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NYSE Euronext (NYX)

Q2 2009 Earnings Call

July 30, 2009 2:30 am ET


Stephen Davidson – Vice President Investor Relations

Duncan Niederauer – Chief Executive Officer

Michael Geltzeiler – Group Executive Vice President and Chief Financial Officer

Lawrence Leibowitz - Group Executive Vice President, Head of US Market and Global Technology


Richard Repetto – Sandler O'Neill Partners

Niamh Alexander – KBW

Roger Freeman – Barclays Capital

Justin Schack – Rosenblatt Securities

Michael Carrier – Deutsche Bank

Ken Worthington – JP Morgan



Good day ladies and gentlemen and welcome to the Second Quarter 2009 NYSE Euronext Earnings Conference Call. My name is Ann and I will be your operator today. (Operator Instructions).

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Stephen Davidson, Head of Investor Relations at NYSE Euronext. Please go ahead, sir.

Stephen Davidson

Thank you, Ann. Good morning and welcome to the NYSE Euronext second quarter 2009 earnings conference call. Before I introduce today's speakers, let me remind you that comments on the call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are based on NYSE Euronext’s current expectations and involve risks and uncertainties that could cause NYSE Euronext actual results to differ materially from those in the statements.

These forward looking statements speak as of today and you should not rely on them as representing our views in the future. Please refer to our SEC filings for a full discussion of the risk factors that may affect any forward looking statements. Except for any obligation to disclose material information under the federal securities laws, NYSE Euronext undertakes no obligation to release publicly any revisions to any forward looking statements to reflect events or circumstances after this conference call.

We will discuss non-GAAP financial measures during the call. These non-GAAP measures are fully reconciled in the tables attached to the text of the earnings press release that we issued earlier this morning. We believe that these tables provides investors useful information about our business trends however our non-GAAP measures do not replace and are not superior to GAAP measures for the call today call today, Duncan Niederauer, Chief Executive Officer will review our second quarter financial highlights comment on market conditions and provide a business by business update Michael Geltzeiler Group Executive Vice President and Chief Financial Officer will then review the financial results for the quarter and he will walk you through the key factors that are driving our positive cost savings development and update you on our financial positions.

We’ll then go back to Duncan for closing comments before we open the lines for your questions and when we go the Q&A session please limit your question to one to allow for broader participation. Also on the call today for the Q&A session are Larry Leibowitz Group Executive Vice President & Head of U.S markets and Global Technology Stephane Biehler Chief Accounting Officer and Corporate Controller. We are incorporating slides for the call today, which are available for viewing on our website and Duncan and Mike will refer to the slides during their remarks.

With that let me now turn over to Duncan

Duncan Niederauer

Thanks Steven good morning everybody and thanks for joining today’s call. before I get to the results I have a quick riddle for you What do Rich Repetto, Carlos Delgado and Jose Reyes have in common? They are all on the disable list as a result of baseball related injuries. So Rich, I heard you hurt yourself at Yankee Stadium the other night and I hope you've recovered. I was pleased to hear that while you were crashing into the wall you managed to hold onto the ball and make the catch in spite of being knocked unconscious or so congratulations. Hopefully you'll be back in the line soon rays.

As you guys will see from the slide presentation which has been a other busy quarter for NYSE Euronext so I'd like to encourage to turn to slide 3 please. You will see hopefully when you review the quarter, that we’ve maintained our focus on expense management and we’ve continue to investing our businesses and our technology, which we hope and expect to drive future growth.

Our second quarter 2009 results were solid, characterized by growth and Pro forma gross revenue net revenue operating income and diluted EPS compared to the first quarter of ’09.

Transaction volumes have held up very well and we are at levels that nobody had anticipated at the end of 2008. While we continue see pricing pressure in our equities business we are making moves to bolster the competitive position of these businesses. And I am looking forward to the second half of 2009, when I anticipate continued improving results and more favorable year-over-year comparisons.

Focusing again on slide 3, you will see that Pro forma non-GAAP EPS for the second quarter was $0.51 up from $0.43 in the first quarter of 2009, but down from $0.75 in the second quarter of 2008. Net revenues were $611 million in the quarter. A decrease of $96 million versus the same quarter last year $57 million or roughly 60% of this decline was driven by the negative impact of foreign currency fluctuations.

And on the cost side, we’ve reported $398 million in fixed cost in the second quarter of ’09, which were 6% below the levels last quarter and also below last year despite acquisitions and new businesses we have launched in the last 12 months.

I am extremely pleased with the efforts we’ve made on the cost side. Considering the challenging market conditions and the new initiatives that we have in our place Michael going to the specifics around these expenses later in the presentation.

We expect the headcount reductions in the second half of ’09 was significantly lower annualized run rate cost as we move through 2009 and into 2010. Few of our strategic initiatives the establishment of NYSE Liffe Clearing and the down sizing of staff we are advanced in this quarter in this quarter and necessitated that we take a pre-tax charge of $442 million. The combination of these two items drove our GAAP loss for the quarter but will be sources of future revenue growth and expense reductions respectively.

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