NYSE Euronext Announces First Quarter 2013 Financial Results
- First Quarter GAAP Diluted EPS of $0.52 vs. $0.34 in Prior Year
- Non-GAAP Diluted EPS of $0.57, Up 21% Excluding Merger Expenses, Exit Costs and Discrete Items
- Global Leader in IPOs Year-to-Date; Share of Tech IPOs at 75%
- Cumulative $147 Million in Project 14 Cost Savings Achieved; 59% of $250 Million Project 14 Goal
- Shareholder Vote for ICE Transaction Scheduled for June 3; Integration Planning Well Underway
Financial and Operating Highlights1, 2, 3
- Diluted EPS of $0.57, up 21% compared to 1Q12; Up 33% from 4Q12
- Net revenue of $600 million in-line with 1Q12; Up 7% from 4Q12
- Fixed operating expenses of $380 million, down 8% on constant dollar / portfolio basis vs. 1Q12
- Operating income of $220 million, up 12% compared to 1Q12; Up 27% from 4Q12
- Debt-to-EBITDA ratio 2.3 times, down from 2.5 times at end of 2012; Cash balances up $147 million
- Board declares second quarter 2013 cash dividend of $0.30 per share
1 All comparisons versus 1Q12 unless otherwise stated. Excludes merger expenses, exit costs, charge for fair value adjustment to RSU awards and discrete tax items.
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.
3Cash balances include cash, cash equivalents and short term financial investments.
NEW YORK – April 30, 2013 – NYSE Euronext (NYX) today reported net income of $126 million, or $0.52 per diluted share, for the first quarter of 2013, compared to net income of $87 million, or $0.34 per diluted share, for the first quarter of 2012. Results for the first quarter of 2013 and 2012 include $8 million and $31 million, respectively, of pre-tax merger expenses and exit costs. Additionally, the results for the first quarter of 2013 include a $10 million pre-tax charge for fair value adjustment to restricted stock unit (RSU) awards resulting from a shift to liability-settled accounting and the subsequent increase in our stock price. Following shareholder approval of the amended stock incentive plan on April 25, 2013, outstanding RSU awards are once again fixed in value under equity-settled accounting. As a result, equity compensation costs in the second quarter of 2013 will decline by $10 million. Excluding merger expenses, exit costs, the stock-based compensation charge and discrete tax items, net income in the first quarter of 2013 was $139 million, or $0.57 per diluted share, compared to $121 million, or $0.47 per diluted share, in the first quarter of 2012.
“Our first quarter results reflected improved trading volumes in our European Derivatives franchise and the benefit of the actions we have taken to strengthen the fundamental earnings power of the Company over the past year,” said Duncan L. Niederauer, CEO, NYSE Euronext. “At the same time, we are moving forward with the requisite approvals and integration planning for the proposed combination with Intercontinental Exchange. The Hart-Scott Rodino waiting period expired in February, we are actively engaged with our regulators in Europe to move all appropriate approvals forward, and we look forward to our respective shareholder votes on the acquisition in early June.”
The table below summarizes the financial results1 for the first quarter of 2013:
|% Δ 1Q13|
|($ in millions, except EPS)||1Q13||4Q12||1Q12||vs. 1Q12|
|Total Revenues, Less Transaction-Based Expenses3||600||562||601||(0%)|
|Other Operating Expenses 4||380||389||405||(6%)|
|Operating Income 4||$220||$173||$196||12%|
|Diluted Earnings Per Share5||$0.57||$0.43||$0.47||21%|
|Operating Margin||37%||31%||33%||4 ppts|
|Adjusted EBITDA Margin||47%||42%||44%||3 ppts|
1A 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 charge for fair value adjustment to RSU awards.
5 Excludes merger expenses, exit costs, charge for fair value adjustment to RSU awards, debt refinancing costs and discrete tax items.
“Disciplined cost and capital management drove a rebound in earnings, both year-over-year and quarter-over-quarter. We repurchased 17 million shares in 2012 and recorded recurring first quarter operating expenses of $380 million, the lowest level since the merger with Euronext,” commented Michael S. Geltzeiler, Group Executive Vice President and CFO, NYSE Euronext. “Based on our first quarter results and anticipated further cost savings, such as our move into ICE Clear Europe in the second half of 2013, we are on target to surpass our full-year 2013 cost guidance target of $1,525 million.”
FIRST QUARTER 2013 CONSOLIDATED RESULTS
Total revenues, less transaction-based expenses, which include Section 31 fees, liquidity payments and routing and clearing fees (net revenue), were $600 million in the first quarter of 2013, in-line with the first quarter of 2012 and included a $1 million negative impact from foreign currency fluctuations. A $13 million year-over-year increase in net trading revenue from higher trading volumes was offset by lower market data and technology services revenue.
Other operating expenses, excluding merger expenses, exit costs and a $10 million pre-tax charge for fair value adjustment to RSU awards, were $380 million in the first quarter of 2013, down $25 million, or 6% compared to the first quarter of 2012. Excluding the impact of new business initiatives and a $1 million positive impact attributable to foreign currency fluctuations, other operating expenses were down $33 million, or 8%, compared to the first quarter of 2012.
Cumulative Project 14 savings through the first quarter of 2013 were $147 million, which represents 59% of the total $250 million expected to be saved by the end of 2014.
Operating income, excluding merger expenses, exit costs and charge for fair value adjustment to RSU awards, was $220 million, up $24 million, or 12% compared to the first quarter of 2012.
Adjusted EBITDA, excluding merger expenses, exit costs and charge for fair value adjustment to RSU awards, was $282 million, up $20 million, or 8% compared to the first quarter of 2012. Adjusted EBITDA margin was 47% in the first quarter of 2013, compared to 44% in the first quarter of 2012.
Loss from associates is primarily related to New York Portfolio Clearing. Net (income) loss attributable to non-controlling interest consists primarily of net income attributable to NYSE Amex Options which was partially offset by the net loss attributable to NYSE Liffe U.S.
The effective tax rate for the first quarter 2013, excluding merger expenses, exit costs, charge for fair value adjustment to RSU awards and discrete tax items, was 24% compared to approximately 25% for the first quarter 2012.
The weighted average diluted shares outstanding in the first quarter of 2013 was 244 million, down from 259 million in first quarter of 2012.
At March 31, 2013, total debt was $2.5 billion. Total debt includes $0.4 billion remaining from the 4.8% June 2013 notes which we expect to retire in the second quarter of 2013. Cash, cash equivalents and short term financial investments (including $76 million related to Section 31 fees collected from market participants and due to the SEC) were $0.5 billion, an increase of $147 million, and net debt was $2.0 billion at the end of the first quarter of 2013. The ratio of debt-to-EBITDA at the end of the first quarter of 2013 was 2.3, down from 2.5 at the end of 2012.
Total capital expenditures were $27 million in the first quarter of 2013, down from $43 million in the first quarter of 2012.
The Board of Directors declared a cash dividend of $0.30 per share for the second quarter of 2013. The second quarter 2013 dividend is payable on June 28, 2013 to shareholders of record as of the close of business on June 14, 2013. The anticipated ex-date will be June 12, 2013.
The Company also set June 3, 2013 as the date of the special stockholder meeting to consider the ICE transaction with a record date of April 26, 2013.
FIRST QUARTER 2013 SEGMENT RESULTS
Below is a summary of business segment results:
|Derivatives||Cash Trading & Listings||Info. Svcs. & Tech. Solutions|
|($ in millions)||Net||Operating||Adjusted||Net||Operating||Adjusted||Operating||Adjusted|
1 Net revenue defined as total revenues less transaction-based expenses including Section 31 fees, liquidity payments and routing & clearing fees.
2 Excludes merger expenses and exit costs.
Derivatives net revenue of $201 million in the first quarter of 2013 increased $25 million, or 14% compared to the first quarter of 2012 and included a $2 million negative impact from foreign currency fluctuations. The $27 million increase in derivatives net revenue, on a constant currency basis, compared to the first quarter of 2012, was driven by higher average daily trading volumes. Highlights for the first quarter of 2013 included:
- Global derivatives ADV in the first quarter of 2013 of 8.8 million contracts increased 17% compared to the first quarter of 2012 and increased 16% compared to fourth quarter of 2012 levels.
- NYSE Euronext European derivatives products ADV of 4.5 million contracts in the first quarter of 2013 increased 36% compared to the first quarter of 2012 and increased 28% from fourth quarter of 2012 levels. Excluding Bclear, European derivatives products ADV in the first quarter of 2013 increased 37% compared to the first quarter of 2012 and increased 55% from the fourth quarter of 2012.
- U.S. equity options ADV in the first quarter of 2013 increased 3% to 4.2 million contracts compared to the first quarter of 2012 and increased 6% from the fourth quarter of 2012. U.S. consolidated equity options ADV of 15.0 million contracts decreased 6% compared to the first quarter of 2012 and increased 5% from the fourth quarter of 2012. NYSE Euronext’s U.S. equity options exchanges accounted for 28% of total consolidated U.S. equity options trading in the first quarter of 2013, up from 26% in the first quarter of 2012, and in-line with the fourth quarter of 2012.
- NYSE Liffe welcomed Marigold International Securities Ltd. and Gold Mountain Futures Ltd. from China and Concord Futures Corp from Taiwan as members of NYSE Liffe’s London and Paris markets. NYSE Liffe now has 11 direct members from Asia.
- NYSE Liffe extended the first of its suite of derivatives based on MSCI indices to the London central order book. NYSE Liffe’s MSCI Europe Net Total Return Index futures contract was first introduced on the Bclear service in October 2011 to provide institutional investors with a means of optimizing exposure to the MSCI Europe Index within an exchange cleared environment.
- NYSE Liffe signed a license agreement with The Egyptian Exchange (EGX) to list the EGX 30 index. This signed agreement will enable NYSE Liffe to work with market participants to develop and launch a futures contract based on the EGX 30 index.
- NYSE Euronext launched mini options contracts on NYSE Arca and NYSE Amex Options in five actively traded securities and exchange-traded funds. For the first time, NYSE Arca and NYSE Amex Options customers are now able to trade mini options with 10 share deliverables as opposed to the standard 100 deliverable contracts.
CASH TRADING AND LISTINGS
Cash Trading and Listings net revenue of $287 million in the first quarter of 2013 decreased $17 million, or 6% compared to the first quarter of 2012 and included a $1 million positive impact from foreign currency fluctuations. The $18 million decrease in net revenue, on a constant currency basis, compared to the first quarter of 2012 was primarily driven by lower average daily trading volumes. Highlights for the first quarter of 2013 included:
- European cash ADV of 1.4 million transactions in the first quarter of 2013 decreased 13% from 1.6 million transactions in the first quarter of 2012, but increased 17% from fourth quarter of 2012 levels. European cash market share (value traded) in NYSE Euronext’s four core markets was 65% in the first quarter of 2013, in-line with 65% in the first quarter of 2012 and down from 66% in the fourth quarter of 2012.
- In the U.S., cash trading ADV in the first quarter of 2013 decreased 13% to 1.5 billion shares from 1.8 billion shares in the first quarter of 2012 and was in-line with the fourth quarter of 2012. Tape A matched market share was 30% in the first quarter of 2013, down from the 31% recorded both in the first quarter of 2012 and the fourth quarter of 2012. Trading off-exchange, as reported by Trade Reporting Facilities (“TRF”), increased to 36% of overall consolidated average daily volume in the first quarter of 2013 from 34% in the first quarter of 2012.
- NYSE Euronext ranked #1 globally in initial public offerings (IPOs) and follow-ons globally in the first quarter of 2013. NYSE Euronext raised $12.1 billion in total global proceeds on 26 IPOs and $48.3 billion in total global proceeds on 140 follow-ons. In the U.S., NYSE Euronext led the market with 17 IPOs (excluding closed-end funds) and has steadily captured share in technology-based IPOs. NYSE Euronext has listed 75% of the technology IPOs in the U.S., through March 2013, including Silver Spring Networks Inc., Model N Inc., and Marin Software Inc.
- In the first quarter of 2013, NYSE Euronext welcomed 6 companies on its European markets. Key listings included: OCI N.V., a leading global fertilizer producer listed on NYSE Euronext in Amsterdam; Infosys, the first company to be admitted to trading on NYSE Euronext in London, Paris and New York and Eli Lilly, a leading global pharmaceutical company listed on NYSE Euronext Paris. Delta Lloyd, a leading financial services provider, cross-listed on NYSE Euronext in Brussels to complement its listing on NYSE Euronext in Amsterdam.
- NYSE Governance Services and Marsh announced a strategic alliance to provide directors and officers with enhanced governance, risk and compliance resources. Together, they will provide directors and officers with unrivaled advisory services and resources they need to make informed decisions on compliance-related trends and issues. In the first of what will be several new joint offerings, the organizations have launched the Board Compliance Oversight and Governance Diagnostic.
- NYSE Euronext celebrated 30 years of the AEX-Index®. The AEX® was introduced on March 4, 1983, and was the first national blue chip index in Europe.
INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS
Information Services and Technology Solutions revenue was $112 million in the first quarter of 2013, a decrease of $9 million, or 7% compared to the first quarter of 2012. The $9 million decrease was primarily due to the decline in the number of large, one-time managed services sales. However, new market data initiatives are on track to build in the second quarter of 2013. Highlights for the first quarter of 2013 included:
- NYSE Technologies welcomed brokers Everbright Securities and GF Securities to Marketplace™, a leading, fully managed FIX-based trading community. NYSE Technologies’ Marketplace™ solution connects brokers to approximately 700 buy-side firms in more than 40 countries and is supported by the industry's most experienced FIX specialists. In addition to being linked to hundreds of global buy-side firms who are potential investors in the Chinese market, through MarketplaceTM and the NYSE Technologies’ FIX order routing technology, Everbright Securities and GF Securities will now be able to receive orders from Qualified Foreign Institutional Investors for the A and B Chinese share markets.
- Social Market Analytics (SMA) and NYSE Technologies announced an agreement to distribute sentiment statistics from SMA's patent-pending social media monitoring engine through NYSE Technologies SFTI Network, and its normalized market data service, SuperFeed. As part of the agreement, subscribing customers can access data from SMA's social media monitoring engine. SMA's engine extracts, evaluates and calculates data in real-time to attempt to generate directional and volatility indications on individual stocks, ETFs, sectors, and indices by measuring the level and quality of social media interactions on social media sources relative to historical levels.
- NYSE Euronext completed its resource transfer from Fixasia Technologies Inc., to a newly created subsidiary, NYSE Philippines Inc. The new subsidiary will operate as a regional technology hub based in Manila. This enables NYSE Technologies to efficiently expand and rapidly diversify its Asia business while enhancing its 24x7 global support model and adding the unique expertise of the Fixasia team.
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The accompanying tables include information integral to assessing the Company’s financial performance.
Analyst/Investor/Media Call: April 30, 2013 at 8:00 a.m. (NY/ET) / 2:00 p.m. (Paris/CET)
A presentation and live audio webcast of the first quarter 2013 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: 800.901.5241
Replay Dial-in Information:
United States: 888.286.8010
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, the BlueNext tax settlement, debt refinancing costs, charge for fair value adjustment to RSU awards 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.
About NYSE Euronext
NYSE Euronext (NYX) is a leading global operator of financial markets and provider of innovative trading technologies. The company's exchanges in Europe and the United States trade equities, futures, options, fixed-income and exchange-traded products. With approximately 8,000 listed issues (excluding European Structured Products), NYSE Euronext's equities markets - the New York Stock Exchange, NYSE Euronext, NYSE MKT, NYSE Alternext and NYSE Arca - represent one-third of the world’s equities trading, the most liquidity of any global exchange group. NYSE Euronext also operates NYSE Liffe, one of the leading European derivatives businesses and the world's second-largest derivatives business by value of trading. The company offers comprehensive commercial technology, connectivity and market data products and services through NYSE Technologies. NYSE Euronext is in the S&P 500 index. For more information, please visit:http://www.nyx.com.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This communication contains “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should carefully read forward-looking statements, including statements that contain these words, because they discuss our future expectations or state other “forward-looking” information. Forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. ICE and NYSE Euronext caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement.
Forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger involving ICE and NYSE Euronext, including future financial results, ICE’s and NYSE Euronext’s plans, objectives, expectations and intentions, the expected timing of completion of the transaction and other statements that are not historical facts. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in ICE’s and NYSE Euronext’s filings with the U.S. Securities and Exchange Commission (the “SEC”). These risks and uncertainties include, without limitation, the following: the inability to close the merger in a timely manner; the inability to complete the merger due to the failure of NYSE Euronext stockholders to adopt the merger agreement or the failure of ICE stockholders to approve the issuance of ICE common stock in connection with the merger; the failure to satisfy other conditions to completion of the merger, including receipt of required regulatory and other approvals; the failure of the proposed transaction to close for any other reason; the possibility that any of the anticipated benefits of the proposed transaction will not be realized; the risk that integration of NYSE Euronext’s operations with those of ICE will be materially delayed or will be more costly or difficult than expected; the challenges of integrating and retaining key employees; the effect of the announcement of the transaction on ICE’s, NYSE Euronext’s or the combined company’s respective business relationships, operating results and business generally; the possibility that the anticipated synergies and cost savings of the merger will not be realized, or will not be realized within the expected time period; the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management’s attention from ongoing business operations and opportunities; general competitive, economic, political and market conditions and fluctuations; actions taken or conditions imposed by the United States and foreign governments or regulatory authorities; and adverse outcomes of pending or threatened litigation or government investigations. In addition, you should carefully consider the risks and uncertainties and other factors that may affect future results of the combined company, as are described in the section entitled “Risk Factors” in the joint proxy statement/prospectus filed by ICE with the SEC, and as described in ICE’s and NYSE Euronext’s respective filings with the SEC that are available on the SEC’s web site located at www.sec.gov, including the sections entitled “Risk Factors” in ICE’s Form 10-K for the fiscal year ended December 31, 2012, as filed with the SEC on February 6, 2013, and “Risk Factors” in NYSE Euronext’s Form 10-K for the fiscal year ended December 31, 2012, as filed with the SEC on February 26, 2013. You should not place undue reliance on forward-looking statements, which speak only as of the date of this written communication. Except for any obligations to disclose material information under the Federal securities laws, neither ICE nor NYSE Euronext undertakes any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this written communication.
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND WHERE TO FIND IT
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction, ICE has filed with the SEC a registration statement on Form S-4, which includes a joint proxy statement/prospectus with respect to the proposed acquisition of NYSE Euronext. The final joint proxy statement/prospectus will be delivered to the stockholders of ICE and NYSE Euronext. INVESTORS AND SECURITY HOLDERS OF BOTH ICE AND NYSE EURONEXT ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION CAREFULLY AND IN ITS ENTIRETY, INCLUDING ANY DOCUMENTS PREVIOUSLY FILED WITH THE SEC AND INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION REGARDING ICE, NYSE EURONEXT AND THE PROPOSED TRANSACTION. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about ICE and NYSE Euronext, without charge, at the SEC’s website at http://www.sec.gov. Investors may also obtain these documents, without charge, from ICE’s website at http://www.theice.com and from NYSE Euronext’s website at http://www.nyx.com
PARTICIPANTS IN THE MERGER SOLICITATION
ICE, NYSE Euronext and their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the transactions contemplated by the Merger Agreement.
You can find information about ICE and ICE’s directors and executive officers in ICE’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on February 6, 2013, and ICE’s proxy statement for its 2013 annual meeting of stockholders, as filed with the SEC on March 28, 2013.
You can find information about NYSE Euronext and NYSE Euronext’s directors and executive officers in NYSE Euronext’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on February 26, 2013, and NYSE Euronext’s proxy statement for its 2013 annual meeting of stockholders, filed with the SEC on March 22, 2013.
Additional information about the interests of potential participants will be included in the joint proxy statement/prospectuses, when it becomes available, and the other relevant documents filed by ICE and NYSE Euronext with the SEC.