NYSE Euronext net income falls to USD125m in third quarter

NYSE Euronext net income falls to USD125m in third quarter

NYSE Euronext’s net income was USD125m, or USD0.48 per diluted share, for the third quarter of 2009, compared to net income of USD174m, or USD0.66 per diluted share for the third quarter of 2008. 

Third quarter 2009 GAAP results include the impact from merger expenses and exit costs, the impact of the disposition of Hugin Group, the sale of its investment in BM&F Bovespa and a fair value adjustment to its investment in BIDS Holdings. 

Pro forma non-GAAP diluted earnings per share excluding these items was USD0.53 in the third quarter of 2009, compared to USD0.72 in the third quarter of 2008.         

“We continue to see stabilization in our core businesses and significant progress on our new initiatives,” says Duncan L. Niederauer, chief executive of NYSE Euronext. "We have successfully maintained market share in our US (NYSE) and European cash markets and have grown market share in US equity options. We have seen a strong increase in new issuances, where we lead the US in both IPOs and secondaries. We significantly enhanced our global derivatives franchise with today’s announced semi-mutualization of our US futures exchange. In addition, we announced a similar semi-mutualization of our NYSE Amex equity options business, launched NYSE Liffe Clearing in Europe and established New York Portfolio Clearing, a joint venture with DTCC.  Lastly, our announced acquisition of NYFIX will greatly expand our NYSE Technologies product offering and client base.”

Pro forma non-GAAP net income for the third quarter of 2009 was USD138m, or USD0.53 per diluted share, compared to net income of USD192m, or USD0.72 per diluted share, for the third quarter of 2008.  Pro forma non-GAAP results for the third quarter of 2009 exclude USD8m in merger expenses and exit costs. 

Gross revenues, excluding activity assessment fees, were USD1,048m in the third quarter of 2009, a ten per cent decrease compared to the third quarter of 2008 and a seven per cent decrease compared to the second quarter of 2009. Third quarter 2009 gross revenues compared to both the third quarter of 2008 and the second quarter of 2009 were negatively impacted by a decline in global cash equities volumes and pricing changes across the company’s European and US 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 USD624m, down 14 per cent compared to USD724m in the third quarter of 2008, but up two per cent compared to the USD611m in the second quarter of 2009. Third quarter 2009 net revenues compared to the third quarter of 2008 include a USD30m negative impact attributable to foreign currency fluctuations.

Fixed operating expenses, defined as operating expenses less merger expenses and exit costs, direct transaction costs, and excluding regulatory fine income, were USD431m, compared to USD428m in the third quarter of 2008 and USD398m in the second quarter of 2009. Excluding the impact of mergers and acquisitions, foreign exchange rates and investment in new businesses, underlying fixed expenses were down USD31m, or seven per cent compared to the third quarter of 2008. Fixed costs increased USD33m compared to the second quarter of 2009, primarily due to a benefits’ curtailment gain of USD10m in the second quarter of 2009 and a combined USD20m in NYSE Liffe Clearing expenses and foreign currency fluctuations. Underlying fixed expenses through the first nine months of 2009 were down USD121m or ten per cent compared to the prior year period.  
 
Operating income was USD197m, down USD100m compared to the third quarter of 2008 and down USD17m compared to the second quarter of 2009. Third quarter 2009 operating income compared to the third quarter of 2008 includes a USD20m negative impact attributable to foreign currency fluctuations.

At 30 September 2009, net debt was USD2.4bn. Cash, cash equivalents, investments and other securities (including USD115m related to Section 31 fees collected from market participants and due to the SEC) was USD0.5bn and total debt was USD2.9bn. 

Global derivatives net revenue was USD184m in the third quarter of 2009, up four per cent from USD177m in the third quarter of 2008 and up 17 per cent from USD157m recorded in the second quarter of 2009. The increase in net revenue was driven by the addition of NYSE Liffe Clearing, which launched on 30 July 2009, and NYSE Amex options, which was acquired on 1 October 2008. The increase compared to the second quarter of 2009 was driven by the addition of NYSE Liffe Clearing.

Global cash markets net revenue was USD135m in the third quarter of 2009, down 46 per cent from the third quarter of 2008 and down 11 per cent from the second quarter of 2009. The decrease was driven primarily by declines in global cash trading volumes and net pricing reductions.

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