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Annual Report

2016 ANNUAL SHAREHOLDER LETTER

from Adena T. Friedman, President and Chief Executive Officer, Nasdaq, Inc.

Dear Shareholders,

Adena Friedman Shareholder Letter March 2017Over the past year, Nasdaq again advanced its ambitions to improve and serve the capital markets ecosystem. Our progress was evident in the strengthening of our competitive position through the adoption of new technologies, our strategic acquisitions and the expansion of our product and service portfolio. All of our efforts are centered on a singular focus – to fuel the ambition of our clients. 

By better serving broker-dealers, exchange operators, corporates and investors we create better opportunities for all parties to interact with the capital markets. And by doing so, we will create value for shareholders, continue to foster a culture of performance and success for our employees, and advance our position as the franchise of choice for prospects and partners around the globe.

Our Ambitions

I am deeply honored by the Board’s decision to select me as Nasdaq’s Chief Executive Officer. To me, Nasdaq is far more than a company. The technology, products, and services we provide help our clients better navigate the complexities of today’s global capital markets. Our offerings allow ideas to find capital and to seize opportunity, and we create more constructive interactions with capital markets which create jobs and drive economic growth. I have spent most of my career at Nasdaq, nearly 20 years, and consider the entrepreneurial spirit and energy of my colleagues to be the engine that fuels our own ambition.

This spirit is the direct result of the extraordinary leadership of my predecessor, Bob Greifeld, who led Nasdaq through several important transformations, leveraging the underpinnings of our position as a leading U.S. cash equity market to become a global capital market and financial technology solutions leader with a market capitalization of more than $11 billion.

The long-term focus on shareholder value that Bob advanced during his 14-year tenure as CEO is a focus that I fully embrace. We accomplished much for our shareholders in 2016, and we intend to continue making great strides for you in 2017 and the years and decades to come. Financially, our results were strong in 2016, with full-year net revenues1 up to a record $2.28 billion and non-GAAP operating income2 also rising to a record $1.06 billion.

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“Financially, our results were strong in 2016, with full-year net revenues up to a record $2.28 billion and non-GAAP operating income also rising to a record, $1.06 billion.”



[1] Represents revenues less transaction-based expenses.
[2] Refer to our accompanying reconciliation of U.S. GAAP to non-GAAP operating income.

 

Our Actions

Our industry is dynamic and we continue to make key investments in our businesses that help strengthen our competitive position, deepen our client relationships, and drive future product innovation. In Market Services, we acquired International Securities Exchange, the operator of three U.S. equity options exchanges. We also completed the acquisition of Nasdaq CXC, formerly Chi-X Canada, an alternative market in Canada for the trading of Canadian-listed securities. In Corporate Solutions, we purchased Marketwired, a global provider of news distribution services with about 7,500 corporate clients, and Boardvantage, a leading board collaboration and productivity provider with approximately 1,900 clients. We are already well along the path to integrate these four businesses, and are targeting about $60 million of combined cost synergies.

It has always been our people at Nasdaq who have been responsible for our progress and taking the business to new heights. In addition to developing a diverse mix of businesses that will best serve our industry and our clients, we focus on having the right people to operate these businesses – individuals with vision, finely honed management skills and deep industry knowledge. In 2016, we continued to strengthen our senior management team in order to drive the kind of performance and innovation we demand of ourselves.

At midyear, we appointed Michael Ptasznik as Chief Financial Officer, a position he held at TMX Group since 2002. Later in the year, we promoted Stacie Swanstrom to Executive Vice President, Corporate Solutions and Bjørn Sibbern to Executive Vice President, Global Information Services. Additionally, Hans-Ole Jochumsen was elevated to Vice Chairman, a role in which he works closely with senior leaders across Nasdaq, most notably in Europe, to identify and select appropriate new opportunities for our businesses.

Fueling Our Clients' Ambitions

Opportunities within Nasdaq’s businesses are numerous in today’s environment. We find ourselves in a period of technological innovation that is truly exciting in its breadth and potential to impact the businesses we operate. If fueling our clients’ ambitions is our core focus, undoubtedly, technology is a key catalyst to our mutual success. It is a component we know well. Nasdaq was founded in 1971 as the world’s first electronic stock market and we remain a financial technology leader today. In fact, nearly one-third of our global workforce comprises engineers, and today our technology powers more than 85 marketplaces around the world.

“If fueling our clients’ ambitions is our core focus, undoubtedly, technology is a key catalyst to our mutual success. It is a component we know well.”

In many ways however, we feel we are still taking the early steps in this journey and there is much more ahead. Last year, for example, we unveiled the Nasdaq Financial Framework, which brings together all of the elements of our Market Technology capabilities. The Framework consists of a single operational core that ties together our business functionality, allowing exchanges, marketplaces, broker-dealers, clearinghouses and other clients to integrate our applications with each other seamlessly to create a more streamlined end-to-end trade lifecycle solution. Additionally, our capital markets clients can now easily leverage the latest technologies we are developing, such as blockchain-driven services and cloud applications to help achieve their objectives.

Importantly, we have also built new products and services for our corporate clients. During 2016, we launched a new innovative Investor Relations platform called Nasdaq IR Insight, which was designed with significant client collaboration to capture the work streams of Investor Relations Officers, improve data intelligence and enhance decision-making through a single product. We also unveiled Nasdaq Influencers, a new solution for communications and marketing professionals to discover and connect with the most relevant public thought leaders.

In addition, we rolled out Trading Insights, a product suite that combines proprietary data with advanced analytics and machine learning to provide our broker-dealer clients with additional insights about the markets that we operate.

While the ways in which we support our clients’ ambitions continue to evolve, the principles of capital formation and well-functioning markets remain at the core of our organization. Companies seek growth, from emerging private companies to the opening bell of their IPOs, to the moment when they become industry giants and household names. In fact, Nasdaq led U.S. exchanges last year by helping companies begin that journey, with a total of 91 IPOs, representing 73% of all U.S. IPOs and including 87% of technology IPOs. We have been successful in combining our market structure and trading tools with our corporate solutions, as well as the attributes of our brand, to create a truly differentiated value proposition for our new listed clients.

Country comparison infographic

“Nasdaq led U.S. exchanges last year by helping companies begin that journey, with a total of 91 IPOs, representing 73% of all U.S. IPOs and including 87% of technology IPOs.”

Executing on Our Ambitions

In 2017, we find ourselves well-positioned to capitalize on the opportunities inherent in a rapidly changing world. Looking across Nasdaq today, I believe this franchise has the broadest set of capabilities in the industry and therefore is well-suited to serve the diverse needs of our global client base. Of course, the secret to capitalizing on these capabilities is extraordinary execution. To us, that means functioning as a single, seamless entity across business units, and we are in a better place to achieve this today than at any point in our history.

Progress for us also means we routinely evaluate our businesses and relationships to find the best path to serve our clients in a unified and strategic way. With our fourth-quarter results, we announced the realignment of our reporting segments, creating a new Corporate Services segment that incorporates our Listing Services and Corporate Solutions businesses. In addition, Market Technology has become a stand-alone segment. These changes are designed to let the investment community better understand how we approach our clients, develop our offerings and create value across the franchise. We also announced a new fixed income strategy, bringing together our U.S. and European fixed income products and services under a single brand called Nasdaq Fixed Income.

Last year was both eventful and successful and one that speaks to the opportunities that lie ahead for Nasdaq. We live in dynamic times – technology, business and the geopolitical landscapes are all evolving at a rapid pace. The role Nasdaq plays at the intersection of capital markets and technology uniquely allows us to help clients navigate this challenging environment. Our management team is keenly focused on identifying these opportunities and advancing our clients’ ambitions.

I am excited to lead this organization forward in the next phase of its journey. I look forward to reporting to you next year on our achievements and our progress in executing our long-term strategy.

 

/ Adena T. Friedman

President and Chief Executive Officer
Nasdaq, Inc.

Fueling Ambition
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