Financial and Operating Highlights1, 2
- Diluted EPS of $0.46 vs. $0.58, down 21%
- Net revenue of $613 million vs. $640 million, including $19 million negative currency impact
- Fixed operating expenses of $425 million vs. $431 million; down 6% on constant dollar/portfolio basis
- Operating income of $188 million vs. $209 million, including $11 million negative currency impact
- FY 2010 EBITDA margin of 44% vs. 43% in the prior year period
- #1 in U.S. for IPOs with 99 for $39.1 billion, including 22 Chinese companies; 14 transfers valued at $41 billion
- Data centers in Mahwah and Basildon live in 4Q
- Board declares first quarter 2011 cash dividend of $0.30 per share
1 All comparisons versus 4Q09 unless otherwise stated. Excludes merger expenses and exit costs.
2A full reconciliation of our non-GAAP results to our GAAP results is included in the attached tables. See also our statement on non-GAAP financial measures at the end of this earnings release.
NEW YORK – Feb. 8, 2011 – NYSE Euronext (NYX) today reported net income of $135 million, or $0.51 per diluted share for the fourth quarter of 2010, compared to net income of $172 million, or $0.66 per diluted share for the fourth quarter of 2009. Results for the fourth quarter of 2010 and fourth quarter of 2009 include $18 million and $43 million, respectively, of pre-tax merger expenses and exit costs as well as the impact of the requisite reversal of discrete tax reserves. Excluding the impact of these items, net income in the fourth quarter of 2010 was $120 million, or $0.46 per diluted share, compared to $151 million, or $0.58 per diluted share, in the fourth quarter of 2009.
“2010 was a year of significant progress for NYSE Euronext in executing on our key strategic priorities and accelerating the transformation of our business,” said Duncan L. Niederauer, CEO, NYSE Euronext. “We made significant investments in key business areas such as our new data centers, New York Portfolio Clearing and our Universal Trading Platform, and in 2011 our focus will be on leveraging these investments to continue to drive success for our customers and shareholders.”
The table below summarizes our financial results1:
Derivatives |
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Info. Svcs. & Tech. Solutions |
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Revenue1 |
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EBITDA2 |
4Q10 | $188 | $91 | $108 | $310 | $99 | $153 | $114 | $28 | $37 | ||||||
3Q10 | $188 | $93 | $108 | $298 | $101 | $145 | $113 | $24 | $34 | ||||||
4Q09 | $200 | $101 | $119 | $334 | $118 | $160 | $103 | $19 | $25 | ||||||
FY 2010 | $826 | $454 | $514 | $1,241 | $432 | $618 | $444 | $89 | $124 | ||||||
FY 2009 | $723 | $342 | $416 | $1,386 | $519 | $687 | $363 | $54 | $78 |
1 A full reconciliation of our non-GAAP results to our GAAP results is included in the attached tables. See also our statement on non-GAAP financial measures at the end of this earnings release.
2 Includes activity assessment fees.
3 Transaction-based expenses include section 31 fees, liquidity payments and routing & clearing fees.
4 Excludes merger expenses, exit costs and net gains from disposal activities.
Michael S. Geltzeiler, Group Executive Vice President and CFO, NYSE Euronext commented, “Despite a challenging trading volume environment in the second half of 2010, we recorded record volumes in our derivatives business for full-year 2010, we stabilized our core cash markets, our listings business showed renewed strength, our technology business is primed for growth in 2011 and we continued to focus on reducing our fixed expense base. For the full-year 2010, fixed expenses were below the low-end of our full-year guidance range and included significant investments in new business initiatives which generated incremental revenue of approximately $150 million. On a constant dollar, constant portfolio basis, our fixed expenses were down $113 million, or 7% compared to full-year 2009.”
FOURTH QUARTER AND FULL-YEAR 2010 CONSOLIDATED RESULTS
Total revenues, less transaction-based expenses, which include Section 31 fees, liquidity payments and routing and clearing fees (net revenue), was $613 million in the fourth quarter of 2010, down $27 million, or 4% compared to $640 million in the fourth quarter of 2009. The $27 million decrease in net revenue compared to the fourth quarter of 2009 was primarily driven by declines in European Derivatives and U.S. cash average daily trading volumes (ADV) and a $19 million negative impact attributable to foreign currency fluctuations, partially offset by higher technology services revenue in the fourth quarter of 2010. For the full-year 2010, net revenues were $2,511 million, an increase of $33 million, or 1% compared to $2,478 million for full-year 2009. The $33 million increase was driven primarily by the full-year effect of NYSE Liffe Clearing, the acquisition of NYFIX and increased market share on NYSE Amex options, partially offset by reductions in European cash pricing, a $42 million negative impact attributable to foreign currency fluctuations and declines in trading volumes over BlueNext, NYSE Euronext’s environmental trading platform in Europe.
Fixed operating expenses, excluding merger expenses and exit costs, were $425 million, compared to $431 million in the fourth quarter of 2009. Excluding the impact of acquisitions, an $8 million positive impact attributable to foreign currency fluctuations and investment in new businesses, fixed operating expenses were down $25 million, or 6%, compared to fourth quarter 2009. For the full-year 2010, fixed operating expenses were $1,678 million compared to $1,676 million in 2009. Excluding the impact of acquisitions, a $19 million positive impact attributable to foreign currency fluctuations and investment in new businesses, fixed operating expenses were down $113 million, or 7%, compared to full-year 2009.
Operating income, excluding merger expenses and exit costs, was $188 million, down $21 million, or 10% compared to the fourth quarter of 2009 and included an $11 million negative impact attributable to foreign currency fluctuations. For the full-year 2010, operating income was $833 million, compared to $802 million for full-year 2009 and included a $25 million negative impact attributable to foreign currency fluctuations.
Adjusted EBITDA, which excludes merger expenses and exit costs, was $268 million, compared to $275 million in the fourth quarter of 2009. For the full-year 2010, adjusted EBITDA was $1,114 million, compared to $1,068 million for full-year 2009. Adjusted EBITDA margin was 44% in the fourth quarter and full-year 2010, slightly above the 43% recorded in the fourth quarter and full-year 2009.
Non-operating income for the fourth quarter of 2010 includes the impact of the investment in New York Portfolio Clearing (income from associates) and NYSE Liffe U.S. (net loss/income attributable to non-controlling interest) initiatives. Both New York Portfolio Clearing and NYSE Liffe U.S. are currently in a loss position. Non-operating income in the fourth quarter of 2009 included a $0.06 per diluted share positive impact from an LCH.Clearnet special dividend (other income) as well as the impact of the sale of stakes in NYSE Liffe U.S. (net loss/income attributable to non-controlling interest) which resulted in the retroactive sharing of losses with our partners.
The effective tax rate for the fourth quarter and full-year 2010 was approximately 26.5%.
The weighted average diluted shares outstanding in the fourth quarter and full-year 2010 were 262 million shares, up from 261 million shares in the fourth quarter and full-year 2009.
At December 31, 2010, total debt declined $0.3 billion from December 31, 2009 to $2.4 billion and consists of $2.1 billion in long-term debt and $0.3 billion in short-term debt. Cash, cash equivalents, investments and other securities (including $98 million related to Section 31 fees collected from market participants and due to the SEC) was $0.4 billion and net debt was $2.0 billion.
Headcount as of December 31, 2010 was 2,968, down 2% from September 30, 2010 and down 12% from December 31, 2009.
The Board of Directors declared a cash dividend of $0.30 per share for the first quarter of 2011. The first quarter 2011 dividend is payable March 31, 2011 to shareholders of record as of the close of business on March 16, 2011. The anticipated ex-date will be March 14, 2011.
FOURTH QUARTER AND FULL-YEAR 2010 SEGMENT RESULTS
Below is a summary of business segment results:
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Total Revenues2 | $1,045 | $1,050 | $1,130 | (8%) | $4,425 | $4,684 | (6%) | ||||||||||
Total Revenues, Less Transaction-Based Expenses3 | 613 | 599 | 640 | (4%) | 2,511 | 2,478 | 1% | ||||||||||
Other Operating Expenses 4 | 425 | 419 | 431 | (1%) | 1,678 | 1,676 | 0% | ||||||||||
Operating Income 4 | $188 | $180 | $209 | (10%) | $833 | $802 | 4% | ||||||||||
Net Income4 | $120 | $121 | $151 | (21%) | $548 | $533 | 3% | ||||||||||
Diluted Earnings Per Share4 | $0.46 | $0.46 | $0.58 | (21%) | $2.09 | $2.04 | 2% | ||||||||||
Operating Margin | 31% | 30% | 33% | (2 ppts) | 33% | 32% | 1 ppts | ||||||||||
EBITDA Margin | 44% | 42% | 43% | 1 ppts | 44% | 43% | 1 ppts |
1 Net revenue defined as total revenue less transaction-based expenses including section 31 fees, liquidity payments and routing & clearing fees.
2 Excludes merger expenses and exit costs.
DERIVATIVES
Derivatives net revenue of $188 million in the fourth quarter of 2010 decreased $12 million, or 6% compared to the fourth quarter of 2009. The decrease in net revenue was primarily driven by a $7 million negative impact from currency fluctuations and an 8% decline in European derivatives ADV, partially offset by a $4 million, or 10% increase in U.S. options net transaction revenue driven by a 20% increase in U.S. equity options ADV. For the full-year 2010, Derivatives net revenue of $826 million increased $103 million, or 14%, and represented 33% of NYSE Euronext’s total net revenue, up from 29% in 2009. The strong annual performance was driven by record European derivatives ADV, which increased 15%, the full-year effect of NYSE Liffe clearing and strong U.S. options ADV which increased 39% compared to full-year 2009, partially offset by a $13 million negative impact from currency fluctuations.
- The Derivatives segment finished 2010 with record trading volumes. Global Derivatives ADV in 2010 was 8.4 million contracts, an increase of 24% compared to 2009 and consisted of ADV of 4.7 million contracts for total notional of €1.2 trillion executed over NYSE Liffe and ADV of 3.7 million contracts executed over NYSE Euronext ’s U.S. equity options exchanges.
- NYSE Euronext’s U.S. equity options exchanges accounted for 25% of total consolidated U.S. equity options trading in the fourth quarter of 2010 and 26% for full-year 2010 compared to 24% in the fourth quarter of 2009 and 20% for full-year 2009.
- In the fourth quarter of 2010, dividend capture trades as a percentage of total U.S. consolidated equity options ADV increased to approximately 10%, from approximately 6% in the third quarter of 2010. This lower-margin business represents a relatively small percentage of NYSE Euronext’s U.S. equity options business.
- New York Portfolio Clearing (NYPC), the innovative derivatives clearinghouse that will deliver single-pot margin efficiency between fixed income securities and interest rate futures was granted registration by the Commodity Futures Trading Commission (CFTC) as a U.S. Derivatives Clearing Organization (DCO) pursuant to the Commodity Exchange Act. NYSE Liffe U.S. expects to launch trading in Eurodollar and U.S. Treasury Futures in conjunction with the launch of NYPC late in the first quarter of 2011, pending regulatory approval from the SEC.
CASH TRADING AND LISTINGS
Cash Trading and Listings net revenue was $310 million in the fourth quarter of 2010, a decrease of $24 million, or 7% compared to the fourth quarter of 2009. The decrease in net revenue was primarily driven by a 13% decline in U.S. cash ADV, year-over-year pricing changes in European cash and a $9 million negative impact from foreign currency fluctuations. For the full-year 2010, net revenue of $1,241 million decreased $145 million, or 10%, and represented 49% of NYSE Euronext’s full-year 2010 net revenue, down from 56% in 2009. The decline in net revenue was primarily driven by pricing reductions in European cash in 2009, declines in trading volumes over BlueNext, NYSE Euronext’s environmental trading platform in Europe, declines in U.S. cash ADV and a $21 million negative impact from currency fluctuations.
- The Cash Trading and Listings segment experienced relative stability in market share and increased momentum in its listing franchise in 2010. European cash market share (value traded) in NYSE Euronext’s four core markets was 73% in the fourth quarter and full-year of 2010, down from 77% in the fourth quarter of 2009 and 78% for full-year 2009. In the U.S., Tape A matched market share was 35% in the fourth quarter and 36% for the full-year 2010 compared to 37% in the fourth quarter of 2009 and 38% for full-year 2009. Adjusting for trading volume executed “off-exchange”, NYSE Euronext’s market share increased in 2010 compared to 2009.
- A total of 99 IPOs, including a record 22 Chinese companies, listed on NYSE Euronext markets for total proceeds of $39.1 billion in 2010, compared to a total of 44 IPOs for $21.1 billion in 2009.
- A total of 14 companies for a combined market capitalization of over $41 billion transferred to NYSE in 2010, the largest number since 2003. Transfers included Charles Schwab Corp., Knight Trading Group, Corporate Executive Board, United Continental Holdings, Paragon Shipping, GFI Group and Compass Diversified Holdings.
- NYSE Euronext garnered nearly 40% of technology-based IPOs in the U.S. in 2010 and the pipeline for 2011 remains strong. Technology-related IPOs in 2010 included Sensata Technologies, MaxLinear, Calix Networks, Higher One Holdings, Fabrinet, RealD, Green Dot and Envestnet.
INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS
Information Services and Technology Solutions revenue was $114 million in the fourth quarter of 2010, an increase of $11 million, or 11% compared to the fourth quarter of 2009. The increase in revenue was primarily driven by an increase in revenue resulting from the launch of the Mahwah and Basildon data-centers, strong enterprise software sales and the impact of the NYFIX acquisition and was partially offset by a $3 million negative impact from currency fluctuations. For the full-year 2010, revenue of $444 million increased $81 million, or 22%, and represented 18% of NYSE Euronext’s total net revenue, up from 15% in 2009. The increase in revenue was driven by the impact of the NYFIX acquisition and increased Exchange Solutions, SFTI and software sales, partially offset by a $7 negative impact from currency fluctuations.
- The Information Services and Technology Solutions segment achieved its full-year target for revenue from the NYFIX acquisition, signed multi-year managed services agreements with the Tokyo and Warsaw exchanges as well as several mid-tier and global investment banks and experienced increasing momentum in the SFTI sales as well as co-location revenue driven by the launch of NYSE Euronext’s two new state of the art data centers.
- The Risk Management Gateway product is gaining momentum as regulatory focus on sponsored access increases.
- NYSE Technologies was selected by Goldman Sachs to build and support its new Multilateral Trading Facility (MTF), SigmaX. The platform will be hosted and managed by NYSE Technologies from NYSE Euronext’s European Liquidity Center in Basildon.
- The Transactions business continued to expand its Marketplace network, ending the year with over 10,500 direct order channels and approximately 650 buy-side clients.
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The accompanying tables include information integral to assessing the Company’s financial performance.
Analyst/Investor/Media Call: February 8, 2011 at 8:00 a.m. (NY/EDT)/2:00 p.m. (Paris/CET)
A presentation and live audio webcast of the fourth quarter 2010 earnings conference call will be available on the Investor Relations section of NYSE Euronext’s website, http://www.nyseeuronext.com/ir. Those wishing to listen to the live conference via telephone should dial-in at least ten minutes before the call begins. An audio replay of the conference call will be available approximately one hour after the call on the Investor Relations section of NYSE Euronext’s website, http://www.nyseeuronext.com/ir or by dial-in beginning approximately two hours following the conclusion of the live call.
Live Dial-in Information:
United States: 866.700.0133
International: 617.213.8831
Passcode: 78593969
Replay Dial-in Information:
United States: 888.286.8010
International: 617.801.6888
Passcode: 12615423
Non-GAAP Financial Measures
To supplement NYSE Euronext’s consolidated financial statements prepared in accordance with GAAP and to better reflect period-over-period comparisons, NYSE Euronext uses non-GAAP financial measures of performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure, calculated and presented in accordance with GAAP. Non-GAAP financial measures do not replace and are not superior to the presentation of GAAP financial results, but are provided to (i) present the effects of certain merger expenses, exit costs and other special items, and (ii) improve overall understanding of NYSE Euronext’s current financial performance and its prospects for the future. Specifically, NYSE Euronext believes the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to financial condition and operating results. In addition, management uses these measures for reviewing financial results and evaluating financial performance. The non-GAAP adjustments for all periods presented are based upon information and assumptions available as of the date of this release.
NYSE Euronext Earnings News Release with Tables and Operating Data