01—Abstract
Summary
Summary of the 10-Q filed November 7, 2012. Cited figures are marked; the original filing is the authoritative source.
NASDAQ OMX Group, Inc. (NDAQ) reported third-quarter and year-to-date financial results for the period ending September 30, 2012.
The company saw a decrease in revenue compared to the prior year, primarily driven by lower trading volumes in both cash equities and derivatives, particularly in its U.S. operations. This decline was partially offset by modest growth in Issuer Services and Market Technology segments. Despite the revenue decline, operating expenses were managed effectively, leading to a decrease in operating income.
Net income attributable to NASDAQ OMX also declined year-over-year, impacting diluted earnings per share. The company continued its share repurchase program and initiated cash dividends on common stock, signaling a commitment to returning capital to shareholders. Significant events during the period included acquisitions in the Issuer Services segment and the divestiture of a subsidiary, alongside ongoing legal proceedings related to the Facebook IPO.
02—Key points
Key Highlights
- Revenue for the nine months ended September 30, 2012, decreased by 1.5% to $2,367 million compared to $2,595 million in the same period of 2011, primarily due to a 10.6% decrease in Market Services revenue.
- Net income attributable to NASDAQ OMX decreased by 13.1% to $266 million for the nine months ended September 30, 2012, compared to $306 million in the prior year.
- Diluted earnings per share (EPS) for the nine months ended September 30, 2012, were $1.53, a decrease from $1.70 in the same period of 2011.
- The company completed its share repurchase program authorized in Q4 2011, repurchasing 9,443,157 shares for $225 million. An additional $300 million repurchase program was authorized in Q3 2012.
- Two acquisitions were completed in 2012: NOS Clearing ASA for approximately $40 million and BWise Beheer B.V. for approximately $57 million initially.
- The company divested its majority-owned subsidiary, International Derivatives Clearing Group, LLC (IDCG), in August 2012, resulting in a $14 million loss.
- Restructuring charges of $36 million were recognized in the first nine months of 2012 related to a company-wide initiative to improve performance and reduce costs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2012, Nasdaq, Inc. kept $0.12.
- Revenue$746.0M100.0%
- Cost of revenue−$334.0M44.8%
- Gross profit$412.0M55.2%
- Operating costs−$242.0M32.4%
- Operating income$170.0M22.8%
- Interest, other & tax−$81.0M10.9%
- Net income$89.0M11.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed November 7, 2012Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $746.00M$944.00M | −21.0% |
| Cost of Revenue | $334.00M$508.00M | −34.3% |
| Gross Profit | $412.00M$436.00M | −5.5% |
| Operating Expenses | $242.00M$241.00M | +0.4% |
| Operating Income | $170.00M$195.00M | −12.8% |
| Interest Expense | $24.00M$30.00M | −20.0% |
| Net Income | $89.00M$110.00M | −19.1% |
| EPS (Basic) | $0.18$0.21 | −14.5% |
| EPS (Diluted) | $0.17$0.20 | −14.8% |
| Shares Outstanding (Basic) | 498.71M531.29M | −6.1% |
| Shares Outstanding (Diluted) | 511.56M542.77M | −5.8% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in revenue?
The primary driver for the decrease in revenue was a decline in trading volumes, particularly in cash equities and derivatives, impacting the Market Services segment. This was exacerbated by unfavorable foreign exchange impacts.
What significant acquisitions or divestitures occurred during the period?
In 2012, NASDAQ OMX acquired NOS Clearing ASA and BWise Beheer B.V. They also divested their majority-owned subsidiary, International Derivatives Clearing Group, LLC (IDCG).
How did the company manage its expenses despite lower revenues?
Operating expenses saw a slight increase of 0.1% for the nine months ended September 30, 2012. This was primarily due to restructuring charges and increased professional services, which offset savings from lower compensation and benefits and merger/strategic initiatives.
What is the company's strategy regarding capital return to shareholders?
NASDAQ OMX demonstrated its commitment to capital return through its share repurchase program, completing a $300 million authorization and initiating a new one, and by initiating cash dividends on its common stock in 2012.
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