NASDAQ Composite (.IXIC) Delivers Strong Revenue Growth in Non-Trading Segments(1)

NASDAQ Composite (.IXIC) Delivers Strong Revenue Growth in Non-Trading Segments(1)

NASDAQ Composite (.IXIC) Delivers Strong Revenue Growth in Non-Trading Segments(1)

  • 2019 net revenues2 were $2,535 million. Revenues in the non-trading segments increased 10% versus the prior year period, while Market Services revenues decreased 5% from a multi-year annual high in 2018 as volatility and volumes receded.
  • The 10% increase in 2019 net revenues in the non-trading segments reflected 8% organic growth and a 3% positive impact from acquisitions, partially offset by a 1% negative impact from unfavorable changes in foreign exchange rates.
  • Fourth quarter 2019 net revenues were $646 million. Revenues in the non-trading segments increased 9% versus the prior year period, primarily driven by organic growth, while Market Services revenues decreased 10% compared to the fourth quarter of 2018, which featured near record volumes and revenues.
  • The GAAP operating margin was 40% in 2019, compared to 41% in the prior year, while the non-GAAP operating margin3 of 49% increased from 48% in the prior year.
  • 2019 GAAP diluted earnings per share was $4.63, compared to $2.73 in 2018, while fourth quarter 2019 GAAP diluted earnings per share was $1.21 compared to a loss of $0.27 in the fourth quarter of 2018.
  • 2019 non-GAAP earnings per share was $5.00, compared to $4.75 in 2018, while fourth quarter 2019 non-GAAP diluted earnings per share of $1.29 increased from $1.24 in the fourth quarter of 2018.
  • During 2019, the company returned $505 million to shareholders, including $200 million through its share buyback program and $305 million through quarterly dividends, while also completing a multi-year deleveraging objective.

Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the fourth quarter and full year 2019.

2019 net revenues were $2,535 million, an increase of $9 million from $2,526 million in the prior year. The full year increase in net revenues included a $112 million positive impact from organic growth in the non-trading segments, partially offset by a $29 million organic decrease in Market Services, a $39 million negative net impact from acquisitions and divestitures and a $35 million unfavorable impact from changes in foreign exchange rates.

Fourth quarter 2019 net revenues were $646 million, up $1 million from $645 million in the prior year period. Net revenues reflected a $22 million positive impact from organic growth in the non-trading segments, a $15 million increase from the inclusion of revenues from acquisitions, partially offset by a $21 million organic decrease in Market Services revenues, a $10 million negative impact from divestitures and a $5 million unfavorable impact from changes in exchange rates.

“We are pleased with our progress in 2019 through the combination of our clear strategic direction, our unwavering commitment to clients and our disciplined execution,” said Adena Friedman, President and CEO, Nasdaq. “Specifically, we continued to adapt and broaden our offerings and deepen our client relationships, while delivering consistently on the organic growth, scalability, and return objectives we established at the onset of our strategic pivot. While still in the early stages of repositioning Nasdaq as a technology and analytics provider, we enter 2020 with clear momentum carried over from our strong finish in 2019, and will continue working to open additional areas of opportunity as the year progresses.”

GAAP operating expenses were $386 million in the fourth quarter of 2019, a decrease of $18 million from $404 million in the fourth quarter of 2018. The decrease primarily reflects lower general, administrative and other expense, lower professional and contract services expense, lower merger and strategic initiatives expense and lower depreciation and amortization expense, partially offset by higher compensation expense and restructuring charges in the fourth quarter of 2019.

Non-GAAP operating expenses were $335 million in the fourth quarter of 2019, an increase of $5 million, or 2%, compared to the fourth quarter of 2018. This reflects an $8 million organic expense increase and a $1 million increase from the net impact of acquisitions and divestitures, partially offset by a $4 million favorable impact from changes in foreign exchange rates.

“In 2019, we continued to reallocate capital and resources strategically to support our most significant growth opportunities while also demonstrating how a more scalable business can drive higher operating leverage and efficiency,” said Michael Ptasznik, Executive Vice President and Chief Financial Officer, Nasdaq. “With our strong cash flow generation, we also completed a multi-year deleveraging program, while also increasing our quarterly dividend and continuing to execute our share repurchase program.”

On a GAAP basis, net income in the fourth quarter of 2019 was $202 million, or diluted earnings per share of $1.21, compared to a net loss of $44 million, or $0.27 per diluted share, in the fourth quarter of 2018. Net income in 2019 was $774 million, or diluted earnings per share of $4.63, compared to net income of $458 million, or $2.73 per diluted share in 2018.

On a non-GAAP basis, net income in the fourth quarter of 2019 was $215 million, or $1.29 per diluted share, compared to $207 million, or $1.24 per diluted share, in the fourth quarter of 2018. Non-GAAP net income in 2019 was $835 million, or $5.00 per diluted share, compared to $797 million, or $4.75 per diluted share in 2018.

At December 31, 2019, the company had cash and cash equivalents of $332 million and total debt of $3,387 million, resulting in net debt of $3,055 million. This compares to total debt of $3,831 million and net debt of $3,286 million at December 31, 2018. As of December 31, 2019, there was $632 million remaining under the board authorized share repurchase program.

INITIATING 2020 NON-GAAP EXPENSE AND TAX GUIDANCE4

The company is initiating its 2020 non-GAAP operating expense guidance in the range of $1,310 to $1,360 million. Nasdaq expects its 2020 non-GAAP tax rate to be in the range of 25.5% to 27.5%.

BUSINESS HIGHLIGHTS

Market Services (35% of total net revenues) – Net revenues were $225 million in the fourth quarter of 2019, down $24 million, or 10%, when compared to the fourth quarter of 2018, a period where significantly higher volatility drove near record volumes and revenues.

Equity Derivative Trading and Clearing (11% of total net revenues) – Net equity derivative trading and clearing revenues were $73 million in the fourth quarter of 2019, down $9 million from the fourth quarter of 2018. The decrease primarily reflects lower U.S. industry trading volumes.

Cash Equity Trading (10% of total net revenues) – Net cash equity trading revenues were $65 million in the fourth quarter of 2019, down $11 million from the fourth quarter of 2018. Lower industry volumes and lower overall matched market share executed on Nasdaq’s U.S. exchanges were partially offset by a higher net capture rate.

Fixed Income and Commodities Trading and Clearing (3% of total net revenues) – Net fixed income and commodities trading and clearing revenues were $15 million in the fourth quarter of 2019, down $4 million from the fourth quarter of 2018. The decrease in revenues was primarily driven by lower net revenues due to the sale of the core assets of our NFX business and lower volumes in U.S. fixed income products.

Trade Management Services (11% of total net revenues) – Trade management services revenues were $72 million in the fourth quarter of 2019, unchanged compared to the fourth quarter of 2018.

Corporate Services (20% of total net revenues) – Revenues were $129 million in the fourth quarter of 2019, up $6 million, or 5%, compared to the fourth quarter of 2018.

Listing Services (12% of total net revenues) – Listing services revenues were $77 million in the fourth quarter of 2019, up $3 million from the fourth quarter of 2018. The change primarily reflects higher listing revenues due to an increase in the number of listed companies.

Corporate Solutions (8% of total net revenues) – Corporate solutions revenues were $52 million in the fourth quarter of 2019, an increase of $3 million from the fourth quarter of 2018 primarily due to an increase in IR intelligence revenues.

Information Services (30% of total net revenues) – Revenues were $194 million in the fourth quarter of 2019, up $7 million, or 4%, from the fourth quarter of 2018.

Market Data (15% of total net revenues) – Market data revenues were $96 million in the fourth quarter of 2019, down $1 million from the fourth quarter of 2018 due to unfavorable changes in foreign exchange rates.

Index (9% of total net revenues) – Index revenues were $57 million in the fourth quarter of 2019, up $3 million from the fourth quarter of 2018, primarily driven by higher licensing revenue from higher average assets under management (AUM) in exchange traded products (ETPs) linked to Nasdaq indexes.

Investment Data & Analytics (6% of total net revenues) – Investment data & analytics revenues were $41 million in the fourth quarter of 2019, up $5 million from the fourth quarter of 2018, primarily due to organic growth in eVestment.

Market Technology (15% of total net revenues) – Revenues were $98 million in the fourth quarter of 2019, up $22 million, or 29%, from the fourth quarter of 2018. The increase is due to the impact of the acquisition of Cinnober, which added $13 million in revenues, or 17%, as well as organic growth of $9 million, or 12%. The organic growth was primarily driven by an increase in change request revenues and software as a service (SaaS) surveillance revenues and an increase in the size and number of software delivery projects.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 9,465.99.

The projected lower bound is: 9,116.19.

The projected closing price is: 9,291.09.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 38.5289. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 59.42. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 3 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -4. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.

Rex Takasugi – TD Profile

NASDAQ COMPOSITE closed up 5.483 at 9,275.164. Volume was 2% below average (neutral) and Bollinger Bands were 8% wider than normal.

Open     High      Low     Close     Volume___
9,318.2579,329.1159,249.0369,275.164 548,873,216
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 9,316.09 8,913.33 8,246.20
Volatility: 17 12 18
Volume: 609,024,576 586,400,832 554,780,096

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

NASDAQ COMPOSITE is currently 12.5% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume into .IXIC (mildly bullish). Our trend forecasting oscillators are currently bullish on .IXIC and have had this outlook for the last 70 periods.

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