Nasdaq profit tops views as non-trading units take flight

By John McCrank and Abhishek Manikandan

(Reuters) - Transatlantic exchange operator Nasdaq Inc <NDAQ.O> on Wednesday reported high-than-expected fourth-quarter earnings, helped by strength in its non-trading businesses.

Chief Executive Officer Adena Friedman has expanded Nasdaq's focus beyond traditional exchange functions to higher-growth opportunities in technology and analytics, since taking the helm of the company in 2017, while selling off less-profitable units.

"We are now in our third year since the announcement of our new vision for Nasdaq," Friedman said on a call with analysts. "Our 2019 results illustrate how Nasdaq can deliver on our technology-led strategy."

Excluding one-time items, the company earned $1.29 per share, topping analysts' average estimate by 2 cents, according to IBES data from Refinitiv.

Revenues in the non-trading segments, such as market technology and information services, increased 9% from a year earlier, while market services revenues dropped 10% on lower volumes.

On the market technology side, Nasdaq recently signed a deal with Skytra, a subsidiary of European planemaker Airbus <AIR.PA>, to create a trading venue for derivatives from airline ticket prices, with the goal of stabilizing airline revenues.

The idea is to create an index using data from ticket prices, both as they are bought and as they are used, that shows trends in pricing along different flight routes, and then to create derivatives on the index that the industry could use as a hedging tools, Friedman said.

That will give airlines more reliable revenue projections, allowing them to look further out into their planning cycles and to make larger capital investments in new airplanes, she said.

Nasdaq said it also signed deals to provide technology to new clients in the sports betting and insurance industries, as well as to more traditional customers, such as banks, brokers, regulators and exchanges.

Revenue from the market technology unit jumped nearly 29% to $98 million (75 million pounds) in the quarter.

Information services revenue rose 3.7% to $194 million.

Corporate services revenue increased 5% to $129 million, as 50 initial public offerings took place during the quarter on Nasdaq's main U.S. exchange.

Market services revenue fell 9.6% to $225 million on lower market volatility.

Profit at Nasdaq, which also operates exchanges in Canada, Denmark, Iceland, Norway and Sweden, was $202 million, or $1.21 per diluted share, compared to a net loss of $44 million, or 27 cents per diluted share, a year earlier, which was mainly the result of $289 million tax charge.

(Reporting by John McCrank in New York and Abhishek Manikandan in Bengaluru; Editing by Vinay Dwivedi and Lisa Shumaker)