-OPERATING INCOME INCREASES 97.0% TO $165.1 MILLION ($83.8 MILLION IN Q307)-
-PHILADELPHIA STOCK EXCHANGE TRANSACTION ACCRETES IN Q308-
-TIMETABLE TO ACHIEVE $100 MILLION OMX EXPENSE SYNERGIES ACCELERATED AGAIN-
New York, N.Y.-The NASDAQ OMX Group, Inc. ("NASDAQ OMX®"; NASDAQ: NDAQ) today reported third quarter 2008 net income of $60.1 million, or $0.28 per diluted share, compared with net income of $365.0 million, or $2.41 per diluted share, in the third quarter of 2007. Included in third quarter 2007 results was a pre-tax gain of $431.4 million associated with NASDAQ's sale of its share capital of the London Stock Exchange Group plc, which had the impact of increasing diluted earnings per share by $1.95.
For comparison purposes pro forma non-GAAP results are being presented that reflect the financial results of both NASDAQ OMX and the Philadelphia Stock Exchange as if we were a combined company for the periods presented and exclude certain non-operational items. Items excluded from third quarter 2008 results are:
For the third quarter of 2008, net income on a pro forma non-GAAP basis was $109.7 million, or $0.52 per diluted share, an increase of 27.7% when compared to pro forma non-GAAP net income of $85.9 million, or $0.42 per diluted share, for the third quarter of 2007, and an increase of 7.2% when compared to pro forma non-GAAP net income of $102.3 million, or $0.48 per diluted share, for the second quarter of 2008.
The remaining results are presented on a pro forma basis unless otherwise noted.
Total revenues were $1.0 billion in the third quarter of 2008. Revenues less liquidity rebates, brokerage, clearance and exchange fees ("net exchange revenues") were $410.6 million for the third quarter of 2008, an increase of $26.4 million, or 6.9%, from the third quarter of 2007, and a decrease of $9.7 million, or 2.3%, from the second quarter of 2008.
"During the quarter we continued on our mission to leverage our massive scale against extreme efficiency to build a global business positioned for success in all economic environments," commented Bob Greifeld, Chief Executive Officer of NASDAQ OMX. "All of the steps taken, including the acquisitions of the Philadelphia Stock Exchange and the Boston Stock Exchange, as well as the launch of NASDAQ OMX Europe, are designed to further diversify our product offerings while utilizing the same efficient platform. In many ways, NASDAQ OMX has never been better positioned to deliver value to our customers and long term returns for our shareholders as we redefine the role of the global exchange company."
Market Services net exchange revenues increased to $299.4 million, up 10.2% from the prior year quarter and up 2.3% from the second quarter of 2008.
Net exchange revenues from Transaction Services were $183.7 million for the third quarter of 2008, an increase of $20.1 million, or 12.3%, when compared to the third quarter of 2007. Net exchange revenues increased $7.4 million, or 4.2%, from the second quarter of 2008.
Derivative Trading net exchange revenues increased from the prior year quarter and from the second quarter of 2008.
Market Data revenues were $87.5 million for the third quarter of 2008, up $5.5 million, or 6.7%, when compared to the third quarter of 2007, but down $0.9 million, or 1.0%, from the second quarter of 2008.
Financial Products revenues were $12.7 million for the third quarter of 2008, up 7.6% when compared to the third quarter of 2007, and up 16.5% when compared to the second quarter of 2008. Driving the increase in revenues is higher license fees associated with NASDAQ-licensed products.
Market Technology revenues were $24.9 million for the third quarter of 2008, equal to revenues recognized in the third quarter of 2007, but down $13.8 million, or 35.7%, when compared to the second quarter of 2008. Revenue declines when compared to the second quarter of 2008 are due to seasonally lower demand for licensed products, technology support and facilities management services.
When presented on a pro forma non-GAAP basis, total operating expenses decreased $4.7 million, or 2.1%, to $222.0 million from $226.7 million in the prior year quarter and $30.4 million, or 12.0%, from $252.4 million in the prior quarter. The decrease in expenses was driven primarily by lower compensation expenses, declines in professional and contract services, and reduced general and administrative expenses. Somewhat offsetting these declines are higher marketing and occupancy expenses and spending on new initiatives.
Net Interest Expense
Net interest expense was $19.0 million for the third quarter of 2008, compared with $31.2 million for the third quarter of 2007 and $20.6 million for the second quarter of 2008. The decline in net interest expense is primarily due to lower interest rates.
Earnings Per Share
On a pro forma non-GAAP basis, third quarter 2008 earnings per diluted share were $0.52 versus $0.42 per diluted share in the prior year quarter, and $0.48 in the second quarter of 2008. NASDAQ OMX's weighted average shares outstanding used to calculate diluted earnings per share were 214.2 million in the third quarter of 2008 versus 212.8 million in the year-ago quarter and 214.4 million in the second quarter of 2008.
About NASDAQ OMX
The NASDAQ OMX Group, Inc. is the world's largest exchange company. With over 3,900 listed companies, it delivers trading, exchange technology and public company services across six continents. NASDAQ OMX offers multiple capital raising solutions to companies around the globe, including its U.S. listings market; the OMX Nordic Exchange, including First North; and the 144A PORTAL Market. The company offers trading across multiple asset classes including equities, derivatives, commodities, structured products and ETFs. NASDAQ OMX technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries. OMX Nordic Exchange is not a legal entity but describes the common offering from NASDAQ OMX exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more information about NASDAQ OMX, visit www.nasdaqomx.com.
In addition to disclosing results determined in accordance with GAAP, NASDAQ OMX also discloses certain pro forma non-GAAP results of operations, including net income, diluted earnings per share, and operating expenses that make certain adjustments or exclude certain charges and gains that are described in the reconciliation table of GAAP to pro forma non-GAAP information provided at the end of this release. Management believes that this pro forma 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 pro forma 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 and achievement of synergy targets, (ii) statements about the implementation dates and benefits of certain strategic initiatives, including the launch of NASDAQ OMX BX, (iii) statements about our integrations with OMX, the Philadelphia Stock Exchange and certain subsidiaries of Nord Pool, 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.
Contacts Media Relations:
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Jonas Rodny +46(8)405.7267
Contact Investor Relations:
Vincent Palmiere +1.212.401.8742
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