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NYSE Euronext (NYX)

Q4 2008 Earnings Call

February 9, 2009 8:00 am ET


Stephen Davidson – Vice President Investor Relations

Duncan Niederauer - Chief Executive Officer

Michael Geltzeiler - Group Executive Vice President and Chief Financial Officer

Jean-François Théodore - Deputy CEO

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

Stephane Biehler - Chief Accounting Officer and Corporate Controller


Howard Chen – Credit Suisse

Dan Fannon – Jefferies

Rick Repetto – Sandler O-Neill

Ken Worthington – JP Morgan

Roger Freeman – Barclays Capital

Mike Vinciquerra – BMO Capital Markets

Rob Rutschow – Deutsche Bank



(Operator Instructions) Welcome to the Fourth Quarter and Full Year 2008 NYSE Euronext Earnings Financial Conference Call. I would like to now the call over to your host for today, Mr. Stephen Davidson.

Stephen Davidson

Welcome to the NYSE Euronext fourth quarter and full year 2008 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.

Please note that the results of operations of Euronext N.V. for the fourth quarter and full year of 2008 are reported under US GAAP and are incorporated in the earnings press release that we issued earlier this morning under the caption European Operations in the accounting tables. 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 release. We believe that these tables provide 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, Duncan Niederauer, Chief Executive Officer, will update you on our fourth quarter and full year financial highlights, review our queries of focus and conclude with some comments on the market. Michael Geltzeiler, Group Executive Vice President and Chief Financial Officer will review the financial results for the quarter and full year, update you on capital related issues and provide selected guidance for 2009. You will then go back to Duncan for closing comments, before we open the line for your questions.

Also on the call today for the Q&A session are Jean-François Théodore, Deputy CEO, Larry Leibowitz, Group Executive Vice President, Head of US Market and Global Technology, Stephane Biehler, Chief Accounting Officer and Corporate Controller. We are incorporating slides for the call today which are available on our website. Duncan and Mike will refer to the slides during their remarks.

Now I’d like to turn the call over to Duncan.

Duncan Niederauer

I’m going to start on slide three so for those of you who are following along with the slide presentation we’re on slide three. I’m pleased to share our fourth quarter and full year 2008 results with you, characterized by volume driven revenue growth both for the quarter and full year. Pro forma non-GAAP earnings per share were $0.52 for the quarter versus $0.65 in the prior year period.

The lower pro forma EPS for the quarter versus prior year reflects the foreign exchange effect of the strengthening US dollar, planned investments for NYSE Liffe and the new market model in the US cash business and MX which was still operating at a loss during the fourth quarter. For the full year, pro forma non-GAAP earnings per share were $2.87 versus $2.63 in 2007 an increase of 9%.

In the fourth quarter, pro forma gross revenues rose 21%, however, this was driven by changes to our pricing structure in our US cash markets. The revenue increase was partially offset by higher liquidity payments from our new market model which we pay to incent the DMMs and SLPs in the US and the tiered pricing structure introduced earlier this year at Arca.

Despite the higher liquidity payments and the decline in regulatory fees in 2008 we ended the full year with net revenue of $2.9 billion a 4% increase over 2007. On the expense front we continue to make headway with our tech and non-tech cost saving initiatives. Adjusting for FX, M&A and select initiatives our fixed operating expenses were down $61 million or 14% in the fourth quarter and down $146 million or 9% for the full year. We are not done here and in this challenging environment we remain focused on rationalizing our cost base beyond the targets identified at the time of the merger.

In the fourth quarter we also continued to execute against the many growth initiatives that will fuel our future growth while continuing to invest in new technology for the benefit of our markets and customers. Some example, while CDS is only the first of what I expect will be many OTC derivatives that move toward a more transparent and regulated model, I am pleased to report that we are the first to market with a real and practical solution.

We also rolled out the new market model in the US cash business which is stabilized and increased our market share in NYSE Classic and we are excited about the MTFs and other initiatives we are launching in the first quarter within our European cash business. We migrated all of the Amex ETFs and equities to our NYSE and Arca platforms within two months of closing the Amex transaction and options will migrate over in early March.

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