01—Abstract
Summary
Summary of the 10-Q filed May 7, 2013. Cited figures are marked; the original filing is the authoritative source.
For the first quarter of 2013, NASDAQ, INC. (NDAQ) reported a notable decrease in net income attributable to NASDAQ OMX, falling to $42 milliona ($0.25 per diluted share) from $85 million ($0.48 per diluted share) in the same period of the prior year.
This decline was primarily driven by a significant increase in operating expenses, notably due to a $62 millionb voluntary accommodation program related to the Facebook IPO systems issues and a $10 million reserve for an SEC matter. Revenues, on a "less transaction rebates, brokerage, clearance and exchange fees" basis, saw a slight increase of 1.0% to $418 million, supported by growth in Information Services and Technology Solutions segments, though this was partially offset by a decline in Market Services revenues.
The company also announced an agreement to acquire eSpeed for trading U.S. Treasuries for approximately $750 millionc in cash, plus contingent stock, indicating a strategic move into fixed-income trading. Despite the near-term profitability dip due to one-time charges, NASDAQ is actively pursuing strategic acquisitions and demonstrating a commitment to returning capital to shareholders through dividends, although its share repurchase program was temporarily suspended.
02—Key points
Key Highlights
- Net income attributable to NASDAQ OMX decreased by 50.6% to $42 million ($0.25/share) compared to $85 million ($0.48/share) in Q1 2012.
- Revenues (less transaction rebates, brokerage, clearance, and exchange fees) increased slightly by 1.0% to $418 million from $414 million year-over-year.
- Operating expenses surged by 35.0% to $328 million, largely due to a $62 million voluntary accommodation program for Facebook IPO system issues and a $10 million reserve for an SEC matter.
- The company announced an agreement to acquire eSpeed for U.S. Treasury trading for approximately $750 million in cash plus contingent stock, signaling expansion into fixed income.
- Market Services segment revenue decreased by 4.2% to $182 million, impacted by lower cash equity trading volumes.
- Information Services and Technology Solutions segments showed growth, with revenues increasing by 5.9% and 10.6% respectively.
- The company declared and paid a cash dividend of $0.13 per common share in Q1 2013 and announced a similar dividend for Q2 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2013, Nasdaq, Inc. kept $0.06.
- Revenue$744.0M100.0%
- Cost of revenue−$326.0M43.8%
- Gross profit$418.0M56.2%
- Operating costs−$328.0M44.1%
- Operating income$90.0M12.1%
- Interest, other & tax−$48.0M6.5%
- Net income$42.0M5.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed May 7, 2013Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $744.00M$804.00M | −7.5% |
| Cost of Revenue | $326.00M$390.00M | −16.4% |
| Gross Profit | $418.00M$414.00M | +1.0% |
| Operating Expenses | $328.00M$243.00M | +35.0% |
| Operating Income | $90.00M$171.00M | −47.4% |
| Interest Expense | $24.00M$24.00M | 0.0% |
| Net Income | $42.00M$85.00M | −50.6% |
| EPS (Basic) | $0.09$0.16 | −46.9% |
| EPS (Diluted) | $0.08$0.16 | −47.9% |
| Shares Outstanding (Basic) | 497.11M518.87M | −4.2% |
| Shares Outstanding (Diluted) | 508.99M532.53M | −4.4% |
05—Questions
Frequently Asked Questions
What led to the significant decrease in net income for the first quarter of 2013?
The primary driver for the substantial decrease in net income was a significant increase in operating expenses. This included a $62 million voluntary accommodation program related to the Facebook IPO system issues and a $10 million reserve for an SEC matter, which are non-recurring or one-time charges. While revenues saw a slight increase, these substantial expense increases outweighed the revenue growth.
What are NASDAQ's key strategic initiatives for growth?
NASDAQ is pursuing growth through strategic acquisitions and diversification. A significant announcement in the quarter was the agreement to acquire eSpeed, a platform for U.S. Treasury trading, which expands its reach into the fixed-income market. The company also continues to see growth in its Information Services and Technology Solutions segments, indicating ongoing strategic focus in these areas.
How has the Market Services segment performed, and what are the contributing factors?
The Market Services segment experienced a revenue decrease of 4.2% to $182 million. This decline was primarily attributed to lower cash equity trading revenues, impacted by reduced industry trading volumes and a decrease in NASDAQ's matched market share. While U.S. derivative trading and clearing showed a slight increase, overall segment performance was affected by weaker equity markets.
What is the status of NASDAQ's share repurchase program and dividend policy?
NASDAQ's share repurchase program was temporarily suspended in April 2013. However, the company continued to return capital to shareholders by declaring and paying a cash dividend of $0.13 per common share in the first quarter of 2013 and announced a similar dividend for the second quarter. This demonstrates a commitment to shareholder returns even with the suspension of buybacks.
06—Continue