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Nasdaq OMX posts Q2 results

23 July 2015  |  2144 views  |  0 Source: Nasdaq OMX Group

The Nasdaq OMX Group, Inc. (NASDAQ:NDAQ) today reported results for the second quarter of 2015. Second quarter net revenues were $518 million, down 1% from $523 million in the prior year period, driven primarily by a $29 million negative impact from foreign exchange rates.

On an organic basis, excluding the impact of foreign exchange rates and acquisitions, second quarter net revenues were up 3%, while across the non-trading segments, organic revenue growth was also 3%.

"In the second quarter, Nasdaq delivered record results and solid earnings growth despite a mixed backdrop for the industry and continued FX headwinds," said Bob Greifeld, CEO, Nasdaq. "Our customer focused approach to the capital markets industry, including investors, intermediaries and issuers, delivered solid organic revenue growth despite the low volatility environment."

Mr. Greifeld continued, "As we move into the second half of 2015, we look forward to continuing our strong performance in foundational equity listings and trading businesses, working to accelerate growth through product enhancements and other initiatives, and to launching NFX, a broad-based partnership with leading market participants to bring more significant choice to the energy derivatives market. Nasdaq's strategic evolution and expanded capabilities have multiplied the opportunities to meet the needs of our customers, and our focus in meeting these challenges will continue to drive our growth."

On a non-GAAP basis, second quarter 2015 operating expenses were $281 million, down 3% as compared to the prior year quarter, due to the impact of changes in foreign exchange rates and the result of expense reduction initiatives. On an organic basis excluding the impact of foreign exchange rates and acquisitions, non-GAAP operating expenses were unchanged in the first half of 2015 compared to the first half of 2014.

"Nasdaq's hallmark focus on efficiency, and in particular recent restructuring efforts, have resulted in flat organic expense levels in the first half of the year, meaningfully offsetting the significant impact of elevated foreign exchange headwinds," said Lee Shavel, EVP and CFO, Nasdaq. "Growth in earnings and cash flow has been coupled with a 67% increase in the dividend and opportunistic buybacks on the capital return front, continued investment in research and development, and the acquisition of Dorsey Wright, which is performing well above initial expectations."

1 Represents revenues less transaction-based expenses.


On a GAAP basis, operating expenses were $301 million in the second quarter of 2015, compared to $332 million in the prior year quarter, and include $20 million of expenses not reflected in non-GAAP operating expenses, including $15 million of amortization expense from acquired intangible assets, and $5 million in charges related to strategic initiatives and restructuring.

On a non-GAAP basis, net income attributable to Nasdaq for the second quarter of 2015 was $143 million, or $0.83 per diluted share, up $0.07 compared to $0.76 in the second quarter of 2014. On a GAAP basis, net income attributable to Nasdaq for the second quarter of 2015 was $133 million, or $0.77 per diluted share, compared with $101 million, or $0.59 per diluted share, 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.

The company repurchased 0.5 million shares, or approximately $25 million of our common stock, in the second quarter of 2015 at an average price of $50.06.

On June 30, 2015, the company had cash and cash equivalents of $324 million and total debt of $2,281 million, resulting in net debt of $1,957 million. This compares to net debt of $1,870 million at December 31, 2014.

BUSINESS HIGHLIGHTS

Market Services (36% of total net revenues) - Net revenues were $189 million in the second quarter of 2015, down $8 million when compared to $197 million in the second quarter of 2014. The $8 million year-over-year decrease reflects a $6 million operational increase which was more than offset by a $14 million decrease due to changes in foreign exchange rates.

  • Equity Derivatives (8% of total net revenues) – Net equity derivative trading and clearing revenues were $44 million in the second quarter of 2015, down $6 million compared to the second quarter of 2014. The decline in equity derivatives revenue was driven by lower market share in U.S. options, and changes in foreign exchange rates, which more than offset the impact of higher volumes in European products.
  • Cash Equities (12% of total net revenues) – Net cash equity trading revenues were $62 million in the second quarter of 2015, up $6 million compared to the second quarter of 2014. The increase in cash equity revenue resulted from higher U.S. cash equity average capture and U.S./European industry volumes, partially offset by lower market shares and the impact of changes in foreign exchange rates.
  • Fixed Income, Currency and Commodities (5% of total net revenues) – Net FICC trading and clearing revenues were $24 million in the second quarter of 2015, down $7 million from the second quarter of 2014, due to the impact of changes in foreign exchange rates, volume declines in commodities and U.S. fixed income products, and a scheduled end in licensing revenues from an eSpeed technology customer.
  • Access and Broker Services (11% of total net revenues) – Access and broker services revenues totaled $59 million in the second quarter of 2015, down $1 million compared to the second quarter of 2014, as organic revenue increases were more than offset by the impact of changes in foreign exchange rates.

Information Services (25% of total net revenues) – Revenues were $128 million in the second quarter of 2015, up $5 million from the second quarter of 2014. The $5 million year-over-year increase reflects a $1 million operational increase and an $8 million increase from Dorsey Wright, which was partially offset by a $4 million decrease due to changes in foreign exchange rates.

  • Data Products (19% of total net revenues) – Data products revenues were $99 million in the second quarter of 2015, down $2 million compared to the second quarter of 2014, as increased revenue from proprietary and shared tape revenue plans, as well as the inclusion of revenue associated with the Dorsey Wright acquisition were more than offset by lower audit collections, and the impact of changes in foreign exchange rates.
  • Index Licensing and Services (6% of total net revenues) – Index licensing and services revenues were $29 million in the second quarter of 2015, up $7 million from the second quarter of 2014. The revenue growth was driven by the inclusion of revenue associated with the Dorsey Wright acquisition, and higher revenue derived from exchange traded products licensed to Nasdaq indexes due to increases in Assets Under Management (AUM) in listed products.

Technology Solutions (26% of total net revenues) - Revenues were $135 million in the second quarter of 2015, down $8 million from the second quarter of 2014. The $8 million year-over-year decrease reflects an $8 million decrease due to changes in foreign exchange rates.

  • Corporate Solutions (15% of total net revenues) – Corporate solutions revenues were $76 million in the second quarter of 2015, down $4 million from the second quarter of 2014. The corporate solutions revenue decline was due primarily to the impact of changes in foreign exchange rates, as well as declines in revenues from investor relations products, partially offset by organic growth in governance products revenues.
  • Market Technology (11% of total net revenues) – Market technology revenues were $59 million in the second quarter of 2015, down $4 million from the second quarter of 2014. Declines were driven by an unfavorable impact from changes in foreign exchange rates and declines in software licensing and support revenues, partially offset by organic growth, in particular from expansion of SMARTS surveillance. New order intake was $31 million for the second quarter of 2015, and the order backlog at June 30, 2015 was $707 million.

Listing Services (13% of total net revenues) – Revenues were $66 million in the second quarter of 2015, up $6 million compared to the second quarter of 2014. The $6 million year-over-year increase reflects a $9 million operational increase which was partially offset by a $3 million decrease due to changes in foreign exchange rates. The operational improvement is due to certain pricing actions and increases in the number of both U.S. and European listed companies.

CORPORATE HIGHLIGHTS

  • • Solid growth in assets tracking Nasdaq indexes, particularly in the smart beta category. Overall AUM in exchange traded products (ETPs) benchmarked to all Nasdaq indexes increased 13% to $108 billion as of June 30, 2015 compared to June 30, 2014. The Dorsey Wright acquisition continues to see strong growth and contributed to the proportion of AUM in Nasdaq-licensed ETPs in smart beta rising to an all-time high of 43% at quarter-end.
  • • The NASDAQ Stock Market (NASDAQ) Led U.S. Exchanges for IPOs in 2Q15. NASDAQ welcomed 79 new listings, including 49 IPOs. Approximately 70% of all U.S. IPOs listed with NASDAQ in 2Q15, including Etsy, David's Tea, Wing Stop, Alarm.com, PennTEX, and Virtu Financial. Nasdaq European new listings totaled 38, the highest quarterly number of new European listings in company history.
  • • Continued momentum at Nasdaq Private Market (NPM). NPM added 25 new clients in the second quarter of 2015 across ExactEquity, Outsourced Administration, Structured Liquidity Programs, and NPM Membership. At June 30, 2015, there were more than 100 NPM clients, with Pinterest, DocuSign, and Business Insider among new additions. Also during the second quarter of 2015, NPM announced a technology initiative to be piloted on ExactEquity in partnership with Chain, a leading provider of blockchain technology.
  • • Nasdaq Futures (NFX) moves toward commercial launch with broad coalition of market participants. NFX, Nasdaq's U.S. based energy futures market, continues to move toward its launch with completion of market testing. NFX is building a broad coalition of support and broad distribution including 16 futures commission merchants (FCMs), 6 independent software vendors, over one dozen registered market makers, and 40 brokers registered to report block trades. Committed FCMs include ABN AMRO Group, ADM Investor Services, Advantage Futures, Citigroup Global Markets, ED&F Man Capital Markets, Goldman Sachs, INTL FCStone, J.P. Morgan, Merrill Lynch, Mizuho Securities USA, Phillip Capital, Rosenthal Collins Group, Societe Generale and Wedbush Futures. 

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