Nasdaq Reports Record-Matching Third Quarter 2014 Non-GAAP Net Income and Non-GAAP EPS
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Generated third quarter 2014 non-GAAP diluted EPS of
$0.72 , matching the prior record, a 9% increase year-over-year. Third quarter 2014 GAAP diluted EPS was$0.71 . -
Third quarter 2014 net revenues1 were
$497 million , down 2% year-over-year. Non-transaction based revenues were 74% of our total third quarter 2014 net revenues. -
Non-GAAP operating expenses were
$284 million in the third quarter of 2014, down 7% year-over-year. - Non-GAAP operating margin was 43% in the third quarter of 2014, up from 40% in the third quarter of 2013.
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Reduced non-GAAP operating expense guidance for 2014, to
$1,205 -$1,225 million . -
The company repurchased
$62 million of stock since the beginning of the third quarter of 2014, bringing total repurchases to$156 million since the repurchase program was restarted in the second quarter of 2014. -
A new
$500 million stock repurchase authorization has been approved by the Board of Directors, bringing the total available authorization to approximately$560 million .
"Nasdaq's unmatched contribution of stable, subscription and recurring revenues, and an unrelenting focus on efficiency helped deliver for our shareholders by matching non-GAAP EPS records and creating recent highs in non-GAAP operating margins," said
On a non-GAAP basis, third quarter 2014 operating expenses were
Third quarter 2014 non-GAAP diluted earnings per share was
On a GAAP basis, net income attributable to Nasdaq for the third quarter of 2014 was
"Our unwavering focus on profitability led to declines in expenses, offsetting revenue headwinds from a number of discrete, temporary factors," said
The company repurchased 0.7 million shares, or
The Board has authorized an additional
On
1 Represents revenues less transaction rebates, brokerage, clearance and exchange fees.
BUSINESS HIGHLIGHTS
Market Services (39% of total net revenues) - Net revenues were
Derivatives (13% of total net revenues) - Total net derivative trading and clearing revenues were
Fixed Income (3% of total net revenues) - Total net fixed income trading revenues were
Access and Broker Services (13% of total net revenues) - Access and broker services revenues totaled
Information Services (23% of total net revenues) - Revenues were
Market Data (19% of total net revenues) - Total market data revenues were
Technology Solutions (26% of total net revenues) - Revenues were
Corporate Solutions (15% of total net revenues) - Corporate solutions revenues were
Market Technology (11% of total net revenues) - Market technology revenues were
Listing Services (12% of total net revenues) - Revenues were
UPDATED COST GUIDANCE - The company has lowered non-GAAP operating expense guidance to
CORPORATE HIGHLIGHTS
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In October, Nasdaq Announced Leadership Appointments to Support Strategic Growth Initiatives.
Lars Ottersgård andNelson Griggs were promoted to Executive Vice President of the firm's Market Technology and Listing Services businesses, respectively. John Jacobs, EVP of Information Services, is retiring at year end after over 30 years at Nasdaq, and will continue to serve as a strategic advisor in 2015. Other leadership moves includedBruce Aust , who has been elevated to Vice Chairman, Listing Services, andBob McCooey , who has taken on the development of a new global key account management program. These moves are designed to align leadership responsibility with areas of strategic growth potential, enabling the company to further broaden and deepen client relationships.
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Nasdaq Led U.S. Exchanges for IPOs in Third Quarter of 2014. Nasdaq announced it welcomed 76 new listings in the third quarter of 2014, including 41 initial public offerings (IPOs), on
The NASDAQ Stock Market (NASDAQ), to bring its total IPO count to 140 for 2014. This represents more IPOs than any other U.S. exchange and an 8% increase in IPOs compared to the same quarter last year. Approximately 62% of all U.S. IPOs, including over 50% of technology IPOs and 90% of healthcare IPOs, occurred on NASDAQ. Also, 89% of venture capital-backed IPOs and private-equity backed listings occurred on NASDAQ.
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Market Technology Continues Rolling Out its Solutions to Participants In Financial Markets Across the Globe. In the U.S., swap execution facility trueEX signed up for SMARTS Integrity. In the Nordics, insurance company Folksam purchased the BWise suite, and in the
Middle East , Bahrain Bourse launched trading on the x-Stream platform. In addition, SMARTS was awarded 2014 Waters Rankings "Best Market Surveillance Provider" for the second year in a row by Waters Technology.
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Strong
Momentum in the Licensing of Exchange-Traded Products (ETPs). Nasdaq continues to diversify its licensed product offerings across asset classes and geographies with the launch of 11 new ETPs this quarter. Nasdaq licensed 6 fixed income ETPs and added a second licensed ETP inKorea , bringing the total number of countries with Nasdaq-licensed products to 27.
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Nasdaq eSpeed Introduced U.S. Treasury Bills Trading. Nasdaq eSpeed successfully introduced U.S. Treasury Bills with notional average daily volume exceeding
$4 billion and daily highs exceeding$10 billion . The introduction of TBills to the electronic market is intended to provide customers with efficient price discovery, established liquidity and all the same benefits as anonymous voice brokerages. In addition, the newly created electronic Roll functionality offers eSpeed customers the opportunity to efficiently transfer risk from one U.S. Treasury security to another without incurring market or legging risk.
ABOUT NASDAQ
Nasdaq (Nasdaq:NDAQ) is a leading provider of trading, exchange technology, information and public company services across six continents. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 70 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to more than 3,500 listed companies with a market value of over
NON-GAAP INFORMATION
In addition to disclosing results determined in accordance with GAAP, Nasdaq also discloses certain non-GAAP results of operations, including, but not limited to, net income attributable to Nasdaq, diluted earnings per share, operating income, and operating expenses, that make certain adjustments or exclude certain charges and gains that are described in the reconciliation table of GAAP to non-GAAP information provided at the end of this release. Management believes that this non-GAAP information provides investors with additional information to assess Nasdaq's operating performance by making certain adjustments or excluding costs or gains and assists investors in comparing our operating performance to prior periods. Management uses this non-GAAP information, along with GAAP information, in evaluating its historical operating performance.
The non-GAAP information is not prepared in accordance with GAAP and may not be comparable to non-GAAP information used by other companies. The non-GAAP information should not be viewed as a substitute for, or superior to, other data prepared in accordance with GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties. Nasdaq cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to (i) projections about our future financial results, growth, trading volumes, taxes and achievement of synergy targets, (ii) statements about the closing or implementation dates and benefits of certain strategic, technology, de-leveraging and capital return initiatives, (iii) statements about our integrations of our recent acquisitions, (iv) statements relating to any litigation or regulatory or government investigation or action to which we are or could become a party, and (v) other statements
that are not historical facts. Forward-looking statements involve a number of risks, uncertainties or other factors beyond Nasdaq's control. These factors include, but are not limited to, Nasdaq's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in Nasdaq's filings with the
NDAQF
The NASDAQ OMX Group, Inc. | |||
Condensed Consolidated Statements of Income | |||
(in millions, except per share amounts) | |||
(unaudited) | |||
Three Months Ended | |||
September 30, | June 30, | September 30, | |
2014 | 2014 | 2013 | |
Revenues: | |||
Market Services | $ 515 | $ 544 | $ 499 |
Cost of revenues: | |||
Transaction rebates | (236) | (252) | (231) |
Brokerage, clearance and exchange fees | (85) | (90) | (68) |
Total cost of revenues | (321) | (342) | (299) |
Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees | 194 | 202 | 200 |
Listing Services | 59 | 60 | 57 |
Information Services | 114 | 123 | 117 |
Technology Solutions | 130 | 138 | 132 |
Revenues less transaction rebates, brokerage, clearance and exchange fees | 497 | 523 | 506 |
Operating Expenses: | |||
Compensation and benefits | 136 | 145 | 150 |
Marketing and advertising | 5 | 9 | 7 |
Depreciation and amortization | 34 | 35 | 33 |
Professional and contract services | 37 | 42 | 41 |
Computer operations and data communications | 22 | 23 | 22 |
Occupancy | 26 | 24 | 26 |
Regulatory | 7 | 7 | 8 |
Merger and strategic initiatives | 5 | 14 | -- |
General, administrative and other | 18 | 33 | 17 |
Total operating expenses | 290 | 332 | 304 |
Operating income | 207 | 191 | 202 |
Interest income | 1 | 1 | 2 |
Interest expense | (29) | (30) | (32) |
Loss from unconsolidated investees, net | -- | -- | (1) |
Income before income taxes | 179 | 162 | 171 |
Income tax provision | 56 | 61 | 58 |
Net income | 123 | 101 | 113 |
Net (income) loss attributable to noncontrolling interests | -- | -- | -- |
Net income attributable to Nasdaq | $ 123 | $ 101 | $ 113 |
Per share information: | |||
Basic earnings per share | $ 0.73 | $ 0.60 | $ 0.68 |
Diluted earnings per share | $ 0.71 | $ 0.59 | $ 0.66 |
Cash dividends declared per common share | $ 0.15 | $ -- | $ 0.13 |
Weighted-average common shares outstanding for earnings per share: | |||
Basic | 168.6 | 169.3 | 167.3 |
Diluted | 173.2 | 172.5 | 172.1 |
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Revenue Detail | |||
(in millions) | |||
(unaudited) | |||
Three Months Ended | |||
September 30, | June 30, | September 30, | |
2014 | 2014 | 2013 | |
MARKET SERVICES | |||
Derivative Trading and Clearing Revenues: | |||
U.S. derivative trading and clearing | $ 114 | $ 117 | $ 106 |
Cost of revenues: | |||
Transaction rebates | (68) | (71) | (58) |
Brokerage, clearance and exchange fees | (7) | (8) | (6) |
Total U.S. derivative trading and clearing cost of revenues | (75) | (79) | (64) |
Net U.S. derivative trading and clearing revenues | 39 | 38 | 42 |
European derivative trading and clearing | 27 | 28 | 29 |
Total net derivative trading and clearing revenues | 66 | 66 | 71 |
Cash Equity Trading Revenues: | |||
U.S. cash equity trading | 276 | 295 | 259 |
Cost of revenues: | |||
Transaction rebates | (168) | (181) | (173) |
Brokerage, clearance and exchange fees | (77) | (81) | (61) |
Total U.S. cash equity cost of revenues | (245) | (262) | (234) |
Net U.S. cash equity trading revenues | 31 | 33 | 25 |
European cash equity trading | 21 | 24 | 21 |
Total net cash equity trading revenues | 52 | 57 | 46 |
Fixed Income Trading Revenues: | |||
Fixed income trading | 14 | 15 | 19 |
Cost of revenues: | |||
Brokerage, clearance and exchange fees | (1) | (1) | (1) |
Total net fixed income trading revenues | 13 | 14 | 18 |
Access and Broker Services Revenues | 63 | 65 | 65 |
Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees | 194 | 202 | 200 |
LISTING SERVICES | |||
U.S. listing services | 45 | 45 | 43 |
European listing services | 14 | 15 | 14 |
Total Listing Services revenues | 59 | 60 | 57 |
INFORMATION SERVICES | |||
Market Data Products Revenues: | |||
U.S. market data products | 68 | 72 | 72 |
European market data products | 17 | 21 | 20 |
Index data products | 7 | 8 | 7 |
Total Market Data Products revenues | 92 | 101 | 99 |
|
22 | 22 | 18 |
Total Information Services revenues | 114 | 123 | 117 |
TECHNOLOGY SOLUTIONS | |||
Corporate Solutions Revenues: | |||
Investor relations | 41 | 42 | 47 |
Public relations | 14 | 15 | 12 |
Multimedia solutions | 15 | 18 | 15 |
Governance | 5 | 5 | 4 |
Total Corporate Solutions revenues | 75 | 80 | 78 |
Market Technology Revenues: | |||
Software, license and support | 37 | 41 | 37 |
Change request and advisory | 9 | 8 | 9 |
Software as a service | 9 | 9 | 8 |
Total Market Technology revenues | 55 | 58 | 54 |
Total Technology Solutions revenues | 130 | 138 | 132 |
Total revenues less transaction rebates, brokerage, clearance and exchange fees | $ 497 | $ 523 | $ 506 |
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Condensed Consolidated Balance Sheets | ||
(in millions) | ||
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|
|
2014 | 2013 | |
Assets | (unaudited) | |
Current assets: | ||
Cash and cash equivalents | $ 286 | $ 398 |
Restricted cash | 27 | 84 |
Financial investments, at fair value | 169 | 189 |
Receivables, net | 370 | 393 |
Deferred tax assets | 30 | 12 |
Default funds and margin deposits | 2,513 | 1,961 |
Other current assets | 162 | 126 |
Total current assets | 3,557 | 3,163 |
Property and equipment, net | 288 | 268 |
Non-current deferred tax assets | 585 | 404 |
Goodwill | 5,802 | 6,186 |
Intangible assets, net | 2,213 | 2,386 |
Other non-current assets | 247 | 170 |
Total assets | $ 12,692 | $ 12,577 |
Liabilities | ||
Current liabilities: | ||
Accounts payable and accrued expenses | $ 182 | $ 228 |
Section 31 fees payable to |
26 | 82 |
Accrued personnel costs | 110 | 154 |
Deferred revenue | 191 | 151 |
Other current liabilities | 135 | 141 |
Deferred tax liabilities | 37 | 38 |
Default funds and margin deposits | 2,513 | 1,961 |
Current portion of debt obligations | -- | 45 |
Total current liabilities | 3,194 | 2,800 |
Debt obligations | 2,345 | 2,589 |
Non-current deferred tax liabilities | 677 | 708 |
Non-current deferred revenue | 221 | 143 |
Other non-current liabilities | 137 | 153 |
Total liabilities | 6,574 | 6,393 |
Commitments and contingencies | ||
Equity | ||
Nasdaq stockholders' equity: | ||
Common stock | 2 | 2 |
Additional paid-in capital | 4,354 | 4,278 |
Common stock in treasury, at cost | (1,145) | (1,005) |
Accumulated other comprehensive loss | (325) | (67) |
Retained earnings | 3,231 | 2,976 |
Total Nasdaq stockholders' equity | 6,117 | 6,184 |
Noncontrolling interests | 1 | -- |
Total equity | 6,118 | 6,184 |
Total liabilities and equity | $ 12,692 | $ 12,577 |
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Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income and | |||
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses | |||
(in millions, except per share amounts) | |||
(unaudited) | |||
Three Months Ended | |||
September 30, | June 30, | September 30, | |
2014 | 2014 | 2013 | |
GAAP net income attributable to Nasdaq | $ 123 | $ 101 | $ 113 |
Non-GAAP adjustments: | |||
Merger and strategic initiatives (1) | 5 | 14 | -- |
Extinguishment of debt | -- | 9 | -- |
Special legal expenses | -- | 1 | -- |
Other | 1 | -- | -- |
Total non-GAAP adjustments | 6 | 24 | -- |
Adjustment to the income tax provision to reflect non-GAAP adjustments (2) | (2) | (7) | (3) |
Significant tax adjustments, net (3) | (2) | 2 | 3 |
Total non-GAAP adjustments, net of tax | 2 | 19 | -- |
Non-GAAP net income attributable to Nasdaq | $ 125 | $ 120 | $ 113 |
GAAP diluted earnings per share | $ 0.71 | $ 0.59 | $ 0.66 |
Total adjustments from non-GAAP net income above | 0.01 | 0.11 | -- |
Non-GAAP diluted earnings per share | $ 0.72 | $ 0.70 | $ 0.66 |
Three Months Ended | |||
September 30, | June 30, | September 30, | |
2014 | 2014 | 2013 | |
GAAP operating income | $ 207 | $ 191 | $ 202 |
Non-GAAP adjustments: | |||
Merger and strategic initiatives (1) | 5 | 14 | -- |
Extinguishment of debt | -- | 9 | -- |
Special legal expenses | -- | 1 | -- |
Other | 1 | -- | -- |
Total non-GAAP adjustments | 6 | 24 | -- |
Non-GAAP operating income | $ 213 | $ 215 | $ 202 |
Total revenues less transaction rebates, brokerage, clearance and exchange fees | $ 497 | $ 523 | $ 506 |
Non-GAAP operating margin (4) | 43% | 41% | 40% |
(1) For the three months ended |
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(2) We determine the tax effect of each item based on the tax rules in the respective jurisdiction where the transaction occurred. For the three months ended |
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(3) For the three months ended |
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(4) Non-GAAP operating margin equals non-GAAP operating income divided by total revenues less transaction rebates, brokerage, clearance and exchange fees. |
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Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income and | |||
Operating Expenses to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, and Operating Expenses | |||
(in millions) | |||
(unaudited) | |||
Three Months Ended | |||
September 30, | June 30, | September 30, | |
2014 | 2014 | 2013 | |
GAAP operating expenses | $ 290 | $ 332 | $ 304 |
Non-GAAP adjustments: | |||
Merger and strategic initiatives (1) | (5) | (14) | -- |
Extinguishment of debt | -- | (9) | -- |
Special legal expenses | -- | (1) | -- |
Other | (1) | -- | -- |
Total non-GAAP adjustments | (6) | (24) | -- |
Non-GAAP operating expenses | $ 284 | $ 308 | $ 304 |
(1) For the three months ended |
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Quarterly Key Drivers Detail | |||
(unaudited) | |||
Three Months Ended | |||
September 30, | June 30, | September 30, | |
2014 | 2014 | 2013 | |
Market Services | |||
Derivative Trading and Clearing | |||
U.S. Equity Options | |||
Total industry average daily volume (in millions) | 14.7 | 14.2 | 13.6 |
Nasdaq PHLX matched market share | 16.3% | 15.6% | 16.7% |
The NASDAQ Options Market matched market share | 9.5% | 10.6% | 9.0% |
Nasdaq BX Options matched market share | 0.8% | 0.8% | 1.0% |
Total market share | 26.6% | 27.0% | 26.7% |
Nasdaq Nordic and Nasdaq Baltic | |||
Average daily volume: | |||
Options, futures and fixed-income contracts | 336,759 | 393,115 | 346,940 |
Finnish option contracts traded on Eurex | 65,324 | 55,599 | 116,583 |
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Power contracts cleared (TWh)(1) | 376 | 345 | 363 |
Cash Equity Trading | |||
NASDAQ securities | |||
Total average daily share volume (in billions) | 1.76 | 1.97 | 1.63 |
Matched market share executed on NASDAQ | 26.1% | 26.6% | 24.3% |
Matched market share executed on Nasdaq BX | 2.3% | 2.4% | 2.3% |
Matched market share executed on Nasdaq PSX | 0.5% | 0.5% | 0.7% |
Market share reported to the FINRA/NASDAQ | |||
Trade Reporting Facility | 34.2% | 34.6% | 37.7% |
Total market share (2) | 63.1% | 64.1% | 65.0% |
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Total average daily share volume (in billions) | 3.00 | 3.16 | 3.12 |
Matched market share executed on NASDAQ | 12.5% | 12.6% | 11.3% |
Matched market share executed on Nasdaq BX | 2.4% | 2.6% | 2.3% |
Matched market share executed on Nasdaq PSX | 0.4% | 0.4% | 0.5% |
Market share reported to the FINRA/NASDAQ | |||
Trade Reporting Facility | 31.2% | 31.2% | 33.6% |
Total market share (2) | 46.5% | 46.8% | 47.7% |
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Total average daily share volume (in billions) | 0.92 | 0.92 | 1.02 |
Matched market share executed on NASDAQ | 11.5% | 12.0% | 13.0% |
Matched market share executed on Nasdaq BX | 3.0% | 2.9% | 3.1% |
Matched market share executed on Nasdaq PSX | 1.0% | 0.8% | 1.4% |
Market share reported to the FINRA/NASDAQ | |||
Trade Reporting Facility | 32.5% | 32.2% | 32.4% |
Total market share (2) | 48.0% | 47.9% | 49.9% |
Total U.S.-listed securities | |||
Total average daily share volume (in billions) | 5.68 | 6.05 | 5.77 |
Matched share volume (in billions) | 71.1 | 77.0 | 67.9 |
Matched market share executed on NASDAQ | 16.6% | 17.1% | 15.3% |
Matched market share executed on Nasdaq BX | 2.5% | 2.6% | 2.4% |
Matched market share executed on Nasdaq PSX | 0.5% | 0.5% | 0.7% |
Total market share | 19.6% | 20.2% | 18.4% |
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Average daily number of equity trades | 303,902 | 331,546 | 285,404 |
Total average daily value of shares traded (in billions) | $ 4.0 | $ 4.9 | $ 4.0 |
Total market share | 72.2% | 72.4% | 67.3% |
Listing Services | |||
Initial public offerings | |||
NASDAQ | 41 | 52 | 38 |
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic | 5 | 17 | -- |
New listings | |||
NASDAQ (3) | 76 | 79 | 59 |
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic (4) | 8 | 32 | 5 |
Number of listed companies | |||
NASDAQ (5) | 2,746 | 2,709 | 2,602 |
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic (6) | 778 | 782 | 752 |
Technology Solutions | |||
Market Technology | |||
Order intake (in millions)(7) | $ 28 | $ 32 | $ 120 |
Total order value (in millions)(8) | $ 621 | $ 638 | $ 584 |
(1) Primarily transactions executed on Nord Pool ASA and reported for clearing to |
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(2) Includes transactions executed on NASDAQ's, Nasdaq BX's and Nasdaq PSX's systems plus trades reported through the FINRA/NASDAQ Trade Reporting Facility. | |||
(3) New listings include IPOs, including those completed on a best efforts basis, issuers that switched from other listing venues, closed-end funds and separately listed exchange traded funds (ETFs). | |||
(4) New listings include IPOs and represent companies listed on the exchanges that comprise Nasdaq Nordic and Nasdaq Baltic and companies on the alternative markets of NasdaqFirst North. | |||
(5) Number of listed companies for NASDAQ at period end, including separately listed ETFs. | |||
(6) Represents companies listed on the exchanges that comprise Nasdaq Nordic and NasdaqBaltic and companies on the alternative markets of Nasdaq First North at period end. | |||
(7) Total contract value of orders signed during the period. | |||
(8) Represents total contract value of orders signed that are yet to be recognized as revenue. |
CONTACT: MEDIA RELATIONS CONTACT:Source: The NASDAQ OMX Group, Inc.Joseph Christinat +1.646.441.5121 joseph.christinat@nasdaq.com INVESTOR RELATIONS CONTACT:Ed Ditmire , CFA +1.212.401.8737 ed.ditmire@nasdaq.com
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