NASDAQ OMX Group Inc.’s (NDAQ) second quarter operating earnings per share of 62 cents came in a couple higher than the Zacks Consensus Estimate of 60 cents but modestly ahead of 52 cents in the prior-year quarter.
NASDAQ’s GAAP net income came in at $92 million or 51 cents per share, slightly up from $96 million or 46 cents in the year-ago quarter. Results in the reported quarter included $20 million of net merger and strategic initiatives, a sub-lease loss reserve and other non-recurring items.
Excluding this, net income was $112 million compared to $108 million in the year-ago quarter. Besides, total operating earnings, on non-GAAP basis, climbed 2.2% year over year to $187 million.
Total net exchange revenues increased 6.7% year over year to $416 million, marginally exceeding the Zacks Consensus Estimate of $414 million. The increase was attributable to the positive movement in exchange rates and substantial improvement in revenues from market, transaction, issuer services and market technology and derivative trading.
This was, however, marginally offset by reduced cash equity trading and average fees along with lower-than-expected market data revenue and year-over-year decline in volumes.
Segment-wise, Market Services net exchange revenues for the quarter increased 2.6% from the year-ago period to $277 million. Issuer Services revenues for the reported quarter were $93 million, up 8.1% from the year-ago period on modest performance by global index group coupled with growth in global listing services revenue. Market technology revenues grew 35.3% year over year to $46 million.
During the reported quarter, NASDAQ’s order intakes surged substantially to $56 million from $12 million in the year-ago quarter. Consequently, total order value (the value of orders signed that have not been recognized as revenue) improved to $483 million from $453 million in the prior year quarter.
Meanwhile, on non-GAAP basis, operating expenses increased 10.6% from the prior-year period to $229 million, primarily due to costs associated with FTEN, SMARTS and Zoomvision Mamato acquisitions. Exchange rate of various currencies as compared to the U.S. dollar pushed up expenses by $16 million compared to the year-ago quarter.
Consequently, operating margin plummeted to 45% from 47% in the year-ago quarter. On a GAAP basis, total operating expenses surged 22.3% year over year to $258 million.
At the end of June 30, 2011, NASDAQ had cash and equivalents of $578 million, up from $315 million at the end of 2010. Debt obligations lowered to $2.07 billion from $2.18 billion at the end of 2010. While total assets decreased to $14.22 billion, total equity grew to $5.16 billion, over 2010.
Guidance
For fiscal year 2011, NASDAQ management contracted its operating expense outlook to the range of $920-$940 million from the prior range of $910-$925 million. However, the revised guidance excludes approximately $40 million in merger related and other infrequent charges. Management have been aiming to generate annualized net revenue of $2 billion by the end of 2013.
Others
During the reported quarter, NASDAQ processed 30 initial public offerings (IPOs) and raised over $1.3 billion. The most notable IPOs included Yandex NV (YNDX), Zipcar Inc. (ZIP) and HomeAway Inc. (AWAY), among others.
Meanwhile, NASDAQ’s arch-rival NYSE Euronext Inc. (NYX) is scheduled to release its earnings results before the market opens on August 2, 2011.
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