By Lisa Beilfuss And Bradley Hope
Nasdaq OMX Group Inc. said its profit dropped in the first
quarter, hurt by restructuring-related expenses and changes in
foreign-exchange rates.
The company's earnings topped estimates, while revenue fell
short.
The exchange operator has attempted to combat the effects of
foreign-exchange fluctuations through expense controls and on
Thursday lowered its expense forecast for the year, pointing to the
impact of its restructuring efforts in the first quarter.
"Our performance at this particular point in time in our
evolution is merely a starting point for us to build upon," said
Robert Greifeld, chief executive of Nasdaq, said on a conference
call on Thursday morning.
He said the company had "solid" financial performance "despite
all of the elevated FX headwinds."
The restructuring initiated during the period will eliminate $17
million to $19 million in annual costs, the company said, through
lower compensation, real estate and technology expenses. Operating
costs were $480 million in the latest period, up from $345 million
a year earlier.
In all, Nasdaq reported a profit of $9 million, or five cents a
share, down from $103 million, or 59 cents, a year earlier.
Excluding certain items, per-share earnings rose to 80 cents from
72 cents.
Revenue decreased 4% to $507 million, hurt by foreign-exchange
rates. Excluding that impact, among other items, revenue was
flat.
Analysts projected 78 cents in per-share profit on $516.6
million in revenue, according to Thomson Reuters.
Chris Allen, an analyst at Evercore Partners, said in a research
note that he did not "see much to get excited about" in the
first-quarter results, but maintained a positive view of the
stock.
Market services revenue, which contributes 37% to the exchange's
top line, fell 9.6% to $188 million, as revenue in most segments
fell. Trading revenue from cash equities, though, rose 3.5% to $59
million on higher average capture and European industry
volumes.
Revenue from information services increased 1.6% while
technology solutions fell 1.7%. Each represents about a quarter of
overall revenue.
Despite busier markets over the quarter, Nasdaq saw its market
share in cash equities decline to 51.1% from 52.9% a year earlier
and its daily average volume in fixed income, currency and
commodity trading fall to 8.4 billion from 9.9 billion trades.
Nasdaq announced in March it would launch a new energy-futures
market to compete with rival exchange operators, Intercontinental
Exchange Inc. and CME Group Inc. Mr. Greifeld said the new venture
would start trading "later this year" on the conference call.
Over the period, Nasdaq repurchased $30 million in stock. The
company has increased buybacks of late as it struggled to find a
good place to invest excess cash.
In addition, the exchange raised its quarterly dividend to 25
cents a share from 15 cents.
Nasdaq now expects expenses of $1.06 billion to $1.1 billion for
the year, down from the January estimate of $1.12 billion to $1.15
billion.
Shares, up about 11% this year through Wednesday's close, were
inactive in premarket trading.
Nasdaq also disclosed on Thursday that it had established a $31
million reserve fund for litigation arising from the IPO of
Facebook Inc. in 2012.
Nasdaq had problems with some of its systems that day, leading
to confusion and trading issues across Wall Street. Nasdaq agreed
to pay a $10 million fine to settle Securities and Exchange
Commission charges that it mishandled the IPO. As part of the
settlement, Nasdaq did not admit or deny the charges.
The new reserve is "intended to cover the amount of a settlement
of class-action litigation initiated on behalf of investors in
Facebook," Nasdaq said in its first quarter financial filing to the
SEC.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com and Bradley Hope
at bradley.hope@wsj.com
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