The NASDAQ OMX Group, Inc. ("NASDAQ OMX®"; NASDAQ: NDAQ) today reported net income of $36.8 million, or $0.17 per diluted share, for the fourth quarter of 2008 and $319.9 million, or $1.58 per diluted share for the full year of 2008.
For comparison purposes net income and dilutive earnings per share for the fourth quarter of 2008 are presented on a non-GAAP basis and exclude losses from foreign currency contracts, asset impairment charges and merger expenses. Net income and dilutive earnings per share for earlier periods are presented on a pro forma non-GAAP basis that reflects the financial results of NASDAQ, OMX, and the Philadelphia Stock Exchange as if they were a combined company for the periods presented and excludes merger expenses, gains (losses) from foreign currency contracts and certain other non-recurring items.
For the fourth quarter of 2008, net income on a non-GAAP basis was $112.1 million, or $0.53 per diluted share, an increase of 35.2% when compared to pro forma non-GAAP net income of $82.9 million, or $0.38 per diluted share, for the fourth quarter of 2007, and an increase of 2.2% when compared to pro forma non-GAAP net income of $109.7 million, or $0.52 per diluted share, for the third quarter of 2008.
Items excluded from fourth quarter 2008 non-GAAP results are:
- A $47.4 million non-cash pre-tax loss primarily related to a forward
contract to hedge the Norwegian Krone cash payment for the acquisition of
Nord Pool's clearing, international derivatives and consulting subsidiaries;
- A $34.9 million non-cash pre-tax other-than-temporary impairment charge on
a long-term available for sale investment security in Oslo Bors VPS Holding
ASA; and
- $9.5 million in pre-tax merger-related expenses.
Total revenues were $1.0 billion in the fourth quarter of 2008. Revenues less liquidity rebates, brokerage, clearance and exchange fees ("net exchange revenues") were $402.6 million for the fourth quarter of 2008, a decrease of $7.0 million, or 1.7%, from pro forma fourth quarter 2007 results, and a decrease of $8.0 million, or 1.9%, from pro forma third quarter 2008 results.
"2008 was a very eventful year for NASDAQ OMX, one in which we completed five acquisitions and announced four strategic investments," commented Bob Greifeld, NASDAQ OMX's Chief Executive Officer. "In the process we've transformed our company and created an organization with operations spanning the globe. The steps taken to leverage our core technology, integrate our acquisitions, and diversify our product offering have yielded immediate benefits as operating income reached new highs."
Recent Highlights
- Reached new market share highs in the trading of U.S. equity options
contracts. The combined market share of NASDAQ OMX PHLX and The NASDAQ
Options Market averaged 18.6% during the fourth quarter of 2008, up from
16.0% in the fourth quarter of 2007, while reaching a high of 19.8% during
the month of December. Total volume traded on these markets grew 15.5% in
the fourth quarter of 2008 when compared to the same period last year.
- The NASDAQ Stock Market matched 29.2% of all U.S. traded cash equity
volume in the fourth quarter of 2008, an increase of 59.3% from the prior
year quarter while matched average daily volume reached a record high of 3.1
billion shares. As a result, The NASDAQ Stock Market maintained its leading
position as the largest single pool of liquidity in which to trade
U.S.-listed equities.
- Recently launched NASDAQ OMX BX (BX), a new venue for trading U.S. cash
equities that utilizes NASDAQ OMX's existing technology platform. While
providing a second quote for U.S. equities, BX also offers customers greater
flexibility and an alternate trading fee schedule.
- During the fourth quarter of 2008, average daily trading volume for cash
equities reached a record 250,497 trades on the exchanges comprising NASDAQ
OMX Nordic and NASDAQ OMX Baltic. Total trades grew 16.7% from the prior
year quarter and 19.6% from the third quarter of 2008.
- Completed an 80% investment in the International Derivatives Clearing
Group (IDCG) furthering NASDAQ OMX's entrance into the derivatives market
while leveraging assets from the OMX business combination and the PHLX
acquisition. By partnering with IDCG, a highly efficient market is being
created to trade, clear, and settle U.S. dollar interest rate swap futures
contracts and other fixed income derivative contracts.
- Acquired a 22% stake in the European Multilateral Clearing Facility N.V. (EMCF),
a leading European clearing house, and signed an agreement with EMCF to use
its central counterparty services for all transactions executed on the
NASDAQ OMX Nordic exchanges. The strategic investment in EMCF and the
introduction of central counterparty services in the Nordic markets is part
of a broader commitment to reduce clearing and settlement costs for
customers in Europe.
- Completed an additional investment in Agora-X, LLC, resulting in our
ownership of a 20% equity interest in the company, following the launch of
Agora-X's electronic communications network for institutional trading in
over the counter commodity contracts. The platform provides a more liquid
and transparent marketplace for price discovery and negotiation for
agricultural swaps and swaptions, as well as swaps and options on ethanol.
- NASDAQ OMX attracted 40 new listings in the fourth quarter of 2008,
including 11 switches from exchanges operated by NYSE Euronext. Notable
switches during the quarter included News Corporation (NASDAQ:NWSA & NWS);
Automatic Data Processing (NASDAQ:ADP); Mylan Laboratories (NASDAQ:MYL); and
Jack in the Box (NASDAQ:JACK). During the full-year 2008 NASDAQ OMX
attracted 208 new listings, including 61 switches from exchanges operated by
NYSE Euronext.
- The Egyptian Exchange (EGX), a NASDAQ OMX Market Technology customer,
announced the successful launch of a newly designed trading engine that is
expected to create a more efficient marketplace and trading experience for
EGX members. The fully integrated trading platform is intended to provide a
much larger capacity, reduced cost and ease of operation. The system is
capable of handling equities, debt, ETFs, futures, options, swaps and
derivatives on a single platform.
- Launched the NASDAQ OMX Government Relief IndexSM (Nasdaq:QGRI), enabling
investors to track the performance of U.S.-listed securities that are
participating in U.S. government sponsored relief programs such as the
Troubled Asset Relief Program or other direct government investments. NASDAQ
OMX also introduced the OMX GES Sustainability Index, a benchmark index
which comprises the 50 leading Nordic listed companies in terms of
sustainability.
- NASDAQ OMX Commodities and Nord Pool ASA, our third party partner, were
chosen by the Futures & Options Association (FOA) in the United Kingdom
(UK) to establish a spot and cash-settled derivatives power market with a
full range of clearing services. FOA chose the consortium of NASDAQ OMX
Commodities and Nord Pool ASA for the delivery of market and clearing
services for the UK Wholesale Power Market. The parties plan to establish
the market in the second quarter of 2009.
"Our integration efforts continue to be successful," said David Warren, NASDAQ OMX's Chief Financial Officer. "I'm pleased to report that during the fourth quarter of 2008 we achieved the targeted $100 million in expense synergies resulting from the combination with OMX, fourteen months ahead of our original schedule. And as we enter this year it is our expectation that we'll realize additional benefits from our integration efforts as we consolidate Nordic cash equities and PHLX trading activity onto our core matching engine. For the full year 2009 we are targeting total operating expenses to be in the range of $840.0 million to $860.0 million, including approximately $30.0 million in merger-related costs."
Financial Review
Results for the fourth quarter of 2008 are presented on a non-GAAP basis.
Results for earlier periods are presented on a pro forma non-GAAP basis that
reflects the financial results of NASDAQ, OMX, and the Philadelphia Stock
Exchange as if they were a combined company for the periods presented and
excludes merger expenses, gains (losses) from foreign currency contracts and
certain other non-recurring items.
Market Services
Market Services net exchange revenues increased to $286.6 million, up 2.4% from
the prior year quarter, and down 4.3% from the third quarter of 2008.
Transaction Services
Net exchange revenues from Transaction Services were $177.3 million for the
fourth quarter of 2008, an increase of $7.7 million, or 4.5%, when compared to
the fourth quarter of 2007. Net exchange revenues decreased $6.4 million, or
3.5%, from the third quarter of 2008.
-
Cash Equity Trading net exchange revenues declined from the prior year quarter and from the third quarter of 2008.
- Net U.S. cash equity trading revenues increased when compared to the
prior year quarter due to higher trading volumes for U.S.-listed
equities. Volume matched on NASDAQ systems increased to 196.6 billion
shares in the fourth quarter of 2008, up 59.3% from 123.4 billion shares
in the fourth quarter of 2007. The decline in net exchange revenues when
compared to the third quarter of 2008 is primarily due to trading a
higher mix of lower margin products in the fourth quarter of 2008.
- Offsetting the increases in U.S. cash equity trading revenues are
declines in European cash equity trading revenues. The decline in
revenues when compared to the fourth quarter of 2007 is driven by a
45.3% reduction in value traded on the exchanges that comprise NASDAQ
OMX Nordic and Baltic, offset slightly by a 16.7% increase in trade
volume. When compared to the third quarter of 2008, value traded
declined 21.7% while trade volume increased 19.6%. Also contributing to
the decline in European cash equity trading revenues in the fourth
quarter of 2008 are changes in the exchange rate of the Swedish Krona as
compared to the U.S. dollar.
- Included in U.S. cash equity trading revenues in the fourth quarter of
2008 are $36.5 million in SEC Section 31 fees, compared with $99.3
million in the fourth quarter of 2007 and $42.4 million in the third
quarter of 2008. Corresponding cost of revenues, reflecting the
reimbursement of these fees to the SEC, is included in brokerage,
clearance and exchange fees.
- Net U.S. cash equity trading revenues increased when compared to the
prior year quarter due to higher trading volumes for U.S.-listed
equities. Volume matched on NASDAQ systems increased to 196.6 billion
shares in the fourth quarter of 2008, up 59.3% from 123.4 billion shares
in the fourth quarter of 2007. The decline in net exchange revenues when
compared to the third quarter of 2008 is primarily due to trading a
higher mix of lower margin products in the fourth quarter of 2008.
-
Derivative trading net exchange revenues increased from the prior year quarter but declined when compared to the third quarter of 2008.
- The increase when compared to the prior year quarter is primarily due
to higher trading volumes for U.S. options contracts. Total combined
equity options volume traded by NASDAQ OMX PHLX and The NASDAQ Options
Market increased 15.5% from the fourth quarter of 2007 and increased
21.4% from the third quarter of 2008. Also contributing to the increase
is the inclusion of NASDAQ OMX Commodities revenues following the
October 21, 2008 closing of NASDAQ OMX's acquisition of Nord Pool ASA's
clearing, international derivatives and consulting subsidiaries.
- The decline in revenues when compared to the third quarter of 2008 is
primarily due to lower trading volume for U.S. options contracts, which
declined 13.8% in the fourth quarter. Somewhat offsetting declines in
U.S. derivative trading revenues are increases in European derivative
trading revenues due to the inclusion of NASDAQ OMX Commodities revenues
noted above.
- The increase when compared to the prior year quarter is primarily due
to higher trading volumes for U.S. options contracts. Total combined
equity options volume traded by NASDAQ OMX PHLX and The NASDAQ Options
Market increased 15.5% from the fourth quarter of 2007 and increased
21.4% from the third quarter of 2008. Also contributing to the increase
is the inclusion of NASDAQ OMX Commodities revenues following the
October 21, 2008 closing of NASDAQ OMX's acquisition of Nord Pool ASA's
clearing, international derivatives and consulting subsidiaries.
Market Data
Market Data revenues were $84.9 million for the fourth quarter of 2008, up $0.4 million, or 0.5%, when compared to the fourth quarter of 2007, but down $2.6 million, or 3.0%, from the third quarter of 2008.
-
Net U.S. Tape Plans revenues in the fourth quarter of 2008 were down $0.9 million, or 2.4%, when compared to the prior year quarter and down $1.6 million, or 4.2%, from the third quarter of 2008.
- U.S. Tape Plans revenues reflect revenues generated by members of
joint industry plans that distribute the national best bid and offer and
last sale information for U.S. equities. Plan members, such as The
NASDAQ Stock Market, share revenue collected from disseminating this
information. The distribution of revenue to each plan member is
determined using a formula, required by Regulation NMS, that calculates
each participant's share of trading and quoting activity.
- The decline in U.S. Tape Plans revenues, net of revenue sharing plans, in the fourth quarter of 2008 when compared to the fourth quarter of 2007 is primarily due to changes in the revenue sharing program for internalized trades reported to the FINRA/NASDAQ Trade Reporting Facility. The decline in revenue in the fourth quarter of 2008 when compared to the third quarter of 2008 is primarily due to reductions in The NASDAQ Stock Market's share of trading and quoting activity in U.S. equities.
- U.S. Tape Plans revenues reflect revenues generated by members of
joint industry plans that distribute the national best bid and offer and
last sale information for U.S. equities. Plan members, such as The
NASDAQ Stock Market, share revenue collected from disseminating this
information. The distribution of revenue to each plan member is
determined using a formula, required by Regulation NMS, that calculates
each participant's share of trading and quoting activity.
-
U.S. market data products revenues were $27.3 million in the fourth quarter of 2008, an increase of $2.6 million, or 10.5%, when compared to the year ago quarter, and up $0.2 million when compared to the third quarter of 2008. U.S. market data products revenues reflect revenues generated from the sale of NASDAQ OMX proprietary data products. Revenue growth when compared to the prior year quarter is driven by the launch of NASDAQ Last Sale, and growth of other proprietary products including TotalView.
-
European market data products revenues were $21.1 million in the fourth quarter of 2008, a decrease of $1.3 million when compared to the prior year quarter and $1.2 million when compared to the third quarter of 2008. The decreases when compared to prior periods are due primarily to changes in the exchange rate of the Euro as compared to the U.S. dollar.
Issuer Services
During the fourth quarter of 2008, Issuer Services revenues declined $10.0
million, or 10.8%, to $82.3 million from the fourth quarter of 2007 and declined
$2.8 million, or 3.3%, from the prior quarter.
Global Listing Services
Global Listing Services revenues were $72.1 million for the fourth quarter of
2008, down $8.5 million, or 10.5%, when compared to the fourth quarter of 2007
and down $0.3 million, or 0.4%, from the third quarter of 2008. Decreases in
revenues from prior periods are driven primarily by lower market capitalization
values for European listed equities, which in turn result in lower European
annual listing fees. Also contributing to the decline in revenues in the quarter
are changes in the exchange rate of the Swedish Krona as compared to the U.S.
dollar.
Global Index Group
Global Index Group revenues were $10.2 million for the fourth quarter of 2008,
down 12.8% when compared to the fourth quarter of 2007, and down 19.7% when
compared to the third quarter of 2008. Driving the decline in revenues are lower
license fees associated with NASDAQ OMX-licensed products resulting from
declines in the assets under management in ETFs and structured products.
Market Technology
Market Technology revenues were $31.5 million for the fourth quarter of 2008,
down $5.5 million, or 14.9%, when compared to the fourth quarter of 2007, but up
$6.6 million, or 26.5%, when compared to the third quarter of 2008. The revenue
decline when compared to the prior year quarter is due to higher than normal
activity recognized in the earlier period. Revenue increases when compared to
the third quarter of 2008 are due to seasonally lower demand for licensed
products, technology support and facilities management services during the prior
quarter.
Operating Expenses
Total operating expenses decreased $47.5 million, or 18.2%, to $213.1 million
from $260.6 million in the prior year quarter and $8.9 million, or 4.0%, from
$222.0 million in the third quarter of 2008. The decrease in expenses was driven
primarily by lower compensation expenses, declines in marketing and advertising
expense, lower depreciation expense, and reduced expenses for computer
operations and data transmission.
Net Interest Expense
Net interest expense was $24.3 million for the fourth quarter of 2008, compared
with $29.3 million for the fourth quarter of 2007 and $19.0 million for the
third quarter of 2008. The decline in net interest expense when compared to the
fourth quarter of 2007 is primarily due to lower interest rates. The increase in
net interest expense when compared to the third quarter of 2008 is primarily due
to the full quarter impact of borrowing costs associated with the acquisition of
Nord Pool ASA's clearing, international derivatives and consulting subsidiaries.
On a non-GAAP basis, fourth quarter 2008 earnings per diluted share were $0.53 as compared to pro forma non-GAAP earnings per diluted share of $0.38 in the prior year quarter, and $0.52 in the third quarter of 2008. NASDAQ OMX's weighted average shares outstanding used to calculate diluted earnings per share were 214.1 million in the fourth quarter of 2008 versus 214.5 million in the year-ago quarter and 214.2 million in the third quarter of 2008.
The NASDAQ OMX Group, Inc.
Condensed Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
Three Months Ended Year Ended
--------------------------- -------------------
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
2008 2008 2007 2008 2007
------- ------- ------- -------- --------
Revenues
Market Services
revenues
$ 907.7 $ 878.6 $ 590.8 $3,207.3 $2,152.4
Cost of revenues:
Liquidity rebates (528.4) (484.3) (295.1) (1,744.3) (1,049.8)
Brokerage,
clearance and
exchange fees (92.7) (106.3) (157.8) (444.3) (574.5)
------- ------- ------- -------- --------
Total cost of
revenues (621.1) (590.6) (452.9) (2,188.6) (1,624.3)
------- ------- ------- -------- --------
Total Market
Services revenues
less liquidity
rebates, brokerage,
clearance and
exchange fees 286.6 288.0 137.9 1,018.7 528.1
Issuer Services
revenues 82.3 85.0 73.6 330.6 283.9
Market Technology
revenues 31.5 24.9 -- 106.2 --
Other revenues 2.2 1.1 0.1 4.6 0.3
------- ------- ------- -------- --------
Total revenues less
liquidity rebates,
brokerage,
clearance and
exchange fees 402.6 399.0 211.6 1,460.1 812.3
------- ------- ------- -------- --------
Operating Expenses
Compensation and
benefits 106.3 106.0 54.4 401.0 200.4
Marketing and
advertising 5.7 7.1 7.6 18.6 20.8
Depreciation and
amortization 26.9 27.9 9.6 92.6 38.9
Professional and
contract services 18.7 16.8 8.6 71.9 32.1
Computer operations
and data
communications 12.5 16.4 5.9 54.5 28.7
Occupancy 17.4 18.8 8.5 65.2 34.5
Regulatory 6.9 7.1 7.4 28.9 28.9
Merger expenses 9.5 8.5 -- 25.4 --
General,
administrative
and other 18.7 18.0 8.0 61.8 62.5
------- ------- ------- -------- --------
Total operating
expenses 222.6 226.6 110.0 819.9 446.8
------- ------- ------- -------- --------
Operating income 180.0 172.4 101.6 640.2 365.5
Other income
(expense), net
Interest income 6.8 9.5 14.8 34.5 37.6
Interest expense (31.1) (26.0) (2.4) (86.6) (72.9)
Dividend and
investment income 3.4 1.7 -- 8.4 14.7
Income (loss) from
unconsolidated
investees, net (0.2) (0.2) -- 27.3 --
Gain (loss) on
foreign currency
contracts (47.4) (50.7) 18.2 (57.9) 44.0
Asset impairment
charges (34.9) (7.3) -- (42.2) --
Gain on sale of
strategic
initiative -- -- -- -- 431.4
Strategic
initiative costs -- -- -- -- (26.5)
------- ------- ------- -------- --------
Total other income
(expense), net (103.4) (73.0) 30.6 (116.5) 428.3
------- ------- ------- -------- --------
Minority interests (0.1) (0.2) -- (1.5) 0.1
------- ------- ------- -------- --------
Income before
income taxes 76.5 99.2 132.2 522.2 793.9
Income tax
provision 39.7 39.1 53.2 202.3 275.5
------- ------- ------- -------- --------
Net income $ 36.8 $ 60.1 $ 79.0 $ 319.9 $ 518.4
======= ======= ======= ======== ========
Basic and diluted
earnings per share:
Basic $ 0.18 $ 0.30 $ 0.63 $ 1.68 $ 4.47
======= ======= ======= ======== ========
Diluted $ 0.17 $ 0.28 $ 0.52 $ 1.58 $ 3.46
======= ======= ======= ======== ========
Weighted-average
common shares
outstanding for
earnings per
share:
Basic 200.6 200.0 125.8 190.4 116.1
Diluted 214.1 214.2 154.0 204.5 152.5
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
(unaudited)
Three Months Ended Year Ended
--------------------------- -------------------
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
2008 2008 2007 2008 2007
------- ------- ------- -------- --------
MARKET SERVICES
Transaction
Services
Cash Equity
Trading Revenues:
U.S. cash equity
trading $ 675.1 $ 643.6 $ 501.1 $2,411.6 $1,806.3
Cost of revenues:
Liquidity
rebates (516.7) (471.2) (295.1) (1,717.8) (1,049.8)
Brokerage,
clearance and
exchange fees (92.7) (106.2) (157.8) (444.2) (574.5)
------- ------- ------- -------- --------
Total U.S. cash
equity cost
of revenues (609.4) (577.4) (452.9) (2,162.0) (1,624.3)
------- ------- ------- -------- --------
Net U.S. cash
equity trading
revenues 65.7 66.2 48.2 249.6 182.0
European cash
equity trading 28.4 33.6 -- 113.3 --
------- ------- ------- -------- --------
Total cash
equity trading
revenues 94.1 99.8 48.2 362.9 182.0
------- ------- ------- -------- --------
Derivative
Trading Revenues:
U.S. derivative
trading 46.9 43.2 -- 92.4 --
Cost of revenues:
Liquidity
rebates (11.7) (13.1) -- (26.5) --
Brokerage,
clearance and
exchange fees -- (0.1) -- (0.1) --
------- ------- ------- -------- --------
Total U.S.
derivative
cost of
revenues (11.7) (13.2) -- (26.6) --
------- ------- ------- -------- --------
Net U.S.
derivative
trading
revenues 35.2 30.0 -- 65.8 --
European
derivative
trading 19.4 16.3 -- 63.2 --
------- ------- ------- -------- --------
Total
derivative
trading
revenues 54.6 46.3 -- 129.0 --
Access Services
revenues 28.6 26.2 20.4 99.2 77.0
------- ------- ------- -------- --------
Total Transaction
Services revenues
less liquidity
rebates,
brokerage,
clearance and
exchange fees 177.3 172.3 68.6 591.1 259.0
------- ------- ------- -------- --------
Market Data
Net U.S. tape
revenue plans 36.5 38.1 37.4 145.6 149.9
U.S. market data
products 27.3 27.1 24.7 106.7 89.6
European market
data products 21.1 22.3 -- 77.5 --
------- ------- ------- -------- --------
Total Market
Data revenues 84.9 87.5 62.1 329.8 239.5
------- ------- ------- -------- --------
Broker Services 10.5 12.9 -- 42.6 --
------- ------- ------- -------- --------
Other Market
Services 13.9 15.3 7.2 55.2 29.6
------- ------- ------- -------- --------
Total Market
Services revenues
less liquidity
rebates,
brokerage,
clearance and
exchange fees 286.6 288.0 137.9 1,018.7 528.1
------- ------- ------- -------- --------
ISSUER SERVICES
Global Listing
Services:
Annual renewal
fees 30.9 30.7 32.2 122.4 125.6
Listing of
additional
shares fees 9.7 9.9 10.4 40.2 40.6
Initial listing
fees 5.3 5.4 5.7 22.1 22.2
------- ------- ------- -------- --------
Total U.S.
listing fees 45.9 46.0 48.3 184.7 188.4
European
listing fees 10.4 11.4 -- 41.0 --
Corporate
services 15.8 15.0 13.7 59.6 52.6
------- ------- ------- -------- --------
Total Global
Listing
Services 72.1 72.4 62.0 285.3 241.0
Global Index
Group 10.2 12.6 11.6 45.3 42.9
------- ------- ------- -------- --------
Total Issuer
Services
revenues 82.3 85.0 73.6 330.6 283.9
------- ------- ------- -------- --------
MARKET TECHNOLOGY
License, support
and project
revenues 18.2 15.6 -- 67.5 --
Facility
management
services 9.5 7.1 -- 28.8 --
Other revenues 3.8 2.2 -- 9.9 --
------- ------- ------- -------- --------
Total Market
Technology
revenues 31.5 24.9 -- 106.2 --
------- ------- ------- -------- --------
Other 2.2 1.1 0.1 4.6 0.3
------- ------- ------- -------- --------
Total revenues less
liquidity rebates,
brokerage,
clearance and
exchange fees $ 402.6 $ 399.0 $ 211.6 $1,460.1 $ 812.3
======= ======= ======= ======== ========
The NASDAQ OMX Group, Inc.
Consolidated Balance Sheets
(in millions)
Dec. 31, Dec. 31,
2008 2007
--------- ---------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 565.8 $ 1,325.3
Financial investments, at fair value 227.3 --
Receivables, net 338.6 249.5
Deferred tax assets 41.3 10.8
Market value, outstanding derivative
positions 4,121.8 --
Other current assets 140.7 96.4
--------- ---------
Total current assets 5,435.5 1,682.0
Property and equipment, net 182.9 64.5
Non-current deferred tax assets 644.1 63.3
Goodwill 4,492.4 980.7
Intangible assets, net 1,582.9 181.6
Other assets 357.1 7.3
--------- ---------
Total assets $12,694.9 $ 2,979.4
========= =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 242.3 $ 115.1
Section 31 fees payable to SEC 49.4 103.6
Accrued personnel costs 156.8 64.6
Deferred revenue 86.3 60.5
Other accrued liabilities 165.3 58.6
Deferred tax liabilities 14.3 8.8
Market value, outstanding derivative
positions 4,121.8 --
Current portion of debt obligations 225.0 --
--------- ---------
Total current liabilities 5,061.2 411.2
Debt obligations 2,293.8 118.4
Non-current deferred tax liabilities 671.9 91.8
Non-current deferred revenue 109.3 94.0
Other liabilities 300.2 55.7
--------- ---------
Total liabilities 8,436.4 771.1
Minority interests 17.0 --
Stockholders' equity
Common stock 2.0 1.4
Preferred stock -- --
Additional paid-in capital 3,518.5 1,189.2
Common stock in treasury, at cost (10.3) (8.0)
Accumulated other comprehensive income
(loss) (619.0) (4.7)
Retained earnings 1,350.3 1,030.4
--------- ---------
Total stockholders' equity 4,241.5 2,208.3
--------- ---------
Total liabilities, minority interests
and stockholders' equity $12,694.9 $ 2,979.4
========= =========
The NASDAQ OMX Group, Inc.
Pro Forma Condensed Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
Three Months Ended
----------------------------------------
Dec 31,(1) Sep 30, June 30, Mar 31,
2008 2008 2008 2008
------- ------- ------- -------
Revenues
Market Services $ 907.7 $ 891.5 $ 737.7 $ 841.6
Cost of revenues:
Liquidity rebates (528.4) (485.7) (350.2) (388.0)
Brokerage, clearance and
exchange fees (92.7) (106.4) (94.8) (152.3)
------- ------- ------- -------
Total cost of revenues (621.1) (592.1) (445.0) (540.3)
------- ------- ------- -------
Total Market Services
revenues less liquidity
rebates, brokerage,
clearance and exchange fees 286.6 299.4 292.7 301.3
Issuer Services revenues 82.3 85.1 87.6 86.3
Market Technology revenues 31.5 24.9 38.7 31.1
Other revenues 2.2 1.2 1.3 0.4
------- ------- ------- -------
Total revenues less
liquidity rebates,
brokerage, clearance and
exchange fees 402.6 410.6 420.3 419.1
------- ------- ------- -------
Expenses
Compensation and benefits 106.3 110.0 129.4 122.2
Marketing and advertising 5.7 7.1 4.0 3.8
Depreciation and
amortization 26.9 29.5 28.3 30.7
Professional and contract
services 18.7 17.3 26.9 26.3
Computer operations and
data communications 12.5 17.4 20.3 19.0
Occupancy 17.4 19.2 18.0 17.9
Regulatory 6.9 7.1 7.5 7.5
Merger expenses 9.5 8.5 5.7 1.4
General, administrative and
other 18.7 18.6 18.0 20.9
------- ------- ------- -------
Total operating expenses 222.6 234.7 258.1 249.7
------- ------- ------- -------
Operating income 180.0 175.9 162.2 169.4
------- ------- ------- -------
Interest income 6.8 9.6 8.2 5.2
Interest expense (31.1) (28.6) (28.8) (30.6)
Dividend and investment
income 3.4 1.8 3.1 1.8
Income (loss) from
unconsolidated investees,
net (0.2) (0.2) 1.3 (0.3)
Gain (loss) on foreign
currency contracts (47.4) (50.7) 4.9 35.3
Asset impairment charges (34.9) (7.3) -- --
Capital gains from shares
in equity investments -- -- -- --
------- ------- ------- -------
Total other income
(expense), net (103.4) (75.4) (11.3) 11.4
------- ------- ------- -------
Minority interests (0.1) (0.2) (0.8) (0.2)
------- ------- ------- -------
Income before income taxes 76.5 100.3 150.1 180.6
Income tax provision 39.7 39.8 48.0 64.8
------- ------- ------- -------
Net income $ 36.8 $ 60.5 $ 102.1 $ 115.8
======= ======= ======= =======
Basic and diluted earnings
per share:
Basic $ 0.18 $ 0.30 $ 0.51 $ 0.58
======= ======= ======= =======
Diluted $ 0.17 $ 0.29 $ 0.48 $ 0.54
======= ======= ======= =======
Weighted-average common
shares outstanding for
earnings per share:
Basic 200.6 200.0 199.7 199.6
Diluted 214.1 214.2 214.4 214.8
Three Months Ended
----------------------------------------
Dec 31, Sep 30, June 30, Mar 31,
2007 2007 2007 2007
------- ------- ------- -------
Revenues
Market Services $ 735.6 $ 716.4 $ 612.6 $ 622.4
Cost of revenues:
Liquidity rebates (297.4) (293.2) (239.2) (226.0)
Brokerage, clearance and
exchange fees (158.3) (151.4) (121.5) (145.0)
------- ------- ------- -------
Total cost of revenues (455.7) (444.6) (360.7) (371.0)
------- ------- ------- -------
Total Market Services
revenues less liquidity
rebates, brokerage,
clearance and exchange fees 279.9 271.8 251.9 251.4
Issuer Services revenues 92.3 87.0 85.6 79.7
Market Technology revenues 37.0 24.9 28.5 28.6
Other revenues 0.4 0.5 0.6 0.6
------- ------- ------- -------
Total revenues less
liquidity rebates,
brokerage, clearance and
exchange fees 409.6 384.2 366.6 360.3
------- ------- ------- -------
Expenses
Compensation and benefits 125.4 113.3 110.0 98.0
Marketing and advertising 11.9 5.6 6.7 6.9
Depreciation and
amortization 30.4 29.8 30.0 29.8
Professional and contract
services 25.5 18.6 25.9 24.1
Computer operations and
data communications 19.3 17.0 19.4 20.3
Occupancy 18.5 17.2 17.7 16.0
Regulatory 7.4 7.7 7.1 6.7
Merger expenses -- -- -- --
General, administrative and
other 23.9 38.1 17.5 33.5
------- ------- ------- -------
Total operating expenses 262.3 247.3 234.3 235.3
------- ------- ------- -------
Operating income 147.3 136.9 132.3 125.0
------- ------- ------- -------
Interest income 9.0 9.8 11.8 8.7
Interest expense (38.3) (41.0) (40.9) (41.0)
Dividend and investment
income 0.1 0.3 2.7 0.1
Income (loss) from
unconsolidated investees,
net (0.2) (0.9) 0.5 (0.3)
Gain (loss) on foreign
currency contracts 18.2 35.2 (1.7) --
Asset impairment charges -- -- -- --
Capital gains from shares
in equity investments 0.5 -- 14.7 --
------- ------- ------- -------
Total other income
(expense), net (10.7) 3.4 (12.9) (32.5)
------- ------- ------- -------
Minority interests (0.2) (0.4) (0.3) --
------- ------- ------- -------
Income before income taxes 136.4 139.9 119.1 92.5
Income tax provision 43.6 45.2 34.9 28.0
------- ------- ------- -------
Net income $ 92.8 $ 94.7 $ 84.2 $ 64.5
======= ======= ======= =======
Basic and diluted earnings
per share:
Basic $ 0.50 $ 0.55 $ 0.49 $ 0.37
======= ======= ======= =======
Diluted $ 0.44 $ 0.46 $ 0.41 $ 0.32
======= ======= ======= =======
Weighted-average common
shares outstanding for
earnings per share:
Basic 186.3 173.7 173.3 173.0
Diluted 214.5 212.8 212.5 212.4
(1) December 31, 2008 quarter results do not include pro forma
adjustments as all recent material acquisitions were included in
the full quarter results.
The NASDAQ OMX Group, Inc.
Pro Forma Quarterly Revenue Detail
(in millions)
(unaudited)
Three Months Ended
----------------------------------------
Dec 31,(1) Sep 30, June 30, Mar 31,
2008 2008 2008 2008
------- ------- ------- -------
MARKET SERVICES
Transaction Services:
Cash Equity Trading
Revenues:
U.S. cash equity
trading $ 675.1 $ 643.8 $ 495.9 $ 598.8
Cost of revenues:
Liquidity rebates (516.7) (471.2) (345.2) (384.8)
Brokerage, clearance
and exchange fees (92.7) (106.2) (94.8) (152.2)
------- ------- ------- -------
Total U.S. cash
equity cost of
revenues (609.4) (577.4) (440.0) (537.0)
------- ------- ------- -------
Net U.S. cash
equity trading
revenues 65.7 66.4 55.9 61.8
European cash equity
trading 28.4 33.6 38.0 43.6
------- ------- ------- -------
Total cash
equity trading
revenues 94.1 100.0 93.9 105.4
------- ------- ------- -------
Derivative Trading
Revenues:
U.S. derivative trading 46.9 54.7 40.4 36.2
Cost of revenues:
Liquidity rebates (11.7) (14.5) (5.0) (3.2)
Brokerage, clearance
and exchange fees -- (0.2) -- (0.1)
------- ------- ------- -------
Total U.S. derivative
cost of revenues (11.7) (14.7) (5.0) (3.3)
------- ------- ------- -------
Net U.S. derivative
trading revenues 35.2 40.0 35.4 32.9
European derivative
trading revenues 19.4 16.3 19.8 24.0
------- ------- ------- -------
Total derivative
trading revenues 54.6 56.3 55.2 56.9
------- ------- ------- -------
Access Services revenues 28.6 27.4 27.2 26.6
------- ------- ------- -------
Total Transaction Services
revenues less liquidity
rebates, brokerage,
clearance and exchange
fees 177.3 183.7 176.3 188.9
------- ------- ------- -------
Market Data:
Net U.S. tape revenue
plans 36.5 38.1 36.2 34.8
U.S. market data
products 27.3 27.1 27.0 25.3
European market data
products 21.1 22.3 25.2 23.7
------- ------- ------- -------
Total Market
Data revenues 84.9 87.5 88.4 83.8
Broker Services 10.5 12.9 12.0 13.9
Other Market Services 13.9 15.3 16.0 14.7
------- ------- ------- -------
Total Market Services
revenues less liquidity
rebates, brokerage,
clearance and exchange
fees 286.6 299.4 292.7 301.3
------- ------- ------- -------
ISSUER SERVICES
Global Listing Services:
Annual renewal fees 30.9 30.7 30.5 30.3
Listing of additional
shares fees 9.7 9.9 10.2 10.4
Initial listing fees 5.3 5.4 5.6 5.8
------- ------- ------- -------
Total U.S. listing fees 45.9 46.0 46.3 46.5
European listing fees 10.4 11.4 15.0 14.7
Corporate services 15.8 15.0 15.4 13.5
------- ------- ------- -------
Total Global
Listing Services 72.1 72.4 76.7 74.7
------- ------- ------- -------
Global Index Group 10.2 12.7 10.9 11.6
------- ------- ------- -------
Total Issuer
Services
revenues 82.3 85.1 87.6 86.3
------- ------- ------- -------
MARKET TECHNOLOGY
License, support and
project revenues 18.2 15.6 26.8 20.8
Facility management
services 9.5 7.1 9.5 7.7
Other revenues 3.8 2.2 2.4 2.6
------- ------- ------- -------
Total Market
Technology
revenues 31.5 24.9 38.7 31.1
------- ------- ------- -------
Other 2.2 1.2 1.3 0.4
------- ------- ------- -------
Total revenues less
liquidity rebates,
brokerage, clearance and
exchange fees $ 402.6 $ 410.6 $ 420.3 $ 419.1
======= ======= ======= =======
Three Months Ended
----------------------------------------
Dec 31, Sep 30, June 30, Mar 31,
2007 2007 2007 2007
------- ------- ------- -------
MARKET SERVICES
Transaction Services:
Cash Equity Trading
Revenues:
U.S. cash equity
trading $ 502.3 $ 492.3 $ 404.3 $ 411.6
Cost of revenues:
Liquidity rebates (295.1) (291.2) (238.3) (225.2)
Brokerage, clearance
and exchange fees (158.2) (151.3) (121.5) (145.0)
------- ------- ------- -------
Total U.S. cash
equity cost of
revenues (453.3) (442.5) (359.8) (370.2)
------- ------- ------- -------
Net U.S. cash
equity trading
revenues 49.0 49.8 44.5 41.4
European cash equity
trading 45.6 44.5 40.7 43.2
------- ------- ------- -------
Total cash
equity trading
revenues 94.6 94.3 85.2 84.6
------- ------- ------- -------
Derivative Trading
Revenues:
U.S. derivative trading 35.5 31.7 25.6 21.7
Cost of revenues:
Liquidity rebates (2.3) (2.0) (0.9) (0.8)
Brokerage, clearance
and exchange fees (0.1) (0.1) -- --
------- ------- ------- -------
Total U.S. derivative
cost of revenues (2.4) (2.1) (0.9) (0.8)
------- ------- ------- -------
Net U.S. derivative
trading revenues 33.1 29.6 24.7 20.9
European derivative
trading revenues 17.2 16.0 16.7 21.5
------- ------- ------- -------
Total derivative
trading revenues 50.3 45.6 41.4 42.4
------- ------- ------- -------
Access Services revenues 24.7 23.7 23.6 22.9
------- ------- ------- -------
Total Transaction Services
revenues less liquidity
rebates, brokerage,
clearance and exchange
fees 169.6 163.6 150.2 149.9
------- ------- ------- -------
Market Data:
Net U.S. tape revenue
plans 37.4 37.4 36.4 38.8
U.S. market data
products 24.7 23.2 21.5 20.2
European market data
products 22.4 21.4 20.0 18.9
------- ------- ------- -------
Total Market
Data revenues 84.5 82.0 77.9 77.9
Broker Services 14.3 13.1 11.6 12.0
Other Market Services 11.5 13.1 12.2 11.6
------- ------- ------- -------
Total Market Services
revenues less liquidity
rebates, brokerage,
clearance and exchange
fees 279.9 271.8 251.9 251.4
------- ------- ------- -------
ISSUER SERVICES
Global Listing Services:
Annual renewal fees 32.2 31.6 31.1 30.7
Listing of additional
shares fees 10.4 10.4 10.1 9.7
Initial listing fees 5.7 5.6 5.5 5.4
------- ------- ------- -------
Total U.S. listing fees 48.3 47.6 46.7 45.8
European listing fees 18.6 13.7 14.8 13.2
Corporate services 13.7 13.9 13.2 11.7
------- ------- ------- -------
Total Global
Listing Services 80.6 75.2 74.7 70.7
------- ------- ------- -------
Global Index Group 11.7 11.8 10.9 9.0
------- ------- ------- -------
Total Issuer
Services
revenues 92.3 87.0 85.6 79.7
------- ------- ------- -------
MARKET TECHNOLOGY
License, support and
project revenues 20.9 14.3 18.2 18.8
Facility management
services 8.9 8.0 8.2 6.1
Other revenues 7.2 2.6 2.1 3.7
------- ------- ------- -------
Total Market
Technology
revenues 37.0 24.9 28.5 28.6
------- ------- ------- -------
Other 0.4 0.5 0.6 0.6
------- ------- ------- -------
Total revenues less
liquidity rebates,
brokerage, clearance and
exchange fees $ 409.6 $ 384.2 $ 366.6 $ 360.3
======= ======= ======= =======
(1) December 31, 2008 quarter results do not include pro forma
adjustments as all recent material acquisitions were included in
the full quarter results.
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP to Pro Forma Non-GAAP Earnings and
Reconciliation of GAAP to Pro Forma Non-GAAP Operating Expenses
(in millions, except per share amounts)
(unaudited)
Three Months Ended
--------------------------
Dec. 31, Sep. 30, Dec. 31,
2008 2008 2007
------ ------ ------
GAAP Net Income: $ 36.8 $ 60.1 $ 79.0
----------------
Pro Forma Adjustments:
OMX results -- -- 30.7
PHLX results -- 2.5 0.4
Amortization of intangibles -- (0.5) (3.4)
Interest expense, net adjustments -- (1.6) (24.7)
Computer operations and data
communications -- -- 9.3
Professional and contract services -- -- 1.5
------ ------ ------
Total Adjustments -- 0.4 13.8
------ ------ ------
Pro Forma Net Income $ 36.8 $ 60.5 $ 92.8
Other Adjustments:
Debt issuance costs -- -- 0.7
Other reserves -- 1.6 --
Workforce reductions -- 1.2 0.4
Merger expenses 6.3 5.5 --
Asset impairment charges 34.9 4.4 --
(Gain) loss on foreign currency
contracts 34.1 36.5 (11.0)
------ ------ ------
Total Adjustments 75.3 49.2 (9.9)
------ ------ ------
Pro Forma Non-GAAP Net Income $112.1 $109.7 $ 82.9
====== ====== ======
GAAP Earnings per Common Share:
-------------------------------
Diluted Earnings per Common Share $ 0.17 $ 0.28 $ 0.52
Pro Forma Adjustments:
Total Adj. from GAAP Net Income Above: -- 0.01 (0.08)
------ ------ ------
Pro Forma Diluted Earnings per Common
Share 0.17 0.29 0.44
Total Adj. from Pro Forma Net Income
Above: 0.36 0.23 (0.06)
------ ------ ------
Pro Forma Non-GAAP Diluted Earnings per
Common Share $ 0.53 $ 0.52 $ 0.38
====== ====== ======
Three Months Ended
--------------------------
Dec. 31, Sep. 30, Dec. 31,
2008 2008 2007
------ ------ ------
GAAP Operating Expenses: $222.6 $226.6 $110.0
------------------------
Pro Forma Adjustments:
OMX operating expenses -- -- 122.0
PHLX operating expenses -- 7.2 38.8
Amortization of intangibles -- 0.9 6.6
Professional and contract services -- -- (2.2)
Computer operations and data
communications -- -- (12.9)
------ ------ ------
Total Adjustments -- 8.1 152.3
------ ------ ------
Pro Forma Operating Expenses $222.6 $234.7 $262.3
Other Adjustments:
Other reserves -- (2.2) --
Debt issuance costs -- -- (1.1)
Workforce reductions -- (2.0) (0.6)
Merger expenses (9.5) (8.5) --
------ ------ ------
Total Adjustments (9.5) (12.7) (1.7)
------ ------ ------
Pro Forma Non-GAAP Operating Expenses $213.1 $222.0 $260.6
====== ====== ======
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP to Pro Forma Non-GAAP Operating Income
(in millions, except per share amounts)
(unaudited)
Three Months Ended
--------------------------
Dec. 31, Sep. 30, Dec. 31,
2008 2008 2007
------ ------ ------
GAAP Operating Income: $180.0 $172.4 $101.6
----------------------
Pro Forma Adjustments:
OMX operating income -- -- 37.5
PHLX operating income -- 4.4 (0.3)
Amortization of intangibles -- (0.9) (6.6)
Professional and contract services -- -- 2.2
Computer operations and data
communications 12.9
------ ------ ------
Total Adjustments -- 3.5 45.7
------ ------ ------
Pro Forma Operating Income $180.0 $175.9 $147.3
Other Adjustments:
Other reserves -- 2.2 --
Debt Issuance Costs -- -- 1.1
Workforce reductions -- 2.0 0.6
Merger expenses 9.5 8.5 --
------ ------ ------
Total Adjustments 9.5 12.7 1.7
------ ------ ------
Pro Forma Non-GAAP Operating Income $189.5 $188.6 $149.0
====== ====== ======
--------------------------------------------------------------------
Pro Forma total revenues less liquidity
rebates, brokerage, clearance and
exchange fees 402.6 410.6 409.6
Pro Forma Non-GAAP Operating Margin (1) 47.1% 45.9% 36.4%
--------------------------------------------------------------------
(1) Pro forma non-GAAP operating margin equals pro forma non-GAAP
operating income divided by pro forma total revenues less
liquidity rebates, brokerage, clearance, and exchange fees.
