NYSE Euronext Announces First Quarter 2010 Financial Results

– First Quarter Diluted EPS of $0.50.
– Diluted EPS of $0.54 Excluding Merger Expenses and Exit Costs; 26% Increase in EPS Versus Prior Year.
– Derivatives Net Revenue Up 44%; Technology Solutions Revenue Up 33% …

Financial and Operating Highlights 1, 2
• New businesses continue to gain traction
• EPS of $0.54, up 26%
• Net revenue of $645 million, up 7% representing the fourth consecutive quarterly increase
• Fixed operating expenses of $427 million, below 4Q09 levels despite impact of NYFIX
• Adjusted operating income of $218 million, up 19%
• Adjusted EBITDA margin of 44% versus 41%
• Board Declares Quarterly Dividend of $0.30 per share
1 All comparisons versus 1Q09 unless otherwise stated. Excludes merger expenses and exit costs.
2 Adjusted EBITDA defined as earnings before interest, taxes, depreciation and amortization, computed as adjusted operating income excluding depreciation and amortization.

NEW YORK – May 4, 2010 – NYSE Euronext (NYX) today reported net income of $130 million, or $0.50 per diluted share for the first quarter of 2010, compared to net income of $104 million, or $0.40 per diluted share for the first quarter of 2009. Results for the first quarter of 2010 and 2009 include $13 million and $23 million, respectively, of pre-tax merger expenses and exit costs. Excluding the impact of these items, net income in the first quarter of 2010 was $140 million, or $0.54 per diluted share, compared to $112 million, or $0.43 per diluted share in the first quarter of 2009.

“Our solid first quarter results were driven by strong growth from our derivatives businesses and the first full-quarter’s impact of the NYFIX acquisition,” said Duncan L. Niederauer, CEO, NYSE Euronext. “We will look to build on this growth with the anticipated regulatory approval and planned third quarter 2010 launch of New York Portfolio Clearing, coinciding with the launch of interest rate futures contracts on NYSE Liffe U.S. and with the go-live of our new data centers in the second-half of the year, which will drive new revenue for our NYSE Technologies business.”

The table below summarizes our results1:

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 Includes transaction-based expenses comprised of section 31 fees, liquidity payments and routing & clearing fees.
4 Excludes merger expenses and exit costs.

Michael S. Geltzeiler, Group Executive Vice President and CFO, NYSE Euronext, commented, “In the first quarter, we continued to execute on those areas of our business we can control and are seeing tangible results. Our new businesses are driving increased revenue, we reduced costs by 10% on a constant dollar, constant portfolio basis and we continued to de-lever with debt to EBITDA levels declining to 2.4 times, down from 2.6 times at the end of 2009. Lastly, the additional transparency of our new segment reporting has served to highlight the strength and diversification of NYSE Euronext for the investment community.”

FIRST QUARTER CONSOLIDATED RESULTS
Total revenue less transaction-based expenses (Net Revenue), which include Section 31 fees, liquidity payments and routing and clearing fees, were $645 million in the first quarter of 2010, up 7% compared to $605 million in the first quarter of 2009. The increase in net revenue compared to the first quarter of 2009 was primarily driven by a 11% increase in net transaction and clearing revenue and a 58% increase in technology services revenue, partially offset by declines in market data and revenue from BlueNext, our environmental trading exchange. First quarter 2010 net revenue compared to the first quarter of 2009 include a $21 million positive impact attributable to foreign currency fluctuations.

Fixed operating expenses, excluding merger expenses and exit costs, were $427 million, compared to $422 million in the first quarter of 2009. Excluding the impact of acquisitions, foreign currency fluctuations and investment in new businesses, fixed operating expenses were down $42 million, or 10% compared to the first quarter of 2009. Headcount as of March 31, 2010 was 3,216, down 4% from December 31, 2009 and down 13% from March 31, 2009.

Operating income, excluding merger expenses and exit costs, was $218 million, up 19% compared to the first quarter of 2009. First quarter 2010 operating income compared to the first quarter of 2009 includes a $10 million positive impact attributable to foreign currency fluctuations.

Adjusted EBITDA, which excludes depreciation and amortization of property and equipment, amortization of intangible assets and merger expenses and exit costs, was $284 million, compared to $251 million in the first quarter of 2009. Adjusted EBITDA margin was 44% in the first quarter of 2010, compared to 41% in the first quarter of 2009.

Non-operating income for the first quarter of 2010 includes some foreign currency losses (other income), the investment in New York Portfolio Clearing (income from associates) and NYSE Liffe U.S. (net income attributable to non-controlling interest) initiatives. Both New York Portfolio Clearing and NYSE Liffe U.S. are currently in a loss position.

The effective tax rate for the first quarter of 2010 was 27.5%, in line with our 2010 guidance.

At March 31, 2010, total debt declined $103 million from December 31, 2009 to $2.7 billion and consists of $2.1 billion in long-term debt and $0.6 billion in short-term debt. Cash, cash equivalents, investments and other securities (including $63 million related to Section 31 fees collected from market participants and due to the SEC) was $0.4 billion and net debt was $2.3 billion. Subsequent to the close of the first quarter of 2010, NYSE Euronext concluded the sale of its stake in the National Stock Exchange of India for gross proceeds of $175 million which will be used to pay down debt.

FIRST QUARTER BUSINESS SEGMENT RESULTS
Beginning with the current quarter’s results, NYSE Euronext has changed its segment reporting to reflect how NYSE Euronext’s primary businesses are managed. The new reportable segments are focused on our three global business units: Derivatives, Cash Trading and Listings, and Information Services and Technology Solutions. The financial results for each reported segment are presented below.

DERIVATIVES
The table below summarizes our first quarter 2010 Derivatives segment results. In the first quarter of 2010, the Derivatives segment represented 35% of net revenue and 51% of operating income (excluding merger expenses and exit costs) for NYSE Euronext, up from 26% and 29%, respectively, in the first quarter of 2009.

1 Transaction-based expenses include section 31 fees, liquidity payments and routing & clearing fees.
2 Excludes merger expenses and exit costs.

• Derivatives net revenue was $224 million in the first quarter of 2010, an increase of $68 million, or 44% from $156 million in the first quarter of 2009 and up $24 million or 12% from the $200 million recorded in the fourth quarter of 2009. The increase in Derivatives net revenue compared to the first quarter of 2009 was primarily driven by a $64 million, or 46% increase in net transaction and clearing revenue principally due to strong European derivatives products and U.S. options trading volumes, as well as the contribution of NYSE Liffe Clearing.

• European derivatives net transaction and clearing revenue of $162 million in the first quarter of 2010 increased $54 million, or 50% compared to the first quarter of 2009. The increase was primarily driven by a 28% increase in European derivatives average daily volume (ADV) to 4.9 million contracts in the first quarter of 2010, from 3.8 million contracts in the prior year period and the addition of NYSE Liffe Clearing revenue. The increase in European derivatives products ADV was primarily driven by a 37% increase in total fixed income products ADV to 2.7 million contracts, compared to ADV of 2.0 million contracts in the first quarter of 2009.

• U.S. equity options net transaction revenue of $42 million in the first quarter of 2010 increased $10 million, or 31% compared to the first quarter of 2009. The increase was primarily driven by a 63% increase in U.S. equity options ADV to 3.7 million contracts in the first quarter of 2010 from 2.3 million contracts in the prior year period.

• NYSE Euronext’s U.S. options exchanges accounted for 27% of the total consolidated equity options trading in the first quarter of 2010, up from 17% in the first quarter of 2009, making NYSE Euronext the largest U.S. options exchange group in the first quarter of 2010.

• Operating income, excluding merger expenses and exit costs, in the first quarter of 2010 was $130 million, a 103% increase compared to $64 million in the first quarter of 2009 and a 29% increase from the fourth quarter of 2009.

• Operating margin, excluding merger expenses and exit costs, was 58%, compared to 41% in the first quarter of 2009 and 51% in the fourth quarter of 2009. Adjusted EBITDA margin was 65%, compared to 54% in the first quarter of 2009 and 60% in the fourth quarter of 2009.

• NYSE Liffe U.S. completed the sale of an ownership stake in the business to DRW Ventures LLC, bringing the total number of equity investors to six including Citadel Securities, GETCO, Goldman Sachs, Morgan Stanley and UBS.

• NYSE Liffe U.S. plans to launch a comprehensive suite of interest rate futures products in the third quarter of 2010 to coincide with the anticipated regulatory approval and launch of New York Portfolio Clearing (NYPC), the new clearing joint venture with DTCC. Interest rate futures products expected to be launched include Eurodollar futures as well as 2-year, 5-year, 10-year and 30-year U.S. Treasury futures, with options on these futures contracts expected to be launched in the fourth quarter of 2010.

CASH TRADING AND LISTINGS
The table below summarizes our first quarter 2010 Cash Trading and Listings segment results. In the first quarter of 2010, the Cash Trading and Listings segment represented 48% of net revenue and 42% of operating income (excluding merger expenses and exit costs) for NYSE Euronext, down from 61% and 66%, respectively, in the first quarter of 2009.

1 Includes impact of activity assessment fees.
2 Transaction-based expenses include section 31 fees, liquidity payments and routing & clearing fees.
3 Excludes merger expenses and exit costs.

• Cash Trading and Listings net revenue was $312 million in the first quarter of 2010, a decrease of $55 million, or 15% from $367 million in the first quarter of 2009 and a $22 million, or 7% from the $334 million recorded in the fourth quarter of 2009. The decrease in net revenue compared to the first quarter of 2009 was primarily driven by a $32 million, or 21% decline in net transaction revenue and a $16 million, or 29% decline in other revenue. The decline in net transaction revenue was principally due to pricing reductions in European cash trading and lower trading volumes and market share in U.S. cash trading. The decline in other revenue was principally due to a decrease in volumes on BlueNext, our environmental trading exchange.

• European cash products net transaction revenue of $69 million decreased $28 million, or 29% from $97 million in the first quarter of 2009. The decline in European cash net transaction revenue was driven primarily by 2009 pricing changes which reduced the average fee per transaction from $1.12 in the first quarter of 2009, to $0.80 per transaction in the first quarter of 2010, including the impact of currency fluctuations. In the first quarter of 2010, European cash trading ADV of 1.4 million transactions was only 0.5% below prior year levels.

• U.S. cash products net transaction revenue of $50 million decreased $4 million, or 7% from $54 million in the first quarter of 2009. The decline in U.S. cash net transaction revenue was primarily driven by a 37% decline in U.S. cash trading volumes and declines in market share, which was partially offset by improved capture rates on NYSE after pricing changes made in March 2009.

• Operating income, excluding merger expenses and exit costs, in the first quarter of 2010 was $106 million, a 27% decline compared to $146 million in the first quarter of 2009 and a 10% decrease from the fourth quarter of 2009.

• Operating margin, excluding merger expenses and exit costs, was 34%, compared to 40% in the first quarter of 2009 and 35% in the fourth quarter of 2009. Adjusted EBITDA margin was 48%, compared to 51% in the first quarter of 2009 and 48% in the fourth quarter of 2009.

• NYSE Euronext’s global listings franchise experienced increased momentum in the first quarter of 2010. Six companies announced transfers to NYSE Euronext markets including Targa Resources Partners, Charles Schwab, Inergy, Inergy Holdings, Paragon Shipping and Kapstone Paper and Packaging for a total market capitalization of $28.7 billion.

• A total of 25 IPOs listed on NYSE Euronext markets for total proceeds of $7.4 billion in the first quarter of 2010, compared to a total of 4 IPOs for $1.2 billion during the same period last year. The $7.4 billion raised on NYSE Euronext markets in the first quarter of 2010 was nearly five times the amount raised by our nearest U.S. competitor during the period according to Dealogic.

• With the launch of U.S. equities on NYSE Arca Europe in the second quarter of 2010, NYSE Euronext clients will be able to trade S&P 100 index components for the first time with clearing and settlement at The Depository Trust Company (DTC) through EuroCCP’s account with DTC.

INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS
The table below summarizes our first quarter 2010 Information Services and Technology Solutions segment results. In the first quarter of 2010, the Information Services and Technology Solutions segment represented 17% of net revenue and 7% of operating income (excluding merger expenses and exit costs) for NYSE Euronext, up from 14% and 5%, respectively, in the first quarter of 2009.

1 Transaction-based expenses include section 31 fees, liquidity payments and routing & clearing fees.
2 Excludes merger expenses and exit costs.

• Information Services and Technology Solutions net revenue was $110 million in the first quarter of 2010, an increase of $27 million, or 33% from $83 million in the first quarter of 2009 and up 7% from $103 million recorded in the fourth quarter of 2009. The increase in net revenue compared to the first quarter of 2009 was primarily driven by the first full quarter’s impact of NYFIX. The first quarter of the year is traditionally the slowest period for software sales.

• Operating income, excluding merger expenses and exit costs, in the first quarter of 2010 was $17 million, a 55% increase compared to $11 million in the first quarter of 2009 and a 11% decline from the fourth quarter of 2009.

• Operating margin, excluding merger expenses and exit costs, was 15%, compared to 13% in the first quarter of 2009 and 18% in the fourth quarter of 2009. Adjusted EBITDA margin was 23%, compared to 20% in the first quarter of 2009 and 24% in the fourth quarter of 2009.

• Advanced cabinet reservations for both our new U.S. and UK data centers continue to be strong with both data centers nearly full-subscribed for cabinet space.

• NYSE Euronext has established real-time market data delivery service to Brazil through a partnership with Universal Telecom (Unitelco) using NYSE Technologies’ SuperFeed. SuperFeed provides on-demand access to consolidated and direct market data from over 30 markets in the U.S., Canada, Europe and Asia.

CORPORATE AND ELIMINATIONS
Summarized below are the results for Corporate and Eliminations. Corporate and Eliminations includes unallocated costs primarily related to corporate governance, public company expenses, one-time integration costs related to the new data centers, as well as intercompany eliminations of revenues and expenses.

1 Transaction-based expenses include section 31 fees, liquidity payments and routing & clearing fees.
2 Excludes merger expenses and exit costs.

NM=Not meaningful

Source: ETFWorld – NYSE Euronext