NYSE Euronext Announces Second Quarter 2011 Financial Results

Second Quarter GAAP Diluted EPS of $0.59 vs. $0.70 in the Prior Year Period
Diluted EPS of $0.61 vs. $0.64, Excluding Merger Expenses, Exit Costs & Disposal Activities
Global Leader for IPOs in the First-Half of 2011 Reflecting Continued Momentum in Global Listings Franchise
Shareholders of NYSE Euronext and Deutsche Boerse Approve Business Combination

Financial and Operating Highlights^{1, 2}

Diluted EPS of $0.61 vs. $0.64, down 5% vs. 2Q10
Net revenue of $661 million, up 1% vs. 2Q10 including $33 million positive FX impact
Fixed operating expenses of $419 million, down 3% on a constant dollar/portfolio basis vs. 2Q10
Operating income of $242 million, down 2% vs. 2Q10 including $16 million positive FX impact
Technology segment revenue increases 14% vs. 2Q10; operating margin increases to 30% from 19%
Debt-to-EBITDA ratio declines to 1.7 times with elimination of short-term debt
Board declares third quarter 2011 cash dividend of $0.30 per share

¹All comparisons versus 2Q10 unless otherwise stated.Excludes merger expenses, exit costs, disposal activities and discrete tax items.
² 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.

NYSE Euronext (NYX) today reported net income of $154 million, or $0.59 per diluted share, for the second quarter of 2011, compared to net income of $184 million, or $0.70 per diluted share, for the second quarter of 2010. Results for the second quarter of 2011 and 2010 include $18 million and $32 million, respectively, of pre-tax merger expenses and exit costs. The $18 million in merger expenses and exit costs in the second quarter of 2011 included $12 million related to the proposed merger with Deutsche Boerse. Second quarter of 2010 results also included a net $54 million pre-tax gain from disposal activities. Excluding merger expenses, exit costs, disposal activities and discrete tax items, net income in the second quarter of 2011 was $160 million, or $0.61 per diluted share, compared to $167 million, or $0.64 per diluted share, in the second quarter of 2010.

“Our solid results in the second quarter reflect our focus on revenue diversification, disciplined cost management and balance sheet strength as we continue to execute against our long-term strategy in an extremely challenging environment,” said Duncan L. Niederauer, CEO, NYSE Euronext. “NYSE Liffe U.S. continues to gain traction with the launch of Eurodollar and U.S. treasury futures, we closed the sale of stakes in NYSE Amex Options and we were the global leader in IPOs for the second consecutive quarter, with a growing share of technology IPOs selecting NYSE. Lastly, our technology services business, which grew revenue 14% year-over-year, launched the first cloud computing platform in financial services.

“I would like to thank the shareholders of both NYSE Euronext and Deutsche Boerse for their overwhelming support of our pending combination. Integration planning is on schedule and we continue to cooperate with all our regulators as we prepare for a closing by end of 2011.”

The table below summarizes the financial results¹ for the second quarter of 2011:

% Δ 2Q11

Year-to-Date

% Δ YTD 11

($ in millions, except EPS)

2Q11

1Q11

2Q10

vs. 2Q10

2011

2010

vs. YTD 10

Total Revenues²

$1,092

$1,148

$1,247

(12%)

$2,240

$2,330

(4%)

Total Revenues, Less Transaction-Based Expenses³

661

679

654

1,340

1,299

Other Operating Expenses⁴

419

415

407

834

Operating Income⁴

$242

$264

$247

(2%)

$506

$465

Net Income⁴

$160

$177

$167

(4%)

$337

$307

10%

Diluted Earnings Per Share⁴

$0.61

$0.68

$0.64

(5%)

$1.28

$1.18

Operating Margin

37%

39%

38%

(1 ppts)

38%

36%

2 ppts

EBITDA Margin

47%

49%

48%

(1 ppts)

48%

46%

2 ppts

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, disposal activities and discrete tax items.

Michael S. Geltzeiler, Group Executive Vice President and CFO, NYSE Euronext commented, “In the second quarter, we continued to deliver on our commitments to shareholders. Revenues year-to-date are running 3% above prior year levels and fixed operating expenses on a constant dollar/portfolio basis are running 4% below prior year, despite increased costs accompanying higher technology revenues. As a result of our strong free cash flow generation and lower capital expenditures, we retired our outstanding commercial paper which lowered our debt-to-EBITDA ratio to 1.7 times in the second quarter. Our financial position continues to strengthen as we move forward with the final phase of our combination with Deutsche Boerse.”

SECOND QUARTER 2011 CONSOLIDATED RESULTS

Total revenues, less transaction-based expenses, which include Section 31 fees, liquidity payments and routing and clearing fees (net revenue), was $661 million in the second quarter of 2011, up $7 million, or 1% compared to the second quarter of 2010 and included a $33 million positive impact from currency fluctuations. The $7 million increase in net revenue compared to the second quarter of 2010 was driven by a $30 million increase in non-trading revenue which more than offset a $23 million decrease in net trading revenues, driven primarily by declines in European derivatives and U.S. cash equity average daily trading volume (“ADV”). Second quarter of 2010 ADV across all venues was marked by unseasonally strong trading volumes due to heightened market volatility driven by the advent of the sovereign debt crisis in Europe and the flash crash in the United States.

Other operating expenses, which exclude merger expenses and exit costs, were $419 million in the second quarter of 2011, up $12 million, or 3% compared to the second quarter of 2010. Excluding the impact of acquisitions, new initiatives and a $17 million negative impact attributable to foreign currency fluctuations, fixed operating expenses were down $14 million, or 3%, compared to the second quarter of 2010.

Operating income, excluding merger expenses and exit costs, was $242 million, down $5 million, or 2% compared to the second quarter of 2010 and included a $16 million positiveimpact attributable to foreign currency fluctuations.

Adjusted EBITDA, which excludes merger expenses and exit costs, was $312 million, in-line with the second quarter of 2010. Adjusted EBITDA margin was 47% in the second quarter of 2011, compared to 48% in the second quarter of 2010.

Non-operating income for the second quarter of 2011 and 2010 includes the impact of the New York Portfolio Clearing (loss/income from associates) and NYSE Liffe U.S. (net loss/income attributable to non-controlling interest) initiatives which are currently in a loss position, but are moving toward profitability as trading volumes and open interest continue to grow. Non-operating income in the second quarter of 2010 includes a net pre-tax gain of $54 million related to disposal activities, primarily in connection with the sale of our 5% stake in the National Stock Exchange of India (other income). With the closing of the sale of stakes in the NYSE Amex Options business, beginning with the third quarter of 2011, profits generated by NYSE Amex Options will be shared with our partners (net loss/income attributable to non-controlling interest). Had the sale closed on April 1, 2011, diluted earnings per share would have decreased by $0.02 in the second quarter of 2011.

For the second quarter of 2011, the effective tax rate, excluding merger expenses, exit costs, disposal activities and discrete tax items, was approximately 26% compared to 27% in the second quarter of 2010.

The weighted average diluted shares outstanding in the second quarter of 2011 was 263 million, up from 261 million shares in the second quarter of 2010. Approximately 0.3 million shares were issued in the second quarter of 2011 to former Amex members in connection with the sale of the former American Stock Exchange headquarters.

At June 30, 2011, total debt of $2.2 billion was $0.2 million below December 31, 2010 levels driven by the elimination of $0.2 billion in commercial paper during the second quarter of 2011. Cash, cash equivalents, investments and other securities (including $172 million related to Section 31 fees collected from market participants and due to the SEC) was $0.4 billion and net debt was $1.8 billion at the end of the second quarter 2011.

The ratio of debt-to-EBITDA in the second quarter of 2011 declined to 1.7 times, the lowest level since the establishment of NYSE Euronext in April 2007.

Total capital expenditures in the second quarter of 2011 were $31 million, compared to $70 million in the second quarter of 2010. Through the first-half of 2011, capital expenditures were $67 million consistent with full-year 2011 guidance of capital expenditures of less than $200 million.

Headcount as of June 30, 2011 was 2,988, down 1% from March 31, 2011 and down slightly from June 30, 2010 levels despite several acquisitions.

The Board of Directors declared a cash dividend of $0.30 per share for the third quarter of 2011. The third quarter 2011 dividend is payable September 30, 2011 to shareholders of record as of the close of business on September 15, 2011. The anticipated ex-date will be September 13, 2011.

SECOND QUARTER 2011 SEGMENT RESULTS

Below is a summary of business segment results:

Derivatives

Cash Trading & Listings

Info. Svcs. & Tech. Solutions

($ in millions)

Net

Operating

Adjusted

Net

Operating

Adjusted

Operating

Adjusted

Revenue1

Income2

EBITDA2

Revenue1

Income2

EBITDA2

Revenue

Income2

EBITDA2

2Q11

$213

$112

$126

$327

$128

$174

$122

$36

$46

1Q11

$236

$146

$161

$328

$125

$171

$116

$28

$37

2Q10

$226

$140

$153

$321

$126

$171

$107

$20

$28

¹Net 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 $213 million in the second quarter of 2011 decreased $13 million, or 6% compared to the second quarter of 2010 and included a $15 million positive impact from currency fluctuations. The $13 million decrease in Derivatives net revenue compared to the second quarter of 2010, was driven by a $13 million, or 8% decrease in European derivatives net trading revenue on a 20% decline in ADV.

Global Derivatives ADV in the second quarter of 2011 was 9.4 million contracts, a decrease of 12% compared to the second quarter of 2010which benefited from heightened market volatility driven by the advent of the sovereign debt crisis in Europe.
NYSE Euronext European derivatives products ADV in the second quarter of 2011 of 5.3 million contracts decreased 20% compared to the second quarter of 2010, but increased 14% from first quarter 2011 levels.
NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext, reached several key milestones in customer participation with total open interest surpassing 750,000 contracts and approaching 800,000. In the four months since the launch Eurodollar and U.S. Treasury futures on the exchange, open interest in these two new products is just under 675,000 with more than 6 million total contracts traded. The level of volume, open interest and liquidity is evidence of the rapid acceptance of NYSE Liffe U.S. by customers. Also during the second quarter, NYSE Liffe U.S. successfully migrated futures contracts based on the international flagship MSCI Emerging Markets and MSCI EAFE indices from the Chicago Mercantile Exchange.
NYSE Euronext completed the sale of a 52.8% equity interest in NYSE Amex Options to seven leading order flow providers and market making firms: Bank of America Merrill Lynch, Barclays Capital, Citadel Securities, Citi, Goldman Sachs, TD Ameritrade and UBS AG. NYSE Euronext will remain the largest single shareholder in the entity which will be supervised by a separate board of directors.
NYSE Euronext’s U.S. equity options exchanges accounted for 26% of total consolidated U.S. equity options trading in the second quarter of 2011, in-line with the second quarter of 2010.

CASH TRADING AND LISTINGS

Cash Trading and Listings net revenue of $327 million in the second quarter of 2011 increased $6 million, or 2% compared to the second quarter of 2010 and included a $13 million positive impact from currency fluctuations. The $6 million increase in net revenue compared to the second quarter of 2010, was primarily driven by a $14 million increase in non-trading related revenue, principally listings and other revenue which more than offset a decline in net trading revenue. The decline in net trading revenue was primarily driven by a 36% decrease in U.S. cash equities ADV, partially offset by a 32% increase in average net revenue per 100 shares handled due to higher fees and favorable business mix.

European cash ADV of 1.5 million transactions in the second quarter of 2011 decreased 11% from 1.7 million transactions in the second quarter of 2010. European cash market share (value traded) in NYSE Euronext’s four core markets was 71% in the second quarter of 2011, down from 74% in the second quarter of 2010, but up from 70% in the first quarter of 2011. In the U.S., cash trading ADV declined 36% to 2.1 billion shares traded from 3.2 billion in the second quarter of 2010. Tape A matched market share was 35% in the second quarter of 2011, down from 37% in the second quarter of 2010, but up slightly from first quarter of 2011 levels.
NYSE Euronext led the global market for listing initial public offerings (IPOs) in the first half of 2011 with $25.4 billion in total capital raised on its European and U.S. markets, more than any exchange group in the world. During the most recent quarter, the New York Stock Exchange (NYSE) led the U.S. IPO market, with 35 IPOs raising $10.6 billion, or 73% of total proceeds raised from IPOs in the U.S.
NYSE has steadily captured share in technology-based IPOs with its commitment to partner with growth companies. NYSE has listed 17 out of 31, or 55% of the tech IPOs YTD, up from 44% in 2010. LinkedIn, Active Network, Fusion-io and Pandora’s offerings came amid a recent fervor for high-profile tech IPOs.
The NYSE has welcomed 6 transfers from Nasdaq with total market capitalization of $6.3 billion thus far in 2011, and lost none. SuccessFactors Inc. was the most recent transfer from Nasdaq to the NYSE and cross-listed on the European markets of NYSE Euronext. This follows the recent trend for transfers, with 40 companies having transferred to the NYSE from Nasdaq since 2007.

INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS

Information Services and Technology Solutions revenue was $122 million in the second quarter of 2011, an increase of $15 million, or 14% compared to the second quarter of 2010 and included a $5 million positive impact from currency fluctuations. The $15 million increase in revenue compared to the second quarter of 2010, was primarily driven by an increase in infrastructure revenue, principally SFTI and data center fees.

The Information Services and Technology Solutions segment achieved its highest level of quarterly revenue generation with an operating margin of 30% as the sales pipeline continues to build.
NYSE Technologies launched the financial services industry’s first cloud platform, the Capital Markets Community Platform. Designed to increase business agility, simplify market access and reduce trading friction by utilizing rapid on-demand computing resources, this enterprise-level platform was developed in partnership with cloud computing experts VMware (NYSE: VMW) and EMC (NYSE: EMC) to address the unique performance and security requirements of financial services firms. The Capital Markets Community Platform will offer a range of cloud-based services that enable customers to easily purchase the computing power required at a given time so they can focus on their core business strategy rather than complex IT infrastructure design and maintenance.
NYSE Technologies was named the “Best Data Provider” among global securities exchanges by Inside Market Data. This recognition was awarded at the 2011 Inside Market Data and Inside Reference Data Awards ceremony recently in New York. The acknowledgement of NYSE Technologies as a leading innovator and comprehensive data provider was determined by an online poll of buy-side and sell-side professionals as well as investors at financial institutions and securities firms globally.

The accompanying tables include information integral to assessing the Company’s financial performance.

Analyst/Investor/Media Call: August 2, 2011 at 8:00 a.m. (NY/EDT)/2:00 p.m. (Paris/CEST)
A presentation and live audio webcast of the second quarter 2011 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: 866.713.8310
International: 617.597.5308
Passcode: 62542406

Replay Dial-in Information:
United States: 888.286.8010
International: 617.801.6888
Passcode: 16712451

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, disposal activities and discrete tax 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