NASDAQ OMX Reports Second Quarter 2012 Results

NASDAQ OMX Reports Second Quarter 2012 Results

• Q212 non-GAAP diluted EPS of $0.64, up $0.02 compared to prior year quarter; Q212 GAAP diluted EPS of $0.53


• Q212 non-GAAP net exchange revenues¹ were $413 million, down 0.5% year-over-year, but up 3% year-over-year on an organic basis (constant currency and excluding acquisitions); Q212 net exchange revenues were $424 million


• Performance driven by growth in Global Market Data Products (revenues up 8% year-over-year to $90 million) and Access Services (revenues up 11% year-over-year to $61 million)

NEW YORK, July 25, 2012 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today reported results for the second quarter of 2012. Second quarter non-GAAP net exchange revenues were $413 million, down 0.5% compared to the second quarter of 2011. Excluding the impact of foreign currency, non-GAAP second quarter 2012 net exchange revenues increased 3% compared to the second quarter of 2011.

Operating expenses were $249 million, compared to $257 million in the second quarter of 2011. On a non-GAAP basis, excluding $17 million of restructuring charges, $1 million of merger and strategic initiative expenses, and $2 million of other charges, second quarter 2012 non-GAAP operating expenses were $229 million. Non-GAAP operating expenses were up $1 million year-over-year.

Second quarter 2012 non-GAAP diluted earnings per share were $0.64, up $0.02 compared to the prior year quarter. Non-GAAP earnings per share in Q212 excludes income from open positions relating to the operations of the Exchange of $11 million, non-cash intangible asset impairment charges of $28 million, restructuring charges of $17 million, merger and strategic initiative expenses of $1 million, and other charges of $2 million. On a GAAP basis, net income attributable to NASDAQ OMX for the second quarter of 2012 was $93 million, or $0.53 per diluted share, compared with $92 million, or $0.51 per diluted share, in the prior year quarter.

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

Robert Greifeld, NASDAQ OMX's CEO, commented: "The second quarter saw a continuation of solid growth in our recurring and subscription-based businesses. Strong growth in our Global Market Data, Access Services and Global Index businesses offset continued weak trends in our transaction-based businesses. This performance was a direct result of our continued focus on cost management, and the execution of our strategy to build strong, recurring and subscription-based revenue businesses that can drive growth, despite the trading environment." 

Lee Shavel, NASDAQ OMX's EVP and Chief Financial Officer, said:
"Over the last three and a half years, NASDAQ OMX has clearly demonstrated its ability to generate strong free cash flow during a historically difficult business cycle. In the second quarter of 2012, we continued to generate substantial capital and to execute on our strategy to deploy that capital effectively. We paid our first cash dividend of $0.13 per common share in June 2012, and repurchased $125 million of our common stock. In addition, we utilized approximately $57 million in cash to acquire a majority interest in BWise, a leader in enterprise governance, risk management and compliance, or GRC, software. The underpinning of our capital deployment strategy is a robust return-on-invested-capital framework which complements our operational discipline and delivers substantial value for our shareholders." 

At June 30, 2012, the company had cash and cash equivalents of $491 million and total debt of $1,996 million, resulting in net debt of $1,505 million. This compares to net debt of $1,611 million at December 31, 2011. During the second quarter of 2012, the company repurchased 5.3 million shares of outstanding common stock under a share repurchase program, for a total of $125 million. Since January 2009, we have repurchased $1,072 million of outstanding common stock, representing 49.1 million shares at an average price of $21.85.

BUSINESS HIGHLIGHTS

Market Services (67% of total non-GAAP net exchange revenues) - non-GAAP net exchange revenues were $278 million in the second quarter of 2012, up $1 million when compared to the second quarter of 2011:

Cash Equities (12% of total non-GAAP net exchange revenues) – Total net cash equity trading revenues were $52 million in the second quarter of 2012, down $7 million compared to the second quarter of 2011. The decline was primarily the result of lower trading activity in U.S. and Europe, and an unfavorable impact from foreign exchange.

Derivatives (17% of total non-GAAP net exchange revenues) – Total net derivative trading and clearing revenues were $70 million in the second quarter of 2012, down $5 million compared to the second quarter of 2011. The year-over-year decline was due to lower industry trading volumes in the Nordic region, and an unfavorable impact from foreign exchange. 

Access and Broker Services (16% of total non-GAAP net exchange revenues) – Revenues of $66 million were up $7 million in the second quarter of 2012 compared to the second quarter of 2011. The increase was primarily driven by the uptake of new products including 40G connectivity and Supercab.

Market Data (22% of total non-GAAP net exchange revenues) – Total Market Data revenues of $90 million reflect a $7 million increase compared to the year ago quarter. The increase in Market Data revenues was primarily the result of growth in U.S. proprietary products and increased audit collections. 

Issuer Services (22% of total non-GAAP net exchange revenues) – Revenues were $91 million in the second quarter of 2012, down $1 million compared to the second quarter of 2011, as increased Corporate Solutions and Global Index Group revenues were more than offset by lower listing fee revenues and an unfavorable impact from foreign exchange. 

Market Technology (11% of total non-GAAP net exchange revenues) – Revenues of $44 million in the second quarter of 2012 declined $2 million compared to the second quarter of 2011. Excluding the impact from foreign exchange, Market Technology revenues increased $3 million year-over-year, primarily due to increased delivery project revenues. 

COST GUIDANCE – For the full year of 2012, total core operating expenses are expected to be in the range of $870 million to $890 million (down from prior core expense guidance of $880 to $900 million), plus $40 million to $50 million in incremental new initiative spending, and an additional $25 million due to the BWise and NOS acquisitions, resulting in total operating expenses in the range of $935 million to $965 million. This guidance excludes expenses related to the cost reduction plan and expenses for the proposed voluntary accommodation program and related expenses.

About NASDAQ OMX Group

The inventor of the electronic exchange, The NASDAQ OMX Group, Inc., fuels economies and provides transformative technologies for the entire lifecycle of a trade - from risk management to trade to surveillance to clearing. In the U.S. and Europe, we own and operate 24 markets, 3 clearinghouses and 5 central securities depositories supporting equities, options, fixed income, derivatives, commodities, futures and structured products. Able to process more than 1 million messages per second at sub-40 microsecond speeds with 99.999% uptime, our technology drives more than 70 marketplaces in 50 developed and emerging countries into the future, powering 1 in 10 of the world's securities transactions. Our award-winning data products and worldwide indexes are the benchmarks in the financial industry. Home to approximately 3,400 listed companies worth $6 trillion in market cap whose
innovations shape our world, we give the ideas of tomorrow access to capital today. Welcome to where the world takes a big leap forward, daily. Welcome to the NASDAQ OMX Century. To learn more, visit www.nasdaqomx.com. Follow us on Facebook (http://www.facebook.com/NASDAQ) and Twitter (http://www.twitter.com/nasdaqomx). (Symbol: NDAQ and member of S&P 500)

Non-GAAP Information

In addition to disclosing results determined in accordance with GAAP, NASDAQ OMX also discloses certain non-GAAP results of operations, including, but not limited to, net income attributable to NASDAQ OMX, diluted earnings per share, net exchange revenues, 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 and capital return 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 and Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on NASDAQ OMX's website at http://www.nasdaqomx.com and the SEC's website at
www.sec.gov. NASDAQ OMX undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

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