filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations of Nasdaq should be read in conjunction with our condensed consolidated financial statements and related notes included in this Form 10-Q.
OVERVIEW
Nasdaq is a global technology company serving corporate clients, investment managers, banks, brokers, and exchange operators as they navigate and interact with the global capital markets and the broader financial system. We aspire to deliver world-leading platforms that improve the liquidity, transparency, and integrity of the global economy. Our diverse offering of data, analytics, software, exchange capabilities, and client-centric services enables clients to optimize and execute their business vision with confidence.
Our organizational structure aligns our businesses with the foundational shifts that are driving the evolution of the global financial system. In order to amplify our strategy, we aligned the Company more closely with evolving client needs into Capital Access Platforms, Financial Technology and Market Services reportable segments. All prior periods have been restated to conform to the current period presentation. See Note 18, “Business Segments,” to the condensed consolidated financial statements for further discussion of our reportable segments and geographic data, as well as how management allocates resources, assesses performance and manages these businesses as three separate segments.
Second Quarter 2024 and Recent Developments
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Nasdaq extended its listings leadership in the U.S., leading U.S. exchanges for eligible operating company IPOs with a 72% total win rate in the second quarter of 2024.
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Nasdaq executed the highest ever one-day notional Closing Cross volume in June. During the annual Russell U.S. indexes reconstitution, Nasdaq successfully facilitated approximately 2.9 billion shares traded in 0.878 seconds across Nasdaq-listed securities, representing a record $95.3 billion dollars in market value.
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ETP AUM linked to Nasdaq indices reached record levels, ending the second quarter of 2024 at $569 billion.
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In the second quarter of 2024, we returned $138 million to shareholders through dividend payments and $58 million in repurchases of our common stock.
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In July 2024, the board of directors approved a regular quarterly cash dividend of $0.24 per share on our outstanding common stock.
Nasdaq’s Operating Results
The following tables summarize our financial performance for the three and six months ended June 30, 2024 compared to the same periods in 2023. The comparability of our results of operations between reported periods is impacted by the acquisition of Adenza in November 2023. See Note 4, “Acquisition,” to the condensed consolidated financial statements for further discussion. For a detailed discussion of our results of operations, see “Segment Operating Results” below.
| Three Months Ended June 30, | Percentage Change | ||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions, except per share amounts) | |||||||||||||||||||||||
| Revenues less transaction-based expenses | $ | 1,159 | $ | 925 | 25.3 | % | |||||||||||||||||
| Operating expenses | 736 | 543 | 35.5 | % | |||||||||||||||||||
| Operating income | $ | 423 | $ | 382 | 10.7 | % | |||||||||||||||||
| Net income attributable to Nasdaq | $ | 222 | $ | 267 | (16.9) | % | |||||||||||||||||
| Diluted earnings per share | $ | 0.38 | $ | 0.54 | (29.6) | % | |||||||||||||||||
| Cash dividends declared per common share | $ | 0.24 | $ | 0.22 | 9.1 | % | |||||||||||||||||
| Six Months Ended June 30, | Percentage Change | ||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions, except per share amounts) | |||||||||||||||||||||||
| Revenues less transaction-based expenses | $ | 2,277 | $ | 1,838 | 23.9 | % | |||||||||||||||||
| Operating expenses | 1,444 | 1,044 | 38.3 | % | |||||||||||||||||||
| Operating income | $ | 833 | $ | 794 | 4.9 | % | |||||||||||||||||
| Net income attributable to Nasdaq | $ | 456 | $ | 568 | (19.7) | % | |||||||||||||||||
| Diluted earnings per share | $ | 0.79 | $ | 1.15 | (31.3) | % | |||||||||||||||||
| Cash dividends declared per common share | $ | 0.46 | $ | 0.42 | 9.5 | % |
In countries with currencies other than the U.S. dollar, revenues and expenses are translated using monthly average exchange rates. Impacts on our revenues less transaction-based expenses and operating income associated with fluctuations in foreign currency are discussed in more detail under “Item 3. Quantitative and Qualitative Disclosures about Market Risk.”
The following chart summarizes our ARR (in millions):
ARR for a given period is the current annualized value 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. For AxiomSL and Calypso recurring revenue contracts, the amount included in ARR is consistent with the amount that we invoice the customer during the current period. Additionally, for AxiomSL and Calypso recurring revenue contracts that include annual values that increase over time, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include the future committed increases in the contract value as of the date of the ARR calculation. 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.
The ARR chart includes:
| ▪ | Proprietary market data subscriptions and annual listing fees within our Data & Listing Services business, index data subscriptions and guaranteed minimum on futures contracts within our Index business and subscription contracts under our Workflow & Insights business. | |||||||
| ▪ | SaaS subscription and support contracts related to Verafin, surveillance, market technology, AxiomSL, Calypso and trade management services, excluding one-time service requests. |
The following chart summarizes our quarterly annualized SaaS revenues for Solutions, which comprises our Capital Access Platforms and Financial Technology segments, for June 30, 2024 and 2023 (in millions):
Segment Operating Results
The following tables present our revenues by segment:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Capital Access Platforms | $ | 481 | $ | 438 | 9.8 | % | ||||||||||||||||||||
| Financial Technology | 420 | 235 | 78.7 | % | ||||||||||||||||||||||
| Market Services | 883 | 750 | 17.7 | % | ||||||||||||||||||||||
| Other revenues | 8 | 10 | (20.0) | % | ||||||||||||||||||||||
| Total revenues | $ | 1,792 | $ | 1,433 | 25.1 | % | ||||||||||||||||||||
| Transaction rebates | (483) | (444) | 8.8 | % | ||||||||||||||||||||||
| Brokerage, clearance and exchange fees | (150) | (64) | 134.4 | % | ||||||||||||||||||||||
| Total revenues less transaction-based expenses | $ | 1,159 | $ | 925 | 25.3 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Capital Access Platforms | $ | 960 | $ | 852 | 12.7 | % | ||||||||||||||||||||
| Financial Technology | 813 | 463 | 75.6 | % | ||||||||||||||||||||||
| Market Services | 1,678 | 1,631 | 2.9 | % | ||||||||||||||||||||||
| Other revenues | 18 | 20 | (10.0) | % | ||||||||||||||||||||||
| Total revenues | $ | 3,469 | $ | 2,966 | 17.0 | % | ||||||||||||||||||||
| Transaction rebates | (965) | (931) | 3.7 | % | ||||||||||||||||||||||
| Brokerage, clearance and exchange fees | (227) | (197) | 15.2 | % | ||||||||||||||||||||||
| Total revenues less transaction-based expenses | $ | 2,277 | $ | 1,838 | 23.9 | % |
The following charts present our Capital Access Platforms, Financial Technology and Market Services segments as a percentage of our total revenues, less transaction-based expenses.
CAPITAL ACCESS PLATFORMS
The following tables present revenues from our Capital Access Platforms segment:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Data & Listing Services | $ | 187 | $ | 187 | — | % | ||||||||||||||||||||
| Index | 167 | 129 | 29.5 | % | ||||||||||||||||||||||
| Workflow & Insights | 127 | 122 | 4.1 | % | ||||||||||||||||||||||
| Total Capital Access Platforms | $ | 481 | $ | 438 | 9.8 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Data & Listing Services | $ | 372 | $ | 371 | 0.3 | % | ||||||||||||||||||||
| Index | 336 | 239 | 40.6 | % | ||||||||||||||||||||||
| Workflow & Insights | 252 | 242 | 4.1 | % | ||||||||||||||||||||||
| Total Capital Access Platforms | $ | 960 | $ | 852 | 12.7 | % |
| As of June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| ARR (in millions) | $ | 1,226 | $ | 1,216 |
Data & Listing Services Revenues
The following tables present key drivers from our Data & Listing Services business:
| Three Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| IPOs | ||||||||||||||||||||
| The Nasdaq Stock Market | 39 | 23 | ||||||||||||||||||
| Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic | 5 | 1 | ||||||||||||||||||
| Total new listings | ||||||||||||||||||||
| The Nasdaq Stock Market | 84 | 62 | ||||||||||||||||||
| Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic | 10 | 6 | ||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| IPOs | ||||||||||||||||||||
| The Nasdaq Stock Market | 66 | 63 | ||||||||||||||||||
| Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic | 6 | 3 | ||||||||||||||||||
| Total new listings | ||||||||||||||||||||
| The Nasdaq Stock Market | 163 | 143 | ||||||||||||||||||
| Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic | 12 | 13 | ||||||||||||||||||
| As of June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| ARR (in millions) | $ | 668 | $ | 678 | ||||||||||||||||
| Number of listed companies | ||||||||||||||||||||
| The Nasdaq Stock Market | 4,004 | 4,106 | ||||||||||||||||||
| Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic | 1,198 | 1,249 |
In the table above:
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For the three months ended June 30, 2024 and 2023, IPOs included 8 and 5 SPACs, respectively. For the six months ended June 30, 2024 and 2023, IPOs included 13 and 15 SPACs, respectively. Number of total listed companies on The Nasdaq Stock Market for the six months ended June 30, 2024 and 2023 included 645 and 547 ETPs, respectively.
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IPOs, new listings (which includes IPOs) and total listed companies for exchanges that comprise Nasdaq Nordic and Nasdaq Baltic represent companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies listed on the alternative markets of Nasdaq First North.
Data & Listing Services revenues were essentially unchanged for the three and six months ended June 30, 2024 compared with the same periods in 2023 as higher data sales, higher data usage, new listings and pricing were partially offset by the impact of 2023 delistings and downgrades and lower amortization of prior period initial listing fees.
Index Revenues
The following table presents key drivers from our Index business:
| As of or Three Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| Number of licensed ETPs | 372 | 386 | ||||||||||||||||||
| TTM change in period end ETP AUM tracking Nasdaq indices (in billions) | ||||||||||||||||||||
| Beginning balance | $ | 418 | $ | 321 | ||||||||||||||||
| Net appreciation | 115 | 73 | ||||||||||||||||||
| Net impact of ETP sponsor switches | (17) | (1) | ||||||||||||||||||
| Net inflows | 53 | 25 | ||||||||||||||||||
| Ending balance | $ | 569 | $ | 418 | ||||||||||||||||
| Quarterly average ETP AUM tracking Nasdaq indices (in billions) | $ | 531 | $ | 381 | ||||||||||||||||
| ARR (in millions) | $ | 74 | $ | 72 |
In the table above, TTM represents trailing twelve months.
Index revenues increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to higher AUM in exchange traded products linked to Nasdaq indices and growth in trading volume on futures contracts linked to the Nasdaq-100 Index. The increase in the first six months also includes a $16 million one-time item related to a legal settlement to recoup revenue.
Workflow & Insights Revenues
The following table presents key drivers from our Workflow & Insights business:
| As of or Three Months Ended June 30 | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| (in millions) | |||||||||||||||||
| ARR | $ | 484 | $ | 466 | |||||||||||||
| Quarterly annualized SaaS revenues | 414 | 394 |
Workflow & Insights revenues increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to an increase in analytics revenues. The increase was primarily due to higher Data Link sales and growth in our eVestment product offerings.
FINANCIAL TECHNOLOGY
The following table presents revenues from our Financial Technology segment:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Financial Crime Management Technology | $ | 67 | $ | 54 | 24.1 | % | ||||||||||||||||||||
| Regulatory Technology | 95 | 35 | 171.4 | % | ||||||||||||||||||||||
| Capital Markets Technology | 258 | 146 | 76.7 | % | ||||||||||||||||||||||
| Total Financial Technology | $ | 420 | $ | 235 | 78.7 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Financial Crime Management Technology | $ | 131 | $ | 106 | 23.6 | % | ||||||||||||||||||||
| Regulatory Technology | 186 | 67 | 177.6 | % | ||||||||||||||||||||||
| Capital Markets Technology | 496 | 290 | 71.0 | % | ||||||||||||||||||||||
| Total Financial Technology | $ | 813 | $ | 463 | 75.6 | % |
Financial Crime Management Technology Revenues
The following tables present revenues and key drivers for our Financial Crime Management Technology business:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | (in millions) | ||||||||||||||||||||||
| Revenues | $ | 67 | $ | 54 | $ | 131 | $ | 106 |
| As of or Three Months Ended June 30 | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| ARR and Quarterly annualized SaaS revenues | $ | 258 | $ | 207 |
Financial Crime Management Technology revenues increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to price increases, new sales to existing clients and new customer acquisitions, particularly small and medium-sized businesses.
Regulatory Technology Revenues
The following tables present revenues and key drivers for our Regulatory Technology business:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | (in millions) | ||||||||||||||||||||||
| Revenues | $ | 95 | $ | 35 | $ | 186 | $ | 67 |
| As of or Three Months Ended June 30 | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| ARR | $ | 338 | $ | 132 | ||||||||||||||||||||||
| Quarterly annualized SaaS revenues | 180 | 116 |
Regulatory Technology revenues increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to the inclusion of revenues from AxiomSL associated with our acquisition of Adenza and higher surveillance revenues.
Capital Markets Technology Revenues
The following tables present revenues and key drivers for our Capital Markets Technology business:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | (in millions) | ||||||||||||||||||||||
| Revenues | $ | 258 | $ | 146 | $ | 496 | $ | 290 |
| As of or Three Months Ended June 30 | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| ARR | $ | 846 | $ | 512 | ||||||||||||||||
| Quarterly annualized SaaS revenues | 123 | 38 |
Capital Markets Technology revenues increased in the second quarter and first six months of 2024 compared with the same periods in 2023. The increase was primarily due to the inclusion of revenues from Calypso associated with our acquisition of Adenza and higher trade management services revenues mainly driven by demand for colocation and connectivity services and pricing, partially offset by lower market technology revenues related to lower professional fees due to a large project delivery in the comparative periods of 2023.
MARKET SERVICES
The following tables present revenues from our Market Services segment:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Market Services | $ | 883 | $ | 750 | 17.7 | % | ||||||||||||||||||||
| Transaction-based expenses: | ||||||||||||||||||||||||||
| Transaction rebates | (483) | (444) | 8.8 | % | ||||||||||||||||||||||
| Brokerage, clearance and exchange fees | (150) | (64) | 134.4 | % | ||||||||||||||||||||||
| Total Market Services, net | $ | 250 | $ | 242 | 3.3 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Market Services | $ | 1,678 | $ | 1,631 | 2.9 | % | ||||||||||||||||||||
| Transaction-based expenses: | ||||||||||||||||||||||||||
| Transaction rebates | (965) | (931) | 3.7 | % | ||||||||||||||||||||||
| Brokerage, clearance and exchange fees | (227) | (197) | 15.2 | % | ||||||||||||||||||||||
| Total Market Services, net | $ | 486 | $ | 503 | (3.4) | % |
Our Market Services segment includes equity derivatives trading, cash equity trading, Nordic fixed income trading & clearing, U.S. Tape plans and other revenues. The following tables present net revenues by product from our Market Services segment:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| U.S. Equity Derivative Trading | $ | 90 | $ | 89 | 1.1 | % | ||||||||||||||||||||
| Cash Equity Trading | 112 | 103 | 8.7 | % | ||||||||||||||||||||||
| U.S. Tape plans | 31 | 35 | (11.4) | % | ||||||||||||||||||||||
| Other | 17 | 15 | 13.3 | % | ||||||||||||||||||||||
| Total Market Services, net | $ | 250 | $ | 242 | 3.3 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| U.S. Equity Derivative Trading | $ | 181 | $ | 191 | (5.2) | % | ||||||||||||||||||||
| Cash Equity Trading | 212 | 206 | 2.9 | % | ||||||||||||||||||||||
| U.S. Tape plans | 59 | 72 | (18.1) | % | ||||||||||||||||||||||
| Other | 34 | 34 | — | % | ||||||||||||||||||||||
| Total Market Services, net | $ | 486 | $ | 503 | (3.4) | % |
In the tables above, Other includes Nordic fixed income trading & clearing, Nordic derivatives and Canadian cash equities trading.
U.S. Equity Derivative Trading
The following tables present total revenues, transaction-based expenses, and total revenues less transaction-based expenses as well as key drivers from our U.S. Equity Derivative Trading business:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| U.S. Equity Derivative Trading Revenues | $ | 334 | $ | 297 | 12.5 | % | ||||||||||||||||||||
| Section 31 fees | 19 | 10 | 90.0 | % | ||||||||||||||||||||||
| Transaction-based expenses: | ||||||||||||||||||||||||||
| Transaction rebates | (243) | (207) | 17.4 | % | ||||||||||||||||||||||
| Section 31 fees | (19) | (10) | 90.0 | % | ||||||||||||||||||||||
| Brokerage and clearance fees | (1) | (1) | — | % | ||||||||||||||||||||||
| U.S. Equity Derivative Trading Revenues, net | $ | 90 | $ | 89 | 1.1 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| U.S. Equity Derivative Trading Revenues | $ | 657 | $ | 624 | 5.3 | % | ||||||||||||||||||||
| Section 31 fees | 30 | 33 | (9.1) | % | ||||||||||||||||||||||
| Transaction-based expenses: | ||||||||||||||||||||||||||
| Transaction rebates | (474) | (431) | 10.0 | % | ||||||||||||||||||||||
| Section 31 fees | (30) | (33) | (9.1) | % | ||||||||||||||||||||||
| Brokerage and clearance fees | (2) | (2) | — | % | ||||||||||||||||||||||
| U.S. Equity Derivative Trading Revenues, net | $ | 181 | $ | 191 | (5.2) | % |
Section 31 fees are recorded as U.S. equity derivative and cash equity trading revenues with a corresponding amount recorded in transaction-based expenses. We are assessed these fees from the SEC and pass them through to our customers in the form of incremental fees. Pass-through fees can increase or decrease due to rate changes by the SEC, our percentage of the overall industry volumes processed on our systems, and differences in actual dollar value traded. Section 31 fees increased in the second quarter of 2024 compared with the same period in 2023 primarily due to higher average SEC fee rates as a result of an increase in the SEC fee rate in May 2024. Section 31 fees decreased in the first six months of 2024 compared with the same period in 2023 primarily due to lower average SEC fee rates. Since the amount recorded in revenues is equal to the amount recorded as Section 31 fees, there is no impact on our net revenues.
| Three Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| U.S. equity options | |||||||||||||||||
| Total industry average daily volume (in millions) | 42.1 | 39.2 | |||||||||||||||
| Nasdaq PHLX matched market share | 9.9 | % | 11.5 | % | |||||||||||||
| The Nasdaq Options Market matched market share | 5.5 | % | 6.4 | % | |||||||||||||
| Nasdaq BX Options matched market share | 2.3 | % | 3.0 | % | |||||||||||||
| Nasdaq ISE Options matched market share | 6.9 | % | 6.0 | % | |||||||||||||
| Nasdaq GEMX Options matched market share | 2.6 | % | 2.2 | % | |||||||||||||
| Nasdaq MRX Options matched market share | 2.1 | % | 1.6 | % | |||||||||||||
| Total matched market share executed on Nasdaq’s exchanges | 29.3 | % | 30.7 | % | |||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| U.S. equity options | |||||||||||||||||
| Total industry average daily volume (in millions) | 42.7 | 40.8 | |||||||||||||||
| Nasdaq PHLX matched market share | 10.1 | % | 11.3 | % | |||||||||||||
| The Nasdaq Options Market matched market share | 5.4 | % | 6.8 | % | |||||||||||||
| Nasdaq BX Options matched market share | 2.3 | % | 3.1 | % | |||||||||||||
| Nasdaq ISE Options matched market share | 6.6 | % | 5.8 | % | |||||||||||||
| Nasdaq GEMX Options matched market share | 2.6 | % | 2.1 | % | |||||||||||||
| Nasdaq MRX Options matched market share | 2.3 | % | 1.6 | % | |||||||||||||
| Total matched market share executed on Nasdaq’s exchanges | 29.3 | % | 30.7 | % |
U.S. equity derivative trading revenues increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to higher gross capture rate and higher industry trading volumes, partially offset by lower overall matched market share executed on Nasdaq’s exchanges. The U.S. equity derivative trading revenues less transaction-based expenses were essentially unchanged in the second quarter compared with the same period in 2023 as higher industry trading volumes were offset by lower capture rate and lower overall matched market share executed on Nasdaq’s exchanges. The U.S. equity derivative trading revenues less transaction-based expenses decreased in first six months of 2024 compared with the same period in 2023 primarily due to lower overall matched market share executed on Nasdaq’s exchanges and lower capture rate, partially offset by higher industry volumes.
Transaction rebates, in which we credit a portion of the execution charge to the market participant, increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to higher rebate capture rate and higher industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges.
Cash Equity Trading Revenues
The following tables present total revenues, transaction-based expenses, and total revenues less transaction-based expenses as well as key drivers and other metrics from our Cash Equity Trading business:
| Three Months Ended June 30, | Percentage Change | ||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Cash Equity Trading Revenues | $ | 353 | $ | 339 | 4.1 | % | |||||||||||||||||||||||
| Section 31 fees | 124 | 49 | 153.1 | % | |||||||||||||||||||||||||
| Transaction-based expenses: | |||||||||||||||||||||||||||||
| Transaction rebates | (235) | (232) | 1.3 | % | |||||||||||||||||||||||||
| Section 31 fees | (124) | (49) | 153.1 | % | |||||||||||||||||||||||||
| Brokerage and clearance fees | (6) | (4) | 50.0 | % | |||||||||||||||||||||||||
| Cash equity trading revenues, net | $ | 112 | $ | 103 | 8.7 | % | |||||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | ||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Cash Equity Trading Revenues | $ | 703 | $ | 705 | (0.3) | % | |||||||||||||||||||||||
| Section 31 fees | 184 | 152 | 21.1 | % | |||||||||||||||||||||||||
| Transaction-based expenses: | |||||||||||||||||||||||||||||
| Transaction rebates | (480) | (489) | (1.8) | % | |||||||||||||||||||||||||
| Section 31 fees | (184) | (152) | 21.1 | % | |||||||||||||||||||||||||
| Brokerage and clearance fees | (11) | (10) | 10.0 | % | |||||||||||||||||||||||||
| Cash equity trading revenues, net | $ | 212 | $ | 206 | 2.9 | % |
See the discussion in "U.S. Equity Derivative Trading" for an explanation of Section 31 fees for the second quarter of 2024 as compared with the same period in 2023. Section 31 fees increased in the first six months of 2024 compared with the same period in 2023 primarily due to higher trading volumes partially offset by lower average SEC fee rates. Since the amount recorded in revenues is equal to the amount recorded as Section 31 fees, there is no impact on our net revenues.
| Three Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Total U.S.-listed securities | |||||||||||||||||
| Total industry average daily share volume (in billions) | 11.8 | 10.8 | |||||||||||||||
| Matched share volume (in billions) | 119.3 | 113.7 | |||||||||||||||
| The Nasdaq Stock Market matched market share | 15.6 | % | 16.3 | % | |||||||||||||
| Nasdaq BX matched market share | 0.3 | % | 0.4 | % | |||||||||||||
| Nasdaq PSX matched market share | 0.2 | % | 0.4 | % | |||||||||||||
| Total matched market share executed on Nasdaq’s exchanges | 16.1 | % | 17.1 | % | |||||||||||||
| Market share reported to the FINRA/Nasdaq Trade Reporting Facility | 42.9 | % | 34.2 | % | |||||||||||||
| Total market share | 59.0 | % | 51.3 | % | |||||||||||||
| Nasdaq Nordic and Nasdaq Baltic securities | |||||||||||||||||
| Average daily number of equity trades executed on Nasdaq’s exchanges | 663,897 | 687,158 | |||||||||||||||
| Total average daily value of shares traded (in billions) | $ | 4.7 | $ | 4.7 | |||||||||||||
| Total market share executed on Nasdaq’s exchanges | 73.5 | % | 71.4 | % | |||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Total U.S.-listed securities | |||||||||||||||||
| Total industry average daily share volume (in billions) | 11.8 | 11.3 | |||||||||||||||
| Matched share volume (in billions) | 236.0 | 235.5 | |||||||||||||||
| The Nasdaq Stock Market matched market share | 15.7 | % | 16.1 | % | |||||||||||||
| Nasdaq BX matched market share | 0.3 | % | 0.3 | % | |||||||||||||
| Nasdaq PSX matched market share | 0.2 | % | 0.4 | % | |||||||||||||
| Total matched market share executed on Nasdaq’s exchanges | 16.2 | % | 16.8 | % | |||||||||||||
| Market share reported to the FINRA/Nasdaq Trade Reporting Facility | 42.2 | % | 32.9 | % | |||||||||||||
| Total market share | 58.4 | % | 49.7 | % | |||||||||||||
| Nasdaq Nordic and Nasdaq Baltic securities | |||||||||||||||||
| Average daily number of equity trades executed on Nasdaq’s exchanges | 665,183 | 739,480 | |||||||||||||||
| Total average daily value of shares traded (in billions) | $ | 4.7 | $ | 5.0 | |||||||||||||
| Total market share executed on Nasdaq’s exchanges | 72.6 | % | 70.1 | % |
In the tables above, total market share includes transactions executed on The Nasdaq Stock Market’s, Nasdaq BX’s and Nasdaq PSX’s systems plus trades reported through the FINRA/Nasdaq Trade Reporting Facility.
Cash equity trading revenues increased in the second quarter of 2024 compared with the same period in 2023 primarily due to higher U.S. industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges and lower gross capture. Cash equity trading revenues was essentially unchanged in the first six months of 2024 compared with the same period in 2023 primarily due to higher U.S. industry trading volumes, offset by lower overall U.S. matched market share executed on Nasdaq's exchanges.
Cash equity trading revenues less transaction-based expenses increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to higher U.S. industry trading volumes and higher capture rate, partially offset by lower overall U.S. matched market share executed on Nasdaq’s exchanges.
Transaction rebates increased in the second quarter of 2024 compared with the same period in 2023 primarily due to higher U.S. industry volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges and lower rebate capture rate. Transaction rebates decreased in the first six months of 2024 compared with the same period in 2023 primarily due to lower U.S. matched market share executed on Nasdaq's exchanges and lower rebate capture rate, partially offset by higher U.S. trading volumes. For The Nasdaq Stock Market and Nasdaq PSX, we credit a portion of the per share execution charge to the market participant that provides the liquidity, and for Nasdaq BX, we credit a portion of the per share execution charge to the market participant that takes the liquidity.
U.S. Tape Plans
The following tables present revenues from our U.S. Tape plans business:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| U.S. Tape plans | $ | 31 | $ | 35 | (11.4) | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| U.S. Tape plans | $ | 59 | $ | 72 | (18.1) | % |
U.S. Tape plans revenues decreased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to lower industry-wide usage volume. The decrease in the first six months of 2024 also reflected the impact of one-time industry-wide adjustments.
Other
Other includes Nordic fixed income trading and clearing, Nordic derivatives and Canadian cash equities trading. The following tables present revenues and a key driver from our Other business:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Other | $ | 17 | $ | 15 | 13.3 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Other | $ | 34 | $ | 34 | — | % |
In the tables above, other includes transaction rebates of $5 million for the three months ended June 30, 2024 and 2023, and $11 million for the six months ended June 30, 2024 and 2023.
| Three Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Nasdaq Nordic and Nasdaq Baltic options and futures | |||||||||||||||||
| Total average daily volume of options and futures contracts | 251,677 | 307,754 | |||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Nasdaq Nordic and Nasdaq Baltic options and futures | |||||||||||||||||
| Total average daily volume of options and futures contracts | 246,527 | 326,687 | |||||||||||||||
In the tables above, Nasdaq Nordic and Nasdaq Baltic total average daily volume of options and futures contracts include Finnish option contracts traded on Eurex for which Nasdaq and Eurex have a revenue sharing arrangement. The revenue sharing arrangement ended in the fourth quarter of 2023.
Other revenues increased in the second quarter of 2024 compared with the same period in 2023 primarily due to an increase in Canadian cash equities trading and Nordic fixed income trading and clearing revenues. Other revenues is unchanged in the first six months of 2024 compared with the same period in 2023.
OTHER REVENUES
For the three and six months ended June 30, 2024 and 2023, other revenues include revenues related to our Nordic power trading and clearing business, following our announcement in June 2023 that we entered into an agreement to sell this business. This agreement was subsequently terminated in June 2024. Revenues from this business will continue to be reflected in Other Revenues. Prior to June 2023, these revenues were included in our Market Services and Capital Access Platforms segments.
EXPENSES
Operating Expenses
The following tables present our operating expenses:
| Three Months Ended June 30, | Percentage Change | ||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Compensation and benefits | $ | 328 | $ | 261 | 25.7 | % | |||||||||||||||||||||||
| Professional and contract services | 39 | 30 | 30.0 | % | |||||||||||||||||||||||||
| Technology and communication infrastructure | 69 | 56 | 23.2 | % | |||||||||||||||||||||||||
| Occupancy | 27 | 32 | (15.6) | % | |||||||||||||||||||||||||
| General, administrative and other | 30 | 22 | 36.4 | % | |||||||||||||||||||||||||
| Marketing and advertising | 12 | 9 | 33.3 | % | |||||||||||||||||||||||||
| Depreciation and amortization | 153 | 65 | 135.4 | % | |||||||||||||||||||||||||
| Regulatory | 18 | 9 | 100.0 | % | |||||||||||||||||||||||||
| Merger and strategic initiatives | 4 | 45 | (91.1) | % | |||||||||||||||||||||||||
| Restructuring charges | 56 | 14 | 300.0 | % | |||||||||||||||||||||||||
| Total operating expenses | $ | 736 | $ | 543 | 35.5 | % | |||||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | ||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Compensation and benefits | $ | 669 | $ | 517 | 29.4% | ||||||||||||||||||||||||
| Professional and contract services | 72 | 61 | 18.0% | ||||||||||||||||||||||||||
| Technology and communication infrastructure | 135 | 110 | 22.7% | ||||||||||||||||||||||||||
| Occupancy | 56 | 71 | (21.1)% | ||||||||||||||||||||||||||
| General, administrative and other | 58 | 35 | 65.7% | ||||||||||||||||||||||||||
| Marketing and advertising | 23 | 19 | 21.1% | ||||||||||||||||||||||||||
| Depreciation and amortization | 308 | 134 | 129.9% | ||||||||||||||||||||||||||
| Regulatory | 28 | 17 | 64.7% | ||||||||||||||||||||||||||
| Merger and strategic initiatives | 13 | 47 | (72.3)% | ||||||||||||||||||||||||||
| Restructuring charges | 82 | 33 | 148.5% | ||||||||||||||||||||||||||
| Total operating expenses | $ | 1,444 | $ | 1,044 | 38.3% |
The increase in compensation and benefits expense for the second quarter and first six months of 2024 compared with the same periods in 2023 was primarily driven by increased headcount related to Adenza and higher incentive compensation. The increase in the first six months of 2024 also includes a pre-tax charge of $23 million resulting from the finalization of the termination of our pension plan.
Headcount, including employees of non-wholly owned consolidated subsidiaries, increased to 8,658 employees as of June 30, 2024 from 6,565 employees as of June 30, 2023, primarily due to our acquisition of Adenza.
Professional and contract services expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to increased legal and consulting expenses.
Technology and communication infrastructure expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to an increase in expenses related to the inclusion of Adenza and an increase in investment in technology expense related to our cloud initiatives and software.
Occupancy expense decreased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to $5 million and $18 million in impairment charges and exit related costs recorded in the second quarter and first six months of 2023, respectively, following the abandonment of leased office space.
General, administrative and other expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to insurance recoveries related to legal matters recorded in the second quarter and first six months of 2023, as well as increased expenses related to the inclusion of Adenza and higher travel costs in the second quarter and first six months of 2024.
Marketing and advertising expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to higher client incentive spending resulting from higher IPO activity.
Depreciation and amortization expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to an increase in amortization related to the intangible assets acquired as part of the Adenza acquisition.
Regulatory expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to the fine incurred in connection with the SFSA inquiry. See “SFSA Inquiry” of Note 17, “Commitments, Contingencies and Guarantees,” to the condensed consolidated financial statements for further discussion.
We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years, which have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third-party transaction costs and vary based on the size and frequency of the activities described above. For the three and six months ended June 30, 2024, and for the three months ended June 30, 2023, these costs primarily relate to the Adenza acquisition. For the three and six months ended June 30, 2024, these costs were partially offset by the recognition of a termination fee due to Nasdaq in the second quarter of 2024, related to the termination of the proposed divestiture of our Nordic power trading and clearing business.
Restructuring charges increased in the second quarter and first six months of 2024 compared with the same periods in 2023 as a result of charges from our Adenza restructuring program and our divisional alignment program. See Note 19, “Restructuring Charges,” to the condensed consolidated financial statements for further discussion. By 2025, we expect to achieve benefits of the 2022 divisional alignment program through combined annual run-rate operating efficiencies and revenue synergies of approximately $30 million annually. We expect to achieve $80 million of net expense synergies two years following the closing of the Adenza acquisition.
Non-operating Income and Expenses
The following tables present our non-operating income and expenses:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Interest income | $ | 6 | $ | 8 | (25.0)% | |||||||||||||||||||||
| Interest expense | (102) | (36) | 183.3 | % | ||||||||||||||||||||||
| Net interest expense | (96) | (28) | 242.9 | % | ||||||||||||||||||||||
| Other income (loss) | 12 | (6) | (300.0) | % | ||||||||||||||||||||||
| Net income (loss) from unconsolidated investees | 2 | (11) | (118.2) | % | ||||||||||||||||||||||
| Total non-operating expense | $ | (82) | $ | (45) | 82.2 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Interest income | $ | 12 | $ | 15 | (20.0) | % | ||||||||||||||||||||
| Interest expense | (211) | (73) | 189.0 | % | ||||||||||||||||||||||
| Net interest expense | (199) | (58) | 243.1 | % | ||||||||||||||||||||||
| Other income (loss) | 13 | (7) | (285.7) | % | ||||||||||||||||||||||
| Net income (loss) from unconsolidated investees | 6 | 3 | 100.0 | % | ||||||||||||||||||||||
| Total non-operating income (expenses) | $ | (180) | $ | (62) | 190.3 | % |
The following tables present our interest expense:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Interest expense on debt | $ | 99 | $ | 34 | 191.2 | % | ||||||||||||||||||||
| Accretion of debt issuance costs and debt discount | 2 | 1 | 100.0 | % | ||||||||||||||||||||||
| Other fees | 1 | 1 | — | % | ||||||||||||||||||||||
| Interest expense | $ | 102 | $ | 36 | 183.3 | % | ||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Interest expense on debt | $ | 202 | $ | 69 | 192.8 | % | ||||||||||||||||||||
| Accretion of debt issuance costs and debt discount | 7 | 3 | 133.3 | % | ||||||||||||||||||||||
| Other fees | 2 | 1 | 100.0 | % | ||||||||||||||||||||||
| Interest expense | $ | 211 | $ | 73 | 189.0 | % |
Interest income decreased in the second quarter and first six months of 2024 compared with the same periods in 2023 due to lower average cash balance.
Interest expense increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to debt issued in June 2023 to finance the Adenza acquisition. See “Financing of the Adenza Acquisition,” of Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion.
Other income (loss) primarily represents realized and unrealized gains and losses from strategic investments related to our corporate venture program.
Net income (loss) from unconsolidated investees increased in the second quarter and first six months of 2024 compared with the same periods in 2023 primarily due to lower income recognized from our equity method investment in OCC. See “Equity Method Investments,” of Note 6, “Investments,” to the condensed consolidated financial statements for further discussion.
Tax Matters
The following tables present our income tax provision and effective tax rate:
| Three Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Income tax provision | $ | 119 | $ | 70 | 70.0 | % | ||||||||||||||||||||
| Effective tax rate | 34.9 | % | 20.8 | % | ||||||||||||||||||||||
| Six Months Ended June 30, | Percentage Change | |||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Income tax provision | $ | 198 | $ | 165 | 20.0 | % | ||||||||||||||||||||
| Effective tax rate | 30.3 | % | 22.5 | % |
For further discussion of our tax matters, see Note 16, “Income Taxes,” to the condensed consolidated financial statements.
NON-GAAP FINANCIAL MEASURES
In addition to disclosing results determined in accordance with U.S. GAAP, we also provide non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share in this Quarterly Report on Form 10-Q. Management uses this non-GAAP information internally, along with U.S. GAAP information, in evaluating our performance and in making financial and operational decisions. We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of our ongoing operating performance.
These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. This non-GAAP information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the notes thereto. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliation, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.
We understand that analysts and investors regularly rely on non-GAAP financial measures, such as non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share, to assess operating performance. We use non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share because they highlight
trends more clearly in our business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance. We believe that excluding the following items from the non-GAAP net income attributable to Nasdaq provides a more meaningful analysis of Nasdaq’s ongoing operating performance and comparisons in Nasdaq’s performance between periods:
*•*Amortization expense of acquired intangible assets: We amortize intangible assets acquired in connection with various acquisitions. Intangible asset amortization expense can vary from period to period due to episodic acquisitions completed, rather than from our ongoing business operations. As such, if intangible asset amortization is included in performance measures, it is more difficult to assess the day-to-day operating performance of the businesses and the relative operating performance of the businesses between periods.
*•*Merger and strategic initiatives expense: We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years that have resulted in expenses which would not have otherwise been incurred. The frequency and the amount of such expenses vary significantly based on the size, timing and complexity of the transaction. These expenses primarily include integration costs, as well as legal, due diligence and other third-party transaction costs. For the three and six months ended June 30, 2024, and for the three months ended June 30, 2023, these costs primarily relate to the Adenza acquisition. For the three and six months ended June 30, 2024, these costs were partially offset by the recognition of a termination fee due to Nasdaq in the second quarter of 2024, related to the termination of the proposed divestiture of our Nordic power trading and clearing business.
-
Restructuring charges: In the fourth quarter of 2023, following the closing of the Adenza acquisition, our management approved, committed to and initiated a restructuring program, “Adenza Restructuring” to optimize our efficiencies as a combined organization. In October 2022, following our September 2022 announcement to realign our segments and leadership, we initiated a divisional alignment program with a focus on realizing the full potential of this structure. See Note 19, “Restructuring Charges,” to the condensed consolidated financial statements for further discussion of our Adenza restructuring program and our divisional alignment program.
-
Net income (loss) from unconsolidated investees: We exclude our share of the earnings and losses of our equity method investments. This provides a more meaningful analysis of Nasdaq’s ongoing operating performance or comparisons in Nasdaq’s performance between periods. See “Equity Method Investments,” of Note 6, “Investments,” to the condensed consolidated financial statements for further discussion.
-
Other items: We have excluded certain other charges or gains, including certain tax items, that are the result of other non-comparable events to measure operating performance. We believe the exclusion of such amounts allows management and investors to better understand the ongoing financial results of Nasdaq. Other significant items include:
**◦**Lease asset impairments: For the three and six months ended June 30, 2023, other items include impairment charges related to our operating lease assets and leasehold improvements associated with vacating certain leased office space, which are recorded in occupancy and depreciation and amortization expense in our Condensed Consolidated Statements of Income.
**◦**Legal and regulatory matters: For the three and six months ended June 30, 2024, other items primarily include settlement of a SFSA fine, see “SFSA Inquiry” of Note 17, “Commitments, Contingencies and Guarantees,” to the condensed consolidated financial statements for further discussion, and accruals related to certain legal matters. For the six months ended June 30, 2023, other items include insurance recoveries related to certain legal matters. The fine is recorded in regulatory expense and the accruals related to legal matters and insurance recoveries are recorded in professional and contract services and general, administrative and other expense in the Condensed Consolidated Statements of Income.
◦Pension settlement charge: For the six months ended June 30, 2024, we recorded a pre-tax charge as a result of settling our U.S. pension plan. The plan was terminated and partially settled in 2023, with final settlement occurring during the first quarter of 2024. The loss is recorded in compensation and benefits in the Condensed Consolidated Statements of Income. See Note 9, “Retirement Plans,” to the condensed consolidated financial statements for further discussion.
**◦**Other (income) loss: For the three and six months ended June 30, 2024, other items include net gains from strategic investments entered into through our corporate venture program, which are included in other income (loss) in our Consolidated Statements of Income
*•*Significant tax items: The non-GAAP adjustment to the income tax provision for all periods primarily includes the tax impact of each non-GAAP adjustment. In addition, for the three and six months ended June 30, 2024, tax items also include a one-time net tax expense of $33 million related to the completion of an intra-group transfer of certain IP assets to our U.S. headquarters.
The following tables present reconciliations between U.S. GAAP net income attributable to Nasdaq and diluted earnings per share and non-GAAP net income attributable to Nasdaq and diluted earnings per share:
| Three Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions, except per share amounts) | ||||||||||||||
| U.S. GAAP net income attributable to Nasdaq | $ | 222 | $ | 267 | ||||||||||
| Non-GAAP adjustments: | ||||||||||||||
| Amortization expense of acquired intangible assets | 122 | 37 | ||||||||||||
| Merger and strategic initiatives expense | 4 | 45 | ||||||||||||
| Restructuring charges | 56 | 14 | ||||||||||||
| Lease asset impairments | — | 5 | ||||||||||||
| Net (income) loss from unconsolidated investees | (2) | 11 | ||||||||||||
| Legal and regulatory matters | 13 | — | ||||||||||||
| Other (income) loss | (10) | 8 | ||||||||||||
| Total non-GAAP adjustments | $ | 183 | $ | 120 | ||||||||||
| Total non-GAAP tax adjustments | (41) | (37) | ||||||||||||
| Tax on intra-group transfer of IP assets | 33 | — | ||||||||||||
| Total non-GAAP adjustments, net of tax | $ | 175 | $ | 83 | ||||||||||
| Non-GAAP net income attributable to Nasdaq | $ | 397 | $ | 350 | ||||||||||
| U.S. GAAP effective tax rate | 34.9 | % | 20.8 | % | ||||||||||
| Total adjustments from non-GAAP tax rate | (10.7) | % | 2.6 | % | ||||||||||
| Non-GAAP effective tax rate | 24.2 | % | 23.4 | % | ||||||||||
| Weighted-average common shares outstanding for diluted earnings per share | 578.9 | 493.6 | ||||||||||||
| U.S. GAAP diluted earnings per share | $ | 0.38 | $ | 0.54 | ||||||||||
| Total adjustments from non-GAAP net income | 0.31 | 0.17 | ||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.69 | $ | 0.71 |
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions, except per share amounts) | |||||||||||
| U.S. GAAP net income attributable to Nasdaq | $ | 456 | $ | 568 | |||||||
| Non-GAAP adjustments: | |||||||||||
| Amortization expense of acquired intangible assets | 244 | 75 | |||||||||
| Merger and strategic initiatives expense | 13 | 47 | |||||||||
| Restructuring charges | 82 | 33 | |||||||||
| Lease asset impairments | — | 23 | |||||||||
| Net (income) loss from unconsolidated investees | (6) | (3) | |||||||||
| Legal and regulatory matters | 16 | (11) | |||||||||
| Pension settlement charge | 23 | — | |||||||||
| Other (income) loss | (9) | 9 | |||||||||
| Total non-GAAP adjustments | $ | 363 | $ | 173 | |||||||
| Total non-GAAP tax adjustments | (88) | (52) | |||||||||
| Tax on intra-group transfer of IP assets | 33 | — | |||||||||
| Total non-GAAP adjustments, net of tax | $ | 308 | $ | 121 | |||||||
| Non-GAAP net income attributable to Nasdaq | $ | 764 | $ | 689 | |||||||
| U.S. GAAP effective tax rate | 30.3 | % | 22.5 | % | |||||||
| Total adjustments from non-GAAP tax rate | (5.4) | % | 1.5 | % | |||||||
| Non-GAAP effective tax rate | 24.9 | % | 24.0 | % | |||||||
| Weighted-average common shares outstanding for diluted earnings per share | 578.9 | 494.2 | |||||||||
| U.S. GAAP diluted earnings per share | $ | 0.79 | $ | 1.15 | |||||||
| Total adjustments from non-GAAP net income | 0.53 | 0.24 | |||||||||
| Non-GAAP diluted earnings per share | $ | 1.32 | $ | 1.39 |
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operating activities and met our commitments through cash generated by operations, augmented by the periodic issuance of debt. Currently, our cost and availability of funding remain healthy. We continue to prudently assess our capital deployment strategy through balancing acquisitions, internal investments, debt repayments, and shareholder return activity, including share repurchases and dividends.
We expect that our current cash and cash equivalents combined with cash flows provided by operating activities, supplemented with our borrowing capacity and access to additional financing, including our revolving credit facility and our commercial paper program, provides us additional flexibility to meet our ongoing obligations and the capital deployment strategic actions described above, while allowing us to invest in activities and product development that support the long-term growth of our operations.
Principal factors that could affect the availability of our internally-generated funds include:
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deterioration of our revenues in any of our business segments;
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changes in regulatory and working capital requirements; and
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an increase in our expenses.
Principal factors that could affect our ability to obtain cash from external sources include:
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operating covenants contained in our credit facilities that limit our total borrowing capacity;
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credit rating downgrades, which could limit our access to additional debt;
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a significant decrease in the market price of our common stock; and
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volatility or disruption in the public debt and equity markets.
The following table summarizes selected measures of our liquidity and capital resources:
| June 30, 2024 | December 31, 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Cash and cash equivalents | $ | 416 | $ | 453 | ||||||||||
| Financial investments | 174 | 188 | ||||||||||||
| Working capital | (482) | 71 |
The decrease in working capital is primarily driven by the reclassification of the 2025 Notes to short-term debt in the second quarter of 2024, see “Debt Obligations” below, increased deferred revenue due to the acquisition of Adenza, and increased Section 31 fees payable to the SEC.
Cash and Cash Equivalents
Cash and cash equivalents includes all non-restricted cash in banks and highly liquid investments with original maturities of 90 days or less at the time of purchase. The balance retained in cash and cash equivalents is a function of anticipated or possible short-term cash needs, prevailing interest rates, our investment policy, and alternative investment choices. As of June 30, 2024, our cash and cash equivalents of $416 million were primarily invested in commercial paper, money market funds and bank deposits.
Repatriation of Cash
Our cash and cash equivalents held outside of the U.S. in various foreign subsidiaries totaled $176 million as of June 30, 2024 and $236 million as of December 31, 2023. The remaining balance held in the U.S. totaled $240 million as of June 30, 2024 and $217 million as of December 31, 2023.
Cash Flow Analysis
The following table summarizes the changes in cash flows:
| Six Months Ended June 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Net cash provided by (used in): | (in millions) | ||||||||||||||||
| Operating activities | $ | 990 | $ | 979 | |||||||||||||
| Investing activities | (18) | (292) | |||||||||||||||
| Financing activities | (2,333) | 4,416 | |||||||||||||||
Net Cash Provided by Operating Activities
Net cash provided by operating activities primarily consists of net income adjusted for certain non-cash items, including depreciation and amortization expense, expense associated with share-based compensation, deferred income taxes and the effects of changes in working capital. Changes in working capital include changes in accounts receivable and deferred revenue which are impacted by the timing of customer billings and related collections from our customers; accounts payable and accrued expenses due to timing of payments; accrued personnel costs, which are impacted by employee performance targets and the timing of payments related to employee bonus incentives; and Section 31 fees payable to the SEC, which is impacted by the changes in SEC fee rates and the timing of collections from customers and payments to the SEC.
Net cash provided by operating activities increased $11 million for the six months ended June 30, 2024 compared with the same period in 2023. The increase was primarily driven by changes in our operating assets and liabilities and timing of various payments and receipts of $40 million, partially offset by a decrease of $29 million driven by the decrease in net income adjusted for certain noncash operating activities.
The changes in our operating assets and liabilities primarily included higher cash inflows from Section 31 fees payable to SEC due to higher Section 31 fee rate as of May 2024, as well as various other increased cash inflows impacting our working capital. This was partially offset by higher cash outflows from receivables, net primarily due to higher Trading Services receivables driven by higher Section 31 fee rate as well as the growth in our index licensing revenues and higher accounts payable and accrued expenses, primarily due to an increase in our accrued interest and interest paid relating to the senior unsecured notes issued in June 2023 in connection with the Adenza acquisition. Non-cash charges in the first six months of 2024 primarily included $308 million of depreciation and amortization and $69 million of share-based compensation.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2024 primarily related to purchases of property and equipment of $91 million and $18 million from other investing activities primarily related to our corporate venture program, partially offset by net proceeds from sales and redemptions of investments related to default funds and margin deposits of $86 million and proceeds from the sales and redemptions of trading securities, net, of $5 million.
Net cash used in investing activities for the six months ended June 30, 2023 primarily related to net purchases of trading securities of $115 million, net purchases of investments related to default funds and margin deposits of $103 million, and purchases of property and equipment of $79 million, partially offset by proceeds of $5 million from other investing activities.
Net Cash Provided by (Used in) Financing Activities
Net cash used in financing activities for the six months ended June 30, 2024 primarily related to a decrease related to our default funds and margin deposits of $1,396 million, $340 million relating to repayment of the 2023 Term Loan, $265 million of dividend payments to our shareholders, $241 million from repayments of our commercial paper, net, $58 million in repurchases of common stock and $54 million of payments related to employee shares withheld for taxes.
Net cash provided by financing activities for the six months ended June 30, 2023 primarily related to $5,016 million proceeds from issuances of senior unsecured notes, in connection with the Adenza transaction, net of debt issuance costs and an increase in default funds and margin deposits of $364 million, partially offset by $524 million from repayments of our commercial paper, net, $206 million of dividend payments to our shareholders, $159 million in repurchases of common stock and $68 million of payments related to employee shares withheld for taxes.
See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion of our debt obligations.
See “Share Repurchase Program,” and “Cash Dividends on Common Stock,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of our share repurchase program and cash dividends declared and paid on our common stock.
Financial Investments
Our financial investments totaled $174 million as of June 30, 2024 and $188 million as of December 31, 2023. Of these securities, $167 million as of June 30, 2024 and $168 million as of December 31, 2023 are assets primarily utilized to meet regulatory capital requirements, mainly for our clearing operations at Nasdaq Clearing. See Note 6, “Investments,” to the condensed consolidated financial statements for further discussion.
Regulatory Capital Requirements
Clearing Operations Regulatory Capital Requirements
We are required to maintain minimum levels of regulatory capital for the clearing operations of Nasdaq Clearing. The level of regulatory capital required to be maintained is dependent upon many factors, including market conditions and creditworthiness of the counterparty. As of June 30, 2024, our required regulatory capital of $122 million was primarily comprised of highly rated European government debt securities that are included in financial investments in the Condensed Consolidated Balance Sheets.
Broker-Dealer Net Capital Requirements
Our broker-dealer subsidiaries, Nasdaq Execution Services, NFSTX, LLC, and Nasdaq Capital Markets Advisory, are subject to regulatory requirements intended to ensure their general financial soundness and liquidity. These requirements obligate these subsidiaries to comply with minimum net capital requirements. As of June 30, 2024, the combined required minimum net capital totaled $1 million and the combined excess capital totaled $23 million, substantially all of which is held in cash and cash equivalents in the Condensed Consolidated Balance Sheets. The required minimum net capital is included in restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets.
Nordic and Baltic Exchange Regulatory Capital Requirements
The entities that operate trading venues in the Nordic and Baltic countries are each subject to local regulations and are required to maintain regulatory capital intended to ensure their general financial soundness and liquidity. As of June 30, 2024, our required regulatory capital of $36 million was primarily invested in European government bills and mortgage bonds and Icelandic government bonds that are included in financial investments in the Condensed Consolidated Balance Sheets and cash, which is included in restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets.
Other Capital Requirements
We operate several other businesses which are subject to local regulation and are required to maintain certain levels of regulatory capital. As of June 30, 2024, other required regulatory capital of $23 million, primarily related to Nasdaq Central Securities Depository, was primarily invested in European government debt securities that are included in financial investments in the Condensed Consolidated Balance Sheets.
Equity and dividends
Share Repurchase Program
See “Share Repurchase Program,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of our share repurchase program.
Cash Dividends on Common Stock
The following table presents our quarterly cash dividends paid per common share on our outstanding common stock:
| 2024 | 2023 | ||||||||||
| First quarter | $ | 0.22 | $ | 0.20 | |||||||
| Second quarter | 0.24 | 0.22 | |||||||||
| Total | $ | 0.46 | $ | 0.42 |
See “Cash Dividends on Common Stock,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of the dividends.
Debt Obligations
The following table summarizes our debt obligations by contractual maturity:
| Maturity Date | June 30, 2024 | December 31, 2023 | ||||||||||||||||||
| Short-term debt: | (in millions) | |||||||||||||||||||
| Commercial paper | $ | 50 | $ | 291 | ||||||||||||||||
| 2025 Notes | June 2025 | 498 | $ | 497 | ||||||||||||||||
| Total short-term debt | $ | 548 | $ | 788 | ||||||||||||||||
| Long-term debt - senior unsecured notes: | ||||||||||||||||||||
| 2026 Notes | June 2026 | 499 | 499 | |||||||||||||||||
| 2028 Notes | June 2028 | 993 | 991 | |||||||||||||||||
| 2029 Notes | March 2029 | 639 | 658 | |||||||||||||||||
| 2030 Notes | February 2030 | 639 | 658 | |||||||||||||||||
| 2031 Notes | January 2031 | 645 | 645 | |||||||||||||||||
| 2032 Notes | February 2032 | 795 | 819 | |||||||||||||||||
| 2033 Notes | July 2033 | 655 | 674 | |||||||||||||||||
| 2034 Notes | February 2034 | 1,240 | 1,239 | |||||||||||||||||
| 2040 Notes | December 2040 | 644 | 644 | |||||||||||||||||
| 2050 Notes | April 2050 | 487 | 487 | |||||||||||||||||
| 2052 Notes | March 2052 | 541 | 541 | |||||||||||||||||
| 2053 Notes | August 2053 | 738 | 738 | |||||||||||||||||
| 2063 Notes | June 2063 | 738 | 738 | |||||||||||||||||
| 2023 Term Loan | November 2026 | — | 339 | |||||||||||||||||
| 2022 Revolving Credit Facility | December 2027 | (4) | (4) | |||||||||||||||||
| Total long-term debt | $ | 9,249 | $ | 9,666 | ||||||||||||||||
| Total debt obligations | $ | 9,797 | $ | 10,454 |
In the table above, the 2025 Notes were reclassified to short-term debt as of June 30, 2024, including the balance as of December 31, 2023, for presentation purposes.
For the six months ended June 30, 2024, the weighted average interest rate on our debt obligations was approximately 3.98%. This rate can fluctuate based on changes in interest rates for our variable rate debts, changes in foreign currency exchange rates and changes in the amount and duration of outstanding debt. In addition to the 2022 Revolving Credit Facility, we also have other credit facilities primarily to support our Nasdaq Clearing operations in Europe, as well as to provide a cash pool credit line. These European credit facilities, which are available in multiple currencies, totaled $181 million as of June 30, 2024 and $191 million as of December 31, 2023 in available liquidity, none of which was utilized.
Financing of the Adenza Acquisition
In June 2023, Nasdaq issued six series of notes for total proceeds of $5,016 million, net of debt issuance costs of $38 million, with various maturity dates ranging from 2025 to 2063. The net proceeds from these notes were used to finance the majority of the cash consideration due in connection with the Adenza acquisition.
In addition, in connection with the financing of the Adenza acquisition, we entered into the 2023 Term Loan agreement. The 2023 Term Loan provided us with the ability to borrow up to $600 million to finance a portion of the cash consideration for the Adenza acquisition and other amounts incurred in connection with this transaction. On November 1, 2023, we borrowed $599 million, net of fees, under this term loan towards payment of the cash consideration due in connection with the Adenza acquisition. As of June 30, 2024 the term loan is fully repaid.
As of June 30, 2024, we were in compliance with the covenants of all of our debt obligations.
See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion of our debt obligations.
Contractual Obligations and Contingent Commitments
Nasdaq had no significant changes to our contractual obligations and contingent commitments from those disclosed in “Part I. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report Form 10-K that was filed with the SEC
February 21, 2024.
Off-Balance Sheet Arrangements
For discussion of off-balance sheet arrangements see:
-
Note 14, “Clearing Operations,” to the condensed consolidated financial statements for further discussion of our non-cash default fund contributions and margin deposits received for clearing operations; and
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Note 17, “Commitments, Contingencies and Guarantees,” to the condensed consolidated financial statements for further discussion of:
◦Guarantees issued and credit facilities available;
◦Other guarantees; and
◦Routing brokerage activities.
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