01—Abstract
Summary
Summary of the 10-Q filed November 6, 2009. Cited figures are marked; the original filing is the authoritative source.
NASDAQ OMX Group, Inc. (NDAQ) reported its financial results for the third quarter and first nine months ended September 30, 2009.
Total revenues for the third quarter decreased by 18.4% to $810 milliona, and for the first nine months by 1.2% to $2.59 billion, compared to the prior year periods. This decline was largely driven by a decrease in Market Services revenues, particularly in U.S. cash equity trading, reflecting lower matched share volume and average net fee per share. However, the company saw improvements in its Market Technology segment.
Despite the revenue dip, the company managed operating expenses effectively, resulting in a decrease in operating expenses for the third quarter and a smaller increase for the nine-month period, partly due to favorable foreign exchange movements and successful integration of recent acquisitions. Net income attributable to NASDAQ OMX for the third quarter was $60 millionb, a slight increase from $58 million in the prior year, but net income for the first nine months decreased to $223 million from $279 million in the prior year. Diluted EPS for the third quarter was $0.28, up from $0.27, while for the nine months it decreased to $1.05 from $1.40.
The company's financial condition remained solid, with total assets at $12.34 billionc and total equity at $4.97 billion. Liquidity was supported by $311 million in cash and cash equivalents. Significant balance sheet items include a substantial amount of goodwill ($4.92 billion) and intangible assets ($1.68 billion) stemming from past acquisitions.
The company also completed the conversion of most of its 3.75%d convertible notes into common stock, incurring a debt conversion expense. Management highlighted ongoing efforts to adapt to a competitive market, including fee structure revisions and a focus on technology and global market presence.
02—Key points
Key Highlights
- Total revenues for Q3 2009 decreased to $810 million from $990 million in Q3 2008, primarily due to a decline in Market Services revenue.
- Net income attributable to NASDAQ OMX for Q3 2009 was $60 million, a slight increase from $58 million in Q3 2008. Diluted EPS was $0.28, up from $0.27.
- Operating expenses decreased by 4.0% in Q3 2009 to $218 million, aided by foreign exchange benefits and lower compensation costs.
- The Market Technology segment showed strong revenue growth of 24.1% in Q3 2009, indicating successful performance in this area.
- The company effectively managed debt, with total debt obligations decreasing to $2.09 billion by September 30, 2009. Most 3.75% convertible notes were converted to common stock.
- Goodwill and intangible assets remain significant on the balance sheet, totaling approximately $4.92 billion and $1.68 billion, respectively, reflecting past acquisitions.
- The company continues to adapt to market dynamics, introducing revised fee structures and focusing on integration of acquisitions to drive future performance.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2009, Nasdaq, Inc. kept $0.07.
- Revenue$810.0M100.0%
- Cost of revenue−$461.0M56.9%
- Gross profit$349.0M43.1%
- Operating costs−$218.0M26.9%
- Operating income$131.0M16.2%
- Interest, other & tax−$71.0M8.8%
- Net income$60.0M7.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2009filed November 6, 2009Financial Statements
| Revenue | $810.00M |
| Cost of Revenue | $461.00M |
| Gross Profit | $349.00M |
| Operating Expenses | $218.00M |
| Operating Income | $131.00M |
| Interest Expense | $26.00M |
| Net Income | $60.00M |
| EPS (Basic) | $0.10 |
| EPS (Diluted) | $0.09 |
05—Questions
Frequently Asked Questions
What is the primary reason for the decrease in total revenues?
The primary reason for the decrease in total revenues, particularly in the third quarter of 2009, was a decline in the Market Services segment. This was largely driven by lower U.S. cash equity trading revenues, which were impacted by decreased matched share volume and a lower average net fee per share. Additionally, European cash equity trading revenues and market data revenues also saw decreases.
How did NASDAQ OMX manage its expenses despite revenue declines?
NASDAQ OMX managed its expenses by effectively controlling operating costs. Total operating expenses decreased by 4.0% in the third quarter of 2009 compared to the prior year. This was achieved through several factors, including favorable foreign currency exchange rates, a reduction in headcount leading to lower compensation and benefits costs, and reduced marketing and advertising expenses. The company also benefited from the integration of recent acquisitions, leading to realized synergies.
What is the significance of the debt conversion expense reported?
The company reported a debt conversion expense of $25 million in the third quarter of 2009 related to the conversion of most of its 3.75% convertible notes into common stock. This expense included a cash inducement paid to noteholders, the fair value of Series A convertible preferred stock issued as an inducement, and debt issuance costs. This event aimed to reduce outstanding debt.
How is the Market Technology segment performing?
The Market Technology segment demonstrated strong performance, with revenues increasing by 24.1% in the third quarter of 2009 compared to the prior year. This growth was primarily driven by increased deliveries of market technology contracts and the full inclusion of OMX's market technology revenues for the nine-month period. This segment appears to be a key growth driver for the company.
06—Continue