The Nasdaq OMX Group, Inc. (Nasdaq:NDAQ) today reported results for the first quarter of 2014. First quarter net revenues were $529 million, up from $418 million in the prior year period, driven by both acquisitions and organic growth in all four business segments. On an organic basis, first quarter net revenues increased 9% year-over-year.
"Our unique and diverse mix of businesses accelerated meaningfully, resulting in record financial results for our shareholders," said Bob Greifeld, CEO, NASDAQ OMX. "After a 2013 which included transformative acquisitions and significant internal investments, NASDAQ OMX has begun 2014 with strong broad-based organic growth."
Mr. Greifeld continued, "While we have benefited from a more constructive market environment, we also saw meaningful improvement in our leadership position in the period, as evidenced by our higher U.S. and European equity trading market share, and our 64% share of U.S. IPOs. Regarding the recent elevated debate over various U.S. equity market structure issues, NASDAQ OMX operates its leading exchanges with transparency, fairness, and efficiency, has been a leading innovator, and will continue to work with regulators and market participants to evolve our markets."
On a non-GAAP basis, first quarter 2014 operating expenses were $315 million, up 33% as compared to the prior year quarter, primarily due to the inclusion of expenses associated with the acquisitions of the Thomson Reuters IR, PR and Multimedia businesses and the eSpeed electronic fixed income trading platform. On an organic basis, first quarter non-GAAP operating expenses were up 6%. On a GAAP basis, operating expenses were $345 million in the first quarter of 2014, up 5% compared to $328 million in the prior year quarter.
First quarter 2014 non-GAAP diluted earnings per share was $0.72, compared to $0.64 in the prior year quarter. Please refer to our reconciliation of GAAP to non-GAAP net income, diluted earnings per share, operating income and operating expenses included in the attached schedules.
On a GAAP basis, net income attributable to NASDAQ OMX for the first quarter of 2014 was $103 million, or $0.59 per diluted share, compared with $42 million, or $0.25 per diluted share, in the prior year quarter.
"Our strategic and measured investments have begun to deliver meaningful results in 2014," said Lee Shavel, EVP and CFO, NASDAQ OMX. "We continue to make substantial investments in promising GIFT initiatives, and in integration, infrastructure and product development that we expect to put us in a position to realize significant synergies from the eSpeed and Thomson Reuters acquisitions in the coming periods."
Mr. Shavel continued, "On the capital front, we continued our strong pace of deleveraging, paying down $121 million in debt, and we expect to bring our gross debt/EBITDA leverage ratio to our longer-term target by the end of the second quarter of 2014."
At March 31, 2014, the company had cash and cash equivalents of $384 million and total debt of $2,514 million, resulting in net debt of $2,130 million. This compares to net debt of $1,375 million at March 31, 2013.
1Represents revenues less transaction rebates, brokerage, clearance and exchange fees.
2Assumes constant currency and excludes acquisitions.
Market Services (40% of total net revenues) - Net revenues were $213 million in the first quarter of 2014, up $31 million when compared to $182 million in the first quarter of 2013.
Derivatives (14% of total net revenues) - Total net derivative trading and clearing revenues were $76 million in the first quarter of 2014, up $2 million compared to the first quarter of 2013. European derivative trading and clearing revenues rose $2 million, due principally to higher energy revenues. Net U.S. derivative trading and clearing revenues were unchanged, as higher market volumes were offset by modestly lower market share and capture.
Cash Equities (11% of total net revenues) - Total net cash equity trading revenues were $58 million in the first quarter of 2014, up $13 million compared to the first quarter of 2013. Net U.S. cash equity trading revenues were $9 million higher, on higher market share, average capture, and industry volumes, while European cash equity trading revenues rose $4 million year-over-year, on higher market share and market volumes.
Fixed Income (3% of total net revenues) - Total net fixed income trading revenues were $14 million in the first quarter of 2014, with the decrease from the fourth quarter of 2013 reflecting an expected decrease in revenues associated with a 3rd party technology customer.
Access and Broker Services (12% of total net revenues) - Access and broker services revenues totaled $65 million in the first quarter of 2014, up $2 million compared to the first quarter of 2013, due to pricing increases, the inclusion of eSpeed hosting revenues, and growth in newer products, like microwave connectivity.
Information Services (23% of total net revenues) - Revenues were $123 million in the first quarter of 2014, up $17 million from the first quarter of 2013.
Market Data (19% of total net revenues) - Total market data revenues were $100 million in the first quarter of 2014, up $11 million compared to the first quarter of 2013, due to the inclusion of market data revenues associated with eSpeed, growth in NASDAQ Basic, higher equity market share, and the impact of select pricing initiatives, partially offset by a $1 million decrease in audit collections.
Index Licensing and Services (4% of total net revenues) - Index licensing and services revenues were $23 million in the first quarter of 2014, up $6 million from the first quarter of 2013. The revenue growth was a function of materially higher assets under management and the number of licensed exchange traded products.
Technology Solutions (26% of total net revenues) - Revenues were $135 million in the first quarter of 2014, up $60 million from the first quarter of 2013.
Corporate Solutions (16% of total net revenues) - Corporate solutions revenues were $82 million in the first quarter of 2014, up $58 million from the first quarter of 2013. Corporate solutions revenue growth was primarily due to the inclusion of the Thomson Reuters IR, PR, and Multimedia businesses, as well as organic growth, in particular the continued growth of Directors Desk.
Market Technology (10% of total net revenues) - Market technology revenues were $53 million in the first quarter of 2014, up $2 million from the first quarter of 2013. The revenue increase is primarily due to an increase in software, license and support revenues as well as an increase in software-as-a-service revenues due to organic growth, in particular at BWise and SMARTS Broker, partially offset by slightly lower change request revenues, and an unfavorable impact from foreign exchange of $1 million.
Listing Services (11% of total net revenues) - Revenues were $58 million in the first quarter of 2014, up $3 million compared to the first quarter of 2013. U.S. listing revenues increased $1 million in the first quarter of 2014 compared to the first quarter of 2013, due to growth in the issuer base and higher new issue activity, including 47 first quarter U.S. IPO wins, 64% of the industry total. European listing revenues rose by $2 million, and new issue activity included the IPO of the largest Nordic company by market capitalization in 14 years, ISS Group A/S.
- NASDAQ OMX Genium INET named "Product of the Year." On January 13, 2014, Risk.net, a publisher of risk management news and analysis, named NASDAQ OMX Genium INET as its Trading Technology Product of the Year. The Genium INET trading platform was designed to be one of the fastest and most functionally complete multi-asset trading systems and supports multiple markets simultaneously on a single platform, including trading of traditional cash and fixed income securities, derivatives, and commodities.
- Global Indexes continues to expand global footprint. Eight of the top ten global exchange traded fund providers now license NASDAQ OMX indexes. This quarter marked a special milestone in NASDAQ OMX's index business with the 15th anniversary of the fourth-largest ETF, the QQQ, benchmarked to its flagship index, the NASDAQ-100. Today, NASDAQ OMX's index licensing business spans twenty-eight countries.
- Launched NASDAQ Private Market (NPM). On March 5, 2014, NASDAQ OMX launched the NASDAQ Private Market, a new capital marketplace for private companies. Built as a company-first platform on industry-leading technology, NASDAQ Private Market provides qualifying private companies the tools and resources to efficiently raise capital, control secondary transactions, and manage their equity-related functions.
- NASDAQ Stock Market leads U.S. exchanges for IPOs in first quarter of 2014. In the first quarter NASDAQ OMX welcomed 77 new U.S. listings, including 47 IPOs on The NASDAQ Stock Market, more than double the number of IPOs of any other U.S. exchange. Combined proceeds raised by NASDAQ's first quarter IPOs totaled approximately $2.6 billion, a 20 percent increase from first quarter figures in 2013. In addition, 98 percent of NASDAQ's IPOs filed as "emerging growth companies," the new class of issuer created under the JOBS Act.
- NASDAQ OMX hosts largest Nordic IPO since 2000. On March 13, 2014, ISS Group A/S began trading on NASDAQ OMX Copenhagen. ISS Group A/S is the largest company by market capitalization to list on a Nordic exchange since 2000.
- NASDAQ OMX becomes first EMIR-authorized clearinghouse. On March 18th, 2014, NASDAQ OMX became the first European authorized clearinghouse under the new European Union rules. The region's clearinghouses have to reapply to operate in Europe under new legislation known as the European Market Infrastructure Regulation (EMIR). More than 20 clearinghouses have applied for authorization.
Full figures available here