Key Takeaways From NASDAQ’s Q1 Earnings

by Trefis Team
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Nasdaq OMX Group
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NASDAQ (NASDAQ:NDAQ) recently reported Q1 revenue of $583 million, implying growth of 9% over the same period last year. The company’s focus on growing its non-trading lines of business services has helped it perform strongly despite a fairly less volatile period leading to low trading volume. The rise in non-trading business segments including Corporate Solutions, Market Technology and Information Services, is equally attributable to organic growth and due to acquisitions. However, the Market Services segment saw revenue growth solely due to the acquisitions, and otherwise would have seen a decline under unfavorable trading conditions. In terms of operating margins, there was no change from the prior year quarter as the gain in margins in non-trading business segments was offset by the decline in the Market Services segment. The company launched NASDAQ Private Market Alternatives, a new segment to add liquidity to the less liquid alternative investment funds. The platform is expected to bring together participants from various domains to facilitate regular, auction-based liquidity events for alternative investment funds.

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Non-Trading Businesses Continued Growth Due To Acquisitions, Proprietary Products
NASDAQ’s non-trading business lines generate around 63% of the company’s overall revenues. These businesses grew by around 10% in the first quarter. The growth in the Information Services segment was supported by increased adoption of its in-house products such as IR Insights and Influencer and revenues from the acquisition of ISE. The Corporate Solutions segment grew primarily due to the revenue addition from the acquisition of Marketwired and Boardvantage. The Market Technology segment grew organically under increased uptake of software licensing and support, surveillance, and BWise advisory. Increased demand for data and technology-related products and services is likely to sustain the growth momentum for these segments.

Market Services Has Grown Due To Acquisitions

The company generates about  37% of its revenue from Market Services, and this segment has grown by 8% year on year. The growth due to acquisitions was partially offset by the decline in trading volumes resulting from unfavorable economic conditions and increased competition. The acquisition of NASDAQ CXC slightly managed to offset the huge losses due to a decline in cash equity trading volumes. The equity options volumes picked up pace, post the acquisition of ISE, which gave NASDAQ a massive 40% market share in the U.S. equity options market.

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Investors have possibly shifted to exchanges with a wider range of financial product offerings with more earning opportunities. Furthermore, the recent launch of Investors’ Exchange is likely to be a threat for the company’s equity business.

Please refer to the full Trefis analysis for Nasdaq

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