Business context and reporting period
Nasdaq, Inc. (NASDAQ: NDAQ) is a global technology and capital-markets company operating exchanges and providing market technology, data, index, analytics, corporate and anti-financial-crime services. This Form 10-K covers the fiscal year ended December 31, 2022. The supplied filing text reports annual results, not a standalone fourth-quarter income statement; Q4-specific revenue and earnings therefore are not clear from the text.
In 2022 Nasdaq reorganized into Market Platforms, Capital Access Platforms and Anti-Financial Crime. Prior periods were restated to match the new segments. Results were also affected by the February 2021 Verafin acquisition, which contributed a full year of revenue in 2022.
Financial performance and liquidity
Unless stated otherwise, figures are in U.S. dollars and millions. Nasdaq reports both total revenue and “revenues less transaction-based expenses,” a company-defined measure that deducts transaction rebates and brokerage, clearance and exchange fees.
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Total revenue | $6,226 | $5,886 | +5.8% |
| Revenue less transaction-based expenses | $3,582 | $3,420 | +4.7% |
| Operating expenses | $2,018 | $1,979 | +2.0% |
| Operating income | $1,564 | $1,441 | +8.5% |
| Net income attributable to Nasdaq | $1,125 | $1,187 | -5.2% |
| Diluted GAAP EPS | $2.26 | $2.35 | -3.8% |
| Operating income / revenue less transaction-based expenses | 43.7% | 42.1% | +1.6 percentage points |
| Cash dividends declared per share | $0.78 | $0.70 | +11.4% |
Non-GAAP net income was $1,324 million and non-GAAP diluted EPS was $2.66 in 2022, versus $1,273 million and $2.52 in 2021. These measures exclude specified items, including acquired-intangible amortization, merger and restructuring costs, and other items; they are not substitutes for GAAP results.
Segment results: Market Platforms revenue was $4,225 million (+4.4%); segment operating income was $859 million, down from $893 million. Capital Access Platforms revenue was $1,684 million (+7.4%) and operating income was $916 million, up from $844 million. Anti-Financial Crime revenue was $306 million (+32.5%) and operating income was $80 million, up from $44 million. Anti-Financial Crime growth reflected demand, surveillance sales and the full-year inclusion of Verafin.
Cash flow and liquidity: Operating cash flow was $1,706 million, compared with $1,083 million in 2021. Investing cash flow was positive $49 million, versus negative $2,653 million, largely reflecting the much lower acquisition outlay in 2022. The filing reports $152 million of property and equipment purchases. Cash and cash equivalents were $502 million, and financial investments were $181 million, at year-end. Working capital was negative $231 million, improved from negative $449 million.
Total debt was $5,399 million, including $664 million of commercial paper and $4,735 million of long-term debt. The $1.25 billion revolving credit facility and $184 million of other credit facilities were unused at year-end; Nasdaq reported compliance with debt covenants. Cash-flow statements also include substantial clearing-member default funds and margin deposits: $6,470 million was restricted cash related to these balances. These collateral funds are not available for ordinary corporate liquidity needs.
Material changes versus prior year
- Revenue less transaction-based expenses increased 4.7%, while operating income grew faster, at 8.5%; net income and GAAP diluted EPS declined, in part amid lower non-operating income and higher taxes.
- Capital Access Platforms and Anti-Financial Crime grew; Market Platforms’ net revenue after transaction-based expenses was essentially flat at $1,581 million versus $1,582 million. U.S. equity-options market share declined to 32.0% from 34.4%; U.S. cash-equity total market share rose to 52.7% from 52.0%.
- Listings slowed sharply: Nasdaq Stock Market IPOs fell to 161 from 752, and Nordic and Baltic IPOs to 38 from 174. The declines included fewer SPAC listings.
- Nasdaq issued $550 million of 3.95% notes due 2052 and used the proceeds to redeem its 4.25% 2024 notes. It also repaid $600 million of 2022 notes and amended its revolving facility, extending maturity to December 2027.
- Nasdaq repurchased $308 million of shares through its program and $325 million under an accelerated share repurchase, and paid $383 million in dividends. A 3-for-1 stock split was effected in August 2022; share and per-share figures in the filing reflect the split.
Outlook, commentary, risks and unusual items
Nasdaq said operating cash generation, cash on hand, its revolving facility and commercial-paper program should fund near-term operating needs, capital expenditures, debt repayments and shareholder returns. No consolidated revenue or EPS guidance is provided in the supplied filing text. For its divisional alignment program, Nasdaq expects $115–$145 million of pre-tax charges over two years and approximately $30 million in annual run-rate efficiencies and revenue synergies by 2025.
Strategic initiatives include migrating additional North American markets to AWS over the next several years and developing a digital-assets custody offering, subject to regulatory approval. Nasdaq completed the migration of Nasdaq MRX to cloud infrastructure in Q4 2022. Management cautions that cloud execution, technology reliability and cybersecurity risks could affect operations and customer confidence.
- Regulatory and market-structure exposure: The SEC proposed significant U.S. stock-trading rule changes in December 2022. Changes to market-data plans and tape revenues may also affect pricing, revenues and Nasdaq’s processor role; implementation timing and impact remained uncertain.
- Clearing fine: Nasdaq Clearing continued to appeal the Swedish regulator’s fine arising from a 2018 commodities-market default. The appellate court reduced the fine from SEK 300 million to SEK 250 million (approximately $24 million); Nasdaq appealed further. The filing describes a prior accrual and a $5 million 2022 release.
- CFTC investigation: A non-operational subsidiary received a Wells Notice concerning alleged historical violations. Nasdaq disputes the allegations; the outcome and any loss range could not be reasonably estimated, and no loss contingency was accrued.
- Other legal and regulatory matters: Nasdaq disclosed an OFAC inquiry concerning a former Armenian subsidiary and said it accrued an immaterial contingency. It also recorded an accrual related to a legal matter, but the amount is not separately clear in the supplied text.
- Financial and operating risks: Nasdaq identifies sensitivity to trading volumes, listings, market conditions, interest and foreign-exchange rates, competition, clearing-member defaults, cyber incidents, outages, third-party cloud providers, and regulatory changes. The filing reports a $85 million net receivable related to consolidated audit trail costs, whose recovery depends on SEC-approved fee assessments.
Nasdaq recorded no goodwill or indefinite-lived intangible-asset impairment in 2022. Goodwill was $8.1 billion at year-end, making future impairment assumptions and operating forecasts relevant to investors. The financial statements received an unqualified audit opinion; management and the auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Review the full financial statements and notes for cash-flow detail, debt terms and the distinction between corporate cash and clearing-member collateral.
- Track whether recurring-revenue growth and the new segment mix offset weaker listings, trading-market-share trends and foreign-exchange effects.
- Monitor actual restructuring charges and whether the stated $30 million annual benefit by 2025 is achieved.
- Follow developments in the Nasdaq Clearing appeal, the CFTC Wells Notice, the OFAC inquiry and the unspecified legal-matter accrual.
- Assess SEC market-structure and market-data rule implementation, as well as cloud-migration, cybersecurity and third-party-provider risks.