UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2010
The NASDAQ OMX Group, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-32651 | 52-1165937 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
| One Liberty Plaza, New York, New York | 10006 | |||
| (Address of principal executive offices) | (Zip code) | |||
Registrant’s telephone number, including area code: +1 212 401 8700
No change since last report
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On October 29, 2010, The NASDAQ OMX Group, Inc. (“NASDAQ OMX”) issued a press release providing financial results for the third quarter of 2010. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On October 29, 2010, NASDAQ OMX posted slides to be used in its earnings presentation for the third quarter of 2010 on its website at http://ir.nasdaqomx.com/.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. |
Exhibit Description | |
| 99.1 | Press release dated October 29, 2010. | |
The information set forth under “Item 2.02 Results of Operations and Financial Condition” and “Item 7.01 Regulation FD Disclosure” is intended to be furnished pursuant to Item 2.02 and Item 7.01, respectively. Such information, including Exhibit 99.1, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any of NASDAQ OMX’s filings under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: October 29, 2010 | The NASDAQ OMX Group, Inc. | |||||
| By: | /S/ EDWARD S. KNIGHT | |||||
| Edward S. Knight | ||||||
| Executive Vice President and General Counsel | ||||||
Exhibit 99.1
October 29, 2010
NASDAQ OMX REPORTS SOLID THIRD QUARTER 2010 RESULTS
–EPS OF $0.50 REPRESENTS 19% INCREASE OVER PRIOR YEAR NON-GAAP RESULTS–
–NET REVENUES GROW 7% TO $372 MILLION–
New York, N.Y.—The NASDAQ OMX Group, Inc. (“NASDAQ OMX®”; NASDAQ: NDAQ) reported solid results for the third quarter of 2010. Net income attributable to NASDAQ OMX for the third quarter of 2010 was $101 million, or $0.50 per diluted share, compared with $96 million, or $0.46 per diluted share, in the second quarter of 2010, and $60 million, or $0.28 per diluted share, in the third quarter of 2009. Included in the third quarter of 2010 results are $4 million of expenses associated with workforce reductions, merger and strategic initiatives, and other items, offset by $4 million of benefits associated with the tax impact of these items and certain other tax adjustments.
Financial Highlights:
| • | Net exchange revenues grew 7% over prior year results to $372 million |
| • | Non-GAAP operating income improved to $169 million, up 11% from third quarter of 2009 results, while operating margins increased to 45% |
| • | Non-GAAP EPS increased to $0.50, up from $0.42 in the prior year quarter |
| • | GAAP EPS of $0.50 represents a 79% increase over third quarter of 2009 results |
| • | Completed $300 million of the $400 million authorized share repurchase program thus far, representing 15.1 million shares. Board has authorized an additional $150 million for the program, bringing the total authorized amount to $550 million. |
| Summary of Non-GAAP Results1
|
| |||||||||||
| ($ millions, except EPS)
|
|
Q310
|
|
|
Q210
|
|
|
Q309
|
| |||
| Net Exchange Revenues2 |
372 | 390 | 349 | |||||||||
| Total Operating Expenses |
203 | 207 | 197 | |||||||||
| Operating Income |
169 | 183 | 152 | |||||||||
| Net Income |
101 | 108 | 89 | |||||||||
| Diluted Earnings Per Share |
$ | 0.50 | $ | 0.52 | $ | 0.42 | ||||||
| 1.A complete reconciliation of GAAP to non-GAAP results is included in the attached tables. 2.Represents revenues less liquidity rebates, brokerage, clearing and exchange fees. |
| |||||||||||
Bob Greifeld, Chief Executive Officer, NASDAQ OMX said:
“Despite lower industry trading volumes, we delivered exceptional results this quarter. This performance can be attributed to the success we’ve had in diversifying our business and identifying opportunities to deliver value-added products and services to our customers. The scale of the NASDAQ OMX business model leaves us well positioned to achieve our stated goal of generating annualized net revenue of $2 billion by the end of 2013.”
Business Highlights
European Transaction Services
| • | Grew volumes for Nordic equity and index options and futures more than 40% from prior year levels. Also in the Nordic derivatives market, NASDAQ OMX recently launched Genium INET, a comprehensive multi-asset trading and clearing system. In addition to powering its own markets, this technology is part of NASDAQ OMX’s commercial exchange technology offering, giving customers access to the fastest and most robust trading system in the world. |
| • | Expanded the Nordic clearinghouse by offering members the opportunity to clear repurchase agreement (“repo”) transactions. As a result of an agreement between the Swedish Money Market Council and NASDAQ OMX, the entire Swedish Interbank repo market will ultimately be cleared through NASDAQ OMX Stockholm AB. |
U.S. Transaction Services
| • | Became number one in U.S. equity options market share in the third quarter of 2010, growing total share to 28.8%. Market share at NASDAQ OMX PHLX (“PHLX”) was 23.7% while The NASDAQ Options Market (“NOM”) achieved market share of 5.1%, representing the highest quarterly market share ever realized at either market. |
| • | Received SEC approval for NASDAQ OMX PSX (“PSX”), the first U.S. equity trading platform with a price-size priority model. Launched on October 8, 2010, PSX is an equity exchange model that encourages participants to display more shares in the transparent marketplace by offering improved execution opportunities for large orders. More displayed volume encourages greater transparency in the public marketplace and increased depth at a given price level for customers. |
| • | Announced State Street Global Markets’ plans to become the fourth member of IDCG’s clearinghouse, joining BNY Mellon Clearing, Newedge USA and MF Global. This addition reflects the growing interest in and client demand for IDCG’s product offering. During the third quarter, IDCG also witnessed growth in clearing activity, ending the period with nearly $400 million in open interest. |
Market Technology
| • | Completed the acquisition of SMARTS Group Holdings (“SMARTS”), the world-leading technology provider of market surveillance solutions to exchanges, regulators and brokers. This acquisition is part of NASDAQ OMX’s strategy to diversify its Market Technology business and enter the broker surveillance and compliance market. |
Issuer Services
| • | Welcomed 45 new listings during the quarter, including two of the largest technology IPOs, SMART Technologies (NASDAQ: SMT) and NXP Semiconductors (NASDAQ: NXPI). Captured 64% of total proceeds raised by information technology companies on U.S. markets, totaling over $1.6 billion. |
Operating Highlights
U.S. Equities
| • | Total matched market share of U.S. equities was 22.3% in the third quarter of 2010, with NASDAQ matching 19.1% and NASDAQ OMX BX (“BX”) matching 3.2%. Total matched market share was 22.8% in the second quarter of 2010 (NASDAQ: 19.0%; BX: |
| The NASDAQ OMX Group, Inc. | 2 |
| 3.8%) and 22.1% in the third quarter of 2009 (NASDAQ: 19.4%; BX: 2.7%). Total matched share volume was 107.8 billion shares in the third quarter of 2010, compared with 147.9 billion shares in the second quarter of 2010 and 131.4 billion shares in the third quarter of 2009. |
European Equities
| • | Total volume was 17.4 million trades in the third quarter of 2010, compared with 19.8 million in the second quarter of 2010 and 12.5 million in the third quarter of 2009. Total value traded was €145 billion in the third quarter of 2010, compared with €179 billion in the second quarter of 2010 and €141 billion in the third quarter of 2009. |
U.S. Options
| • | Total market share of U.S. equity options was 28.8% in the third quarter of 2010, with PHLX matching 23.7% and NOM matching 5.1%. Total market share of U.S. equity options was 25.1% in the second quarter of 2010 (PHLX: 21.7%; NOM: 3.4%) and 20.2% in the third quarter of 2009 (PHLX: 17.0%; NOM: 3.2%). Total industry average daily volume was 12.5 million contracts in the third quarter of 2010, compared with 15.7 million contracts in the second quarter of 2010 and 13.2 million contracts in the third quarter of 2009. |
European Derivatives
| • | In the third quarter of 2010, the total volume of stock options and futures was 8.2 million contracts (Q210: 8.9 million; Q309: 6.6 million), index options and futures volume was 11.0 million contracts (Q210: 13.0 million; Q309: 6.9 million) and fixed income volume was 7.1 million contracts (Q210: 6.5 million; Q309: 6.2 million). Within NASDAQ OMX Commodities, cleared contracts during the third quarter of 2010 totaled 385 terawatt hours (“TWh”) (Q210: 499 TWh; Q309: 473 TWh). |
Listings
| • | New listings totaled 45 in the third quarter of 2010 compared with 65 in the second quarter of 2010 and 35 in the third quarter of 2009. Of the 45 new company listings in the third quarter of 2010, 41 listed on The NASDAQ Stock Market and 4 listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic. New listings in the third quarter of 2010 included 18 initial public offerings, compared with 27 in the second quarter of 2010 and 12 in the third quarter of 2009. |
Market Technology
| • | Total order intake, which represents the value of orders signed, was $27 million during the third quarter of 2010, compared with $12 million in the second quarter of 2010 and $37 million in the third quarter of 2009. At the end of the third quarter of 2010, total order value, which represents the total contract value of orders signed that are yet to be recognized as revenue, was $446 million, compared with $453 million at the end of the second quarter of 2010 and $318 million at the end of the third quarter of 2009. |
Adena Friedman, Chief Financial Officer, said:
“In addition to our ability to innovate and execute our growth strategy, expense management continues to be a core competency as evidenced by our results this quarter. When adjusting for expenses associated with the SMARTS acquisition, our spending in the
| The NASDAQ OMX Group, Inc. | 3 |
third quarter of 2010 is on par with levels realized last year while net revenues increased. Our ability to achieve operational efficiencies has allowed us to continue to invest in new initiatives while expanding profit margins.”
Expense Guidance
Total operating expenses for the full year of 2010 are expected to be in the range of $880 million to $890 million, including approximately $60 million in non-recurring costs.
Financial Review
Revenues
Revenues less liquidity rebates, brokerage, clearance and exchange fees (“net exchange revenues”) were $372 million for the third quarter of 2010, a decrease of $18 million, or 5%, from the second quarter of 2010 and an increase of $23 million, or 7%, from the third quarter of 2009. Changes in the exchange rates of various currencies as compared to the U.S. dollar had the impact of increasing revenues in the third quarter of 2010 by $5 million when compared to the second quarter of 2010; however, changes in exchange rates had the impact of decreasing revenues by $2 million when compared to the third quarter of 2009.
Market Services
Market Services net exchange revenues were $249 million, down 8% when compared to the second quarter of 2010 results but up 8% when compared to the third quarter of 2009.
Transaction Services
Net exchange revenues from Transaction Services were $168 million for the third quarter of 2010, a decrease of $18 million, or 10%, when compared to the second quarter of 2010, but an increase of $28 million, or 20%, when compared to the third quarter of 2009.
| • | Total net cash equity trading revenues were $63 million for the third quarter of 2010, down $13 million, or 17%, from the second quarter of 2010, but up $15 million, or 31%, from the prior year quarter. |
| • | Net U.S. cash equity trading revenues decreased $12 million when compared to the second quarter of 2010 due to lower industry volumes, which declined 26% from second quarter of 2010 levels. Revenues increased $18 million when compared to the prior year quarter due primarily to modified rates and to higher matched market share of U.S. cash equity trading, offset somewhat by lower industry volumes. |
| • | European cash equity trading revenues declined $1 million when compared to results from the second quarter of 2010 and $3 million from the third quarter of 2009. When compared to the second quarter of 2010 the decrease in revenue is due to lower trading activity. The reduction in revenue when compared to the third quarter of 2009 is due primarily to revised trading fees introduced in the fourth |
| The NASDAQ OMX Group, Inc. | 4 |
| quarter of 2009 and the first quarter of 2010, partially offset by increases in trading activity. |
| • | Included in U.S. cash equity trading revenues in the third quarter of 2010 are $60 million in SEC Section 31 fees, compared with $81 million in the second quarter of 2010 and $94 million in the third quarter of 2009. Corresponding cost of revenues, reflecting the reimbursement of these fees to the SEC, is included in brokerage, clearance and exchange fees. |
| • | Total net derivative trading and clearing revenues were $60 million for the third quarter of 2010, down $9 million, or 13%, from the second quarter of 2010 and up $6 million, or 11%, from the prior year quarter. |
| • | Net U.S. derivative trading and clearing revenues decreased $6 million when compared to the second quarter of 2010 and were equal to third quarter of 2009 revenues. The decline when compared to the second quarter of 2010 is due to lower industry volumes, which were down 19%. Partially offsetting this decline was higher market share. When compared to the third quarter of 2009, increases in market share were offset by declines in industry volumes and in the average net fees for traded contracts. |
| • | European derivative trading and clearing revenues decreased $3 million when compared to the second quarter of 2010 but increased $6 million when compared to the third quarter of 2009. The decline when compared to the second quarter of 2010 is due to lower trading volumes for options and futures contracts. The increase when compared to the third quarter of 2009 is due to higher trading volumes for options and futures contracts and clearing of fixed income products. |
| • | Access Services revenues were $45 million for the third quarter of 2010, an increase of $4 million, or 10%, when compared to the second quarter of 2010 and an increase of $7 million, or 18%, when compared to the prior year quarter. The increase in revenues when compared to the second quarter of 2010 is primarily due to increased demand for access services. The increase in revenues when compared to the third quarter of 2009 is due to revised fees for access services and increased demand for co-location services. |
Market Data
Market Data revenues were $76 million for the third quarter of 2010, down $3 million, or 4%, when compared to the second quarter of 2010 and to the third quarter of 2009.
| • | Net U.S. tape plans revenues were $28 million in the third quarter of 2010, down $2 million, or 7%, when compared to the second quarter of 2010 and down $3 million, or 10%, when compared to the prior year quarter. The reduction in revenues when compared to the second quarter of 2010 and to the third quarter of 2009 is due to lower plan shareable revenue and to declines in trading and quoting market share of U.S equities, as calculated under the SEC-mandated market data revenue quoting and trading formula. |
| The NASDAQ OMX Group, Inc. | 5 |
| • | U.S. market data products revenues were $32 million in the third quarter of 2010, equal to revenues reported in the second quarter of 2010, but up $3 million, or 10%, when compared to the prior year quarter. The increase in revenues when compared to the third quarter of 2009 is driven by the growth of new products such as BX TotalView, options data feeds, and mutual fund products. |
| • | European market data products revenues were $16 million in the third quarter of 2010, a decrease of $1 million, or 6%, when compared to the second quarter of 2010, and a decrease of $3 million, or 16%, when compared to the prior year quarter. The decrease when compared to the second quarter of 2010 is primarily due to lower audit revenues. The decrease in revenues when compared to the third quarter of 2009 is due primarily to declines in subscriber populations, discontinued products and changes in the exchange rates of various currencies as compared to the U.S. dollar. |
Issuer Services
Issuer Services revenues were $85 million, a decrease of $1 million, or 1%, when compared to the second quarter of 2010, and an increase of $3 million, or 4%, when compared to the third quarter of 2009.
Global Listing Services
Global Listing Services revenues were $73 million for the third quarter of 2010, down $1 million, or 1%, from the second quarter of 2010, but up $1 million, or 1%, when compared to the third quarter of 2009. The decrease when compared to the second quarter of 2010 is primarily due to a modest decline in Corporate Services revenues, resulting from seasonally lower demand for services from listed companies. The increase when compared to the third quarter of 2009 is primarily due to higher European listing revenues resulting from higher market capitalization values for European listed equities.
Global Index Group
Global Index Group revenues were $12 million for the third quarter of 2010, equal to revenues in the second quarter of 2010, and up $2 million, or 20%, when compared to the third quarter of 2009. Higher revenues when compared to the prior year quarter are primarily due to increases in asset sizes of licensed exchange traded funds (“ETFs”) as well as additional demand for new licensed ETFs and other financial products.
Market Technology
Market Technology revenues were $38 million for the third quarter of 2010, up $4 million, or 12%, from the second quarter of 2010, and up $2 million, or 6%, when compared to the third quarter of 2009. These increases primarily relate to the inclusion of revenue associated with SMARTS, which was acquired during the quarter.
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Operating Expenses
Total non-GAAP operating expenses decreased $4 million, or 2%, to $203 million in the third quarter of 2010 from $207 million in the second quarter of 2010, and increased $6 million, or 3%, from $197 million in the prior year quarter. The decrease in expenses when compared to the second quarter of 2010 is primarily driven by lower compensation, professional and contract services, and computer operations and data communications expenses. Partially offsetting lower spending in the quarter is the impact of changes in the exchange rates of various currencies as compared to the U.S. dollar, which had the effect of increasing expenses by $3 million when compared to the second quarter of 2010, as well as additional expenses associated with SMARTS. The increase in expenses from the third quarter of 2009 is primarily due to costs associated with SMARTS and higher compensation expenses, partially offset by a reduction in expenses resulting from the sale of Carpenter Moore, which occurred in the fourth quarter of 2009.
Net Interest Expense
Net interest expense was $23 million for the third quarter of 2010, compared with $24 million for the second quarter of 2010 and $23 million for the third quarter of 2009. Included in total net interest expense for the third quarter of 2010 is $19 million in interest expense, $4 million of non-cash expense associated with the accretion of senior and convertible notes, and $2 million in non-cash debt amortization expenses and other related fees. Interest income for the third quarter of 2010 was $2 million.
Earnings Per Share
On a non-GAAP basis, third quarter 2010 earnings per diluted share were $0.50 as compared to non-GAAP earnings per diluted share of $0.52 in the second quarter of 2010 and non-GAAP earnings per diluted share of $0.42 in the prior year quarter. NASDAQ OMX’s weighted average shares outstanding used to calculate diluted earnings per share was 204 million for the third quarter of 2010, 209 million for the second quarter of 2010, and 215 million for the third quarter of 2009.
About NASDAQ OMX
The NASDAQ OMX Group, Inc. is the world’s largest exchange company. It delivers trading, exchange technology and public company services across six continents, with approximately 3,600 listed companies. NASDAQ OMX offers multiple capital raising solutions to companies around the globe, including its U.S. listings market, NASDAQ OMX Nordic, NASDAQ OMX Baltic, NASDAQ OMX Second North, and the U.S. 144A sector. The company offers trading across multiple asset classes including equities, derivatives, debt, commodities, structured products and exchange-traded funds. NASDAQ OMX technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries. NASDAQ OMX Nordic and NASDAQ OMX Baltic are not legal entities but describe the common offering from NASDAQ OMX exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more information about NASDAQ OMX, visit http://www.nasdaqomx.com. *Please follow NASDAQ OMX on Facebook
| The NASDAQ OMX Group, Inc. | 7 |
(http://www.facebook.com/pages/NASDAQ-OMX/108167527653) and Twitter (http://www.twitter.com/nasdaqomx). NDAQG NDAQF
Non-GAAP Information
In addition to disclosing results determined in accordance with GAAP, NASDAQ OMX also discloses certain non-GAAP results of operations, including net income, diluted earnings per share, operating expenses, and operating income that make certain adjustments or exclude certain charges and gains that are described in the reconciliation table of GAAP to non-GAAP information provided at the end of this release. Management believes that this non-GAAP information provides investors with additional information to assess NASDAQ OMX’s operating performance by making certain adjustments or excluding costs or gains and assists investors in comparing our operating performance to prior periods. Management uses this non-GAAP information, along with GAAP information, in evaluating its historical operating performance.
The non-GAAP information is not prepared in accordance with GAAP and may not be comparable to non-GAAP information used by other companies. The non-GAAP information should not be viewed as a substitute for, or superior to, other data prepared in accordance with GAAP.
Cautionary Note Regarding Forward-Looking Statements
Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties. NASDAQ OMX cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to (i) projections about our future financial results, growth, trading volumes, tax benefits and achievement of synergy targets, (ii) statements about the implementation dates and benefits of certain strategic initiatives, (iii) statements about our integrations of our recent acquisitions and (iv) other statements that are not historical facts. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ OMX’s control. These factors include, but are not limited to, NASDAQ OMX’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in NASDAQ OMX’s filings with the U.S. Securities Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on NASDAQ OMX’s website at http://www.nasdaqomx.com and the SEC’s website at www.sec.gov. NASDAQ OMX undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
| Contact Media Relations: | Contact Investor Relations: | |
| Frank DeMaria +1.212.231.5183 | Vincent Palmiere +1.212.401.8742 | |
| The NASDAQ OMX Group, Inc. | 8 |
The NASDAQ OMX Group, Inc.
Condensed Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
| Three Months Ended | ||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 30, 2009 |
||||||||||
| Revenues |
||||||||||||
| Market Services revenues |
$ | 628 | $ | 756 | $ | 692 | ||||||
| Cost of revenues: |
||||||||||||
| Liquidity rebates |
(297 | ) | (374 | ) | (329 | ) | ||||||
| Brokerage, clearance and exchange fees |
(82 | ) | (112 | ) | (132 | ) | ||||||
| Total cost of revenues |
(379 | ) | (486 | ) | (461 | ) | ||||||
| Total Market Services revenues less liquidity rebates, brokerage, clearance and exchange fees |
249 | 270 | 231 | |||||||||
| Issuer Services revenues |
85 | 86 | 82 | |||||||||
| Market Technology revenues |
38 | 34 | 36 | |||||||||
| Total revenues less liquidity rebates, brokerage, clearance and exchange fees |
372 | 390 | 349 | |||||||||
| Operating Expenses |
||||||||||||
| Compensation and benefits |
102 | 104 | 100 | |||||||||
| Marketing and advertising |
5 | 5 | 3 | |||||||||
| Depreciation and amortization |
25 | 25 | 27 | |||||||||
| Professional and contract services |
18 | 20 | 20 | |||||||||
| Computer operations and data communications |
13 | 14 | 14 | |||||||||
| Occupancy |
23 | 21 | 19 | |||||||||
| Regulatory |
9 | 9 | 10 | |||||||||
| Merger and strategic initiatives |
1 | 1 | 5 | |||||||||
| General, administrative and other |
11 | 12 | 20 | |||||||||
| Total operating expenses |
207 | 211 | 218 | |||||||||
| Operating income |
165 | 179 | 131 | |||||||||
| Interest income |
2 | 2 | 3 | |||||||||
| Interest expense |
(25 | ) | (26 | ) | (26 | ) | ||||||
| Income from unconsolidated investees, net |
1 | 1 | — | |||||||||
| Loss on divestiture of businesses |
— | (11 | ) | — | ||||||||
| Dividend and investment income |
— | 1 | 1 | |||||||||
| Debt conversion expense |
— | — | (25 | ) | ||||||||
| Income before income taxes |
143 | 146 | 84 | |||||||||
| Income tax provision |
43 | 51 | 25 | |||||||||
| Net income |
100 | 95 | 59 | |||||||||
| Net loss attributable to noncontrolling interests |
1 | 1 | 1 | |||||||||
| Net income attributable to NASDAQ OMX |
$ | 101 | $ | 96 | $ | 60 | ||||||
| Basic and diluted earnings per share: |
||||||||||||
| Basic earnings per share |
$ | 0.51 | $ | 0.46 | $ | 0.30 | ||||||
| Diluted earnings per share |
$ | 0.50 | $ | 0.46 | $ | 0.28 | ||||||
| Weighted-average common shares outstanding for earnings per share: |
||||||||||||
| Basic |
200 | 206 | 203 | |||||||||
| Diluted |
204 | 209 | 215 | |||||||||
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
(unaudited)
| Three Months Ended | ||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 30, 2009 |
||||||||||
| MARKET SERVICES |
||||||||||||
| Transaction Services |
||||||||||||
| Cash Equity Trading Revenues: |
||||||||||||
| U.S. cash equity trading |
$ | 362 | $ | 488 | $ | 461 | ||||||
| Cost of revenues: |
||||||||||||
| Liquidity rebates |
(242 | ) | (326 | ) | (310 | ) | ||||||
| Brokerage, clearance and exchange fees |
(78 | ) | (108 | ) | (127 | ) | ||||||
| Total U.S. cash equity cost of revenues |
(320 | ) | (434 | ) | (437 | ) | ||||||
| Net U.S. cash equity trading revenues |
42 | 54 | 24 | |||||||||
| European cash equity trading |
21 | 22 | 24 | |||||||||
| Total net cash equity trading revenues |
63 | 76 | 48 | |||||||||
| Derivative Trading and Clearing Revenues: |
||||||||||||
| U.S. derivative trading and clearing |
93 | 92 | 58 | |||||||||
| Cost of revenues: |
||||||||||||
| Liquidity rebates |
(55 | ) | (48 | ) | (19 | ) | ||||||
| Brokerage, clearance and exchange fees |
(4 | ) | (4 | ) | (5 | ) | ||||||
| Total U.S. derivative trading and clearing cost of revenues |
(59 | ) | (52 | ) | (24 | ) | ||||||
| Net U.S. derivative trading and clearing revenues |
34 | 40 | 34 | |||||||||
| European derivative trading and clearing revenues |
26 | 29 | 20 | |||||||||
| Total net derivative trading and clearing revenues |
60 | 69 | 54 | |||||||||
| Access Services Revenues |
45 | 41 | 38 | |||||||||
| Total Transaction Services revenues less liquidity rebates, brokerage, clearance and exchange fees |
168 | 186 | 140 | |||||||||
| Market Data |
||||||||||||
| Net U.S. tape plans |
28 | 30 | 31 | |||||||||
| U.S. market data products |
32 | 32 | 29 | |||||||||
| European market data products |
16 | 17 | 19 | |||||||||
| Total Market Data revenues |
76 | 79 | 79 | |||||||||
| Broker Services |
4 | 4 | 9 | |||||||||
| Other Market Services |
1 | 1 | 3 | |||||||||
| Total Market Services revenues less liquidity rebates, brokerage, clearance and exchange fees |
249 | 270 | 231 | |||||||||
| ISSUER SERVICES |
||||||||||||
| Global Listing Services: |
||||||||||||
| Annual renewal fees |
29 | 28 | 29 | |||||||||
| Listing of additional shares fees |
10 | 10 | 9 | |||||||||
| Initial listing fees |
4 | 5 | 5 | |||||||||
| Total U.S. listing fees |
43 | 43 | 43 | |||||||||
| European listing fees |
12 | 12 | 11 | |||||||||
| Corporate services |
18 | 19 | 18 | |||||||||
| Total Global Listing Services |
73 | 74 | 72 | |||||||||
| Global Index Group |
12 | 12 | 10 | |||||||||
| Total Issuer Services revenues |
85 | 86 | 82 | |||||||||
| MARKET TECHNOLOGY |
||||||||||||
| License, support and project revenues |
30 | 27 | 28 | |||||||||
| Facility management services |
5 | 6 | 7 | |||||||||
| Other revenues |
3 | 1 | 1 | |||||||||
| Total Market Technology revenues |
38 | 34 | 36 | |||||||||
| Total revenues less liquidity rebates, brokerage, clearance and exchange fees |
$ | 372 | $ | 390 | $ | 349 | ||||||
The NASDAQ OMX Group, Inc.
Condensed Consolidated Balance Sheets
(in millions)
| September 30, 2010 |
December 31, 2009 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 336 | $ | 594 | ||||
| Restricted cash |
53 | 30 | ||||||
| Financial investments, at fair value |
343 | 308 | ||||||
| Receivables, net |
308 | 301 | ||||||
| Deferred tax assets |
17 | 25 | ||||||
| Market value, outstanding derivative positions |
1,657 | 2,054 | ||||||
| Other current assets |
166 | 112 | ||||||
| Total current assets |
2,880 | 3,424 | ||||||
| Non-current restricted cash |
106 | 80 | ||||||
| Property and equipment, net |
160 | 164 | ||||||
| Non-current deferred tax assets |
403 | 504 | ||||||
| Goodwill |
5,041 | 4,800 | ||||||
| Intangible assets, net |
1,680 | 1,631 | ||||||
| Other assets |
85 | 119 | ||||||
| Total assets |
$ | 10,355 | $ | 10,722 | ||||
| Liabilities |
||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued expenses |
$ | 138 | $ | 125 | ||||
| Section 31 fees payable to SEC |
19 | 137 | ||||||
| Accrued personnel costs |
97 | 114 | ||||||
| Deferred revenue |
156 | 105 | ||||||
| Other current liabilities |
134 | 71 | ||||||
| Deferred tax liabilities |
26 | 23 | ||||||
| Market value, outstanding derivative positions |
1,657 | 2,054 | ||||||
| Current portion of debt obligations |
140 | 225 | ||||||
| Total current liabilities |
2,367 | 2,854 | ||||||
| Debt obligations |
1,846 | 1,867 | ||||||
| Non-current deferred tax liabilities |
713 | 683 | ||||||
| Non-current deferred revenue |
169 | 160 | ||||||
| Other liabilities |
182 | 199 | ||||||
| Total liabilities |
5,277 | 5,763 | ||||||
| Commitments and contingencies |
||||||||
| Series A convertible preferred stock |
— | 15 | ||||||
| Equity |
||||||||
| NASDAQ OMX stockholders’ equity: |
||||||||
| Common stock |
2 | 2 | ||||||
| Preferred stock |
— | — | ||||||
| Additional paid-in capital |
3,776 | 3,736 | ||||||
| Common stock in treasury, at cost |
(310 | ) | (10 | ) | ||||
| Accumulated other comprehensive loss |
(268 | ) | (406 | ) | ||||
| Retained earnings |
1,867 | 1,610 | ||||||
| Total NASDAQ OMX stockholders’ equity |
5,067 | 4,932 | ||||||
| Noncontrolling interests |
11 | 12 | ||||||
| Total equity |
5,078 | 4,944 | ||||||
| Total liabilities, Series A convertible preferred stock and equity |
$ | 10,355 | $ | 10,722 | ||||
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP to Non-GAAP Earnings and
Reconciliation of GAAP to Non-GAAP Operating Expenses
(in millions, except per share amounts)
(unaudited)
| Three Months Ended | ||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 30, 2009 |
||||||||||
| GAAP Net Income attributable to NASDAQ OMX: |
$ | 101 | $ | 96 | $ | 60 | ||||||
| Adjustments: |
||||||||||||
| Workforce reductions |
2 | 3 | 4 | |||||||||
| Merger and strategic initiatives |
1 | 1 | 5 | |||||||||
| Occupancy |
2 | — | — | |||||||||
| Asset retirements |
2 | — | 10 | |||||||||
| Foreign currency revaluation |
(3 | ) | — | — | ||||||||
| Loss on divestiture of businesses |
— | 11 | — | |||||||||
| Loss on exchange of ownership of NASDAQ Dubai |
— | 1 | — | |||||||||
| Professional fees |
— | — | 2 | |||||||||
| Debt conversion expense |
— | — | 25 | |||||||||
| Total Adjustments |
4 | 16 | 46 | |||||||||
| Adjustment to the income tax provision to reflect Non-GAAP adjustments(1) |
(2 | ) | (7 | ) | (7 | ) | ||||||
| Non-recurring tax items, net |
(2 | ) | 3 | (10 | ) | |||||||
| Total Adjustments, net of tax |
— | 12 | 29 | |||||||||
| Non-GAAP Net Income attributable to NASDAQ OMX: |
$ | 101 | $ | 108 | $ | 89 | ||||||
| GAAP Diluted Earnings per Common Share: |
$ | 0.50 | $ | 0.46 | $ | 0.28 | ||||||
| Total Adj. from Non-GAAP Net Income Above: |
— | 0.06 | 0.14 | |||||||||
| Non-GAAP Diluted Earnings per Common Share: |
$ | 0.50 | $ | 0.52 | $ | 0.42 | ||||||
| Three Months Ended | ||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 30, 2009 |
||||||||||
| GAAP Operating Expenses: |
$ | 207 | $ | 211 | $ | 218 | ||||||
| Adjustments: |
||||||||||||
| Workforce reductions |
(2 | ) | (3 | ) | (4 | ) | ||||||
| Merger and strategic initiatives |
(1 | ) | (1 | ) | (5 | ) | ||||||
| Occupancy |
(2 | ) | — | — | ||||||||
| Asset retirements |
(2 | ) | — | (10 | ) | |||||||
| Foreign currency revaluation |
3 | — | — | |||||||||
| Professional fees |
— | — | (2 | ) | ||||||||
| Total Adjustments |
(4 | ) | (4 | ) | (21 | ) | ||||||
| Non-GAAP Operating Expenses |
$ | 203 | $ | 207 | $ | 197 | ||||||
| (1) | We determine the tax effect of each item based on the tax rules in the respective jurisdiction where the transaction occurred. The foreign currency revaluation has no associated tax impact. |
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP to Non-GAAP Operating Income
(in millions)
(unaudited)
| Three Months Ended | ||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 30, 2009 |
||||||||||
| GAAP Operating Income: |
$ | 165 | $ | 179 | $ | 131 | ||||||
| Adjustments: |
||||||||||||
| Workforce reductions |
2 | 3 | 4 | |||||||||
| Merger and strategic initiatives |
1 | 1 | 5 | |||||||||
| Occupancy |
2 | — | — | |||||||||
| Asset retirements |
2 | — | 10 | |||||||||
| Foreign currency revaluation |
(3 | ) | — | — | ||||||||
| Professional fees |
— | — | 2 | |||||||||
| Total Adjustments |
4 | 4 | 21 | |||||||||
| Non-GAAP Operating Income |
$ | 169 | $ | 183 | $ | 152 | ||||||
| Total revenues less liquidity rebates, brokerage, clearance and exchange fees |
$ | 372 | $ | 390 | $ | 349 | ||||||
| Non-GAAP Operating Margin (1) |
45 | % | 47 | % | 44 | % | ||||||
| (1) | Non-GAAP Operating Margin equals Non-GAAP Operating Income divided by total revenues less liquidity rebates, brokerage, clearance, and exchange fees. |
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
| Three Months Ended | ||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 30, 2009 |
||||||||||
| Market Services |
||||||||||||
| Cash Equity Trading |
||||||||||||
| NASDAQ securities |
||||||||||||
| Average daily share volume (in billions) |
2.02 | 2.53 | 2.25 | |||||||||
| Matched market share executed on NASDAQ |
29.0 | % | 28.8 | % | 30.4 | % | ||||||
| Matched market share executed on NASDAQ OMX BX |
2.5 | % | 3.2 | % | 2.0 | % | ||||||
| Market share reported to the FINRA/NASDAQ |
||||||||||||
| Trade Reporting Facility(1) |
30.4 | % | 39.0 | % | 39.3 | % | ||||||
| Total market share (2) |
61.9 | % | 71.0 | % | 71.8 | % | ||||||
| NYSE securities |
||||||||||||
| Average daily share volume (in billions) |
4.24 | 5.96 | 5.53 | |||||||||
| Matched market share executed on NASDAQ |
13.8 | % | 14.0 | % | 14.1 | % | ||||||
| Matched market share executed on NASDAQ OMX BX |
3.5 | % | 4.1 | % | 3.1 | % | ||||||
| Market share reported to the FINRA/NASDAQ |
||||||||||||
| Trade Reporting Facility(1) |
27.0 | % | 33.5 | % | 35.4 | % | ||||||
| Total market share (2) |
44.3 | % | 51.6 | % | 52.6 | % | ||||||
| NYSE Amex and regional securities |
||||||||||||
| Average daily share volume (in billions) |
1.29 | 1.84 | 1.53 | |||||||||
| Matched market share executed on NASDAQ |
21.0 | % | 21.7 | % | 22.2 | % | ||||||
| Matched market share executed on NASDAQ OMX BX |
3.3 | % | 3.5 | % | 2.1 | % | ||||||
| Market share reported to the FINRA/NASDAQ |
||||||||||||
| Trade Reporting Facility(1) |
25.1 | % | 30.0 | % | 34.4 | % | ||||||
| Total market share (2) |
49.4 | % | 55.2 | % | 58.6 | % | ||||||
| Total U.S.-listed equities |
||||||||||||
| Average daily share volume (in billions) |
7.55 | 10.33 | 9.31 | |||||||||
| Matched share volume (in billions) |
107.8 | 147.9 | 131.4 | |||||||||
| Matched market share executed on NASDAQ |
19.1 | % | 19.0 | % | 19.4 | % | ||||||
| Matched market share executed on NASDAQ OMX BX |
3.2 | % | 3.8 | % | 2.7 | % | ||||||
| NASDAQ OMX Nordic and NASDAQ OMX Baltic Markets |
||||||||||||
| Average daily number of equity trades |
263,965 | 324,560 | 189,002 | |||||||||
| Average daily value of shares traded (in billions) |
$ | 2.8 | $ | 3.7 | $ | 3.0 | ||||||
| Derivative Trading and Clearing |
||||||||||||
| U.S. Equity Options Contracts |
||||||||||||
| Total industry average daily volume (in millions) |
12.5 | 15.7 | 13.2 | |||||||||
| Matched market share: |
||||||||||||
| NASDAQ OMX PHLX |
23.7 | % | 21.7 | % | 17.0 | % | ||||||
| The NASDAQ Options Market |
5.1 | % | 3.4 | % | 3.2 | % | ||||||
| NASDAQ OMX Nordic and NASDAQ OMX Baltic Markets |
||||||||||||
| Average daily volume: |
||||||||||||
| Equity options and fixed-income contracts |
398,041 | 460,790 | 298,849 | |||||||||
| Equity options contracts traded on EDX London(3) |
— | — | 87,636 | |||||||||
| Finnish option contracts traded on Eurex |
124,553 | 138,493 | 65,779 | |||||||||
| NASDAQ OMX Commodities |
||||||||||||
| Clearing Turnover: |
||||||||||||
| Power contracts (TWh)(4) |
385 | 499 | 473 | |||||||||
| Carbon contracts (1000 tCO2)(4) |
3,219 | 9,557 | 13,534 | |||||||||
| Issuer Services |
||||||||||||
| NASDAQ |
||||||||||||
| Initial public offerings |
17 | 23 | 12 | |||||||||
| New listings (5) |
41 | 59 | 33 | |||||||||
| Number of listed companies (6) |
2,805 | 2,831 | 2,863 | |||||||||
| NASDAQ OMX Nordic and NASDAQ OMX Baltic Markets |
||||||||||||
| Initial public offerings |
1 | 4 | — | |||||||||
| New listings |
4 | 6 | 2 | |||||||||
| Number of listed companies (7) |
780 | 788 | 800 | |||||||||
| Market Technology |
||||||||||||
| Order intake (in millions)(8) |
$ | 27 | $ | 12 | $ | 37 | ||||||
| Total order value (in millions)(9) |
$ | 446 | $ | 453 | $ | 318 | ||||||
| (1) | Transactions reported to the Financial Industry Regulatory Authority, or FINRA, FINRA/NASDAQ Trade Reporting Facility. |
| (2) | Includes transactions executed on both NASDAQ’s and NASDAQ OMX BX’s systems plus trades reported through the FINRA/NASDAQ Trade Reporting Facility. |
| (3) | In December 2009, derivative volume was transferred to NASDAQ OMX from EDX. |
| (4) | Transactions executed on Nord Pool ASA and reported for clearing to NASDAQ OMX Commodities measured by Terawatt hours (TWh) and one thousand metric tons of carbon dioxide (1000 tCO2). |
| (5) | 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 ETFs. |
| (6) | Number of listed companies for NASDAQ at period end, including separately listed ETFs. |
| (7) | Represents companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets, NASDAQ OMX First North, at period end. |
| (8) | Total contract value of orders signed. |
| (9) | Represents total contract value of orders signed that are yet to be recognized as revenue. |