New York, N.Y.-The NASDAQ OMX Group, Inc. ("NASDAQ OMX®"; NASDAQ: NDAQ) today reported net income attributable to NASDAQ OMX of $43 million, or $0.20 per diluted share, for the fourth quarter of 2009 compared with net income attributable to NASDAQ OMX of $60 million, or $0.28 per diluted share, in the third quarter of 2009, and net income attributable to NASDAQ OMX of $35 million, or $0.17 per diluted share, in the fourth quarter of 2008. Net income attributable to NASDAQ OMX for the full year of 2009 was $266 million, or $1.25 per diluted share.Included in fourth quarter of 2009 results are:
Excluding the above items net income attributable to NASDAQ OMX calculated on a non-GAAP basis was $99 million, compared with non-GAAP net income attributable to NASDAQ OMX of $89 million for the third quarter of 2009 and $110 million for the fourth quarter of 2008. Non-GAAP diluted earnings per common share were $0.46 for the fourth quarter of 2009 compared with non-GAAP diluted earnings per common share of $0.42 for the third quarter of 2009 and $0.52 for the fourth quarter of 2008.
"We've accomplished much in the past year, completing our integration efforts and furthering the diversity of our revenue model through growth in market technology, in European derivative trading, and in fee based services," commented Bob Greifeld, NASDAQ OMX's Chief Executive Officer. "Today we are a more efficient operator with better financial flexibility, placing us in a strong position to lever our expertise in trading technology, clearing, data distribution, and corporate services. The changing dynamics of our industry are providing numerous growth opportunities and our technology leadership leaves us well positioned to swiftly capitalize on those changes to expand our business."
"The strong cash flow of our diverse business model recently provided us with an opportunity to refinance our outstanding credit facility at extremely favorable terms," noted Adena Friedman, Chief Financial Officer. "The terms of the new debt provide us with increased flexibility in our capital management decisions while reducing our interest rate exposure. Additionally, the recent upgrades of our debt ratings speak to our sound financial policy and to the fact that we delivered on the promises of our integration efforts and improved the efficiency of our operations. In 2010, our goal is to maintain this financial discipline while delivering growth to our shareholders. For the full year of 2010, our guidance for total operating expenses is to be in the range of $865 million to $885 million, including approximately $50 million in non-recurring costs."
Revenues less liquidity rebates, brokerage, clearance and exchange fees ("net exchange revenues") were $369 million for the fourth quarter of 2009, an increase of $20 million, or 6%, from third quarter of 2009 results. Net exchange revenues decreased $34 million, or 8%, from fourth quarter of 2008 results.
Market Services net exchange revenues were $240 million, an increase of 4% from the third quarter of 2009, but a decrease of 14% from the fourth quarter of 2008.
Net exchange revenues from Transaction Services were $150 million for the fourth quarter of 2009, an increase of $11 million, or 8%, when compared to the third quarter of 2009, but a decrease of $30 million, or 17%, when compared to the fourth quarter of 2008.
Market Data revenues were $83 million for the fourth quarter of 2009, up $4 million, or 5%, when compared to the third quarter of 2009, but down $2 million, or 2%, when compared to the fourth quarter of 2008.
During the fourth quarter of 2009, Issuer Services revenues were $82 million, representing an increase of $1 million, or 1%, from the prior quarter, but a decrease of $3 million, or 4%, from the fourth quarter of 2008.
Global Listing Services
Global Listing Services revenues were $72 million for the fourth quarter of 2009, up $1 million, or 1%, from the third quarter of 2009, but down $3 million, or 4%, when compared to the fourth quarter of 2008. The increase when compared to the third quarter of 2009 is primarily due to higher market capitalization values for European listed equities, which in turn result in higher European listing fees. Decreases in revenues from the prior year period are due primarily to the fourth quarter of 2009 sale of Carpenter Moore, NASDAQ OMX's insurance brokerage business. Also contributing to the decline are lower U.S. annual renewal fees resulting from fewer listed companies.
Market Technology revenues were $44 million for the fourth quarter of 2009, up $8 million, or 22%, when compared to the third quarter of 2009, and up $9 million, or 26%, when compared to the fourth quarter of 2008. Revenue increases are primarily due to the increased deliveries of market technology contracts. Also contributing to the increases are changes in the exchange rates of various currencies as compared to the U.S. dollar.
Total non-GAAP operating expenses increased $7 million, or 4%, to $204 million from $197 million in the third quarter of 2009, but decreased $9 million, or 4%, from $213 million in the prior year quarter. The increase in expenses when compared to the third quarter of 2009 is primarily driven by higher compensation expense and increased marketing and advertising spending. The decrease in expenses from the fourth quarter of 2008 was realized through a reduction in compensation expense and lower general, administrative and other expense. These reductions were driven by successful integration efforts associated with NASDAQ's business combination with OMX and acquisition of the Philadelphia Stock Exchange.
Net Interest Expense
Net interest expense was $22 million for the fourth quarter of 2009, compared with $23 million for the third quarter of 2009 and $28 million for the fourth quarter of 2008. Included in interest expense for the fourth quarter of 2009 is $15 million in interest expense, $3 million of non-cash expense associated with accretion of 2.5% convertible notes, $3 million in non-cash debt amortization expenses, and $4 million in other related fees. Interest income for the fourth quarter of 2009 was $3 million.
Earnings Per Share
On a non-GAAP basis, fourth quarter 2009 earnings per diluted share were $0.46 as compared to non-GAAP earnings per diluted share of $0.42 in the third quarter of 2009 and non-GAAP earnings per diluted share of $0.52 in the prior year quarter. NASDAQ OMX's weighted average shares outstanding used to calculate diluted earnings per share was 215 million for the fourth quarter of 2009 compared with 215 million for the third quarter of 2009 and 214 million for the fourth quarter of 2008.
In June 2009, NASDAQ OMX filed an application for an advance tax ruling with the Swedish Tax Council for Advanced Tax Rulings. The application was filed to confirm whether certain interest expense is deductible for Swedish tax purposes under legislation that became effective on January 1, 2009. We expect to receive a favorable response from the Swedish Tax Council for Advance Tax Rulings. We recorded the Swedish tax benefit as described above in our condensed consolidated financial statements. In the fourth quarter of 2009, we recorded a tax benefit of $5 million, or $0.02 per diluted share. For the full year of 2009, we recorded a tax benefit of $19 million, or $0.09 per diluted share. We expect to record recurring quarterly tax benefits of $4 million to $5 million with respect to this issue for the foreseeable future.
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 3,700 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 First 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 Twitter (http://twitter.com/nasdaq) and Facebook (http://www.facebook.com/pages/NASDAQcom/13881287428).
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 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.
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