NASDAQ OMX Reports Record Earnings, Continues to Deliver Growth in Revenues
The NASDAQ OMX Group, Inc.
26.10.2011 13:02
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- Non-GAAP Diluted EPS of $0.67 Represents 34% Increase Over Q310 Results -
- Net Exchange Revenues Reach Record High of $438 Million -
NEW YORK, Oct. 26, 2011 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. ('NASDAQ
OMX(r)') (Nasdaq:NDAQ) reported record results for the third quarter of 2011. Net
income attributable to NASDAQ OMX for the third quarter of 2011 was $110
million, or $0.61 per diluted share, compared with $92 million, or $0.51 per
diluted share, in the second quarter of 2011, and $101 million, or $0.50 per
diluted share, in the third quarter of 2010.
Included in the third quarter of 2011 results are $9 million of pre-tax
expenses associated with debt extinguishment and merger and strategic
initiatives. Also included is $5 million of tax expense related to a true-up of
2010 tax return liabilities and the corresponding effect on net deferred tax
liabilities.
Financial Highlights:
-- Net exchange revenues were a record $438 million, 18% higher than Q310
results.
-- Non-GAAP operating income improved to $204 million, up 21% from the prior
year quarter, while operating margins increased to 47%.
-- Non-GAAP net income was $121 million, up 20% from $101 million in Q310.
-- Non-GAAP diluted EPS increased to $0.67, up 34% over prior year results.
Summary of Non-GAAP Results1
--------------------------------------------------------------------------------
-
($ millions, except EPS) Q311 Q211 Q310
--------------------------------------------------------------------------------
Net Exchange Revenues2 $ 438 $ 416 $ 372
Total Operating Expenses 234 229 203
Operating Income 204 187 169
Net Income 121 112 101
Diluted Earnings Per Share $0.67 $0.62 $0.50
1. A complete reconciliation of GAAP to non-GAAP results is included in the
attached tables.
2. Represents revenues less transaction rebates, brokerage, clearance and
exchange fees.
Bob Greifeld, Chief Executive Officer and President, NASDAQ OMX said:
'Our fourth consecutive quarter of record earnings was driven by strong growth
in revenues. And year-to-date our revenues have increased 13 percent over last
year, against a 10 percent decline in U.S. equity volumes. But to truly
appreciate our performance one must consider the strength and diversity of the
business we've built and evaluate what we've delivered over the longer term,
and that is double digit earnings growth. A truly impressive track record for
the team here at NASDAQ OMX.'
Business Highlights
-- Entered into a $1.2 billion senior unsecured five-year credit facility to
refinance NASDAQ OMX's prior credit facilities due 2013, and simultaneously
initiated a cash tender offer for its outstanding 2.50% Convertible Senior
Notes. NASDAQ OMX subsequently accepted for payment $335 million, or 78%,
of the outstanding notes tendered during the offer period. These
transactions reduce NASDAQ OMX's overall borrowing costs, extend the
maturity profile of debt obligations, increase revolver borrowing capacity
and generate positive earnings per share returns.
-- Announced the approval of a share repurchase program, authorizing NASDAQ
OMX to repurchase in aggregate up to $300 million of its outstanding common
stock. Further demonstrating its commitment to decrease leverage, during
the fourth quarter of 2011, NASDAQ OMX is reducing its debt obligations by
approximately $120 million; including a $109 million optional debt payment
in addition to an $11 million required quarterly principal payment.
Market Services
-- NASDAQ OMX continued its success in U.S. equity options during the third
quarter of 2011, achieving number one in market share for a fifth
consecutive quarter. A record high 312 million contracts were traded,
representing a 35% increase when compared to the third quarter of 2010.
-- Migrated The NASDAQ Options Market ('NOM') to the NASDAQ OMX PHLX ('PHLX')
technology architecture, thereby aligning PHLX and NOM market maker
protocols, access ports and back-office systems, and creating the fastest
options match engine in the industry. Market maker enhancements included
with the migration allow for pure market makers on PHLX, which should
increase liquidity and customer fill rates.
-- Witnessed increases in Nordic equity volumes as the number of trades
reached a record high of 27.9 million in the third quarter of 2011.
Year-to-date trade volume has grown 26% while value traded has grown 9%
when compared to the same period in 2010.
-- FTEN received a second patent which applies to technology that is capable
of reducing systemic risk in the financial markets by providing users the
ability to manage securities trading risk on a cross-market, -system, and
-asset basis by aggregating trading data from disparate liquidity
destinations; normalizing information into a common format; analyzing the
data using user defined criteria; and providing alerts and actions
initiated upon the occurrence of defined situations.
-- Announced plans to introduce UltraFeed(SM), a highly-efficient data feed
that aggregates all North American equity, options, futures and index data
feeds. Employing NASDAQ OMX state-of-the-art technology, UltraFeed will
first be delivered to QUODD Financial Information Services -- a full service
market data provider. QUODD Financial Information Services will provide
UltraFeed to its approximately 550 downstream client firms who, in turn,
feed thousands of end-users.
Issuer Services
-- Corporate Solutions revenues continued to perform well, growing 22% when
compared to the third quarter of 2010. During the quarter, Corporate
Solutions launched Directors Desk HD, an intuitive, feature-rich and secure
iPad App providing directors and executives access to sensitive and timely
information on-the-go. NASDAQ OMX Directors Desk is a secure cloud-based
solution designed to improve board communications and effectiveness while
relieving corporate executives of the paperwork and time involved in
keeping boards informed.
-- NASDAQ OMX welcomed 38 new listings during the quarter, including 18
initial public offerings. Among the largest IPOs this quarter was Dunkin'
Brands Group which raised over $422.7 million in proceeds. NASDAQ also led
U.S. markets for IPOs in the financial and technology sectors with over
$848.9 million in total capital raised in the third quarter of 2011 by the
two sectors combined. And an important milestone was celebrated as Zillow
became the first NASDAQ-listed company to adopt a coveted single letter
ticker symbol. Zillow is listed under the ticker symbol Z.
Market Technology
-- The Singapore Exchange ('SGX') went live with its new Reach system, which
is based on NASDAQ OMX's Genium INET technology. The implementation of
this new system marks a significant milestone for SGX as it delivers
considerable capacity and latency improvement for their cash market.
-- Japannext launched NASDAQ OMX's X-stream, replacing a trading system based
on competing technology. Japannext's decision to upgrade to X-stream was
based on their desire to improve the performance of their system and
attract increasing amounts of algorithmic trading.
-- The Mako Group ('Mako'), a leading provider of liquidity in derivatives,
selected NASDAQ OMX's SMARTS Broker solution to monitor trading activity
across multiple derivatives markets. Mako enables its market-makers to
price and trade large inventories of derivatives, while also providing its
surveillance department with compliance tools covering all asset classes
and markets to keep pace with the continually evolving regulatory
landscape. The use of SMARTS Broker will give Mako in-depth data analysis,
intuitive visualization tools and real-time alert algorithms, and provide
their surveillance department with the highest level of transparency across
global derivatives trading venues in a single, consolidated view.
-- BM&FBOVESPA, the largest stock exchange in Latin America, and Bovespa
Market Supervision ('BSM'), the Brazilian self-regulatory organization in
charge of inspecting and supervising the transactions and the persons
authorized to trade, announced that they will use NASDAQ OMX's SMARTS
Integrity market surveillance platform to monitor trading across their
equities and commodities platforms. The SMARTS Integrity platform will
provide BM&FBOVESPA and BSM with an automated solution for market
surveillance, operations and market oversight, strengthening their current
surveillance capabilities and providing them a scalable platform for
long-term growth.
Operating Highlights
U.S. Cash Equities
-- Total matched market share of U.S. cash equities was 22.4% in the third
quarter of 2011, with NASDAQ matching 18.9%, NASDAQ OMX BX ('BX') matching
2.4% and NASDAQ OMX PSX ('PSX') matching 1.1%. Total matched market share
was 22.0% in the second quarter of 2011 (NASDAQ: 18.9%; BX: 2.0%; PSX 1.1%)
and 22.3% in the third quarter of 2010 (NASDAQ: 19.1%; BX: 3.2%). Total
matched share volume was 125.0 billion shares in the third quarter of 2011,
compared with 99.7 billion shares in the second quarter of 2011 and 107.8
billion shares in the third quarter of 2010.
European Cash Equities
-- Total average daily volume was 423 thousand trades in the third quarter of
2011, compared with 320 thousand in the second quarter of 2011 and 264
thousand in the third quarter of 2010. Total average daily value traded was
$3.7 billion in the third quarter of 2011, compared with $4.0 billion in
the second quarter of 2011 and $2.8 billion in the third quarter of 2010.
U.S. Options
-- Total market share of U.S. equity options was 26.4% in the third quarter of
2011, with PHLX matching 22.3% and NOM matching 4.1%. Total market share of
U.S. equity options was 28.9% in the second quarter of 2011 (PHLX: 24.3%;
NOM: 4.6%) and 28.8% in the third quarter of 2010 (PHLX: 23.7%; NOM: 5.1%).
Total industry average daily volume was 18.5 million contracts in the third
quarter of 2011, compared with 15.8 million contracts in the second quarter
of 2011 and 12.5 million contracts in the third quarter of 2010.
European Derivatives
-- In the third quarter of 2011, the average daily volume of options, futures
and fixed-income contracts was 492 thousand (Q211: 428 thousand; Q310: 398
thousand). Within NASDAQ OMX Commodities, cleared power contracts during
the third quarter of 2011 totaled 421 terawatt hours ('TWh') (Q211: 383
TWh; Q310: 388 TWh).
Global Listings
-- New listings totaled 38 in the third quarter of 2011 compared with 53 in
the second quarter of 2011 and 45 in the third quarter of 2010. New
listings for the third quarter of 2011 included 18 initial public
offerings, compared with 30 in the second quarter of 2011 and 18 in the
third quarter of 2010.
Market Technology
-- Total order intake, which represents the value of orders signed, was $35
million during the third quarter of 2011, compared with $56 million in the
second quarter of 2011 and $27 million in the third quarter of 2010. At the
end of the third quarter of 2011, total order value, which represents the
total contract value of orders signed that are yet to be recognized as
revenue, was $473 million, compared with $483 million at the end of the
second quarter of 2011 and $446 million at the end of the third quarter of
2010.
Lee Shavel, Chief Financial Officer, said:
'Building on the positive steps made in prior periods, we continue to take
actions to improve our balance sheet and return capital to shareholders. During
the third quarter, we reduced our leverage ratios, refinanced our credit
facility, and lowered our borrowing costs. And we recently announced the
approval of a $300 million share repurchase plan. The strength of our business
model and the strong cash flows it generates leave us well positioned to
continue to invest in new growth opportunities and deliver strong returns to
investors.'
Expense Guidance
Total run rate operating expenses for the full year of 2011 are expected to be
in the range of $915 million to $925 million, excluding approximately $75
million in merger related and other infrequent charges.
Financial Review
Revenues
Revenues less transaction rebates, brokerage, clearance and exchange fees ('net
exchange revenues') were $438 million for the third quarter of 2011, an
increase of $22 million, or 5%, from the second quarter of 2011 and an increase
of $66 million, or 18%, from the third quarter of 2010. Changes in the
exchange rates of various currencies as compared to the U.S. dollar had the
impact of decreasing revenues in the third quarter of 2011 by $3 million when
compared to the second quarter of 2011, and increasing revenues by $16 million
when compared to the third quarter of 2010.
Market Services
Market Services net exchange revenues were $300 million for the third quarter
of 2011, up 8% when compared to the second quarter of 2011 results and 20% when
compared to the third quarter of 2010.
Transaction Services
Net exchange revenues from Transaction Services were $211 million for the third
quarter of 2011, an increase of $22 million, or 12%, when compared to the
second quarter of 2011, and $43 million, or 26%, when compared to the third
quarter of 2010.
-- Total net cash equity trading revenues were $67 million for the third
quarter of 2011, up $8 million, or 14%, from the second quarter of 2011,
and up $4 million, or 6%, from the prior year quarter.
-- Net U.S. cash equity trading revenues increased $7 million when compared to
the second quarter of 2011 and $1 million when compared to the third
quarter of 2010. The growth in revenues when compared to both periods is
primarily due to increases in industry trading volumes, partially offset by
declines in the average net fee per share matched on NASDAQ's trading
system.
-- Included in U.S. cash equity trading revenues in the third quarter of 2011
are $92 million in SEC Section 31 fees, compared with $74 million in the
second quarter of 2011 and $60 million in the third quarter of 2010.
Corresponding cost of revenues, reflecting the reimbursement of these fees
to the SEC, is included in brokerage, clearance and exchange fees.
-- European cash equity trading revenues were up $1 million, or 4%, from the
second quarter of 2011 and $3 million, or 14%, from the prior year quarter.
The increase when compared to both periods is primarily due to increases in
trading volumes. Also contributing to the increase when compared to the
third quarter of 2010 are changes in the exchange rates of various
currencies as compared to the U.S. dollar.
-- Total net derivative trading and clearing revenues were $84 million for the
third quarter of 2011, up $9 million, or 12%, from the second quarter of
2011, and up $24 million, or 40%, from the prior year quarter.
-- Net U.S. derivative trading and clearing revenues increased $7 million when
compared to the second quarter of 2011 and $17 million when compared to
third quarter of 2010 net revenues. The increases when compared to both
periods are primarily due to higher industry trading volumes, offset
slightly by modest declines in market share.
-- European derivative trading and clearing revenues increased $2 million from
the second quarter of 2011 and $7 million when compared to the third
quarter of 2010. Higher revenues when compared to both periods are
primarily due to increases in derivative trading activity. Also
contributing to the increase when compared to the third quarter of 2010 are
changes in the exchange rates of various currencies as compared to the U.S.
dollar.
-- Access Services revenues were $60 million for the third quarter of 2011, an
increase of $5 million, or 9%, when compared to the second quarter of 2011
and an increase of $15 million, or 33%, when compared to the prior year
quarter. The growth in revenues when compared to the second quarter of 2011
is primarily due to increased demand for services. The growth in revenues
when compared to the third quarter of 2010 is due to the acquisition of
FTEN, which was completed in December 2010, and to increased demand for
services.
Market Data
Market Data revenues were $83 million for the third quarter of 2011, equal to
revenues for the second quarter of 2011, but up $7 million, or 9%, when
compared to the third quarter of 2010.
-- Net U.S. tape plans revenues were $30 million in the third quarter of 2011,
equal to revenues in the second quarter of 2011, but up $2 million when
compared to the prior year quarter. The higher revenues when compared to
the third quarter of 2010 are due to an increase in the amount of shareable
revenues available in the various tape plans, partially offset by lower
Trade Reporting Facility market share.
-- U.S. market data products revenues were $33 million in the third quarter of
2011, up $1 million when compared to revenues reported in the second
quarter of 2011 and in the prior year quarter. The increase in revenues
when compared to both periods is due to higher customer demand for
proprietary data products.
-- European market data products revenues were $20 million in the third
quarter of 2011, a decrease of $1 million, or 5%, when compared to the
second quarter of 2011, but an increase of $4 million, or 25%, when
compared to the prior year quarter. The decrease when compared to the
second quarter of 2011 is primarily due to higher audit fees in the earlier
period, and to changes in the exchange rates of various currencies as
compared to the U.S. dollar. The increase when compared to the third
quarter of 2010 is primarily due to modified fees for market data products
and to changes in the exchange rates of various currencies as compared to
the U.S. dollar.
Issuer Services
Issuer Services revenues were $92 million for the third quarter of 2011, a
decrease of $1 million, or 1%, when compared to the second quarter of 2011, and
an increase of $7 million, or 8%, when compared to the third quarter of 2010.
Global Listing Services
Global Listing Services revenues were $79 million for the third quarter of
2011, down $1 million, or 1%, when compared to the second quarter of 2011, but
up $6 million, or 8%, when compared to the third quarter of 2010. The decrease
when compared to the second quarter of 2011 is due to lower Corporate Solutions
and European listing revenues. When compared to the prior year period, revenue
growth is primarily due to increases in Corporate Solutions revenues, resulting
from higher demand for services from listed companies, and increases in listing
revenues. When compared to the third quarter of 2010, European listing revenues
benefited from changes in the exchange rates of various currencies as compared
to the U.S. dollar.
Global Index Group
Global Index Group revenues were $13 million for the third quarter of 2011,
equal to revenues in the second quarter of 2011, and up $1 million, or 8%, when
compared to the third quarter of 2010. Higher revenues when compared to the
prior year period are primarily due to increases in asset sizes of licensed
ETFs, as well as additional demand for new licensed ETFs and other financial
products.
Market Technology
Market Technology revenues were $46 million for the third quarter of 2011,
equal to revenues in the second quarter of 2011, and up $8 million, or 21%,
when compared to the third quarter of 2010. The increase when compared to the
third quarter of 2010 is primarily due to the inclusion of revenue from SMARTS,
which was acquired in August 2010. Also contributing to the increase in
revenues when compared to the third quarter of 2010 are revenues associated
with recently delivered projects and changes in the exchange rates of various
currencies as compared to the U.S. dollar.
Operating Expenses
Total non-GAAP operating expenses increased $5 million, or 2%, to $234 million
in the third quarter of 2011 from $229 million in the second quarter of 2011,
and increased $31 million, or 15%, from $203 million in the prior year quarter.
The increase when compared to the second quarter of 2011 is primarily driven by
higher compensation and depreciation and amortization expenses. When compared
to the third quarter of 2010, the increase is primarily due to higher expenses
associated with FTEN (acquired in December 2010), SMARTS (acquired in August
2010), and Zoomvision Mamato (acquired in December 2010). Also contributing to
the increase were higher compensation expenses and changes in the exchange
rates of various currencies as compared to the U.S. dollar, which had the
effect of increasing expenses by $10 million.
Net Interest Expense
Net interest expense was $27 million for the third quarter of 2011, compared
with $28 million for the second quarter of 2011 and $23 million for the third
quarter of 2010. The decrease in net interest expense when compared to the
second quarter of 2011 is primarily due to a lower average interest rate on the
floating rate term loan in the third quarter of 2011. The increase in net
interest expense when compared to the third quarter of 2010 is primarily due to
the issuance of senior notes in December 2010 to partially finance the
repurchase of shares. Included in total net interest expense for the third
quarter of 2011 is $23 million in interest expense, $4 million of non-cash
expense associated with the accretion of debt discounts, $2 million in debt
issuance amortization expense, and $1 million of other bank-related fees.
Interest income for the third quarter of 2011 was $3 million.
Earnings Per Share
On a non-GAAP basis, third quarter 2011 earnings per diluted share were $0.67
as compared to non-GAAP earnings per diluted share of $0.62 in the second
quarter of 2011 and non-GAAP earnings per diluted share of $0.50 in the prior
year quarter. NASDAQ OMX's weighted average shares outstanding used to
calculate diluted earnings per share was 181 million for the second and third
quarters of 2011 and 204 million for the third quarter of 2010.
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 3,500 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 Facebook (http://www.facebook.com/pages/NASDAQ-OMX/108167527653)
and Twitter (http://www.twitter.com/nasdaqomx).
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
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, 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.
NDAQF
The NASDAQ OMX Group, Inc.
Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
Three Months Ended
---------------------------
Septembe June Septembe
r 30, 30, r 30,
2011 2011 2010
---------------------------
Revenues:
Market Services $ 808 $ 699 $ 634
---------------------------
Cost of revenues:
Transaction rebates (390) (322) (303)
Brokerage, clearance and exchange fees (118) (100) (82)
---------------------------
Total cost of revenues (508) (422) (385)
---------------------------
Total Market Services revenues less transaction 300 277 249
rebates, brokerage, clearance and exchange fees
Issuer Services 92 93 85
Market Technology 46 46 38
---------------------------
Revenues less transaction rebates, brokerage, 438 416 372
clearance and exchange fees
---------------------------
Operating Expenses:
Compensation and benefits 118 115 101
Marketing and advertising 4 5 5
Depreciation and amortization 28 26 25
Professional and contract services 23 22 18
Computer operations and data communications 17 16 13
Occupancy 23 23 23
Regulatory 9 8 9
Merger and strategic initiatives 3 29 1
General, administrative and other 18 14 12
---------------------------
Total operating expenses 243 258 207
---------------------------
Operating income 195 158 165
Interest income 3 3 2
Interest expense (30) (31) (25)
Dividend and investment income 1 -- --
Income from unconsolidated investees, net 1 1 1
---------------------------
Income before income taxes 170 131 143
Income tax provision 61 40 43
---------------------------
Net income 109 91 100
Net loss attributable to noncontrolling interests 1 1 1
---------------------------
Net income attributable to NASDAQ OMX $ 110 $ 92 $ 101
===========================
Basic and diluted earnings per share:
Basic earnings per share $ 0.62 $ 0.52 $ 0.51
===========================
Diluted earnings per share $ 0.61 $ 0.51 $ 0.50
===========================
Weighted-average common shares outstanding for
earnings per share:
Basic 177 177 200
Diluted 181 181 204
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
(unaudited)
Three Months Ended
---------------------------
Septembe June Septembe
r 30, 30, r 30,
2011 2011 2010
---------------------------
MARKET SERVICES
Transaction Services
Cash Equity Trading Revenues:
U.S. cash equity trading $ 481 $ 387 $ 368
---------------------------
Cost of revenues:
Transaction rebates (327) (258) (248)
Brokerage, clearance and exchange fees (111) (93) (78)
---------------------------
Total U.S. cash equity cost of revenues (438) (351) (326)
---------------------------
Net U.S. cash equity trading revenues 43 36 42
European cash equity trading 24 23 21
---------------------------
Total net cash equity trading revenues 67 59 63
---------------------------
Derivative Trading and Clearing Revenues:
U.S. derivative trading and clearing 121 115 93
---------------------------
Cost of revenues:
Transaction rebates (63) (64) (55)
Brokerage, clearance and exchange fees (7) (7) (4)
---------------------------
Total U.S. derivative trading and clearing cost (70) (71) (59)
of revenues
---------------------------
Net U.S. derivative trading and clearing revenues 51 44 34
European derivative trading and clearing 33 31 26
---------------------------
Total net derivative trading and clearing revenues 84 75 60
Access Services Revenues 60 55 45
---------------------------
Total Transaction Services revenues less 211 189 168
transaction rebates, brokerage, clearance and
exchange fees
---------------------------
Market Data Revenues:
Net U.S. tape plans 30 30 28
U.S. market data products 33 32 32
European market data products 20 21 16
---------------------------
Total Market Data revenues 83 83 76
---------------------------
Broker Services Revenues 5 4 4
---------------------------
Other Market Services Revenues 1 1 1
---------------------------
Total Market Services revenues less transaction 300 277 249
rebates, brokerage, clearance and exchange fees
---------------------------
ISSUER SERVICES
Global Listing Services Revenues:
Annual renewal 30 29 29
Listing of additional shares 10 10 10
Initial listing 4 4 4
---------------------------
Total U.S. listing services 44 43 43
European listing services 13 14 12
Corporate Solutions 22 23 18
---------------------------
Total Global Listing Services revenues 79 80 73
Global Index Group Revenues 13 13 12
---------------------------
Total Issuer Services revenues 92 93 85
---------------------------
MARKET TECHNOLOGY
License, support and facility management 28 30 27
Delivery project 6 6 4
Change request, advisory and broker surveillance 12 10 7
---------------------------
Total Market Technology revenues 46 46 38
---------------------------
Total revenues less transaction rebates, brokerage, $ 438 $ 416 $ 372
clearance and exchange fees
===========================
The NASDAQ OMX Group, Inc.
Condensed Consolidated Balance Sheets
(in millions)
September 30, December 31,
2011 2010
----------------------------
(unaudited)
Assets
Current assets:
----------------------------
Cash and cash equivalents $ 543 $ 315
----------------------------
Restricted cash 51 60
----------------------------
Financial investments, at fair value 294 253
----------------------------
Receivables, net 347 298
----------------------------
Deferred tax assets 20 13
----------------------------
Open clearing contracts:
Derivative positions, at fair value 1,423 4,037
Resale agreements, at contract value 2,873 3,441
Other current assets 126 93
----------------------------
Total current assets 5,677 8,510
Non-current restricted cash 105 105
Property and equipment, net 168 164
Non-current deferred tax assets 385 433
Goodwill 5,046 5,127
Intangible assets, net 1,657 1,719
Other non-current assets 119 149
----------------------------
Total assets $ 13,157 $ 16,207
============================
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 175 $ 142
Section 31 fees payable to SEC 30 82
Accrued personnel costs 105 122
Deferred revenue 152 122
Other current liabilities 151 119
Deferred tax liabilities 26 26
Open clearing contracts:
Derivative positions, at fair value 1,423 4,037
Repurchase agreements, at contract value 2,873 3,441
Current portion of debt obligations 45 140
----------------------------
Total current liabilities 4,980 8,231
Debt obligations 2,168 2,181
Non-current deferred tax liabilities 678 698
Non-current deferred revenue 158 170
Other non-current liabilities 177 198
----------------------------
Total liabilities 8,161 11,478
Commitments and contingencies
Equity
NASDAQ OMX stockholders' equity:
Common stock 2 2
Additional paid-in capital 3,790 3,780
Common stock in treasury, at cost (769) (796)
Accumulated other comprehensive loss (346) (272)
Retained earnings 2,310 2,004
----------------------------
Total NASDAQ OMX stockholders' equity 4,987 4,718
Noncontrolling interests 9 11
----------------------------
Total equity 4,996 4,729
----------------------------
Total liabilities and equity $ 13,157 $ 16,207
============================
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
-----------------------------
September June September
30, 30, 30,
2011 2011 2010
-----------------------------
GAAP net income attributable to NASDAQ OMX: $ 110 $ 92 $ 101
Non-GAAP adjustments:
Merger and strategic initiatives 3 29 1
Extinguishment of debt 6 -- --
Asset retirements -- -- 2
Workforce reductions -- -- 2
Other -- -- (1)
-----------------------------
Total non-GAAP adjustments 9 29 4
Adjustment to the income tax provision to reflect (3) (9) (2)
non-GAAP adjustments(1)
Significant tax adjustments, net 5 -- (2)
-----------------------------
Total non-GAAP adjustments, net of tax 11 20 --
Non-GAAP net income attributable to NASDAQ OMX: $ 121 $ 112 $ 101
=============================
GAAP diluted earnings per common share: $ 0.61 $ 0.51 $ 0.50
Total adj. from non-GAAP net income above 0.06 0.11 --
-----------------------------
Non-GAAP diluted earnings per common share: $ 0.67 $ 0.62 $ 0.50
=============================
Three Months Ended
-----------------------------
September June September
30, 30, 30,
2011 2011 2010
-----------------------------
GAAP operating income: $ 195 $ 158 $ 165
Non-GAAP adjustments:
Merger and strategic initiatives 3 29 1
Extinguishment of debt 6 -- --
Asset retirements -- -- 2
Workforce reductions -- -- 2
Other -- -- (1)
-----------------------------
Total non-GAAP adjustments 9 29 4
-----------------------------
Non-GAAP operating income $ 204 $ 187 $ 169
=============================
--------------------------------------------------------------------------------
-
Total revenues less transaction rebates, $ 438 $ 416 $ 372
brokerage, clearance and exchange fees
Non-GAAP operating margin (2) 47% 45% 45%
--------------------------------------------------------------------------------
-
(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
--------------------------------------------
September 30, June 30, September 30,
2011 2011 2010
--------------------------------------------
GAAP operating expenses: $ 243 $ 258 $ 207
Non-GAAP adjustments:
Merger and strategic initiatives (3) (29) (1)
Extinguishment of debt (6) -- --
Asset retirements -- -- (2)
Workforce reductions -- -- (2)
Other -- -- 1
--------------------------------------------
Total non-GAAP adjustments (9) (29) (4)
--------------------------------------------
Non-GAAP operating expenses $ 234 $ 229 $ 203
============================================
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
Three Months Ended
--------------------------------
September June September
30, 30, 30,
2011 2011 2010
--------------------------------
Market Services
Cash Equity Trading
NASDAQ securities
Average daily share volume (in billions) 2.18 2.00 2.02
Matched market share executed on NASDAQ 28.0% 28.8% 29.0%
Matched market share executed on NASDAQ OMX 2.5% 1.8% 2.5%
BX
Matched market share executed on NASDAQ OMX 1.2% 1.2% --
PSX
Market share reported to the FINRA/NASDAQ
Trade Reporting Facility 28.6% 32.2% 30.4%
Total market share (1) 60.2% 64.0% 61.9%
New York Stock Exchange, or NYSE securities
Average daily share volume (in billions) 4.78 3.91 4.24
Matched market share executed on NASDAQ 14.3% 14.0% 13.8%
Matched market share executed on NASDAQ OMX 2.5% 2.1% 3.5%
BX
Matched market share executed on NASDAQ OMX 0.6% 0.8% --
PSX
Market share reported to the FINRA/NASDAQ
Trade Reporting Facility 25.6% 27.8% 27.0%
Total market share (1) 43.0% 44.7% 44.3%
NYSE Amex and regional securities
Average daily share volume (in billions) 1.80 1.29 1.29
Matched market share executed on NASDAQ 19.9% 18.5% 21.0%
Matched market share executed on NASDAQ OMX 2.1% 1.9% 3.3%
BX
Matched market share executed on NASDAQ OMX 2.0% 2.0% --
PSX
Market share reported to the FINRA/NASDAQ
Trade Reporting Facility 24.2% 25.5% 25.1%
Total market share (1) 48.2% 47.9% 49.4%
Total U.S.-listed securities
Average daily share volume (in billions) 8.76 7.19 7.55
Matched share volume (in billions) 125.0 99.7 107.8
The NASDAQ OMX Group, Inc.
26.10.2011 13:02
---------------------------------------------------------------------------
- Non-GAAP Diluted EPS of $0.67 Represents 34% Increase Over Q310 Results -
- Net Exchange Revenues Reach Record High of $438 Million -
NEW YORK, Oct. 26, 2011 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. ('NASDAQ
OMX(r)') (Nasdaq:NDAQ) reported record results for the third quarter of 2011. Net
income attributable to NASDAQ OMX for the third quarter of 2011 was $110
million, or $0.61 per diluted share, compared with $92 million, or $0.51 per
diluted share, in the second quarter of 2011, and $101 million, or $0.50 per
diluted share, in the third quarter of 2010.
Included in the third quarter of 2011 results are $9 million of pre-tax
expenses associated with debt extinguishment and merger and strategic
initiatives. Also included is $5 million of tax expense related to a true-up of
2010 tax return liabilities and the corresponding effect on net deferred tax
liabilities.
Financial Highlights:
-- Net exchange revenues were a record $438 million, 18% higher than Q310
results.
-- Non-GAAP operating income improved to $204 million, up 21% from the prior
year quarter, while operating margins increased to 47%.
-- Non-GAAP net income was $121 million, up 20% from $101 million in Q310.
-- Non-GAAP diluted EPS increased to $0.67, up 34% over prior year results.
Summary of Non-GAAP Results1
--------------------------------------------------------------------------------
-
($ millions, except EPS) Q311 Q211 Q310
--------------------------------------------------------------------------------
Net Exchange Revenues2 $ 438 $ 416 $ 372
Total Operating Expenses 234 229 203
Operating Income 204 187 169
Net Income 121 112 101
Diluted Earnings Per Share $0.67 $0.62 $0.50
1. A complete reconciliation of GAAP to non-GAAP results is included in the
attached tables.
2. Represents revenues less transaction rebates, brokerage, clearance and
exchange fees.
Bob Greifeld, Chief Executive Officer and President, NASDAQ OMX said:
'Our fourth consecutive quarter of record earnings was driven by strong growth
in revenues. And year-to-date our revenues have increased 13 percent over last
year, against a 10 percent decline in U.S. equity volumes. But to truly
appreciate our performance one must consider the strength and diversity of the
business we've built and evaluate what we've delivered over the longer term,
and that is double digit earnings growth. A truly impressive track record for
the team here at NASDAQ OMX.'
Business Highlights
-- Entered into a $1.2 billion senior unsecured five-year credit facility to
refinance NASDAQ OMX's prior credit facilities due 2013, and simultaneously
initiated a cash tender offer for its outstanding 2.50% Convertible Senior
Notes. NASDAQ OMX subsequently accepted for payment $335 million, or 78%,
of the outstanding notes tendered during the offer period. These
transactions reduce NASDAQ OMX's overall borrowing costs, extend the
maturity profile of debt obligations, increase revolver borrowing capacity
and generate positive earnings per share returns.
-- Announced the approval of a share repurchase program, authorizing NASDAQ
OMX to repurchase in aggregate up to $300 million of its outstanding common
stock. Further demonstrating its commitment to decrease leverage, during
the fourth quarter of 2011, NASDAQ OMX is reducing its debt obligations by
approximately $120 million; including a $109 million optional debt payment
in addition to an $11 million required quarterly principal payment.
Market Services
-- NASDAQ OMX continued its success in U.S. equity options during the third
quarter of 2011, achieving number one in market share for a fifth
consecutive quarter. A record high 312 million contracts were traded,
representing a 35% increase when compared to the third quarter of 2010.
-- Migrated The NASDAQ Options Market ('NOM') to the NASDAQ OMX PHLX ('PHLX')
technology architecture, thereby aligning PHLX and NOM market maker
protocols, access ports and back-office systems, and creating the fastest
options match engine in the industry. Market maker enhancements included
with the migration allow for pure market makers on PHLX, which should
increase liquidity and customer fill rates.
-- Witnessed increases in Nordic equity volumes as the number of trades
reached a record high of 27.9 million in the third quarter of 2011.
Year-to-date trade volume has grown 26% while value traded has grown 9%
when compared to the same period in 2010.
-- FTEN received a second patent which applies to technology that is capable
of reducing systemic risk in the financial markets by providing users the
ability to manage securities trading risk on a cross-market, -system, and
-asset basis by aggregating trading data from disparate liquidity
destinations; normalizing information into a common format; analyzing the
data using user defined criteria; and providing alerts and actions
initiated upon the occurrence of defined situations.
-- Announced plans to introduce UltraFeed(SM), a highly-efficient data feed
that aggregates all North American equity, options, futures and index data
feeds. Employing NASDAQ OMX state-of-the-art technology, UltraFeed will
first be delivered to QUODD Financial Information Services -- a full service
market data provider. QUODD Financial Information Services will provide
UltraFeed to its approximately 550 downstream client firms who, in turn,
feed thousands of end-users.
Issuer Services
-- Corporate Solutions revenues continued to perform well, growing 22% when
compared to the third quarter of 2010. During the quarter, Corporate
Solutions launched Directors Desk HD, an intuitive, feature-rich and secure
iPad App providing directors and executives access to sensitive and timely
information on-the-go. NASDAQ OMX Directors Desk is a secure cloud-based
solution designed to improve board communications and effectiveness while
relieving corporate executives of the paperwork and time involved in
keeping boards informed.
-- NASDAQ OMX welcomed 38 new listings during the quarter, including 18
initial public offerings. Among the largest IPOs this quarter was Dunkin'
Brands Group which raised over $422.7 million in proceeds. NASDAQ also led
U.S. markets for IPOs in the financial and technology sectors with over
$848.9 million in total capital raised in the third quarter of 2011 by the
two sectors combined. And an important milestone was celebrated as Zillow
became the first NASDAQ-listed company to adopt a coveted single letter
ticker symbol. Zillow is listed under the ticker symbol Z.
Market Technology
-- The Singapore Exchange ('SGX') went live with its new Reach system, which
is based on NASDAQ OMX's Genium INET technology. The implementation of
this new system marks a significant milestone for SGX as it delivers
considerable capacity and latency improvement for their cash market.
-- Japannext launched NASDAQ OMX's X-stream, replacing a trading system based
on competing technology. Japannext's decision to upgrade to X-stream was
based on their desire to improve the performance of their system and
attract increasing amounts of algorithmic trading.
-- The Mako Group ('Mako'), a leading provider of liquidity in derivatives,
selected NASDAQ OMX's SMARTS Broker solution to monitor trading activity
across multiple derivatives markets. Mako enables its market-makers to
price and trade large inventories of derivatives, while also providing its
surveillance department with compliance tools covering all asset classes
and markets to keep pace with the continually evolving regulatory
landscape. The use of SMARTS Broker will give Mako in-depth data analysis,
intuitive visualization tools and real-time alert algorithms, and provide
their surveillance department with the highest level of transparency across
global derivatives trading venues in a single, consolidated view.
-- BM&FBOVESPA, the largest stock exchange in Latin America, and Bovespa
Market Supervision ('BSM'), the Brazilian self-regulatory organization in
charge of inspecting and supervising the transactions and the persons
authorized to trade, announced that they will use NASDAQ OMX's SMARTS
Integrity market surveillance platform to monitor trading across their
equities and commodities platforms. The SMARTS Integrity platform will
provide BM&FBOVESPA and BSM with an automated solution for market
surveillance, operations and market oversight, strengthening their current
surveillance capabilities and providing them a scalable platform for
long-term growth.
Operating Highlights
U.S. Cash Equities
-- Total matched market share of U.S. cash equities was 22.4% in the third
quarter of 2011, with NASDAQ matching 18.9%, NASDAQ OMX BX ('BX') matching
2.4% and NASDAQ OMX PSX ('PSX') matching 1.1%. Total matched market share
was 22.0% in the second quarter of 2011 (NASDAQ: 18.9%; BX: 2.0%; PSX 1.1%)
and 22.3% in the third quarter of 2010 (NASDAQ: 19.1%; BX: 3.2%). Total
matched share volume was 125.0 billion shares in the third quarter of 2011,
compared with 99.7 billion shares in the second quarter of 2011 and 107.8
billion shares in the third quarter of 2010.
European Cash Equities
-- Total average daily volume was 423 thousand trades in the third quarter of
2011, compared with 320 thousand in the second quarter of 2011 and 264
thousand in the third quarter of 2010. Total average daily value traded was
$3.7 billion in the third quarter of 2011, compared with $4.0 billion in
the second quarter of 2011 and $2.8 billion in the third quarter of 2010.
U.S. Options
-- Total market share of U.S. equity options was 26.4% in the third quarter of
2011, with PHLX matching 22.3% and NOM matching 4.1%. Total market share of
U.S. equity options was 28.9% in the second quarter of 2011 (PHLX: 24.3%;
NOM: 4.6%) and 28.8% in the third quarter of 2010 (PHLX: 23.7%; NOM: 5.1%).
Total industry average daily volume was 18.5 million contracts in the third
quarter of 2011, compared with 15.8 million contracts in the second quarter
of 2011 and 12.5 million contracts in the third quarter of 2010.
European Derivatives
-- In the third quarter of 2011, the average daily volume of options, futures
and fixed-income contracts was 492 thousand (Q211: 428 thousand; Q310: 398
thousand). Within NASDAQ OMX Commodities, cleared power contracts during
the third quarter of 2011 totaled 421 terawatt hours ('TWh') (Q211: 383
TWh; Q310: 388 TWh).
Global Listings
-- New listings totaled 38 in the third quarter of 2011 compared with 53 in
the second quarter of 2011 and 45 in the third quarter of 2010. New
listings for the third quarter of 2011 included 18 initial public
offerings, compared with 30 in the second quarter of 2011 and 18 in the
third quarter of 2010.
Market Technology
-- Total order intake, which represents the value of orders signed, was $35
million during the third quarter of 2011, compared with $56 million in the
second quarter of 2011 and $27 million in the third quarter of 2010. At the
end of the third quarter of 2011, total order value, which represents the
total contract value of orders signed that are yet to be recognized as
revenue, was $473 million, compared with $483 million at the end of the
second quarter of 2011 and $446 million at the end of the third quarter of
2010.
Lee Shavel, Chief Financial Officer, said:
'Building on the positive steps made in prior periods, we continue to take
actions to improve our balance sheet and return capital to shareholders. During
the third quarter, we reduced our leverage ratios, refinanced our credit
facility, and lowered our borrowing costs. And we recently announced the
approval of a $300 million share repurchase plan. The strength of our business
model and the strong cash flows it generates leave us well positioned to
continue to invest in new growth opportunities and deliver strong returns to
investors.'
Expense Guidance
Total run rate operating expenses for the full year of 2011 are expected to be
in the range of $915 million to $925 million, excluding approximately $75
million in merger related and other infrequent charges.
Financial Review
Revenues
Revenues less transaction rebates, brokerage, clearance and exchange fees ('net
exchange revenues') were $438 million for the third quarter of 2011, an
increase of $22 million, or 5%, from the second quarter of 2011 and an increase
of $66 million, or 18%, from the third quarter of 2010. Changes in the
exchange rates of various currencies as compared to the U.S. dollar had the
impact of decreasing revenues in the third quarter of 2011 by $3 million when
compared to the second quarter of 2011, and increasing revenues by $16 million
when compared to the third quarter of 2010.
Market Services
Market Services net exchange revenues were $300 million for the third quarter
of 2011, up 8% when compared to the second quarter of 2011 results and 20% when
compared to the third quarter of 2010.
Transaction Services
Net exchange revenues from Transaction Services were $211 million for the third
quarter of 2011, an increase of $22 million, or 12%, when compared to the
second quarter of 2011, and $43 million, or 26%, when compared to the third
quarter of 2010.
-- Total net cash equity trading revenues were $67 million for the third
quarter of 2011, up $8 million, or 14%, from the second quarter of 2011,
and up $4 million, or 6%, from the prior year quarter.
-- Net U.S. cash equity trading revenues increased $7 million when compared to
the second quarter of 2011 and $1 million when compared to the third
quarter of 2010. The growth in revenues when compared to both periods is
primarily due to increases in industry trading volumes, partially offset by
declines in the average net fee per share matched on NASDAQ's trading
system.
-- Included in U.S. cash equity trading revenues in the third quarter of 2011
are $92 million in SEC Section 31 fees, compared with $74 million in the
second quarter of 2011 and $60 million in the third quarter of 2010.
Corresponding cost of revenues, reflecting the reimbursement of these fees
to the SEC, is included in brokerage, clearance and exchange fees.
-- European cash equity trading revenues were up $1 million, or 4%, from the
second quarter of 2011 and $3 million, or 14%, from the prior year quarter.
The increase when compared to both periods is primarily due to increases in
trading volumes. Also contributing to the increase when compared to the
third quarter of 2010 are changes in the exchange rates of various
currencies as compared to the U.S. dollar.
-- Total net derivative trading and clearing revenues were $84 million for the
third quarter of 2011, up $9 million, or 12%, from the second quarter of
2011, and up $24 million, or 40%, from the prior year quarter.
-- Net U.S. derivative trading and clearing revenues increased $7 million when
compared to the second quarter of 2011 and $17 million when compared to
third quarter of 2010 net revenues. The increases when compared to both
periods are primarily due to higher industry trading volumes, offset
slightly by modest declines in market share.
-- European derivative trading and clearing revenues increased $2 million from
the second quarter of 2011 and $7 million when compared to the third
quarter of 2010. Higher revenues when compared to both periods are
primarily due to increases in derivative trading activity. Also
contributing to the increase when compared to the third quarter of 2010 are
changes in the exchange rates of various currencies as compared to the U.S.
dollar.
-- Access Services revenues were $60 million for the third quarter of 2011, an
increase of $5 million, or 9%, when compared to the second quarter of 2011
and an increase of $15 million, or 33%, when compared to the prior year
quarter. The growth in revenues when compared to the second quarter of 2011
is primarily due to increased demand for services. The growth in revenues
when compared to the third quarter of 2010 is due to the acquisition of
FTEN, which was completed in December 2010, and to increased demand for
services.
Market Data
Market Data revenues were $83 million for the third quarter of 2011, equal to
revenues for the second quarter of 2011, but up $7 million, or 9%, when
compared to the third quarter of 2010.
-- Net U.S. tape plans revenues were $30 million in the third quarter of 2011,
equal to revenues in the second quarter of 2011, but up $2 million when
compared to the prior year quarter. The higher revenues when compared to
the third quarter of 2010 are due to an increase in the amount of shareable
revenues available in the various tape plans, partially offset by lower
Trade Reporting Facility market share.
-- U.S. market data products revenues were $33 million in the third quarter of
2011, up $1 million when compared to revenues reported in the second
quarter of 2011 and in the prior year quarter. The increase in revenues
when compared to both periods is due to higher customer demand for
proprietary data products.
-- European market data products revenues were $20 million in the third
quarter of 2011, a decrease of $1 million, or 5%, when compared to the
second quarter of 2011, but an increase of $4 million, or 25%, when
compared to the prior year quarter. The decrease when compared to the
second quarter of 2011 is primarily due to higher audit fees in the earlier
period, and to changes in the exchange rates of various currencies as
compared to the U.S. dollar. The increase when compared to the third
quarter of 2010 is primarily due to modified fees for market data products
and to changes in the exchange rates of various currencies as compared to
the U.S. dollar.
Issuer Services
Issuer Services revenues were $92 million for the third quarter of 2011, a
decrease of $1 million, or 1%, when compared to the second quarter of 2011, and
an increase of $7 million, or 8%, when compared to the third quarter of 2010.
Global Listing Services
Global Listing Services revenues were $79 million for the third quarter of
2011, down $1 million, or 1%, when compared to the second quarter of 2011, but
up $6 million, or 8%, when compared to the third quarter of 2010. The decrease
when compared to the second quarter of 2011 is due to lower Corporate Solutions
and European listing revenues. When compared to the prior year period, revenue
growth is primarily due to increases in Corporate Solutions revenues, resulting
from higher demand for services from listed companies, and increases in listing
revenues. When compared to the third quarter of 2010, European listing revenues
benefited from changes in the exchange rates of various currencies as compared
to the U.S. dollar.
Global Index Group
Global Index Group revenues were $13 million for the third quarter of 2011,
equal to revenues in the second quarter of 2011, and up $1 million, or 8%, when
compared to the third quarter of 2010. Higher revenues when compared to the
prior year period are primarily due to increases in asset sizes of licensed
ETFs, as well as additional demand for new licensed ETFs and other financial
products.
Market Technology
Market Technology revenues were $46 million for the third quarter of 2011,
equal to revenues in the second quarter of 2011, and up $8 million, or 21%,
when compared to the third quarter of 2010. The increase when compared to the
third quarter of 2010 is primarily due to the inclusion of revenue from SMARTS,
which was acquired in August 2010. Also contributing to the increase in
revenues when compared to the third quarter of 2010 are revenues associated
with recently delivered projects and changes in the exchange rates of various
currencies as compared to the U.S. dollar.
Operating Expenses
Total non-GAAP operating expenses increased $5 million, or 2%, to $234 million
in the third quarter of 2011 from $229 million in the second quarter of 2011,
and increased $31 million, or 15%, from $203 million in the prior year quarter.
The increase when compared to the second quarter of 2011 is primarily driven by
higher compensation and depreciation and amortization expenses. When compared
to the third quarter of 2010, the increase is primarily due to higher expenses
associated with FTEN (acquired in December 2010), SMARTS (acquired in August
2010), and Zoomvision Mamato (acquired in December 2010). Also contributing to
the increase were higher compensation expenses and changes in the exchange
rates of various currencies as compared to the U.S. dollar, which had the
effect of increasing expenses by $10 million.
Net Interest Expense
Net interest expense was $27 million for the third quarter of 2011, compared
with $28 million for the second quarter of 2011 and $23 million for the third
quarter of 2010. The decrease in net interest expense when compared to the
second quarter of 2011 is primarily due to a lower average interest rate on the
floating rate term loan in the third quarter of 2011. The increase in net
interest expense when compared to the third quarter of 2010 is primarily due to
the issuance of senior notes in December 2010 to partially finance the
repurchase of shares. Included in total net interest expense for the third
quarter of 2011 is $23 million in interest expense, $4 million of non-cash
expense associated with the accretion of debt discounts, $2 million in debt
issuance amortization expense, and $1 million of other bank-related fees.
Interest income for the third quarter of 2011 was $3 million.
Earnings Per Share
On a non-GAAP basis, third quarter 2011 earnings per diluted share were $0.67
as compared to non-GAAP earnings per diluted share of $0.62 in the second
quarter of 2011 and non-GAAP earnings per diluted share of $0.50 in the prior
year quarter. NASDAQ OMX's weighted average shares outstanding used to
calculate diluted earnings per share was 181 million for the second and third
quarters of 2011 and 204 million for the third quarter of 2010.
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 3,500 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 Facebook (http://www.facebook.com/pages/NASDAQ-OMX/108167527653)
and Twitter (http://www.twitter.com/nasdaqomx).
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
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, 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.
NDAQF
The NASDAQ OMX Group, Inc.
Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
Three Months Ended
---------------------------
Septembe June Septembe
r 30, 30, r 30,
2011 2011 2010
---------------------------
Revenues:
Market Services $ 808 $ 699 $ 634
---------------------------
Cost of revenues:
Transaction rebates (390) (322) (303)
Brokerage, clearance and exchange fees (118) (100) (82)
---------------------------
Total cost of revenues (508) (422) (385)
---------------------------
Total Market Services revenues less transaction 300 277 249
rebates, brokerage, clearance and exchange fees
Issuer Services 92 93 85
Market Technology 46 46 38
---------------------------
Revenues less transaction rebates, brokerage, 438 416 372
clearance and exchange fees
---------------------------
Operating Expenses:
Compensation and benefits 118 115 101
Marketing and advertising 4 5 5
Depreciation and amortization 28 26 25
Professional and contract services 23 22 18
Computer operations and data communications 17 16 13
Occupancy 23 23 23
Regulatory 9 8 9
Merger and strategic initiatives 3 29 1
General, administrative and other 18 14 12
---------------------------
Total operating expenses 243 258 207
---------------------------
Operating income 195 158 165
Interest income 3 3 2
Interest expense (30) (31) (25)
Dividend and investment income 1 -- --
Income from unconsolidated investees, net 1 1 1
---------------------------
Income before income taxes 170 131 143
Income tax provision 61 40 43
---------------------------
Net income 109 91 100
Net loss attributable to noncontrolling interests 1 1 1
---------------------------
Net income attributable to NASDAQ OMX $ 110 $ 92 $ 101
===========================
Basic and diluted earnings per share:
Basic earnings per share $ 0.62 $ 0.52 $ 0.51
===========================
Diluted earnings per share $ 0.61 $ 0.51 $ 0.50
===========================
Weighted-average common shares outstanding for
earnings per share:
Basic 177 177 200
Diluted 181 181 204
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
(unaudited)
Three Months Ended
---------------------------
Septembe June Septembe
r 30, 30, r 30,
2011 2011 2010
---------------------------
MARKET SERVICES
Transaction Services
Cash Equity Trading Revenues:
U.S. cash equity trading $ 481 $ 387 $ 368
---------------------------
Cost of revenues:
Transaction rebates (327) (258) (248)
Brokerage, clearance and exchange fees (111) (93) (78)
---------------------------
Total U.S. cash equity cost of revenues (438) (351) (326)
---------------------------
Net U.S. cash equity trading revenues 43 36 42
European cash equity trading 24 23 21
---------------------------
Total net cash equity trading revenues 67 59 63
---------------------------
Derivative Trading and Clearing Revenues:
U.S. derivative trading and clearing 121 115 93
---------------------------
Cost of revenues:
Transaction rebates (63) (64) (55)
Brokerage, clearance and exchange fees (7) (7) (4)
---------------------------
Total U.S. derivative trading and clearing cost (70) (71) (59)
of revenues
---------------------------
Net U.S. derivative trading and clearing revenues 51 44 34
European derivative trading and clearing 33 31 26
---------------------------
Total net derivative trading and clearing revenues 84 75 60
Access Services Revenues 60 55 45
---------------------------
Total Transaction Services revenues less 211 189 168
transaction rebates, brokerage, clearance and
exchange fees
---------------------------
Market Data Revenues:
Net U.S. tape plans 30 30 28
U.S. market data products 33 32 32
European market data products 20 21 16
---------------------------
Total Market Data revenues 83 83 76
---------------------------
Broker Services Revenues 5 4 4
---------------------------
Other Market Services Revenues 1 1 1
---------------------------
Total Market Services revenues less transaction 300 277 249
rebates, brokerage, clearance and exchange fees
---------------------------
ISSUER SERVICES
Global Listing Services Revenues:
Annual renewal 30 29 29
Listing of additional shares 10 10 10
Initial listing 4 4 4
---------------------------
Total U.S. listing services 44 43 43
European listing services 13 14 12
Corporate Solutions 22 23 18
---------------------------
Total Global Listing Services revenues 79 80 73
Global Index Group Revenues 13 13 12
---------------------------
Total Issuer Services revenues 92 93 85
---------------------------
MARKET TECHNOLOGY
License, support and facility management 28 30 27
Delivery project 6 6 4
Change request, advisory and broker surveillance 12 10 7
---------------------------
Total Market Technology revenues 46 46 38
---------------------------
Total revenues less transaction rebates, brokerage, $ 438 $ 416 $ 372
clearance and exchange fees
===========================
The NASDAQ OMX Group, Inc.
Condensed Consolidated Balance Sheets
(in millions)
September 30, December 31,
2011 2010
----------------------------
(unaudited)
Assets
Current assets:
----------------------------
Cash and cash equivalents $ 543 $ 315
----------------------------
Restricted cash 51 60
----------------------------
Financial investments, at fair value 294 253
----------------------------
Receivables, net 347 298
----------------------------
Deferred tax assets 20 13
----------------------------
Open clearing contracts:
Derivative positions, at fair value 1,423 4,037
Resale agreements, at contract value 2,873 3,441
Other current assets 126 93
----------------------------
Total current assets 5,677 8,510
Non-current restricted cash 105 105
Property and equipment, net 168 164
Non-current deferred tax assets 385 433
Goodwill 5,046 5,127
Intangible assets, net 1,657 1,719
Other non-current assets 119 149
----------------------------
Total assets $ 13,157 $ 16,207
============================
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 175 $ 142
Section 31 fees payable to SEC 30 82
Accrued personnel costs 105 122
Deferred revenue 152 122
Other current liabilities 151 119
Deferred tax liabilities 26 26
Open clearing contracts:
Derivative positions, at fair value 1,423 4,037
Repurchase agreements, at contract value 2,873 3,441
Current portion of debt obligations 45 140
----------------------------
Total current liabilities 4,980 8,231
Debt obligations 2,168 2,181
Non-current deferred tax liabilities 678 698
Non-current deferred revenue 158 170
Other non-current liabilities 177 198
----------------------------
Total liabilities 8,161 11,478
Commitments and contingencies
Equity
NASDAQ OMX stockholders' equity:
Common stock 2 2
Additional paid-in capital 3,790 3,780
Common stock in treasury, at cost (769) (796)
Accumulated other comprehensive loss (346) (272)
Retained earnings 2,310 2,004
----------------------------
Total NASDAQ OMX stockholders' equity 4,987 4,718
Noncontrolling interests 9 11
----------------------------
Total equity 4,996 4,729
----------------------------
Total liabilities and equity $ 13,157 $ 16,207
============================
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
-----------------------------
September June September
30, 30, 30,
2011 2011 2010
-----------------------------
GAAP net income attributable to NASDAQ OMX: $ 110 $ 92 $ 101
Non-GAAP adjustments:
Merger and strategic initiatives 3 29 1
Extinguishment of debt 6 -- --
Asset retirements -- -- 2
Workforce reductions -- -- 2
Other -- -- (1)
-----------------------------
Total non-GAAP adjustments 9 29 4
Adjustment to the income tax provision to reflect (3) (9) (2)
non-GAAP adjustments(1)
Significant tax adjustments, net 5 -- (2)
-----------------------------
Total non-GAAP adjustments, net of tax 11 20 --
Non-GAAP net income attributable to NASDAQ OMX: $ 121 $ 112 $ 101
=============================
GAAP diluted earnings per common share: $ 0.61 $ 0.51 $ 0.50
Total adj. from non-GAAP net income above 0.06 0.11 --
-----------------------------
Non-GAAP diluted earnings per common share: $ 0.67 $ 0.62 $ 0.50
=============================
Three Months Ended
-----------------------------
September June September
30, 30, 30,
2011 2011 2010
-----------------------------
GAAP operating income: $ 195 $ 158 $ 165
Non-GAAP adjustments:
Merger and strategic initiatives 3 29 1
Extinguishment of debt 6 -- --
Asset retirements -- -- 2
Workforce reductions -- -- 2
Other -- -- (1)
-----------------------------
Total non-GAAP adjustments 9 29 4
-----------------------------
Non-GAAP operating income $ 204 $ 187 $ 169
=============================
--------------------------------------------------------------------------------
-
Total revenues less transaction rebates, $ 438 $ 416 $ 372
brokerage, clearance and exchange fees
Non-GAAP operating margin (2) 47% 45% 45%
--------------------------------------------------------------------------------
-
(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
--------------------------------------------
September 30, June 30, September 30,
2011 2011 2010
--------------------------------------------
GAAP operating expenses: $ 243 $ 258 $ 207
Non-GAAP adjustments:
Merger and strategic initiatives (3) (29) (1)
Extinguishment of debt (6) -- --
Asset retirements -- -- (2)
Workforce reductions -- -- (2)
Other -- -- 1
--------------------------------------------
Total non-GAAP adjustments (9) (29) (4)
--------------------------------------------
Non-GAAP operating expenses $ 234 $ 229 $ 203
============================================
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
Three Months Ended
--------------------------------
September June September
30, 30, 30,
2011 2011 2010
--------------------------------
Market Services
Cash Equity Trading
NASDAQ securities
Average daily share volume (in billions) 2.18 2.00 2.02
Matched market share executed on NASDAQ 28.0% 28.8% 29.0%
Matched market share executed on NASDAQ OMX 2.5% 1.8% 2.5%
BX
Matched market share executed on NASDAQ OMX 1.2% 1.2% --
PSX
Market share reported to the FINRA/NASDAQ
Trade Reporting Facility 28.6% 32.2% 30.4%
Total market share (1) 60.2% 64.0% 61.9%
New York Stock Exchange, or NYSE securities
Average daily share volume (in billions) 4.78 3.91 4.24
Matched market share executed on NASDAQ 14.3% 14.0% 13.8%
Matched market share executed on NASDAQ OMX 2.5% 2.1% 3.5%
BX
Matched market share executed on NASDAQ OMX 0.6% 0.8% --
PSX
Market share reported to the FINRA/NASDAQ
Trade Reporting Facility 25.6% 27.8% 27.0%
Total market share (1) 43.0% 44.7% 44.3%
NYSE Amex and regional securities
Average daily share volume (in billions) 1.80 1.29 1.29
Matched market share executed on NASDAQ 19.9% 18.5% 21.0%
Matched market share executed on NASDAQ OMX 2.1% 1.9% 3.3%
BX
Matched market share executed on NASDAQ OMX 2.0% 2.0% --
PSX
Market share reported to the FINRA/NASDAQ
Trade Reporting Facility 24.2% 25.5% 25.1%
Total market share (1) 48.2% 47.9% 49.4%
Total U.S.-listed securities
Average daily share volume (in billions) 8.76 7.19 7.55
Matched share volume (in billions) 125.0 99.7 107.8