Third Quarter 2018 Highlights*
- Diluted EPS of $0.76, up 43
Percent
- Adjusted Diluted EPS of $1.06(1), up 19 Percent
- Net Revenue of $270.5 Million
Compared to $269.7 Million in Third
Quarter 2017
- $84 Million of Capital
Returned to Shareholders
CHICAGO, Nov. 2, 2018 /PRNewswire/ -- Cboe Global
Markets, Inc. (Cboe: CBOE) today reported financial results
for the third quarter of 2018.
Consolidated results for year-to-date 2017 include Bats Global
Markets (Bats) for the period March 1
through September 30, 2017. Cboe completed its
acquisition of Bats on February 28,
2017.
"We are pleased to report strong financial results for the third
quarter at Cboe, where we continued to lay the foundation for
future growth, including the successful launch of two new Cboe
corporate bond index futures," said Edward
T. Tilly, Cboe Global Markets Chairman and Chief Executive
Officer. "Our diverse offering of multi-asset products and
services, anchored by our suite of proprietary products, uniquely
positions Cboe to deliver value to our customers and shareholders
in various market conditions. We saw trading volume in our
proprietary products improve month-over-month throughout the third
quarter and accelerate in October as volatility increased and
investors around the globe looked to Cboe products to help manage
their risk."
"This was another solid quarter for Cboe. The strength of
our business enables us to continue to invest in the growth of our
business for the long-term while returning nearly $84 million of capital to shareholders in the
quarter through dividends and share repurchases," said Brian N. Schell, Cboe Global Markets Executive
Vice President and Chief Financial Officer. "We remain
focused on strong expense discipline as we execute our key
strategic growth initiatives and strive to deliver long-term value
to our shareholders."
*All comparisons are third quarter 2018 compared to third
quarter 2017.
(1)A full reconciliation of our non-GAAP
results to our GAAP results is included in the attached tables. See
"Non-GAAP Information" in the accompanying financial
tables.
Consolidated Third Quarter Results -Table 1
Table 1 below presents summary selected unaudited condensed
consolidated financial information for the company as reported and
on an adjusted basis for the three months ended September 30, 2018 and 2017.
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Table
1
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Consolidated Third Quarter Results
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3Q18
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3Q17
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($ in millions except per share)
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3Q18
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3Q17
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Change
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Adjusted1
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Adjusted1
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Change
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Total Revenues Less
Cost of Revenues
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$
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270.5
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$
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269.7
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-
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$
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270.5
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$
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269.7
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-
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Total Operating
Expenses
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$
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144.4
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$
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150.4
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(4)
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%
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$
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99.1
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$
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101.9
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(3)
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%
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Operating
Income
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$
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126.1
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$
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119.3
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6
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%
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$
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171.4
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$
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167.8
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2
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%
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Operating Margin
%
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46.6
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%
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44.2
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%
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240
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bps
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63.4
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%
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62.2
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%
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120
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bps
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Net Income Allocated to
Common Stockholders
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$
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85.0
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$
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59.7
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42
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%
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$
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118.3
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$
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100.1
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18
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%
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Diluted EPS
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$
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0.76
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$
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0.53
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43
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%
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$
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1.06
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$
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$ 0.89
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19
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%
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EBITDA1
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$
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175.5
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$
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171.2
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3
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%
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$
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181.4
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$
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180.9
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-
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EBITDA Margin
% 1
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64.9
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%
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63.5
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%
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140
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bps
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67.1
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%
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|
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67.1
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%
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-
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- Total revenues less cost of revenues (referred to as "net
revenue") were $270.5 million, up
nominally from $269.7 million in the
prior-year period.
- Total operating expenses were $144.4
million versus $150.4 million
in the third quarter of 2017. Adjusted operating expenses¹ were
$99.1 million versus $101.9 million in the third quarter of 2017,
primarily reflecting a decrease in depreciation and amortization
and travel and promotional expenses.
- Operating income grew 6 percent to $126.1 million and adjusted operating income grew
by 2 percent to $171.4¹ million.
- The effective tax rate for the third quarter of 2018 was 26.3
percent compared to 43.1 percent in the third quarter of 2017. The
effective tax rate on adjusted earnings¹ in the third quarter of
2018 was 26.4 percent compared with 36.2 percent in the third
quarter of 2017. The lower effective tax rate in 2018 primarily
reflects the impact of corporate tax reform.
- Diluted EPS for the third quarter of 2018 was $0.76. Adjusted diluted EPS1 was
$1.06, up 19 percent compared to
2017's third quarter.
Business Segment Information:
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Table
2
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Total Revenues
Less Cost of Revenues by
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Business
Segment
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(in
millions)
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3Q18
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3Q17
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Change
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Options
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$
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133.2
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$
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130.7
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2
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%
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U.S.
Equities
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71.4
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70.2
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2
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%
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Futures
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30.0
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38.9
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(23)
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%
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European
Equities
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22.3
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18.4
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21
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%
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Global FX
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13.6
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11.3
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20
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%
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Corporate
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-
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0.2
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(100)
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%
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Total
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$
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270.5
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$
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269.7
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-
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(1)A full reconciliation of our
non-GAAP results to our GAAP results is included in the attached
tables. See "Non-GAAP Information" in the accompanying financial
tables.
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Discussion of Results by Business Segment:
Options:
- Options net revenue of $133.2
million was up $2.5 million or
2 percent from the third quarter of 2017, primarily due to higher
revenue from access fees and growth in net transaction fees from
multiply-listed options, offset by lower net transaction fees from
index options.
- Net transaction fees¹ decreased $1.5
million or 1 percent, as total options average daily volume
(ADV) was relatively flat and the average RPC decreased 1 percent
for the third quarter. The RPC decline reflects a shift in the mix
of trading volume, with multiply-listed options accounting for a
higher percentage of volume versus 2017's third quarter.
U.S. Equities:
- U.S. Equities net revenue of $71.4
million was up $1.2 million or
2 percent, primarily due to higher net transaction fees¹, driven by
a 16 percent increase in net capture, offset somewhat by lower
volume resulting from a decline in market share.
- Cboe's U.S. Equities business had market share of 17.5 percent
for the third quarter of 2018 compared to 19.2 percent in the third
quarter of 2017.
Futures:
- Futures net revenue of $30.0
million decreased $8.9 million
or 23 percent, primarily due to lower net transaction fees¹, offset
somewhat by increases in market data fees and exchange services and
other fees.
- Net transaction fees¹ decreased $10.9
million or 31 percent, due to a 28 percent decline in VIX
futures ADV and a 3 percent decline in futures RPC, primarily
resulting from a shift in the mix of trading volume.
European Equities:
- Total notional value traded during the quarter was €9.6
billion, up 10 percent from last year's third quarter, with net
capture up 12 percent, reflecting a higher mix of periodic auction
volume. Cboe Europe's Periodic Auctions book maintained strong
volume in the third quarter with average daily notional value
(ADNV) traded of €1.0 billion. Net revenue for European Equities
increased 21 percent, reflecting growth in both net transaction
fees¹ and non-transaction revenue.
- For the third quarter of 2018, Cboe Europe Equities retained
its position as the largest Pan-European stock exchange with 23.1
percent market share, up from 21.1 percent in the third quarter of
2017.
Global FX:
- Global FX net revenue of $13.6
million increased $2.3 million
or 20 percent from $11.3 million,
primarily due to higher net transaction fees¹ compared with the
third quarter of 2017. ADNV traded on the Cboe FX platform was
$34.6 billion for the quarter, up 19
percent from last year's third quarter.
- Cboe FX market share increased to 14.8 percent from 12.9
percent in the third quarter of 2017.
(1)A full reconciliation of our
non-GAAP results to our GAAP results is included in the attached
tables. See "Non-GAAP Information" in the accompanying financial
tables.
2018 Fiscal Year Financial Guidance
The company reaffirmed its financial guidance for the 2018
fiscal year as follows:
- Adjusted operating expenses are expected to be in a range of
$420 to $428
million. The guidance excludes the amortization of acquired
intangible assets of $157 million,
which the company plans to include in its non-GAAP
reconciliation.¹
- Depreciation and amortization expense, which is included in
adjusted operating expenses above, is expected to be in the range
of $43 to $48
million, excluding the amortization of acquired intangible
assets of $157 million.
- Capital expenditures are expected to be in the range of
$35 to $40
million. This includes the company's ongoing investments in
technology, including Cboe's migration to Bats technology.
- The effective tax rate¹ on adjusted earnings for the full year
is expected to be in the range of 26.5 to 28.5 percent. However,
the company noted that it expects the tax rate for the fourth
quarter to be at the higher end of the guidance range. Significant
changes in trading volume, expenses, federal, state and local tax
laws or rates and other items could materially impact this
expectation.
(1)Specific quantifications of the amounts
that would be required to reconcile the company's adjusted
operating expenses guidance and adjusted effective tax rate
guidance are not available. The company believes that there is
uncertainty and unpredictability with respect to certain of its
GAAP measures, primarily related to acquisition-related expenses
that would be required to reconcile to GAAP operating expenses and
GAAP effective tax rate, which preclude the company from providing
accurate guidance on certain forward-looking GAAP to non-GAAP
reconciliations. The company believes that providing estimates of
the amounts that would be required to reconcile the range of the
company's adjusted operating expenses and adjusted effective tax
rate would imply a degree of precision that would be confusing or
misleading to investors for the reasons identified above.
Capital Management
As announced on October 30, 2018,
the Cboe Board of Directors declared a dividend of $0.31 per share for the fourth quarter of 2018
payable December 14, 2018, to
stockholders of record as of November 30,
2018.
The company paid cash dividends of $34.7
million, or $0.31 per share,
during the third quarter of 2018 and utilized $49.1 million to repurchase 491,899 shares of its
common stock under its share repurchase program at an average price
of $99.75 per share. As of
September 30, 2018, the company had
approximately $206.1 million of
availability remaining under its existing share repurchase
authorizations.
At September 30, 2018, the company
had adjusted cash and financial investments¹ of $137.7 million. Long-term debt as of
September 30, 2018 was $1.2 billion.
Earnings Conference Call
Executives of Cboe Global Markets will host a conference call to
review its third-quarter financial results today, November 2, 2018, at 8:30 a.m.
ET/7:30 a.m. CT. The conference call and any accompanying
slides will be publicly available via live webcast from the
Investor Relations section of the company's website at www.cboe.com
under Events & Presentations. Participants may also listen
via telephone by dialing (877) 255‑4313 from the United States, (866) 450‑4696 from
Canada or (412) 317‑5466 for
international callers. Telephone participants should place calls 10
minutes prior to the start of the call. The webcast will be
archived on the company's website for replay. A telephone replay of
the earnings call also will be available from approximately
11:00 a.m. CT, November 2, 2018,
through 11:00 p.m. CT, November 9,
2018, by calling (877) 344‑7529 from the U.S., (855)
669‑9658 from Canada or (412)
317‑0088 for international callers, using replay code 10124263.
(1)A full reconciliation of our non-GAAP
results to our GAAP results is included in the attached tables. See
"Non-GAAP Information" in the accompanying financial
tables.
About Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE) is one of the
world's largest exchange holding companies, offering cutting-edge
trading and investment solutions to investors around the world. The
company is committed to relentless innovation, connecting global
markets with world-class technology, and providing seamless
solutions that enhance the customer experience.
Cboe offers trading across a diverse range of products in
multiple asset classes and geographies, including options, futures,
U.S. and European equities, exchange-traded products (ETPs), global
foreign exchange (FX) and multi-asset volatility products based on
the Cboe Volatility Index (VIX Index), the world's barometer for
equity market volatility.
Cboe's trading venues include the largest options exchange in
the U.S. and the largest stock exchange by value traded in
Europe. In addition, the company
is the second-largest stock exchange operator in the U.S. and a
leading market globally for ETP trading.
The company is headquartered in Chicago with offices in Kansas City, New
York, London, San Francisco, Singapore, Hong
Kong and Ecuador. For more
information, visit www.cboe.com.
Cautionary Statements Regarding Forward-Looking
Information
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
that involve a number of risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "might,"
"should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," and the negative of these
terms and other comparable terminology. All statements that reflect
our expectations, assumptions or projections about the future other
than statements of historical fact are forward-looking statements.
These forward-looking statements, which are subject to known and
unknown risks, uncertainties and assumptions about us, may include
projections of our future financial performance based on our growth
strategies and anticipated trends in our business. These statements
are only predictions based on our current expectations and
projections about future events. There are important factors that
could cause our actual results, level of activity, performance or
achievements to differ materially from those expressed or implied
by the forward-looking statements.
We operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time,
and it is not possible to predict all risks and uncertainties, nor
can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements.
Some factors that could cause actual results to differ include:
the loss of our right to exclusively list and trade certain index
options and futures products; economic, political and market
conditions; compliance with legal and regulatory obligations; price
competition and consolidation in our industry; decreases in trading
volumes, market data fees or a shift in the mix of products traded
on our exchanges; legislative or regulatory changes; increasing
competition by foreign and domestic entities; our dependence on and
exposure to risk from third parties; our index providers' ability
to maintain the quality and integrity of their indexes and to
perform under our agreements; our ability to operate our business
without violating the intellectual property rights of others and
the costs associated with protecting our intellectual property
rights; our ability to attract and retain skilled management and
other personnel, including those experienced with post-acquisition
integration; our ability to accommodate trading volume and
transaction traffic, including significant increases, without
failure or degradation of performance of our systems; our ability
to protect our systems and communication networks from security
risks, including cyber-attacks and unauthorized disclosure of
confidential information; challenges to our use of open source
software code; our ability to meet our compliance obligations,
including managing potential conflicts between our regulatory
responsibilities and our for-profit status; damage to our
reputation; the ability of our compliance and risk management
methods to effectively monitor and manage our risks; our ability to
manage our growth and strategic acquisitions or alliances
effectively; unanticipated difficulties or expenditures relating to
the acquisition of Bats Global Markets, Inc., including, without
limitation, difficulties that result in the failure to realize
expected synergies, accretion, efficiencies and cost savings from
the acquisition within the expected time period (if at all),
whether in connection with integration, migrating trading
platforms, broadening distribution of product offerings or
otherwise; restrictions imposed by our debt obligations; our
ability to maintain an investment grade credit rating; potential
difficulties in our migration of trading platforms and our ability
to retain employees as a result of the acquisition; and the
accuracy of our estimates and expectations. More detailed
information about factors that may affect our actual results to
differ may be found in our filings with the SEC, including in our
Annual Report on Form 10-K for the year ended December 31, 2017 and other filings made from
time to time with the SEC.
We do not undertake, and we expressly disclaim, any duty to
update any forward-looking statement whether as a result of new
information, future events or otherwise, except as required by law.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date
hereof.
The condensed consolidated statements of income and balance
sheets are unaudited and subject to reclassification.
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Cboe Media
Contacts:
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Analyst
Contact:
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Suzanne
Cosgrove
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Stacie
Fleming
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Debbie
Koopman
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(312)
786‑7123
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44‑20‑7012‑8950
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(312)
786‑7136
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cosgrove@cboe.com
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sfleming@cboe.com
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koopman@cboe.com
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CBOE-F
Trademarks:
Cboe®, Bats®, BZX®, BYX®, EDGX®, EDGA®, Cboe Volatility Index® and
VIX® are registered trademarks and Cboe Global MarketsSM
is a service mark of Cboe Global Markets, Inc. and its
subsidiaries. All other trademarks and service marks are the
property of their respective owners.
Cboe Global
Markets, Inc.
|
Key Performance
Statistics by Business Segment
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3Q
2018
|
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2Q
2018
|
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1Q
2018
|
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4Q
2017
|
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3Q
2017
|
|
Options (ADV
in thousands)
|
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|
|
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|
Total industry
ADV
|
|
|
18,292
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|
18,807
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22,407
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|
17,347
|
|
|
16,182
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|
Total company
Options ADV
|
|
|
6,733
|
|
|
7,095
|
|
|
9,092
|
|
|
7,029
|
|
|
6,751
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|
Multiply-listed
options
|
|
|
4,965
|
|
|
5,264
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|
|
6,286
|
|
|
4,971
|
|
|
4,685
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|
Index
options
|
|
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1,768
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1,831
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2,806
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|
2,058
|
|
|
2,066
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|
Total Options
Market Share
|
|
|
36.8
|
%
|
|
37.7
|
%
|
|
40.6
|
%
|
|
40.5
|
%
|
|
41.7
|
%
|
Total Options
RPC:
|
|
$
|
0.244
|
|
$
|
0.241
|
|
$
|
0.261
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$
|
0.239
|
|
$
|
0.247
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|
Multiply-listed
options
|
|
$
|
0.068
|
|
$
|
0.063
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|
$
|
0.061
|
|
$
|
0.056
|
|
$
|
0.061
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|
Index
options
|
|
$
|
0.737
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|
$
|
0.753
|
|
$
|
0.710
|
|
$
|
0.682
|
|
$
|
0.669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Equities
|
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|
Total industry ADV
(shares in billions)
|
|
|
6.3
|
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|
6.9
|
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|
7.6
|
|
|
6.4
|
|
|
6.1
|
|
Market share
%
|
|
|
17.5
|
%
|
|
18.9
|
%
|
|
19.4
|
%
|
|
18.5
|
%
|
|
19.2
|
%
|
Net capture (per 100
touched shares)
|
|
$
|
0.026
|
|
$
|
0.023
|
|
$
|
0.023
|
|
$
|
0.022
|
|
$
|
0.022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADV (in
thousands)
|
|
|
239
|
|
|
258
|
|
|
368
|
|
|
285
|
|
|
331
|
|
RPC
|
|
$
|
1.704
|
|
$
|
1.633
|
|
$
|
1.727
|
|
$
|
1.799
|
|
$
|
1.752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
European
Equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total industry ADNV
(Euros - in billions)
|
|
€
|
41.4
|
|
€
|
47.4
|
|
€
|
50.8
|
|
€
|
43.8
|
|
€
|
41.1
|
|
Market share
%
|
|
|
23.1
|
%
|
|
22.2
|
%
|
|
21.2
|
%
|
|
20.3
|
%
|
|
21.1
|
%
|
Net capture
(bps)
|
|
|
0.195
|
|
|
0.183
|
|
|
0.190
|
|
|
0.177
|
|
|
0.168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
FX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market share
%
|
|
|
14.8
|
%
|
|
14.9
|
%
|
|
15.3
|
%
|
|
14.9
|
%
|
|
12.9
|
%
|
ADNV ($ in
billions)
|
|
$
|
34.6
|
|
$
|
38.4
|
|
$
|
41.6
|
|
$
|
32.4
|
|
$
|
29.0
|
|
Net capture (per one
million shares traded)
|
|
$
|
2.63
|
|
$
|
2.56
|
|
$
|
2.45
|
|
$
|
2.57
|
|
$
|
2.63
|
|
|
ADV = average daily
volume; ADNV = average daily notional value.
|
|
RPC, average revenue
per contract, for options and futures represents total net
transaction fees recognized for the period divided by total
contracts traded during the period.
|
|
U.S. Equities, "net
capture per 100 touched shares" refers to transaction fees less
liquidity payments and routing and clearing costs divided by the
product of one-hundredth ADV of touched shares on BZX, BYX, EDGX
and EDGA and the number of trading days.
|
|
European Equities,
"net capture per matched notional value" refers to transaction fees
less liquidity payments in British pounds divided by the product of
matched ADNV in British pounds and the number of
trading days.
|
|
Global FX, "net
capture per one million dollars traded" refers to net transaction
fees divided by the product of one-thousandth of ADNV traded on the
Cboe FX market and the number of trading days, divided by two,
which represents the buyer and seller that are both charged on the
transaction. Market Share represents Cboe FX volume divided by the
total volume of publicly reporting spot FX venues (Cboe FX, NEX,
Reuters/FXall, and FastMatch).
|
|
Average transaction
fees per contract can be affected by various factors, including
exchange fee rates, volume-based discounts and transaction mix by
contract type and product type.
|
Cboe Global
Markets, Inc. and Subsidiaries
|
Consolidated
Statements of Income (Unaudited)
|
Three Months and
Nine Months Ended September 30, 2018 and 2017
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
(in millions, except
per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
fees
|
|
$
|
411.8
|
|
$
|
423.3
|
|
$
|
1,423.7
|
|
$
|
1,133.6
|
Access fees
|
|
|
34.3
|
|
|
30.1
|
|
|
94.1
|
|
|
77.6
|
Exchange services and
other fees
|
|
|
19.3
|
|
|
20.0
|
|
|
62.3
|
|
|
55.3
|
Market data
fees
|
|
|
47.6
|
|
|
46.8
|
|
|
154.3
|
|
|
117.3
|
Regulatory
fees
|
|
|
55.2
|
|
|
83.5
|
|
|
260.8
|
|
|
205.1
|
Other
revenue
|
|
|
7.7
|
|
|
7.7
|
|
|
25.9
|
|
|
19.5
|
Total
Revenues
|
|
|
575.9
|
|
|
611.4
|
|
|
2,021.1
|
|
|
1,608.4
|
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
payments
|
|
|
229.2
|
|
|
234.3
|
|
|
803.2
|
|
|
606.1
|
Routing and
clearing
|
|
|
8.7
|
|
|
9.4
|
|
|
28.8
|
|
|
27.9
|
Section 31
fees
|
|
|
46.8
|
|
|
75.9
|
|
|
236.7
|
|
|
180.5
|
Royalty fees
|
|
|
20.7
|
|
|
22.1
|
|
|
69.9
|
|
|
63.9
|
Total Cost of
Revenue
|
|
|
305.4
|
|
|
341.7
|
|
|
1,138.6
|
|
|
878.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues Less Cost
of Revenues
|
|
|
270.5
|
|
|
269.7
|
|
|
882.5
|
|
|
730.0
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
51.8
|
|
|
50.4
|
|
|
168.1
|
|
|
148.2
|
Depreciation and
amortization
|
|
|
50.3
|
|
|
55.4
|
|
|
154.9
|
|
|
136.3
|
Technology support
services
|
|
|
10.6
|
|
|
11.4
|
|
|
34.5
|
|
|
30.9
|
Professional fees and
outside services
|
|
|
16.6
|
|
|
17.6
|
|
|
51.9
|
|
|
48.9
|
Travel and promotional
expenses
|
|
|
2.6
|
|
|
4.5
|
|
|
9.8
|
|
|
12.0
|
Facilities
costs
|
|
|
3.3
|
|
|
2.9
|
|
|
8.6
|
|
|
7.7
|
Acquisition-related
costs
|
|
|
5.9
|
|
|
5.5
|
|
|
23.3
|
|
|
75.4
|
Other
expenses
|
|
|
3.3
|
|
|
2.7
|
|
|
8.5
|
|
|
7.4
|
Total Operating
Expenses
|
|
|
144.4
|
|
|
150.4
|
|
|
459.6
|
|
|
466.8
|
Operating
Income
|
|
|
126.1
|
|
|
119.3
|
|
|
422.9
|
|
|
263.2
|
Other
Income/(Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(9.6)
|
|
|
(10.5)
|
|
|
(28.5)
|
|
|
(30.9)
|
Other
income
|
|
|
(0.2)
|
|
|
(2.9)
|
|
|
1.1
|
|
|
(2.0)
|
Total Other
Income
|
|
|
(9.8)
|
|
|
(13.4)
|
|
|
(27.4)
|
|
|
(32.9)
|
Income Before Income
Taxes
|
|
|
116.3
|
|
|
105.9
|
|
|
395.5
|
|
|
230.3
|
Income tax
provision
|
|
|
30.6
|
|
|
45.6
|
|
|
108.7
|
|
|
86.8
|
Net
Income
|
|
|
85.7
|
|
|
60.3
|
|
|
286.8
|
|
|
143.5
|
Net loss attributable
to redeemable noncontrolling interest
|
|
|
0.3
|
|
|
0.2
|
|
|
0.9
|
|
|
0.8
|
Net Income Excluding
Redeemable Noncontrolling Interest
|
|
|
86.0
|
|
|
60.5
|
|
|
287.7
|
|
|
144.3
|
Change in redemption
value of redeemable noncontrolling interest
|
|
|
(0.3)
|
|
|
(0.2)
|
|
|
(0.9)
|
|
|
(0.8)
|
Net income allocated to
participating securities
|
|
|
(0.7)
|
|
|
(0.6)
|
|
|
(2.1)
|
|
|
(1.4)
|
Net Income Allocated
to Common Stockholders
|
|
$
|
85.0
|
|
$
|
59.7
|
|
$
|
284.7
|
|
$
|
142.1
|
Net Income Per Share
Allocated to Common Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
0.76
|
|
$
|
0.53
|
|
$
|
2.54
|
|
$
|
1.35
|
Diluted earnings per
share
|
|
|
0.76
|
|
|
0.53
|
|
|
2.53
|
|
|
1.34
|
Weighted average shares
used in computing income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
111.4
|
|
|
112.3
|
|
|
112.0
|
|
|
105.5
|
Diluted
|
|
|
111.8
|
|
|
112.6
|
|
|
112.4
|
|
|
105.8
|
Cboe Global
Markets, Inc. and Subsidiaries
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
September 30, 2018
and December 31, 2017
|
|
|
|
September 30,
|
|
December 31,
|
(in
millions)
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
136.8
|
|
$
|
143.5
|
Financial
investments
|
|
|
0.9
|
|
|
47.3
|
Accounts receivable,
net
|
|
|
221.9
|
|
|
217.3
|
Income taxes
receivable
|
|
|
59.8
|
|
|
17.2
|
Other current
assets
|
|
|
16.1
|
|
|
9.4
|
Total Current
Assets
|
|
|
435.5
|
|
|
434.7
|
|
|
|
|
|
|
|
Investments
|
|
|
88.7
|
|
|
82.7
|
Land
|
|
|
4.9
|
|
|
4.9
|
Property and
equipment, net
|
|
|
65.9
|
|
|
73.9
|
Goodwill
|
|
|
2,697.6
|
|
|
2,707.4
|
Intangible assets,
net
|
|
|
1,768.2
|
|
|
1,902.6
|
Other assets,
net
|
|
|
58.7
|
|
|
59.5
|
Total
|
|
$
|
5,119.5
|
|
$
|
5,265.7
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interest and Stockholders'
Equity
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
147.8
|
|
$
|
153.8
|
Section 31 fees
payable
|
|
|
15.1
|
|
|
105.6
|
Current portion of
long-term debt
|
|
|
299.6
|
|
|
—
|
Deferred
revenue
|
|
|
13.4
|
|
|
15.4
|
Income taxes
payable
|
|
|
—
|
|
|
2.6
|
Contingent
consideration liabilities
|
|
|
3.0
|
|
|
56.6
|
Total Current
Liabilities
|
|
|
478.9
|
|
|
334.0
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
915.1
|
|
|
1,237.9
|
Income tax
liability
|
|
|
81.7
|
|
|
78.8
|
Deferred income
taxes
|
|
|
475.4
|
|
|
488.2
|
Other non-current
liabilities
|
|
|
7.1
|
|
|
6.8
|
Total
Liabilities
|
|
|
1,479.3
|
|
|
2,145.7
|
|
|
|
|
|
|
|
Redeemable
Noncontrolling Interest
|
|
|
9.4
|
|
|
9.4
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common
stock
|
|
|
1.2
|
|
|
1.2
|
Treasury stock at
cost
|
|
|
(715.0)
|
|
|
(558.3)
|
Additional
paid-in-capital
|
|
|
2,654.5
|
|
|
2,623.7
|
Retained
earnings
|
|
|
1,185.4
|
|
|
993.3
|
Accumulated other
comprehensive income (loss), net
|
|
|
25.8
|
|
|
50.7
|
Total
Stockholders' Equity
|
|
|
3,151.9
|
|
|
3,110.6
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,119.5
|
|
$
|
5,265.7
|
Non-GAAP Information
In addition to disclosing results determined in accordance with
GAAP, Cboe Global Markets has disclosed certain non-GAAP measures
of operating performance. These measures are not in accordance
with, or a substitute for, GAAP, and may be different from or
inconsistent with non-GAAP financial measures used by other
companies. The non-GAAP measures provided in this press release
include net transaction fees, adjusted operating expenses, adjusted
operating income, adjusted operating margin, adjusted net income
allocated to common stockholders and adjusted diluted earnings per
share, adjusted tax rate, adjusted cash and financial investments,
EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA
margin.
Management believes that the non-GAAP financial measures
presented in this press release, including adjusted operating
income and adjusted operating expenses, provide additional and
comparative information to assess trends in our core operations and
a means to evaluate period-to-period comparisons. Non-GAAP
financial measures disclosed by management are provided as
additional information to investors in order to provide them with
an alternative method for assessing our financial condition and
operating results.
Amortization expense of acquired intangible assets: We
amortize intangible assets acquired in connection with various
acquisitions. Amortization of intangible assets is inconsistent in
amount and frequency and is significantly affected by the timing
and size of our acquisitions. As such, if intangible asset
amortization is included in performance measures, it is more
difficult to assess the day-to-day operating performance of the
businesses, the relative operating performance of the businesses
between periods and the earnings power of the company. Therefore,
we believe performance measures excluding intangible asset
amortization expense provide investors with an additional basis for
comparison across accounting periods.
Acquisition-related expenses: From time to time, we have
pursued small bolt-on acquisitions and in 2017 completed a larger
transformative acquisition, which have resulted in expenses which
would not otherwise have been incurred in the normal course of the
company's business operations. These expenses include integration
costs, as well as legal, due diligence and other third party
transaction costs. The frequency and the amount of such expenses
vary significantly based on the size, timing and complexity of the
transaction. Accordingly, we exclude these costs for purposes of
calculating non-GAAP measures which provide an additional analysis
of Cboe's ongoing operating performance or comparisons in Cboe's
performance between periods.
Other significant items: We have excluded certain other
charges that are the result of other non-comparable events to
measure operating performance. For 2017, other significant items
primarily included interest and other borrowing costs incurred
prior to the close of the Bats transaction and accelerated
stock-based compensation that was incurred due to a change in the
vesting schedule for equity award grants.
The tables below show the reconciliation of each financial
measure from GAAP to non-GAAP. The non-GAAP financial measures
exclude the impact of those items detailed below and are referred
to as adjusted financial measures.
Reconciliation of
GAAP and non-GAAP Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Table
4
|
|
September 30,
|
|
September 30,
|
|
(in millions, except
per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Reconciliation of
Net Income Allocated to Common Stockholders to
Non-GAAP (As shown on Table 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated
to common stockholders
|
|
$
|
85.0
|
|
$
|
59.7
|
|
$
|
284.7
|
|
$
|
142.1
|
|
Non-GAAP
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
Acquisition-related
expenses (2)
|
|
|
5.9
|
|
|
5.5
|
|
|
23.3
|
|
|
75.4
|
|
Amortization of
acquired intangible assets (3)
|
|
|
39.4
|
|
|
42.6
|
|
|
121.2
|
|
|
99.6
|
|
Change in contingent
consideration
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
1.1
|
|
Debt issuance
costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
Provision for
uncollectable convertible notes receivable
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
3.8
|
|
Change in redemption
value of noncontrolling interests
|
|
|
0.3
|
|
|
0.2
|
|
|
0.9
|
|
|
0.8
|
|
Interest and other
borrowing costs (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.3
|
|
Total Non-GAAP
adjustments
|
|
|
45.6
|
|
|
52.5
|
|
|
145.4
|
|
|
198.8
|
|
Income tax expense
related to the items above
|
|
|
(12.1)
|
|
|
(19.1)
|
|
|
(37.7)
|
|
|
(73.1)
|
|
Re-measurement of
deferred tax assets and liabilities as a result of corporate
rate increase in Illinois
|
|
|
—
|
|
|
7.4
|
|
|
—
|
|
|
7.4
|
|
Net income allocated
to participating securities - effect on reconciling
items
|
|
|
(0.2)
|
|
|
(0.4)
|
|
|
(0.7)
|
|
|
(1.1)
|
|
Adjusted net
income allocated to common stockholders
|
|
$
|
118.3
|
|
$
|
100.1
|
|
$
|
391.7
|
|
$
|
274.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Diluted EPS to Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
|
$
|
0.76
|
|
$
|
0.53
|
|
$
|
2.53
|
|
$
|
1.34
|
|
Per share impact of
non-GAAP adjustments noted above
|
|
|
0.30
|
|
|
0.36
|
|
|
0.96
|
|
|
1.21
|
|
Adjusted diluted
earnings per common share
|
|
$
|
1.06
|
|
$
|
0.89
|
|
$
|
3.49
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Operating Margin to Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less cost of
revenue
|
|
$
|
270.5
|
|
$
|
269.7
|
|
$
|
882.5
|
|
$
|
730.0
|
|
Non-GAAP adjustments
noted above
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted revenue
less cost of revenue
|
|
$
|
270.5
|
|
$
|
269.7
|
|
$
|
882.5
|
|
$
|
730.0
|
|
Operating
expenses
|
|
$
|
144.4
|
|
$
|
150.4
|
|
$
|
459.6
|
|
$
|
466.8
|
|
Non-GAAP adjustments
noted above
|
|
|
45.3
|
|
|
48.5
|
|
|
144.5
|
|
|
185.2
|
|
Adjusted operating
expenses
|
|
$
|
99.1
|
|
$
|
101.9
|
|
$
|
315.1
|
|
$
|
281.6
|
|
Operating
income
|
|
$
|
126.1
|
|
$
|
119.3
|
|
$
|
422.9
|
|
$
|
263.2
|
|
Non-GAAP adjustments
noted above
|
|
|
45.3
|
|
|
48.5
|
|
|
144.5
|
|
|
185.2
|
|
Adjusted operating
income
|
|
$
|
171.4
|
|
$
|
167.8
|
|
$
|
567.4
|
|
$
|
448.4
|
|
Adjusted operating
margin (5)
|
|
|
63.4
|
%
|
|
62.2
|
%
|
|
64.3
|
%
|
|
61.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Income Tax Rate to Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
|
116.3
|
|
|
105.9
|
|
|
395.5
|
|
|
230.3
|
|
Non-GAAP adjustments
noted above
|
|
|
45.6
|
|
|
52.5
|
|
|
145.4
|
|
|
198.8
|
|
Adjusted income
before income taxes
|
|
$
|
161.9
|
|
$
|
158.4
|
|
$
|
540.9
|
|
$
|
429.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
30.6
|
|
|
45.6
|
|
|
108.7
|
|
|
86.8
|
|
Non-GAAP adjustments
noted above
|
|
|
12.1
|
|
|
11.7
|
|
|
37.7
|
|
|
65.7
|
|
Adjusted income
tax (benefit) expense
|
|
$
|
42.7
|
|
$
|
57.3
|
|
$
|
146.4
|
|
$
|
152.5
|
|
Adjusted income
tax rate
|
|
|
26.4
|
%
|
|
36.2
|
%
|
|
27.3
|
%
|
|
35.5
|
%
|
|
(*) Includes Bats for
the period March 1 through September 30, 2017.
|
(1) For the nine
months ended September 30, 2017, this amount includes $9.1 million
for accelerated stock-based compensation expense.
|
(2) This amount
includes professional fees and outside services, severance, and
other costs related to the company's acquisition of
Bats.
|
(3) This amount
represents the amortization of acquired intangible assets for
Bats.
|
(4) This amount
represents interest and other borrowing costs incurred prior to the
close of the Bats acquisition.
|
(5) Adjusted
operating margin represents adjusted operating income divided by
adjusted revenue less cost of revenue.
|
EBITDA Reconciliations
EBITDA (earnings before interest, income taxes, depreciation and
amortization) is a widely used non-GAAP financial measure of
operating performance. EBITDA margin represents EBITDA divided by
revenues less cost of revenues (net revenue). It is presented as
supplemental information that the company believes is useful to
investors to evaluate its results because it excludes certain items
that are not directly related to the company's core operating
performance. EBITDA is calculated by adding back to net income
interest expense, income tax expense, depreciation and
amortization. EBITDA should not be considered as substitutes either
for net income, as an indicator of the company's operating
performance, or for cash flow, as a measure of the company's
liquidity. In addition, because EBITDA may not be calculated
identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies.
EBITDA margin represents EBITDA divided by net revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(in
millions)
|
|
September 30,
|
|
September 30,
|
|
Reconciliation of
Net Income Allocated to Common
Stockholders to EBITDA and Adjusted EBITDA (Per Table
1)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income
allocated to common stockholders
|
|
$
|
85.0
|
|
$
|
59.7
|
|
$
|
284.7
|
|
$
|
142.1
|
|
Interest
|
|
|
9.6
|
|
|
10.5
|
|
|
28.5
|
|
|
30.9
|
|
Income tax
provision
|
|
|
30.6
|
|
|
45.6
|
|
|
108.7
|
|
|
86.8
|
|
Depreciation and
amortization
|
|
|
50.3
|
|
|
55.4
|
|
|
154.9
|
|
|
136.3
|
|
EBITDA
|
|
$
|
175.5
|
|
$
|
171.2
|
|
$
|
576.8
|
|
$
|
396.1
|
|
EBITDA
Margin¹
|
|
|
64.9
|
%
|
|
63.5
|
%
|
|
65.4
|
%
|
|
54.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments not included in above line items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits (accelerated stock-based
compensation)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
Acquisition-related
expenses
|
|
|
5.9
|
|
|
5.5
|
|
|
23.3
|
|
|
75.4
|
|
Provision for
uncollectable convertible notes receivable
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
3.8
|
|
Other
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
1.1
|
|
Adjusted
EBITDA
|
|
$
|
181.4
|
|
$
|
180.9
|
|
$
|
600.1
|
|
$
|
485.5
|
|
Adjusted EBITDA
Margin¹
|
|
|
67.1
|
%
|
|
67.1
|
%
|
|
68.0
|
%
|
|
66.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
88.5
|
|
$
|
143.5
|
|
|
|
|
|
|
|
Financial
investments
|
|
|
49.2
|
|
|
47.3
|
|
|
|
|
|
|
|
Less cash collected for
Section 31 Fees
|
|
|
—
|
|
|
(70.5)
|
|
|
|
|
|
|
|
Adjusted
Cash
|
|
$
|
137.7
|
|
$
|
120.3
|
|
|
|
|
|
|
|
|
¹EBITDA margin
represents the respective EBITDA divided by the respective net
revenue as shown in the non-GAAP reconciliations
provided.
|
Reconciliation of
Net Transaction Fees –Three Months Ended September 30, 2018 and
2017 - Table 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Options
Segment
|
|
U.S. Equities
Segment
|
|
Futures
Segment
|
|
European Equities
Segment
|
|
Global FX
Segment
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Transaction
fees
|
$
|
411.8
|
|
$
|
423.3
|
|
$
|
175.2
|
|
$
|
172.3
|
|
$
|
176.7
|
|
$
|
185.5
|
|
$
|
25.7
|
|
$
|
36.6
|
|
$
|
22.4
|
|
$
|
19.0
|
|
$
|
11.8
|
|
$
|
9.9
|
Liquidity
payments
|
|
(229.2)
|
|
|
(234.3)
|
|
|
(68.2)
|
|
|
(64.5)
|
|
|
(152.7)
|
|
|
(161.9)
|
|
|
—
|
|
|
—
|
|
|
(8.3)
|
|
|
(7.9)
|
|
|
—
|
|
|
—
|
Routing and
clearing
|
|
(8.7)
|
|
|
(9.4)
|
|
|
(3.5)
|
|
|
(2.8)
|
|
|
(5.2)
|
|
|
(6.6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Net transaction
fees
|
$
|
173.9
|
|
$
|
179.6
|
|
$
|
103.5
|
|
$
|
105.0
|
|
$
|
18.8
|
|
$
|
17.0
|
|
$
|
25.7
|
|
$
|
36.6
|
|
$
|
14.1
|
|
$
|
11.1
|
|
$
|
11.8
|
|
$
|
9.9
|
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