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The Nasdaq OMX Group (NDAQ)

Q1 2013 Earnings Call

April 24, 2013 8:00 am ET


Ed Ditmire

Robert Greifeld - Chief Executive Officer, President, Staff Director, Member of Executive Committee and Member of Finance Committee

Lee Shavel - Chief Financial Officer and Executive Vice President of Corporate Strategy

Eric W. Noll - Executive Vice President of Transaction Services - US and UK


Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division

Howard Chen - Crédit Suisse AG, Research Division

Brian Bedell - ISI Group Inc., Research Division

Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division

Christopher Harris - Wells Fargo Securities, LLC, Research Division

Christopher J. Allen - Evercore Partners Inc., Research Division

Michael Carrier - BofA Merrill Lynch, Research Division

Jillian Miller - BMO Capital Markets U.S.



Good day, ladies and gentlemen, and welcome to the NASDAQ OMX First Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Ed Ditmire, Vice President, Investor Relations. Please go ahead, sir.

Ed Ditmire

Good morning, everyone, and thanks for joining us today to discuss NASDAQ OMX's first quarter 2013 earnings results. On the line are Bob Greifeld, our CEO; Lee Shavel, CFO; Ed Knight, General Counsel; and other members of the management team.

After prepared remarks, we'll open up to Q&A. The press release and presentation are on our website. We intend to use the website as a means of disclosing material, nonpublic information and complying with disclosure obligations under SEC Regulation FD. I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC.

I now will turn the call over to Bob.

Robert Greifeld

Thank you, Ed. Good morning, everyone, and thank you for joining us today on this call to discuss NASDAQ OMX's first quarter 2013 earnings results.

I would characterize NASDAQ OMX's first quarter results as consistently strong, when we look at them from both the strategic, operational and financial level. My intent today is provide a few highlights from the quarter and then go into little more detail to give you a greater sense about how our strategy is manifesting itself in our business performance and the earnings power of this franchise.

When we look at all the pieces of our business and how they fit together, it is important that we have a clear view into all aspects of the operation where we weigh, measure and count every action that we take. To this point, I want to start by highlighting something that we announced early in the quarter with regard to how we segment our businesses.

We have realigned our businesses to better serve our customers and, as a consequence, have begun to report them in a way which will provide greater transparency to the investment community. For example, we announced the combination of our Corporate Solutions and Market Technology businesses. The combined unit, Technology Solutions, allows us to evaluate this business, alongside larger software and financial technology players in this space with similar profiles, companies such as ACI Worldwide, Fidessa, Pfizer and Fidelity National Information Services.

In a similar fashion, we have combined our Global Data and Index businesses. The combined unit, Information Services, now has the breadth, depth and similar profile to companies such as MSCI, McGraw-Hill and FactSet. We are also presenting all Market Services segment and Listing Services segment separately. This is something new for us, and by segmenting our business this way, we are providing greater insight into the way we manage our expansive set of products and services to better serve our clients and create greater transparency for the investment community. You will see in the presentation a more detailed breakdown of these businesses.

I'd like to now turn to some of the highlights that drove our performance. In line with the Jack Welch management maxim, we have built a portfolio of trophy assets that are truly remarkable. Virtually all of our businesses, including our 2 most recent acquisitions, are #1 or #2 in their category. All this will help us to deliver consistent returns for our shareholders and will best position us to seize opportunities in the segments in which we compete.

First quarter 2013 non-GAAP EPS of $0.64 is tied for the second highest quarterly performance in our history. Subscription and recurring revenues accounted for 72% of the total first quarter net revenues, the highest level in our history, further emphasizing the balance of our model. Despite a flat to down volume environment versus last year, significant investment in our GIFT initiatives and especially soft U.S. equity trading quarter, our portfolio of corporate, trading, technology and information solutions continue to deliver consistent revenue and earnings performance.

In particular, our revenues rose $4 million to $418 million, increasing slightly year-over-year despite these flat to down volumes. Subscription and recurring revenues grew $13 million or 5%, while transaction-driven revenues declined by $9 million.

Some of the standouts in terms of the performance this quarter were our Market Technology, Corporate Solutions, Data and Index businesses. Revenue in European cash equity trading did increase from fourth quarter to $22 million, while on the European derivatives side, we did benefit from higher contract volumes in equity derivatives, stock index and short-term interest rate products.

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