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NYSE Euronext (NYX)

Q1 2011 Earnings Call

April 28, 2011 8:00 am ET

Executives

Michael Geltzeiler - Chief Financial Officer and Group Executive Vice President

Unknown Speaker -

Jennifer Ginnis -

Jan Hessels - Chairman and Chairman of Nominating & Governance Committee

Ricardo Salgado - Director and Member of Human Resources & Compensation Committee

Unknown Executive -

Duncan Niederauer - Chief Executive Officer and Director

Kenneth Steiner -

Analysts

Unknown Speaker

Presentation

Jan Hessels

All right, it's 8:00. Ladies and gentlemen, dear shareholders, welcome to this 2011 NYSE Euronext Annual Meeting. My name is Jan Michiel Hessels, Chairman of the Board of Directors. And I'm very happy to be here with all of you again, and more importantly that you are here with so many for this important meeting.

I would also like to welcome those stockholders who are attending the meeting via the internet this year, the meeting is web casted.

Seated next to me is Marsh Carter, Deputy Chair of the Board of Directors. On this side is Duncan Niederauer, our CEO; and at the far end we have Dominique Cerutti, our President and Deputy Chief Executive Officer.

I'll now call the 2011 annual meeting of stockholders to order. We know that there are many questions on the minds of our stockholders and we also promised to report our first quarter earnings at today's meeting. So we will first hear the CEO's report on the state of the company, then we will conduct a formal business of the meeting and finally, importantly, we will take questions from the stockholders.

To ensure that our stockholders have ample opportunity to ask questions, we ask that only stockholders or their designated proxies ask questions. If you're called on by me, please begin by identifying yourself and the number of shares you hold.

Each stockholder who has complied with the applicable procedural requirements will be allotted 2 minutes to present his or her stockholder proposal during the formal part of the meeting and 2 minutes to ask questions at the Q&A session at the end of the meeting. As a reminder, question should relate directly to the company business and not to personal or individual matters. Copies of the agenda and the rules of conduct have been placed on your seats. So as promised, Duncan, could you now give the CEO reports and may I again ask that all stockholders hold their questions until the appropriate time at the end of the meeting.

Duncan Niederauer

Thanks, Jan Michiel. And thank you all for being here. This is going to be a little different than the normal annual shareholder meeting. Normally, we just report the most recent news from up here. We thought with everything going on, it was much more appropriate to do a full sim report and everything that's going on at the company. And as all of you noticed and as Jan Michiel mentioned, we have rolled the Q1 report through to today so we announced our earnings early this morning.

So without further adieu, I'm going to give each of you a minute to read that slide, and then that slide and then we'll move right into the presentation, okay?

What we're going to talk about today, I'm really going to break down into 3 sections. The first section is going to be about the first quarter, a terrific quarter for the company, we continue to execute. The second section of the presentation is going to be really that this quarter comes as no surprise to those of you who have been with us for the last couple of years, it's a continuation of everything we've been doing. And if you think about the beginning of our tenure here as a leadership team, '08 and'09 were about transforming the company, getting us fit to fight the good fight. 2010 was about evolving and communicating our strategy, and 2011 is really when we've been kicking in to high gear. And that will take us into the third section, which is the proposed merger with DB, which we believe is the accelerator.

We believe not only is it consistent with the strategy we've talked about and articulated for the last couple of years, it is the difference maker. It is going to help us get to where we're trying to get to even faster. And as you'll see in the presentation, I hope, it should be fairly obvious that the 2 complementary sets of assets create a game-changing company and what is increasingly a global industry.

So first a little bit on the first quarter. Those of you, many of you may have had a chance to see our results that we published earlier this morning. A terrific quarter by any measure. Whether you want to compare it to the Q1 results last year, if you want to compare it sequentially to Q4, it's hard to argue with anything other than this was a great quarter. Revenue is up against last year and last quarter, expense down against last year and last quarter. You can see operating income growing more than 20% versus last year, 40% versus the last quarter. And an earnings and EPS, 25% versus last year, nearly 50% versus last quarter. Margins continue to expand. We continue to operate the company more efficiently, right on target. This was roughly about 10% to 12% above what the analysts were expecting by the way. I think the analysts were at $0.60, $0.61, so we come in at $0.68, really a terrific start to the year by any measure.

And what we're also proud of is we had success across our portfolio. As you know we've been talking about these 3 segments in our business for the last year or so. Our Derivatives business, a terrific quarter. Our Cash Trading and Listings business, which I'll get on to a little more detail on in a minute, a terrific quarter and a record revenue quarter for our Information Solutions Services Tech business, our Commercial Technology business and Data business.

Now the first quarter, obviously, we had some other things going on like announcing a game changing merger that didn't make the slide, but we had a terrific quarter in terms of executing the business just day to day because what we're committed to all of you is, we're not taking our eye off the ball. 2011 we've got a plan, we're executing against that plan. And yes in the middle of the quarter, we announced what we think is a game changer that doesn't give us permission or the right to not pay attention to what we've committed to all of you for 2011. So what I thought is I'll just hit a few of the highlights of the quarter to leave you with the impression that while we're busy working on that, we're also executing very successfully against the plan that we've articulated.

Probably the most significant introduction of the quarter was the introduction of the very innovative NYPC initiative. We've talked about this on many analysts calls, in fact we talked about this at the annual meeting last year as we were beginning to work on it. So we take our NYSE Liffe business. We get a medallion out of the CME-Nymex deal to give us the right operated derivative business in the United States. We start to build on that by listing a few products in the metal space and then subsequently in the MSCI index space. And then we get together with some of the leading customers with DTC and with the regulators, and we do what I think is a great example of collaboration in the 21st century and we'll talk about it later. This is innovative. This is collaborative. We're out of the game, we've only been up and running for a month, we're already at 2% to 3% market share in Eurodollars, open interest as you'll see later in the presentation, growing literally every day, and we don't even have most of the clients connected yet. So this really didn't contribute anything to Q1 earnings, but I think it's significant because it gives us another growth opportunity that we've invested in.

Great quarter for Liffe volumes, great quarter for Options volumes, and we're really well positioned to take advantage of that.

Shifting to the Cash Trading and Listings business. You will read some things in the press that say we're having trouble competing. The U.S. isn't competing for IPOs anymore. We're not sure who they're talking about because we were number 1 globally for IPOs in the first quarter by proceeds raised. Last year, we finished number 3 only behind Hong Kong and Shanghai. And we were number 2 until the last couple of days of the year but think of the amount of issuance that is going on in that part of the world, and it is destined to continue to go on and yet we're still punching right at that rate, right at that weight, right with them, and for the first quarter we were number 1.

In the U.S., about 60% of the deals have come our way including several in the Tech space, which is sort of new news for us if you look back at our history. 92% of the proceeds raised year-to-date listed on the NYSE. I'll leave it to you to conclude where the other 8% went.

Two more companies have transferred to the NYSE. Two more companies have announced they're transferring, that's 18 transfers to the NYSE in the last 15 months. We've had 3 companies move the other away.

In our European business, a terrific quarter year-on-year, a terrific quarter sequentially and we've also improved our margins and held our market shares steady in the U.S. business.

And lastly, in the Technology Services business, as I said a record quarterly revenue. That continues to grow on track for probably we think more than $500 million of revenue this year. We launched an MTF that we're operating for Goldman Sachs over in Europe. We finished the migration of all of our NYSE Arca businesses to the Mahwah data center, and although we can't announced the name, we have our first major infrastructure sale to a truly Tier 1 financial services company. So the point of this slide is we're not taking our eye off the ball by any stretch. This was all what was going on in the midst of this great quarter that I just reported on.

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