Nasdaq, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Nasdaq operates Capital Access Platforms, Financial Technology and Market Services. Comparability is substantially affected by the November 2023 Adenza acquisition; prior-period segment results were recast to the current structure.
Financial results and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1.674 billion | $1.533 billion | +9.2% |
| Revenue less transaction-based expenses | $1.117 billion | $914 million | +22.2% |
| Operating expenses | $707 million | $502 million | +40.8% |
| Operating income | $410 million | $412 million | -0.5% |
| Net income attributable to Nasdaq | $234 million | $302 million | -22.5% |
| Diluted EPS | $0.40 | $0.61 | -34.4% |
| Operating cash flow | $530 million | $565 million | -$35 million |
GAAP operating margin was approximately 24.5% of total revenue, versus 26.9% a year earlier; net margin was approximately 14.0%, versus 19.7%. Higher interest expense and acquisition-related amortization and costs weighed on earnings. Non-GAAP net income was $367 million ($0.63 diluted EPS), compared with $339 million ($0.69) in Q1 2023; the company’s adjustments exclude specified items and are not GAAP measures.
- Segment revenue: Capital Access Platforms $479 million (+15.4%); Financial Technology $392 million (+71.2%); Market Services $794 million (-9.7%). Market Services revenue less transaction-based expenses was $237 million, down 8.8%.
- Capital Access Platforms growth included Index revenue up 52.7%, reflecting higher Nasdaq-index ETP assets, futures capture and trading, plus a $16 million one-time legal settlement recovery. Financial Technology growth primarily reflects acquired AxiomSL and Calypso revenue, alongside growth in other technology businesses.
- Period-end ETP assets tracking Nasdaq indices were a record $519 billion, up from $366 billion a year earlier. Financial Technology ARR increased notably, including Regulatory Technology to $328 million from $125 million and Capital Markets Technology to $821 million from $506 million; acquisition effects contribute to these comparisons.
Cash, debt and liquidity
- Cash and cash equivalents were $388 million at March 31, versus $453 million at year-end; financial investments were $173 million. Working capital was negative $72 million, versus positive $71 million at year-end.
- Total debt obligations were $9.989 billion, down from $10.454 billion at year-end. Nasdaq repaid the remaining $340 million Adenza-related term loan in Q1 and had $224 million of commercial paper outstanding. No borrowings were outstanding under its $1.25 billion revolving credit facility; $180 million of European credit facilities was also unused. Nasdaq reported compliance with debt covenants.
- Cash, restricted cash and clearing-member deposits totaled $5.230 billion at quarter-end, but $4.821 billion was restricted clearing-related cash and is not ordinary corporate liquidity. The reported $1.888 billion net decrease in this combined measure included a $1.317 billion decrease in default funds and margin deposits and a $311 million adverse foreign-exchange effect.
- Operating cash flow was $530 million. Investing activities used $232 million, including $184 million net investment in clearing-related funds and margin deposits and $39 million in property and equipment. Financing activities used $1.875 billion, including the clearing-deposit decrease, term-loan and commercial-paper repayments, and $127 million in dividends.
Material changes, outlook and risks
- Interest expense rose to $108 million from $36 million, primarily because of debt issued to fund Adenza. Depreciation and amortization increased to $155 million from $69 million, including $123 million of acquired-intangible amortization versus $38 million a year earlier.
- Q1 included a $23 million pre-tax pension settlement loss and $26 million of restructuring charges. The Adenza restructuring program is expected to incur approximately $80 million in pre-tax charges; $17 million had been incurred by quarter-end. The separate divisional-alignment program had incurred $104 million of its expected $115–$145 million charges.
- Management expects approximately $80 million of net expense synergies two years after the Adenza acquisition and approximately $30 million in annual run-rate operating efficiencies and revenue synergies from the divisional-alignment program by 2025. These are stated expectations, not quarterly earnings guidance. The filing provides no specific revenue or EPS guidance for 2024.
- The board approved a Q2 dividend of $0.24 per share, a 9% increase from $0.22; Q1 dividends paid totaled $127 million. No shares were repurchased under the public repurchase program in Q1; $1.9 billion remained authorized. Employee tax-withholding share transactions are separate from program repurchases.
- Key risks include integration and realization of Adenza synergies, market-volume and market-share shifts, technology and cybersecurity risks, interest-rate and foreign-exchange exposure, clearing-counterparty risk, and regulatory matters. The CFTC matter concerning former subsidiary NFX could result in an enforcement action; potential remedies could materially affect results or reputation. An SFSA review of Nasdaq Stockholm’s suspected-market-abuse reporting obligations is ongoing. Outcomes and potential penalties are uncertain.
Investor verification priorities
- Separate acquired Adenza growth from organic Financial Technology growth, and track ARR, renewals and realized synergies against management’s targets.
- Monitor debt, interest costs, commercial-paper balances and unrestricted cash; distinguish corporate liquidity from clearing-member deposits and restricted cash.
- Assess whether Market Services’ revenue and market-share declines persist, and whether Capital Access Platforms’ Index growth and record linked ETP assets are sustained.
- Track restructuring spending and benefits, acquired-intangible amortization, and the effect of other exclusions on non-GAAP results versus GAAP earnings.
- Follow developments in the CFTC and SFSA matters, the European energy-business sale, and potential clearing or regulatory exposures.