The NASDAQ OMX Group, Inc. (NDAQ)

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Q4 2013 Earnings Call

February 05, 2014 08:00 am ET


Ed Ditmire - Investor Relations

Bob Greifeld - Chief Executive Officer

Lee Shavel - Chief Financial Officer


Rich Repetto - Sandler O'Neill

Kenneth Hill - Barclays

Dan Fannon - Jefferies

Jillian Miller - BMO Capital Markets

Bill Katz - Citi

Ken Worthington - JPMorgan

Rob Rutschow - CLSA

Michael Carrier - Bank of America Merrill Lynch



Good day, ladies and gentlemen, and welcome to The NASDAQ OMX Fourth Quarter 2013 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Ed Ditmire, Head of Investor Relations. Sir, you may begin.

Ed Ditmire

Good morning, everyone, and thanks for joining us today to discuss NASDAQ OMX's fourth quarter 2013 earnings results. On the line are Bob Greifeld, our CEO, Lee Shavel, our 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, non-public 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.

Now I will turn the call over to Bob.

Bob Greifeld

Thank you, Ed, and thank you everybody for joining us on this very difficult morning. I want to start by saying we are very pleased to announce record fourth quarter 2013 results. It truly caps another exceptional year for our franchise. While the quarter featured record revenues, non-GAAP net income and non-GAAP EPS perhaps what is most noteworthy for us is that we achieved this while also making significant strategic investments in our future.

The progress and strong performance across our core businesses provides us the flexibility that allows us to make critical investments in our future such as NLX, our interest rate derivatives exchange in London, NASDAQ private markets are offering to help private companies manage their interactions with investors and our lead to cash initiative which we expect to make our back office interactions with our Corporate Solution customers more efficient while also delivering outstanding results.

When we look at the underlying reasons for our performance in 2013, and in particular the fourth quarter, it is impressive to recognize the progress across all our business segments, clearly highlighting the soundness of our strategy and approach. Let me highlight some of the major factors contributing to the $1.9 billion record revenue we achieved during the year. We saw a strong performance in Technology Solutions, in particular the doubling of our revenue Corporate Solutions to $230 million.

We also grew our Market Technology business, which achieved record revenue of $219 million, up 12% year-on-year. In fact, in the fourth quarter, we saw organic growth across all our non-transaction business segments, including Information Services Technology Solutions and Listing Services, leading to a 5% overall organic revenue growth in the period.

One of the standout performers in particular was our Index Licensing and Services group. In 2013, revenue grew to a record $74 million, up 17% year-on-year. We made significant progress diversifying and expanding our product offerings by launching 22,000 new indices. We are now one of the only providers that have licensed products covering every major asset class. Clearly, our diverse high-quality revenue mix with 73% coming from recurring and subscription sources and over 60% of our trading revenues coming from the derivatives and fixed income categories has been a core driver in the returns we deliver to our shareholders.

Looking at the bottom line, on a non-GAAP basis fourth quarter 2013 EPS of $0.69 was up 8% versus the prior year quarter of $0.64, but the non-GAAP operating income, up 11% year-over-year. More important than the numbers for this quarter and the year 2013 is the fact that our customers, partners and stakeholders fundamentally recognized the substantial and unique value that NASDAQ OMX provides.

As I mentioned on this call before, our objective is to become a well-established provider of a diversified portfolio of services to the financial and corporate community. Given the strength of our competitive position, with 96% of our revenue is generated from businesses where were either number one or number two, we are executing on that strategy quite well.

Now, I want to turn to some of broad business highlights that define our quarter and the results we delivered, but more importantly how we expanded our capabilities and delivered more value to our customers and also to our shareholders. When we think about the journey this organization has been on since beginning. Over 40 years ago, our technology and expertise in technology have been the drivers behind the value we deliver in the marketplace. As proof of that, as previously mentioned, our Technology Solutions segment had a truly outstanding quarter, with record revenues driven by all-time highs in both, the Market Tech and Corporate Solutions businesses.

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