Nasdaq profit hit by deal costs, but tops expectations

(Reuters) - Transatlantic exchange operator Nasdaq Inc NDAQ.O said on Wednesday its quarterly profit fell on acquisition costs following a string of deals, but the results still topped expectations, helped by higher data and technology revenues.

A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City, U.S., October 24, 2016. REUTERS/Shannon Stapleton

Nasdaq net income in the third quarter dropped 5.1 percent to $131 million, or 77 cents per diluted share, compared to $138 million, or 80 cents per diluted share, a year earlier, it said.

Excluding one-time items, Nasdaq earned 91 cents per diluted share, a penny better than analysts expected, according to Thomson Reuters I/B/E/S.

Nasdaq completed four acquisitions in the first half of the year, including its $1.1 billion purchase of options exchange operator International Securities Exchange (ISE) in June.

The New York-based company also bought Canadian stock trading venue CXC and news distribution company Marketwired in February. It acquired business communications firm Boardvantage in May.

“Strategically, these acquisitions play to our core strengths, or down the center of our bowling alley,” Robert Greifeld, Nasdaq’s chief executive officer, said on a conference call.

The exchange industry is in the midst of a wave of consolidation as companies seek to move more trading onto fewer technology platforms to boost profit margins.

Nasdaq rival Bats Global Markets BATS.Z is being acquired by Chicago Board Options Exchange parent CBOE Holdings CBOE.O for $3.2 billion. The London Stock Exchange Group LSE.L is seeking regulatory approval for a proposed $28 billion merger with Deutsche Boerse DB1Gn.DE.

Nasdaq has also been increasing its presence in non-trading related businesses, such as technology sales and corporate relations, which have revenue streams that are less affected by market volumes.

Nasdaq said its market services revenue in the quarter was up 7 percent to $213 million due to the addition of ISE. But it said cash equities revenues slumped 12 percent as more stock trading moved to off-exchange trading venues, such as dark pools, denting Nasdaq’s market share.

Technology solutions revenue, including corporate solutions and market technology, rose 27 percent to $167 million, helped by the Marketwired and Boardvantage acquisitions, as well as higher software licensing and surveillance product revenues.

Information services revenue, which includes market data and index licensing and services, rose 4 percent to $132 million.

Listing services revenue was up 3 percent at $68 million, helped by an increase of company listings in the Nordics.

Overall, revenue increased 11 percent to $585 million.

Operating expenses rose by $54 million from a year earlier to $352 million, due to the acquisition costs.

Reporting by John McCrank in New York and Richa Naidu in Bengaluru; Editing by Sriraj Kalluvila and Will Dunham