NYX Notes

6/7/2007 – Sandler report

• Closed Euronext merger 4/4/07

• Company affirms $275m expense synergies and $100m revenue synergies over 3 years

• Consolidating data centers from 10 to 4 centers

• Needs to acquire US derivative exchange to fill hole in product offering

• Continues to loose market share of NYSE and NDAQ listed volume

• Thain has 3 goals

  • Maintain NYX role as consolidator of exchanges

  • Successful integration of Euronext

  • Recover market share losses in US equities

• Cash equity market share loss not as important as only accounts for 10% of revenue

• Majority of European derivatives trading (22% of total revenue) is short-term interest rate contracts.

  • May volumes only up 2.6% YOY versus 5 year trend of 17%

  • Sandler sees this as an anomaly

• Market data revenue may be under pressure as NDAQ taking market share on tape recording.

Q4 2007 EPS Report and c-call (2/5/08)

• Net income $543m (2.70) for full year 2007 – up 214% over 2006

• Q4 net income $156m (0.59) versus $45m (0.29) last year

• Reached new levels in trading volume, message traffic and IPO proceeds

• Recently announced acquisition of American Stock Exchange and Wombat Financial Software

• AEMS transaction brings European trading and IT operations in-house

  • Anticipate realizing $200m in cost savins by Q1 2010 and full $250m by year end 2010

• Non-GAAP measures $705m (2.65) income up 46% from 2006 and Q4 income $175m (0.66) up 39%

• Pre-tax margin of 27.3% for 2007 versus 23.5% last year

• Cash balance of $1,532m and $2,713 in debt obligations

• Arca options claimed 16.3% of volume in December

• NYX was number 1 in overall IPO proceeds worldwide - $80b in proceeds

• In Q4 became component in S&P 500 and is only exchange group in SP 100

• 2008 will be migrating from 10 data centers down to 4 to save costs.

Lehman Report 2/6/08

• Sharp stock decline likely from disappointment with higher than expected expenses

• Cost Savings from Euronext merger not changing but being pushed back 3 quarters.

DBAB report 2/5/08

• Believes consensus estimates still too high

• Decline in stock represents realization consensus is still high and merger integration will still take much work.

• Acquisitive nature raises concern that NYX will overpay for its next target as it expands.

CSFB Report 12/10/2008

-          Overall activity levels have remained healthy

o        YTD US cash equities volume up 45%, European cash equities up 24% and EU derivatives up 10%

-          CSFB factoring 13-15% Y?Y declines industrywide US equities in 2009

-          Management believes historical growth rates of 10-15% are still in place long-term

-          Technology improvements helping to rebuild market share – more room for improvement

-          Integration of acquisitions ahead of schedule – expects $100 mil of expense synergies by early to mid 2009

-          Upcoming launch of cleared CDS contracts could provide growth

-          Strong Dollar has been a headwind as 40% of gross revenue and 70% of operating income is from European Operations

-          Uses of capital likely to approach $1 bil (dividend , data centers, large payment to LCH)

o        But EBITDA will generate $1.4 bil

o        Dividend yield now about 5%

-          $1 bil cash and equivalents and $3.2 bil debt which matures in 5-7 years

-          Long-term likely to use cash for share repurchases, but current environment requires more conservative approach.

 

EPS Release 2009-02-09

-          Pro-forma net income $137 mil (0.52 per share) versus 0.62 in Q4 2007

o        Excludes 4.59 bil non-cash charge for impairment of goodwill – no impact on debt covenants, cash-flow or operations

-          FY EPS $2.87 per share – up 9% versus 2007

-          Gross revenues up 21% in Q4 but net revenues not as strong due to rebates paid to liquidity providers

o        Volumes higher across most markets

-          Refraining from stock purchases but maintaining $0.30 quarterly div.

o        Balance between capital management and shareholder value

-          Focusing capital on growth initiatives while pruning back operating expenses on existing divisions

-          Plans to roll out new pricing model March 1

 

RAJA note 2/10/09

-          EPS of $0.52 shy of estimate, considerably down from Q3 2008

-          Third straight quarter of declining earnings

-          Drivers: - Decision to pursue market share at expense of pricing

o        Strong dollar also pressured EPS

-          Not optimistic with near-term 2009 outlook

o        Lower trading volumes y/y

o        Expenses related to growth initiatives will pressure margins

o        Decision to suspend share repurchase

-          LiffeClear (initiative to bring futures clearing in-house) may be lone hope for upside surprise

 

Barclays 2/10/09

-          Updated cost structure confusing to investors (investment in growth measures misconstrued as less cost reduction)

o        Hoping for more details during investor day – Wednesday

 

CSFB Report 2/10/09

-          Weaker than expected volumes and lower revenue capture trends

-          Could take few more quarters to provide clarity to drive stock price higher

-          Shares should find suppot near current valuations

-          Better than expected share gains to be offset by pricing compression

-          Management continues to target $370 m in synergies (250m from Euronext, $120 from AMEX)

Raymond James Note 4/23/09

-          Rumors of Deutsche Borse and NYSE Euronext merger

o        Companies acknowledged discussions back in December

-          Deutsche Borse may have more ability now that 2 activist investors who had previously blocked a deal are gone

-          Likely that deutsche borse would be buyer (larger market cap) and deal likelty to be equity based

-          Raymond James believes would be an integration nightmare

-          Deal would cover 50% of US option trading – dominate Europe Futures market and continental Europe Equity trading

-          ICE could be another attractive acquisition