October 23, 2013 1:08 pm

Nasdaq profits boosted by acquisitions

Nasdaq said net sales and profits were stronger than expected in its third-quarter, as the exchange operator’s results were lifted by the integration of the corporate services unit from Thomson Reuters and a bond-trading platform from BGC Partners.

Revenues increased to $506m, up 22.8 per cent on the same three-month period to September 30 a year ago. Stripping out the gains from the acquisitions, the company said organic sales growth was 4 per cent. Net profit jumped almost 27 per cent to $113m, with earnings of 66 cents a share 14 cents better than a year ago.

The better than expected results came even as the exchange faced scrutiny in the quarter following a problem with a data feed it administers that knocked out trading in nearly all US stocks for three hours on August 22. Nasdaq also recently lost out to rival NYSE Euronext for the Twitter initial public offering.

Consensus forecasts from analysts had estimated sales of $503m and earnings of 62 cents per share for the period, which had seen weaker equity trading volumes and volatility for long portions of the summer months.

Revenues from equity trading fell slightly in the quarter, while its US listings business was flat. Operating costs rose to $304m from $231m a year ago, primarily due to a pick-up in compensation and benefits payments.

The quarterly results provided the first full look at Nasdaq’s recent acquisitions, which were made as the company had said it was looking to balance its equity trading business with other units.

In fixed-income trading, the company reported sales of $18m from eSpeed, which it acquired for $750m. “Higher industry-wide volumes for electronically-traded, on-the-run US Treasury securities were offset by somewhat lower market share compared to the prior period, a function of market share changes before Nasdaq OMX’s ownership,” it said.

The moves for eSpeed and the Thomson Reuters unit, which boosted sales in its technology services unit, were made as a larger deal has eluded Nasdaq.

Its main rival, NYSE Euronext, is closing its takeover by IntercontinentalExchange early next month, while BATS Global Markets and Direct Edge announced plans to tie up in August in a deal that would see the combined entity have a greater share of US equity trading than Nasdaq.

Shares in Nasdaq have climbed 34.4 per cent from the start of the year, but were down slightly in the quarter.

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