2019 net revenues² were $2,535 million. Revenues in the non-trading segments increased 10% versus the prior year period, while Market Services revenues decreased 5% from a multi-year annual high in 2018 as volatility and volumes receded.

The 10% increase in 2019 net revenues in the non-trading segments reflected 8% organic growth and a 3% positive impact from acquisitions, partially offset by a 1% negative impact from unfavorable changes in foreign exchange rates.

Fourth quarter 2019 net revenues were $646 million. Revenues in the non-trading segments increased 9% versus the prior year period, primarily driven by organic growth, while Market Services revenues decreased 10% compared to the fourth quarter of 2018, which featured near record volumes and revenues.

The GAAP operating margin was 40% in 2019, compared to 41% in the prior year, while the non-GAAP operating margin³ of 49% increased from 48% in the prior year.

2019 GAAP diluted earnings per share was $4.63, compared to $2.73 in 2018, while fourth quarter 2019 GAAP diluted earnings per share was $1.21 compared to a loss of $0.27 in the fourth quarter of 2018.

2019 non-GAAP earnings per share was $5.00, compared to $4.75 in 2018, while fourth quarter 2019 non-GAAP diluted earnings per share of $1.29 increased from $1.24 in the fourth quarter of 2018.

During 2019, the company returned $505 million to shareholders, including $200 million through its share buyback program and $305 million through quarterly dividends, while also completing a multi-year deleveraging objective.

Constitutes revenues from Market Technology, Information Services and Corporate Services segments.

Represents revenues less transaction-based expenses.

Refer to our reconciliations of U.S. GAAP to non-GAAP net income (loss), diluted earnings (loss) per share, operating income and operating expenses, included in the attached schedules.

U.S. GAAP operating expense and tax rate guidance are not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors including the unpredictability in the movement in foreign currency rates, as well as future charges or reversals outside of the normal course of business.

Nasdaq continues to see strong client traction in its Market Technology segment. In 2019, Nasdaq signed seven new market infrastructure operator and New Market clients for its core matching, surveillance and post trade systems, as well as 18 new buy-side and sell-side customers. Annualized recurring revenue¹, or ARR, totaled $260 million in the fourth quarter of 2019, an increase of 17% year over year. Development and deployment of the next generation Nasdaq Financial Framework solution continues on schedule and the company continued to grow its sell-side, Nasdaq-hosted execution platform offering with four new firms in 2019 (two in the fourth quarter), including three Tier 1 global banks. In the non-financial market area, Nasdaq signed an agreement with Airbus subsidiary Skytra to create a new marketplace for the trading of air travel price derivatives. Nasdaq will deliver a full suite of marketplace systems including our matching engine, market surveillance and pre-trade risk management, as well as a system for the regulatory reporting required under MiFID II. The systems will be hosted in Nasdaq’s data centers and the public cloud, while Nasdaq will provide a fully managed service, including technical operations of all software and infrastructure.

The Nasdaq Stock Market led U.S. exchanges for IPOs during 2019 with a 78% win rate. In the U.S. market, The Nasdaq Stock Market welcomed 107 new listings, including 50 IPOs, in the fourth quarter of 2019, and welcomed 188 IPOs in 2019. The U.S. IPO win rate totaled 82% during the fourth quarter of 2019. The Nasdaq Stock Market led U.S. exchanges during 2019 with a 78% IPO win rate, including 10 of the top 15 IPOs by capital raised, and with 58% of the IPO issuance raised. During 2019, the company had 16 new listings resulting from new companies switching their listings from either the NYSE or IEX to join Nasdaq, and combined with companies who transferred additional components of their listings to Nasdaq during 2019, an aggregate of $230 billion in global equity market capitalization switched to Nasdaq. Nasdaq’s new U.S. corporate bond listing offering won 11 new issues and 37 existing bonds transferred from the NYSE. Nasdaq’s European exchanges added 17 new listings including 12 IPOs during the fourth quarter of 2019, and welcomed 53 new listings including 34 IPOs in 2019.

Index revenues and ETP assets under management tracking Nasdaq indexes each set a new quarterly record. Overall AUM in ETPs benchmarked to Nasdaq’s proprietary index products totaled $233 billion as of December 31, 2019, an increase of $61 billion compared to December 31, 2018. The December 31, 2019 total AUM included $100 billion, or 43%, tracking smart beta indexes.

Nasdaq maintained its commitment to sustainability through a number of product announcements and initiatives. In 2019 and early 2020, Nasdaq achieved a number of Environmental, Social and Governance (ESG) milestones for its work with corporate clients as well as within its own operations. These milestones included the launches of the Nasdaq Sustainable Bond Network, a platform for increased transparency in the global sustainable bond markets, and an ESG Advisory Program to help companies analyze, assess and implement ESG programs with the goal of attracting long-term capital. Nasdaq also saw continued growth in the Nasdaq European Sustainable Debt market while delivering further advancements in its European ESG data offering for institutional and retail investors. Nasdaq achieved carbon neutrality across all the company’s operations through the purchase of carbon offsets and renewable energy certificates.

Nasdaq introduced artificial intelligence capabilities to improve surveillance patterns on the U.S. stock market. Nasdaq, through a collaboration of its Market Technology business and U.S. market surveillance unit, launched the use of artificial intelligence for surveillance patterns on The Nasdaq Stock Market, the world’s largest stock exchange by volume traded. The initiative enhances Nasdaq’s market surveillance functionality to improve detection of malicious activity. Over time, our Market Technology business expects to offer these new detection capabilities for surveillance to its exchange and regulator customers as well as its banks and broker customers.

Annualized Recurring Revenue (ARR) for a given period is the annualized revenue of active Market Technology support and SaaS subscription contracts. ARR is currently one of our key performance metrics to assess the health and trajectory of our business. ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

Revenues:

Market Services

Transaction-based expenses:

Transaction rebates

Brokerage, clearance and exchange fees

Total Market Services revenues less transaction-based expenses

Corporate Services

Information Services

Market Technology

Other Revenues

Revenues less transaction-based expenses

Operating Expenses:

Compensation and benefits

Professional and contract services

Computer operations and data communications

Occupancy

General, administrative and other

Marketing and advertising

Depreciation and amortization

Regulatory

Merger and strategic initiatives

Restructuring charges

Total operating expenses

Operating income

Interest income

Interest expense

Gain on sale of investment security

Net gain on divestiture of businesses

Other income

Net income from unconsolidated investees

Income before income taxes

Income tax provision

Net income (loss) attributable to Nasdaq

Per share information:

Basic earnings (loss) per share

Diluted earnings (loss) per share

Cash dividends declared per common share

Weighted-average common shares outstanding for earnings (loss) per share:

Basic

Diluted ⁽¹⁾

Due to the net loss for the quarter ended December 31, 2018, the diluted earnings (loss) per share calculation excludes 3.2 million of employee stock awards as they were anti-dilutive.

MARKET SERVICES REVENUES

Equity Derivative Trading and Clearing Revenues

Transaction-based expenses:

Transaction rebates

Brokerage, clearance and exchange fees

Total net equity derivative trading and clearing revenues

Cash Equity Trading Revenues

Transaction-based expenses:

Transaction rebates

Brokerage, clearance and exchange fees

Total net cash equity trading revenues

Fixed Income and Commodities Trading and Clearing Revenues

Transaction-based expenses:

Transaction rebates

Brokerage, clearance and exchange fees

Total net fixed income and commodities trading and clearing revenues

Trade Management Services Revenues

Total Net Market Services revenues

CORPORATE SERVICES REVENUES

Listings Services revenues

Corporate Solutions revenues

Total Corporate Services revenues

INFORMATION SERVICES REVENUES

Market Data revenues

Index revenues

Investment Data & Analytics revenues

Total Information Services revenues

MARKET TECHNOLOGY REVENUES

OTHER REVENUES

REVENUES LESS TRANSACTION-BASED EXPENSES

Assets

Current assets:

Cash and cash equivalents

Restricted cash

Financial investments

Receivables, net

Default funds and margin deposits

Other current assets

Total current assets

Property and equipment, net

Goodwill

Intangible assets, net

Operating lease assets

Other non-current assets

Total assets

Liabilities

Current liabilities:

Accounts payable and accrued expenses

Section 31 fees payable to SEC

Accrued personnel costs

Deferred revenue

Other current liabilities

Default funds and margin deposits

Short-term debt

Total current liabilities

Long-term debt

Deferred tax liabilities, net

Operating lease liabilities

Other non-current liabilities

Total liabilities

Commitments and contingencies

Equity

Nasdaq stockholders’ equity:

Common stock

Additional paid-in capital

Common stock in treasury, at cost

Accumulated other comprehensive loss

Retained earnings

Total Nasdaq stockholders’ equity

Total liabilities and equity

U.S. GAAP net income (loss) attributable to Nasdaq

Non-GAAP adjustments:

Amortization expense of acquired intangible assets ⁽¹⁾

Merger and strategic initiatives ⁽²⁾

Restructuring charges ⁽³⁾

Net income from unconsolidated investee ⁽⁴⁾

Net gain on divestiture of businesses ⁽⁵⁾

Extinguishment of debt ⁽⁶⁾

Clearing default ⁽⁷⁾

Provision for notes receivable ⁽⁸⁾

Gain on sale of investment security ⁽⁹⁾

Other ⁽¹⁰⁾

Total non-GAAP adjustments

Non-GAAP adjustment to the income tax provision ⁽¹¹⁾

Reversal of Swedish tax benefits

Impact of enacted U.S. tax legislation ⁽¹²⁾

Excess tax benefits related to employee share-based compensation

Total non-GAAP adjustments, net of tax

Non-GAAP net income attributable to Nasdaq

U.S. GAAP diluted earnings (loss) per share

Total adjustments from non-GAAP net income above

Non-GAAP diluted earnings per share

Weighted-average diluted common shares outstanding for earnings (loss) per share:

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.

We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years which have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs and will vary based on the size and frequency of the activities described above.

In September 2019, we initiated the transition of certain technology platforms to advance the company’s strategic opportunities as a technology and analytics provider and continue the realignment of certain business areas. Charges associated with this plan represent a fundamental shift in our strategy and technology as well as executive re-alignment and will be excluded for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq’s performance between periods. For the three months ended December 31, 2019, we recorded $9 million in charges primarily related to severance and employee-related costs. For the three months ended September 30, 2019, we recorded $30 million in charges primarily related to asset impairment charges mainly related to capitalized software that was retired.

In the relevant periods, primarily represents net income recognized from our equity interest in OCC. The increase for the year ended December 31, 2019 primarily represents additional income recognized in 2019 due to the timing of information received from the OCC. In February 2019, due to the SEC disapproval of the OCC rule change that established OCC’s 2015 capital plan, OCC suspended customer rebates and dividends to owners. We were not able to determine the impact of the disapproval of the OCC capital plan on OCC’s 2018 net income until March 2019, when OCC’s 2018 financial statements were made available to us. As a result, in March 2019, we recognized an additional $36 million of income relating to our share of OCC’s net income for the year ended December 31, 2018. We also recognized our share of OCC’s net income of $48 million for the year ended December 31, 2019. We will continue to exclude net income related to our share of OCC’s earnings for purposes of calculating non-GAAP measures as our income on this investment will vary significantly compared to prior years. This will provide a more meaningful analysis of Nasdaq’s ongoing operating performance or comparisons in Nasdaq’s performance between periods.

For the year ended December 31, 2019, represents the pre-tax gain on the sale of the BWise enterprise governance, risk and compliance software platform and for the year ended December 31, 2018, represents the pre-tax gain on the sale of the Public Relations Solutions and Digital Media Services businesses.

Represents a charge recorded in connection with the early extinguishment of our 5.55% senior unsecured notes, primarily related to a premium paid for early redemption. This charge is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents charges associated with the clearing default which occurred in 2018. These charges are recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents a provision for notes receivable associated with the funding of technology development for the consolidated audit trail, which is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents a pre-tax gain on the sale of our 5.0% ownership interest in LCH Group Holdings Limited for $169 million in cash.

For the three months and year ended December 31, 2019, other charges included costs for a tax reserve for certain prior year examinations, which is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss) and certain litigation costs which are recorded in professional and contract services expense in the Condensed Consolidated Statements of Income (Loss). For the three months and year ended December 31, 2018, other charges included litigation costs, which are recorded in professional and contract services expense in our Condensed Consolidated Statements of Income (Loss), as well as certain charges related to a sales and use tax audit and VAT reserves which are recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

The non-GAAP adjustment to the income tax provision primarily includes the tax impact of each non-GAAP adjustment. In addition, for the three months and year ended December 31, 2019, a tax benefit of $10 million was recorded, primarily related to an adjustment to the 2018 federal and state tax returns. The year ended December 31, 2019 also includes a tax benefit of $10 million related to capital distributions from the OCC recorded in March 2019. See footnote 4 above for further discussion of our OCC investment. In certain periods the adjustment may include the recognition of previously unrecognized tax benefits associated with positions taken in prior years.

Represents the impact of enacted U.S. tax legislation related to the Tax Cuts and Jobs Act which was enacted on December 22, 2017. For the three months and year ended December 31, 2018, we recorded an increase to tax expense of $289 million and $290 million, respectively and a reduction to a deferred tax asset related to foreign currency translation.

U.S. GAAP operating income

Non-GAAP adjustments:

Amortization expense of acquired intangible assets ⁽¹⁾

Merger and strategic initiatives ⁽²⁾

Restructuring charges ⁽³⁾

Extinguishment of debt ⁽⁴⁾

Clearing default ⁽⁵⁾

Provision for notes receivable ⁽⁶⁾

Other ⁽⁷⁾

Total non-GAAP adjustments

Non-GAAP operating income

Revenues less transaction-based expenses

U.S. GAAP Operating margin ⁽⁸⁾

Non-GAAP operating margin ⁽⁹⁾

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.

We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years which have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs and will vary based on the size and frequency of the activities described above.

In September 2019, we initiated the transition of certain technology platforms to advance the company’s strategic opportunities as a technology and analytics provider and continue the realignment of certain business areas. Charges associated with this plan represent a fundamental shift in our strategy and technology as well as executive re-alignment and will be excluded for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq’s performance between periods. For the three months ended December 31, 2019, we recorded $9 million in charges primarily related to severance and employee-related costs. For the three months ended September 30, 2019, we recorded $30 million in charges primarily related to asset impairment charges mainly related to capitalized software that was retired.

Represents a charge recorded in connection with the early extinguishment of our 5.55% senior unsecured notes, primarily related to a premium paid for early redemption. This charge is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents charges associated with the clearing default which occurred in 2018. These charges are recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents a provision for notes receivable associated with the funding of technology development for the consolidated audit trail, which is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

For the three months and year ended December 31, 2019, other charges included costs for a tax reserve for certain prior year examinations, which is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss) and certain litigation costs which are recorded in professional and contract services expense in the Condensed Consolidated Statements of Income (Loss). For the three months and year ended December 31, 2018, other charges included litigation costs, which are recorded in professional and contract services expense in our Condensed Consolidated Statements of Income (Loss), as well as certain charges related to a sales and use tax audit and VAT reserves which are recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

U.S. GAAP operating margin equals U.S. GAAP operating income divided by revenues less transaction-based expenses.

Non-GAAP operating margin equals non-GAAP operating income divided by revenues less transaction-based expenses.

U.S. GAAP operating expenses

Non-GAAP adjustments:

Amortization expense of acquired intangible assets ⁽¹⁾

Merger and strategic initiatives ⁽²⁾

Restructuring charges ⁽³⁾

Extinguishment of debt ⁽⁴⁾

Clearing default ⁽⁵⁾

Provision for notes receivable ⁽⁶⁾

Other ⁽⁷⁾

Total non-GAAP adjustments

Non-GAAP operating expenses

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.

We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years which have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs and will vary based on the size and frequency of the activities described above.

In September 2019, we initiated the transition of certain technology platforms to advance the company’s strategic opportunities as a technology and analytics provider and continue the realignment of certain business areas. Charges associated with this plan represent a fundamental shift in our strategy and technology as well as executive re-alignment and will be excluded for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq’s performance between periods. For the three months ended December 31, 2019, we recorded $9 million in charges primarily related to severance and employee-related costs. For the three months ended September 30, 2019, we recorded $30 million in charges primarily related to asset impairment charges mainly related to capitalized software that was retired.

Represents a charge recorded in connection with the early extinguishment of our 5.55% senior unsecured notes, primarily related to a premium paid for early redemption. This charge is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents charges associated with the clearing default which occurred in 2018. These charges are recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Represents a provision for notes receivable associated with the funding of technology development for the consolidated audit trail, which is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

For the three months and year ended December 31, 2019, other charges included costs for a tax reserve for certain prior year examinations, which is recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss) and certain litigation costs which are recorded in professional and contract services expense in the Condensed Consolidated Statements of Income (Loss). For the three months and year ended December 31, 2018, other charges included litigation costs, which are recorded in professional and contract services expense in our Condensed Consolidated Statements of Income (Loss), as well as certain charges related to a sales and use tax audit and VAT reserves which are recorded in general, administrative and other expense in our Condensed Consolidated Statements of Income (Loss).

Market Services

Equity Derivative Trading and Clearing

U.S. equity options

Total industry average daily volume (in millions)

Nasdaq PHLX matched market share

The Nasdaq Options Market matched market share

Nasdaq BX Options matched market share

Nasdaq ISE Options matched market share

Nasdaq GEMX Options matched market share

Nasdaq MRX Options matched market share

Total matched market share executed on Nasdaq’s exchanges

Nasdaq Nordic and Nasdaq Baltic options and futures

Total average daily volume options and futures contracts ⁽¹⁾

Cash Equity Trading

Total U.S.-listed securities

Total industry average daily share volume (in billions)

Matched share volume (in billions)

The Nasdaq Stock Market matched market share

Nasdaq BX matched market share

Nasdaq PSX matched market share

Total matched market share executed on Nasdaq’s exchanges

Market share reported to the FINRA/Nasdaq Trade Reporting Facility

Total market share⁽²⁾

Nasdaq Nordic and Nasdaq Baltic securities

Average daily number of equity trades executed on Nasdaq’s exchanges

Total average daily value of shares traded (in billions)

Total market share executed on Nasdaq’s exchanges

Fixed Income and Commodities Trading and Clearing

Fixed Income

U.S. fixed income volume (in billions traded)

Total average daily volume of Nasdaq Nordic and Nasdaq Baltic fixed income contracts

Commodities

Power contracts cleared (TWh) ⁽³⁾

Corporate Services

Initial public offerings

The Nasdaq Stock Market

Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic

Total new listings

The Nasdaq Stock Market⁽⁴⁾

Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic⁽⁵⁾

Number of listed companies

The Nasdaq Stock Market⁽⁶⁾

Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic⁽⁷⁾

Information Services

Number of licensed exchange traded products (ETPs)

ETP assets under management (AUM) tracking Nasdaq indexes (in billions)

Market Technology

Order intake (in millions) ⁽⁸⁾

Annualized recurring revenues (in millions) ⁽⁹⁾

Includes Finnish option contracts traded on Eurex Group.

Includes transactions executed on The Nasdaq Stock Market’s, Nasdaq BX’s and Nasdaq PSX’s systems plus trades reported through the Financial Industry Regulatory Authority/Nasdaq Trade Reporting Facility.

Transactions executed on Nasdaq Commodities or OTC and reported for clearing to Nasdaq Commodities measured by Terawatt hours (TWh).

New listings include IPOs, including those completed on a best efforts basis, issuers that switched from other listing venues,closed-end funds and separately listed ETPs.

New listings include IPOs and represent companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North.

Number of total listings on The Nasdaq Stock Market at period end, including 412 ETPs as of December 31, 2019, 382 ETPs as of September 30, 2019, and 392 ETPs as of December 31, 2018.

Represents companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North at period end.

Total contract value of orders signed during the period.

Annualized Recurring Revenue, or ARR, for a given period is the annualized revenue of Market Technology support and SaaS subscription contracts. ARR is currently one of our key performance metrics to assess the health and trajectory of our business. ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts during the reporting period used in calculating ARR may or may not be extended or renewed by our customers.