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8-K - FORM 8-K - NASDAQ, INC.d475511d8k.htm
EX-99.2 - EXHIBIT 99.2 - NASDAQ, INC.d475511dex992.htm

Exhibit 99.1

 

 

LOGO

 

January 31, 2013

NASDAQ OMX REPORTS FOURTH QUARTER AND FULL YEAR 2012 RESULTS

 

   

Fourth quarter 2012 non-GAAP diluted EPS of $0.64, tied for the second highest quarterly performance in the firm’s history; fourth quarter 2012 GAAP diluted EPS of $0.50

 

   

Fourth quarter net exchange revenues1 reach $419 million, the highest non-GAAP net exchange revenue level of the year. On an organic basis (constant currency and excluding acquisitions) fourth quarter revenue declined by 3 percent year-over-year

 

   

Non-transaction based revenues were 71 percent of fourth quarter net exchange revenue, tied for the highest level in NASDAQ OMX’s history

 

   

2012 non-GAAP operating expenses of $918 million came in below previous guidance range of $922 to $935 million

 

   

Repurchased 11.5 million shares at an average price of $23.82 for a total cost of $275 million in 2012

New York, N.Y.—The NASDAQ OMX Group, Inc. (NASDAQ: NDAQ) today reported results for the fourth quarter and full year 2012. Fourth quarter net exchange revenues were $419 million, driven by particularly strong growth in our Corporate Solutions business.

Operating expenses were $244 million in the fourth quarter of 2012, compared to $259 million in the prior year quarter. On a non-GAAP basis, fourth quarter 2012 operating expenses were $233 million, flat compared to the prior year quarter.

Fourth quarter 2012 non-GAAP diluted earnings per share were $0.64, up $0.01 compared to the prior year quarter. Non-GAAP earnings per share in the fourth quarter of 2012 exclude $8 million of restructuring expenses, $4 million of merger and strategic expenses, $3 million in sublease reserve expenses, $2 million of special legal expenses, and a $7 million value added tax refund related to prior year periods. On a GAAP basis, net income attributable to NASDAQ OMX for the fourth quarter of 2012 was $85 million, or $0.50 per diluted share, compared with $82 million, or $0.45 per diluted share, in the prior year quarter.

“NASDAQ OMX ended 2012 with a strong finish to the year, driven by a significant pick-up in corporate activity coupled with solid performance in our U.S. options, U.S. proprietary data products and global index businesses ,” said Bob Greifeld, CEO, NASDAQ OMX. “While the volume environment remained weak in the fourth quarter, we continued to expand our diversified, global portfolio of businesses, increasing our stream of recurring revenues, generating strong cash flows and delivering attractive returns for our shareholders.”

Mr. Greifeld continued, “Looking to 2013, we are encouraged to see positive, multi week inflows from retail investors into U.S. equity mutual funds and some signs of improvement in the volume environment. As we move through the year, we will remain focused on strengthening our franchise by ensuring we have the talent, structure and business portfolio

 

 

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


to deliver for our clients and shareholders. I believe we are creating the foundation for growth and outperformance regardless of the economic, business or volume cycles.”

Lee Shavel, NASDAQ OMX’s EVP and Chief Financial Officer, said: “Our cost reduction plan was successful and we exited the year with $50 million in run-rate savings. In 2012 we generated in excess of $500 million in free cash flow, and we continued to deploy our cash flow in ways that benefit our investors. During the year, we returned $275 million to shareholders through buybacks, $65 million through our dividend program, and we purchased a number of attractive assets, including BWise, NOS and the index business of Mergent, Inc., including Indxis. We also recently announced the proposed acquisition of Thomson Reuters’ Investor Relations, Public Relations and Multimedia Solutions businesses. I fully expect these acquisitions, coupled with our ongoing capital deployment efforts to drive substantial shareholder value in the years ahead.”

At December 31, 2012, the company had cash and cash equivalents of $497 million and total debt of $1,976 million, resulting in net debt of $1,479 million. This compares to net debt of $1,611 million at December 31, 2011. During the fourth quarter of 2012, the company repurchased 2.1 million shares of outstanding common stock under a share repurchase program, for a total of $50 million. Since January 2010, NASDAQ OMX has repurchased $1,172 million of outstanding common stock, representing 53.4 million shares at an average price of $21.97.

BUSINESS HIGHLIGHTS

Market Services (64% of total net exchange revenues) – Net exchange revenues were $270 million in the fourth quarter of 2012, down $11 million when compared to the fourth quarter of 2011.

Cash Equities (11% of total net exchange revenues) – Total net cash equity trading revenues were $47 million in the fourth quarter of 2012, down $12 million compared to the fourth quarter of 2011. A lower level of industry trading volumes and a slightly lower market share were partially offset by positive revenue capture in both the U.S. and Nordic equity markets.

Derivatives (18% of total net exchange revenues) – Total net derivative trading and clearing revenues were $75 million in the fourth quarter of 2012, up $2 million compared to the fourth quarter of 2011. U.S. derivative revenues increased 10% year-over-year on market share gains and positive revenue capture per traded contract. European derivative and clearing revenues declined $2 million on lower volumes.

Access and Broker Services (15% of total net exchange revenues) – Access and broker services revenues totaled $65 million, up $4 million compared to the fourth quarter of 2011. The increase was primarily driven by the uptake of new products including 40G connectivity.

Market Data (20% of total net exchange revenues) – Total Market Data revenues of $83 million reflect a $4 million decrease compared to the year ago quarter. The decrease was driven by a lower level of audit collections and lower U.S. tape revenues.

Issuer Services (24% of total net exchange revenues) – Revenues were $101 million in the fourth quarter of 2012, up $10 million compared to the fourth quarter of 2011. The

 

 

The NASDAQ OMX Group, Inc.

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increase was driven by strength in the Corporate Solutions business which saw double digit revenue growth in the GlobeNewswire, Directors Desk and Surveillance businesses. In addition, Corporate Solutions revenues benefited from the acquisitions of BWise in May 2012 and Glide Technologies in October 2011. The Global Index Group’s revenues increased by $1 million, or 8%, year-over-year driven by an increase in the underlying assets associated with licensed financial products due to product growth and newly executed product licenses.

Market Technology (12% of total net exchange revenues) – Revenues of $48 million in the fourth quarter of 2012 were flat compared to the fourth quarter of 2011. The Market Technology segment had exceptionally strong order intake of $95 million in the fourth quarter of 2012, rounding out a record year for new business wins.

COST GUIDANCE – For the full year of 2013, core operating expenses, including $50 million of expenses related to 2012 acquisitions, are expected to be in the range of $910 million to $930 million, with an additional $50 million to $60 million in incremental new initiative spending, resulting in total operating expenses in the range of $960 million to $990 million. This guidance excludes expenses related to our previously announced cost reduction plan, expenses for the proposed voluntary accommodation program and special legal expenses. We anticipate that the effective tax rate may increase in 2013, due to the potential loss of tax deductions resulting from changes in tax laws in certain jurisdictions. The impact of such tax law changes has not yet been determined. As a result, we expect a 2013 effective tax rate in the range of 34% to 37%.

CORPORATE HIGHLIGHTS

 

   

Agreement to Acquire Thomson Reuters’ IR, PR and Multimedia businesses. Announced agreement with Thomson Reuters to acquire the Investor Relations, Public Relations and Multimedia Solutions businesses, which provide insight, analytics and communications solutions to more than 7,000 clients worldwide. Upon completion of the transaction, these complementary businesses will be integrated into NASDAQ OMX Corporate Solutions. The combination, which is subject to customary regulatory approvals, will create a global corporate services portfolio, with more diversified and comprehensive offerings to sell to NASDAQ OMX’s listing and corporate clients.

 

   

Acquired the Index Business of Mergent, Inc., including Indxis Announced and closed on the first acquisition in the Global Index Group -the index business of Mergent, Inc., including Indxis. With this acquisition, the Global Index Group is one of the largest providers of dividend-themed indexes based on benchmarked assets.

 

   

Appointment of Chief Information Officer. Appointed Bradley Peterson as Executive Vice President and Chief Information Officer. Mr. Peterson joins NASDAQ OMX from Charles Schwab. He will focus on driving the design and development of scalable and reliable solutions to further the growth and expansion of core products and services and underlying tools and technologies used by NASDAQ OMX customers.

 

   

Combination of Market Technology and Corporate Solutions businesses. Announced the combination of the Market Technology and Corporate Solutions businesses, which will operate under the name Global Technology Solutions and will be led by Anna Ewing, Executive Vice President, Global Technology Solutions. The combination will enable increased focus, drive growth across the company’s technology businesses and create a dedicated software and technology management structure.

 

 

The NASDAQ OMX Group, Inc.

  3


   

Combination of Global Data Products and Global Index Group businesses. Announced the combination of the Global Data Products and Global Index Group businesses, which will operate under the name Global Information Services and be led by John Jacobs, Executive Vice President, Global Information Services. The combination will enable greater customer focus and leverage of NASDAQ OMX’s scalable technology, product innovation and robust distribution channels.

About NASDAQ OMX Group

The inventor of the electronic exchange, The NASDAQ OMX Group, Inc., fuels economies and provides transformative technologies for the entire lifecycle of a trade—from risk management to trade to surveillance to clearing. In the U.S. and Europe, we own and operate 23 markets, 3 clearinghouses and 5 central securities depositories supporting equities, options, fixed income, derivatives, commodities, futures and structured products. Able to process more than 1 million messages per second at sub-40 microsecond speeds with 99.99+% uptime, our technology drives more than 70 marketplaces in 50 developed and emerging countries into the future, powering 1 in 10 of the world’s securities transactions. Our award-winning data products and worldwide indexes are the benchmarks in the financial industry. Home to approximately 3,300 listed companies worth more than $6 trillion in market cap whose innovations shape our world, we give the ideas of tomorrow access to capital today. Welcome to where the world takes a big leap forward, daily. Welcome to the NASDAQ OMX Century. To learn more, visit www.nasdaqomx.com. Follow us on Facebook (www.facebook.com/NASDAQ) and Twitter (www.twitter.com/nasdaqomx). (Symbol: NDAQ and member of S&P 500)

Non-GAAP Information

In addition to disclosing results determined in accordance with GAAP, NASDAQ OMX also discloses certain non-GAAP results of operations, including, but not limited to, net income attributable to NASDAQ OMX, diluted earnings per share, net exchange revenues, operating income, and operating expenses, that make certain adjustments or exclude certain charges and gains that are described in the reconciliation table of GAAP to non-GAAP information provided at the end of this release. Management believes that this non-GAAP information provides investors with additional information to assess NASDAQ OMX’s operating performance by making certain adjustments or excluding costs or gains and assists investors in comparing our operating performance to prior periods. Management uses this non-GAAP information, along with GAAP information, in evaluating its historical operating performance.

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

 

 

The NASDAQ OMX Group, Inc.

  4


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.

 

Contact Media Relations:

  Contact Investor Relations:

Joseph Christinat +1.646.441.5121

  John Sweeney +1.212.401.8737

Joseph.Christinat@NASDAQOMX.Com

  John.Sweeney@NASDAQOMX.Com

NDAQF

(tables follow)

(income statement)

(revenue statement)

(balance sheet)

(GAAP reconciliation table)

(key drivers)

 

 

The NASDAQ OMX Group, Inc.

  5


The NASDAQ OMX Group, Inc.

Consolidated Statements of Income

(in millions, except per share amounts)

 

    Three Months Ended     Year Ended  
    December 31,
2012
    September 30,
2012
    December 31,
2011
    December 31,
2012
    December 31,
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,
2012
    September 30,
2012
    December 31,
2011
    December 31,
2012
    December 31,
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,
2012
    December 31,
2011
 
     (unaudited)        
Assets     

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,
2012
    September 30,
2012
    December 31,
2011
        December 31,
2012
    December 31,
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,
2012
    September 30,
2012
    December 31,
2011
        December 31,
2012
    December 31,
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.