North American stock exchange Nasdaq OMX Group Inc. (NDAQ) on Thursday posted an increase in third-quarter profit, reflecting lower expenses and tax provision. However, non-GAAP profit fell 18% from last year, hurt by Cash Equity Trading performance.
Q3 Results
The New York-based firm's third-quarter net income attributable to Nasdaq OMX was $60 million or $0.28 per share, compared to $58 million or $0.27 per share in the year-ago quarter.
On a non-GAAP basis, net income attributable to Nasdaq OMX totaled $89 million or $0.42 per share, a decrease of 18%, compared to $108 million or $0.51 per share in the same quarter of last year.
On average, 18 analysts polled by Thomson Reuters expected the company to post earnings of $0.42 per share. Analysts' estimates typically exclude special items.
The latest quarter results excluded $25 million in debt conversion expense associated with the inducement provided to Silver Lake and another holder to convert their 3.75% convertible notes into common stock; $16 million in pre-tax expenses associated with asset retirements, workforce reductions, and other non-recurring items; and, $5 million in pre-tax merger expenses.
Revenues less liquidity rebates, brokerage, clearance and exchange fees or net exchange revenues fell 15% to $349 million from the previous year's net exchange revenues of $399 million, of which $14 million was due to changes in the exchange rates of various currencies as compared to the U.S. dollar. Fourteen Wall Street analysts had a consensus revenue estimate of $354.92 million for the quarter.
Adena Friedman, Chief Financial Officer of Nasdaq OMX, said, "During the third quarter, Nasdaq OMX continued to execute on a key priority of lowering total debt obligations. Through principal debt payments, repurchases of convertible notes, the conversion of convertible notes, as well as other actions, we have been able to reduce total debt obligations by approximately $452 million this year alone."
Market Services
Market Services net exchange revenues were down 21% to $230 million from $278 million reported in the third-quarter of 2008. Net exchange revenues from Transaction Services totaled $139 million for the recent quarter, down 27% from the prior-year's revenue of $178 million. Market Data revenues were $79 million, a decline of 9%, compared to $87 million reported in the comparable quarter of the previous year.
Cash Equity Trading net exchange revenues were $49 million, a decline of 52%, compared to $101 million reported in the third quarter of 2008, due primarily to declines in matched share volume and the average net fee per share matched on Nasdaq's trading system. Derivative trading net exchange revenues were down 4% to $54 million from $46 million in the previous year.
Issuer Services
Issuer Services revenues for the third quarter of fiscal 2009 dropped 10% to $80 million from $89 million reported in the same quarter of last year. Global Listing Services revenues were $70 million for the most recent quarter, down 8% from last year's $76 million, due primarily to lower U.S. annual renewal fees resulting from fewer listed companies, and to lower market capitalization values for European listed equities, which in turn result in lower European listing fees. Also contributing to the decline in revenues are changes in the exchange rates of various currencies as compared to the U.S. dollar.
Global Index Group revenues fell 23% to $10 million from $13 million reported a year ago, reflecting lower license fees associated with Nasdaq OMX-licensed products, related to lower volumes in licensed derivatives and declines in assets under management in ETFs and structured products.
Market Technology
Total Market Technology revenues advanced 24% to $36 million from $29 million reported a year earlier, driven primarily by the increased deliveries of market technology contracts.
FY09 Forecast
Looking ahead, Nasdaq OMX updated its fiscal 2009 forecast for total operating expenses to be in the range of $840 million - $850 million, including about $50 million in non-recurring costs. Previously, the company expected total operating expense in the range of $830.0 million - $850.0 million, including about $30.0 million in non-recurring costs.
Peer Performance
Among Nasdaq OMX's rivals, CME Group Inc. (CME) reported higher third-quarter net income of $202.3 million or $3.04 per share, compared to $168.7 million or $2.81 per share last year, predominantly on lower expenses and tax provision. Total revenues was $650.4 million, compared to $680.9 million in the prior year quarter.
Another peer, NYSE Euronext Inc. (NYX) reported a decline in third-quarter profit totaling $125 million or $0.48 per share, compared to $174 million or $0.66 per share a year ago, hurt by a fall in revenues due to lower overall trading volumes and pricing changes. Total revenues declined to $1.16 billion from $1.20 billion in the prior year period.
Stock Quotes
Nasdaq OMX shares, which have been trading between $14.96 and $33.94 in the past 52 weeks, are currently trading at $18.35, up 15 cents or 0.82%.
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