The NASDAQ OMX Group, Inc. ("NASDAQ OMX(r)") (Nasdaq:NDAQ) today reported third quarter 2008 net income of $60.1 million, or $0.28 per diluted share, compared with net income of $365.0 million, or $2.41 per diluted share, in the third quarter of 2007. Included in third quarter 2007 results was a pre-tax gain of $431.4 million associated with NASDAQ's sale of its share capital of the London Stock Exchange Group plc, which had the impact of increasing diluted earnings per share by $1.95.
For comparison purposes pro forma non-GAAP results are being presented that reflect the financial results of both NASDAQ OMX and the Philadelphia Stock Exchange as if we were a combined company for the periods presented and exclude certain non-operational items. Items excluded from third quarter 2008 results are:
- A $50.7 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;
- $8.5 million in pre-tax merger related expenses;
- A pre-tax non-cash impairment charge of $7.3 million primarily related to intangible assets of our insurance agency business; and
- $4.2 million in pre-tax expenses associated with workforce reductions and other reserves.
For the third quarter of 2008, net income on a pro forma non-GAAP basis was $109.7 million, or $0.52 per diluted share, an increase of 27.7% when compared to pro forma non-GAAP net income of $85.9 million, or $0.42 per diluted share, for the third quarter of 2007, and an increase of 7.2% when compared to pro forma non-GAAP net income of $102.3 million, or $0.48 per diluted share, for the second quarter of 2008.
The remaining results are presented on a pro forma basis unless otherwise noted.
Total revenues were $1.0 billion in the third quarter of 2008. Revenues less liquidity rebates, brokerage, clearance and exchange fees ("net exchange revenues") were $410.6 million for the third quarter of 2008, an increase of $26.4 million, or 6.9%, from the third quarter of 2007, and a decrease of $9.7 million, or 2.3%, from the second quarter of 2008.
"During the quarter we continued with our ongoing mission to leverage massive scale against extreme efficiencies, building a global business to be successful in all economic environments," commented Bob Greifeld, Chief Executive Officer of NASDAQ OMX. "All of the steps taken, including the acquisitions of the Philadelphia Stock Exchange and the Boston Stock Exchange, as well as the launch of NASDAQ OMX Europe, are designed to further diversify our product offerings while utilizing the same efficient platform. In many ways, NASDAQ OMX has never been better positioned to deliver value to our customers and long term returns for our shareholders as we redefine the role of the global exchange company."
Recent Highlights
- On October 21, 2008, NASDAQ OMX was added to the S&P 500 index, the most widely watched index of large-cap U.S. stocks.
- 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 17.9% during the third quarter of 2008, up from 15.6% in the third quarter of 2007, while reaching a high of 19.0% during the month of August. Total volume traded grew 54.3% in the third quarter of 2008 when compared to the same period last year.
- Total cash equity volume matched on NASDAQ in the third quarter of 2008 grew 47.2% from the prior year quarter while matched average daily volume reached a record high of 2.8 billion shares. NASDAQ matched 29.6% of all U.S. traded equity volume in the third quarter of 2008, maintaining its leading position as the largest single pool of liquidity in which to trade U.S.-listed equities. And NASDAQ continued to gain share in NYSE-listed securities, matching 23.3% of volume during the quarter.
- Launched NASDAQ OMX Europe and recently completed the phased roll- out of trading for approximately 600 listed European equities. NASDAQ OMX also announced its intentions to launch a London listing venue by becoming a Recognized Investment Exchange.
- Completed the acquisition of the Boston Stock Exchange (BSE). Subject to SEC approval, BSE will be renamed NASDAQ OMX BX and will be used to launch a second U.S. equities market.
- Became the world leader in cleared power derivatives volumes following the October 21, 2008 acquisition of Nord Pool's clearing, international derivatives and consulting subsidiaries. NASDAQ OMX also launched NASDAQ OMX Commodities, which includes Nord Pool's energy and carbon derivatives products.
- Announced a binding agreement to acquire a 22% equity stake in the European Multilateral Clearing Facility N.V. (EMCF) from Fortis Bank Nederland (Holding) N.V. (FBN) on October 16, 2008. EMCF is a central counterparty clearing house for European equity trading on exchanges and multilateral trading facilities. NASDAQ OMX's and FBN's objective is to reinforce EMCF's position as the leading cash equity central counter party clearing facility in Europe.
- NASDAQ OMX attracted 62 new listings in the third quarter of 2008, including 21 new listings and 4 IPOs from China, 3 switches from the New York Stock Exchange and 16 from the American Stock Exchange. Notable switches from the NYSE during the quarter were the CME Group, Inc. (Nasdaq:CME), Seagate Technology (Nasdaq:STX), and Celera Corporation (Nasdaq:CRA). Also, Automatic Data Processing, Inc. switched its listing from NYSE to NASDAQ on October 21, 2008 while retaining its three-character ticker symbol ADP.
- Board Recruiting, a service of NASDAQ OMX, announced that it created a strategic alliance with leading executive search firm Heidrick & Struggles to provide companies with enhanced services in board recruiting. The new offering will integrate the leadership assessment expertise of Heidrick & Struggles with Board Recruiting's online matching system to provide clients with a broader array of choices in how they identify and recruit director candidates.
"We continue to deliver strong operating results," said David Warren, NASDAQ OMX's Chief Financial Officer. "Our integration efforts are moving forward well ahead of schedule. The $100 million in expense synergies resulting from the combination with OMX are now expected to be achieved in the fourth quarter this year, up from the original estimate of year-end 2009, and up from the first quarter of 2009 target that we communicated last quarter. And the integration of the Philadelphia Stock Exchange is far ahead of schedule as the deal accreted to shareholders this quarter."
Financial Review
Market Services
Market Services net exchange revenues increased to $299.4 million, up 10.2% from the prior year quarter and up 2.3% from the second quarter of 2008.
Transaction Services
Net exchange revenues from Transaction Services were $183.7 million for the third quarter of 2008, an increase of $20.1 million, or 12.3%, when compared to the third quarter of 2007. Net exchange revenues increased $7.4 million, or 4.2%, from the second quarter of 2008.
- Cash Equity Trading net exchange revenues increased from the prior year quarter and from the second quarter of 2008.
- Increases when compared to both the prior year quarter and the second quarter of 2008 are due to higher trading volumes for U.S.-listed equities. Volume matched on NASDAQ systems increased to 179.2 billion shares in the third quarter of 2008, up 47.2% from 121.7 billion shares in the third quarter of 2007, and up 31.4% from 136.4 billion shares in the second quarter of 2008.
- Somewhat offsetting the increases in U.S. cash equity trading are declines in European cash equity trading revenues. The decline in revenue when compared to the third quarter of 2007 is driven by a 34.6% reduction in value traded on the Nordic Markets, offset slightly by a 4.6% increase in trade volume. When compared to the second quarter of 2008, value traded declined 10.0% while trade volume increased 7.9%.
- Included in U.S. cash equity trading revenues in the third quarter of 2008 are $42.4 million in SEC Section 31 fees, compared with $94.2 million in the third quarter of 2007 and $37.3 million in the second quarter of 2008. Corresponding cost of revenues, reflecting the reimbursement of these fees to the SEC, is included in brokerage, clearance and exchange fees.
- Derivative Trading net exchange revenues increased from the prior year quarter and from the second quarter of 2008.
- The increases when compared to prior periods are primarily due to higher trading volumes for U.S. options contracts. Total combined volume traded by NASDAQ OMX PHLX and The NASDAQ Options Market increased 53.5% from the third quarter of 2007 and increased 21.4% from the second quarter 2008.
- Somewhat offsetting the increases in U.S. options revenues when compared to the second quarter of 2008 are declines in European derivative trading revenues, which are primarily driven by seasonally lower trading volumes for derivative products.
Market Data
Market Data revenues were $87.5 million for the third quarter of 2008, up $5.5 million, or 6.7%, when compared to the third quarter of 2007, but down $0.9 million, or 1.0%, from the second quarter of 2008.
- Net U.S. Tape Plan revenues in the third quarter of 2008 were up $0.7 million, or 1.9%, when compared to the prior year quarter and up $1.9 million, or 5.2%, from the second quarter of 2008.
- U.S. Tape Plan 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.
- Driving U.S. Tape Plan revenues, net of revenue sharing plans, higher in the third quarter of 2008 when compared to the second quarter of 2008 were increases in NASDAQ's share of trading and quoting activity in NYSE-listed securities. Somewhat offsetting this increase is a decline in NASDAQ's share of trading and quoting activity in NASDAQ-listed securities.
- U.S. market data products revenues were $27.1 million in the third quarter of 2008, an increase of $3.9 million, or 16.8%, when compared to the year ago quarter, and up $0.1 million when compared to the second quarter of 2008. U.S. market data products revenues reflect revenue 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. Revenue growth when compared to the second quarter of 2008 is driven primarily by the launch of NASDAQ Last Sale, offset by declines in demand for certain proprietary products and higher than usual revenue in the second quarter from back-billing of customers.
- European market data products revenues were $22.3 million in the third quarter of 2008, an increase of $0.9 million when compared to the prior year quarter but a decline of $2.9 million when compared to the second quarter of 2008. The increase from prior year is due primarily to changes in the exchange rate of the Euro as compared to the U.S. dollar. Declines when compared to the second quarter of 2008 are due to changes in the exchange rate of the Euro as compared to the U.S. dollar as well as a decrease in demand for certain European data products.
Issuer Services
During the third quarter of 2008, Issuer Services revenues declined $1.9 million, or 2.2%, to $85.1 million from the third quarter of 2007 and declined $2.5 million, or 2.9%, from the prior quarter.
Listing Services
Listing Services revenues were $72.4 million for the third quarter of 2008, down $2.8 million, or 3.7%, when compared to the third quarter of 2007 and down $4.3 million, or 5.6%, from the second quarter of 2008. Decreases in revenues from prior periods are driven primarily by lower market capitalization values for European listed equities, which in turn resulted in a decline in European listing fees of $2.3 million when compared to the third quarter of 2007 and $3.6 million when compared to the second quarter of 2008.
Financial Products
Financial Products revenues were $12.7 million for the third quarter of 2008, up 7.6% when compared to the third quarter of 2007, and up 16.5% when compared to the second quarter of 2008. Driving the increase in revenues is higher license fees associated with NASDAQ-licensed products.
Market Technology
Market Technology revenues were $24.9 million for the third quarter of 2008, equal to revenues recognized in the third quarter of 2007, but down $13.8 million, or 35.7%, when compared to the second quarter of 2008. Revenue declines when compared to the second quarter of 2008 are due to seasonally lower demand for licensed products, technology support and facilities management services.
Operating Expenses
When presented on a pro forma non-GAAP basis, total operating expenses decreased $4.7 million, or 2.1%, to $222.0 million from $226.7 million in the prior year quarter and $30.4 million, or 12.0%, from $252.4 million in the prior quarter. The decrease in expenses was driven primarily by lower compensation expenses, declines in professional and contract services, and reduced general and administrative expenses. Somewhat offsetting these declines are higher marketing and occupancy expenses, and spending on new initiatives.
Net Interest Expense
Net interest expense was $19.0 million for the third quarter of 2008, compared with $31.2 million for the third quarter of 2007 and $20.6 million for the second quarter of 2008. The decline in net interest expense is primarily due to lower interest rates.
Earnings Per Share
On a pro forma non-GAAP basis, third quarter 2008 earnings per diluted share were $0.52 versus $0.42 per diluted share in the prior year quarter, and $0.48 in the second quarter of 2008. NASDAQ OMX's weighted average shares outstanding used to calculate diluted earnings per share were 214.2 million in the third quarter of 2008 versus 212.8 million in the year-ago quarter and 214.4 million in the second quarter of 2008.
About NASDAQ OMX
The NASDAQ OMX Group, Inc. is the world's largest exchange company. With over 3,900 listed companies, it delivers trading, exchange technology and public company services across six continents. NASDAQ OMX offers multiple capital raising solutions to companies around the globe, including its U.S. listings market; the OMX Nordic Exchange, including First North; and the 144A PORTAL Market. The company offers trading across multiple asset classes including equities, derivatives, commodities, structured products and ETFs. NASDAQ OMX technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries. OMX Nordic Exchange is not a legal entity but describes the common offering from NASDAQ OMX exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more information about NASDAQ OMX, visit www.nasdaqomx.com.
Non-GAAP Information
In addition to disclosing results determined in accordance with GAAP, NASDAQ OMX also discloses certain pro forma non-GAAP results of operations, including net income, diluted earnings per share, and operating expenses that make certain adjustments or exclude certain charges and gains that are described in the reconciliation table of GAAP to pro forma non-GAAP information provided at the end of this release. Management believes that this pro forma non-GAAP information provides investors with additional information to assess NASDAQ OMX's operating performance by making certain adjustments or excluding costs or gains and assists investors in comparing our operating performance to prior periods. Management uses this pro forma non-GAAP information, along with GAAP information, in evaluating its historical operating performance.
The non-GAAP information is not prepared in accordance with GAAP and may not be comparable to non-GAAP information used by other companies. The non-GAAP information should not be viewed as a substitute for, or superior to, other data prepared in accordance with GAAP.
Cautionary Note Regarding Forward-Looking Statements
Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties. NASDAQ OMX cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to (i) projections about our future financial results, growth and achievement of synergy targets, (ii) statements about the implementation dates and benefits of certain strategic initiatives, including the launch of NASDAQ OMX BX, (iii) statements about our integrations with OMX, the Philadelphia Stock Exchange and certain subsidiaries of Nord Pool, and (iv) other statements that are not historical facts. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ OMX's control. These factors include, but are not limited to, NASDAQ OMX's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in NASDAQ OMX's filings with the U.S. Securities Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on NASDAQ OMX's website at http://www.nasdaqomx.com and the SEC's website at www.sec.gov. NASDAQ OMX undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
NDAQF
The NASDAQ OMX Group, Inc.
Condensed Consolidated Statements of Income
(in millions, except per share amounts)
(unaudited)
Three Months Ended
-------------------------------
Sept. 30, June 30, Sept. 30,
2008 2008 2007
--------- --------- ---------
Revenues
Market Services revenues $ 879.3 $ 694.1 $ 578.7
Cost of revenues:
Liquidity rebates (484.3) (346.8) (291.2)
Brokerage, clearance and exchange
fees (107.0) (94.5) (150.8)
--------- --------- ---------
Total cost of revenues (591.3) (441.3) (442.0)
--------- --------- ---------
Total Market Services revenues less
liquidity rebates, brokerage,
clearance and exchange fees 288.0 252.8 136.7
Issuer Services revenues 85.0 87.6 73.2
Market Technology revenues 24.9 38.7 --
Other revenues 1.1 1.1 0.1
--------- --------- ---------
Total revenues less liquidity
rebates, brokerage, clearance and
exchange fees 399.0 380.2 210.0
--------- --------- ---------
Operating Expenses
Compensation and benefits 106.0 115.2 52.0
Marketing and advertising 7.1 4.0 4.1
Depreciation and amortization 27.9 22.2 9.7
Professional and contract services 16.8 22.5 6.4
Computer operations and data
communications 16.4 17.4 6.6
Occupancy 18.8 16.6 8.2
Regulatory 7.1 7.5 7.7
Merger expenses 8.5 5.7 --
General, administrative and other 25.3 14.3 31.5
--------- --------- ---------
Total operating expenses 233.9 225.4 126.2
--------- --------- ---------
Operating income 165.1 154.8 83.8
Other income (expense), net
Interest income 9.5 8.0 9.5
Interest expense (26.0) (20.9) (23.4)
Dividend and investment income 1.7 2.9 0.1
Income from unconsolidated
investees, net (0.2) 1.3 --
Gain (loss) on foreign currency
contracts (50.7) 4.9 35.2
Gain on sale of strategic
initiative -- -- 431.4
--------- --------- ---------
Total other income (expense), net (65.7) (3.8) 452.8
--------- --------- ---------
Minority interests (0.2) (0.8) --
--------- --------- ---------
Income before income taxes 99.2 150.2 536.6
Income tax provision 39.1 48.6 171.6
--------- --------- ---------
Net income $ 60.1 $ 101.6 $ 365.0
========= ========= =========
Basic and diluted earnings per
share:
Basic $ 0.30 $ 0.51 $ 3.23
========= ========= =========
Diluted $ 0.28 $ 0.48 $ 2.41
========= ========= =========
Weighted-average common shares
outstanding for earnings per
share:
Basic 200.0 199.7 113.2
Diluted 214.2 214.4 152.3
The NASDAQ OMX Group, Inc.
Quarterly Revenue Detail
(in millions)
(unaudited)
Three Months Ended
----------------------------
Sept. 30, June 30, Sept. 30,
2008 2008 2007
-------- -------- --------
MARKET SERVICES
Transaction Services
--------------------
Cash Equity Trading Revenues:
U.S. cash equity trading $ 643.6 $ 495.0 $ 491.3
Cost of revenues:
Liquidity rebates (471.2) (345.2) (291.2)
Brokerage, clearance and exchange
fees (106.2) (94.5) (150.8)
-------- -------- --------
Total U.S. cash equity cost of
revenues (577.4) (439.7) (442.0)
-------- -------- --------
Net U.S. cash equity trading
revenues 66.2 55.3 49.3
European cash equity trading 33.6 38.0 --
-------- -------- --------
Total cash equity trading revenues 99.8 93.3 49.3
-------- -------- --------
Derivative Trading Revenues:
U.S. derivative trading 43.2 2.4 --
Cost of revenues:
Liquidity rebates (13.1) (1.6) --
Brokerage, clearance and exchange
fees (0.8) -- --
-------- -------- --------
Total U.S. derivative cost of
revenues (13.9) (1.6) --
-------- -------- --------
Net U.S. derivative trading revenues 29.3 0.8 --
European derivative trading 16.3 19.8 --
-------- -------- --------
Total derivative trading revenues 45.6 20.6 --
Access Services revenues 26.9 22.6 19.1
-------- -------- --------
Total Transaction Services revenues
less liquidity rebates, brokerage,
clearance and exchange fees 172.3 136.5 68.4
-------- -------- --------
Market Data
-----------
Net U.S. tape revenue plans 38.1 36.2 37.3
U.S. market data products 27.1 27.0 23.2
European market data products 22.3 25.2 --
-------- -------- --------
Total Market Data revenues 87.5 88.4 60.5
-------- -------- --------
Broker Services 12.9 12.0 --
-------- -------- --------
Other Market Services 15.3 15.9 7.8
-------- -------- --------
Total Market Services revenues less
liquidity rebates, brokerage,
clearance and exchange fees 288.0 252.8 136.7
-------- -------- --------
ISSUER SERVICES
Listing Services:
Annual renewal fees 30.7 30.5 31.6
Listing of additional shares fees 9.9 10.2 10.4
Initial listing fees 5.4 5.6 5.6
-------- -------- --------
Total U.S. listing fees 46.0 46.3 47.6
European listing fees 11.4 15.0 --
Corporate services 15.0 15.4 13.9
-------- -------- --------
Total Listing Services 72.4 76.7 61.5
Financial Products 12.6 10.9 11.7
-------- -------- --------
Total Issuer Services revenues 85.0 87.6 73.2
-------- -------- --------
MARKET TECHNOLOGY
License, support and project revenues 15.6 26.8 --
Facility management services 7.1 9.5 --
Other revenues 2.2 2.4 --
-------- -------- --------
Total Market Technology revenues 24.9 38.7 --
-------- -------- --------
Other 1.1 1.1 0.1
-------- -------- --------
Total revenues less liquidity rebates,
brokerage, clearance and exchange
fees $ 399.0 $ 380.2 $ 210.0
======== ======== ========
The NASDAQ OMX Group, Inc.
Condensed Consolidated Balance Sheets
(in millions)
Sept. 30, Dec. 31,
2008 2007
----------- -----------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 737.9 $ 1,325.3
Financial investments, at fair value 194.1 --
Receivables, net 375.6 249.5
Deferred tax assets 36.6 10.8
Market value, outstanding derivative
positions 761.7 --
Other current assets 215.0 96.4
----------- -----------
Total current assets 2,320.9 1,682.0
Property and equipment, net 192.8 64.5
Non-current deferred tax assets 191.9 63.3
Goodwill 4,681.8 980.7
Intangible assets, net 2,407.2 181.6
Other assets 424.0 7.3
----------- -----------
Total assets $ 10,218.6 $ 2,979.4
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 287.8 $ 115.1
Section 31 fees payable to SEC 14.4 103.6
Accrued personnel costs 132.7 64.6
Deferred revenue 124.2 60.5
Other accrued liabilities 202.9 58.6
Deferred tax liabilities 31.3 8.8
Market value, outstanding derivative
positions 761.7 --
Current portion of debt obligations 206.2 --
----------- -----------
Total current liabilities 1,761.2 411.2
Debt obligations 2,349.9 118.4
Non-current deferred tax liabilities 1,020.4 91.8
Non-current deferred revenue 125.2 94.0
Other liabilities 203.5 55.7
----------- -----------
Total liabilities 5,460.2 771.1
Minority interests 3.8 --
Stockholders' equity
Common stock 2.0 1.4
Preferred stock -- --
Additional paid-in capital 3,488.9 1,189.2
Common stock in treasury, at cost (13.1) (8.0)
Accumulated other comprehensive income
(loss) (36.7) (4.7)
Retained earnings 1,313.5 1,030.4
----------- -----------
Total stockholders' equity 4,754.6 2,208.3
----------- -----------
Total liabilities, minority interests and
stockholders' equity $ 10,218.6 $ 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
-------------------------------
Sep 30, June 30, Mar 31,
2008 2008 2008
--------- --------- ---------
Revenues
Market Services $ 892.2 $ 737.7 $ 841.6
Cost of revenues:
Liquidity rebates (485.7) (350.2) (388.0)
Brokerage, clearance and exchange
fees (107.1) (94.8) (152.3)
--------- --------- ---------
Total cost of revenues (592.8) (445.0) (540.3)
--------- --------- ---------
Total Market Services revenues less
liquidity rebates, brokerage,
clearance and exchange fees 299.4 292.7 301.3
--------- --------- ---------
Issuer Services revenues 85.1 87.6 86.3
Market Technology revenues 24.9 38.7 31.1
Other revenues 1.2 1.3 0.4
--------- --------- ---------
Total revenues less liquidity
rebates, brokerage, clearance and
exchange fees 410.6 420.3 419.1
--------- --------- ---------
Expenses
Compensation and benefits 110.0 129.4 122.2
Marketing and advertising 7.1 4.0 3.8
Depreciation and amortization 29.5 28.3 30.7
Professional and contract services 17.3 26.9 26.3
Computer operations and data
communications 17.4 20.3 19.0
Occupancy 19.2 18.0 17.9
Regulatory 7.1 7.5 7.5
Merger expenses 8.5 5.7 1.4
General, administrative and other 25.9 18.0 20.9
--------- --------- ---------
Total operating expenses 242.0 258.1 249.7
--------- --------- ---------
Operating income 168.6 162.2 169.4
--------- --------- ---------
Interest income 9.6 8.2 5.2
Interest expense (28.6) (28.8) (30.6)
Dividend and investment income 1.8 3.1 1.8
Income (loss) from unconsolidated
investees, net (0.2) 1.3 (0.3)
Gain (loss) on foreign currency
contracts (50.7) 4.9 35.3
Capital gains from shares in equity
investments -- -- --
--------- --------- ---------
Total other income (expense), net (68.1) (11.3) 11.4
--------- --------- ---------
Minority interests (0.2) (0.8) (0.2)
--------- --------- ---------
Income before income taxes 100.3 150.1 180.6
Income tax provision 39.8 48.0 64.8
--------- --------- ---------
Net income $ 60.5 $ 102.1 $ 115.8
========= ========= =========
Basic and diluted earnings per
share:
Basic $ 0.30 $ 0.51 $ 0.58
========= ========= =========
Diluted $ 0.29 $ 0.48 $ 0.54
========= ========= =========
Weighted-average common shares
outstanding for earnings per
share:
Basic 200.0 199.7 199.6
Diluted 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) --
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
The NASDAQ OMX Group, Inc.
Pro Forma Quarterly Revenue Detail
(in millions)
(unaudited)
Three Months Ended
----------------------------
Sept 30, Jun 30, Mar 31,
2008 2008 2008
-------- -------- --------
MARKET SERVICES
Transaction Services:
Cash Equity Trading Revenues:
U.S. cash equity trading $ 643.8 $ 495.9 $ 598.8
Cost of revenues:
Liquidity rebates (471.2) (345.2) (384.8)
Brokerage, clearance and exchange
fees (106.2) (94.8) (152.2)
-------- -------- --------
Total U.S. cash equity cost of
revenues (577.4) (440.0) (537.0)
-------- -------- --------
Net U.S. cash equity trading
revenues 66.4 55.9 61.8
European cash equity trading 33.6 38.0 43.6
Total cash equity trading
revenues 100.0 93.9 105.4
-------- -------- --------
Derivative Trading Revenues:
U.S. derivative trading 54.7 40.4 36.2
Cost of revenues:
Liquidity rebates (14.5) (5.0) (3.2)
Brokerage, clearance and
exchange fees (0.9) -- (0.1)
-------- -------- --------
Total U.S. derivative cost of
revenues (15.4) (5.0) (3.3)
-------- -------- --------
Net U.S. derivative trading
revenues 39.3 35.4 32.9
European derivative trading
revenues 16.3 19.8 24.0
-------- -------- --------
Total derivative trading
revenues 55.6 55.2 56.9
-------- -------- --------
Access Services revenues 28.1 27.2 26.6
-------- -------- --------
Total Transaction Services revenues
less liquidity rebates, brokerage,
clearance and exchange fees 183.7 176.3 188.9
-------- -------- --------
Market Data:
Net U.S. tape revenue plans 38.1 36.2 34.8
U.S. market data products 27.1 27.0 25.3
European market data products 22.3 25.2 23.7
-------- -------- --------
Total Market Data revenues 87.5 88.4 83.8
Broker Services 12.9 12.0 13.9
Other Market Services 15.3 16.0 14.7
-------- -------- --------
Total Market Services revenues less
liquidity rebates, brokerage,
clearance and exchange fees 299.4 292.7 301.3
-------- -------- --------
ISSUER SERVICES
Listing Services:
Annual renewal fees 30.7 30.5 30.3
Listing of additional shares fees 9.9 10.2 10.4
Initial listing fees 5.4 5.6 5.8
-------- -------- --------
Total U.S. listing fees 46.0 46.3 46.5
European listing fees 11.4 15.0 14.7
Corporate services 15.0 15.4 13.5
-------- -------- --------
Total Listing Services 72.4 76.7 74.7
-------- -------- --------
Financial Products 12.7 10.9 11.6
-------- -------- --------
Total Issuer Services revenues 85.1 87.6 86.3
-------- -------- --------
MARKET TECHNOLOGY
License, support and project revenues 15.6 26.8 20.8
Facility management services 7.1 9.5 7.7
Other revenues 2.2 2.4 2.6
-------- -------- --------
Total Market Technology revenues 24.9 38.7 31.1
-------- -------- --------
Other 1.2 1.3 0.4
-------- -------- --------
Total revenues less liquidity
rebates, brokerage, clearance and
exchange fees $ 410.6 $ 420.3 $ 419.1
======== ======== ========
Three Months Ended
----------------------------------
Dec 31, Sep 30, Jun 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
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 Listing Services 80.6 75.2 74.7 70.7
------- ------- ------- -------
Financial Products 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
======= ======= ======= =======
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
Three Months Ended
--------------------------------------------
3Q'08 2Q'08 1Q'08 4Q'07 3Q'07
-------- -------- -------- -------- --------
Key Drivers
-----------
Market Services
Cash Equity Trading
Average daily share
volume in NASDAQ
securities (mn) 2,264 2,108 2,451 2,187 2,181
Matched market share
in NASDAQ
securities (a) 41.0% 42.0% 46.8% 45.6% 47.3%
Market share
reported to the
FINRA/NASDAQ
Trade Reporting
Facility in NASDAQ
securities (b) 21.3% 23.1% 20.7% 23.0% 23.2%
Total market share
in NASDAQ
securities (c) 62.3% 65.1% 67.5% 68.6% 70.5%
Matched market share
in NYSE securities
(a) 23.3% 22.1% 21.1% 18.8% 18.0%
Market share
reported to the
FINRA/NASDAQ
Trade Reporting
Facility in NYSE
securities (b) 18.7% 19.2% 16.6% 18.1% 17.0%
Total market share
in NYSE
securities (c) 42.0% 41.3% 37.7% 36.9% 35.0%
Matched market share
in AMEX and
regional
securities (a) 35.3% 34.3% 36.2% 35.2% 34.2%
Market share
reported to the
FINRA/NASDAQ Trade
Reporting Facility
in AMEX and
regional securities
(b) 14.6% 17.0% 16.1% 17.7% 18.2%
Total market share
in AMEX and
regional
securities (c) 49.9% 51.3% 52.3% 52.9% 52.4%
Matched share volume
in all U.S.-listed
equities (bn) 179.2 136.4 153.7 123.4 121.7
Matched market share
in all U.S.-listed
equities (a) 29.6% 29.6% 31.0% 29.7% 29.5%
Average daily number
of equity trades
on the Nordic
Exchange 196,671 194,006 216,618 -- --
Average daily
value of shares
trades on the
Nordic Exchange
(mn) $ 4,638 $ 6,089 $ 6,843 -- --
Derivative Trading
Average daily volume
of U.S. equity
contracts traded on
NOM and PHLX (mn) 2.6 0.1 -- -- --
PHLX matched market
share of U.S.
equities options 16.6% -- -- -- --
NASDAQ Options Market
matched market share
of U.S. equities
options 1.3% 0.7% -- -- --
Average daily volume
of equity and fixed-
income contracts
traded on the Nordic
Exchange 391,049 435,601 575,225 -- --
Average daily volume
of Nordic equity
contracts traded on
EDX London 169,604 150,891 163,766 -- --
Average daily volume
of Finnish option
contracts traded on
Eurex (d) 72,993 74,108 77,769 -- --
Issuer Services
Initial public
offerings
NASDAQ 2 3 7 37 22
OMX 3 9 2 -- --
New listings
NASDAQ (e) 58 42 48 90 56
OMX 4 12 2 -- --
Number of listed
companies
NASDAQ (f) 3,062 3,080 3,115 3,135 3,134
OMX (g) 841 847 849 -- --
Market Technology
Order intake (mn) (h) $ 62.0 $ 78.5 $ 46.7 -- --
Total order value
(mn) (i) $ 465.0 $ 435.0 $ 391.4 -- --
(a) Transactions executed on NASDAQ's systems.
(b) Transactions reported to the FINRA/NASDAQ TRF.
(c) Transactions executed on NASDAQ's systems plus trades reported
to NASDAQ through the FINRA/NASDAQ TRF.
(d) Options of OMX-listed companies traded on Eurex.
(e) New listings include initial public offerings, including those
completed on a best efforts basis, issuers that switched from other
listing venues, closed-end funds and separately listed ETFs.
(f) Includes separately listed ETFs.
(g) Number of listed companies at OMX represents companies listed on
the Nordic Exchange and companies on its alternative market, First
North.
(h) Total contract value of orders signed for period.
(i) Represents total contract value of orders signed that are yet to
be recognized as revenue.
FINRA is a registered trademark of the Financial Industry Regulatory
Authority and is used under license from the Financial Industry
Regulatory Authority.
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
--------------------------------
Sept. 30, June 30, Sept. 30,
2008 2008 2007
---------- ---------- ----------
GAAP Net Income: $ 60.1 $ 101.6 $ 365.0
----------------
Pro Forma Adjustments:
OMX results -- -- 25.2
PHLX results 2.5 6.8 3.6
Amortization of intangibles (0.5) (1.5) (3.7)
Interest expense, net adjustments (1.6) (4.8) (8.2)
General, administrative and other -- -- 3.5
Professional and contract services -- -- 6.9
Gain on sale of strategic
initiative -- -- (297.6)
---------- ---------- ----------
Total Adjustments 0.4 0.5 (270.3)
---------- ---------- ----------
Pro Forma Net Income $ 60.5 $ 102.1 $ 94.7
Other Adjustments:
Tax sharing payment -- -- 11.8
Other reserves 1.6 --
Workforce reductions 1.2 -- 0.7
Merger expenses 5.5 3.7 --
Impairment charge 4.4 -- --
(Gain) loss on foreign currency
contracts 36.5 (3.5) (21.3)
---------- ---------- ----------
Total Adjustments 49.2 0.2 (8.8)
---------- ---------- ----------
Pro Forma Non-GAAP Net Income $ 109.7 $ 102.3 $ 85.9
========== ========== ==========
GAAP Earnings per Common Share:
-------------------------------
Diluted Earnings per Common Share $ 0.28 $ 0.48 $ 2.41
Pro Forma Adjustments:
Total Adj. from GAAP Net Income
Above: 0.01 -- (1.95)
---------- ---------- ----------
Pro Forma Diluted Earnings per
Common Share 0.29 0.48 0.46
Total Adj. from Pro Forma Net
Income Above: 0.23 -- (0.04)
---------- ---------- ----------
Pro Forma Non-GAAP Diluted Earnings
per Common Share $ 0.52 $ 0.48 $ 0.42
========== ========== ==========
Three Months Ended
--------------------------------
Sept. 30, June 30, Sept. 30,
2008 2008 2007
---------- ---------- ----------
GAAP Operating Expenses: $ 233.9 $ 225.4 $ 126.2
------------------------
Pro Forma Adjustments:
OMX operating expenses -- -- 101.7
PHLX operating expenses 7.2 30.0 27.8
Amortization of intangibles 0.9 2.7 7.0
Professional and contract
services -- -- (9.6)
General, administrative and other -- -- (5.8)
---------- ---------- ----------
Total Adjustments 8.1 32.7 121.1
---------- ---------- ----------
Pro Forma Operating Expenses $ 242.0 $ 258.1 $ 247.3
Other Adjustments:
Tax sharing payment -- -- (19.5)
Other reserves (2.2) -- --
Workforce reductions (2.0) -- (1.1)
Merger expenses (8.5) (5.7) --
Impairment charge (7.3) -- --
---------- ---------- ----------
Total Adjustments (20.0) (5.7) (20.6)
---------- ---------- ----------
Pro Forma Non-GAAP Operating
Expenses $ 222.0 $ 252.4 $ 226.7
========== ========== ==========
