The FINANCIAL -- NYSE Euronext (NYX) one of the leading global operators of financial markets and provider of innovative trading technologies, on February 9 reported net income of $172 million, or $0.66 per diluted share for the fourth quarter of 2009, compared to a net loss of ($1,338) million, or ($5.06) per diluted share for the fourth quarter of 2008.
"Fourth quarter 2009 GAAP results include the impact of merger expenses and exit costs and the requisite reversal of discrete tax reserves. Fourth quarter 2008 results include the impact of merger expenses and exit costs and a non-cash charge for the impairment of certain goodwill and indefinite-lived intangible assets. Non-GAAP diluted earnings per share excluding these items was $0.58 in the fourth quarter of 2009, compared to $0.52 in the fourth quarter of 2008," NYSE Euronext reports.
“Our fourth quarter and full-year results were solid, reflecting growing revenue and earnings power driven by our new businesses and our continuing efforts to harmonize our technology infrastructure and trading platforms,” said Duncan L. Niederauer, CEO, NYSE Euronext. “With the addition of NYFIX Marketplace, we expanded our customer base and points of connectivity with our trading communities. We moved forward with the semi-mutualization of our U.S. futures platform, and we plan to do the same with the NYSE Amex options business. We continue to make progress with the migration to the Universal Trading Platform that will provide global scale and will be a competitive differentiator and with our data center build-out nearly complete, we will expand the suite of technology services we offer our clients today, while enhancing our ability to develop the cutting-edge products of the future.”
Michael S. Geltzeiler, Group Executive Vice President and Chief Financial Officer, NYSE Euronext, commented, “Our fourth quarter results represented the third consecutive quarterly increase in net revenue and earnings per share, reflecting increasing momentum in our business model and the continuing benefit of our various cost reduction programs. For the full-year 2009, we recorded fixed operating expenses of $1,683 million, well below the $1,742 million for full-year 2008, despite the addition of several new businesses including the former Amex businesses, NYSE Liffe Clearing and NYFIX. On a constant portfolio and constant currency basis, our underlying expense base was down $195 million, or 11% when compared to full-year 2008. As we move into 2010, our new initiatives are gaining traction, we are aggressively moving forward with the NYFIX integration and we expect to realize the full-year benefit from cost reduction programs launched in 2009.”
Non-GAAP net income for the fourth quarter of 2009 was $151 million, or $0.58 per diluted share, compared to non-GAAP net income of $137 million, or $0.52 per diluted share for the fourth quarter of 2008. Non-GAAP results for the fourth quarter of 2009 exclude $44 million in merger expenses and exit costs and the favorable impact of the requisite reversal of discrete tax reserves. Non-GAAP results for the fourth quarter of 2008 exclude $94 million in pre-tax merger expenses and exit costs and a pre-tax $1,590 million non-cash charge, primarily for the impairment of certain goodwill and indefinite-lived intangible assets. Non-GAAP net income for the full-year 2009 was $533 million, or $2.04 per diluted share, compared to non-GAAP net income of $763 million, or $2.87 per diluted share, for the full-year 2008. In addition to the items excluded above, non-GAAP results also exclude activity assessment and Section 31 fees[1].
Other Financial Highlights (Non-GAAP Basis)
• Gross revenues, excluding activity assessment fees, were $1,014 million in the fourth quarter of 2009, a 14% decrease compared to the fourth quarter of 2008 and a 3% decrease compared to the third quarter of 2009. For the full-year 2009, gross revenues of $4,299 million decreased 4% compared to full-year 2008. Full-year 2009 gross revenues were negatively impacted by a decline in global cash equities volumes and pricing changes across our European and U.S. cash businesses.
• Net revenues, defined as gross revenues less direct transaction costs consisting of Section 31 fees, liquidity payments and routing and clearing fees, were $640 million in the fourth quarter of 2009, down 6% compared to $683 million in the fourth quarter of 2008, but up 3% compared to $624 million in the third quarter of 2009. Fourth quarter 2009 net revenues compared to the fourth quarter of 2008 include a $27 million positive impact attributable to foreign currency fluctuations. Full-year 2009 net revenues were $2,479 million compared to $2,882 million for full-year 2008 and include a ($123) million negative impact attributable to foreign currency fluctuations.
• NYSE Euronext continues to make significant strides in diversifying revenue streams and creating a world-class diversified multi-asset global exchange group. Net revenues from its primary business activities are represented below as a percentage of total net revenues for the fourth quarter of 2009.
• Global derivatives trading 28%
• Global listings 17%
• Global market data 15%
• European cash trading 13%
• Software and technology services 10%
• U.S. cash trading 9%
• Other 8%
Beginning with first quarter 2010 results, NYSE Euronext will change its segment reporting to reflect how NYSE Euronext’s primary businesses will be managed in 2010. The new reportable segments will be focused on our three primary global business units: Derivatives, Cash Equities & Listings and Technology and Information Solutions.
• Fixed operating expenses, defined as operating expenses less merger expenses and exit costs, direct transaction costs, and excluding regulatory fine income, were $432 million, compared to $473 million in the fourth quarter of 2008 and $431 million in the third quarter of 2009. For the full-year 2009, fixed operating expenses of $1,683 million were down 3% compared to full-year 2008. Excluding the impact of acquisitions, foreign currency fluctuations and investment in new businesses, underlying fixed expenses were down $74 million, or 16% compared to the fourth quarter of 2008 and were down $195 million or 11% compared to the full-year 2008.
• Operating income was $210 million, flat compared to the fourth quarter of 2008, but up $13 million or 7% compared to the third quarter of 2009. Fourth quarter 2009 operating income compared to the fourth quarter of 2008 includes a $10 million positive impact attributable to foreign currency fluctuations. For the full-year 2009, operating income was $803 million compared to $1,143 million for full-year 2008 and includes a ($66) million negative impact attributable to foreign currency fluctuations.
• The effective tax rate for the fourth quarter and full-year 2009 was 27%, down from 29% in the prior year. The decline in the tax rate was due to the favorable mix of profits from our global subsidiaries.
• Non-operating income for the fourth quarter of 2009 includes the impact of a special dividend from LCH.Clearnet, as well as the impact of the sale of stakes in NYSE Liffe U.S. which resulted in the retroactive sharing of losses with our partners in the new venture.
• Despite the closing of the NYFIX acquisition, at December 31, 2009, total debt declined $119 million from the third quarter of 2009 to $2.8 billion and consists of $2.2 billion in long-term debt and $0.6 billion in short-term debt. Cash, cash equivalents, investments and other securities (including $145 million related to Section 31 fees collected from market participants and due to the SEC) was $0.5 billion and net debt was $2.3 billion.
• Headcount as of December 31, 2009 was 3,231 (excluding 136 headcount from NYFIX), down 5% from September 30, 2009 and down 14% from December 31, 2008.
Business Highlights
Global Derivatives Markets
• Global derivatives markets net trading revenue, which includes our European and U.S. derivatives businesses, was $182 million in the fourth quarter of 2009, up 21% from $150 million in the fourth quarter of 2008 and down 1% from $184 million recorded in the third quarter of 2009. For the full-year 2009, global derivatives markets net revenue was $668 million, a decrease of 7% compared to $714 million for full-year 2008.
• European derivatives net trading revenue of $146 million in the fourth quarter of 2009 increased 23% from $119 million in the fourth quarter of 2008, driven primarily by the addition of NYSE Liffe Clearing, but was down $6 million, or 4% from $152 million in the third quarter of 2009, driven by higher liquidity rebates. For the full-year 2009, European derivatives net revenue of $535 million decreased 14% from $620 million for full-year 2008, primarily driven by a ($82) million negative impact attributable to foreign currency fluctuations.
• U.S. derivatives net trading revenue of $36 million in the fourth quarter of 2009, increased $5 million from the fourth quarter of 2008 and increased $4 million from the third quarter of 2009 driven by an increase in matched market share which increased 670 and 460 basis points, respectively, compared to fourth quarter 2008 and third quarter 2009. For the full- year 2009, net revenue of $133 million increased 41%, compared to $94 million for full-year 2008 driven by the addition of the former Amex options business from October 1, 2008 and the increase in matched market share beginning in the third quarter of 2009.
Global Cash Markets
• Global cash markets net trading revenue, which includes our U.S. and European cash equities businesses, was $139 million in the fourth quarter of 2009, down 38% from the fourth quarter of 2008, but up 3% from the third quarter of 2009. For the full-year 2009 global cash markets net revenue of $580 million decreased 42% from $998 million for full-year 2008. The decrease in net revenue for all periods was driven primarily by declines in global cash equities trading volumes from the record levels achieved in 2008 and net pricing reductions.
• European cash equities net trading revenue of $80 million in the fourth quarter of 2009, decreased $62 million from the fourth quarter of 2008 and decreased $1 million from the third quarter of 2009. For the full-year 2009, European cash equities net revenue of $345 million decreased 45% from $628 million for full-year 2008 and included a ($19) million negative impact attributable to foreign currency fluctuations.
• U.S. cash equities net trading revenue of $59 million in the fourth quarter of 2009, decreased $24 million from the fourth quarter of 2008 and increased $5 million from the third quarter of 2009. For the full-year 2009, U.S. cash equities net revenue of $235 million decreased 36% from $370 million for full-year 2008.
• Total global listings revenue in the fourth quarter of 2009 was $106 million, compared to $101 million in the fourth quarter of 2008 and $100 million in the third quarter of 2009. For the full-year 2009 total global listings revenue of $406 million increased 3% from $395 million for full-year 2008.
• In the fourth quarter of 2009, a total of 20 IPOs listed on NYSE Euronext markets for total proceeds of $14.2 billion. Among the IPOs were 3 closed-end funds, 1 REIT and 16 operating companies including Banco Santander Brasil, Hyatt Hotels, Cobalt International Energy, Dollar General, Cloud Peak and Dole Food. The 20 IPOs listed on NYSE Euronext markets in the fourth quarter of 2009 represented 38% of the IPOs NYSE Euronext brought to market in 2009. According to Dealogic, for the full-year 2009, NYSE Euronext raised the second most capital among all exchanges through 53 IPOs for a total of $24.5 billion, behind the Hong Kong Stock Exchange which raised a total of $27.0 billion, but ahead of the Shanghai Exchange that raised $21.6 billion, and Nasdaq OMX which raised $8.1 billion through 33 IPOs. In 2009, NYSE Euronext raised $7.5 billion in the Banco Santander Brasil IPO, the single largest IPO for the year.
Technology Services
• NYSE Euronext closed the previously announced NYFIX acquisition on November 30, 2009. The acquisition significantly expands NYSE Euronext’s pre-trade product offering and global buy-side and sell-side trading communities. The NYFIX Marketplace is one of the industry’s broadest and deepest FIX-based communities where more than 1,000 global trading counterparties connect to one another via more than 9,000 fully managed FIX-based messaging channels.
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