Nasdaq OMX Group Inc. (NDAQ) announced first-quarter operating earnings per share of 43 cents, which lagged behind the Zacks Consensus Estimate and prior quarter earnings of 46 cents. Also, operating earnings declined substantially from 48 cents in the prior-year quarter. Total operating earnings, on a non-GAAP basis, were $92 million, down from $99 million in the prior quarter and $102 million in the year-ago quarter.

Nasdaq’s GAAP net income was $61 million or 28 cents per share, up from $43 million or 20 cents in the prior quarter but down from $94 million or 44 cents in the year-ago quarter. Results included $40 million in charges related to the recognition of unamortized debt issuance costs associated with a credit facility refinanced in the reported quarter, and costs to terminate an associated interest rate swap along with $7 million in asset divestments and other non-recurring expenses. This was partially offset by a Swedish tax benefit of $5 million.

Total net exchange revenues declined 2% year over year to $360 million due to the negative impact of exchange rates and declining revenues from marketing and transaction services, market data and cash equity trading. Moreover, declining volumes and lower average net fee per share on Nasdaq’s trading system weakened the results.

Market Services net exchange revenues for the quarter declined 7% from the year-ago period to $241 million, but was flat from the previous quarter. Issuer Services revenues for the reported quarter were $84 million, flat from the previous quarter but up 5% from the year-ago period on robust performance from the global index group that was partially offset by weakness in global listing services revenue. Market technology revenues increased 17% from the year-ago period to $34 million, primarily due to the increased delivery of customer orders currently in production and for which revenue is recognized now. However, this declined 23% from the previous quarter due to the changes in the exchange rates of various currencies as compared to the U.S. dollar.

During the reported quarter, order intakes improved, increasing to $50 million from $9 million in the year-ago quarter. Total order value (the value of orders signed that have not been recognized as revenue) increased to $496 million from $340 million in the prior year quarter.

On a GAAP basis, total operating expenses increased to $248 million from $203 million in the previous-year quarter. On a non-GAAP basis, operating expenses increased 4% from the prior-year period to $201 million, primarily due to changes in the exchange rates of various currencies as compared to the U.S. dollar, which effectively increased expenses by $11 million.

At the end of Mar 31, 2010, Nasdaq had cash and equivalents of $535 million, debt obligations of $1.99 billion and total equity of $4.93 billion.

Share Repurchase Update

In Mar 2010, the Board of Nasdaq approved a share repurchase program, authorizing Nasdaq to repurchase in the aggregate up to $300 million of its outstanding common stock. During the first quarter of 2010, Nasdaq repurchased 2.3 million shares of common stock with an aggregate principal value of $46 million. As of Apr 30, 2010, the company has acquired 3.7 million shares with a total market value in excess of $76 million.

Debt Restructure Update

Moving ahead with its debt restructuring strategies, Nasdaq completed its $1 billion underwritten public offering of senior notes and borrowing from the $950 million senior unsecured credit facility in Jan 2010. The new credit facility includes a $700 million funded term loan and a $250 million unfunded revolver.

The company used the net proceeds from the notes offering along with the borrowings from the new senior unsecured credit facilities and cash on hand to repay all outstanding debt taken under its existing senior secured credit facilities and cease the associated credit agreement.

Nasdaq is expected to benefit from the current debt restructuring, as trimming its old debts will help generate financial flexibility, while liberating it from the stringent terms and conditions of the old credit facility that allowed only a restricted utility of the borrowings. However, the current high rate of interest associated with the new loans may weigh on the company’s bottom-line in the upcoming quarters.

Overall, the issue of current debt offerings is crucial to Nasdaq given the company’s competitive environment in the backdrop of the current favorable economic trends that could provide more opportunities and leverage.

Guidance

For fiscal year 2010, Nasdaq management now expects total operating expenses to be in the range of $875-$890 million, including about $65 million in non-recurring costs. The company projects recurring quarterly tax benefits of $4 million to $5 million with respect to the Swedish tax benefit for the second quarter of 2010

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