- First quarter 2021 net revenues1 were $851 million, an increase of 21% over the first quarter of 2020. Compared to the prior year period, Solutions segments2 revenues increased 22% while Market Services revenues increased 20%.
- Annualized Recurring Revenue (ARR)3 was $1,760 million in the first quarter of 2021, an increase of 21% from the prior year period.
- First quarter 2021 GAAP diluted earnings per share of $1.78 increased 46% compared to $1.22 in the first quarter of 2020. First quarter 2021 non-GAAP4 diluted earnings per share of $1.96 increased 31% from $1.50 in the first quarter of 2020.
- Nasdaq advanced its strategic positioning by completing the acquisition of Verafin, establishing the company as a leading anti-financial crime technology provider.
- Also in the first quarter of 2021, Nasdaq agreed to sell its U.S. Fixed Income business, which will allow the company to concentrate resources on its technology, analytics and ESG opportunities.
- The company is announcing a 10% increase to the quarterly dividend, to $0.54 per share, and returned $243 million of cash to investors in the first quarter of 2021, including $162 million in share repurchases.
Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the first quarter of 2021.
First quarter 2021 net revenues were $851 million, an increase of $150 million, or 21%, from $701 million in the prior year period. Net revenues reflected a $118 million, or 17%, positive impact from organic growth, an $18 million increase from the impact of favorable changes in FX rates and a $14 million increase from the inclusion of revenues from acquisitions.
“I am pleased with how our team delivered for clients against an incredibly dynamic capital markets backdrop, reflecting record trading and listing results as well as strong growth across our solutions segments," said Adena Friedman, President and CEO, Nasdaq. "We continue to execute against key secular growth opportunities, as illustrated by strong momentum in our institutional investor analytics solutions, as well as by the broad-based growth in total company ARR compared to the prior year period. We are also making fundamental progress in Nasdaq's strategic repositioning this year, with the close of the Verafin acquisition, and the consequent expansion of our addressable market and long-term performance potential.”
GAAP operating expenses were $486 million in the first quarter of 2021, an increase of $60 million from $426 million in the first quarter of 2020. The increase of $60 million primarily relates to an $18 million increase from acquisitions and a $15 million increase from changes in FX rates. In addition, the increase reflects higher compensation and benefits expense, higher merger and strategic initiatives expense, and higher depreciation and amortization expense, partially offset by lower general, administrative and other expense. The lower general, administrative and other expense primarily reflects bond refinancing costs that were incurred in the first quarter of 2020, higher charitable donations made to COVID-19 response and relief efforts in the first quarter of 2020 and reduced corporate travel expenses.
Non-GAAP operating expenses were $393 million in the first quarter of 2021, an increase of $57 million, or 17%, compared to the first quarter of 2020. This increase reflects a $24 million, or 7%, organic increase over the prior year period, an $18 million increase from acquisitions and a $15 million increase from changes in FX rates. The organic increase was primarily driven by higher performance-linked compensation expenses.
"I am incredibly excited to become Nasdaq's CFO at such an interesting time, in particular to have the opportunity to support our evolution as a technology and analytics provider," said Ann Dennison, Executive Vice President and Chief Financial Officer, Nasdaq. "During the first quarter, we completed the Verafin acquisition, which we financed at attractive interest rates. In addition, we reached an agreement to divest our U.S. Fixed Income business and announced an increase to our existing share repurchase program authorization to, over time, neutralize the impact of the divestiture on our EPS."
On a GAAP basis, net income in the first quarter of 2021 was $298 million, an increase of 47% compared to $203 million in the first quarter of 2020. GAAP diluted EPS was $1.78, an increase of 46% compared $1.22 in the first quarter of 2020.
On a non-GAAP basis, net income in the first quarter of 2021 was $327 million, an increase of 30% compared to $251 million in the first quarter of 2020. Non-GAAP diluted EPS totaled $1.96, an increase of 31% from $1.50 in the first quarter of 2020.
As of March 31, 2021, the company had cash and cash equivalents of $774 million and total debt of $5,890 million, resulting in net debt of $5,116 million. This compares to total debt of $5,541 million and net debt of $2,796 million at December 31, 2020. The increase in net debt reflects closing the acquisition of Verafin. As of March 31, 2021, there was $248 million remaining under the board authorized share repurchase program (excluding the additional $1 billion authorized subject to the closing of the divestiture of our U.S. Fixed Income business and the resulting share issuance upon the consummation of that transaction).
UPDATING 2021 NON-GAAP EXPENSE AND TAX GUIDANCE5
The company is updating its 2021 non-GAAP operating expense guidance to a range of $1,570 to $1,620 million. Nasdaq expects its 2021 non-GAAP tax rate to be in the range of 25% to 27%.
BUSINESS HIGHLIGHTS
Market Services - Net revenues were a record $338 million in the first quarter of 2021, an increase of $57 million, or 20%, compared to the first quarter of 2020.
Equity Derivative Trading and Clearing - Net revenues increased $12 million, or 13%, in the first quarter of 2021 compared to the first quarter of 2020. The increase primarily reflects higher U.S. industry trading volumes, partially offset by a lower U.S. net capture rate.
Cash Equity Trading - Net revenues increased $35 million, or 36%, in the first quarter of 2021 compared to the first quarter of 2020. The increase primarily reflects higher U.S. industry trading volumes, net capture rates, and the impact from changes in FX rates, partially offset by lower U.S. market share.
Fixed Income and Commodities Trading and Clearing - Net revenues increased $2 million, or 12%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to the impact from changes in FX rates.
Trade Management Services - Revenues increased $8 million, or 11%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to increased demand for connectivity services.
Corporate Platforms - Revenues were $155 million in the first quarter of 2021, up $27 million, or 21%, compared to the first quarter of 2020.
Listing Services - Revenues increased $23 million, or 31%, in the first quarter of 2021 compared to the first quarter of 2020. The increase was primarily driven by higher U.S. listing revenues due to an increase in the overall number of listed companies and higher Nasdaq Private Market revenues.
IR & ESG Services - Revenues increased $4 million, or 8%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to an increase in both IR and ESG advisory services revenues.
Investment Intelligence - Revenues were $258 million in the first quarter of 2021, up $47 million, or 22%, compared to the first quarter of 2020.
Market Data - Revenues increased $11 million, or 11%, in the first quarter of 2021 compared to the first quarter of 2020. The increase reflects organic growth in proprietary data products from new sales, including continued expansion geographically and an increase in shared tape plan revenues.
Index - Revenues increased $29 million, or 40%, in the first quarter of 2021 compared to the first quarter of 2020. 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 increased $7 million, or 17%, in the first quarter of 2021 compared to the first quarter of 2020, primarily due to growth in eVestment and Solovis clients.
Market Technology - Revenues were $100 million in the first quarter of 2021, up $19 million, or 23% compared to the first quarter of 2020.
Marketplace Infrastructure Technology - Revenues increased $2 million, or 4%, in the first quarter of 2021 compared to the first quarter of 2020, primary due to the impact from changes in FX rates.
Anti Financial Crime Technology - Revenues increased $17 million, or 59%, in the first quarter of 2021 compared to the first quarter of 2020. The increase is due to continued growth in surveillance solutions, the inclusion of revenues from our acquisition of Verafin and the impact from changes in FX rates.
CORPORATE HIGHLIGHTS
- Nasdaq accelerates the company's evolution as a leading SaaS technology provider of anti-financial crime solutions by completing the acquisition of Verafin. In February 2021, Nasdaq completed the acquisition of Verafin, an industry pioneer in anti-financial crime technology solutions. The acquisition strengthens Nasdaq's existing regulatory and anti-financial crime solutions, while expanding Verafin's reach to serve a global ecosystem of Tier-1 and Tier-2 banks and broker-dealers.
- 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 $385 billion as of March 31, 2021, an increase of 87% compared to March 31, 2020. Additionally, the number of futures and options on futures contracts tracking Nasdaq indexes set a quarterly record with 105 million contracts traded, an increase of 31% from 80 million in the first quarter of 2020. There are 17 products tracking Nasdaq indexes which launched in the first quarter of 2021, including 13 outside of the U.S.
- Nasdaq's analytics business led by eVestment and Solovis delivered strong retention and sales growth during the first quarter of 2021. The eVestment and Solovis analytics businesses continue to see increased growth, not only due to increased number of users, but also in both new sales and retention compared to the prior year period. On a sequential basis, new sales were up 23% from the fourth quarter of 2020, reflecting both a rebound in institutional investment industry demand following some temporary contraction in 2020, as well as increasing realization of synergies across the suite of solutions. These synergies helped to drive 28 new accounts to Solovis in the first quarter of 2021.
- The Nasdaq Stock Market led U.S. exchanges for IPOs during the first quarter of 2021. The Nasdaq Stock Market led U.S. exchanges with a 69% total IPO win rate, including a 77% win rate among operating companies6 and a 66% win rate among special purpose acquisition companies. In the first quarter of 2021, The Nasdaq Stock Market welcomed 275 IPOs representing $74 billion in capital raised, including 79 operating company IPOs such as Bumble, Qualtrics, Affirm, Playtika and Petco, as well as 196 IPOs from special purpose acquisition companies.
- Nasdaq's Market Services segment sets new quarterly trading volume records in U.S. options and U.S. equities in the first quarter of 2021. In the first quarter of 2021, Nasdaq's U.S. options market set a quarterly record of 892 million contracts traded, an increase of 57% year over year. Additionally, Nasdaq led all exchanges during the period in total volume traded for options inclusive of both multiply-listed equity options and index options products. Nasdaq's U.S. equities markets set a quarterly record of 153 billion shares traded, an increase of 20% year over year.
- Nasdaq agrees to sell its U.S. Fixed Income business to Tradeweb Markets. Nasdaq's decision to sell its U.S. Fixed Income business aligns with its corporate strategy to concentrate its resources and capital to maximize its potential as a major technology and analytics provider to the global capital markets. The transaction is expected to close later in 2021 subject to satisfaction of customary closing conditions, including the receipt of required regulatory approvals.
____________1 Represents revenues less transaction-based expenses. 2 Constitutes revenues from Market Technology, Investment Intelligence and Corporate Platforms segments.3 Annualized Recurring Revenue (ARR) for a given period is the annualized revenue 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 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.4 Refer 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.5 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. 6 Operating companies exclude special purpose acquisition companies and when a special purpose acquisition company completes an acquisition.
