Nasdaq, Inc.
Jul 24, 2014

NASDAQ OMX Reports Strong Second Quarter 2014 Results

NEW YORK, July 24, 2014 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today reported results for the second quarter of 2014. Second quarter net revenues were $523 million, up 16% from $451 million in the prior year period, driven by both acquisitions and organic growth. On an organic basis, second quarter net revenues increased 4% year-over-year.

"Once again, our diverse businesses generated solid organic growth in revenues despite a continued low volatility trading environment," said Bob Greifeld, CEO, NASDAQ OMX. "NASDAQ OMX's strong and improving competitive position, as measured by the 59% win rate in U.S. IPO listings and increased market share in cash equity trading coupled with the continued client traction in our technology and information businesses, provides confidence in the balance and diversity of our model to succeed in all cycles."

Mr. Greifeld continued, "We've taken steps to enhance and strengthen the management team and structure, engage in regulatory discussions to constructively move our industry forward and create new opportunities for clients and our future. We introduced new Treasury bills functionality on eSpeed, completed our data center migration and have implemented new functionality into our Corporate Solutions products. We continue to believe NASDAQ Private Market and NLX represent attractive long-term opportunities and have seen constructive progress in each of these areas. More broadly, I'm extremely proud of the depth and development of our businesses, and believe that our management team and staff at NASDAQ OMX has never been stronger."

On a non-GAAP basis, second quarter 2014 operating expenses were $308 million, up 15% as compared to the prior year quarter, primarily due to the inclusion of expenses associated with the acquisitions of the Thomson Reuters IR, PR and Multimedia businesses and the eSpeed electronic fixed income trading platform. On an organic basis, second quarter non-GAAP operating expenses were down 2% compared to the prior year period. On a GAAP basis, operating expenses were $332 million in the second quarter of 2014, up 14% compared to $292 million in the prior year quarter.

Second quarter 2014 non-GAAP diluted earnings per share was $0.70, compared to $0.62 in the prior year quarter. Please refer to our reconciliation of GAAP to non-GAAP net income, diluted earnings per share, operating income and operating expenses included in the attached schedules.

On a GAAP basis, net income attributable to NASDAQ OMX for the second quarter of 2014 was $101 million, or $0.59 per diluted share, compared with $88 million, or $0.52 per diluted share, in the prior year quarter.

"We continue to work diligently to ensure our recent acquisitions deliver on their full potential, and are on pace to achieve $35 million in synergies across our Corporate Solutions business and our margin goals across the Technology Solutions segment," said Lee Shavel, EVP and CFO, NASDAQ OMX. "In consideration of the lower volume trading environment, we have taken steps to reduce expenses in the second half of the year. Consequently, we are lowering our expense guidance."

Mr. Shavel continued, "On the capital front, we completed deleveraging to our long-term target ahead of the mid-year objective set when we acquired eSpeed, allowing us to resume our buyback plan during the second quarter. In addition to paying down $100 million of debt during the quarter, we repurchased $93 million of NASDAQ OMX shares, demonstrating our strong capacity and commitment to direct cash flows to enhance returns for our shareholders."

At June 30, 2014, the company had cash and cash equivalents of $314 million and total debt of $2,408 million, resulting in net debt of $2,094 million. This compares to net debt of $2,406 million at June 30, 2013. The company repurchased 2.6 million shares, or $93 million of stock, in the second quarter of 2014 at an average price of $36.46.

1 Represents revenues less transaction rebates, brokerage, clearance and exchange fees.

2 Assumes constant currency and excludes acquisitions.

BUSINESS HIGHLIGHTS

Market Services (39% of total net revenues) - Net revenues were $202 million in the second quarter of 2014, up $12 million when compared to $190 million in the second quarter of 2013.

Derivatives (13% of total net revenues) - Total net derivative trading and clearing revenues were $66 million in the second quarter of 2014, down $10 million compared to the second quarter of 2013. European derivative trading and clearing revenues were unchanged, while net U.S. derivative trading and clearing revenues were down $10 million, due to materially lower industry volumes, and moderate declines in average capture and market share.

Cash Equities (11% of total net revenues) - Total net cash equity trading revenues were $57 million in the second quarter of 2014, up $6 million compared to the second quarter of 2013. Net U.S. cash equity trading revenues were $4 million higher than the prior year quarter, on higher market share and average capture, partially offset by lower industry volumes, while European cash equity trading revenues rose $2 million year-over-year, on higher market share and market volumes, partially offset by lower average capture.

Fixed Income (3% of total net revenues) - Total net fixed income trading revenues were $14 million in the second quarter of 2014, unchanged from the first quarter of 2014.

Access and Broker Services (12% of total net revenues) - Access and broker services revenues totaled $65 million in the second quarter of 2014, up $2 million compared to the second quarter of 2013, due primarily to the inclusion of eSpeed hosting revenues.

Information Services (23% of total net revenues) - Revenues were $123 million in the second quarter of 2014, up $16 million from the second quarter of 2013.

Market Data (19% of total net revenues) - Total market data revenues were $101 million in the second quarter of 2014, up $12 million compared to the second quarter of 2013, due to growth in NASDAQ Basic, the inclusion of market data revenues associated with eSpeed, and a $3 million increase in audit collections.

Index Licensing and Services (4% of total net revenues) - Index licensing and services revenues were $22 million in the second quarter of 2014, up $4 million from the second quarter of 2013. The revenue growth was a function of materially higher assets under management and number of licensed exchange traded products.

Technology Solutions (26% of total net revenues) - Revenues were $138 million in the second quarter of 2014, up $42 million from the second quarter of 2013.

Corporate Solutions (15% of total net revenues) - Corporate solutions revenues were $80 million in the second quarter of 2014, up $36 million from the second quarter of 2013. Corporate solutions revenue growth was primarily due to the acquisition of the Thomson Reuters IR, PR, and Multimedia businesses completed on May 31, 2013. Also contributing to the increase in revenues was organic growth, in particular growth in the Director's Desk governance solution and press release distribution.

Market Technology (11% of total net revenues) - Market technology revenues were $58 million in the second quarter of 2014, up $6 million from the second quarter of 2013. The increase is primarily due to organic growth in software, license and support revenues, in particular at BWise, as well as organic growth in software-as-a-service revenues, in particular at SMARTS Broker, partially offset by slightly lower change request and advisory revenues.

Listing Services (12% of total net revenues) - Revenues were $60 million in the second quarter of 2014, up $2 million compared to the second quarter of 2013. U.S. listing revenues increased $1 million in the second quarter of 2014 compared to the second quarter of 2013, due to growth in the issuer base and higher new issue activity, including 52 second quarter U.S. IPO wins, 59% of the industry total. European listing revenues rose by $1 million, due primarily to higher market capitalization of listed companies and higher new issue activity.

UPDATED COST GUIDANCE - The company has lowered non-GAAP operating expense guidance to $1,220-$1,250 million, down from the prior $1,250-$1,285 million. Included in this non-GAAP operating expense guidance is an expected $30-$40 million in GIFT new initiative spending, down from a prior $35-$50 million estimate, and $1,190-$1,210 million in core non-GAAP operating expense, down from $1,215-$1,235 million.

CORPORATE HIGHLIGHTS

About NASDAQ OMX Group

NASDAQ OMX (Nasdaq:NDAQ) is a leading provider of trading, exchange technology, information and public company services across six continents. Through its diverse portfolio of solutions, NASDAQ OMX enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 70 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. NASDAQ OMX is home to more than 3,400 listed companies with a market value of over $8.5 trillion and more than 10,000 corporate clients. To learn more, visit www.nasdaqomx.com.

Non-GAAP Information

In addition to disclosing results determined in accordance with GAAP, NASDAQ OMX also discloses certain non-GAAP results of operations, including, but not limited to, net income attributable to NASDAQ OMX, diluted earnings per share, operating income, and operating expenses, 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, taxes and achievement of synergy targets, (ii) statements about the closing or implementation dates and benefits of certain strategic, technology, de-leveraging and capital return initiatives, (iii) statements about our integrations of our recent acquisitions, (iv) statements relating to any litigation or regulatory or government investigation or action to which we are or could become a party, and (v) 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 and 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.

NDAQF

 
 
 The NASDAQ OMX Group, Inc. 
 Condensed Consolidated Statements of Income 
 (in millions, except per share amounts) 
 (unaudited) 
    
    
  Three Months Ended 
  June 30,  March 31,  June 30, 
  2014  2014  2013 
Revenues:    
Market Services  $ 544 $ 582 $ 553
Cost of revenues:    
Transaction rebates  (252) (285) (276)
Brokerage, clearance and exchange fees  (90) (84) (87)
Total cost of revenues  (342) (369) (363)
Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees  202 213 190
    
Listing Services  60 58 58
Information Services   123 123 107
Technology Solutions  138 135 96
Revenues less transaction rebates, brokerage, clearance and exchange fees  523 529 451
    
Operating Expenses:     
Compensation and benefits  145 158 126
Marketing and advertising  9 8 8
Depreciation and amortization  35 35 28
Professional and contract services  42 39 35
Computer operations and data communications  23 22 20
Occupancy  24 25 23
Regulatory  7 7 8
Merger and strategic initiatives  14 28 25
General, administrative and other  33 23 19
Total operating expenses  332 345 292
    
Operating income  191 184 159
    
Interest income  1 2 2
Interest expense  (30) (30) (26)
    
Income before income taxes  162 156 135
Income tax provision  61 53 47
    
Net income  101 103 88
    
Net (income) loss attributable to noncontrolling interests  --  --  -- 
    
Net income attributable to NASDAQ OMX  $ 101 $ 103 $ 88
    
Per share information:    
Basic earnings per share  $ 0.60 $ 0.61 $ 0.53
Diluted earnings per share  $ 0.59 $ 0.59 $ 0.52
Cash dividends declared per common share  $ --  $ 0.28 $ 0.13
    
Weighted-average common shares outstanding for earnings per share:    
Basic  169.3 169.6 166.4
Diluted  172.5 173.7 170.1
 
 
 
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
(unaudited)
    
    
  Three Months Ended 
 June 30, March 31, June 30, 
  2014   2014  2013 
MARKET SERVICES     
Derivative Trading and Clearing Revenues:    
U.S. derivative trading and clearing $ 117$ 126$ 125
Cost of revenues:    
Transaction rebates  (71) (75)(68)
Brokerage, clearance and exchange fees  (8) (7) (9)
Total U.S. derivative trading and clearing cost of revenues  (79) (82) (77)
Net U.S. derivative trading and clearing revenues 38 44 48
European derivative trading and clearing  28 32 28
Total net derivative trading and clearing revenues 66  76  76
    
Cash Equity Trading Revenues:    
U.S. cash equity trading  295 318 315
Cost of revenues:    
Transaction rebates  (181) (210) (208)
Brokerage, clearance and exchange fees  (81) (76) (78)
Total U.S. cash equity cost of revenues  (262) (286) (286)
Net U.S. cash equity trading revenues 33 32 29
European cash equity trading  24 26 22
Total net cash equity trading revenues 57  58  51
    
Fixed Income Trading Revenues:    
Fixed income trading  15 15 -- 
Cost of revenues:    
Brokerage, clearance and exchange fees  (1) (1) -- 
Total net fixed income trading revenues 14  14  -- 
    
Access and Broker Services Revenues  65  65  63
    
Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees  202  213  190
    
LISTING SERVICES    
U.S. listing services  45 43 44
European listing services  15 15 14
    
Total Listing Services revenues 60  58  58
    
INFORMATION SERVICES    
Market Data Products Revenues:    
U.S. market data products  72 71 63
European market data products  21 22 20
Index data products  8 7 6
Total Market Data Products revenues 101  100  89
    
Index Licensing and Services revenues  22  23  18
     
Total Information Services revenues  123  123  107
    
TECHNOLOGY SOLUTIONS    
Corporate Solutions Revenues:    
Investor relations  42 45 24
Multimedia solutions  18 17 7
Public relations  15 15 9
Governance  5 5 4
Total Corporate Solutions revenues  80  82  44
    
Market Technology Revenues:    
Software, license and support  41 40 36
Change request and advisory  8 5 9
Software as a service  9 8  7
Total Market Technology revenues  58  53  52
    
Total Technology Solutions revenues  138  135  96
    
Total revenues less transaction rebates, brokerage, clearance and exchange fees   $ 523  $ 529  $ 451
 
 
The NASDAQ OMX Group, Inc.
Condensed Consolidated Balance Sheets 
(in millions)
   
 June 30,December 31,
 20142013
Assets(unaudited) 
Current assets:  
Cash and cash equivalents $ 314 $ 398
Restricted cash 39 84
Financial investments, at fair value 203 189
Receivables, net 395 393
Deferred tax assets 22 12
Default funds and margin deposits 2,579 1,961
Other current assets 166 126
Total current assets 3,718 3,163
Property and equipment, net 280 268
Non-current deferred tax assets 482 404
Goodwill6,0686,186
Intangible assets, net 2,313 2,386
Other non-current assets 255 170
Total assets $ 13,116 $ 12,577
   
Liabilities   
Current liabilities:  
Accounts payable and accrued expenses $ 188 $ 228
Section 31 fees payable to SEC 154 82
Accrued personnel costs 100 154
Deferred revenue 230 151
Other current liabilities 135 141
Deferred tax liabilities 38 38
Default funds and margin deposits 2,579 1,961
Current portion of debt obligations --  45
Total current liabilities 3,424 2,800
Debt obligations 2,408 2,589
Non-current deferred tax liabilities 697 708
Non-current deferred revenue 232 143
Other non-current liabilities 148 153
Total liabilities 6,909 6,393
   
Commitments and contingencies   
Equity  
NASDAQ OMX stockholders' equity:  
Common stock 2 2
Additional paid-in capital 4,328  4,278
Common stock in treasury, at cost (1,117) (1,005)
Accumulated other comprehensive loss (142) (67)
Retained earnings 3,134 2,976
Total NASDAQ OMX stockholders' equity 6,205 6,184
Noncontrolling interests 2 -- 
Total equity 6,207 6,184
Total liabilities and equity $ 13,116 $ 12,577
 
 
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income and 
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses
(in millions, except per share amounts)
(unaudited)
    
    
  Three Months Ended 
  June 30,  March 31,  June 30, 
  2014  2014  2013 
GAAP net income attributable to NASDAQ OMX $ 101 $ 103 $ 88
    
Non-GAAP adjustments:    
    
Merger and strategic initiatives 14 28 25
Extinguishment of debt 9 --  -- 
Special legal expenses 1 1 -- 
Other --  1 -- 
Total non-GAAP adjustments 24 30 25
    
Adjustment to the income tax provision to reflect non-GAAP adjustments (1) (7) (8) (8)
Significant tax adjustments, net 2 --  -- 
Total non-GAAP adjustments, net of tax 19 22 17
    
Non-GAAP net income attributable to NASDAQ OMX $ 120 $ 125 $ 105
    
GAAP diluted earnings per share $ 0.59 $ 0.59 $ 0.52
Total adjustments from non-GAAP net income above 0.11 0.13 0.10
    
Non-GAAP diluted earnings per share $ 0.70 $ 0.72  $ 0.62
    
    
    
  Three Months Ended 
  June 30,  March 31,  June 30, 
  2014  2014  2013 
    
GAAP operating income $ 191 $ 184 $ 159
    
Non-GAAP adjustments:   
    
Merger and strategic initiatives 14  28 25
Extinguishment of debt 9 --  -- 
Special legal expenses 1 1 -- 
Other --  1 -- 
 Total non-GAAP adjustments  24 30 25
    
Non-GAAP operating income $ 215 $ 214 $ 184
    
Total revenues less transaction rebates, brokerage,  clearance and exchange fees  $ 523 $ 529 $ 451
    
Non-GAAP operating margin (2)41%40%41%
    
    
(1) We determine the tax effect of each item based on the tax rules in the respective jurisdiction where the transaction occurred. 
(2) Non-GAAP operating margin equals non-GAAP operating income divided by total revenues less transaction rebates, brokerage, clearance and exchange fees. 
 
 
 
 
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income and 
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses
(in millions)
(unaudited)
    
    
  Three Months Ended 
  June 30,  March 31,  June 30, 
  2014   2014  2013 
    
GAAP operating expenses $ 332 $ 345 $ 292
    
Non-GAAP adjustments:   
    
Merger and strategic initiatives (14) (28) (25)
Extinguishment of debt (9) --  -- 
Special legal expenses (1) (1) -- 
Other --  (1) -- 
Total non-GAAP adjustments (24) (30) (25)
    
Non-GAAP operating expenses $ 308 $ 315 $ 267
 
 
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
    
 Three Months Ended
  June 30,  March 31,  June 30, 
  2014  2014  2013 
Market Services   
Derivative Trading and Clearing   
U.S. Equity Options   
Total industry average daily volume (in millions)14.216.115.9
NASDAQ OMX PHLX matched market share15.6%16.0%18.0%
The NASDAQ Options Market matched market share10.6%10.3%8.9%
NASDAQ OMX BX Options matched market share0.8%1.0%1.0%
Total market share27.0%27.3%27.9%
    
NASDAQ OMX Nordic and NASDAQ OMX Baltic   
Average daily volume:   
Options, futures and fixed-income contracts393,115420,941438,418
Finnish option contracts traded on Eurex55,59982,134101,255
     
NASDAQ OMX Commodities   
Power contracts cleared (TWh)(1) 345 429 424
    
Cash Equity Trading   
NASDAQ securities   
Total average daily share volume (in billions)1.972.171.78
Matched market share executed on NASDAQ26.6%25.8%25.5%
Matched market share executed on NASDAQ OMX BX2.4%2.7%2.4%
Matched market share executed on NASDAQ OMX PSX0.5%0.5%0.8%
Market share reported to the FINRA/NASDAQ    
 Trade Reporting Facility34.6%35.2%35.8%
Total market share (2)64.1%64.2%64.5%
    
New York Stock Exchange, or NYSE, securities   
Total average daily share volume (in billions)3.163.573.58
Matched market share executed on NASDAQ12.6%13.6%11.7%
Matched market share executed on NASDAQ OMX BX2.6%2.9%2.2%
Matched market share executed on NASDAQ OMX PSX0.4%0.4%0.5%
Market share reported to the FINRA/NASDAQ    
 Trade Reporting Facility 31.2%31.1%32.0%
Total market share (2)46.8%48.0%46.4%
    
NYSE MKT and regional securities   
Total average daily share volume (in billions)0.921.201.24
Matched market share executed on NASDAQ12.0%12.2%14.6%
Matched market share executed on NASDAQ OMX BX2.9%3.4%2.7%
Matched market share executed on NASDAQ OMX PSX0.8%0.9%1.4%
Market share reported to the FINRA/NASDAQ    
 Trade Reporting Facility32.2%30.7%31.2%
Total market share (2)47.9%47.2%49.9%
    
Total U.S.-listed securities   
Total average daily share volume (in billions)  6.05 6.94 6.60
Matched share volume (in billions) 77.0 87.2 80.7
Matched market share executed on NASDAQ17.1%17.2%15.9%
Matched market share executed on NASDAQ OMX BX2.6%2.9%2.4%
Matched market share executed on NASDAQ OMX PSX0.5%0.5%0.8%
Total market share 20.2%20.6%19.1%
    
NASDAQ OMX Nordic and NASDAQ OMX Baltic Securities   
Average daily number of equity trades331,546383,448329,030
Total average daily value of shares traded (in billions) $ 4.9 $ 5.7 $ 4.4
Total market share72.4%71.9%69.7%
    
Listing Services   
Initial public offerings   
NASDAQ524735
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic 17 5 6
    
New listings   
NASDAQ (3)797767
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic (4)32912
    
Number of listed companies   
NASDAQ (5) 2,709 2,667 2,581
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic (6) 782 755 758
    
Technology Solutions   
Market Technology   
Order intake (in millions)(7) $ 32 $ 57 $ 45
Total order value (in millions)(8) $ 638 $ 652 $ 512
    
    
(1) Primarily transactions executed on Nord Pool ASA and reported for clearing to NASDAQ OMX Commodities measured by Terawatt hours (TWh) .
(2) Includes transactions executed on NASDAQ's, NASDAQ OMX BX's and NASDAQ OMX PSX's systems plus trades reported through the FINRA/NASDAQ Trade Reporting Facility.
(3) 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 exchange traded funds (ETFs).
(4) New listings include IPOs and represent companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets of NASDAQ OMX First North.
(5) Number of listed companies for NASDAQ at period end, including separately listed ETFs.
(6) Represents companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets of NASDAQ OMX First North at period end.
(7) Total contract value of orders signed during the period. 
(8) Represents total contract value of orders signed that are yet to be recognized as revenue. 
CONTACT: 
Media Relations:

         Joseph Christinat +1.646.441.5121

         Joseph.Christinat@NASDAQOMX.Com

      

         Investor Relations:

         Ed Ditmire +1.212.401.8737

         Ed.Ditmire@NASDAQOMX.Com





This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: The NASDAQ OMX Group, Inc. via Globenewswire


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