filings.toolsItem 1. Financial Statements
176K characters. Original on sec.gov · Markdown
Item 1. Financial Statements
Nasdaq, Inc.
Condensed Consolidated Balance Sheets
(in millions, except share and par value amounts)
| September 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 266 | $ | 453 | |||||||
| Restricted cash and cash equivalents | 42 | 20 | |||||||||
| Default funds and margin deposits (including restricted cash and cash equivalents of $5,487 and $6,645, respectively) | 5,865 | 7,275 | |||||||||
| Financial investments | 202 | 188 | |||||||||
| Receivables, net | 944 | 929 | |||||||||
| Other current assets | 239 | 231 | |||||||||
| Total current assets | 7,558 | 9,096 | |||||||||
| Property and equipment, net | 584 | 576 | |||||||||
| Goodwill | 14,165 | 14,112 | |||||||||
| Intangible assets, net | 7,072 | 7,443 | |||||||||
| Operating lease assets | 388 | 402 | |||||||||
| Other non-current assets | 793 | 665 | |||||||||
| Total assets | $ | 30,560 | $ | 32,294 | |||||||
| Liabilities | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 289 | $ | 332 | |||||||
| Section 31 fees payable to SEC | 74 | 84 | |||||||||
| Accrued personnel costs | 314 | 303 | |||||||||
| Deferred revenue | 663 | 594 | |||||||||
| Other current liabilities | 229 | 146 | |||||||||
| Default funds and margin deposits | 5,865 | 7,275 | |||||||||
| Short-term debt | 499 | 291 | |||||||||
| Total current liabilities | 7,933 | 9,025 | |||||||||
| Long-term debt | 9,359 | 10,163 | |||||||||
| Deferred tax liabilities, net | 1,566 | 1,642 | |||||||||
| Operating lease liabilities | 399 | 417 | |||||||||
| Other non-current liabilities | 222 | 220 | |||||||||
| Total liabilities | 19,479 | 21,467 | |||||||||
| Commitments and contingencies | |||||||||||
| Equity | |||||||||||
| Nasdaq stockholders’ equity: | |||||||||||
| Common stock, $0.01 par value, 900,000,000 shares authorized, shares issued: 598,541,046 at September 30, 2024 and 598,014,520 at December 31, 2023; shares outstanding: 574,742,353 at September 30, 2024 and 575,159,336 at December 31, 2023 | 6 | 6 | |||||||||
| Additional paid-in capital | 5,477 | 5,496 | |||||||||
| Common stock in treasury, at cost: 23,798,693 shares at September 30, 2024 and 22,855,184 shares at December 31, 2023 | (643) | (587) | |||||||||
| Accumulated other comprehensive loss | (1,952) | (1,924) | |||||||||
| Retained earnings | 8,184 | 7,825 | |||||||||
| Total Nasdaq stockholders’ equity | 11,072 | 10,816 | |||||||||
| Noncontrolling interests | 9 | 11 | |||||||||
| Total equity | 11,081 | 10,827 | |||||||||
| Total liabilities and equity | $ | 30,560 | $ | 32,294 |
See accompanying notes to condensed consolidated financial statements.
Nasdaq, Inc.
Condensed Consolidated Statements of Income
(unaudited)
(in millions, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Capital Access Platforms | $ | 501 | $ | 456 | $ | 1,460 | $ | 1,309 | |||||||||||||||||||||
| Financial Technology | 371 | 238 | 1,183 | 700 | |||||||||||||||||||||||||
| Market Services | 1,022 | 747 | 2,700 | 2,378 | |||||||||||||||||||||||||
| Other revenues | 8 | 10 | 27 | 30 | |||||||||||||||||||||||||
| Total revenues | 1,902 | 1,451 | 5,370 | 4,417 | |||||||||||||||||||||||||
| Transaction-based expenses: | |||||||||||||||||||||||||||||
| Transaction rebates | (513) | (447) | (1,478) | (1,377) | |||||||||||||||||||||||||
| Brokerage, clearance and exchange fees | (243) | (64) | (470) | (262) | |||||||||||||||||||||||||
| Revenues less transaction-based expenses | 1,146 | 940 | 3,422 | 2,778 | |||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Compensation and benefits | 332 | 260 | 1,000 | 777 | |||||||||||||||||||||||||
| Professional and contract services | 36 | 31 | 108 | 92 | |||||||||||||||||||||||||
| Technology and communication infrastructure | 71 | 58 | 207 | 168 | |||||||||||||||||||||||||
| Occupancy | 28 | 28 | 85 | 99 | |||||||||||||||||||||||||
| General, administrative and other | 26 | 26 | 84 | 62 | |||||||||||||||||||||||||
| Marketing and advertising | 11 | 12 | 34 | 30 | |||||||||||||||||||||||||
| Depreciation and amortization | 153 | 64 | 460 | 198 | |||||||||||||||||||||||||
| Regulatory | 9 | 9 | 37 | 27 | |||||||||||||||||||||||||
| Merger and strategic initiatives | 10 | 4 | 23 | 51 | |||||||||||||||||||||||||
| Restructuring charges | 22 | 17 | 103 | 49 | |||||||||||||||||||||||||
| Total operating expenses | 698 | 509 | 2,141 | 1,553 | |||||||||||||||||||||||||
| Operating income | 448 | 431 | 1,281 | 1,225 | |||||||||||||||||||||||||
| Interest income | 8 | 72 | 20 | 86 | |||||||||||||||||||||||||
| Interest expense | (102) | (101) | (313) | (174) | |||||||||||||||||||||||||
| Other income (loss) | 1 | 1 | 15 | (6) | |||||||||||||||||||||||||
| Net income (loss) from unconsolidated investees | 1 | (12) | 7 | (8) | |||||||||||||||||||||||||
| Income before income taxes | 356 | 391 | 1,010 | 1,123 | |||||||||||||||||||||||||
| Income tax provision | 51 | 97 | 250 | 262 | |||||||||||||||||||||||||
| Net income | 305 | 294 | 760 | 861 | |||||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | 1 | — | 2 | 1 | |||||||||||||||||||||||||
| Net income attributable to Nasdaq | $ | 306 | $ | 294 | $ | 762 | $ | 862 | |||||||||||||||||||||
| Per share information: | |||||||||||||||||||||||||||||
| Basic earnings per share | $ | 0.53 | $ | 0.60 | $ | 1.32 | $ | 1.76 | |||||||||||||||||||||
| Diluted earnings per share | $ | 0.53 | $ | 0.60 | $ | 1.32 | $ | 1.74 | |||||||||||||||||||||
| Cash dividends declared per common share | $ | 0.24 | $ | 0.22 | $ | 0.70 | $ | 0.64 |
See accompanying notes to condensed consolidated financial statements.
Nasdaq, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
(in millions)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
| Net income | $ | 305 | $ | 294 | $ | 760 | $ | 861 | |||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||||||||
| Foreign currency translation gains (losses) | 31 | 41 | (48) | (96) | |||||||||||||||||||||||||
| Income tax benefit (expense)(1) | 28 | (24) | 7 | (15) | |||||||||||||||||||||||||
| Foreign currency translation, net | 59 | 17 | (41) | (111) | |||||||||||||||||||||||||
| Employee benefit plan adjustment | — | — | 19 | — | |||||||||||||||||||||||||
| Income tax expense | — | — | (4) | — | |||||||||||||||||||||||||
| Employee benefit plan, net | — | — | 15 | — | |||||||||||||||||||||||||
| Other | — | — | (2) | — | |||||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | 59 | 17 | (28) | (111) | |||||||||||||||||||||||||
| Comprehensive income | 364 | 311 | 732 | 750 | |||||||||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interests | 1 | — | 2 | 1 | |||||||||||||||||||||||||
| Comprehensive income attributable to Nasdaq | $ | 365 | $ | 311 | $ | 734 | $ | 751 |
____________
(1) Primarily relates to the tax effect of unrealized gains and losses on Euro denominated notes.
See accompanying notes to condensed consolidated financial statements.
Nasdaq, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
(in millions)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | Shares | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | 576 | 6 | 491 | 5 | 575 | 6 | 492 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | 5,528 | 1,363 | 5,496 | 1,445 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program | (1) | (88) | — | — | (2) | (145) | (3) | (159) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 37 | — | 31 | 3 | 105 | 3 | 90 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other issuances of common stock, net | — | — | — | — | — | 21 | — | 18 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | 5,477 | 1,394 | 5,477 | 1,394 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock in treasury, at cost | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | (641) | (583) | (587) | (515) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other employee stock activity | — | (2) | — | (2) | (1) | (56) | (1) | (70) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | (643) | (585) | (643) | (585) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | (2,011) | (2,119) | (1,924) | (1,991) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | 59 | 17 | (28) | (111) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | (1,952) | (2,102) | (1,952) | (2,102) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained earnings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | 8,016 | 7,569 | 7,825 | 7,207 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to Nasdaq | 306 | 294 | 762 | 862 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared and paid | (138) | (108) | (403) | (314) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | 8,184 | 7,755 | 8,184 | 7,755 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Nasdaq stockholders’ equity | 11,072 | 6,467 | 11,072 | 6,467 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | 10 | 12 | 11 | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity related to noncontrolling interests | (1) | — | (2) | (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | 9 | 12 | 9 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Equity | 575 | $ | 11,081 | 491 | $ | 6,479 | 575 | $ | 11,081 | 491 | $ | 6,479 | |||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
Nasdaq, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in millions)
| Nine Months Ended September 30, | |||||||||||||||||
| Cash flows from operating activities: | 2024 | 2023 | |||||||||||||||
| Net income | $ | 760 | $ | 861 | |||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 460 | 198 | |||||||||||||||
| Share-based compensation | 105 | 90 | |||||||||||||||
| Deferred income taxes | (62) | 44 | |||||||||||||||
| Extinguishment of debt and bridge fees | — | 25 | |||||||||||||||
| Non-cash restructuring charges | 33 | 12 | |||||||||||||||
| Net (income) loss from unconsolidated investees | (7) | 8 | |||||||||||||||
| Operating lease asset impairments | — | 13 | |||||||||||||||
| Adenza purchase accounting adjustment | 32 | — | |||||||||||||||
| Other reconciling items included in net income | 39 | 22 | |||||||||||||||
| Net change in operating assets and liabilities: | |||||||||||||||||
| Receivables, net | (99) | 75 | |||||||||||||||
| Other assets | (43) | 25 | |||||||||||||||
| Accounts payable and accrued expenses | (43) | 110 | |||||||||||||||
| Section 31 fees payable to SEC | (10) | (224) | |||||||||||||||
| Accrued personnel costs | 11 | (28) | |||||||||||||||
| Deferred revenue | 8 | 90 | |||||||||||||||
| Other liabilities | 50 | (42) | |||||||||||||||
| Net cash provided by operating activities | 1,234 | 1,279 | |||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Purchases of securities | (152) | (530) | |||||||||||||||
| Proceeds from sales and redemptions of securities | 141 | 427 | |||||||||||||||
| Purchases of property and equipment | (147) | (116) | |||||||||||||||
| Investments related to default funds and margin deposits, net(1) | 237 | 64 | |||||||||||||||
| Other investing activities | (24) | (3) | |||||||||||||||
| Net cash provided by (used in) investing activities | 55 | (158) | |||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Repayments of commercial paper, net | (291) | (662) | |||||||||||||||
| Repayments of term loan | (340) | — | |||||||||||||||
| Payment of debt extinguishment cost and bridge fees | — | (25) | |||||||||||||||
| Proceeds from issuances of debt, net of issuance costs | — | 5,011 | |||||||||||||||
| Repurchases of common stock | (145) | (159) | |||||||||||||||
| Dividends paid | (403) | (314) | |||||||||||||||
| Proceeds received from employee stock activity and other issuances | 21 | 18 | |||||||||||||||
| Payments related to employee shares withheld for taxes | (56) | (70) | |||||||||||||||
| Default funds and margin deposits | (1,320) | (779) | |||||||||||||||
| Other financing activities | (3) | (1) | |||||||||||||||
| Net cash provided by (used in) financing activities | (2,537) | 3,019 | |||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents | (75) | (300) | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents | (1,323) | 3,840 | |||||||||||||||
| Cash and cash equivalents, restricted cash and cash equivalents at beginning of period | 7,118 | 6,994 | |||||||||||||||
| Cash and cash equivalents, restricted cash and cash equivalents at end of period | $ | 5,795 | $ | 10,834 | |||||||||||||
| Reconciliation of Cash, Cash Equivalents and Restricted Cash and Cash Equivalents | |||||||||||||||||
| Cash and cash equivalents | $ | 266 | $ | 5,340 | |||||||||||||
| Restricted cash and cash equivalents | 42 | 25 | |||||||||||||||
| Restricted cash and cash equivalents (default funds and margin deposits) | 5,487 | 5,469 | |||||||||||||||
| Total | $ | 5,795 | $ | 10,834 | |||||||||||||
| Supplemental Disclosure Cash Flow Information | |||||||||||||||||
| Interest paid | $ | 315 | $ | 89 | |||||||||||||
| Income taxes paid, net of refund | $ | 236 | $ | 198 |
__________________________
(1) Includes purchases and proceeds from sales and redemptions related to the default funds and margin deposits of our clearing operations. For further information, see "Default Fund Contributions and Margin Deposits," within Note 14, "Clearing Operations."
See accompanying notes to condensed consolidated financial statements.
Nasdaq, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION AND NATURE OF OPERATIONS
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.
In the fourth quarter of 2023, following the completion of the Adenza acquisition, including its two flagship solutions, AxiomSL and Calypso, we aligned our business more closely with the foundational shifts that are driving the evolution of the global financial system. We now manage, operate and provide our products and services in three business segments: Capital Access Platforms, Financial Technology and Market Services. The divisional structure, which was implemented during the fourth quarter of 2023, is as follows:
Capital Access Platforms
Our Capital Access Platforms segment comprises Data & Listing Services, Index and Workflow & Insights.
Our Data business distributes historical and real-time market data to sell-side customers, the institutional investing community, retail online brokers, proprietary trading firms and other venues, as well as internet portals and data distributors. Our data products can enhance the transparency of market activity within our exchanges and provide critical information to professional and non-professional investors globally.
Our Listing Services business operates listing platforms in the U.S. and Europe to provide multiple global capital raising solutions for public companies. Our main listing markets are The Nasdaq Stock Market and the Nasdaq Nordic and Nasdaq Baltic exchanges. Through Nasdaq First North, our Nordic and Baltic operations also offer alternative marketplaces for smaller companies and growth companies.
As of September 30, 2024, a total of 5,225 companies listed securities on our U.S., Nasdaq Nordic, Nasdaq Baltic and Nasdaq First North exchanges. As of September 30, 2024, there were 4,039 total listings on The Nasdaq Stock Market, including 712 ETPs. The combined market capitalization in the U.S. was approximately $32.7 trillion. In Europe, the Nasdaq Nordic and Nasdaq Baltic exchanges, together with Nasdaq First North, were home to 1,186 listed companies with a combined market capitalization of approximately $2.3 trillion.
Our Index business develops and licenses Nasdaq-branded indices and financial products. We also license cash-settled futures, options and options on futures on our indices. As of September 30, 2024, 388 ETPs listed on 27 exchanges in over 20 countries tracked a Nasdaq index and accounted for $600 billion in AUM.
Workflow & Insights includes our analytics and corporate solutions businesses. Our analytics business provides asset managers, investment consultants and institutional asset owners with information and analytics to make data-driven investment decisions, deploy their resources more productively, and provide liquidity solutions for private funds. Through our eVestment and Solovis solutions, we provide a suite of cloud-based solutions that help institutional investors and consultants conduct pre-investment due diligence, and monitor their portfolios post-investment. The eVestment platform also enables asset managers to efficiently distribute information about their firms and funds to asset owners and consultants worldwide.
Through our Solovis platform, endowments, foundations, pensions and family offices transform how they collect and aggregate investment data, analyze portfolio performance, model and predict future outcomes, and share meaningful portfolio insights with key stakeholders. The Nasdaq Fund Network and Nasdaq Data Link are additional platforms in our suite of investment data analytics offerings and data management tools.
Our corporate solutions business serves both public and private companies and organizations through our Investor Relations Intelligence, ESG Solutions and Governance Solutions products. Our public company clients can be companies listed on our exchanges or other U.S. and global exchanges. Our private company clients include a diverse group of organizations ranging from family-owned companies, government organizations, law firms, privately held entities, and various non-profit organizations to hospitals and healthcare systems. We help organizations enhance their ability to understand and expand their global shareholder base, improve corporate governance, and navigate the evolving ESG landscape through our suite of advanced technology, analytics, reporting and consulting services.
Financial Technology
Our Financial Technology segment comprises Financial Crime Management Technology, Regulatory Technology and Capital Markets Technology solutions.
Financial Crime Management Technology includes our Verafin solution, a cloud-based platform to help financial institutions detect, investigate, and report money laundering and financial fraud.
Regulatory Technology comprises our surveillance and AxiomSL solutions. Our surveillance solutions are designed for banks, brokers and other market participants to assist them in complying with market abuse and integrity rules and regulations. In addition, we provide regulators and exchanges with a platform for surveillance. AxiomSL is a global leader in risk data management and regulatory reporting solutions for the financial industry, including banks, broker dealers and asset managers. Its unique enterprise data management platform delivers data lineage, risk aggregation, analytics, workflow automation, reconciliation, validation and audit functionality, as well as disclosures. AxiomSL’s platform supports compliance across a wide range of global and local regulations.
Capital Markets Technology includes market technology, trade management services and Calypso solutions. Our market technology business is a leading global technology solutions provider and partner to exchanges, clearing organizations, central securities depositories, regulators, banks, brokers, buy-side firms and corporate businesses. Our market technology solutions are utilized by leading markets in North America, Europe and Asia as well as emerging markets in the Middle East, Latin America, and Africa. Our trade management services provide market participants with a wide variety of alternatives for connecting to and accessing our markets for a fee. Our marketplaces may be accessed via a number of different protocols used for quoting, order entry, trade reporting and connectivity to various data feeds. We also provide colocation services to market participants, whereby we offer firms cabinet space and power to house their own equipment and servers within our data centers. Additionally, we offer a number of wireless connectivity offerings between select data centers using millimeter wave
and microwave technology. Calypso is a leading provider of front-to-back technology solutions for the financial markets. The Calypso platform provides customers with a single platform designed from the outset to enable consolidation, innovation and growth.
Market Services
Our Market Services segment includes revenues from equity derivatives trading, cash equity trading, Nordic fixed income trading & clearing, Nordic commodities and U.S. Tape plans data. We operate 19 exchanges across several asset classes, including derivatives, commodities, cash equity, debt, structured products and ETPs. In addition, in certain countries where we operate exchanges, we also provide clearing, settlement and central depository services. In June 2023, we entered into an agreement to sell our Nordic power trading and clearing business, which was subsequently terminated in June 2024. While we continue to operate Nordic power trading and clearing, and are focused on providing service to our clients, we are evaluating options for this business. Revenues from this business continue to be reflected in Other Revenues in the Condensed Consolidated Statements of Income for all periods, and in our Corporate segment for our segment disclosures. Additionally, certain data revenues from this business that were previously included in our Capital Access Platforms segment are also reflected in Other Revenues in the Condensed Consolidated Statements of Income for all periods, and in our Corporate segment for our segment disclosures.
Our transaction-based platforms provide market participants with the ability to access, process, display and integrate orders and quotes. The platforms allow the routing and execution of buy and sell orders as well as the reporting of transactions, providing fee-based revenues.
2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include the accounts of Nasdaq, its wholly-owned subsidiaries and other entities in which Nasdaq has a controlling financial interest. When we do not have a controlling interest in an entity, but exercise significant influence over the entity’s operating and financial policies, such investment is accounted for under the equity method of accounting. We recognize our share of earnings or losses of an equity method investee based on our ownership percentage. See “Equity Method Investments,” of Note 6, “Investments,” for further discussion of our equity method investments.
The accompanying condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results. These adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation.
As permitted under U.S. GAAP, certain footnotes or other financial information can be condensed or omitted in the interim condensed consolidated financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in Nasdaq’s Form 10-K. The year-end balance sheet data was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Accounting Estimates
In preparing our condensed consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenues, operating income and net income, as well as on the value of certain assets and liabilities in our Condensed Consolidated Balance Sheets. At least quarterly, we evaluate our assumptions, judgments and estimates, and make changes as deemed necessary.
Recent Accounting Developments
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within the segment measure of profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. We are currently reviewing the impact that the adoption of ASU 2023-07 may have on our consolidated financial statements and disclosures.
Subsequent Events
We have evaluated subsequent events through the issuance date of this Quarterly Report on Form 10-Q.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following tables summarize the disaggregation of revenue by major product and service and by segment for the three and nine months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Capital Access Platforms | |||||||||||||||||||||||
| Data & Listing Services | $ | 190 | $ | 188 | |||||||||||||||||||
| Index | 182 | 144 | |||||||||||||||||||||
| Workflow & Insights | 129 | 124 | |||||||||||||||||||||
| Financial Technology | |||||||||||||||||||||||
| Financial Crime Management Technology | 69 | 58 | |||||||||||||||||||||
| Regulatory Technology | 68 | 35 | |||||||||||||||||||||
| Capital Markets Technology | 234 | 145 | |||||||||||||||||||||
| Market Services, net | 266 | 236 | |||||||||||||||||||||
| Other revenues | 8 | 10 | |||||||||||||||||||||
| Revenues less transaction-based expenses | $ | 1,146 | $ | 940 | |||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Capital Access Platforms | |||||||||||||||||||||||
| Data & Listing Services | $ | 562 | $ | 559 | |||||||||||||||||||
| Index | 517 | 383 | |||||||||||||||||||||
| Workflow & Insights | 381 | 367 | |||||||||||||||||||||
| Financial Technology | |||||||||||||||||||||||
| Financial Crime Management Technology | 200 | 163 | |||||||||||||||||||||
| Regulatory Technology | 253 | 102 | |||||||||||||||||||||
| Capital Markets Technology | 730 | 435 | |||||||||||||||||||||
| Market Services, net | 752 | 739 | |||||||||||||||||||||
| Other revenues | 27 | 30 | |||||||||||||||||||||
| Revenues less transaction-based expenses | $ | 3,422 | $ | 2,778 |
Substantially all revenues from the Capital Access Platforms and Financial Technology segments were recognized over time for the three and nine months ended September 30, 2024 and 2023. For the three months ended September 30, 2024 and 2023, approximately 94.6%, and 92.5%, respectively, of Market Services revenues were recognized at a point in time and 5.4%, and 7.5%, respectively, were recognized over time. For the nine months ended September 30, 2024 and 2023, approximately 95.4%, and 92.9%, respectively, of Market Services revenues were recognized at a point in time and 4.6%, and 7.1%, respectively, were recognized over time.
During the third quarter of 2024, as part of finalizing the purchase accounting of the Adenza acquisition, we implemented a change to the accounting treatment of the revenues associated with AxiomSL on-premises subscription contracts, which are included in the Regulatory Technology business within the Financial Technology segment. Starting in the third quarter of 2024, we began recognizing AxiomSL’s subscription-based revenues on a ratable basis over the contract term. The change reflects new information obtained on the frequent and ongoing mandatory updates to AxiomSL's regulatory reporting software, which are critical to the utility and value of the product for the client. As a result of this change, we recognized a one-time revenue reduction of $32 million in the third quarter of 2024, reflecting the net impact of the accounting change since the date of the Adenza acquisition. See Note 4, “Acquisition,” for further discussion on the measurement period adjustment.
Contract Balances
Substantially all of our revenues are considered to be revenues from contracts with customers. The related accounts receivable balances are recorded in our Condensed Consolidated Balance Sheets as receivables, which are net of allowance for doubtful accounts of $15 million as of September 30, 2024 and $18 million as of December 31, 2023. There were no material upward or downward adjustments to the allowance during the nine months ended September 30, 2024. We do not have obligations for warranties, returns or refunds to customers.
Deferred revenue is the only significant contract asset or liability as of September 30, 2024. Deferred revenue represents consideration received that is yet to be recognized as revenue for unsatisfied performance obligations. See Note 7, “Deferred Revenue,” for our discussion on deferred revenue balances, activity, and expected timing of recognition.
We do not provide disclosures about the transaction price allocated to unsatisfied performance obligations if contract durations are less than one year. For our initial listings, the transaction price allocated to remaining performance obligations is included in deferred revenue, and therefore not included below. For our Financial Crime Management Technology, Regulatory Technology, Capital Markets Technology and Workflow & Insights contracts, the portion of transaction price allocated to unsatisfied performance obligations is presented in the table below. The timing in the table below is based on our best estimates as, for certain contracts, the recognition is primarily dependent upon the completion of customization and any significant modifications made pursuant to existing contracts. To the extent consideration has been received, unsatisfied performance obligations would be included in the table below as well as deferred revenue.
The following table summarizes the amount of the transaction price allocated to performance obligations that are unsatisfied, for contract durations greater than one year, as of September 30, 2024:
| Financial Crime Management Technology | Regulatory Technology | Capital Markets Technology | Workflow & Insights | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Remainder of 2024 | $ | 58 | $ | 88 | $ | 95 | $ | 48 | $ | 289 | |||||||||||||||||||
| 2025 | 252 | 320 | 304 | 153 | 1,029 | ||||||||||||||||||||||||
| 2026 | 214 | 170 | 241 | 87 | 712 | ||||||||||||||||||||||||
| 2027 | 125 | 89 | 166 | 39 | 419 | ||||||||||||||||||||||||
| 2028 | 42 | 63 | 105 | 16 | 226 | ||||||||||||||||||||||||
| 2029+ | 16 | 22 | 219 | 3 | 260 | ||||||||||||||||||||||||
| Total | $ | 707 | $ | 752 | $ | 1,130 | $ | 346 | $ | 2,935 |
4. ACQUISITION
In June 2023, we entered into a definitive agreement to acquire Adenza, a provider of mission-critical risk management and regulatory software to the financial services industry, for $5.75 billion in cash (subject to customary post-closing adjustments) and a fixed amount of 85.6 million shares of Nasdaq common stock, based on the volume-weighted average price per share over 15 consecutive trading days prior to signing. Nasdaq issued approximately $5.0 billion of debt, and entered into a $600 million term loan, and used the proceeds for the cash portion of the consideration. See “Senior Unsecured Notes” and “2023 Term Loan” in “Financing of the Adenza Acquisition” of Note 8, “Debt Obligations,” for further discussion.
On November 1, 2023, Nasdaq completed the acquisition of Adenza for a total purchase consideration of $9,984 million, which comprises the following:
| (in millions, except price per share) | |||||
| Shares of Nasdaq common stock issued | 85.6 | ||||
| Closing price per share of Nasdaq common stock on November 1, 2023 | $ | 48.71 | |||
| Fair value of equity portion of the purchase consideration | $ | 4,170 | |||
| Cash consideration | $ | 5,814 | |||
| Total purchase consideration | $ | 9,984 |
At the closing of the transaction, the 85.6 million shares of Nasdaq common stock were issued to Thoma Bravo, the sole shareholder of Adenza, and represented approximately 15% of the outstanding shares of Nasdaq. For further discussion on the rights of common stockholders refer to “Common Stock” of Note 11, “Nasdaq Stockholders’ Equity.” This acquisition is part of our Financial Technology segment.
On July 26, 2024, Nasdaq announced a secondary public offering of 41.6 million shares of our common stock held by Thoma Bravo, which was offered to the public at $65.30 per share. Concurrently, Nasdaq entered into a share repurchase agreement with Thoma Bravo and repurchased 1.2 million
shares of our common stock from this offering. Nasdaq used cash on hand and borrowings under our commercial paper program to fund the share repurchase amount of $77 million. At the completion of these transactions, Thoma Bravo held 42.8 million shares of Nasdaq common stock, representing approximately 7.4% of the outstanding shares of Nasdaq.
The amounts in the table below represent the preliminary allocation of the purchase price to the acquired intangible assets, the deferred tax liability on the acquired intangible assets and other assets acquired and liabilities assumed based on their preliminary respective estimated fair values on the date of acquisition.
The excess purchase price over the net tangible and acquired intangible assets has been recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies and is assigned to our Financial Technology segment.
| (in millions) | |||||
| Goodwill | $ | 5,933 | |||
| Acquired intangible assets | 5,050 | ||||
| Receivables, net | 236 | ||||
| Other net assets acquired | 153 | ||||
| Cash and cash equivalents | 48 | ||||
| Accrued personnel costs | (44) | ||||
| Deferred revenue | (130) | ||||
| Deferred tax liability on acquired intangible assets | (1,262) | ||||
| Total purchase consideration | $ | 9,984 |
In the third quarter of 2024 we recorded a purchase accounting adjustment to the estimated purchase price allocation shown above, and disclosed as of December 31, 2023. This adjustment relates to the impact of the change from upfront to ratable revenue recognition for AxiomSL on-premises contracts entered into prior to the acquisition date, as described above, and decreased accrued income (which reflects revenue earned but not yet billed and included in receivables above) by $46 million, increased deferred revenue by $56 million and increased goodwill by $77 million, net of a deferred tax asset of $25 million.
Intangible Assets
The following table presents the details of acquired intangible assets at the date of acquisition. Acquired intangible assets with finite lives are amortized using the straight-line method.
| Customer Relationships | Technology | Trade Names | Total Acquired Intangible Assets | |||||||||||
| Intangible asset value (in millions) | $ | 3,740 | $ | 950 | $ | 360 | $ | 5,050 | ||||||
| Discount rate used | 9.5 | % | 8.5 | % | 8.5 | % | ||||||||
| Estimated average useful life | 22 years | 6 years | 20 years |
Customer Relationships
Customer relationships represent the contractual relationships with customers.
Methodology
Customer relationships were valued using the income approach, specifically an excess earnings method. The excess earnings method examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return that is attributable to the intangible asset being valued.
Discount Rate
The discount rate used reflects the amount of risk associated with the hypothetical cash flows for the customer relationships relative to the overall business. In developing a discount rate for the customer relationships, we estimated a weighted-average cost of capital for the overall business and we utilized this rate as an input when discounting the cash flows. The resulting discounted cash flows were then tax-effected at the applicable statutory rate.
A discounted tax amortization benefit was added to the fair value of the assets under the assumption that the customer relationships would be amortized for tax purposes over a period of 15 years.
Technology
As part of our acquisition of Adenza, we acquired developed technology relating to AxiomSL and Calypso.
Methodology
The developed technology was valued using the income approach, specifically the relief-from-royalty method, which is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. The royalty rate is applied to the projected revenue over the expected remaining life of the intangible asset to estimate royalty savings. The net after-tax royalty savings are calculated for each year in the remaining economic life of the technology and discounted to present value.
Discount Rate
The discount rate used reflects the amount of risk associated with the hypothetical cash flows for the developed technology relative to the overall business as discussed above in “Customer Relationships.”
Trade Name
As part of our acquisition of Adenza, we acquired the AxiomSL and Calypso trade names. The trade names are recognized in the industry and carry a reputation for quality. As such, the reputation and positive recognition embodied in the trade names is a valuable asset to Nasdaq.
Methodology
The AxiomSL and Calypso trade names were valued using the income approach, specifically the relief-from-royalty method as discussed above in “Technology.”
Discount Rate
The discount rate used reflects the amount of risk associated with the hypothetical cash flows for the trade name relative to the overall business as discussed above in “Customer Relationships.”
5. GOODWILL AND ACQUIRED INTANGIBLE ASSETS
Goodwill
The following table presents the changes in goodwill by business segment during the nine months ended September 30, 2024:
| (in millions) | |||||
| Capital Access Platforms | |||||
| Balance at December 31, 2023 | $ | 4,214 | |||
| Foreign currency translation adjustments | (4) | ||||
| Balance at September 30, 2024 | $ | 4,210 | |||
| Financial Technology | |||||
| Balance at December 31, 2023 | $ | 7,873 | |||
| Measurement period adjustment | 77 | ||||
| Foreign currency translation adjustments | (5) | ||||
| Balance at September 30, 2024 | $ | 7,945 | |||
| Market Services | |||||
| Balance at December 31, 2023 | $ | 2,025 | |||
| Foreign currency translation adjustments | (15) | ||||
| Balance at September 30, 2024 | $ | 2,010 | |||
| Total | |||||
| Balance at December 31, 2023 | $ | 14,112 | |||
| Measurement period adjustments | 77 | ||||
| Foreign currency translation adjustments | (24) | ||||
| Balance at September 30, 2024 | $ | 14,165 |
Goodwill represents the excess of purchase price over the value assigned to the net assets, including identifiable intangible assets, of a business acquired. Goodwill is allocated to our reporting units based on the assignment of the fair values of each reporting unit of the acquired company. We test goodwill for impairment at the reporting unit level annually, or in interim periods if certain events occur indicating that the carrying amount may be impaired, such as changes in the business climate, poor indicators of operating performance or the sale or disposition of a significant portion of a reporting unit. There was no impairment of goodwill for the three and nine months ended September 30, 2024 and 2023; however, events such as prolonged economic weakness or unexpected significant declines in operating results of any of our reporting units or businesses may result in goodwill impairment charges in the future. See Note 4, “Acquisition,” for a description of the measurement period adjustment recorded during the third quarter of 2024.
Acquired Intangible Assets
The following table presents details of our total acquired intangible assets, both finite- and indefinite-lived:
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Finite-Lived Intangible Assets | (in millions) | ||||||||||||||||||||||||||||||||||||||||
| Gross Amount | |||||||||||||||||||||||||||||||||||||||||
| Technology | $ | 1,235 | $ | 1,254 | |||||||||||||||||||||||||||||||||||||
| Customer relationships | 5,721 | 5,743 | |||||||||||||||||||||||||||||||||||||||
| Trade names and other | 417 | 417 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | (197) | (194) | |||||||||||||||||||||||||||||||||||||||
| Total gross amount | $ | 7,176 | $ | 7,220 | |||||||||||||||||||||||||||||||||||||
| Accumulated Amortization | |||||||||||||||||||||||||||||||||||||||||
| Technology | $ | (299) | $ | (169) | |||||||||||||||||||||||||||||||||||||
| Customer relationships | (1,096) | (912) | |||||||||||||||||||||||||||||||||||||||
| Trade names and other | (38) | (21) | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 127 | 120 | |||||||||||||||||||||||||||||||||||||||
| Total accumulated amortization | $ | (1,306) | $ | (982) | |||||||||||||||||||||||||||||||||||||
| Net Amount | |||||||||||||||||||||||||||||||||||||||||
| Technology | $ | 936 | $ | 1,085 | |||||||||||||||||||||||||||||||||||||
| Customer relationships | 4,625 | 4,831 | |||||||||||||||||||||||||||||||||||||||
| Trade names and other | 379 | 396 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | (70) | (74) | |||||||||||||||||||||||||||||||||||||||
| Total finite-lived intangible assets | $ | 5,870 | $ | 6,238 | |||||||||||||||||||||||||||||||||||||
| Indefinite-Lived Intangible Assets | |||||||||||||||||||||||||||||||||||||||||
| Exchange and clearing registrations | $ | 1,257 | $ | 1,257 | |||||||||||||||||||||||||||||||||||||
| Trade names | 121 | 121 | |||||||||||||||||||||||||||||||||||||||
| Licenses | 52 | 52 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | (228) | (225) | |||||||||||||||||||||||||||||||||||||||
| Total indefinite-lived intangible assets | $ | 1,202 | $ | 1,205 | |||||||||||||||||||||||||||||||||||||
| Total intangible assets, net | $ | 7,072 | $ | 7,443 | |||||||||||||||||||||||||||||||||||||
There was no impairment of intangible assets for the three and nine months ended September 30, 2024 and 2023.
The following tables present our amortization expense for acquired finite-lived intangible assets:
| Three Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| (in millions) | |||||||||||||||||
| Amortization expense | $ | 122 | $ | 37 | |||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| (in millions) | |||||||||||||||||
| Amortization expense | $ | 366 | $ | 112 |
The table below presents the estimated future amortization expense (excluding the impact of foreign currency translation adjustments of $70 million as of September 30, 2024) of acquired finite-lived intangible assets as of September 30, 2024:
| (in millions) | |||||
| Remainder of 2024 | $ | 124 | |||
| 2025 | 499 | ||||
| 2026 | 494 | ||||
| 2027 | 494 | ||||
| 2028 | 460 | ||||
| 2029+ | 3,869 | ||||
| Total | $ | 5,940 |
6. INVESTMENTS
The following table presents the details of our investments:
| September 30, 2024 | December 31, 2023 | ||||||||||
| (in millions) | |||||||||||
| Financial investments | $ | 202 | $ | 188 | |||||||
| Equity method investments | 408 | 380 | |||||||||
| Equity securities | 111 | 87 |
Financial Investments
Financial investments are comprised of trading securities, primarily highly rated European government debt securities, of which $192 million as of September 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.
Equity Method Investments
We record our estimated pro-rata share of earnings or losses each reporting period and record any dividends as a reduction in the investment balance. As of September 30, 2024 and 2023, our equity method investments primarily included our 40.0% equity interest in OCC.
The carrying amounts of our equity method investments are included in other non-current assets in the Condensed Consolidated Balance Sheets. No impairments were recorded for the three and nine months ended September 30, 2024 and 2023.
Net income (loss) recognized from our equity interest in the earnings and losses of these equity method investments, was $1 million and $(12) million for the three months ended September 30, 2024 and 2023, respectively, and $7 million and $(8) million for the nine months ended September 30, 2024 and 2023, respectively.
Equity Securities
The carrying amounts of our equity securities are included in other non-current assets in the Condensed Consolidated Balance Sheets. We elected the measurement alternative for substantially all of our equity securities as they do not have a readily determinable fair value. No material adjustments were made to the carrying value of our equity securities for the three and nine months ended September 30, 2024 and 2023. As of September 30, 2024 and December 31, 2023, our equity securities primarily represent various strategic minority investments made through our corporate venture program.
7. DEFERRED REVENUE
Deferred revenue represents consideration received that is yet to be recognized as revenue. The changes in our deferred revenue during the nine months ended September 30, 2024 are reflected in the following table:
| Balance at December 31, 2023 | Additions | Revenue Recognized | Adjustments | Balance at September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Capital Access Platforms: | |||||||||||||||||||||||||||||||||||||||||
| Initial Listings | $ | 97 | $ | 22 | $ | (29) | $ | — | $ | 90 | |||||||||||||||||||||||||||||||
| Annual Listings | 3 | 89 | (1) | — | 91 | ||||||||||||||||||||||||||||||||||||
| Workflow & Insights | 180 | 172 | (160) | — | 192 | ||||||||||||||||||||||||||||||||||||
| Financial Technology: | |||||||||||||||||||||||||||||||||||||||||
| Financial Crime Management Technology | 123 | 114 | (106) | (4) | 127 | ||||||||||||||||||||||||||||||||||||
| Regulatory Technology | 68 | 38 | (55) | 56 | 107 | ||||||||||||||||||||||||||||||||||||
| Capital Markets Technology | 183 | 70 | (145) | — | 108 | ||||||||||||||||||||||||||||||||||||
| Other | 21 | 13 | (8) | — | 26 | ||||||||||||||||||||||||||||||||||||
| Total | $ | 675 | $ | 518 | $ | (504) | $ | 52 | $ | 741 | |||||||||||||||||||||||||||||||
In the above table:
-
Additions reflect deferred revenue billed in the current period, net of recognition.
-
Revenue recognized includes revenue recognized during the current period that was included in the beginning balance.
-
Adjustments reflect foreign currency translation adjustments and the impact of the measurement period adjustment recorded during the third quarter of 2024. See Note 4, “Acquisition,” for a description of the measurement period adjustment.
-
Other primarily includes deferred revenue from our non-U.S. listing of additional shares fees and our Index business. These fees are included in our Capital Access Platforms segment.
As of September 30, 2024, we estimate that our deferred revenue will be recognized in the following years:
| Fiscal year ended: | 2024 | 2025 | 2026 | 2027 | 2028 | 2029+ | Total | ||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Capital Access Platforms: | |||||||||||||||||||||||||||||||||||||||||
| Initial Listings | $ | 10 | $ | 31 | $ | 26 | $ | 14 | $ | 5 | $ | 4 | $ | 90 | |||||||||||||||||||||||||||
| Annual Listings | 91 | — | — | — | — | — | 91 | ||||||||||||||||||||||||||||||||||
| Workflow & Insights | 87 | 105 | — | — | — | — | 192 | ||||||||||||||||||||||||||||||||||
| Financial Technology: | |||||||||||||||||||||||||||||||||||||||||
| Financial Crime Management Technology | 61 | 66 | — | — | — | — | 127 | ||||||||||||||||||||||||||||||||||
| Regulatory Technology | 48 | 59 | — | — | — | — | 107 | ||||||||||||||||||||||||||||||||||
| Capital Markets Technology | 63 | 41 | 2 | 2 | — | — | 108 | ||||||||||||||||||||||||||||||||||
| Other | 7 | 10 | 6 | 3 | — | — | 26 | ||||||||||||||||||||||||||||||||||
| Total | $ | 367 | $ | 312 | $ | 34 | $ | 19 | $ | 5 | $ | 4 | $ | 741 | |||||||||||||||||||||||||||
In the above table, 2024 represents the remaining three months of 2024.
Deferred revenue that will be recognized beyond September 30, 2025 is included in other non-current liabilities in the Condensed Consolidated Balance Sheets. The timing of recognition of deferred revenue related to certain contracts represents our best estimates as the recognition is primarily dependent upon the completion of customization and any significant modifications made pursuant to existing contracts.
8. DEBT OBLIGATIONS
The following table presents the carrying amounts of our debt outstanding, net of unamortized debt issuance costs:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Short-term debt: | (in millions) | ||||||||||
| Commercial paper | $ | — | $ | 291 | |||||||
| 2025 Notes, $500 million, 5.650% notes due June 28, 2025 | 499 | 497 | |||||||||
| Total short-term debt | $ | 499 | $ | 788 | |||||||
| Long-term debt - senior unsecured notes: | |||||||||||
| 2026 Notes, $500 million, 3.850% notes due June 30, 2026 | 499 | 499 | |||||||||
| 2028 Notes, $1 billion, 5.350% notes due June 28, 2028 | 993 | 991 | |||||||||
| 2029 Notes, €600 million, 1.75% notes due March 28, 2029 | 665 | 658 | |||||||||
| 2030 Notes, €600 million, 0.875% notes due February 13, 2030 | 664 | 658 | |||||||||
| 2031 Notes, $650 million, 1.650% notes due January 15, 2031 | 645 | 645 | |||||||||
| 2032 Notes, €750 million, 4.500% notes due February 15, 2032 | 827 | 819 | |||||||||
| 2033 Notes, €615 million, 0.900% notes due July 30, 2033 | 681 | 674 | |||||||||
| 2034 Notes $1.25 billion, 5.550% notes due February 15, 2034 | 1,240 | 1,239 | |||||||||
| 2040 Notes, $650 million, 2.500% notes due December 21, 2040 | 644 | 644 | |||||||||
| 2050 Notes, $500 million, 3.250% notes due April 28, 2050 | 487 | 487 | |||||||||
| 2052 Notes, $550 million, 3.950% notes due March 7, 2052 | 541 | 541 | |||||||||
| 2053 Notes, $750 million, 5.950% notes due August 15, 2053 | 738 | 738 | |||||||||
| 2063 Notes, $750 million, 6.100% notes due June 28, 2063 | 738 | 738 | |||||||||
| 2023 Term Loan | — | 339 | |||||||||
| 2022 Revolving Credit Facility | (3) | (4) | |||||||||
| Total long-term debt | $ | 9,359 | $ | 9,666 | |||||||
| Total debt obligations | $ | 9,858 | $ | 10,454 |
In the table above, the 2025 Notes were reclassified to short-term debt as of September 30, 2024, including the balance as of December 31, 2023, for presentation purposes.
Commercial Paper Program
Our U.S. dollar commercial paper program is supported by our 2022 Revolving Credit Facility, which provides liquidity support for the repayment of commercial paper issued through this program. See “2022 Revolving Credit Facility” below for further discussion. The effective interest rate of commercial paper issuances fluctuates as short-term interest rates and demand fluctuate. The fluctuation of these rates may impact our interest expense.
Senior Unsecured Notes
Our 2040 Notes were issued at par. All of our other outstanding senior unsecured notes were issued at a discount. As a result of the discount, the proceeds received from each issuance were less than the aggregate principal amount. As of September 30, 2024, the amounts in the table above reflect the aggregate principal amount, less the unamortized debt issuance costs, which are being accreted through interest expense over the life of the applicable notes. The accretion of these costs was $8 million for the nine months ended September 30, 2024. Our Euro denominated notes are adjusted for the impact of foreign currency translation. Our senior unsecured notes are general unsecured obligations which rank equally with all of our existing and future unsubordinated obligations and are not guaranteed by any of our subsidiaries. The senior unsecured notes were issued under indentures that, among other things, limit our ability to consolidate, merge or sell all or substantially all of our assets, create liens, and enter into sale and leaseback transactions. The senior unsecured notes may be redeemed by Nasdaq at any time, subject to a make-whole amount.
Upon a change of control triggering event (as defined in the various supplemental indentures governing the applicable notes), the terms require us to repurchase all or part of each holder’s notes for cash equal to 101% of the aggregate principal amount purchased plus accrued and unpaid interest, if any.
The 2029 Notes, 2030 Notes, 2032 Notes and 2033 Notes pay interest annually. All other notes pay interest semi-annually. The U.S. dollar senior unsecured notes coupon rates may vary with Nasdaq’s debt rating, to the extent Nasdaq is downgraded below investment grade, up to an upward rate adjustment not to exceed 2%.
Net Investment Hedge
Our Euro denominated notes have been designated as a hedge of our net investment in certain foreign subsidiaries to mitigate the foreign exchange risk associated with certain investments in these subsidiaries. Accordingly, the remeasurement of these notes is recorded in accumulated other comprehensive loss within Nasdaq’s stockholders’ equity in the Condensed Consolidated Balance Sheets. For the nine months ended September 30, 2024, the impact of translation increased the U.S. dollar value of our Euro denominated notes by $25 million.
Financing of the Adenza Acquisition
Senior Unsecured Notes
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. For further discussion of the Adenza acquisition, see Note 4, “Acquisition.”
2023 Term Loan
In June 2023, in connection with the financing of the Adenza acquisition, we entered into a term loan credit agreement, or the 2023 Term Loan. 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, for repayment of certain debt of Adenza and its subsidiaries, and to pay fees, costs and expenses related to the 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 September 30, 2024 the term loan is fully repaid.
Credit Facilities
2022 Revolving Credit Facility
In December 2022, Nasdaq amended and restated its previously issued $1.25 billion five-year revolving credit facility, with a new maturity date of December 16, 2027. Nasdaq intends to use funds available under the 2022 Revolving Credit Facility for general corporate purposes and to provide liquidity support for the repayment of commercial paper issued through the commercial paper program. Nasdaq is permitted to repay borrowings under our 2022 Revolving Credit Facility at any time in whole or in part, without penalty.
As of September 30, 2024, no amounts were outstanding on the 2022 Revolving Credit Facility. The $(3) million balance represents unamortized debt issuance costs which are being accreted through interest expense over the life of the credit facility.
Borrowings under the revolving credit facility and swingline borrowings bear interest on the principal amount outstanding at a variable interest rate based on either the SOFR (or a successor rate to SOFR), the base rate (as defined in the 2022 Revolving Credit Facility agreement), or other applicable rate with respect to non-dollar borrowings, plus an applicable margin that varies with Nasdaq’s debt rating. We are charged commitment fees of 0.100% to 0.250%, depending on our credit rating, whether or not amounts have been borrowed. These commitment fees are included in interest expense and were not material for the three and nine months ended September 30, 2024 and 2023.
The 2022 Revolving Credit Facility contains financial and operating covenants. Financial covenants include a maximum leverage ratio. Operating covenants include, among other things, limitations on Nasdaq’s ability to incur additional indebtedness, grant liens on assets, dispose of assets and make certain restricted payments. The facility also contains customary affirmative covenants, including access to financial statements, notice of defaults and certain other material events, maintenance of properties and insurance, and customary events of default, including cross-defaults to our material indebtedness.
The 2022 Revolving Credit Facility includes an option for Nasdaq to increase the available aggregate amount by up to $750 million, subject to the consent of the lenders funding the increase and certain other conditions.
Other Credit Facilities
Certain of our European subsidiaries have several other credit facilities, which are available in multiple currencies, primarily to support our Nasdaq Clearing operations in Europe, as well as to provide a cash pool credit line. These credit facilities, in aggregate, totaled $189 million as of September 30, 2024 and $191 million as of December 31, 2023 in available liquidity, none of which was utilized. Generally, these facilities each have a one-year term. The amounts borrowed under these various credit facilities bear interest on the principal amount outstanding at a variable interest rate based on a base rate (as defined in the applicable credit agreement), plus an applicable margin. We are charged commitment fees (as defined in the applicable credit agreement), whether or not amounts have been borrowed. These commitment fees are included in interest expense and were not material for the three and nine months ended September 30, 2024 and 2023.
These facilities include customary affirmative and negative operating covenants and events of default.
Debt Covenants
As of September 30, 2024, we were in compliance with the covenants of all of our debt obligations.
9. RETIREMENT PLANS
Defined Contribution Savings Plan
We sponsor a 401(k) plan, which is a voluntary defined contribution savings plan, for U.S. employees. Employees are immediately eligible to make contributions to the plan and are also eligible for an employer contribution match at an amount equal to 100.0% of the first 6.0% of eligible employee contributions. The following table presents the savings plan expense for the three and nine months ended September 30, 2024 and 2023, which is included in compensation and benefits expense in the Condensed Consolidated Statements of Income:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Savings Plan expense | $ | 5 | $ | 4 | $ | 14 | $ | 14 |
Pension and Supplemental Executive Retirement Plans
Prior to 2024, we maintained non-contributory, defined-benefit pension plan, nonqualified SERPs for certain senior executives and other post-retirement benefit plans for eligible employees in the U.S. Most employees outside the U.S. are covered by local retirement plans or by applicable social laws. Benefits under social laws are generally expensed in the periods in which the costs are incurred.
In June 2023, we terminated our U.S. pension plan and took steps to wind down the plan and transfer the resulting liability to an insurance company, which started in 2023 and was completed in 2024. These steps included settling all future obligations under our U.S. pension plan through a combination of lump sum payments to eligible, electing participants (completed in 2023) and the transfer of any remaining benefits to a third-party insurance company through a group annuity contract. In connection with the plan termination and partial settlement, a pre-tax charge of $9 million was recorded to compensation and benefits expense in 2023. We finalized the transfer of any remaining benefits during the first quarter of 2024 and recorded an additional settlement pre-tax charge of $23 million to compensation and benefits expense in the Condensed Consolidated Statements of Income. This was offset by a $19 million adjustment to Other Comprehensive Income and a $4 million cash settlement.
The total expense for these plans is included in compensation and benefits expense in the Condensed Consolidated Statements of Income:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Retirement Plans expense | $ | 8 | $ | 6 | $ | 47 | $ | 19 |
Nonqualified Deferred Compensation Plan
We sponsor a nonqualified deferred compensation plan, the Nasdaq, Inc. Deferred Compensation Plan. This plan provides certain eligible employees with the opportunity to defer a portion of their annual salary and bonus up to certain approval limits. All deferrals and associated earnings are our general unsecured obligations and were immaterial for the three and nine months ended September 30, 2024 and 2023.
10. SHARE-BASED COMPENSATION
We have a share-based compensation program for employees and non-employee directors. Share-based awards granted under this program include restricted stock (consisting of restricted stock units), PSUs and stock options. For accounting purposes, we consider PSUs to be a form of restricted stock. Generally, annual employee awards are granted on or about April 1st of each year.
Summary of Share-Based Compensation Expense
The following table presents the total share-based compensation expense resulting from equity awards and the 15.0% discount for the ESPP for the three and nine months ended September 30, 2024 and 2023, which is included in compensation and benefits expense in the Condensed Consolidated Statements of Income:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense before income taxes | $ | 37 | $ | 31 | $ | 105 | $ | 90 |
Common Shares Available Under Our Equity Plan
As of September 30, 2024, we had approximately 22.8 million shares of common stock authorized for future issuance under our Equity Plan.
Restricted Stock
We grant restricted stock to most employees. The grant date fair value of restricted stock awards is based on the closing stock price at the date of grant less the present value of future cash dividends. Restricted stock awards granted to employees below the manager level generally vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and the remainder on the third anniversary of the grant date. Restricted stock awards granted to employees at or above the manager level generally vest 33% on the second anniversary of the grant date, 33% on the third anniversary of the grant date, and the remainder on the fourth anniversary of the grant date.
Summary of Restricted Stock Activity
The following table summarizes our restricted stock activity for the nine months ended September 30, 2024:
| Restricted Stock | |||||||||||
| Number of Awards | Weighted-Average Grant Date Fair Value | ||||||||||
| Unvested at December 31, 2023 | 4,209,299 | $ | 51.15 | ||||||||
| Granted | 1,823,569 | 59.83 | |||||||||
| Vested | (1,479,226) | 44.72 | |||||||||
| Forfeited | (223,054) | 55.26 | |||||||||
| Unvested at September 30, 2024 | 4,330,588 | $ | 55.59 |
As of September 30, 2024, $146 million of total unrecognized compensation cost related to restricted stock is expected to be recognized over a weighted-average period of 2.3 years.
PSUs
We grant three-year PSUs to certain eligible employees. PSUs are based on performance measures that impact the amount of shares that each PSU eligible individual receives, subject to the satisfaction of applicable market performance conditions, with a three-year cumulative performance period that vest at the end of the performance period and which settle in shares of our common stock. Compensation cost is recognized over the three-year performance period, taking into account an estimated forfeiture rate, regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. Performance will be determined by comparing Nasdaq’s TSR to two peer groups, each weighted 50.0%. The first peer group consists of exchange companies, and the second peer group consists of all companies in the S&P 500. Beginning in 2024, we replaced the exchange company peer group with the S&P 500 GICS 4020 Index, which is a blend of exchanges, as well as data, financial technology and banking companies to align more closely with Nasdaq’s diverse business and competitors. Nasdaq’s relative performance ranking against each of these groups will determine the final number of shares delivered to each individual under the program. The award issuance under this program will be between 0.0% and 200.0% of the number of PSUs granted and will be determined by Nasdaq’s overall performance against both peer groups. However, if Nasdaq’s TSR is negative for the three-year performance period, regardless of TSR ranking, the award issuance will not exceed 100.0% of the number of PSUs granted. We estimate the fair value of PSUs granted under the three-year PSU program using the Monte Carlo simulation model, as these awards contain a market condition.
In 2024, we also granted PSUs with a two-year performance period to certain eligible executives at the senior vice president level and above. These PSUs are based on performance measures relating to the implementation of certain integration actions in connection with the Adenza acquisition. Achievement of the targets impacts the amount of shares that each PSU eligible individual receives. The PSUs have a two-year performance period and will vest one year after the end of the performance period, and settle in shares of our common stock. The award issuance under this program will be between 0.0% and 200.0% of the number of PSUs granted.
Grants of PSUs that were issued in 2021 with a three-year performance period exceeded the applicable performance metrics. As a result, an additional 387,011 units above the original target were granted in the first quarter of 2024 and were fully vested upon issuance.
The following weighted-average assumptions were used to determine the weighted-average fair values of the outstanding PSU awards granted under the three-year PSU program during the nine months ended September 30, 2024 and 2023:
| 2024 Grants | 2023 Grant | ||||||||||
| Weighted-average risk-free interest rate | 4.51 | % | 3.75 | % | |||||||
| Expected volatility | 24.50 | % | 23.88 | % | |||||||
| Weighted-average grant date share price | $ | 62.28 | $ | 54.40 | |||||||
| Weighted-average fair value at grant date | $ | 78.43 | $ | 52.56 |
Summary of PSU Activity
The following table summarizes our PSU activity for the nine months ended September 30, 2024:
| PSUs | |||||||||||||||||||||||
| Three-Year Program | |||||||||||||||||||||||
| Number of Awards | Weighted-Average Grant Date Fair Value | ||||||||||||||||||||||
| Unvested at December 31, 2023 | 2,008,322 | $ | 62.86 | ||||||||||||||||||||
| Granted | 1,275,336 | 73.75 | |||||||||||||||||||||
| Vested | (961,331) | 73.14 | |||||||||||||||||||||
| Forfeited | (97,671) | 61.30 | |||||||||||||||||||||
| Unvested at September 30, 2024 | 2,224,656 | $ | 64.72 |
In the table above, in addition to the annual employee grant described above, the granted amount also includes additional awards granted based on overachievement of performance metrics.
As of September 30, 2024, the total unrecognized compensation cost related to the PSU program is $76 million and is expected to be recognized over a weighted-average period of 1.4 years.
Stock Options
There were no stock option awards granted for the nine months ended September 30, 2024. There were no stock options exercised for the nine months ended September 30, 2024 and 2023.
A summary of our outstanding and exercisable stock options at September 30, 2024 is as follows:
| Number of Stock Options | Weighted-Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in millions) | |||||||||||
| Outstanding at September 30, 2024 | 1,420,323 | $ | 41.79 | 4.4 | $ | 44 | ||||||||
| Exercisable at September 30, 2024 | 806,451 | $ | 22.23 | 2.3 | $ | 41 |
As of September 30, 2024, the aggregate pre-tax intrinsic value of the outstanding and exercisable stock options in the above table was $44 million and represents the difference between our closing stock price on September 30, 2024 of $73.01 and the exercise price, times the number of shares that would have been received by the option holder had the option holder exercised the stock options on that date. This amount can change based on the fair market value of our common stock. As of September 30, 2024 and 2023, 0.8 million outstanding stock options were exercisable and the exercise price was $22.23.
ESPP
We have an ESPP under which approximately 11.0 million shares of our common stock were available for future issuance as of September 30, 2024. Under our ESPP, employees may purchase shares having a value not exceeding 10.0% of their annual compensation, subject to applicable annual Internal Revenue Service limitations. We record compensation expense related to the 15.0% discount that is given to our employees.
11. NASDAQ STOCKHOLDERS’ EQUITY
Common Stock
As of September 30, 2024, 900,000,000 shares of our common stock were authorized, 598,541,046 shares were issued and 574,742,353 shares were outstanding. As of December 31, 2023, 900,000,000 shares of our common stock were authorized, 598,014,520 shares were issued and 575,159,336 shares were outstanding. The holders of common stock are entitled to one vote per share, except that our certificate of incorporation limits the ability of any shareholder to vote in excess of 5.0% of the then-outstanding shares of Nasdaq common stock.
Common Stock in Treasury, at Cost
We account for the purchase of treasury stock under the cost method with the shares of stock repurchased reflected as a reduction to Nasdaq stockholders’ equity and included in common stock in treasury, at cost in the Condensed Consolidated Balance Sheets. Shares repurchased under our share repurchase program are currently retired and canceled and are therefore not included in the common stock in treasury balance. If treasury shares are reissued, they are recorded at the average cost of the treasury shares acquired. We held 23,798,693 shares of common stock in treasury as of September 30, 2024 and 22,855,184 shares as of December 31, 2023, most of which are related to shares of our common stock withheld for the settlement of employee tax withholding obligations arising from the vesting of restricted stock and PSUs.
Share Repurchase Program
As of September 30, 2024, the remaining aggregate authorized amount under the existing share repurchase program was $1.7 billion.
These repurchases may be made from time to time at prevailing market prices in open market purchases, privately-negotiated transactions, block purchase techniques, an accelerated share repurchase program or otherwise, as determined by our management. The repurchases are primarily funded from existing cash balances. The share repurchase program may be suspended, modified or discontinued at any time, and has no defined expiration date.
The following is a summary of our share repurchase activity, reported based on settlement date, for the nine months ended September 30, 2024:
| Nine Months Ended September 30, 2024 | ||||||||||||||
| Number of shares of common stock repurchased | 2,344,609 | |||||||||||||
| Average price paid per share | $ | 61.94 | ||||||||||||
| Total purchase price (in millions) | $ | 145 |
In the table above, the number of shares of common stock repurchased excludes an aggregate of 943,509 shares withheld to satisfy tax obligations of the grantee upon the vesting of restricted stock and PSUs, and these repurchases are excluded from our repurchase program. Shares repurchased pursuant to the stock repurchase agreement with Thoma Bravo executed in July 2024 are included in the table above. See Note 4, “Acquisition,” for further discussion.
As discussed above in “Common Stock in Treasury, at Cost,” shares repurchased under our share repurchase program are currently retired and cancelled.
Preferred Stock
Our certificate of incorporation authorizes the issuance of 30,000,000 shares of preferred stock, par value $0.01 per share, issuable from time to time in one or more series. As of September 30, 2024 and December 31, 2023, no shares of preferred stock were issued or outstanding.
Cash Dividends on Common Stock
During the first nine months of 2024, our board of directors declared and paid the following cash dividends:
| Declaration Date | Dividend Per Common Share | Record Date | Total Amount Paid | Payment Date | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| January 29, 2024 | $ | 0.22 | March 14, 2024 | $ | 127 | March 28, 2024 | ||||||||||||||||||||
| April 24, 2024 | 0.24 | June 14, 2024 | 138 | June 28, 2024 | ||||||||||||||||||||||
| July 24, 2024 | 0.24 | September 13, 2024 | 138 | September 27, 2024 | ||||||||||||||||||||||
| $ | 403 |
The total amount paid of $403 million was recorded in retained earnings within Nasdaq’s stockholders’ equity in the Condensed Consolidated Balance Sheets at September 30, 2024.
In October 2024, the board of directors approved a regular quarterly cash dividend of $0.24 per share on our outstanding common stock. The dividend is payable on December 20, 2024 to shareholders of record at the close of business on December 6, 2024. The estimated aggregate payment of this dividend is $138 million. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the board of directors.
The board of directors maintains a dividend policy with the intention to provide shareholders with regular and increasing dividends as earnings and cash flows increase.
12. EARNINGS PER SHARE
The following tables set forth the computation of basic and diluted earnings per share:
| Three Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Numerator: | (in millions, except share and per share amounts) | ||||||||||||||||
| Net income attributable to common shareholders | $ | 306 | $ | 294 | |||||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average common shares outstanding for basic earnings per share | 575,120,541 | 491,315,824 | |||||||||||||||
| Weighted-average effect of dilutive securities - Employee equity awards | 3,896,663 | 2,796,138 | |||||||||||||||
| Weighted-average common shares outstanding for diluted earnings per share | 579,017,204 | 494,111,962 | |||||||||||||||
| Basic and diluted earnings per share: | |||||||||||||||||
| Basic earnings per share | $ | 0.53 | $ | 0.60 | |||||||||||||
| Diluted earnings per share | $ | 0.53 | $ | 0.60 | |||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Numerator: | (in millions, except share and per share amounts) | ||||||||||||||||
| Net income attributable to common shareholders | $ | 762 | $ | 862 | |||||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average common shares outstanding for basic earnings per share | 575,647,283 | 490,680,174 | |||||||||||||||
| Weighted-average effect of dilutive securities - Employee equity awards | 3,317,144 | 3,495,584 | |||||||||||||||
| Weighted-average common shares outstanding for diluted earnings per share | 578,964,427 | 494,175,758 | |||||||||||||||
| Basic and diluted earnings per share: | |||||||||||||||||
| Basic earnings per share | $ | 1.32 | $ | 1.76 | |||||||||||||
| Diluted earnings per share | $ | 1.32 | $ | 1.74 |
In the preceding table, employee equity awards from our PSU program, which are considered contingently issuable, are included in the computation of dilutive earnings per share on a weighted average basis when management determines that the applicable performance criteria would have been met if the performance period ended as of the date of the relevant computation.
Securities that were not included in the computation of diluted earnings per share because their effect was antidilutive were immaterial for the three and nine months ended September 30, 2024 and 2023.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tables present our financial assets and financial liabilities that were measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.
| September 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| European government debt securities | $ | 192 | $ | 192 | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||
| Swedish mortgage bonds | 7 | — | 7 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | 3 | — | 3 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total assets at fair value | $ | 202 | $ | 192 | $ | 10 | $ | — | ||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| European government debt securities | $ | 170 | $ | 170 | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||
| State-owned enterprises and municipal securities | 11 | — | 11 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Swedish mortgage bonds | 7 | — | 7 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total assets at fair value | $ | 188 | $ | 170 | $ | 18 | $ | — | ||||||||||||||||||||||||||||||||||||||||||
Financial Instruments Not Measured at Fair Value on a Recurring Basis
Some of our financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include: cash and cash equivalents, restricted cash and cash equivalents, receivables, net, certain other current assets, accounts payable and accrued expenses, Section 31 fees payable to SEC, accrued personnel costs, commercial paper and certain other current liabilities.
We have certain investments, primarily our investment in OCC, which are accounted for under the equity method of accounting. We have elected the measurement alternative for the majority of our equity securities, which primarily represent various strategic investments made through our corporate venture program. See “Equity Method Investments,” and “Equity Securities,” of Note 6, “Investments,” for further discussion.
We also consider our debt obligations to be financial instruments. As of September 30, 2024, the majority of our debt obligations were fixed-rate obligations. We are exposed to changes in interest rates as a result of borrowings under our 2022 Revolving Credit Facility, as the interest rates on this facility have a variable rate depending on the maturity of the borrowing and the implied underlying reference rate. We are also exposed to changes in interest rates on amounts outstanding from the sale of commercial paper under our commercial paper program. The fair value of our remaining debt obligations utilizing discounted cash flow analyses for our floating rate debt, and prevailing market rates for our fixed rate debt was $9.5 billion as of September 30, 2024 and $10.0 billion as of December 31, 2023. The discounted cash flow analyses are based on borrowing rates currently available to us for debt with similar terms and maturities. Our commercial paper and our fixed rate and floating rate debt are categorized as Level 2 in the fair value hierarchy.
For further discussion of our debt obligations, see Note 8, “Debt Obligations.”
Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis
Our non-financial assets, which include goodwill, intangible assets, and other long-lived assets, are not required to be carried at fair value on a recurring basis. Fair value measures of non-financial assets are primarily used in the impairment analysis of these assets. Any resulting asset impairment would require that the non-financial asset be recorded at its fair value. Nasdaq uses Level 3 inputs to measure the fair value of the above assets on a non-recurring basis. As of September 30, 2024 and December 31, 2023, there were no non-financial assets measured at fair value on a non-recurring basis.
14. CLEARING OPERATIONS
Nasdaq Clearing
Nasdaq Clearing is authorized and supervised under EMIR as a multi-asset clearinghouse by the SFSA. Such authorization is effective for all member states of the European Union and certain other non-member states that are part of the European Economic Area, including Norway. The clearinghouse acts as the CCP for exchange and OTC trades in equity derivatives, fixed income derivatives, resale and repurchase contracts, power derivatives, emission allowance derivatives, and seafood derivatives. In June 2023, we entered into an agreement to sell our Nordic power trading and clearing business, which was subsequently terminated in June 2024. While we continue to operate Nordic power trading and clearing, and are focused on providing service to our clients, we are evaluating options for this business.
Through our clearing operations in the financial markets, which include the resale and repurchase market, the commodities markets, and the seafood market, Nasdaq Clearing is the legal counterparty for, and guarantees the fulfillment of, each contract cleared. These contracts are not used by Nasdaq Clearing for the purpose of trading on its own behalf. As the legal counterparty of each transaction, Nasdaq Clearing bears the counterparty risk between the purchaser and seller in the contract. In its guarantor role, Nasdaq Clearing has precisely equal and offsetting claims to and from clearing members on opposite sides of each contract, standing as the CCP on every contract cleared. In accordance with the rules and regulations of Nasdaq Clearing, default fund and margin collateral requirements are calculated for each clearing member’s positions in accounts with the CCP. See “Default Fund Contributions and Margin Deposits” below for further discussion of Nasdaq Clearing’s default fund and margin requirements.
Nasdaq Clearing maintains three member sponsored default funds: one related to financial markets, one related to commodities markets and one related to the seafood market. Under this structure, Nasdaq Clearing and its clearing members must contribute to the total regulatory capital related to the clearing operations of Nasdaq Clearing. This structure applies an initial separation of default fund contributions for the financial, commodities and seafood markets in order to create a buffer for each market’s counterparty risks. See “Default Fund Contributions” below for further discussion of Nasdaq Clearing’s default fund. A power of assessment and a liability waterfall have also been implemented to further align risk between Nasdaq Clearing and its clearing members. See “Power of Assessment” and “Liability Waterfall” below for further discussion.
Default Fund Contributions and Margin Deposits
As of September 30, 2024, clearing member default fund contributions and margin deposits were as follows:
| September 30, 2024 | |||||||||||||||||
| Cash Contributions | Non-Cash Contributions | Total Contributions | |||||||||||||||
| (in millions) | |||||||||||||||||
| Default fund contributions | $ | 1,052 | $ | 148 | $ | 1,200 | |||||||||||
| Margin deposits | 4,813 | 5,961 | 10,774 | ||||||||||||||
| Total | $ | 5,865 | $ | 6,109 | $ | 11,974 |
Of the total default fund contributions of $1,200 million, Nasdaq Clearing can utilize $1,107 million as capital resources in the event of a counterparty default. The remaining balance of $93 million pertains to member posted surplus balances.
Our clearinghouse holds material amounts of clearing member cash deposits which are held or invested primarily to provide security of capital while minimizing credit, market and liquidity risks. While we seek to achieve a reasonable rate of return, we are primarily concerned with preservation of capital and managing the risks associated with these deposits.
Clearing member cash contributions are maintained in demand deposits held at central banks and large, highly rated financial institutions or secured through direct investments, primarily central bank certificates and highly rated European government debt securities with original maturities primarily one year or less, reverse repurchase agreements and multilateral development bank debt securities. Investments in reverse repurchase agreements range in maturity from 1 to 7 days and are secured with highly rated government securities and multilateral development banks. The carrying value of these securities approximates their fair value due to the short-term nature of the instruments and reverse repurchase agreements.
Nasdaq Clearing has invested the total cash contributions of $5,865 million as of September 30, 2024 and $7,275 million as of December 31, 2023, in accordance with its investment policy as follows:
| September 30, 2024 | December 31, 2023 | ||||||||||
| (in millions) | |||||||||||
| Demand deposits | $ | 3,932 | $ | 5,344 | |||||||
| Central bank certificates | 1,555 | 1,301 | |||||||||
| Restricted cash and cash equivalents | $ | 5,487 | $ | 6,645 | |||||||
| European government debt securities | 24 | 306 | |||||||||
| Reverse repurchase agreements | 192 | 209 | |||||||||
| Multilateral development bank debt securities | 162 | 115 | |||||||||
| Investments | $ | 378 | $ | 630 | |||||||
| Total | $ | 5,865 | $ | 7,275 |
In the preceding table, the change from December 31, 2023 to September 30, 2024 includes currency translation adjustments of $75 million for restricted cash and cash equivalents and $15 million for investments.
For the nine months ended September 30, 2024 and 2023, investments related to default funds and margin deposits, net includes purchases of investment securities of $27,301 million and $33,506 million respectively, and proceeds from sales and redemptions of investment securities of $27,538 million, and $33,570 million respectively.
In the investment activity related to default fund and margin contributions, we are exposed to counterparty risk related to reverse repurchase agreement transactions, which reflect the risk that the counterparty might become insolvent and, thus, fail to meet its obligations to Nasdaq Clearing. We mitigate this risk by only engaging in transactions with high credit quality reverse repurchase agreement counterparties and by limiting the acceptable collateral under the reverse repurchase agreement to high quality issuers, primarily government securities and other securities explicitly guaranteed by a government. The value of the underlying security is monitored during the lifetime of the contract, and in the event the market value of the underlying security falls below the reverse repurchase amount, our clearinghouse may require additional collateral or a reset of the contract.
Default Fund Contributions
Required contributions to the default funds are proportional to the exposures of each clearing member. When a clearing member is active in more than one market, contributions must be made to all markets’ default funds in which the member is active. Clearing members’ eligible contributions may include cash and non-cash contributions. Cash contributions received are maintained in demand deposits held at central banks and large, highly rated financial institutions or invested by Nasdaq Clearing, in accordance with its investment policy, either in central bank certificates, highly rated government debt securities, reverse repurchase agreements with highly rated government debt securities as collateral, or multilateral development bank debt securities. Nasdaq Clearing maintains and manages all cash deposits related to margin collateral. All risks and rewards of collateral ownership, including interest, belong to Nasdaq Clearing. Clearing members’ cash contributions are included in default funds and margin deposits in the Condensed Consolidated Balance Sheets as both a current asset and a current liability. Non-cash contributions include highly rated government debt securities that must meet specific criteria approved by Nasdaq Clearing. Non-cash contributions are pledged assets that are not recorded in the Condensed Consolidated Balance Sheets as Nasdaq Clearing does not take legal ownership of these assets and the risks and rewards remain with the clearing members. These balances may fluctuate over time due to changes in the amount of deposits required and whether members choose to provide cash or non-cash contributions.
In addition to clearing members’ required contributions to the liability waterfall, Nasdaq Clearing is also required to contribute capital to the liability waterfall and overall regulatory capital as specified under its clearinghouse rules. As of September 30, 2024, Nasdaq Clearing committed capital totaling $140 million to the liability waterfall and overall regulatory capital, in the form of government debt securities, which are recorded as financial investments in the Condensed Consolidated Balance Sheets. The combined regulatory capital of the clearing members and Nasdaq Clearing is intended to secure the obligations of a clearing member exceeding such member’s own margin and default fund deposits and may be used to cover losses sustained by a clearing member in the event of a default.
Margin Deposits
Nasdaq Clearing requires all clearing members to provide collateral, which may consist of cash and non-cash contributions, to guarantee performance on the clearing members’ open positions, or initial margin. In addition, clearing members must also provide collateral to cover the daily margin call if needed. See “Default Fund Contributions” above for further discussion of cash and non-cash contributions.
Similar to default fund contributions, Nasdaq Clearing maintains and manages all cash deposits related to margin collateral. All risks and rewards of collateral ownership, including interest, belong to Nasdaq Clearing and are recorded in revenues. These cash deposits are recorded in default funds and margin deposits in the Condensed Consolidated Balance Sheets as both a current asset and a current liability. Pledged margin collateral is not recorded in our Condensed Consolidated Balance Sheets as all risks and rewards of collateral ownership, including interest, belong to the counterparty.
Nasdaq Clearing marks to market all outstanding contracts and requires payment from clearing members whose positions have lost value. The mark-to-market process helps identify any clearing members that may not be able to satisfy their financial obligations in a timely manner allowing Nasdaq Clearing the ability to mitigate the risk of a clearing member defaulting due to exceptionally large losses. In the event of a default, Nasdaq Clearing can access the defaulting member’s margin and default fund deposits to cover the defaulting member’s losses.
Regulatory Capital and Risk Management Calculations
Nasdaq Clearing manages risk through a comprehensive counterparty risk management framework, which comprises policies, procedures, standards and financial resources. The level of regulatory capital is determined in accordance with Nasdaq Clearing’s regulatory capital and default fund policy, as approved by the SFSA. Regulatory capital calculations are continuously updated through a proprietary capital-at-risk calculation model that establishes the appropriate level of capital.
As mentioned above, Nasdaq Clearing is the legal counterparty for each contract cleared and thereby guarantees the fulfillment of each contract. Nasdaq Clearing accounts for this guarantee as a performance guarantee. We determine the fair value of the performance guarantee by considering daily settlement of contracts and other margining and default fund requirements, the risk management program, historical evidence of default payments, and the estimated probability of potential default payouts. The calculation is determined using proprietary risk management software that simulates gains and losses based on historical market prices, extreme but plausible market scenarios, volatility and other factors present at that point in time for those particular unsettled contracts. Based on this analysis, excluding any liability related to the Nasdaq commodities clearing default (see discussion above), the estimated liability was nominal and no liability was recorded as of September 30, 2024.
Power of Assessment
To further strengthen the contingent financial resources of the clearinghouse, Nasdaq Clearing has power of assessment that provides the ability to collect additional funds from its clearing members to cover a defaulting member’s remaining obligations up to the limits established under the terms of the clearinghouse rules. The power of assessment corresponds to 230% of the clearing member’s aggregate contribution to the financial, commodities and seafood markets’ default funds.
Liability Waterfall
The liability waterfall is the priority order in which the capital resources would be utilized in the event of a default where the defaulting clearing member’s collateral and default fund contribution would not be sufficient to cover the cost to settle its portfolio. If a default occurs and the defaulting clearing member’s collateral, including cash deposits and pledged assets, is depleted, then capital is utilized in the following amount and order:
-
junior capital contributed by Nasdaq Clearing, which totaled $43 million as of September 30, 2024;
-
a loss-sharing pool related only to the financial market that is contributed to by clearing members and only applies if the defaulting member’s portfolio includes interest rate swap products;
-
specific market default fund where the loss occurred (i.e., the financial, commodities, or seafood market), which includes capital contributions of the clearing members on a pro-rata basis; and
-
fully segregated senior capital for each specific market contributed by Nasdaq Clearing, calculated in accordance with clearinghouse rules, which totaled $21 million as of September 30, 2024.
If additional funds are needed after utilization of the liability waterfall, or if part of the waterfall has been utilized and needs to be replenished, then Nasdaq Clearing will utilize its power of assessment and additional capital contributions will be required by non-defaulting members up to the limits established under the terms of the clearinghouse rules.
In addition to the capital held to withstand counterparty defaults described above, Nasdaq Clearing also has committed capital of $76 million to ensure that it can handle an orderly wind-down of its operation, and that it is adequately protected against investment, operational, legal, and business risks.
Market Value of Derivative Contracts Outstanding
The following table presents the market value of derivative contracts outstanding prior to netting:
| September 30, 2024 | |||||
| (in millions) | |||||
| Commodity and seafood options, futures and forwards | $ | 34 | |||
| Fixed-income options and futures | 888 | ||||
| Stock options and futures | 162 | ||||
| Index options and futures | 53 | ||||
| Total | $ | 1,137 |
In the table above:
-
We determined the fair value of our option contracts using standard valuation models that were based on market-based observable inputs including implied volatility, interest rates and the spot price of the underlying instrument.
-
We determined the fair value of our futures contracts based upon quoted market prices and average quoted market yields.
-
We determined the fair value of our forward contracts using standard valuation models that were based on market-based observable inputs including benchmark rates and the spot price of the underlying instrument.
Derivative Contracts Cleared
The following table presents the total number of derivative contracts cleared through Nasdaq Clearing for the nine months ended September 30, 2024 and 2023:
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Commodity and seafood options, futures and forwards | 165,641 | 172,222 | |||||||||
| Fixed-income options and futures | 14,306,316 | 14,437,712 | |||||||||
| Stock options and futures | 17,592,459 | 15,584,780 | |||||||||
| Index options and futures | 26,833,338 | 30,059,441 | |||||||||
| Total | 58,897,754 | 60,254,155 |
In the table above, the total volume in cleared power related to commodity contracts was 110 Terawatt hours (TWh) and 284 TWh for the nine months ended September 30, 2024 and 2023, respectively.
Resale and Repurchase Agreements Contracts Outstanding and Cleared
The outstanding contract value of resale and repurchase agreements was $2.1 billion and $1.9 billion as of September 30, 2024 and 2023, respectively. The total number of resale and repurchase agreements contracts cleared was 3,706,152 and 3,519,163 for the nine months ended September 30, 2024 and 2023, respectively.
15. LEASES
We have operating leases, which are primarily real estate leases, predominantly for our U.S. and European headquarters, data centers and for general office space. The following table provides supplemental balance sheet information related to Nasdaq’s operating leases:
| Leases | Balance Sheet Classification | September 30, 2024 | December 31, 2023 | |||||||||||||||||
| Assets: | (in millions) | |||||||||||||||||||
| Operating lease assets | Operating lease assets | $ | 388 | $ | 402 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Current lease liabilities | Other current liabilities | $ | 59 | $ | 62 | |||||||||||||||
| Non-current lease liabilities | Operating lease liabilities | 399 | 417 | |||||||||||||||||
| Total lease liabilities | $ | 458 | $ | 479 |
The following table summarizes Nasdaq’s lease cost:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Operating lease cost | $ | 19 | $ | 19 | $ | 59 | $ | 68 | ||||||||||||||||||||||||||||||
| Variable lease cost | 10 | 10 | 28 | 32 | ||||||||||||||||||||||||||||||||||
| Sublease income | (1) | (1) | (2) | (1) | ||||||||||||||||||||||||||||||||||
| Total lease cost | $ | 28 | $ | 28 | $ | 85 | $ | 99 |
In the table above, operating lease costs include short-term lease cost, which was immaterial.
In the first quarter of 2023, we initiated a review of our real estate and facility capacity requirements due to our new and evolving work models. As a result of this ongoing review, for the nine months ended September 30, 2023, we recorded impairment charges of $23 million, of which $13 million related to operating lease asset impairment and is included in operating lease cost in the table above, $5 million related to exit costs and is included in variable lease cost in the table above and $5 million related to impairment of leasehold improvements, which are recorded in depreciation and amortization expense in the Condensed Consolidated Statements of Income. We fully impaired our lease assets for locations that we vacated with no intention to sublease. Substantially all of the property, equipment and leasehold improvements associated with the vacated leased office space were fully impaired as there are no expected future cash flows for these items.
The following table reconciles the undiscounted cash flows for the following years and total of the remaining years to the operating lease liabilities recorded in our Condensed Consolidated Balance Sheets.
| September 30, 2024 | ||||||||
| (in millions) | ||||||||
| Remainder of 2024 | $ | 20 | ||||||
| 2025 | 73 | |||||||
| 2026 | 60 | |||||||
| 2027 | 56 | |||||||
| 2028 | 54 | |||||||
| 2029+ | 283 | |||||||
| Total lease payments | $ | 546 | ||||||
| Less: interest | (88) | |||||||
| Present value of lease liabilities | $ | 458 |
In the table above, interest is calculated using the interest rate for each lease. Present value of lease liabilities includes the current portion of $59 million.
Total lease payments in the table above excludes $76 million of legally binding minimum lease payments for leases signed but not yet commenced. This primarily relates to a new lease signed in the first quarter of 2024 for our European headquarters. This lease will commence in 2025 with a lease term of 10 years. These payments also include a data center lease for which we have not yet obtained full control of the leased premises.
The following table provides information related to Nasdaq’s lease term and discount rate:
| September 30, 2024 | ||||||||
| Weighted-average remaining lease term (in years) | 9.2 | |||||||
| Weighted-average discount rate | 3.9 | % |
The following table provides supplemental cash flow information related to Nasdaq’s operating leases:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 64 | $ | 57 | |||||||||||||||||||
| Lease assets obtained in exchange for operating lease liabilities | $ | 28 | $ | 8 |
16. INCOME TAXES
Income Tax Provision
The following tables present our income tax provision and effective tax rate:
| Three Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Income tax provision | $ | 51 | $ | 97 | |||||||
| Effective tax rate | 14.3 | % | 24.8 | % | |||||||
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Income tax provision | $ | 250 | $ | 262 | |||||||
| Effective tax rate | 24.8 | % | 23.3 | % |
The lower effective tax rate for the three months ended September 30, 2024 was primarily due to a reduction in U.S. taxes on international income related to the changes in our tax profile from recent acquisitions and the purchase of energy tax credits made available under the Inflation Reduction Act. The higher effective tax rate for the nine months ended September 30, 2024 included the completion of an intra-group transfer of certain intellectual property, or IP, assets to our U.S. headquarters, which resulted in a one-time net tax expense of $33 million, partially offset by the items mentioned above. The effective tax rate in 2023 included a higher tax benefit from a favorable audit settlement.
The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses. These and other factors, including history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets.
Tax Audits
Nasdaq and its eligible subsidiaries file a consolidated U.S. federal income tax return, applicable state and local income tax returns and non-U.S. income tax returns. We are subject to examination by federal, state and local, and foreign tax authorities. Our federal income tax return is under audit for tax year 2018 and is subject to examination by the Internal Revenue Service for the years 2020 through 2023. Several state tax returns are currently under examination by the
respective tax authorities for the years 2014 through 2022. Non-U.S. tax returns are subject to examination by the respective tax authorities for the years 2018 through 2023.
We regularly assess the likelihood of additional assessments by each jurisdiction and have established tax reserves that we believe are adequate in relation to the potential for additional assessments. Examination outcomes and the timing of examination settlements are subject to uncertainty. Although the results of such examinations may have an impact on our unrecognized tax benefits, we do not anticipate that such impact will be material to our condensed consolidated financial position or results of operations, but may be material to our operating results for a particular period and the effective tax rate for that period. We do not expect the settlement of any tax audits to be material in the next twelve months.
17. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Guarantees Issued and Credit Facilities Available
In addition to the default fund contributions and margin collateral pledged by clearing members discussed in Note 14, “Clearing Operations,” we have obtained financial guarantees and credit facilities, which are guaranteed by us through counter indemnities, to provide further liquidity related to our clearing businesses. Financial guarantees issued to us totaled $4 million as of September 30, 2024 and December 31, 2023. As discussed in “Other Credit Facilities,” of Note 8, “Debt Obligations,” we also have credit facilities primarily related to our Nasdaq Clearing operations, which are available in multiple currencies, and totaled $189 million as of September 30, 2024 and $191 million as of December 31, 2023 in available liquidity, none of which was utilized.
Other Guarantees
Through our clearing operations in the financial markets, Nasdaq Clearing is the legal counterparty for, and guarantees the performance of, its clearing members. See Note 14, “Clearing Operations,” for further discussion of Nasdaq Clearing performance guarantees.
We have provided a guarantee related to lease obligations for The Nasdaq Entrepreneurial Center, Inc., which is a not-for-profit organization designed to convene, connect and engage aspiring and current entrepreneurs. This entity is not included in the condensed consolidated financial statements of Nasdaq.
We believe that the potential for us to be required to make payments under these arrangements is unlikely. Accordingly, no contingent liability is recorded in the Condensed Consolidated Balance Sheets for the above guarantees.
Routing Brokerage Activities
One of our broker-dealer subsidiaries, Nasdaq Execution Services, provides a guarantee to securities clearinghouses and exchanges under its standard membership agreements, which require members to guarantee the performance of other
members. If a member becomes unable to satisfy its obligations to a clearinghouse or exchange, other members would be required to meet its shortfalls. To mitigate these performance risks, the exchanges and clearinghouses often require members to post collateral, as well as meet certain minimum financial standards. Nasdaq Execution Services’ maximum potential liability under these arrangements cannot be quantified. However, we believe that the potential for Nasdaq Execution Services to be required to make payments under these arrangements is unlikely. Accordingly, no contingent liability is recorded in the Condensed Consolidated Balance Sheets for these arrangements.
Legal and Regulatory Matters
CFTC Matter
In August 2024, following an inquiry that resulted in the issuance of a Wells notice in June 2022, the CFTC issued an order alleging certain violations of the Commodity Exchange Act and CFTC regulations by NASDAQ Futures, Inc. (“NFX”), a non-operational, wholly-owned subsidiary of Nasdaq, during the period from July 2015 through July 2018. The CFTC also announced that NFX had consented to the entry of the order, without admitting or denying any of its findings or conclusions, to pay a civil monetary penalty, of an immaterial amount, for which we have previously accrued, to cease and desist from violating in the future certain provisions of the Commodity Exchange Act and CFTC regulations, and to abide by certain undertakings relating to cooperation and public statements. Nasdaq sold NFX’s futures exchange business to a third-party in November 2019, including the portfolio of open interest in NFX contracts. During 2020, all remaining open interest in NFX contracts was migrated to other exchanges and NFX ceased operation.
European Commission Matter
In September 2024, the European Commission conducted an inspection at the Nasdaq Stockholm offices. The inspection related to a potential competition law concern regarding the trading of Nordics financial derivatives. We have been cooperating with the European Commission, but are uncertain about the duration or ultimate outcome of the European Commission’s review, or to the extent there is any finding against us, the nature of any remedies or the amount of any fines.
Other Matters
Except as disclosed above and in our prior reports filed under the Exchange Act, we are not currently a party to any litigation or proceeding that we believe could have a material adverse effect on our business, consolidated financial condition, or operating results. However, from time to time, we have been threatened with, or named as a defendant in, lawsuits or involved in regulatory proceedings.
In the normal course of business, Nasdaq discusses matters with its regulators raised during regulatory examinations or otherwise subject to their inquiries. Management believes that censures, fines, penalties or other sanctions that could result from any ongoing examinations or inquiries will not have a material impact on its consolidated financial position or results of operations. However, we are unable to predict the outcome or the timing of the ultimate resolution of these matters, or the potential fines, penalties or injunctive or other equitable relief, if any, that may result from these matters.
Tax Audits
We are engaged in ongoing discussions and audits with taxing authorities on various tax matters, the resolutions of which are uncertain. Currently, there are matters that may lead to assessments, some of which may not be resolved for several years. Based on currently available information, we believe we have adequately provided for any assessments that could result from those proceedings where it is more likely than not that we will be assessed. We review our positions on these matters as they progress. See “Tax Audits,” of Note 16, “Income Taxes,” for further discussion.
18. BUSINESS SEGMENTS
In the fourth quarter of 2023, following the completion of the Adenza acquisition, including its two flagship solutions, AxiomSL and Calypso, we aligned our business more closely with the foundational shifts that are driving the evolution of the global financial system. We now manage, operate and provide our products and services in three business segments: Capital Access Platforms, Financial Technology and Market Services. See Note 1, “Organization and Nature of Operations,” for further discussion of our reportable segments.
This Quarterly Report on Form 10-Q presents our results in alignment with the new corporate structure. All periods presented are restated to reflect the new structure.
Our management allocates resources, assesses performance and manages these businesses as three separate segments. We evaluate the performance of our segments based on several factors, of which the primary financial measure is operating income. Results of individual businesses are presented based on our management accounting practices and structure. Our chief operating decision maker does not review total assets or statements of income below operating income by segments as key performance metrics; therefore, such information is not presented below.
The following tables present certain information regarding our business segments for the three and nine months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Capital Access Platforms | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 501 | $ | 456 | ||||||||||||||||||||||||||||
| Operating income | 290 | 254 | ||||||||||||||||||||||||||||||
| Financial Technology | ||||||||||||||||||||||||||||||||
| Total revenues | 405 | 238 | ||||||||||||||||||||||||||||||
| Operating income | 182 | 95 | ||||||||||||||||||||||||||||||
| Market Services | ||||||||||||||||||||||||||||||||
| Total revenues | 1,022 | 747 | ||||||||||||||||||||||||||||||
| Transaction-based expenses | (756) | (511) | ||||||||||||||||||||||||||||||
| Revenues less transaction-based expenses | 266 | 236 | ||||||||||||||||||||||||||||||
| Operating income | 161 | 136 | ||||||||||||||||||||||||||||||
| Corporate Items | ||||||||||||||||||||||||||||||||
| Total revenues | (26) | 10 | ||||||||||||||||||||||||||||||
| Operating loss | (185) | (54) | ||||||||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 1,902 | $ | 1,451 | ||||||||||||||||||||||||||||
| Transaction-based expenses | (756) | (511) | ||||||||||||||||||||||||||||||
| Revenues less transaction-based expenses | $ | 1,146 | $ | 940 | ||||||||||||||||||||||||||||
| Operating income | $ | 448 | $ | 431 | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Capital Access Platforms | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 1,460 | $ | 1,309 | ||||||||||||||||||||||||||||
| Operating income | 840 | 720 | ||||||||||||||||||||||||||||||
| Financial Technology | ||||||||||||||||||||||||||||||||
| Total revenues | 1,217 | 700 | ||||||||||||||||||||||||||||||
| Operating income | 556 | 279 | ||||||||||||||||||||||||||||||
| Market Services | ||||||||||||||||||||||||||||||||
| Total revenues | 2,700 | 2,378 | ||||||||||||||||||||||||||||||
| Transaction-based expenses | (1,948) | (1,639) | ||||||||||||||||||||||||||||||
| Revenues less transaction-based expenses | 752 | 739 | ||||||||||||||||||||||||||||||
| Operating income | 439 | 440 | ||||||||||||||||||||||||||||||
| Corporate Items | ||||||||||||||||||||||||||||||||
| Total revenues | (7) | 30 | ||||||||||||||||||||||||||||||
| Operating loss | (554) | (214) | ||||||||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 5,370 | $ | 4,417 | ||||||||||||||||||||||||||||
| Transaction-based expenses | (1,948) | (1,639) | ||||||||||||||||||||||||||||||
| Revenues less transaction-based expenses | $ | 3,422 | $ | 2,778 | ||||||||||||||||||||||||||||
| Operating income | $ | 1,281 | $ | 1,225 | ||||||||||||||||||||||||||||
The following tables summarize our Corporate Items:
| Three Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Revenues: | |||||||||||
| Divested businesses | $ | 8 | $ | 10 | |||||||
| Adenza purchase accounting adjustment | (34) | — | |||||||||
| Expenses: | |||||||||||
| Amortization expense of acquired intangible assets | 122 | 37 | |||||||||
| Merger and strategic initiatives expense | 10 | 4 | |||||||||
| Restructuring charges | 22 | 17 | |||||||||
| Expenses - divested businesses | 4 | 4 | |||||||||
| Other | 1 | 2 | |||||||||
| Total expenses | $ | 159 | $ | 64 | |||||||
| Operating loss | $ | (185) | $ | (54) |
| Nine Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| (in millions) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Divested businesses | $ | 27 | $ | 30 | |||||||||||||
| Adenza purchase accounting adjustment | (34) | — | |||||||||||||||
| Expenses: | |||||||||||||||||
| Amortization expense of acquired intangible assets | 366 | 112 | |||||||||||||||
| Merger and strategic initiatives expense | 23 | 51 | |||||||||||||||
| Restructuring charges | 103 | 49 | |||||||||||||||
| Lease asset impairments | — | 24 | |||||||||||||||
| Legal and regulatory matters | 16 | (10) | |||||||||||||||
| Pension Settlement | 23 | — | |||||||||||||||
| Expenses - divested businesses | 12 | 16 | |||||||||||||||
| Other | 4 | 2 | |||||||||||||||
| Total expenses | $ | 547 | $ | 244 | |||||||||||||
| Operating loss | $ | (554) | $ | (214) |
For further discussion of our segments’ results, see “Segment Operating Results,” of “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The items in the preceding tables are allocated to Corporate Items in our management reports as we believe they do not contribute to a meaningful evaluation of a particular segment’s ongoing operating performance. Management does not consider these items for the purpose of evaluating the performance of our segments or their managers or when making decisions to allocate resources. Therefore, we believe performance measures excluding the below items provide management with a useful representation of our segments’ ongoing activity in each period. These items, which are presented in the tables above, include the following:
-
Revenues and expenses - divested businesses: In June 2023, we entered into an agreement to sell our Nordic power trading and clearing business, which was subsequently terminated in June 2024. While we continue to operate Nordic power trading and clearing and are focused on providing service to our clients, we are evaluating options for this business. Revenues and expenses related to this business for the three and nine months ended September 30, 2024 and 2023, continue to be included as revenues and expenses - divested businesses. Historically, these amounts were included in our Market Services and Capital Access Platforms results.
-
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 segments, and the relative operating performance of the segments 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. These expenses generally include integration costs, as well as legal, due diligence and other third-party transaction costs. The frequency and the amount of such expenses vary significantly based on the size, timing and complexity of the transaction. For the three and nine months ended September 30, 2024 and 2023, these costs primarily relate to the Adenza acquisition. For the nine months ended September 30, 2024, these costs were partially offset by receipt of a fee 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. In September 2024, we completed our divisional alignment program. See Note 19, “Restructuring Charges,” for further discussion of these plans.
*•*Other items: We have included certain other charges or gains in corporate items, to the extent we believe they should be excluded when evaluating the ongoing operating performance of each individual segment. Other items primarily include:
◦Adenza purchase accounting adjustment: As discussed in Note 3, “Revenue from Contracts with Customers,” during the third quarter of 2024, as part of finalizing the purchase accounting of the Adenza acquisition, a one-time net revenue reduction of $32 million was recorded in our Financial Technology segment, reflecting the net impact of the accounting change on AxiomSL subscription revenue from the date of the Adenza acquisition. For purposes of evaluating the performance of our segments, we have excluded the reduction of $34 million as this relates to the prior year impact of this change. We have not excluded the $2 million offsetting current year impact of this change.
◦Lease asset impairments: For the nine months ended September 30, 2023, this included 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 nine months ended September 30, 2024, this primarily related to the settlement of a previously disclosed SFSA inquiry, and accruals related to certain legal matters. For the nine months ended September 30, 2023, this primarily included insurance recoveries related to certain legal matters. The fine is recorded in regulatory expense and the accruals 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 nine months ended September 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 pre-tax charge is recorded in compensation and benefits in the Condensed Consolidated Statements of Income. See Note 9, “Retirement Plans,” for further discussion.
19. 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 connection with this program, we expect to incur approximately $80 million in pre-tax charges principally related to employee-related costs, contract terminations and other related costs. We expect to achieve benefits primarily in the form of expense and revenue synergies.
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. As of September 30, 2024, we completed our divisional alignment program and recognized total pre-tax charges of $139 million over a two-year period, within the anticipated range of $115 million to $145 million.
Costs related to these programs are recorded as restructuring charges in the Condensed Consolidated Statements of Income.
The following table presents a summary of the Adenza restructuring program and our divisional alignment program charges for the three and nine months ended September 30, 2024 and 2023 as well as total program costs incurred since the inception date of each program.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Asset impairment charges | |||||||||||||||||||||||
| Adenza restructuring | $ | — | $ | — | $ | 24 | $ | — | |||||||||||||||
| Divisional realignment | 5 | — | 9 | 12 | |||||||||||||||||||
| Consulting services | |||||||||||||||||||||||
| Adenza restructuring | 1 | — | 4 | — | |||||||||||||||||||
| Divisional realignment | 6 | 9 | 27 | 20 | |||||||||||||||||||
| Employee-related costs | |||||||||||||||||||||||
| Adenza restructuring | 3 | — | 15 | — | |||||||||||||||||||
| Divisional realignment | 2 | 4 | 8 | 10 | |||||||||||||||||||
| Other | |||||||||||||||||||||||
| Adenza restructuring | 1 | — | 6 | — | |||||||||||||||||||
| Divisional realignment | 4 | 4 | 10 | 7 | |||||||||||||||||||
| Total restructuring charges | $ | 22 | $ | 17 | $ | 103 | $ | 49 | |||||||||||||||
| Total Program Costs Incurred | |||||||||||||||||||||||
| Adenza restructuring | $ | 59 | |||||||||||||||||||||
| Divisional realignment | $ | 139 |
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