Nyse Euronext today reported net income of $173 million, or $0.71 per diluted share on a GAAP basis, for the second quarter of 2013, compared to net income of $125 million, or $0.49 per diluted share, for the second quarter of 2012.
Results for the second quarter of 2013 and 2012 included $22 million and $12 million, respectively, of pre-tax merger expenses and exit costs. Second quarter 2013 results also included a $10 million gain recorded for non-operating items due to the sale of a portion of our equity stake in LCH.Clearnet and a reserve release related to a favorable settlement with certain European tax authorities which significantly reduced our GAAP effective tax rate. Excluding merger expenses, exit costs, disposal activity and discrete tax items, net income in the second quarter of 2013 was $153 million, or $0.63 per diluted share on a non-GAAP basis, compared to $128 million, or $0.51 per diluted share, in the second quarter of 2012.
"We continue to execute solidly against our business plan as we build momentum toward closing the ICE deal," said Duncan L. Niederauer, CEO, NYSE Euronext. "We successfully transitioned our London-based derivatives market to ICE Clear Europe and were ranked number one year-to-date in capital raising with our market share in technology listings increasing to 64%. The strength of our listings franchise continues to build and we are very pleased to welcome Oracle to the NYSE today to close the market. We were also appointed the administrator for LIBOR. Turning to our transaction with ICE, we are gratified that our shareholders and the European Commission have approved the transaction and we are working with the College of Regulators in Europe and other regulators to obtain all the appropriate remaining approvals."
"Our results for the second quarter reflect the actions we have taken to grow our businesses and diligently manage our cost base and capital," commented Michael S. Geltzeiler, Group Executive Vice President and CFO, NYSE Euronext. "On a constant dollar/portfolio basis, costs are down 7% year-to-date and we have already achieved 64% of the $250 million Project 14 target for costs reductions, well ahead of the 60% promised by yearpromised by yearpromised by yearhead of the 60% promised by yearchieved 64% of the $250 million Project 14 target for costs reductions, well ahead of the 60% promised by year-end 2013. Further cost savings will come online in the second-half of 2013 with the completed transition to ICE Clear Europe which will position us to easily surpass our full-year cost guidance target of $1,525 million. Turning to capital, capital expenditures year-to-date are running 30% below the prior year period and we are on track to come in well below our 2013 guidance of $150 million. We retired the $414 million remaining on our $750 million June 2013 notes, which combined with strong EBITDA generation, reduced our debt-to-EBITDA ratio to 1.9 times. The debt retirement will reduce interest expense in the second half of the year. All of these actions have helped bolster our business model and set the table for our proposed combination with ICE."
SECOND 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 $611 million in the second quarter of 2013, up 1% from the second quarter of 2012 and included a $2 million negative impact from foreign currency fluctuations.
Other operating expenses, excluding merger expenses and exit costs, were $382 million in the second quarter of 2013, down $14 million, or 4% compared to the second quarter of 2012. Excluding the impact of new business initiatives and a $2 million positive impact attributable to foreign currency fluctuations, other operating expenses were down $20 million, or 5%, compared to the second quarter of 2012.
Cumulative Project 14 savings through the second quarter of 2013 were $161 million, which represented 64% of the total $250 million expected to be saved by the end of 2014.
Operating income, excluding merger expenses and exit costs, was $229 million, up $23 million, or 11% compared to the second quarter of 2012.
Adjusted EBITDA, excluding merger expenses and exit costs, was $291 million, up $19 million, or 7% compared to the second quarter of 2012. Adjusted EBITDA margin was 48% in the second quarter of 2013, compared to 45% in the second 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 second quarter of 2013, excluding merger expenses, exit costs and discrete tax items, was 24% compared to approximately 25% for the second quarter of 2012.
The weighted average diluted shares outstanding in the second quarter of 2013 was 244 million, down from 253 million in second quarter of 2012.
At June 30, 2013, total debt was $2.2 billion. The decline in total debt was driven by the retirement of the remaining $414 million of our $750 million 4.80% notes that were due in June 2013. Cash, cash equivalents and short term financial investments (including $154 million related to Section 31 fees collected from market participants and due to the SEC) were $0.3 billion and net debt was $1.9 billion.
The ratio of debt-to-EBITDA at the end of the second quarter of 2013 was 1.9x, down from 2.5x at the end of 2012. The decline was driven by the retirement of the remaining $414 million of our $750 million 4.80% notes due in June 2013 and stronger adjusted EBITDA generation in the first half of 2013, compared to the second half of 2012.
Total capital expenditures were $32 million in the second quarter of 2013, down from $41 million in the second quarter of 2012.
The board of directors declared a cash dividend of $0.30 per share for the third quarter of 2013 with a record date of September 16, 2013 and a payment date of September 30, 2013. The anticipated ex-date will be September 12, 2013. However, the third quarter 2013 dividend is payable on the payment date only if the ICE transaction has not been completed as of the record date.
SECOND QUARTER 2013 SEGMENT RESULTS
DERIVATIVES
Derivatives net revenue of $195 million in the second quarter of 2013 increased $13 million, or 7% compared to the second quarter of 2012 and included a $3 million negative impact from foreign currency fluctuations. The $16 million increase in derivatives net revenue, on a constant currency basis, compared to the second quarter of 2012, was driven by higher average daily trading volumes in European interest rate derivatives products. Highlights for the second quarter of 2013 included:
• Global derivatives ADV, excluding Bclear, in the second quarter of 2013 of 7.7 million contracts increased 12% compared to the second quarter of 2012, but decreased 2% compared to first quarter of 2013 levels.
• NYSE Euronext European derivatives products ADV of 4.0 million contracts in the second quarter of 2013 decreased 13% compared to the second quarter of 2012 and decreased 10% from first quarter of 2013 levels. Excluding Bclear, European derivatives products ADV in the second quarter of 2013 increased 13% compared to the second quarter of 2012, but decreased 9% from the first quarter of 2013.
• U.S. equity options ADV in the second quarter of 2013 increased 12% to 4.4 million contracts compared to the second quarter of 2012 and increased 3% from the first quarter of 2013. U.S. consolidated equity options ADV of 15.9 million contracts increased 7% compared to the second quarter of 2012 and increased 6% from the first quarter of 2013. NYSE Euronext's U.S. equity options exchanges accounted for 28% of total consolidated U.S. equity options trading in the second quarter of 2013, up from 26% in the second quarter of 2012, and in-line with the first quarter of 2013.
• NYSE Liffe and ICE Clear Europe, a wholly-owned subsidiary of IntercontinentalExchange, completed the clearing transition for the London-based derivatives market of NYSE Liffe to ICE Clear Europe. The clearing transition involved 43 member firms with 75 million contract sides being transferred to ICE Clear Europe along with $11.2 billion margin held at the clearing house on the morning of July 1, 2013. The combined guaranty fund for ICE Energy and NYSE Liffe Futures and Options is set at $1.2 billion from July 1, 2013. In addition, the migration covered over 1,300 products across bond, commodity, equity, index and interest rate derivatives and ten new settlement currencies for ICE Clear Europe.
• NYSE Euronext Rate Administration Limited, a subsidiary of NYSE Euronext, announced that following a rigorous selection process conducted by the independent Hogg Tendering Advisory Committee, NYSE Euronext Rate Administration Limited has been appointed as the new administrator for LIBOR. The transfer of the administration from BBA LIBOR Ltd, the subsidiary of the British Bankers' Association is expected to be completed in early 2014, once the Financial Conduct Authority's authorization of NYSE Euronext Rate Administration Limited is complete.
CASH TRADING AND LISTINGS
Cash Trading and Listings net revenue of $302 million in the second quarter of 2013 increased $2 million, or 1% compared to the second quarter of 2012 and included a $1 million positive impact from foreign currency fluctuations. Highlights for the second quarter of 2013 included:
• European cash ADV of 1.5 million transactions in the second quarter of 2013 decreased 14% from 1.7 million transactions in the second quarter of 2012, but increased 7% from first quarter of 2013 levels. European cash market share (value traded) in NYSE Euronext's four core markets was 67% in the second quarter of 2013, up from 66% in the second quarter of 2012 and up from 65% in the first quarter of 2013.
• In the U.S., cash trading ADV in the second quarter of 2013 decreased 11% to 1.6 billion shares from 1.8 billion shares in the second quarter of 2012, but increased 5% from the first quarter of 2013. Tape A matched market share was 31% in the second quarter of 2013, down from the 32% recorded in the second quarter of 2012, but up from 30% recorded in the first quarter of 2013. Trading off-exchange, as reported by Trade Reporting Facilities ("TRF"), increased to 35% of overall consolidated average daily volume in the second quarter of 2013 up from 32% in the second quarter of 2012.
• NYSE Euronext ranked #1 globally in initial public offerings (IPOs) and follow-ons globally through the second quarter of 2013. NYSE Euronext raised $29 billion in total global proceeds on 72 IPOs and $105 billion in total global proceeds on 256 follow-ons. In the U.S., NYSE Euronext led the market with 47 IPOs raising $15 billion in proceeds (excluding closed-end funds) and has steadily captured share in technology-based IPOs. NYSE Euronext has listed 64% of the technology IPOs in the U.S., through the second quarter of 2013, including Tableau Software, Gigamon, Light in the Box and ChannelAdvisor.
• NYSE was the leader in transfers - 4 companies with $168 billion in total market capitalization transferred or announcing transfer to the NYSE in the first half of 2013, while 8 companies with $3.9 billion in total market capitalization transferred away. Oracle Corp. (ORCL) announced transfer to the NYSE on 6/20/2013, and began trading on the NYSE on 7/15/2013. ORCL is the largest transfer in history with $156 billion in market capitalization. Since 2010, five Nasdaq-100 Index members have transferred to the NYSE, including two in 2013 (Oracle Corp. and Perrigo Co.). Since 2000, 227 companies have transferred to the NYSE with a total market capitalization of $706 billion.
• In the first half of 2013, NYSE Euronext welcomed 23 new listings on its European markets. Key listings included: Infosys (INFY), a global leader in consulting and technology and the first Indian company admitted to trading on NYSE Euronext's London and Paris markets; Constellium (CSTM), a global leader in innovative and high value‐added aluminum products; and Bpost (BPOST), the leading postal operator in Belgium, and the year's second largest IPO in Europe and the largest non-finance related IPO.
• NYSE Euronext opened EnterNext®, its marketplace for SMEs. This new subsidiary is dedicated to companies that have a capitalization of under €1 billion and already covers over 750 SMEs listed on the regulated market of NYSE Euronext and on NYSE Alternext.
• Euronext extended its range of stock market indices with the addition of the CAC 40® Ext, which tracks the market's benchmark CAC 40®, but with extended calculation and distribution hours. With the CAC 40® Ext index, investors can track trends in the CAC 40®.
INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS
Information Services and Technology Solutions revenue was $114 million in the second quarter of 2013, a decrease of $5 million, or 4% compared to the second quarter of 2012 but increased $2 million or 2% from the first quarter of 2013. The decrease in revenue was primarily due to the decline in the number of large, one-time managed services sales which was partially offset by higher market data revenue from previously announced market data initiatives. Highlights for the second quarter of 2013 included:
• NYSE Technologies launched NYSE BQT (Best Quote & Trades), a consolidated XDP feed that provides a real-time, unified view of Level 1 market data, including Best Bid/Offer and Last Sale information for the NYSE, NYSE Arca, and NYSE MKT exchanges including NASDAQ issues traded on NYSE Arca and NYSE MKT.
• Market Data initiatives continue to build with approximately 84% of all clients registered for the new non-display license agreements. This momentum will be further reflected in the third quarter and on an annual basis is expected to increase revenues by double digits.
• NYSE Technologies was named 'Best Data Center Provider to the Sell Side' by Waters Technology. The award was presented at the Waters Technology, Sell Side Technology Awards.
• Americas Trading System Brasil (ATS Brasil), a joint venture between Americas Trading Group (ATG) and NYSE Euronext, has formally made an authorization request with the Securities and Exchange Commission (CVM) in Brazil to launch a new stock exchange in the Brazilian market. The formal request to approve ATS Brasil for trading in 2014 also includes provisions for the admission of new liquidity providers to the joint venture.
NYSE Euronext today reported net income of $173 million, or $0.71 per diluted share on a GAAP basis, for the second quarter of 2013, compared to net income of $125 million, or $0.49 per diluted share, for the second quarter of 2012.