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Back to all NASDAQ OMX announcements

NASDAQ OMX Reports Strong Second Quarter 2014 Results

  • Second quarter 2014 net revenues1 were $523 million, up 16% year-over-year.
  • Achieved 4% organic revenue growth2 year-over-year, and saw 9% organic growth across the non-transactional segments: Information Services, Technology Solutions, and Listing Services.
  • Generated second quarter 2014 non-GAAP diluted EPS of $0.70, a 13% increase year-over-year. Second quarter 2014 GAAP diluted EPS was $0.59.
  • Non-transaction based revenues were 74% of our total second quarter 2014 net revenues, and increased 19% from the prior year quarter.
  • Announcing reduction of Non-GAAP operating expense guidance for 2014, reflecting the impact of recent industry volume levels and certain management cost actions.
  • The company paid down $100 million of debt in the second quarter and returned to its long-term leverage target. Completing this de-leveraging allowed a resumption of the buyback program and $93 million of stock was repurchased during the period.

The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today reported results for the second quarter of 2014. Second quarter net revenues were $523 million, up 16% from $451 million in the prior year period, driven by both acquisitions and organic growth. On an organic basis, second quarter net revenues increased 4% year-over-year.

"Once again, our diverse businesses generated solid organic growth in revenues despite a continued low volatility trading environment," said Bob Greifeld, CEO, NASDAQ OMX. "NASDAQ OMX's strong and improving competitive position, as measured by the 59% win rate in U.S. IPO listings and increased market share in cash equity trading coupled with the continued client traction in our technology and information businesses, provides confidence in the balance and diversity of our model to succeed in all cycles."

Mr. Greifeld continued, "We've taken steps to enhance and strengthen the management team and structure, engage in regulatory discussions to constructively move our industry forward and create new opportunities for clients and our future. We introduced new Treasury bills functionality on eSpeed, completed our data center migration and have implemented new functionality into our Corporate Solutions products. We continue to believe NASDAQ Private Market and NLX represent attractive long-term opportunities and have seen constructive progress in each of these areas. More broadly, I'm extremely proud of the depth and development of our businesses, and believe that our management team and staff at NASDAQ OMX has never been stronger."

On a non-GAAP basis, second quarter 2014 operating expenses were $308 million, up 15% 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, second quarter non-GAAP operating expenses were down 2% compared to the prior year period. On a GAAP basis, operating expenses were $332 million in the second quarter of 2014, up 14% compared to $292 million in the prior year quarter.

Second quarter 2014 non-GAAP diluted earnings per share was $0.70, compared to $0.62 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 second quarter of 2014 was $101 million, or $0.59 per diluted share, compared with $88 million, or $0.52 per diluted share, in the prior year quarter.

"We continue to work diligently to ensure our recent acquisitions deliver on their full potential, and are on pace to achieve $35 million in synergies across our Corporate Solutions business and our margin goals across the Technology Solutions segment," said Lee Shavel, EVP and CFO, NASDAQ OMX. "In consideration of the lower volume trading environment, we have taken steps to reduce expenses in the second half of the year. Consequently, we are lowering our expense guidance."

Mr. Shavel continued, "On the capital front, we completed deleveraging to our long-term target ahead of the mid-year objective set when we acquired eSpeed, allowing us to resume our buyback plan during the second quarter. In addition to paying down $100 million of debt during the quarter, we repurchased $93 million of NASDAQ OMX shares, demonstrating our strong capacity and commitment to direct cash flows to enhance returns for our shareholders."

At June 30, 2014, the company had cash and cash equivalents of $314 million and total debt of $2,408 million, resulting in net debt of $2,094 million. This compares to net debt of $2,406 million at June 30, 2013. The company repurchased 2.6 million shares, or $93 million of stock, in the second quarter of 2014 at an average price of $36.46.

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

2 Assumes constant currency and excludes acquisitions.

BUSINESS HIGHLIGHTS

Market Services (39% of total net revenues) - Net revenues were $202 million in the second quarter of 2014, up $12 million when compared to $190 million in the second quarter of 2013.

Derivatives (13% of total net revenues) – Total net derivative trading and clearing revenues were $66 million in the second quarter of 2014, down $10 million compared to the second quarter of 2013. European derivative trading and clearing revenues were unchanged, while net U.S. derivative trading and clearing revenues were down $10 million, due to materially lower industry volumes, and moderate declines in average capture and market share.

Cash Equities (11% of total net revenues) – Total net cash equity trading revenues were $57 million in the second quarter of 2014, up $6 million compared to the second quarter of 2013. Net U.S. cash equity trading revenues were $4 million higher than the prior year quarter, on higher market share and average capture, partially offset by lower industry volumes, while European cash equity trading revenues rose $2 million year-over-year, on higher market share and market volumes, partially offset by lower average capture.

Fixed Income (3% of total net revenues) – Total net fixed income trading revenues were $14 million in the second quarter of 2014, unchanged from the first quarter of 2014.

Access and Broker Services (12% of total net revenues) – Access and broker services revenues totaled $65 million in the second quarter of 2014, up $2 million compared to the second quarter of 2013, due primarily to the inclusion of eSpeed hosting revenues.

Information Services (23% of total net revenues) – Revenues were $123 million in the second quarter of 2014, up $16 million from the second quarter of 2013.

Market Data (19% of total net revenues) – Total market data revenues were $101 million in the second quarter of 2014, up $12 million compared to the second quarter of 2013, due to growth in NASDAQ Basic, the inclusion of market data revenues associated with eSpeed, and a $3 million increase in audit collections.

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

Technology Solutions (26% of total net revenues) - Revenues were $138 million in the second quarter of 2014, up $42 million from the second quarter of 2013.

Corporate Solutions (15% of total net revenues) – Corporate solutions revenues were $80 million in the second quarter of 2014, up $36 million from the second quarter of 2013. Corporate solutions revenue growth was primarily due to the acquisition of the Thomson Reuters IR, PR, and Multimedia businesses completed on May 31, 2013. Also contributing to the increase in revenues was organic growth, in particular growth in the Director's Desk governance solution and press release distribution.

Market Technology (11% of total net revenues) – Market technology revenues were $58 million in the second quarter of 2014, up $6 million from the second quarter of 2013. The increase is primarily due to organic growth in software, license and support revenues, in particular at BWise, as well as organic growth in software-as-a-service revenues, in particular at SMARTS Broker, partially offset by slightly lower change request and advisory revenues.

Listing Services (12% of total net revenues) – Revenues were $60 million in the second quarter of 2014, up $2 million compared to the second quarter of 2013. U.S. listing revenues increased $1 million in the second quarter of 2014 compared to the second quarter of 2013, due to growth in the issuer base and higher new issue activity, including 52 second quarter U.S. IPO wins, 59% of the industry total. European listing revenues rose by $1 million, due primarily to higher market capitalization of listed companies and higher new issue activity.

UPDATED COST GUIDANCE – The company has lowered non-GAAP operating expense guidance to $1,220-$1,250 million, down from the prior $1,250-$1,285 million. Included in this non-GAAP operating expense guidance is an expected $30-$40 million in GIFT new initiative spending, down from a prior $35-$50 million estimate, and $1,190-$1,210 million in core non-GAAP operating expense, down from $1,215-$1,235 million.

CORPORATE HIGHLIGHTS

  • Management structure enhanced with creation of two co-President positions. These co-President roles were filled by the return of Adena Friedman, with 17 years of experience at the company, to lead the non-transactional Information Services, Technology Solutions and Listing Services segments, and by the promotion of Hans-Ole Jochumsen, with 16 years at the company, to lead Market Services. 
  • NASDAQ Stock Market leads U.S. exchanges for IPOs in the second quarter of 2014, while seeing strong Nordic listings growth. In the second quarter of 2014, NASDAQ OMX welcomed 79 new U.S. listings, including 52 IPOs on The NASDAQ Stock Market, an almost 50% increase in IPO wins from the second quarter of 2013. In the second quarter of 2014, 59% of U.S. IPOs listed on NASDAQ, up from 53% in the second quarter of 2013. In the Nordics, the number of listed companies rose 3% compared to the second quarter of 2013, with 41 new listings in the first half of 2014.
  • eSpeed completes data center migration and performance engineering enhancements. In May 2014, eSpeed successfully completed performance engineering enhancements and the migration to the NASDAQ OMX Data Center. The updated platform and data center environment is intended to provide customers with improved cost efficiencies, trading opportunities across multiple asset classes, and access to leading-edge services.
  • Completed the integration of NOS Clearing ASA into NASDAQ OMX Clearing. The integration of NOS Clearing products and staff provides NASDAQ OMX Clearing with additional capabilities in the global commodities markets. Clients across the globe gain access to a wide variety of new products including tanker and dry cargo freight, fuel oil, seafood derivatives, iron ore and electricity certificates.