NASDAQ, INC. (NDAQ) FY 2022 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations of Nasdaq should be read in conjunction with our consolidated financial statements and related notes included in this Form 10-K, as well as the discussion under “Item 1A. Risk Factors.” For further discussion of our growth strategy, products and services, and competitive strengths, see “Item 1. Business.” Unless stated otherwise, the comparisons presented in this discussion and analysis refer to the year-over-year comparison of changes in our financial condition and results of operations as of and for the fiscal years ended December 31, 2022 and December 31, 2021. Discussion of fiscal year 2021 items and the year-over year comparison of changes in our financial condition and results of operations as of and for the fiscal years ended December 31, 2021 and December 31, 2020 can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was previously filed with the SEC on February 23, 2022, with the exception of certain discussions impacted by the new corporate structure.

Business Segments

In September 2022, we announced a new organizational structure which aligns our businesses more closely with the foundational shifts that are driving the evolution of the global financial system. The new corporate structure includes three business segments: Market Platforms, Capital Access Platforms and Anti-Financial Crime. All prior periods have been restated to conform to the current period presentation. See Note 1, “Organization and Nature of Operations,” and Note 19, “Business Segments,” to the consolidated financial statements for further discussion of our reportable segments and geographic data, as well as how management allocates resources, assesses performance and manages these businesses as three separate segments. See “Part I, Item 1. Business” for additional discussion on recent developments and highlights.

Nasdaq's Operating Results

The following tables summarize our financial performance for the year ended December 31, 2022 when compared to the same period in 2021 and for the year ended December 31, 2021 when compared to the same period in 2020. The comparability of our results of operations between reported periods is impacted by the acquisition of Verafin in February 2021. See “2021 Acquisition,” of Note 4, “Acquisitions and Divestiture,” to the consolidated financial statements for further discussion. For a detailed discussion of our results of operations, see “Segment Operating Results” below.

In countries with currencies other than the U.S. dollar, revenues and expenses are translated using monthly average exchange rates. Impacts on our revenues less transaction-based expenses and operating income associated with fluctuations in foreign currency are discussed in more detail under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.”

The following chart summarizes our ARR (in millions):

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ARR for a given period is the annualized revenue derived from subscription contracts with a defined contract value. This excludes contracts that are not recurring, are one-time in nature, or where the contract value fluctuates based on defined metrics. Also excluded are contracts that are signed but not yet commenced. ARR is one of our key performance metrics to assess the health and trajectory of our recurring 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.

The ARR chart includes:

The following chart summarizes our quarterly annualized SaaS revenues for our Solutions Businesses, which are comprised of the Capital Access Platforms and Anti-Financial Crime segments and the Marketplace Technology business within the Market Platforms segment, for the three months ended December 31, 2022, 2021 and 2020 (in millions):

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Segment Operating Results

The following table presents our revenues by segment, transaction-based expenses for our Market Platforms segment and total revenues less transaction-based expenses:

The following charts present our Market Platforms, Capital Access Platforms and Anti-Financial Crime segments as a percentage of our total revenues, less transaction-based expenses.

Percentage of Revenues Less Transaction-based Expenses by Segment for the:

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MARKET PLATFORMS

The following tables present revenues from our Market Platforms segment:

Trading Services

Our Trading Services business includes equity derivatives trading, cash equity trading, Nordic fixed income trading & clearing, U.S. Tape plans and other revenues. The following tables present net revenues by product from our Trading Services business:

In the table above, Other includes Nordic fixed income trading & clearing, Nordic derivatives, Nordic commodities, and Canadian cash equities trading.

U.S. Equity Derivative Trading

The following tables present total revenues, transaction-based expenses, and total revenues less transaction-based expenses as well as key drivers from our U.S. Equity Derivative Trading business:

Section 31 fees are recorded as equity derivative and cash equity derivative trading revenues with a corresponding amount recorded in transaction-based expenses. We are assessed these fees from the SEC and pass them through to our customers in the form of incremental fees. Pass-through fees can increase or decrease due to rate changes by the SEC, our percentage of the overall industry volumes processed on our systems, and differences in actual dollar value traded. The SEC implemented a fee increase in May 2022 and a decrease in February 2021. Since the amount recorded in revenues is equal to the amount recorded as Section 31 fees, there is no impact on our net revenues.

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U.S. equity derivative trading revenues decreased in 2022 compared with 2021 primarily due to lower overall matched market share executed on Nasdaq's exchanges and lower gross capture rate, partially offset by higher industry trading volumes.

U.S. equity derivative trading revenues less transaction-based expenses increased in 2022 compared with 2021 primarily due to higher capture rates and higher industry trading volumes, and lower transaction rebates, partially offset by lower overall matched market share executed on Nasdaq's exchanges.

U.S. equity derivative trading and clearing revenues and U.S. equity derivative trading and clearing revenues less transaction-based expenses increased in 2021 compared with 2020 primarily due to higher U.S. industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges and a lower capture rate.

Transaction rebates, in which we credit a portion of the execution charge to the market participant, decreased in 2022 compared with 2021 primarily due to lower overall U.S. matched market share executed on Nasdaq's exchanges and lower rebate capture rate, partially offset by higher industry trading volumes. Transaction rebates increased in 2021 compared with 2020 primarily due to higher U.S. industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges and a lower rebate capture rate.

Cash Equity Trading Revenues

The following tables present total revenues, transaction-based expenses, and total revenues less transaction-based expenses as well as key drivers and other metrics from our Cash Equity trading business:

See discussion in "U.S. Equity Derivative Trading" for an explanation of Section 31 fees and the period over period analysis.

In the tables above, total market shares includes transactions executed on The Nasdaq Stock Market’s, Nasdaq BX’s and Nasdaq PSX’s systems plus trades reported through the FINRA/Nasdaq Trade Reporting Facility.

Cash equity trading revenues increased in 2022 compared with 2021 primarily due to higher U.S. industry trading volumes and higher overall U.S. matched market share executed on Nasdaq's exchanges, partially offset by an unfavorable impact of changes in foreign exchange rates of $16 million, lower U.S. gross capture rate, lower European trading volumes and lower European market share executed on Nasdaq's exchanges.

Cash equity trading revenues less transaction-based expenses decreased in 2022 compared with 2021 primarily due to lower capture rate, the unfavorable impact of changes in foreign exchange rates of $16 million, lower European trading volumes and lower European market share executed on Nasdaq's exchanges, partially offset by higher U.S. industry trading volumes.

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Cash equity trading revenues decreased in 2021 compared with 2020 primarily due to lower overall U.S. matched market share executed on Nasdaq's exchanges, partially offset by higher U.S. gross capture rates, higher U.S. industry trading volumes, higher European value traded and a favorable impact from changes in foreign exchange rates.

Cash equity trading revenues less transaction-based expenses increased in 2021 compared with 2020 primarily due to higher U.S. capture rates, higher U.S. industry trading volumes, higher European value traded and a favorable impact from changes in foreign exchange rates, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges.

Transaction rebates increased in 2022 compared with 2021. For The Nasdaq Stock Market and Nasdaq PSX, we credit a portion of the per share execution charge to the market participant that provides the liquidity, and for Nasdaq BX, we credit a portion of the per share execution charge to the market participant that takes the liquidity. The increase was primarily due to higher U.S. industry volumes and higher U.S. matched market share executed on Nasdaq's exchanges, partially offset by lower rebate capture rate. Transaction rebates decreased in 2021 compared with 2020, primarily due to lower overall U.S. matched market share executed on Nasdaq's exchanges and a lower rebate capture rate, partially offset by higher U.S. industry trading volumes.

U.S. Tape Plans

The following tables present revenues from our U.S. Tape plans business:

U.S. Tape plans revenues decreased in 2022 compared with in 2021 and 2021 compared with 2020 primarily due to lower market share and usage.

Other

Other includes Nordic fixed income trading and clearing, Nordic derivatives, Nordic commodities and Canadian cash equities trading. The following tables present revenue and key driver from our Other business:

In the table above, other includes transaction rebates of $30 million, $32 million and $31 million in 2022, 2021 and 2020 respectively.

In the tables above, Nasdaq Nordic and Nasdaq Baltic total average daily volume of options and futures contracts include Finnish option contracts traded on Eurex for which Nasdaq and Eurex have a revenue sharing arrangement.

Other revenues decreased in 2022 compared with 2021 primarily due to the unfavorable impact of changes in foreign exchange rates of $14 million and lower commodities products revenues, partially offset by higher European trading volumes and higher collateral management services revenues. Other revenues increased in 2021 compared with 2020 primarily due to the favorable impact of changes in foreign exchange rates of $5 million, higher capture rate and higher European clearing products revenues, partially offset by lower European trading volumes.

Marketplace Technology

Marketplace Technology includes our trade management services and market technology businesses.

The following tables present revenues and key drivers from our Marketplace Technology business:

In the table above, order intake is for our market technology business and represents the total contract value of orders signed during the period.

Marketplace technology revenues increased in 2022 compared with 2021 and 2021 compared with 2020 primarily due to higher trade management services revenues associated with increased demand for connectivity services, partially offset by lower market technology revenues. The decrease in market technology revenues in 2022 was due to the successful completion of long-term contracts in 2021 and the unfavorable impact of changes in foreign exchange rates of $10 million, partially offset by growth in SaaS-based revenues. The decrease in market technology revenues in 2021 was primarily due to lower professional services revenues, partially offset by an increase in SaaS revenues.

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CAPITAL ACCESS PLATFORMS

The following tables present revenues and key drivers from our Capital Access Platforms segment:

Data & Listing Services Revenues

The following tables present key drivers from our Data & Listing Services business:

In the tables above:

•The Nasdaq Stock Market new listings include IPOs, including issuers that switched from other listing venues and separately listed ETPs. For the years ended December 31, 2022, 2021 and 2020, IPOs included 74, 433 and 132 SPACs, respectively.

•Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic 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 listed companies on The Nasdaq Stock Market for the years ended December 31, 2022, 2021 and 2020 included 528, 441 and 412 ETPs, respectively.

•Number of total listed companies on the exchanges that comprise Nasdaq Nordic and Nasdaq Baltic represents companies listed on these exchanges and companies on the alternative markets of Nasdaq First North.

Data & Listing Services revenues increased in 2022 compared with 2021 and 2021 compared with 2020. The increase in 2022 was primarily due to an increase in annual listing fees, due to an increase in the overall number of listed companies, and an increase in proprietary data revenues driven by higher international demand, partially offset by lower initial listings fees and the unfavorable impact of changes in foreign exchange rates of $21 million. The increase in 2021 was primarily due to an increase in annual and initial listing fees due to the increase in the overall number of listed companies and an increase in proprietary data revenues driven by higher international demand.

Index Revenues

The following tables present key drivers from our Index business:

In the table above, TTM represents trailing twelve months.

Index revenues increased in 2022 compared with 2021 and 2021 compared with 2020. The increase in 2022 was primarily due to higher licensing revenues from futures trading linked to the Nasdaq-100 Index, partially offset by lower AUM in ETPs linked to Nasdaq indexes. The increase in 2021 was primarily due to higher licensing revenues from higher average AUM in ETPs linked to Nasdaq indexes and higher licensing revenues from futures trading linked to the Nasdaq-100 Index.

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Workflow & Insights Revenues

Workflow & Insights revenues increased in 2022 compared with 2021 and 2021 compared with 2020. The increase in both periods was due to an increase in both analytics and corporate solutions revenues. The increase in analytics revenues for both periods was primarily due to the growth in our eVestment and Solovis products driven by new sales, strong retention, and higher average revenue per client from expanded offerings. The increase in corporate solutions for both periods was due to higher adoption of our investor relations intelligence products as well as new ESG solutions, with ESG solutions being the primary driver of the increase in 2022.

ANTI-FINANCIAL CRIME

The following tables present revenues and key drivers from our Anti-Financial Crime segment:

In the table above, signed ARR reflects ARR recognized as revenue in the current period as well as ARR for new contracts signed but not yet commenced. We began tracking signed ARR in 2021 following our acquisition of Verafin, and thus there is no available metric for 2020.

Anti-financial crime revenues increased in 2022 compared with 2021 primarily due to an increase in demand for fraud detection and anti-money laundering solutions and strong performance by our surveillance business in new sales to existing clients and new customer acquisitions. The increase was also driven by a $28 million purchase price adjustment on Verafin deferred revenue in 2021 and the inclusion of a full year of Verafin revenues in 2022. The increase in 2021 compared with 2020 was due to the inclusion of revenues from our acquisition of Verafin and growth in our surveillance solutions.

OTHER REVENUES

Other revenues include revenues related to our Nordic broker services business, for which we completed the wind-down in June 2022, as well as revenues associated with our U.S. Fixed Income business, which was sold in June 2021. Prior to the closing of the transaction, these revenues were included in our Market Platforms and Capital Access Platforms segments. See “2021 Divestiture,” of Note 4, “Acquisitions and Divestiture,” to the consolidated financial statements for further discussion of this divestiture. Additionally, for the years ended December 31, 2021 and 2020, other revenues include revenues associated with the NPM business which we contributed in July 2021 to a standalone, independent company, of which we own the largest minority interest, together with a consortium of third-party financial institutions. Prior to July 2021, these revenues were included in our Capital Access Platforms segment. For the twelve months ended December 31, 2022, other revenues also include a transitional services agreement associated with a divested business.

EXPENSES

Operating Expenses

The following table presents our operating expenses:

The increase in compensation and benefits expense in 2022 compared with 2021 was primarily driven by continued investment in employees to drive growth and inflationary pressures, partially offset by a favorable impact from foreign exchange rates of $42 million.

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Headcount, including employees of non-wholly owned consolidated subsidiaries, increased to 6,377 employees as of December 31, 2022 from 5,814 as of December 31, 2021 reflecting growth across each of our three segments.

Professional and contract services expense decreased in 2022 compared with 2021 primarily due to a favorable impact from foreign exchange rates and a decrease in legal fees, partially offset by an increase in consulting costs.

Computer operations and data communications expense increased in 2022 compared with 2021 primarily due to higher software costs and higher costs related to new cloud initiatives.

Occupancy expense decreased in 2022 compared with 2021 primarily due to a favorable impact from foreign exchange rates.

General, administrative and other expense increased in 2022 compared with 2021 primarily due to an accrual related to a legal matter and higher travel costs.

Marketing and advertising expense decreased in 2022 compared with 2021, reflecting lower IPO activity.

Depreciation and amortization expense decreased in 2022 compared with 2021 due to an impairment charge of $14 million in 2021 related to a finite-lived intangible asset for customer relationships associated with the wind down of a previous acquisition and a favorable impact from foreign exchange rates.

Regulatory expense decreased in 2022 compared with 2021 due to a charge in 2021 associated with an administrative fine issued by the SFSA. See “Nasdaq Commodities Clearing Default,” of Note 15, “Clearing Operations,” to the consolidated financial statements for further discussion of the SFSA administrative fine.

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 vary based on the size and frequency of the activities described above.

See Note 20, “Restructuring Charges,” to the consolidated financial statements for further discussion of our 2022 divisional alignment program and 2019 restructuring plans and charges associated with these plans.

Non-operating Income and Expenses

The following table presents our non-operating income and expenses:

_______

N/M Not meaningful.

The following table presents our interest expense:

Interest income increased in 2022 compared with 2021 primarily due to an increase in interest rates.

Interest expense increased in 2022 compared with 2021 primarily due to an increase in interest rates related to borrowings under our commercial paper program.

The net gain on divestiture of business in 2021 relates to the sale of our U.S. Fixed Income business, which was part of our FICC business within our Market Services segment. We recognized a pre-tax gain on the sale of $84 million, net of disposal costs. See “2021 Divestiture,” of Note 4, “Acquisitions and Divestiture,” to the consolidated financial statements for further discussion.

Other income decreased in 2022 compared with 2021 primarily due to gains from strategic investments related to our corporate venture program in the prior year.

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Net income from unconsolidated investees decreased in 2022 compared with 2021 primarily due to a decrease in income recognized from our equity method investment in OCC. See “Equity Method Investments,” of Note 6, “Investments,” to the consolidated financial statements for further discussion.

Tax Matters

The following table presents our income tax provision and effective tax rate:

For further discussion of our tax matters, see Note 17, “Income Taxes,” to the consolidated financial statements.

NON-GAAP FINANCIAL MEASURES

In addition to disclosing results determined in accordance with U.S. GAAP, we also provide non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share. Management uses this non-GAAP information internally, along with U.S. GAAP information, in evaluating our performance and in making financial and operational decisions. We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of our ongoing operating performance.

These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. This non-GAAP information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this Annual Report on Form 10-K, including our consolidated financial statements and the notes thereto. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliation, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.

We understand that analysts and investors regularly rely on non-GAAP financial measures, such as non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share, to assess operating performance. We use non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share because they highlight trends more clearly in our business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance. We believe that excluding the following items from the non-GAAP net income attributable to Nasdaq provides a more meaningful analysis of Nasdaq’s ongoing operating performance and comparisons in Nasdaq’s performance between periods:

•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 businesses and the relative operating performance of the businesses 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. The frequency and the amount of such expenses vary significantly based on the size, timing and complexity of the transaction. These expenses primarily include integration costs, as well as legal, due diligence and other third-party transaction costs.

•Restructuring charges: In 2022, following our September 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 2019, we initiated the transition of certain technology platforms to advance our strategic opportunities as a technology and analytics provider and continue the realignment of certain business areas. See Note 20, “Restructuring Charges,” to the consolidated financial statements for further discussion of our 2022 divisional alignment program as well as our 2019 restructuring plan, which was completed in June 2021.

•Net income from unconsolidated investee: Our income on our investment in OCC may vary significantly compared to prior periods due to the changes in OCC's capital management policy. See “Equity Method Investments,” of Note 6, “Investments,” to the consolidated financial statements for further discussion.

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•Other items: We have excluded certain other charges or gains, including certain tax items, that are the result of other non-comparable events to measure operating performance. For the year ended December 31, 2022, other items include accruals related to a legal matter, included in general, administrative and other expense in our Consolidated Statements of Income and a regulatory matter offset by the release of $5 million in relation to the reduction of the administrative fine issued by the SFSA both recorded in regulatory expense in our Consolidated Statements of Income. For the years ended December 31, 2022 and 2021 other items also include a loss on extinguishment of debt, included in general, administrative and other expense in our Consolidated Statements of Income and net gains and losses from strategic investments entered into through our corporate venture program, included in other income in our Consolidated Statements of Income. For the year ended December 31, 2021, other items included a charge related to an administrative fine imposed by the SFSA. The 2022 and 2021 SFSA charges associated with the default that occurred in 2018, are included in regulatory expense in our Consolidated Statements of Income. See “Nasdaq Commodities Clearing Default,” of Note 15, “Clearing Operations,” to the consolidated financial statements for further discussion. For the year ended December 31, 2021, other items also included a net gain on divestiture of businesses, which represents our pre-tax net gain of $84 million on the sale of our U.S. Fixed Income business.

•Significant tax items: The non-GAAP adjustment to the income tax provision for the years ended December 31, 2022 and 2021 primarily includes the tax impact of each non-GAAP adjustment. In addition, for the year ended December 31, 2021, the non-GAAP adjustment to the income tax provision includes adjustments related to return-to-provision and a prior year tax benefit.

The following tables present reconciliations between U.S. GAAP net income attributable to Nasdaq and diluted earnings per share and non-GAAP net income attributable to Nasdaq and diluted earnings per share:

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LIQUIDITY AND CAPITAL RESOURCES

Historically, we have funded our operating activities and met our commitments through cash generated by operations, augmented by the periodic issuance of debt. Currently, our cost and availability of funding remain healthy. We continue to prudently assess our capital deployment strategy through balancing acquisitions, internal investments, debt repayments, and shareholder return activity, including share repurchases and dividends.

In the near term, we expect that our operations and the availability under our revolving credit facility and commercial paper program will provide sufficient cash to fund our operating expenses, capital expenditures, debt repayments, any share repurchases and any dividends.

The value of various assets and liabilities, including cash and cash equivalents, receivables, accounts payable and accrued expenses, the current portion of long-term debt, and commercial paper, can fluctuate from month to month. Working capital (calculated as current assets less current liabilities) was $(231) million as of December 31, 2022, compared with $(449) million as of December 31, 2021, an increase of $218 million. The increase was primarily driven by a decrease in short-term debt and increases in cash and cash equivalents and receivables, net, partially offset by increases in Section 31 fees payable to the SEC and deferred revenue and decreases in other current assets and financial investments.

Principal factors that could affect the availability of our internally-generated funds include:

•    deterioration of our revenues in any of our business segments;

•    changes in regulatory and working capital requirements; and

•an increase in our expenses.

Principal factors that could affect our ability to obtain cash from external sources include:

•    operating covenants contained in our credit facilities that limit our total borrowing capacity;

•    credit rating downgrades, which could limit our access to additional debt;

•    a significant decrease in the market price of our common stock; and

•    volatility or disruption in the public debt and equity markets.

The following table summarizes our financial assets:

Cash and Cash Equivalents

Cash and cash equivalents includes all non-restricted cash in banks and highly liquid investments with original maturities of 90 days or less at the time of purchase. The balance retained in cash and cash equivalents is a function of anticipated or possible short-term cash needs, prevailing interest rates, our investment policy, and alternative investment choices. As of December 31, 2022, our cash and cash equivalents of $502 million were primarily invested in bank deposits, money market funds and commercial paper. In the long-term, we may use both internally generated funds and external sources to satisfy our debt obligations and other long-term liabilities. Cash and cash equivalents as of December 31, 2022 increased $109 million from December 31, 2021.

Repatriation of Cash

Our cash and cash equivalents held outside of the U.S. in various foreign subsidiaries totaled $275 million as of December 31, 2022 and $266 million as of December 31, 2021. The remaining balance held in the U.S. totaled $227 million as of December 31, 2022 and $127 million as of December 31, 2021.

Unremitted earnings of certain subsidiaries outside of the U.S. are used to finance our international operations and are considered to be indefinitely reinvested.

Cash Flow Analysis

The following table summarizes the changes in cash flows:

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We have adjusted the presentation of the 2020 opening and ending amounts of cash, cash equivalents, and restricted cash and cash equivalents in our consolidated statements of cash flows to include restricted cash and cash equivalents related to the default funds and margin deposits. See Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements for further discussion of this adjustment.

Net Cash Provided by Operating Activities

Net cash provided by operating activities primarily consists of net income adjusted for certain non-cash items such as: depreciation and amortization expense of property and equipment; amortization expense of acquired finite-lived intangible assets; expense associated with share-based compensation; deferred income taxes; expense associated with extinguishment of debt; net gain on divestiture of business; and net income from unconsolidated investees.

Net cash provided by operating activities is also impacted by the effects of changes in operating assets and liabilities such as: accounts receivable and deferred revenue which are impacted by the timing of customer billings and related collections from our customers; accounts payable and accrued expenses due to timing of payments; accrued personnel costs, which are impacted by employee performance targets and the timing of payments related to employee bonus incentives; and Section 31 fees payable to the SEC, which is impacted by the changes in SEC fee rates and the timing of collections from customers and payments to the SEC.

Net cash provided by operating activities increased $623 million for the year ended December 31, 2022 compared with the same period in 2021. The increase was primarily driven by Section 31 fees payable to the SEC due to higher SEC fee rates in 2022 and cash payments made in the second quarter of 2021 related to the acquisition of Verafin, including a tax obligation paid on behalf of Verafin of $221 million and a cash payment of $102 million, the release of which was subject to certain employment-related conditions following the closing of the acquisition of Verafin. During the fourth quarter of 2022, the remaining amount of the $102 million was accelerated and paid to the eligible former Verafin employees. The remaining change was primarily due to other fluctuations in our working capital.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities for the year ended December 31, 2022 primarily related to net proceeds from sales and redemptions of investments related to default funds and margin deposits of $211 million and proceeds of $33 million from other investing activities, partially offset by purchases of property and equipment of $152 million and $41 million cash used for acquisitions, net of cash and cash equivalents acquired.

Net cash used in investing activities for the year ended December 31, 2021 primarily related to $2,430 million of cash used for acquisitions, net of cash and cash equivalents acquired, primarily $221 million of cash acquired that was utilized to satisfy an acquisition-related tax obligation on behalf of Verafin, $163 million of purchases of property and equipment, net purchases of investments related to default funds and margin deposits of $132 million, other investing activities of $87 million, and $31 million of net purchases of securities, partially offset by proceeds from the divestiture of a business, net of cash divested of $190 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022 primarily related to an increase in default funds and margin deposits of $2,440 million, proceeds of $541 million from the issuance of long-term-debt and proceeds of $238 million from the issuances of our commercial paper, net, partially offset by $1,097 million related to the repayment of our 2022 and 2024 Notes, $383 million of dividend payments to our shareholders, $325 million of repurchases of common stock pursuant to the ASR agreement and $308 million in other repurchases of common stock.

Net cash provided by financing activities for the year ended December 31, 2021 primarily related to an increase in default funds and margin deposits of $2,330 million, proceeds of $826 million from the issuances of long-term-debt and utilization of credit commitment and $420 million of proceeds from issuances of commercial paper, net, partially offset by repayment of borrowings under our credit commitment and debt obligations of $804 million, $475 million of repurchases pursuant to the ASR agreement, $468 million in other repurchases of common stock, $350 million of dividend payments to our shareholders and a $33 million payment for debt extinguishment costs.

See Note 4, “Acquisitions and Divestiture,” to the consolidated financial statements for further discussion of our acquisitions and divestiture.

See Note 9, “Debt Obligations,” to the consolidated financial statements for further discussion of our debt obligations.

See “ASR Agreement,” “Share Repurchase Program,” and “Cash Dividends on Common Stock,” of Note 12, “Nasdaq Stockholders’ Equity,” to the consolidated financial statements for further discussion of our ASR agreement, share repurchase program and cash dividends paid on our common stock.

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Financial Investments

Our financial investments totaled $181 million as of December 31, 2022 and $208 million as of December 31, 2021. Of these securities, $161 million as of December 31, 2022 and $162 million December 31, 2021, are assets primarily utilized to meet regulatory capital requirements, mainly for our clearing operations at Nasdaq Clearing. See Note 6, “Investments,” to the consolidated financial statements for further discussion.

Regulatory Capital Requirements

Clearing Operations Regulatory Capital Requirements

We are required to maintain minimum levels of regulatory capital for the clearing operations of Nasdaq Clearing. The level of regulatory capital required to be maintained is dependent upon many factors, including market conditions and creditworthiness of the counterparty. As of December 31, 2022, our required regulatory capital of $125 million was comprised of highly rated European government debt securities that are included in financial investments in the Consolidated Balance Sheets.

Broker-Dealer Net Capital Requirements

Our broker-dealer subsidiaries, Nasdaq Execution Services, NFSTX, LLC, and Nasdaq Capital Markets Advisory, are subject to regulatory requirements intended to ensure their general financial soundness and liquidity. These requirements obligate these subsidiaries to comply with minimum net capital requirements. As of December 31, 2022, the combined required minimum net capital totaled $1 million and the combined excess capital totaled $18 million, substantially all of which is held in cash and cash equivalents in the Consolidated Balance Sheets. The required minimum net capital is included in restricted cash and cash equivalents in the Consolidated Balance Sheets.

Nordic and Baltic Exchange Regulatory Capital Requirements

The entities that operate trading venues in the Nordic and Baltic countries are each subject to local regulations and are required to maintain regulatory capital intended to ensure their general financial soundness and liquidity. As of December 31, 2022, our required regulatory capital of $34 million was primarily invested in European mortgage bonds and Icelandic government bonds that are included in financial investments in the Consolidated Balance Sheets and cash, which is included in restricted cash and cash equivalents in the Consolidated Balance Sheets.

Other Capital Requirements

We operate several other businesses, which are subject to local regulation and are required to maintain certain levels of regulatory capital. As of December 31, 2022, other required regulatory capital of $10 million, primarily related to Nasdaq Central Securities Depository, was primarily invested in European government debt securities that are included in financial investments in the Consolidated Balance Sheets and cash, which is included in restricted cash and cash equivalents in the Consolidated Balance Sheets.

Equity and dividends

Stock Split Effected in the Form of a Stock Dividend

On August 26, 2022, we effected a 3-for-1 stock split of the Company's common stock in the form of a stock dividend to shareholders of record as of August 12, 2022. The par value per share of our common stock remains $0.01 per share. All references made with respect to a number of shares or per share amounts throughout this Annual Report on Form 10-K have been retroactively adjusted to reflect the stock split.

Share Repurchase Program

See “Share Repurchase Program,” of Note 12, “Nasdaq Stockholders’ Equity,” to the consolidated financial statements for further discussion of our share repurchase program.

ASR Agreement

See “ASR Agreement,” of Note 12, “Nasdaq Stockholders’ Equity,” to the consolidated financial statements for further discussion of our ASR agreement.

Cash Dividends on Common Stock

The following table presents our quarterly cash dividends paid per common share on our outstanding common stock:

See “Cash Dividends on Common Stock,” of Note 12, “Nasdaq Stockholders’ Equity,” to the consolidated financial statements for further discussion of the dividends.

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Debt Obligations

The following table summarizes our debt obligations by contractual maturity:

In the table above, the 2024 Notes were reclassified to short-term debt as of March 31, 2022, and were repaid in April 2022.

In December 2022, Nasdaq amended and restated the 2020 Credit Facility with a new maturity date of December 16, 2027. In addition to the 2022 Credit Facility, we also have other credit facilities primarily to support our Nasdaq Clearing operations in Europe, as well as to provide a cash pool credit line for one subsidiary. These credit facilities, which are available in multiple currencies, totaled $184 million as of December 31, 2022 and $212 million as of December 31, 2021 in available liquidity, none of which was utilized.

As of December 31, 2022, we were in compliance with the covenants of all of our debt obligations.

See Note 9, “Debt Obligations,” to the consolidated financial statements for further discussion of our debt obligations.

Contractual Obligations and Contingent Commitments

Nasdaq has contractual obligations to make future payments under debt obligations by contract maturity, operating lease payments, and other obligations. The following table summarizes material cash requirements for known contractual and other obligations as of December 31, 2022, and the estimated timing thereof.

In the table above:

•Debt obligations by contractual maturity include both principal and interest obligations. As of December 31, 2022, an interest rate of 4.4% was used to compute the amount of the contractual obligations for interest on the 2022 Credit Facility. All other debt obligations were primarily calculated on a 365-day basis at the contractual fixed rate multiplied by the aggregate principal amount as of December 31, 2022. See Note 9, “Debt Obligations,” to the consolidated financial statements for further discussion.

•Operating lease obligations represent our undiscounted operating lease liabilities as of December 31, 2022, as well as legally binding minimum lease payments for leases signed but not yet commenced. See Note 16, “Leases,” to the consolidated financial statements for further discussion of our leases.

•Purchase obligations primarily represent minimum outstanding obligations due under software license agreements. The balance as of December 31, 2022 is primarily comprised of our multi-year AWS partnership contract, which replaces our previous shorter term contracts, including those with no minimum spend commitment, and is not expected to increase our overall spend footprint with AWS over the life of the contract, based on projected growth and expansion of our existing AWS-based solutions.

Off-Balance Sheet Arrangements

For discussion of off-balance sheet arrangements see:

•    Note 15, “Clearing Operations,” to the consolidated financial statements for further discussion of our non-cash default fund contributions and margin deposits received for clearing operations; and

•    Note 18, “Commitments, Contingencies and Guarantees,” to the consolidated financial statements for further discussion of:

◦Guarantees issued and credit facilities available;

◦Other guarantees;

◦Routing brokerage activities;

◦Legal and regulatory matters; and

◦Tax audits.

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