Letter from Our Board of Directors
MARCH 14, 2018
Dear Fellow Stockholders,
Thank you for your interest in Nasdaq and for trusting us to oversee and grow your investment in our business. In 2017, we have worked to create value for our stockholders and to position Nasdaq for continued success over the long term.
The new corporate strategy is designed to focus our resources on the greatest growth opportunities while retaining our goal of double-digit total stockholder return.
One of the Board’s most important responsibilities is to oversee the CEO succession process and to ensure a successful and orderly leadership transition. Following years of planning, on January 1, 2017, Adena T. Friedman became the President and CEO of Nasdaq. In May 2017, the Board elected Michael R. Splinter, the retired Chairman and former CEO of Applied Materials, as Board Chairman. The leadership transition arrived at an important time for Nasdaq as we began to refocus our business for the future.
Early in 2017, with the full support of the Board, our management team initiated a comprehensive review of Nasdaq’s strategy and businesses that resulted in a strategic pivot for the organization. The new corporate strategy is designed to focus our resources on the greatest growth opportunities while retaining our goal of double-digit total stockholder return.
As a result, we intend to increase investment in: our Market Technology segment, including our market infrastructure and regulatory technology businesses; our Information Services segment, including our data analytics capabilities; and a select number of smaller growth businesses, including Nasdaq Private Market. We intend to maintain our investments in our core businesses, notably our foundational trading and listings businesses. Finally ,we intend to review areas that are not critical to our core. In these areas, we expect to target resiliency and efficiency versus growth, and thus free up and redirect our resources toward greater opportunities.
Our financial results were strong in 2017, with full-year net revenue1 at a record $2.43 billion. 2017 GAAP diluted EPS was $4.33, compared to $0.64 in 2016, while 2017 non-GAAP diluted EPS2 was $4.06, a 10% increase compared to the prior year.
1 Represents revenues less transaction-based expenses.
2 Refer to Annex A for our reconciliations of U.S. GAAP to non-GAAP net income and diluted EPS.
A fundamental objective of the strategic pivot is to optimize our capital allocation decisions to be consistent with market opportunities. The Board works closely with management in planning and executing such efforts. In 2017, the company made two key acquisitions (eVestment and Sybenetix) and explored strategic alternatives for certain existing businesses in a way that was consistent with our new strategic direction. As a result of this review, we have entered into a definitive agreement to sell the public relations (Public Relations Solutions) and webcasting and webhosting (Digital Media Services) products and services within our Corporate Solutions business. The closing of this transaction, which is subject to regulatory approvals and customary closing conditions, is expected in the second quarter of 2018. In addition to investments and divestitures, the Board and management remain focused on investment in organic growth opportunities, de-leveraging the balance sheet and returning capital to stockholders. These efforts include share buybacks and growing our dividend as earnings and cash flow increase.
We are pleased to have nominated Jacob Wallenberg, Chairman of Investor AB, to the Board.
With a new administration in Washington, in 2017 we elevated our voice on important issues critical to market operation, market structure and our listed companies. This effort, with the Board’s support, resulted in the development of a detailed blueprint, entitled The Promise of Market Reform: Reigniting America’s Economic Engine, which is available at http://business.nasdaq.com/revitalize, reaffirming our commitment to capital markets reform and detailing specific proposals to promote legislative and policy reforms around market structure, proxy statements, litigation, taxes, long-termism and the Financial CHOICE Act, which was passed by the House of Representatives in June 2017.
We intend to increase investment in: our Market Technology segment, including our market infrastructure and regulatory technology businesses; our Information Services segment, including our data analytics capabilities; and a select number of smaller growth businesses, including Nasdaq Private Market.
BOARD COMPOSITION AND GOVERNANCE FOCUS
Refreshing the Board with new perspectives and ideas is critical to a successful and strategic board of directors. In 2017, we welcomed Melissa M. Arnoldi, President of Technology & Operations at AT&T Communications, and John D. Rainey, CFO and EVP of Global Customer Operations at PayPal Holdings, Inc., to the Board. We continue to evaluate our Board composition to ensure the Board is comprised of talented, skilled and ethical directors to represent the long-term interest of stockholders and are pleased to have nominated Jacob Wallenberg, Chairman of Investor AB, to the Board. Mr. Wallenberg will stand for election at our Annual Meeting on April 24, 2018. We also continue to strive for various types of diversity on the Board, with the Board now including three female members.
In addition to the strategic and capital allocation priorities discussed earlier, we also continue to focus our attention on the important issues of: executive compensation; board structure and composition; corporate culture, diversity and human capital; our environmental, social and governance policies; information and cybersecurity initiatives; and enterprise risk management.
As we make decisions in the boardroom, a priority for the Board is to hear from and engage with you, our stockholders. We accomplish this through ongoing outreach and engagement. Please continue to share your opinions and suggestions with us. You can submit your views by writing to us at: AskBoard@nasdaq.com or Nasdaq Board of Directors c/o Joan Conley, SVP and Corporate Secretary, 805 King Farm Blvd., Rockville, MD 20850.
We thank you for the trust you have placed in us and for your continued support of Nasdaq. The Board is committed to working on your behalf to ensure Nasdaq’s continued ability to optimize and execute our new strategy for the ultimate benefit of stockholders.
The Board of Directors of Nasdaq, Inc.
Melissa M. Arnoldi
Charlene T. Begley
Steven D. Black
Adena T. Friedman
Thomas A. Kloet
John D. Rainey
Michael R. Splinter
Lars R. Wedenborn
Please continue to share your opinions and suggestions with us. You can submit your views by writing to us at: AskBoard@nasdaq.com or Nasdaq Board of Directors c/o Joan Conley, SVP and Corporate Secretary, 805 King Farm Blvd., Rockville, MD 20850.
Letter from Our President and CEO
MARCH 14, 2018
As I look back at the past year, it strikes me that 2017 will be viewed as pivotal for Nasdaq. We continued to execute against our near-term goals, posting strong operating and financial results, but at the same time we looked firmly to the future, developing a long-term strategy that leverages our core strengths and channels our resources to those areas that will position us best in the years to come.
Everything we accomplish at Nasdaq is the result of our constant focus on understanding and satisfying the needs of our clients. My first year as CEO has allowed me to spend time visiting our clients and offices across the globe, and I have been impressed at every turn. Our team’s talent and dedication to clients extend to all levels of the organization. We have instilled a partnership approach to everything we do for our clients, working tirelessly to understand the dynamics and evolution of their respective businesses. All of our employees contribute in important ways to Nasdaq’s corporate vision: to reimagine markets to realize the potential of tomorrow. Our employees take great pride in our role in promoting global economic growth through the creation and operation of advanced capital markets. We succeed when our clients succeed.
As we deliver for our clients, Nasdaq is committed to sustainable business practices and community support. We measure and report our environmental, social, and governance performance because we believe it directly contributes to long-term value. Nasdaq’s volunteerism and philanthropy programs have grown exponentially over the last few years, attracting new talent to the company and enhancing internal job satisfaction. We have also embarked on specific programs to improve our sustainable footprint, focusing on LEED green building standards, energy efficiency, recycling, and waste reduction campaigns.
Our values – putting clients first, acting with integrity, and leading with innovation – are instilled throughout the organization, starting at the top with our Board of Directors. Michael R. Splinter, an independent director who has served on the Board since 2008, was elected Chairman this past year. We also had the good fortune to add two new Board members, Melissa M. Arnoldi and John D. Rainey. Our Board brings invaluable diversity of backgrounds and thinking, all with the same ambition to further Nasdaq’s mission globally on behalf of our stockholders. To that end, Jacob Wallenberg, Chairman of Investor AB, will stand for election to the Board at our Annual Meeting in April.
The challenge for any organization in today’s environment is the ability to look to the future while at the same time keeping a close eye on the present. In this, Nasdaq has done well, remaining focused throughout the year on the three near-term execution priorities we laid out at the beginning of 2017, while also developing our strategy for the future.
Our values – putting clients first, acting with integrity, and leading with innovation – are instilled throughout the organization, starting at the top with our Board of Directors.
EXECUTING ON OUR COMMITMENT TO THE CAPITAL MARKETS
Nasdaq’s first execution priority was enhancing our competitive position, which resulted in improved market share in our largest trading revenue categories, U.S. equities, U.S. options and European equities. This came during a year that saw the Nasdaq Composite reach new highs as the lengthy bull market continued to advance. In addition, Nasdaq maintained its leadership in global listings, having won 63% of U.S. IPOs in 2017 and winning a record-breaking 108 new listings on our Nordic and Baltic exchanges and Nasdaq First North. We also welcomed 11 listing transfers in the U.S., representing approximately $217.8 billion in market capitalization. These included storied brands such as PepsiCo and Principal Financial. This was a significant milestone as we have now surpassed over $1 trillion in total market value switching from the New York Stock Exchange to Nasdaq since 2005.
Our second execution priority for the year was completing the integration of our 2016 acquisitions, which included International Securities Exchange, Nasdaq Canada and Boardvantage. We achieved our initial synergy targets in just 12 months and identified still more savings, maintaining strong relationships with clients as the integrations progressed.
The year’s final execution priority was the commercialization of our disruptive technologies, which include blockchain, cloud computing and machine learning. This was demonstrated by the strong support from clients for our cloud-enabled Nasdaq Financial Framework and the successful launch of Analytics Hub, which leverages machine learning to deliver unique trading insights.
The end result of execution should always be performance, and our ability to deliver on these three priorities yielded a strong year from a financial perspective, with Nasdaq’s full-year net revenues rising in 2017 to $2.4 billion.
We also turned decisively to the future. Early in the year, we took to the next level our leadership role in policy discussions on the future of the U.S. capital markets, a critical issue for many clients. We developed a blueprint, entitled The Promise of Market Reform: Reigniting America’s Economic Engine, outlining our views on how to make real progress in reconstructing the regulatory framework of our capital markets, modernizing market structure and promoting long-term thinking. We were pleased to see support for many of our proposals from our clients, regulators and lawmakers.
In addition to addressing policy matters, we initiated a thorough analysis of Nasdaq itself and how we want to position ourselves for the future. One of my first actions as CEO was to conduct a strategic review of Nasdaq’s businesses in the context of our core strengths, competitive advantages and the remarkable pace of change we see. This review resulted in a decision to focus on those businesses that offer the largest growth opportunities, which include Market Technology and information Services, and deploy resources where they can generate the most value for our clients and our stockholders. We stand at the center of today’s capital markets, and we are focusing the organization so that we can leverage our unique technology and market structure expertise to reimagine the markets of the future.
The end result of execution should always be performance, and our ability to deliver on our three 2017 execution priorities yielded a strong year from a financial perspective, with Nasdaq’s full-year net revenues rising in 2017 to $2.4 billion.
Driving Nasdaq’s new strategic direction is the understanding that we are operating in a new environment today, characterized by technological advances that seem likely to rewrite the future we all might have imagined just a few years ago. In fact, our new brand campaign launched this past year is “Rewrite Tomorrow,” acknowledging and embracing this future, a future we like to think about in terms of four key trends that stand to greatly impact how we serve clients going forward.
The first is the marketplace economy, a natural evolution of commerce in which two-sided market mechanisms are applied to the purchase and sale of non-financial assets. We are already working with clients that wish to create auction mechanics or continuous markets for such assets, and we believe the desire to give consumers the power to negotiate price will only continue to grow. This bid-and-ask of the future represents a tremendous long-term opportunity for Nasdaq.
The second trend we see is the renewed role of investment banks as critical pillars of our financial system. Now recovered from the financial crisis, these banks have demonstrated a willingness to work with partners like Nasdaq in developing the financial technologies of tomorrow. Our Ocean initiative, through which Nasdaq technology powers the internal trading venues of banks, is a great example of such a partnership in action.
Third is the virtual explosion in data that has occurred in recent years, coupled with remarkable advances in machine learning and artificial intelligence. Machine learning can add structure to this data, allowing it to be used in making trading decisions and protecting the integrity of our capital markets. Today, we are actively implementing these technologies in Nasdaq’s surveillance and data analytics offerings.
The final key trend we see is the changing investment management landscape, which not only includes the well-discussed shift from active to passive management but also the importance of private company investment, the growth of quantitative and other data-driven strategies and the increasing competitiveness of the asset management space as a whole.
With this new environment top of mind and our new strategy in place, Nasdaq moved decisively this past year and made two acquisitions, both consistent with these key trends. We acquired eVestment, a leading data, content and analytics platform serving institutional investors, and Sybenetix, a leading surveillance provider that combines behavioral analytics and cognitive computing with deep financial markets expertise. In addition, our strategy prompted us to explore strategic alternatives for our Public Relations Solutions and Digital Media Services businesses, which culminated in an agreement to sell those assets to West Corporation, announced in January 2018. The transaction is subject to regulatory approvals and customary closing conditions.
In terms of our disruptive technologies, Nasdaq also continues to innovate. Our pioneering work in blockchain, for example, has resulted in new projects that include testing a platform for mutual fund trading processing and record-keeping with Skandinaviska Enskilda Banken AB in Sweden as well as a proxy voting solution with Strate (Pty) Ltd in South Africa. We continue to find a myriad of use-cases for blockchain technology across the capital markets ecosystem, specifically where an immutable record of transfers in ownership and inventory management are paramount.
Nasdaq is also investing in the future of its core markets and global market technology offerings with the Nasdaq Financial Framework. This is a multi-year project to rearchitect our market infrastructure technology across the entire trade life-cycle, to create a seamlessly integrated solution using a micro-services architecture. The framework leverages the efficiency and security of the cloud, and offers new fintech capabilities – notably blockchain and advanced data management – across the fabric of the platform. We already have very strong demand for the Nasdaq Financial Framework core platform among our traditional exchange and broker dealer clients, as well as new, non-financial markets. Clients are drawn to its flexibility and cloudbased architecture, coupled with the data management and the future-proofing of an integrated blockchain solution. And we are just beginning to execute on the potential of this new platform to transform the global markets economy.
Moving forward through 2018 and beyond, we will continue to be guided by our new strategic direction and our evolving understanding of the future.
OUR PATH FORWARD
The successes of the past year were significant for Nasdaq from both an operating and a strategic perspective and I am proud of the progress we have made.
Moving forward through 2018 and beyond, we will continue to be guided by our new strategic direction and our evolving understanding of the future. We know this future is coming, and now is the time to build the infrastructure that will support it, ensuring safety, transparency and fairness. If we do so, we can secure a future in which all market participants are able to join in the enormous economic opportunities ahead with the end goal of creating a more dynamic economy.
For our stockholders, we remain committed to executing this vision while focusing on efficiency and strict capital discipline. Entering my second year as CEO, I could not be more excited about the years to come. We have the unique skills, experience and vision to continue generating tremendous value for our clients and stockholders as well as the drive to keep innovating and disrupting as we have since Nasdaq launched the world’s first electronic stock market nearly five decades ago.
Adena T. Friedman
President and Chief Executive Officer
Notice of 2018 Annual Meeting of Stockholders
TO THE STOCKHOLDERS OF NASDAQ, INC.
You are receiving this proxy statement because you were a stockholder at the close of business on the record date of February 26, 2018 and are entitled to vote at the 2018 Annual Meeting of Stockholders. Our Board of Directors is soliciting the accompanying proxy for use at the Annual Meeting. The Annual Meeting will be held to:
- elect ten directors for a one-year term;
- approve the company’s executive compensation on an advisory basis;
- approve the Nasdaq, Inc. Equity Incentive Plan, as amended and restated;
- ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;
- consider a stockholder proposal described in the accompanying proxy statement, if properly presented at the meeting; and
- transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement of the meeting. In accordance with rules of the SEC, instead of mailing printed copies of our proxy materials to each stockholder of record, we are furnishing the proxy materials for the 2018 Annual Meeting by providing access to these documents on the internet. A notice of internet availability of proxy materials is being mailed to our stockholders. We first mailed or delivered this notice on or about March 14, 2018. The notice of internet availability contains instructions for accessing and reviewing our proxy materials and submitting a proxy over the internet. Our proxy materials were made available at www.proxyvote.com on the date that we first mailed or delivered the notice of internet availability. The notice also will tell you how to request our proxy materials in printed form or by e-mail, at no charge. The notice contains a control number that you will need to submit a proxy to vote your shares.
If you plan to attend the meeting in New York, you will need to request an admission ticket in advance and present a valid form of photo identification and proof of ownership of our common stock as of the record date as detailed on page 122 of the proxy statement.
Tuesday, April 24, 2018
8:30 a.m. (EDT)
Four Times Square
New York, NY 10036
HOW TO VOTE
Your vote is important. You are eligible to vote if you were a stockholder of record at the close of business on February 26, 2018. Please read the proxy statement with care and vote right away using any of the following methods and your control number.
|By Internet Using Your Tablet or Smart Phone||By Phone||By Internet Using Your Computer||By Mail||Attend the Annual Meeting|
|Scan this QR code 24/7 to vote with your mobile device||Call +1 800 690 6903 in the U.S. or Canada to vote your shares||Visit 24/7 www.proxyvote.com||Cast your ballot, sign your proxy card and return by free post||Vote in person|
Join the live webcast of the meeting from our Investor Relations website: http://ir.nasdaq.com/annual-meeting-info.cfm
By Order of the Board of Directors,
Adena T. Friedman
President and CEO
New York, New York
March 14, 2018
Acronyms and Certain Defined Terms
|COBRA||Consolidated Omnibus Budget Reconciliation Act|
|ECIP||Executive Corporate Incentive Plan|
|EPS||Earnings Per Share|
|Equity Plan||Nasdaq’s Equity Incentive Plan|
|ERM||Enterprise Risk Management|
|ESG||Environmental, Social and Governance|
|ESPP||Employee Stock Purchase Plan|
|Exchange Act||Securities Exchange Act of 1934, as amended|
|FASB ASC Topic 718||Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Stock Compensation”|
|GAAP||Generally Accepted Accounting Principles|
|IPO||Initial Public Offering|
|NEO||Named Executive Officer|
|PCAOB||Public Company Accounting Oversight Board|
|PSUs||Performance Share Units|
|RSUs||Restricted Stock Units|
|SEC||U.S. Securities and Exchange Commission|
|S&P||Standard & Poor’s|
|TSR||Total Stockholder Return|