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NASDAQ OMX Reports Fourth Quarter And Full Year 2012 Results

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, taxes and achievement of synergy targets, (ii) statements about the closing or 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.

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

NDAQF

 
 
 The NASDAQ OMX Group, Inc. 
 Consolidated Statements of Income 
 (in millions, except per share amounts) 
 
           
   Three Months Ended   Year Ended 
   December 31,   September 30,   December 31,   December 31,   December 31, 
   2012   2012   2011   2012   2011 
Revenues:  (unaudited) (unaudited) (unaudited) (unaudited)  
Market Services   $ 603  $ 603  $ 698  $ 2,560  $ 2,886
Cost of revenues:           
Transaction rebates   (249)  (250)  (324)  (1,104)  (1,344)
Brokerage, clearance and exchange fees   (84)  (84)  (93)  (352)  (404)
Total cost of revenues   (333)  (334)  (417)  (1,456)  (1,748)
Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees   270  269  281  1,104  1,138
           
Issuer Services   101  93  91  375  361
Market Technology   48  47  48  184  183
           
Revenues less transaction rebates, brokerage,  clearance and exchange fees   419  409  420  1,663  1,682
Operating Expenses:           
Compensation and benefits   116  113  113  454  458
Marketing and advertising   7  6  9  26  24
Depreciation and amortization   27  26  28  104  109
Professional and contract services   26  24  23  96  83
Computer operations and data communications   10  18  15  60  65
Occupancy   25  22  22  93  91
Regulatory   7  8  9  34  35
Merger and strategic initiatives   4  (3)  1  4  38
Restructuring charges   8  10  --   44  -- 
General, administrative and other   14  15  39  58  83
Total operating expenses   244  239  259  973  986
           
Operating income   175  170  161  690  696
           
Interest income   3  2  3  10  11
Interest expense   (25)  (24)  (26)  (97)  (119)
Asset impairment charges   --   --   (18)  (40)  (18)
Dividend and investment income   --   --   --   --   1
Loss on divestiture of business   --   (14)  --   (14)  -- 
Income (loss) from unconsolidated investees, net   --   --   1  (1)  2
           
Income before income taxes   153  134  121  548  573
Income tax provision   69  45  40  199  190
Net income   84  89  81  349  383
           
Net loss attributable to noncontrolling interests   1  --   1  3  4
Net income attributable to NASDAQ OMX   $ 85  $ 89  $ 82  $ 352  $ 387
           
Basic and diluted earnings per share:           
Basic earnings per share   $ 0.52  $ 0.53  $ 0.46  $ 2.09  $ 2.20
Diluted earnings per share   $ 0.50  $ 0.52  $ 0.45  $ 2.04  $ 2.15
Cash dividends declared per common share   $ 0.13  $ 0.13  $ --   $ 0.39  $ -- 
           
Weighted-average common shares outstanding for earnings per share:           
Basic   164.5  166.2  175.4  168.3  176.3
Diluted   169.1  170.5  179.5  172.6  180.0
 
 
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
           
   Three Months Ended  Year Ended
   December 31,   September 30,   December 31,   December 31,   December 31, 
   2012   2012   2011   2012   2011 
  (unaudited) (unaudited) (unaudited) (unaudited)  
MARKET SERVICES           
Transaction Services           
Cash Equity Trading Revenues:           
U.S. cash equity trading   $ 283  $ 297  $ 385  $ 1,294  $ 1,617
Cost of revenues:           
Transaction rebates   (180)  (193)  (261)  (854)  (1,087)
Brokerage, clearance and exchange fees   (74)  (75)  (87)  (318)  (375)
Total U.S. cash equity cost of revenues   (254)  (268)  (348)  (1,172)  (1,462)
Net U.S. cash equity trading revenues  29  29  37  122  155
European cash equity trading   18  18  22  78  93
Total net cash equity trading revenues  47  47  59  200  248
           
Derivative Trading and Clearing Revenues:           
U.S. derivative trading and clearing   124  110  110  458  471
Cost of revenues:           
Transaction rebates   (69)  (57)  (63)  (250)  (257)
Brokerage, clearance and exchange fees   (10)  (9)  (6)  (34)  (29)
Total U.S. derivative trading and clearing cost of revenues   (79)  (66)  (69)  (284)  (286)
Net U.S. derivative trading and clearing revenues  45  44  41  174  185
European derivative trading and clearing   30  28  32  116  128
Total net derivative trading and clearing revenues  75  72  73  290  313
           
Access Services Revenues   60  61  56  238  223
           
Total Transaction Services revenues less transaction rebates, brokerage, clearance and exchange fees   182  180  188  728  784
           
Market Data Revenues:           
Net U.S. tape plans   26  28  29  117  115
U.S. market data products   39  38  37  150  135
European market data products   18  18  21  77  83
           
Total Market Data revenues  83  84  87  344  333
           
Broker Services Revenues   5  5  5  19  19
           
Other Market Services Revenues   --   --   1  13  2
Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees   270  269  281  1,104  1,138
           
ISSUER SERVICES           
Global Listing Services Revenues:           
Annual renewal   28  28  30  112  117
Listing of additional shares   10  10  10  39  40
Initial listing   5  5  5  20  21
Total U.S. listing services   43  43  45  171  178
European listing fees   13  12  13  50  55
Corporate Solutions   31  24  20  97  76
Total Global Listing Services revenues  87  79  78  318  309
           
Global Index Group Revenues   14  14  13  57  52
Total Issuer Services revenues  101  93  91  375  361
           
MARKET TECHNOLOGY           
License, support and facility management   27  27  29  110  115
Delivery project   6  7  6  27  24
Change request, advisory and broker surveillance   15  13  13  47  44
Total Market Technology revenues   48  47  48  184  183
           
Total revenues less transaction rebates, brokerage, clearance and exchange fees   $ 419  $ 409  $ 420  $ 1,663  $ 1,682
 
 
The NASDAQ OMX Group, Inc.
Consolidated Balance Sheets 
(in millions)
     
  December 31, December 31,
  2012 2011
Assets (unaudited)  
Current assets:    
Cash and cash equivalents  $ 497  $ 506
Restricted cash  85  34
Financial investments, at fair value  223  279
Receivables, net  333  308
Deferred tax assets  33  16
Default funds and margin deposits  209  17
Open clearing contracts:    
Derivative positions, at fair value  --   1,566
Resale agreements, at contract value  --   3,745
Other current assets  112  110
Total current assets  1,492  6,581
Non-current restricted cash  25  97
Property and equipment, net  211  193
Non-current deferred tax assets  294  392
Goodwill 5,335 5,061
Intangible assets, net  1,650  1,648
Other non-current assets  125  119
Total assets  $ 9,132  $ 14,091
     
Liabilities     
Current liabilities:    
Accounts payable and accrued expenses  $ 172  $ 164
Section 31 fees payable to SEC  97  106
Accrued personnel costs  111  132
Deferred revenue  139  124
Other current liabilities  119  112
Deferred tax liabilities  35  27
Default funds and margin deposits  209  17
Open clearing contracts:    
 Derivative positions, at fair value  --   1,566
 Repurchase agreements, at contract value  --   3,745
Current portion of debt obligations  45  45
Total current liabilities  927  6,038
Debt obligations  1,931  2,072
Non-current deferred tax liabilities  713  670
Non-current deferred revenue  156  154
Other non-current liabilities  196  171
Total liabilities  3,923  9,105
     
Commitments and contingencies     
Equity    
NASDAQ OMX stockholders' equity:    
 Common stock  2  2
 Additional paid-in capital  3,771  3,793
 Common stock in treasury, at cost  (1,058)  (860)
 Accumulated other comprehensive loss  (185)  (350)
 Retained earnings  2,678  2,391
Total NASDAQ OMX stockholders' equity  5,208  4,976
Noncontrolling interests  1  10
Total equity  5,209  4,986
Total liabilities and equity  $ 9,132  $ 14,091
 
 
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income, Net Exchange Revenues (3) and Operating Expenses 
to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, Net Exchange Revenues (3) and Operating Expenses
(in millions, except per share amounts)
(unaudited)
           
   Three Months Ended   Year Ended 
   December 31,   September 30,   December 31,   December 31,   December 31, 
   2012   2012   2011   2012   2011 
GAAP net income attributable to NASDAQ OMX:  $ 85  $ 89  $ 82  $ 352  $ 387
           
Non-GAAP adjustments:          
           
Income from open positions relating to the operations of the Exchange  --   --   --   (11)  -- 
Merger and strategic initiatives  4  (3)  1  4  38
Restructuring charges  8  10  --   44  -- 
Asset impairment charges  --   --   18  40  18
Loss on divestiture of business  --   14  --   14  -- 
Special legal expenses  2  4  --   7  -- 
Extinguishment of debt  --   --   25  --   31
Sublease reserve  3  --   --   3  -- 
Value added tax refund  (7)  --   --   (7)  -- 
Other  1  --   --   4  4
Total non-GAAP adjustments  11  25  44  98  91
           
Adjustment to the income tax provision to reflect non-GAAP adjustments (1)  (5)  (10)  (13)  (32)  (28)
Significant tax adjustments, net  17  1  --   14  5
Total non-GAAP adjustments, net of tax  23  16  31  80  68
           
Non-GAAP net income attributable to NASDAQ OMX:  $ 108  $ 105  $ 113  $ 432  $ 455
           
           
GAAP diluted earnings per share:  $ 0.50  $ 0.52  $ 0.45  $ 2.04  $ 2.15
Total adjustments from non-GAAP net income above  0.14  0.10  0.18  0.46  0.38
           
Non-GAAP diluted earnings per share:  $ 0.64  $ 0.62  $ 0.63  $ 2.50  $ 2.53
           
           
   Three Months Ended   Year Ended 
   December 31,   September 30,   December 31,   December 31,   December 31, 
   2012   2012   2011   2012   2011 
           
GAAP operating income:  $ 175  $ 170  $ 161  $ 690  $ 696
           
Non-GAAP adjustments:          
           
 Income from open positions relating to the operations of the Exchange  --   --   --   (11)  -- 
 Merger and strategic initiatives  4  (3)  1  4  38
 Restructuring charges  8  10  --   44  -- 
 Extinguishment of debt  --   --   25  --   31
 Special legal expenses  2  4  --   7  -- 
 Sublease reserve  3  --   --   3  -- 
 Value added tax refund  (7)  --   --   (7)  -- 
 Other  1  --   --   4  4
 Total non-GAAP adjustments  11  11  26  44  73
           
Non-GAAP operating income  $ 186  $ 181  $ 187  $ 734  $ 769
           
           
           
           
Total Non-GAAP revenues less transaction rebates, brokerage, clearance and exchange fees   $ 419  $ 409  $ 420  $ 1,652  $ 1,682
           
Non-GAAP operating margin (2) 44% 44% 45% 44% 46%
           
           
(1) We determine the tax effect of each item based on the tax rules in the respective jurisdiction where the transaction occurred.        
(2) Non-GAAP operating margin equals non-GAAP operating income divided by Non-GAAP revenues less transaction rebates, brokerage, clearance and exchange fees.       
(3) Represents revenues less transaction rebates, brokerage, clearance and exchange fees.           
 
 
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income, Net Exchange Revenues (1) and Operating Expenses 
to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, Net Exchange Revenues (1) and Operating Expenses
(in millions)
(unaudited)
           
   Three Months Ended   Year Ended 
  December 31, September 30,  December 31,  December 31,  December 31, 
  2012  2012  2011  2012  2011 
           
GAAP revenues less transaction rebates, brokerage, clearance and exchange fees:  $ 419  $ 409  $ 420  $ 1,663  $ 1,682
           
Non-GAAP adjustments:          
           
Income from open positions relating to the operations of the Exchange  --   --   --   (11)  -- 
Total non-GAAP adjustments  --   --   --   (11)  -- 
           
Non-GAAP revenues less transaction rebates, brokerage, clearance and exchange fees:  $ 419  $ 409  $ 420  $ 1,652  $ 1,682
           
           
   Three Months Ended   Year Ended 
  December 31,  September 30,  December 31,  December 31,  December 31, 
  2012  2012  2011  2012  2011 
           
GAAP operating expenses:  $ 244  $ 239  $ 259  $ 973  $ 986
           
Non-GAAP adjustments:          
           
Merger and strategic initiatives  (4)  3  (1)  (4)  (38)
Restructuring charges  (8)  (10)  --   (44)  -- 
Extinguishment of debt  --   --   (25)  --   (31)
Special legal expenses  (2)  (4)  --   (7)  -- 
Sublease reserve  (3)  --   --   (3)  -- 
Value added tax refund  7  --   --   7  -- 
Other  (1)  --   --   (4)  (4)
Total non-GAAP adjustments  (11)  (11)  (26)  (55)  (73)
           
Non-GAAP operating expenses  $ 233  $ 228  $ 233  $ 918  $ 913
           
(1) Represents revenues less transaction rebates, brokerage, clearance and exchange fees. 
 
 
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
       
  Three Months Ended
   December 31,   September 30,   December 31, 
   2012   2012   2011 
Market Services      
Cash Equity Trading      
NASDAQ securities      
Total average daily share volume (in billions) 1.74 1.66 1.85
Matched market share executed on NASDAQ 23.6% 25.2% 27.2%
Matched market share executed on NASDAQ OMX BX 2.6% 2.7% 2.5%
Matched market share executed on NASDAQ OMX PSX 1.3% 1.2% 1.1%
Market share reported to the FINRA/NASDAQ       
 Trade Reporting Facility 33.2% 31.5% 30.2%
Total market share (1) 60.6% 60.6% 61.0%
       
New York Stock Exchange, or NYSE securities      
Total average daily share volume (in billions) 3.39 3.39  4.14
Matched market share executed on NASDAQ 11.5% 12.8% 13.3%
Matched market share executed on NASDAQ OMX BX 2.5% 2.5% 2.5%
Matched market share executed on NASDAQ OMX PSX 0.7% 0.6% 0.6%
Market share reported to the FINRA/NASDAQ       
 Trade Reporting Facility 30.0% 28.6% 27.5%
Total market share (1) 44.7% 44.6% 44.0%
       
NYSE MKT and regional securities      
Total average daily share volume (in billions) 0.97 0.94  1.45
Matched market share executed on NASDAQ 14.1% 16.1% 19.2%
Matched market share executed on NASDAQ OMX BX 2.9% 3.0% 1.9%
Matched market share executed on NASDAQ OMX PSX 1.6% 1.5% 1.9%
Market share reported to the FINRA/NASDAQ       
 Trade Reporting Facility 30.6% 29.5% 27.2%
Total market share (1) 49.3% 50.1% 50.2%
       
Total U.S.-listed securities      
Total average daily share volume (in billions)  6.09  5.99  7.45
Matched share volume (in billions)  71.6  76.6  100.0
Matched market share executed on NASDAQ 15.4% 16.8% 17.9%
Matched market share executed on NASDAQ OMX BX 2.6% 2.7% 2.4%
Matched market share executed on NASDAQ OMX PSX 1.0% 0.9% 1.0%
       
NASDAQ OMX Nordic and NASDAQ OMX Baltic Securities      
Average daily number of equity trades 273,330 284,764  394,290
Total average daily value of shares traded (in billions)  $ 3.4  $ 3.2  $ 4.2
Total market share 68.2% 68.5% 71.9%
       
Derivative Trading and Clearing      
U.S. Equity Options      
Total industry average daily volume (in millions) 14.3 13.8  15.5
NASDAQ OMX PHLX matched market share 21.9% 21.4% 22.7%
The NASDAQ Options Market matched market share 6.2% 5.2% 4.5%
NASDAQ OMX BX Options matched market share 1.0% 0.7%  -- 
       
NASDAQ OMX Nordic and NASDAQ OMX Baltic      
Average daily volume:      
Options, futures and fixed-income contracts 379,905 371,230  455,341
Finnish option contracts traded on Eurex 107,373 70,211  46,557
       
NASDAQ OMX Commodities      
Clearing Turnover:      
Power contracts (TWh) (2)  453  384  494
Carbon contracts (1000 tCO2) (2)  7,503  5,009  29,908
       
Issuer Services      
Initial public offerings      
NASDAQ 19 17 15
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic 4 1 1
       
New listings      
NASDAQ (3) 46 40 44
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic (4) 9 4 12
       
Number of listed companies      
NASDAQ (5)  2,577  2,610  2,680
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic (6)  754  754  776
       
Market Technology      
Order intake (in millions) (7)  $ 95  $ 31  $ 36
Total order value (in millions) (8)  $ 546  $ 523  $ 458
       
(1) Includes transactions executed on NASDAQ's, NASDAQ OMX BX's and NASDAQ OMX PSX's systems plus trades reported through the FINRA/NASDAQ Trade Reporting Facility.
(2) Primarily transactions executed on Nord Pool ASA and reported for clearing to NASDAQ OMX Commodities measured by Terawatt hours (TWh) and one thousand metric tons of carbon dioxide (1000 tCO2). 
(3) New listings include IPOs, including those completed on a best efforts basis, issuers that switched from other listing venues, closed-end funds and separately listed ETFs.
(4) New listings include IPOs and represent companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets of NASDAQ OMX First North.
(5) Number of listed companies for NASDAQ at period end, including separately listed ETFs.
(6) Represents companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets of NASDAQ OMX First North at period end.
(7) Total contract value of orders signed during the period. 
(8) Represents total contract value of orders signed that are yet to be recognized as revenue. 
CONTACT: Media Relations:
         Joseph Christinat +1.646.441.5121
         Joseph.Christinat@NASDAQOMX.Com

         Investor Relations:
         John Sweeney +1.212.401.8737
         John.Sweeney@NASDAQOMX.Com

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