafin, creating a global leader in fighting financial crime. On November 19, 2020, Nasdaq announced an agreement to acquire Verafin. The combination is expected to bring together Verafin's comprehensive suite of anti-financial crime management products with Nasdaq's reach and established regulatory technology leadership to create a global SaaS leader in the fight against financial crime. Based in St. John's, Newfoundland and Labrador and founded in 2003, Verafin provides a cloud-based platform to detect, investigate, and report money laundering and financial fraud to more than 2,000 financial institutions in North America. The acquisition is expected to close in the first quarter of 2021.
Nasdaq to advance diversity through proposed new listing rule. Nasdaq filed a new proposed U.S. listing rule with the U.S. Securities and Exchange Commission (SEC) that seeks to standardize disclosure of board-level diversity statistics through a consistent disclosure framework. The proposal includes disclosure of either the recommended minimum diversity goal of two diverse directors or an explanation, and is subject to SEC approval.
1-Represents revenues less transaction-based expenses. 2Constitutes revenues from Market Technology, Investment Intelligence and Corporate Platforms segments. 3Annualized Recurring Revenue (ARR) for a given period is the annualized revenues derived from contracted termed subscription contracts. This excludes contracts that are not recurring and are one time in nature. ARR is currently one of our key performance metrics to assess the health and trajectory of our 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. 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. 4Refer 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.5U.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. 6Operating companies exclude special purpose acquisition companies and when a special purpose acquisition company completes an acquisition.
ABOUT NASDAQ
Nasdaq (Nasdaq: NDAQ) is a global technology company serving the capital markets and other industries. Our diverse offering of data, analytics, software and 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, non-GAAP operating expenses, and non-GAAP EBITDA, 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 its 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 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 that have less bearing on our ongoing operating performance.
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, ability to transition to new business models, 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 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, government and industry regulation, interest rate risk, U.S. and global competition, the impact of the COVID-19 pandemic on our business, operations, results of operations, financial condition, workforce or the operations or decisions of our customers, suppliers or business partners, 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.
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