Nasdaq revenues stay flat for Q4

Source: NASDAQ OMX

The NASDAQ OMX Group, Inc. (NDAQ) today reported results for the fourth quarter of 2014.

Fourth quarter net revenues were $517 million, down 1% from $520 million in the prior year period, driven by the impact of foreign exchange rates. On an organic basis, excluding the impact of foreign exchange rates, fourth quarter net revenues increased 3% year-over-year.

"Nasdaq's record profitability resulted from its improved strategic positioning, successfully meeting the evolving demands of our diverse client base, and maintaining the organization's relentless focus on efficiency," said Bob Greifeld, CEO, Nasdaq. "Moreover, the strong results in the fourth quarter, and 2014 overall, were driven by both broad-based organic growth and the first full year of contributions from our recent acquisitions."

Mr. Greifeld continued, "I'm also pleased to say that we realized a sequential uptick in organic growth in the fourth quarter. More importantly, we see clear avenues to accelerate organic growth further from strategic investments made in upgrading and launching several product offerings within recently-acquired fixed income and corporate solutions businesses. The 2015 environmental backdrop also shows evidence of continued momentum and should bring us new opportunities to serve customers."

On a non-GAAP basis, fourth quarter 2014 operating expenses were $296 million, down 5% as compared to the prior year quarter, due to the impact of changes in foreign exchange rates and the result of the expense reduction initiatives in 2014. On an organic basis, fourth quarter 2014 non-GAAP operating expenses were down 2% compared to the prior year period. On a GAAP basis, operating expenses were $344 million in the fourth quarter of 2014, up 22% compared to $282 million in the prior year quarter.

Fourth quarter 2014 non-GAAP diluted earnings per share was $0.75, compared to $0.69 in the prior year quarter. Non-GAAP diluted earnings per share for the fourth quarter of 2014 excluded $97 million of pre-tax adjustme up 22% compared to $282 million in the prior year quarter.

Fourth quarter 2014 non-GAAP diluted earnings per share was $0.75, compared to $0.69 in the prior year quarter. Non-GAAP diluted earnings per share for the fourth quarter of 2014 excluded $97 million of pre-tax adjustments, including: $49 million of asset impairment charges related to acquired intangible assets associated with certain customer relationships and certain technology assets, $35 million of merger and strategic initiatives costs (including a charge of $23 million related to the reversal of a receivable under a tax sharing agreement with an unrelated party that is offset on the tax line, and $12 million primarily associated with our acquisitions of the Thomson Reuters Corporate businesses), $11 million of sublease loss reserve charges on space we currently occupy due to excess capacity, and $2 million of debt extinguishment costs incurred with the refinancing of the company's credit facility.

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 for the fourth quarter of 2014 was $87 million, or $0.50 per diluted share, compared with $141 million, or $0.81 per diluted share, in the prior year quarter.

"Our continued expense discipline offset foreign exchange headwinds and helped deliver record earnings for our shareholders," said Lee Shavel, EVP and CFO, Nasdaq. "We anticipate the ongoing successful integration of acquisitions, coupled with our broader expense management philosophy, will create margin expansion opportunities throughout 2015."

Mr. Shavel continued, "Additionally, we continue to balance the use of our capital to create value for shareholders and clients. We have repurchased $178 million in stock since the second quarter while also enhancing our profitability profile, growth dynamics and product offering through the agreement to acquire Dorsey, Wright & Associates. We will continue to utilize our capital with the goals of maximizing returns for our shareholders and creating value for our clients."

The company repurchased 1.4 million shares, or $58 million of stock, in the fourth quarter of 2014 at an average price of $42.07.

On December 31, 2014, the company had cash and cash equivalents of $427 million and total debt of $2,313 million, resulting in net debt of $1,886 million. This compares to net debt of $2,236 million at December 31, 2013.

1 Represents revenues less transaction-based expenses.

BUSINESS HIGHLIGHTS

Market Services (39% of total net revenues) - Net revenues were $205 million in the fourth quarter of 2014, up $1 million when compared to $204 million in the fourth quarter of 2013.

Equity Derivatives (10% of total net revenues) -- Net equity derivative trading and clearing revenues were $53 million in the fourth quarter of 2014, down $1 million compared to the fourth quarter of 2013. The decline in equity derivatives revenue was driven by changes in foreign exchange rates. Excluding the impact of foreign exchange rates, revenues rose on higher contract volumes in both U.S. and European markets, partially offset by moderate declines in average capture.

Cash Equities (11% of total net revenues) -- Net cash equity trading revenues were $59 million in the fourth quarter of 2014, up $9 million compared to the fourth quarter of 2013. The increase in cash equity trading revenue resulted primarily from higher U.S. industry trading volume and an increase in overall market share executed on Nasdaq's exchanges. Revenues from European cash equities rose modestly, as higher industry value traded, average capture and market share were partially offset by the impact of changes in foreign exchange rates.

Fixed Income, Currency and Commodities (6% of total net revenues) -- Net FICC trading revenues were $29 million in the fourth quarter of 2014, down $7 million from the fourth quarter of 2013, due to declines across most FICC product volumes, a scheduled reduction in payments from an eSpeed technology customer, and the impact of changes in foreign exchange rates.

Access and Broker Services (12% of total net revenues) -- Access and broker services revenues totaled $64 million in the fourth quarter of 2014, unchanged compared to the fourth quarter of 2013, as core revenue increases were offset by the impact of changes in foreign exchange rates.

Information Services (22% of total net revenues) -- Revenues were $113 million in the fourth quarter of 2014, up $6 million from the fourth quarter of 2013.

Data Products (18% of total net revenues) -- Data products revenues were $91 million in the fourth quarter of 2014, up $4 million compared to the fourth quarter of 2013, due primarily to increased revenues from Nasdaq BASIC.

Index Licensing and Services (4% of total net revenues) -- Index licensing and services revenues were $22 million in the fourth quarter of 2014, up $2 million from the fourth quarter of 2013. The revenue growth was largely a function of materially higher assets under management in licensed exchange traded products.

Technology Solutions (27% of total net revenues) - Revenues were $138 million in the fourth quarter of 2014, down $13 million from the fourth quarter of 2013.

Corporate Solutions (15% of total net revenues) -- Corporate solutions revenues were $78 million in the fourth quarter of 2014, down $5 million from the fourth quarter of 2013. The corporate solutions revenue decline was due primarily to IR product pricing actions designed to compensate for subsidies previously provided to certain customers by a competitor, as well as to maintain and promote broader customer relationships. Additional declines in IR products and the impact of changes in foreign exchange rates were partially offset by organic growth in multimedia and governance solutions.

Market Technology (12% of total net revenues) -- Market technology revenues were $60 million in the fourth quarter of 2014, down $8 million from the fourth quarter of 2013. Declines were driven primarily by an unfavorable foreign exchange impact and the recognition of $3 million of previously deferred revenues at BWise in the fourth quarter of 2013, partially offset by organic growth, in particular from expansion of SMARTS Broker surveillance and BWise enterprise risk management solutions. New order intake of $193 million for the fourth quarter of 2014 and the $704 million backlog at December 31, 2014 each set new all-time record highs.

Listing Services (12% of total net revenues) -- Revenues were $61 million in the fourth quarter of 2014, up $3 million compared to the fourth quarter of 2013 due to increases in the number of both U.S. and European listed companies, and a higher number of initial public offerings (IPOs), partially offset by the impact of changes in foreign exchange rates.

INITIATING 2015 NON-GAAP EXPENSE GUIDANCE -- The company has initiated 2015 non-GAAP operating expense guidance of $1,120-$1,150 million, which excludes amortization of acquired intangibles. Included in this non-GAAP operating expense guidance is an expected $30-$40 million in R&D spending.

CORPORATE HIGHLIGHTS

  • Salil Donde appointed as EVP to Lead Information Services. Mr. Donde will join Nasdaq with extensive experience leading technology and data companies, a diverse background in the broader financial services industry, and a proven track record of transforming companies and creating value for shareholders. Most recently, Mr. Donde was CEO of Lewtan Technologies Inc., where, in his three-year tenure, he developed and executed a new strategy to broaden the client base, increase revenues, and consolidate product platforms.
  • NASDAQ Led U.S. Exchanges for IPOs in 2014. Nasdaq announced it welcomed 327 new listings to The NASDAQ Stock Market (NASDAQ) in 2014, including 189 IPOs, more than any other U.S. exchange, representing a 50 percent increase from the 126 IPOs that occurred on NASDAQ in 2013. 62 percent of the top 100 best performing IPOs overall this year, including 8 of the top 10, listed on NASDAQ and combined proceeds raised by NASDAQ-listed IPOs in 2014 totaled more than $22 billion.
  • Market Technology Sees Record New Order Intake in the Fourth Quarter of 2014. Order Intake was a record high at $193 million in the fourth quarter of 2014, and the backlog stood at a record $704 million on December 31, 2014. Notable new business included The Japan Exchange Group, which will upgrade to Genium INET Trading, including TradeGuard; Singapore Exchange, which will upgrade its derivatives market to Genium INET Trading & Clearing, including TradeGuard, and KSEI, an Indonesian CSD, which will implement the X-stream CSD. In addition, the BWise enterprise risk management solution saw record new order intake, and sales of SMARTS Broker set a new quarterly record.
  • Agreement to Acquire Dorsey, Wright & Associates (DWA), Strengthening its Position as a Leader in Smart Beta. DWA is a market leader in data analytics, passive indexing and smart beta strategies, and will add to Nasdaq's robust index portfolio, bringing model-based strategies and analysis to support the financial advisor community, and further strengthening Nasdaq's position as a leading smart beta index provider. As a result, Nasdaq Global Indexes will become one of the largest providers of smart beta indexes with nearly $45 billion in assets benchmarked to its family of Smart Beta indexes and more than $105 billion benchmarked to all Nasdaq Indexes, as of December 31, 2014.The NASDAQ OMX Group, Inc. (NDAQ) today reported results for the fourth quarter of 2014. Fourth quarter net revenues were $517 million, down 1% from $520 million in the prior year period, driven by the impact of foreign exchange rates. On an organic basis, excluding the impact of foreign exchange rates, fourth quarter net revenues increased 3% year-over-year.

    "Nasdaq's record profitability resulted from its improved strategic positioning, successfully meeting the evolving demands of our diverse client base, and maintaining the organization's relentless focus on efficiency," said Bob Greifeld, CEO, Nasdaq. "Moreover, the strong results in the fourth quarter, and 2014 overall, were driven by both broad-based organic growth and the first full year of contributions from our recent acquisitions."

    Mr. Greifeld continued, "I'm also pleased to say that we realized a sequential uptick in organic growth in the fourth quarter. More importantly, we see clear avenues to accelerate organic growth further from strategic investments made in upgrading and launching several product offerings within recently-acquired fixed income and corporate solutions businesses. The 2015 environmental backdrop also shows evidence of continued momentum and should bring us new opportunities to serve customers."

    On a non-GAAP basis, fourth quarter 2014 operating expenses were $296 million, down 5% as compared to the prior year quarter, due to the impact of changes in foreign exchange rates and the result of the expense reduction initiatives in 2014. On an organic basis, fourth quarter 2014 non-GAAP operating expenses were down 2% compared to the prior year period. On a GAAP basis, operating expenses were $344 million in the fourth quarter of 2014, up 22% compared to $282 million in the prior year quarter.

    Fourth quarter 2014 non-GAAP diluted earnings per share was $0.75, compared to $0.69 in the prior year quarter. Non-GAAP diluted earnings per share for the fourth quarter of 2014 excluded $97 million of pre-tax adjustments, including: $49 million of asset impairment charges related to acquired intangible assets associated with certain customer relationships and certain technology assets, $35 million of merger and strategic initiatives costs (including a charge of $23 million related to the reversal of a receivable under a tax sharing agreement with an unrelated party that is offset on the tax line, and $12 million primarily associated with our acquisitions of the Thomson Reuters Corporate businesses), $11 million of sublease loss reserve charges on space we currently occupy due to excess capacity, and $2 million of debt extinguishment costs incurred with the refinancing of the company's credit facility.

    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 for the fourth quarter of 2014 was $87 million, or $0.50 per diluted share, compared with $141 million, or $0.81 per diluted share, in the prior year quarter.

    "Our continued expense discipline offset foreign exchange headwinds and helped deliver record earnings for our shareholders," said Lee Shavel, EVP and CFO, Nasdaq. "We anticipate the ongoing successful integration of acquisitions, coupled with our broader expense management philosophy, will create margin expansion opportunities throughout 2015."

    Mr. Shavel continued, "Additionally, we continue to balance the use of our capital to create value for shareholders and clients. We have repurchased $178 million in stock since the second quarter while also enhancing our profitability profile, growth dynamics and product offering through the agreement to acquire Dorsey, Wright & Associates. We will continue to utilize our capital with the goals of maximizing returns for our shareholders and creating value for our clients."

    The company repurchased 1.4 million shares, or $58 million of stock, in the fourth quarter of 2014 at an average price of $42.07.

    On December 31, 2014, the company had cash and cash equivalents of $427 million and total debt of $2,313 million, resulting in net debt of $1,886 million. This compares to net debt of $2,236 million at December 31, 2013.

    1 Represents revenues less transaction-based expenses.

    BUSINESS HIGHLIGHTS

    Market Services(39% of total net revenues) - Net revenues were $205 million in the fourth quarter of 2014, up $1 million when compared to $204 million in the fourth quarter of 2013.

    Equity Derivatives (10% of total net revenues) -- Net equity derivative trading and clearing revenues were $53 million in the fourth quarter of 2014, down $1 million compared to the fourth quarter of 2013. The decline in equity derivatives revenue was driven by changes in foreign exchange rates. Excluding the impact of foreign exchange rates, revenues rose on higher contract volumes in both U.S. and European markets, partially offset by moderate declines in average capture.

    Cash Equities (11% of total net revenues) -- Net cash equity trading revenues were $59 million in the fourth quarter of 2014, up $9 million compared to the fourth quarter of 2013. The increase in cash equity trading revenue resulted primarily from higher U.S. industry trading volume and an increase in overall market share executed on Nasdaq's exchanges. Revenues from European cash equities rose modestly, as higher industry value traded, average capture and market share were partially offset by the impact of changes in foreign exchange rates.

    Fixed Income, Currency and Commodities (6% of total net revenues) -- Net FICC trading revenues were $29 million in the fourth quarter of 2014, down $7 million from the fourth quarter of 2013, due to declines across most FICC product volumes, a scheduled reduction in payments from an eSpeed technology customer, and the impact of changes in foreign exchange rates.

    Access and Broker Services (12% of total net revenues) -- Access and broker services revenues totaled $64 million in the fourth quarter of 2014, unchanged compared to the fourth quarter of 2013, as core revenue increases were offset by the impact of changes in foreign exchange rates.

    Information Services (22% of total net revenues) -- Revenues were $113 million in the fourth quarter of 2014, up $6 million from the fourth quarter of 2013.

    Data Products (18% of total net revenues) -- Data products revenues were $91 million in the fourth quarter of 2014, up $4 million compared to the fourth quarter of 2013, due primarily to increased revenues from Nasdaq BASIC.

    Index Licensing and Services (4% of total net revenues) -- Index licensing and services revenues were $22 million in the fourth quarter of 2014, up $2 million from the fourth quarter of 2013. The revenue growth was largely a function of materially higher assets under management in licensed exchange traded products.

    Technology Solutions (27% of total net revenues) - Revenues were $138 million in the fourth quarter of 2014, down $13 million from the fourth quarter of 2013.

    Corporate Solutions (15% of total net revenues) -- Corporate solutions revenues were $78 million in the fourth quarter of 2014, down $5 million from the fourth quarter of 2013. The corporate solutions revenue decline was due primarily to IR product pricing actions designed to compensate for subsidies previously provided to certain customers by a competitor, as well as to maintain and promote broader customer relationships. Additional declines in IR products and the impact of changes in foreign exchange rates were partially offset by organic growth in multimedia and governance solutions.

    Market Technology (12% of total net revenues) -- Market technology revenues were $60 million in the fourth quarter of 2014, down $8 million from the fourth quarter of 2013. Declines were driven primarily by an unfavorable foreign exchange impact and the recognition of $3 million of previously deferred revenues at BWise in the fourth quarter of 2013, partially offset by organic growth, in particular from expansion of SMARTS Broker surveillance and BWise enterprise risk management solutions. New order intake of $193 million for the fourth quarter of 2014 and the $704 million backlog at December 31, 2014 each set new all-time record highs.

    Listing Services (12% of total net revenues) -- Revenues were $61 million in the fourth quarter of 2014, up $3 million compared to the fourth quarter of 2013 due to increases in the number of both U.S. and European listed companies, and a higher number of initial public offerings (IPOs), partially offset by the impact of changes in foreign exchange rates.

    INITIATING 2015 NON-GAAP EXPENSE GUIDANCE -- The company has initiated 2015 non-GAAP operating expense guidance of $1,120-$1,150 million, which excludes amortization of acquired intangibles. Included in this non-GAAP operating expense guidance is an expected $30-$40 million in R&D spending.

    CORPORATE HIGHLIGHTS

  • Salil Donde appointed as EVP to Lead Information Services. Mr. Donde will join Nasdaq with extensive experience leading technology and data companies, a diverse background in the broader financial services industry, and a proven track record of transforming companies and creating value for shareholders. Most recently, Mr. Donde was CEO of Lewtan Technologies Inc., where, in his three-year tenure, he developed and executed a new strategy to broaden the client base, increase revenues, and consolidate product platforms.
  • NASDAQ Led U.S. Exchanges for IPOs in 2014. Nasdaq announced it welcomed 327 new listings to The NASDAQ Stock Market (NASDAQ) in 2014, including 189 IPOs, more than any other U.S. exchange, representing a 50 percent increase from the 126 IPOs that occurred on NASDAQ in 2013. 62 percent of the top 100 best performing IPOs overall this year, including 8 of the top 10, listed on NASDAQ and combined proceeds raised by NASDAQ-listed IPOs in 2014 totaled more than $22 billion.
  • Market Technology Sees Record New Order Intake in the Fourth Quarter of 2014. Order Intake was a record high at $193 million in the fourth quarter of 2014, and the backlog stood at a record $704 million on December 31, 2014. Notable new business included The Japan Exchange Group, which will upgrade to Genium INET Trading, including TradeGuard; Singapore Exchange, which will upgrade its derivatives market to Genium INET Trading & Clearing, including TradeGuard, and KSEI, an Indonesian CSD, which will implement the X-stream CSD. In addition, the BWise enterprise risk management solution saw record new order intake, and sales of SMARTS Broker set a new quarterly record.
  • Agreement to Acquire Dorsey, Wright & Associates (DWA), Strengthening its Position as a Leader in Smart Beta. DWA is a market leader in data analytics, passive indexing and smart beta strategies, and will add to Nasdaq's robust index portfolio, bringing model-based strategies and analysis to support the financial advisor community, and further strengthening Nasdaq's position as a leading smart beta index provider. As a result, Nasdaq Global Indexes will become one of the largest providers of smart beta indexes with nearly $45 billion in assets benchmarked to its family of Smart Beta indexes and more than $105 billion benchmarked to all Nasdaq Indexes, as of December 31, 2014.

Full figures available here.

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