Nasdaq Reports First Quarter 2022 Results; Delivers Strong Growth In Solutions Segments Revenue

Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the first quarter of 2022.

• First quarter 2022 net revenues¹ increased 5% compared to the first quarter of 2021. Solutions segments2 revenues increased 15%, including 13% organic growth and 4% contribution from the acquisition of Verafin, partially offset by a negative 2% FX impact.
• Annualized Recurring Revenue (ARR)3 increased 9% compared to the first quarter of 2021. Annualized SaaS revenues increased 12% and represented 34% of ARR.
• First quarter 2022 GAAP diluted earnings per share decreased 4% compared to the first quarter of 2021. First quarter 2022 non-GAAP4 diluted earnings per share increased 1% compared to the first quarter of 2021.
• In addition to returning $556 million to shareholders through dividends and repurchases in the first quarter, the company is announcing an 11% increase in the dividend, to $0.60 per share. The company also began the process of obtaining both shareholder and SEC approvals to facilitate a 3-for-1 stock split in the form of a stock dividend. If such approvals are received, we expect the split to be completed in the third quarter of 2022.

First Quarter 2022 Highlights

Adena Friedman, President and CEO said, “As we enter the third year with unprecedented dynamics affecting financial markets, our clients continue to turn to us to help them navigate that increasing complexity. Our record revenue performance this quarter is further evidence that Nasdaq can deliver consistently in multiple operating environments. This sustained growth is testament to the tangible and wide-ranging value we are delivering to our clients throughout the financial ecosystem.”

Ann Dennison, Executive Vice President and CFO said, “We continue to invest thoughtfully in our teams and capabilities to support growth in 2022 and beyond in accordance with our strategy, which in the first quarter of 2022 contributed to strong, scalable organic growth in Solutions Segments revenues. At the same time, the company has increased share repurchases, announced an 11% increase in the quarterly dividend, and has begun seeking approvals to split our shares 3-to-1 through a stock dividend.”

FINANCIAL REVIEW    

• First quarter 2022 net revenues were $892 million, an increase of $41 million, or 5%, from $851 million in the prior year period. Net revenues reflected a $51 million, or 6%, positive impact from organic growth and a $4 million increase from the net impact of acquisitions and divestitures, partially offset by a $14 million decrease due to changes in FX rates.
• Solutions segments revenues were $576 million in the first quarter of 2022, an increase of $74 million, or 15%. The increase reflects a $64 million, or 13%, positive impact from organic growth and a $18 million, or 4%, increase from the inclusion of revenues from the acquisition of Verafin, partially offset by a $8 million decrease from the impact of changes in FX rates.
• Market Services net revenues were $315 million in the first quarter of 2022, a decrease of $19 million, or 6%, compared to record revenues in the prior year period. The decrease reflects a $13 million, or 4%, organic decline and a $6 million decrease from the impact of changes in FX rates.
• First quarter 2022 GAAP operating expenses increased $1 million versus the prior year period. The increase primarily reflects higher compensation and benefits expense, professional and contract services expense, general, administrative and other expense, and computer operations and data communication expense, partially offset by lower merger and strategic initiatives expense and restructuring charges.
• First quarter 2022 non-GAAP operating expenses increased 9% versus the prior year period. The increase reflects a $36 million, or 9%, organic increase over the prior year period, a $9 million, or 2%, increase from the net impact of acquisitions and divestitures, partially offset by a $10 million decrease from changes in FX rates. The organic increase primarily reflects higher compensation and benefits expense, professional and contract services expense, general, administrative and other expense and computer operations and data communication expense.
• The company repurchased $467 million in shares of its common stock in the first quarter of 2022, including the impact of the $325 million accelerated share repurchase agreement previously disclosed and executed in the first quarter of 2022. As of March 31, 2022, there was $459 million remaining under the board authorized share repurchase program.
• The company is announcing an 11% increase in the dividend, to $0.60 per share. The company also began the process of obtaining certain shareholder and SEC approvals to facilitate a 3-for-1 stock split in the form of a stock dividend. If such approvals are received, we expect the split to be completed in the third quarter of 2022. The company issued another press release today with further details on the dividend and proposed stock split.

2022 EXPENSE AND TAX GUIDANCE UPDATE5

• The company is narrowing its 2022 non-GAAP operating expense guidance to a range of $1,700 to $1,760 million. Nasdaq expects its 2022 non-GAAP tax rate to be in the range of 24.0% to 26.0%.

STRATEGIC AND BUSINESS UPDATES     

• Nasdaq’s annualized SaaS revenues in the first quarter of 2022 increased 12% year over year. Annualized SaaS revenues totaled $655 million in the first quarter of 2022, representing 34% of total company ARR, up from 33% in the first quarter of 2021. The 12% year over year increase in annualized SaaS revenues primarily reflects strong growth in our anti-financial crime and analytics businesses.
• After reaching the 1-year anniversary of Nasdaq’s acquisition of Verafin, Nasdaq achieved significant progress as a leading Anti Financial Crime (AFC) solutions provider. In February 2021, Nasdaq closed the acquisition of Verafin, which we have since combined with our trade and market surveillance solutions to create our AFC business. During the first twelve months since the closing, the combined franchise expanded its client network of banks, credit unions, and fintech firms using the Fraud & AML solutions, while sustaining consistent growth of our trade and market surveillance offerings. Nasdaq has also introduced new and enhanced functionalities to address key emerging challenges, including the investigation of fraud involving digital wallets and detection of sanction-evading behaviors.
• Corporate Platforms delivered record revenues in the first quarter of 2022 with strong growth from both Listing Services and IR and ESG Services businesses. IR & ESG Services revenue in the first quarter of 2022 increased 7% to a quarterly record of $61 million. The number of clients using Nasdaq IR & ESG Services solutions increased 9% from the prior year period. Listing Services revenue rose 20% to a record $107 million, as the number of Nasdaq-listed corporate issuers, excluding SPACs, increased 13% compared to the prior year period.
• Investment Intelligence delivered strong results across all businesses. The combined Analytics offerings including eVestment and Solovis saw continued strong user adoption across both asset owners and asset managers as annualized SaaS revenues increased 14% to $209 million. Market Data posted steady growth year over year driven by international demand for proprietary data. Over the last 12 months, 55 ETPs tracking Nasdaq indexes were launched and accumulated $2.5 billion of AUM. Additionally, the number of futures and options on futures contracts tracking Nasdaq indexes set a quarterly record with 147 million contracts traded, an increase of 40% year over year.
• Nasdaq’s Market Services segment delivered the second highest quarterly net revenues on record. Market Services net revenues totaled $315 million in the first quarter of 2022, the second highest quarterly revenues versus the record achieved in the first quarter of 2021. In the Equity Derivatives business, Nasdaq led all exchanges during the first quarter of 2022 in total multiply-listed U.S. options traded and achieved record net revenues of $112 million. Nasdaq’s Nordic equities markets saw strong volumes with the value of shares traded on Nasdaq’s Nordic and Baltic markets totaling €289 billion, the highest in the last decade.

____________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 recurring 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.