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The NASDAQ OMX Group, Inc. (NDAQ)

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The Nasdaq OMX Group (NDAQ)

Q2 2013 Earnings Call

July 24, 2013 8:00 am ET

Executives

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

Analysts

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

Howard Chen - Crédit Suisse AG, Research Division

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division

Christopher Harris - Wells Fargo Securities, LLC, Research Division

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Brian Bedell - ISI Group Inc., Research Division

Michael Carrier - BofA Merrill Lynch, Research Division

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

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the NASDAQ OMX Second 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.

Ed Ditmire

Good morning, everyone, and thanks for joining us today to discuss NASDAQ OMX's second 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 the 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, and good morning, everyone, and thank you for joining us today on this call to discuss NASDAQ OMX's second quarter 2013 earnings results.

We are pleased to announce another solid quarter. Second quarter 2013 net revenues reached a record $451 million, up 8% from the prior year's non-GAAP result, and all 4 business segments showed organic revenue growth. Our non-transaction-based revenues remained near record levels at 72%, emphasizing our sound and unique business model amongst our exchange peers.

Our business is performing well and the results we delivered indicate significant progress and strong execution by this team. And in fact, this is, for me, one of the most exciting times during my tenure here at this organization. We ended the quarter with several significant achievements, which I believe are indicative of the positive growth and evolution of this franchise. We completed 2 transformative acquisitions: Thomson Reuters' IR, PR and Multimedia businesses and eSpeed, a leading platform for the trading of on-the-run benchmark U.S. treasuries.

As you all know, we strive to have accretion or demand accretion within 12 months of closing of the transaction. I'm happy to announce that in the one month we owned the Thomson Reuters' assets from May to June, we had, for the first time, accretion in that very first month. In addition, I'm happy to announce that eSpeed, we're moving the date of accretion up from 12 months to the end of this year.

In addition during the quarter, we launched NLX, a London-based futures market with a unique value proposition to compete with 2 major incumbents across a full spectrum of short and long-term interest rate derivatives, as well as other promising new initiatives like the WorkSpace, virtual data room and the German Power Initiative.

In addition, during the quarter, we raised $600 million -- EUR 600 million with very attractive rates and terms. We had our investment grade ratings affirmed, and on top of all this, as I mentioned earlier, we delivered record revenues. Again, all is coming in the last 3 months. So I would say this is truly remarkable progress, and we are now positioning this company to capture significant opportunities ahead and deliver attractive returns for our shareholders.

When we look at the drivers of our success, it really boils down to 2 key ingredients: clear strategy and quality execution. Our strategy is clear. We lever our technology, our expertise and resources to identify and develop business opportunities. We strive to achieve a #1 or #2 position through unrelenting client and competitive focus. We optimize profitability and capital returns through intense operational focus.

Our strategic objective is to continue to become a deeply embedded provider of product and services to the global market community of investors, issuers, traders, exchangers and regulators, delivering growth, stable cash flows and attractive returns to our investors. Whether it's NLX, eSpeed or Corporate Solutions, we are working to expand our offerings in ways that are important and meaningful to our clients.

Moving to the quality execution aspects of our culture, we have many great examples how we're executing this strategy with our recent acquisitions. I'll discuss some of that in greater detail later on.

As a result of our continued focus in execution, NASDAQ OMX is predominantly either the #1 or #2 player in the businesses we operate, business segments today that represent 96% of our total revenue mix. So for 96% of our revenue, we're either #1 or #2 in those chosen businesses. I would again emphasize that the management team here has done a tremendous job in executing our strategy, and the results you see is that we're competing very well in all these businesses.

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