EX-99.1 2 v105333_ex99-1.htm
 
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Don Duffy
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Integrated Corporate Relations
Intermarket Communications
(203) 682-8215
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NYFIX REPORTS FOURTH QUARTER AND FULL YEAR 2007 RESULTS
Full Year 2007 Revenues up 24% Driven by Growth in Transaction Services


New York, NY, February 28, 2008: NYFIX, Inc. (Nasdaq: NYFX) (“NYFIX” or the “Company”), a trusted provider of innovative solutions that optimize trading efficiency, today reported results for the fourth quarter and full year 2007. For the full year 2007, revenues increased 24% over 2006, driven by a 74% increase in Transaction Services revenues. Fourth quarter revenues of $30.7 million represented a 16% increase over fourth quarter 2006. Business highlights during the quarter included the signing of key partnership agreements for Euro-Millennium™, NYFIX’s European-based neutral dark pool of liquidity scheduled to launch in March, as well as continued infrastructure enhancements designed to position the Company for further growth.

“We are pleased with our tremendous progress during 2007, not only in terms of revenue growth, but also with respect to the remediation activities that marked this as a transitional year,” said Howard Edelstein, CEO of NYFIX. “In 2008 we look forward to focusing our energies on growing the business.”

Three Month Results

Financial highlights for fourth quarter 2007 include:

 
·
Revenues of $30.7 million, a 16% increase over revenues of $26.4 million for fourth quarter 2006.
 
·
An 8% increase in net revenues for the FIX Division to $14.7 million, as compared to $13.6 million for fourth quarter 2006.
 
·
A 64% increase in net revenues for the Transaction Services Division to $13.8 million, as compared to $8.4 million for fourth quarter 2006.
 
·
A 50% decrease in net revenues for the OMS Division to $2.2 million, as compared to $4.4 million for fourth quarter 2006.
 
1
 
 
·
Gross profit of $14.6 million, a 9% increase over the gross profit of $13.4 million for fourth quarter 2006. These gross profit amounts include the impact of stock-based compensation included in cost of revenue of $0.4 million and less than $0.1 million for fourth quarter 2007 and fourth quarter 2006, respectively.
 
·
Loss from continuing operations of $(20.6) million, or $(0.56) per share, compared to a loss from continuing operations for fourth quarter 2006 of $(3.9) million, or $(0.11) per share. These loss amounts exclude the impact of accumulated preferred dividends of $(1.2) million, or $(0.03) per share, and $(1.4) million, or $(0.04) for fourth quarter 2007 and fourth quarter 2006, respectively, as well as the beneficial conversion feature on preferred stock of $(18.1) million, or $(0.51) per share for fourth quarter 2006. Other significant items which affected the loss amounts disclosed above include the following:
 
 
 
Three Months Ended December 31,
 
 
 
2007
 
2006
 
(in millions, except per share amounts)
 
Amount
per share
 
Amount
per share
  
SEC investigation, restatement and other related expenses
  
$
(0.2
)
$
(0.01
)
$
(3.1
)
$
(0.09
)
Transitional rebuilding and remediation costs
    
(0.9
)
  
(0.03
)
  
(0.8
)
  
(0.02
)
Transitional employment costs
    
(1.6
)
  
(0.04
)
  
(0.9
)
  
(0.02
)
Euro Millennium pre-operating start-up costs
    
(2.0
)
  
(0.05
)
  
-
   
-
 
Impairment and restructuring charges
    
(7.9
)
  
(0.22
)
  
-
   
-
 
Stock-based compensation
    
(5.7
)
  
(0.16
)
  
(0.1
)
  
(0.00
)
Tax benefit associated with goodwill impairment
    
0.6
   
0.02
   
-
   
-
 
Interest penalty on convertible note for filing delay
    
-
   
-
   
(0.3
)
  
(0.01
)

 
NYFIX has incurred significant transitional rebuilding and remediation costs relating to deficiencies involving critical operational systems and processes, including technology infrastructure and management information systems, and certain historical administrative issues. In addition, NYFIX has incurred significant transitional employment costs to build critical teams, retain key employees and remediate certain skill gaps.

Since the second quarter of 2007 NYFIX has incurred pre-operating start-up costs for a new initiative, Euro Millennium, a multilateral trading facility for non-displayed liquidity in pan-European listed cash equities.

As previously announced, during fourth quarter 2007, NYFIX entered into a strategic agreement with Citi to offer NYFIX Fusion OMS customers a transition arrangement to Citi’s Lava ColorPalette® OMS. As a result of discontinuing the Fusion OMS, the Company recorded $7.9 million of impairment and employment related restructuring charges, partially offset by a tax credit of $0.6 million related to impaired goodwill.

During fourth quarter 2007, NYFIX adopted a new equity incentive plan to assist in retention and to further promote alignment with stockholders, and issued awards (options and restricted stock units) for approximately 9.9 million shares of common stock.

2
Fourth quarter 2007 results also include income from discontinued operations of $1.1 million. This amount reflects a preliminary estimate of the earn-out gain associated with the sale of the Company’s NYFIX Overseas, Inc. subsidiary in August 2006, net of related expenses and an accrual for the estimated cost to resolve a tax contingency associated with historical stock option gains realized by NYFIX Overseas employees. The Company may have a more up-to-date estimate of the earn-out gain prior to filing its 2007 Form 10-K and as a result, the actual reported amount may vary from the amount noted above.

 
Full Year Results

Financial highlights for full year 2007 include:

 
·
Revenues of $121.7 million, a 24% increase over revenues of $98.4 million for full year 2006.
 
·
A 19% increase in net revenues for the FIX Division to $57.7 million, as compared to $48.6 million for full year 2006.
 
·
A 74% increase in net revenues for the Transaction Services Division to $53.6 million, as compared to $30.8 million for full year 2006.
 
·
A 44% decrease in net revenues for the OMS Division to $10.5 million, as compared to $18.9 million for full year 2006.
 
·
Gross profit of $56.6 million, an 18% increase over the gross profit of $48.0 million for full year 2006. These gross profit amounts include the impact of stock-based compensation included in cost of revenue of $0.4 million and $0.1 million for full year 2007 and full year 2006, respectively.
 
·
Loss from continuing operations of $(41.8) million, or $(1.15) per share, compared to a loss from continuing operations for full year 2006 of $(16.6) million, or $(0.49) per share. These loss amounts exclude the impact of accumulated preferred dividends of $(5.9) million, or $(0.16) per share, and $(1.4) million, or $(0.04) per share for full year 2007 and full year 2006, respectively, as well as the beneficial conversion feature on preferred stock of $(18.1) million, or $(0.53) per share for full year 2006. Other significant items which affected the loss amounts disclosed above include the following:
 
   
Year Ended December 31,
 
 
 
2007
 
2006
 
(in millions, except per share amounts)
 
Amount
per share
 
Amount
per share
  
SEC investigation, restatement and other related expenses
  
$
(5.8
)
$
(0.16
)
$
(12.8
)
$
(0.37
)
Transitional rebuilding and remediation costs
    
(6.4
)
  
(0.18
)
  
(0.8
)
  
(0.02
)
Transitional employment costs
    
(4.0
)
  
(0.11
)
  
(1.9
)
  
(0.06
)
NYSE linkage fees not passed to clients
    
(1.9
)
  
(0.05
)
  
-
   
-
 
Euro Millennium pre-operating start-up costs
    
(4.0
)
  
(0.11
)
  
-
   
-
 
Impairment and restructuring charges
    
(7.9
)
  
(0.22
)
  
-
   
-
 
Stock-based compensation
    
(6.0
)
  
(0.16
)
  
(0.8
)
  
(0.02
)
Tax benefit associated with goodwill impairment
    
0.6
   
0.02
   
-
   
-
 
Restructuring charge on office closing
    
-
   
-
   
(2.1
)
  
(0.06
)
Interest penalty on convertible note for filing delay
    
-
   
-
   
(0.5
)
  
(0.01
)
 
3
Full year 2007 and full year 2006 results also include income from discontinued operations of $1.1 million and $3.6 million, respectively. The full year 2007 amount reflects an estimate of the earn-out gain associated with the sale of NYFIX Overseas in August 2006, net of related expenses, and an accrual for the estimated cost to resolve a tax contingency associated with historical stock option gains realized by NYFIX Overseas employees. The full year 2006 amount includes a gain recorded on the NYFIX Overseas sale of $4.0 million as well as the 2006 results of operations of NYFIX Overseas through the sale date.

2008 Outlook and Subsequent Events

In 2008 the Company will be focused on growing its Transaction Services and FIX Marketplace™ businesses, and further expanding throughout Europe. As previously reported, NYFIX Millennium®, one of the industry’s leading dark pools of liquidity, reached a new high in volumes during January 2008, matching a total of over 1.2 billion shares. This volume established a new average daily volume high for a month with an ADV of nearly 58 million shares.

The Company expects to leverage the experience gained with NYFIX Millennium in the U.S. and launch Euro Millennium in March 2008. This initiative is well aligned with the Company’s goal of global expansion during a time of rapid regulatory change. The Company expects to incur approximately $2.0 million of costs related to this effort in the first quarter of 2008.

The transitional costs for the rebuilding, remediation and employment initiatives described above were substantially complete by year-end, with approximately $0.6 million of remaining costs expected during the first half of 2008. In addition, the Company expects to incur $0.6 million of remaining employment related restructuring costs related to the Fusion OMS wind-down, which is currently expected to be completed during the second quarter of 2008. Going forward, stock-based compensation expense is expected to be at lower levels than the fourth quarter of 2007 due to shortened initial vesting periods and other awards that were fully vested on issuance. For 2008, stock-based compensation expense is estimated at $3.0 million for the first quarter and approximately $2.0 million per quarter thereafter. These stock-based compensation amounts may vary, however, depending on the fair value of performance awards when the applicable criteria are established and whether such performance awards actually vest.

In January 2008, NYFIX received a $5.0 million advance from its primary carrier under its previous Directors and Officers insurance policy for fees incurred in defense of the SEC investigation into the Company’s historical stock option activity as well as related litigation. As this amount can be recovered in certain circumstances, NYFIX will defer recognition of these proceeds in its operating results until further progress is made in resolving these contingencies. NYFIX is pursuing additional claims from its secondary carriers under its previous insurance policies which have additional limits aggregating $10.0 million.
 

4

Investor Conference Call

As previously announced, the Company will host a conference call to discuss its results and business outlook later today at 5:00 PM Eastern. The conference call can be accessed live via telephone by dialing, (866) 225-8754 or for international callers by dialing (480) 629-9562. A replay will be available two hours after the call and can be accessed by dialing (800) 406-7325 or (303) 590-3030 for international callers; the password is 3846539. The replay will be available until March 6, 2008. The call will be webcast live from the Company's website at www.nyfix.com under the investor relations section.


About NYFIX, Inc.

A pioneer in electronic trading solutions, NYFIX continues to transform trading through innovation. The NYFIX Marketplace™ is a global community of trading counterparties utilizing innovative services that optimize the business of trading. NYFIX Millennium® provides the NYFIX Marketplace™ with new methods of accessing liquidity. NYFIX also provides value-added informational and analytical services and powerful tools for measuring execution quality. A trusted business partner to the buy-side and sell-side alike, NYFIX enables ultra low touch, low impact market access and end-to-end transaction processing. For more information, please visit www.nyfix.com.

This press release may contain forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning NYFIX, Inc.'s plans, objectives, expectations and intentions and other statements that are not historical or current facts. Forward-looking statements are based on NYFIX, Inc.’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause NYFIX, Inc.’s results or future events to differ materially from current expectations include, but are not limited to: the possibility that the Company may record a significant impairment charge relating to its goodwill because the Company is not profitable; the effects of current, pending and future legislation, regulation and regulatory actions; the ability of the Company to achieve and maintain effective internal control over financial reporting in accordance with SEC rules promulgated under Section 404 of the Sarbanes-Oxley Act; the impact of accounting for stock-based compensation and ongoing regulatory investigations, including the possibility of new and significant information subsequently arising which could lead to different determinations and require different accounting treatment; actions and initiatives by both current and future competitors; our ability to accommodate increased levels of trading activity and keep current with market data requirements; and other factors detailed in NYFIX, Inc.’s Annual Report on Form 10-K for 2006, and other periodic reports filed with the U.S. Securities and Exchange Commission. In addition, these statements are based on a number of assumptions that are subject to change. The inclusion of forward-looking statements herein should not be regarded as a representation by NYFIX, Inc. that the forward-looking statements will prove to be correct. In addition, the forward-looking statements included in this press release represent the Company’s views as of February 28, 2008. The Company anticipates that subsequent events and developments will cause the Company’s views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to February 28, 2008.
 
5

NYFIX, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
 
   
Three Months Ended
December 31,
  
Year Ended
December 31,
  
   
2007
  
2006
  
2007
  
2006
  
   
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Audited)
  
Revenue:
                  
Subscription and maintenance
  
$
16,815
  
$
17,676
  
$
67,116
  
$
65,801
  
Transaction
    
13,582
   
7,960
   
52,339
   
29,609
 
Product sales and services
    
254
   
803
   
2,247
   
2,943
 
Total revenue
    
30,651
   
26,439
   
121,702
   
98,353
 
                           
Cost of revenue:
                          
Subscription and maintenance
    
8,670
   
8,457
   
34,381
   
32,638
 
Transaction
   
7,287
   
4,149
   
29,916
   
15,901
 
Product sales and services
   
77
   
459
   
813
   
1,824
 
Total cost of revenue
    
16,034
   
13,065
   
65,110
   
50,363
 
                           
Gross profit
    
14,617
   
13,374
   
56,592
   
47,990
 
                           
Operating expense:
                          
Selling, general and administrative
   
27,624
   
14,662
   
86,848
   
49,237
 
Asset impairment charge
    
7,596
   
-
   
7,596
   
-
 
Depreciation and amortization
    
515
   
267
   
1,554
   
1,185
 
Restructuring charge
    
331
   
-
   
331
   
2,056
 
SEC investigation, restatement and other related expenses
    
249
   
3,088
   
5,846
   
12,758
 
                           
Loss from operations
    
(21,698
)
  
(4,643
)
  
(45,583
)
  
(17,246
)
                           
Interest expense
    
(166
)
  
(394
)
  
(565
)
  
(1,029
)
Investment income
    
815
   
1,179
   
4,114
   
1,894
 
Other income (expense), net
    
1
   
5
   
(3
)
  
20
 
Loss from continuing operations before income tax (benefit) provision
    
(21,048
)
  
(3,853
)
  
(42,037
)
  
(16,361
)
Income tax (benefit) provision
    
(416
)
  
48
   
(275
)
  
189
 
Loss from continuing operations
    
(20,632
)
  
(3,901
)
  
(41,762
)
  
(16,550
)
Income from discontinued operations, including gain on sale
                          
of $2,334 and $4,035, respectively
    
1,105
   
-
   
1,105
   
3,646
 
Net loss
    
(19,527
)
  
(3,901
)
  
(40,657
)
  
(12,904
)
Accumulated preferred dividends
    
(1,182
)
  
(1,354
)
  
(5,868
)
  
(1,354
)
Beneficial conversion feature on preferred stock
    
-
   
(18,139
)
  
-
   
(18,139
)
Loss applicable to common stockholders
  
$
(20,709
)
$
(23,394
)
$
(46,525
)
$
(32,397
)
                           
Basic and diluted loss from continuing operations per
                          
common share (net of accumulated preferred dividends)
  
$
(0.60
)
$
(0.66
)
$
(1.32
)
$
(1.06
)
Basic and diluted income from discontinued operations
                          
per common share
    
0.03
   
-
   
0.03
   
0.11
 
                           
Basic and diluted loss per common share
  
$
(0.57
)
$
(0.66
)
$
(1.29
)
$
(0.95
)
                           
Basic and diluted weighted average common shares outstanding
    
36,601
   
35,521
   
36,160
   
34,035
 
 
6

NYFIX, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
 
           
   
December 31,
  
   
2007
  
2006
  
   
(Unaudited)
 
(Audited)
  
Assets
          
Current assets:
          
Cash and cash equivalents
  
$
75,657
  
$
105,888
  
Accounts receivable, net
    
14,609
   
13,727
 
Clearing broker assets
    
483,867
   
423,153
 
Prepaid expenses and other current assets
    
8,588
   
4,179
 
Total current assets
    
582,721
   
546,947
 
Property and equipment, net
    
21,478
   
14,808
 
Capitalized software costs, net
   
5,789
   
5,900
 
Goodwill
   
57,401
   
58,193
 
Acquired intangible assets, net
    
3,708
   
1,966
 
Other assets, net
    
1,745
   
1,514
 
Total assets
  
$
672,842
  
$
629,328
  
               
Liabilities and Stockholders' Equity
              
Current liabilities:
              
Accounts payable and accrued expenses
  
$
39,422
  
$
25,133
  
Clearing broker liabilities
    
483,600
   
422,429
 
Current portion of capital lease obligations
    
923
   
1,223
 
Current portion of long-term debt
    
-
   
188
 
Current portion of other long-term liabilities
    
1,564
   
1,235
 
Deferred revenue
    
4,648
   
4,212
 
Total current liabilities
    
530,157
   
454,420
 
Long-term portion of capital lease obligations
    
550
   
461
 
Long-term debt
    
9,941
   
7,412
 
Other long-term liabilities
    
2,354
   
3,662
 
Total liabilities
    
543,002
   
465,955
 
Commitments and contingencies
              
Stockholders' equity:
              
Preferred stock, $1.00 par value; 5,000,000 shares authorized:
              
Series A, none issued
    
-
   
-
 
Series B Voting Convertible, 1,500,000 shares issued and outstanding; liquidation preference of $77,625 at December 31, 2007
    
62,092
   
62,092
 
Series C Non-Voting Convertible, none issued
    
-
   
-
 
Common stock, $0.001 par value; 100,000,000 and 60,000,000 shares authorized; 37,725,758 and 36,654,986 shares issued, respectively
    
261,307
   
256,835
 
Preferred stock dividend distributable, 525,000 common shares
    
2,441
   
-
 
Accumulated deficit
    
(182,803
)
  
(139,309
)
Treasury stock, 906,826 and 1,133,778 shares, respectively, at cost
    
(13,194
)
  
(16,224
)
Accumulated other comprehensive loss
    
(3
)
  
(21
)
Total stockholders' equity
    
129,840
   
163,373
 
Total liabilities and stockholders' equity
  
$
672,842
  
$
629,328
  
 
7