CHICAGO, May 1, 2020 /PRNewswire/ -- Cboe Global
Markets, Inc. (Cboe: CBOE) today reported financial results
for the first quarter of 2020.
"The first quarter 2020 was defined by tremendous market
uncertainty fueled by the COVID-19 pandemic. We took swift
action to protect the health of our associates and trading floor
community, while maintaining orderly markets to serve our customers
and the investing public. As we've seen in the past, market
participants leveraged the utility of our proprietary products,
which neared record trading levels for the quarter, to navigate the
market turbulence," said Edward T.
Tilly, Cboe Global Markets Chairman, President and Chief
Executive Officer.
"As we know, volumes ebb and flow as uncertainty plays out. When
markets are less active, we will leverage our customized
educational and trading resources to help customers reposition
for new permutations of uncertainty likely to result from the
re-opening of the economy. Nobody can say with certainty how this
situation will evolve. As the path to recovery is unlikely to be
linear, we expect investors to continue to deploy - and redeploy -
our unique product set to represent their views and meet
their hedging needs as the crisis evolves. Above
all, I am extremely proud of the way the Cboe team
successfully responded to the rapidly changing and adverse market
conditions brought about by the crisis, while continuing to advance
our strategic growth initiatives. As a result, we are
well positioned to continue to successfully navigate this period of
market turbulence, and to maintain our focus on
delivering increased value to our customers and our
shareholders in 2020 and beyond,"
Mr. Tilly added.
"During the quarter, increased trading activity across our asset
classes led to record net revenues. Additionally, our
continued focus on expense discipline and operational efficiencies
resulted in record earnings and an adjusted EBITDA margin in excess
of 74 percent for the quarter," said Brian
N. Schell, Cboe Global Markets Executive Vice President,
Chief Financial Officer and Treasurer. "During the quarter,
we also maintained our ongoing commitment to returning capital to
shareholders in a disciplined and consistent manner with
$120 million of share repurchases and
$40 million of dividends," Mr. Schell
added.
*All comparisons are first quarter 2020 compared to the same
period in 2019.
(1)A full reconciliation of our
non-GAAP results to our GAAP results is included in the attached
tables. See "Non-GAAP Information" in the accompanying financial
tables.
Consolidated First Quarter Results -Table 1
Table 1 below presents summary selected unaudited condensed
consolidated financial information for the company as reported and
on an adjusted basis for the three months ended March 31, 2020 and 2019.
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Table
1
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Consolidated First Quarter Results
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1Q20
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1Q19
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($ in millions except per share)
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1Q20
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1Q19
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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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358.3
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$
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280.5
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28
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%
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$
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358.3
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$
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280.5
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28
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%
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Total Operating
Expenses
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$
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131.9
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$
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134.0
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(2)
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%
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$
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98.6
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$
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94.1
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5
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%
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Operating
Income
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$
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226.4
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$
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146.5
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55
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%
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$
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259.7
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$
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186.4
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39
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%
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Operating Margin
%
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63.2
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%
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52.2
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%
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11.0
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pp
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72.5
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%
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66.5
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%
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6.0
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pp
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Net Income Allocated to
Common Stockholders
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$
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157.0
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$
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94.6
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66
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%
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$
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182.3
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$
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124.5
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46
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%
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Diluted EPS
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$
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1.42
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$
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0.85
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67
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%
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$
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1.65
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$
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1.11
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48
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%
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EBITDA1
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$
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264.9
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$
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184.3
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44
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%
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$
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265.7
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$
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186.6
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42
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%
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EBITDA Margin
% 1
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73.9
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%
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65.7
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%
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8.2
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pp
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74.2
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%
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66.5
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%
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7.7
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pp
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- Total revenues less cost of revenues (referred to as "net
revenue") of $358.3 million increased
28 percent compared to $280.5 million
in the prior-year period, reflecting higher trading volumes across
each business segment, particularly in options and futures, which
include our proprietary index products, SPX options and VIX options
and futures.
- Total operating expenses were $131.9
million versus $134.0 million
in the first quarter of 2019. Adjusted operating expenses¹ of
$98.6 million increased 5 percent
compared with $94.1 million in the
first quarter of 2019. The increase was primarily due to higher
compensation and benefits expense, reflecting an increase in
incentive-based compensation, which is aligned with the company's
financial and operational performance.
- Operating income increased 55 percent to $226.4 million and adjusted operating income¹
increased by 39 percent to $259.7
million as a result of higher net revenue and lower
operating expenses.
- The operating margin for the first quarter was 63.2 percent
compared to 52.2 percent in the first quarter of 2019. The adjusted
operating margin¹ for the first quarter was 72.5 percent, up 600
basis points from 2019's first quarter, reflecting increased
operating leverage from higher net revenue.
- The effective tax rate for the first quarter of 2020 was 27.6
percent compared with 25.5 percent in the first quarter of 2019.
The effective tax rate on adjusted earnings¹ in the first quarter
of 2020 was 27.0 percent compared with 25.4 percent in last year's
first quarter. The lower effective tax rate for the first quarter
of 2019 was primarily due to excess tax benefits related to equity
awards.
- Diluted EPS for the first quarter of 2020 was $1.42, up 67 percent. Adjusted diluted
EPS1 of $1.65 increased 48
percent compared to 2019's first-quarter results and set a new
all-time high.
Business Segment Information:
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Table
2
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Total Revenues
Less Cost of Revenues by
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Business
Segment
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(in
millions)
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1Q20
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1Q19
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Change
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Options
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$
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188.5
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$
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138.5
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36
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%
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U.S.
Equities
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86.6
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75.8
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14
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%
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Futures
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40.1
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29.5
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36
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%
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European
Equities
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26.2
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22.8
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15
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%
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Global FX
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16.9
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13.9
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22
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%
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Total
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$
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358.3
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$
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280.5
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28
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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.
Discussion of Results by Business Segment:
Options:
- Options net revenue of $188.5
million was up $50.0 million
or 36 percent from the first quarter of 2019, primarily due to
higher revenue from net transaction fees1 and market
data, offset somewhat by an increase in royalty fees.
- Net transaction fees¹ increased $51.7
million, as total options average daily volume (ADV)
increased 51 percent, setting a new quarterly trading record,
offset by a 3 percent decline in revenue per contract (RPC)
compared to the first quarter 2019. The decrease in total options
RPC was mainly due to multi-listed options representing a higher
percentage of options volume. The RPC for multi-listed options
decreased 21 percent, primarily due to a mix shift and higher
volume rebates versus the first quarter of 2019. The RPC for index
options increased 7 percent, reflecting a shift in the mix by order
execution and type, as well as fee changes implemented during the
quarter.
- Cboe's Options business had market share of 38.3 percent for
the first quarter of 2020 compared to 36.8 percent in the first
quarter of 2019.
U.S. Equities:
- U.S. Equities net revenue of $86.6
million was up $10.8 million
or 14 percent, primarily due to higher revenue from net transaction
fees1, as well as higher revenue from non-transaction
fees.
- Cboe U.S. Equities had market share of 16.7 percent for the
first quarter of 2020 compared to 16.0 percent in the first quarter
of 2019. The increase is due in part to a migration of volume
traded on-exchange, which is typical during periods of heightened
volatility.
Futures:
- Futures net revenue of $40.1
million increased $10.6
million or 36 percent, primarily due to growth in net
transaction fees1.
- Net transaction fees¹ increased $11.3
million or 46 percent, reflecting a 43 percent increase in
ADV and a 1 percent increase in RPC.
European Equities:
- European Equities net revenue of $26.2
million increased by 15 percent, reflecting increases in net
transaction fees1 and non-transaction revenue. In local
currency, net revenue was up 17 percent. Average daily notional
value (ADNV) for the overall market was up 24 percent during the
quarter and ADNV traded for Cboe Europe was €9.1 billion, down 1
percent from last year's first quarter, with net capture up 16
percent.
- For the first quarter of 2020, Cboe European Equities had 17.7
percent market share, down from 22.1 percent in the first quarter
of 2019, primarily as a result of significant market profile shifts
due to the highly volatile market conditions during the quarter,
which saw some market participants recalibrate their models or
retrench from the market, which impacted order flow to Cboe.
Global FX:
- Global FX net revenue of $16.9
million increased $3.0 million
or 22 percent, primarily due to higher net transaction
fees1 compared with the first quarter of 2019. ADNV
traded on the Cboe FX platform was $43.3
billion for the quarter, up 19 percent from last year's
first quarter, and net capture increased 3 percent, with net
capture per one million dollars
traded of $2.69 for first quarter
2020 compared to $2.61 in the first
quarter 2019.
- Cboe FX had market share of 15.7 percent for the first quarter
of 2020 compared to 15.8 percent in last year's first quarter.
(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.
2020 Fiscal Year Financial Guidance
The company updated or reaffirmed its guidance for the 2020
fiscal year as noted below. This guidance does not take into
account the company's planned acquisition of EuroCCP, which is
subject to satisfaction or waiver of conditions precedent, and its
investment in launching pan-European derivatives trading and
clearing, which is subject to regulatory approval. The
company plans to update its guidance for 2020 after the acquisition
closes, which is currently expected in the second quarter of this
year.
- Adjusted operating expenses are now expected to be in the range
of $419 to $427 million, down $16
million from the previous guidance of $435 to $443
million, primarily reflecting near-term cost reductions due
to the COVID-19 pandemic. The guidance excludes the expected
amortization of acquired intangible assets of $120 million, which the company plans to include
in its non-GAAP reconciliation.¹
- Reaffirmed that depreciation and amortization expense, which is
included in adjusted operating expenses above, is expected to be in
the range of $34 to $38 million, excluding the expected amortization
of acquired intangible assets of $120
million.
- Reaffirmed that 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. Significant changes in trading volume, expenses, federal,
state and local tax laws or rates and other items could materially
impact this expectation.
- Reaffirmed that capital expenditures are expected to be in the
range of $65 to $70 million, which includes expenditures
associated with the company's Chicago headquarters relocation occurring
later this year and its trading floor relocation planned for
2021.
(1)Specific quantifications of the
amounts that would be required to reconcile the company's adjusted
operating expenses guidance and the effective tax rate on adjusted
earnings 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 the
effective tax rate on adjusted earnings would imply a degree of
precision that would be confusing or misleading to investors for
the reasons identified above.
Capital Management
The company paid cash dividends of $40.0
million, or $0.36 per share,
during the first quarter of 2020 and utilized $119.5 million to repurchase 1.1 million shares
of its common stock under its share repurchase program at an
average price of $112.46 per
share. As of March 31, 2020,
the company had approximately $179.7
million of availability remaining under its existing share
repurchase authorizations.
At March 31, 2020, the company had
adjusted cash2 of $137.3
million. Total debt as of March 31,
2020 was $868.1 million.
(2)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.
Earnings Conference Call
Executives of Cboe Global Markets will host a conference call to
review its first-quarter financial results today, May 1, 2020, 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, May 1, 2020,
through 11:00 p.m. CT, May 8,
2020, by calling (877) 344‑7529 from the U.S., (855)
669‑9658 from Canada or (412)
317‑0088 for international callers, using replay code 10140092.
About Cboe Global Markets
Cboe Global Markets (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 defining markets to benefit its participants and drive
the global marketplace forward through product innovation, leading
edge technology and seamless trading solutions.
The company 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 volatility products based on the Cboe
Volatility Index (VIX Index), recognized as the world's premier
gauge of U.S. equity market volatility.
Cboe's subsidiaries include the largest options exchange and the
third largest stock exchange operator in the U.S. In addition, the
company operates one of the largest stock exchanges by value traded
in Europe and is a leading market
globally for ETP listings and trading.
The company is headquartered in Chicago with a network of domestic and global
offices across the Americas, Europe and Asia, including main hubs in New York, London, Kansas
City and Amsterdam. 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 impact of the novel coronavirus ("COVID-19") pandemic,
including changes to trading behavior broadly in the market as well
as due to the temporary suspension of open outcry trading in
response to COVID-19; 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; our ability to protect our systems and
communication networks from security risks, cybersecurity risks,
insider threats and unauthorized disclosure of confidential
information; increasing competition by foreign and domestic
entities; our dependence on and exposure to risk from third
parties; fluctuations to currency exchange rates; 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; our ability to accommodate trading
volume and transaction traffic, including significant increases,
without failure or degradation of performance of our systems;
misconduct by those who use our markets or our products; 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; restrictions imposed by our debt
obligations; our ability to maintain an investment grade credit
rating; impairment of our goodwill, long-lived assets, investments
or intangible assets; 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, 2019 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.
Cboe Media
Contacts:
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Analyst
Contact:
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Angela Tu
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Stacie
Fleming
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Debbie
Koopman
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(646)
856‑8734
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44‑20‑7012‑8950
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(312)
786‑7136
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atu@cboe.com
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sfleming@cboe.com
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dkoopman@cboe.com
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CBOE-F
Trademarks:
Cboe®, Cboe Global Markets®, Bats®, BZX®, BYX®, EDGX®, EDGA®,
Cboe Volatility Index® and VIX® are registered trademarks 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.
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Key Performance
Statistics by Business Segment
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1Q
2020
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4Q
2019
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3Q
2019
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2Q
2019
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1Q
2019
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Options (ADV
in thousands)
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Total industry
ADV
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28,014
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19,492
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19,790
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19,274
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19,193
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Total company
Options ADV
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10,731
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7,297
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7,720
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7,261
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7,063
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Multi-listed
options
|
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8,069
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5,552
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5,715
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5,329
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5,215
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Index
options
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2,663
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1,745
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2,005
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1,932
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|
1,848
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|
Total Options
Market Share
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38.3
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%
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|
37.4
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%
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39.0
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%
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37.7
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%
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36.8
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%
|
Total Options
RPC:
|
|
$
|
0.234
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$
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0.225
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$
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0.236
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$
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0.238
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|
$
|
0.240
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|
Multi-listed
options
|
|
$
|
0.053
|
|
$
|
0.055
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|
$
|
0.056
|
|
$
|
0.058
|
|
$
|
0.067
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|
Index
options
|
|
$
|
0.781
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|
$
|
0.766
|
|
$
|
0.751
|
|
$
|
0.736
|
|
$
|
0.730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Equities
|
|
|
|
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|
Total industry ADV
(shares in billions)
|
|
|
11.0
|
|
|
6.8
|
|
|
6.9
|
|
|
6.9
|
|
|
7.5
|
|
Market share
%
|
|
|
16.7
|
%
|
|
16.4
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%
|
|
17.2
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%
|
|
15.7
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%
|
|
16.0
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%
|
Net capture (per 100
touched shares)
|
|
$
|
0.026
|
|
$
|
0.023
|
|
$
|
0.020
|
|
$
|
0.028
|
|
$
|
0.029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADV (in
thousands)
|
|
|
331
|
|
|
228
|
|
|
279
|
|
|
257
|
|
|
231
|
|
RPC
|
|
$
|
1.750
|
|
$
|
1.794
|
|
$
|
1.746
|
|
$
|
1.748
|
|
$
|
1.739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
European
Equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total industry ADNV
(Euros - in billions)
|
|
€
|
51.5
|
|
€
|
35.1
|
|
€
|
34.2
|
|
€
|
40.8
|
|
€
|
41.7
|
|
Market share
%
|
|
|
17.7
|
%
|
|
18.4
|
%
|
|
19.8
|
%
|
|
20.3
|
%
|
|
22.1
|
%
|
Net capture
(bps)
|
|
|
0.244
|
|
|
0.248
|
|
|
0.233
|
|
|
0.224
|
|
|
0.210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
FX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market share
%
|
|
|
15.7
|
%
|
|
16.0
|
%
|
|
14.1
|
%
|
|
15.2
|
%
|
|
15.8
|
%
|
ADNV ($ in
billions)
|
|
$
|
43.3
|
|
$
|
30.1
|
|
$
|
30.3
|
|
$
|
32.5
|
|
$
|
36.5
|
|
Net capture (per one
million dollars traded)
|
|
$
|
2.69
|
|
$
|
2.80
|
|
$
|
2.80
|
|
$
|
2.65
|
|
$
|
2.61
|
|
|
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-millionth of ADNV traded on the
Cboe FX market, the number of trading days, and 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, EBS,
Refinitiv, 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
Condensed
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31, 2020 and 2019
|
|
|
|
Three Months
Ended March 31,
|
(in millions, except
per share amounts)
|
|
2020
|
|
2019
|
Revenue:
|
|
|
|
|
|
|
Transaction
fees
|
|
$
|
661.5
|
|
$
|
430.4
|
Access and capacity
fees
|
|
|
57.7
|
|
|
54.4
|
Market data
fees
|
|
|
56.2
|
|
|
51.6
|
Regulatory
fees
|
|
|
136.8
|
|
|
58.7
|
Other
revenue
|
|
|
9.3
|
|
|
7.5
|
Total
Revenues
|
|
|
921.5
|
|
|
602.6
|
Cost of
Revenues:
|
|
|
|
|
|
|
Liquidity
payments
|
|
|
392.4
|
|
|
243.7
|
Routing and
clearing
|
|
|
16.0
|
|
|
9.2
|
Section 31
fees
|
|
|
127.4
|
|
|
48.2
|
Royalty fees
|
|
|
27.4
|
|
|
21.0
|
Total Cost of
Revenues
|
|
|
563.2
|
|
|
322.1
|
Revenues Less Cost
of Revenues
|
|
|
358.3
|
|
|
280.5
|
Operating
Expenses:
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
53.3
|
|
|
48.1
|
Depreciation and
amortization
|
|
|
40.5
|
|
|
47.2
|
Technology support
services
|
|
|
11.9
|
|
|
11.9
|
Professional fees and
outside services
|
|
|
14.9
|
|
|
16.2
|
Travel and promotional
expenses
|
|
|
2.1
|
|
|
2.6
|
Facilities
costs
|
|
|
4.1
|
|
|
2.1
|
Acquisition-related
costs
|
|
|
0.8
|
|
|
2.3
|
Other
expenses
|
|
|
4.3
|
|
|
3.6
|
Total Operating
Expenses
|
|
|
131.9
|
|
|
134.0
|
Operating
Income
|
|
|
226.4
|
|
|
146.5
|
Non-operating
Expense:
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(7.3)
|
|
|
(9.9)
|
Other expense,
net
|
|
|
(1.6)
|
|
|
(8.8)
|
Total Non-operating
Expense
|
|
|
(8.9)
|
|
|
(18.7)
|
Income Before Income
Tax Provision
|
|
|
217.5
|
|
|
127.8
|
Income tax
provision
|
|
|
60.1
|
|
|
32.6
|
Net
Income
|
|
|
157.4
|
|
|
95.2
|
Net loss attributable
to redeemable noncontrolling interest
|
|
|
—
|
|
|
0.2
|
Net Income Excluding
Redeemable Noncontrolling Interest
|
|
|
157.4
|
|
|
95.4
|
Change in redemption
value of redeemable noncontrolling interest
|
|
|
—
|
|
|
(0.2)
|
Net income allocated to
participating securities
|
|
|
(0.4)
|
|
|
(0.6)
|
Net Income Allocated
to Common Stockholders
|
|
$
|
157.0
|
|
$
|
94.6
|
Net Income Per Share
Allocated to Common Stockholders:
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
1.42
|
|
$
|
0.85
|
Diluted earnings per
share
|
|
|
1.42
|
|
|
0.85
|
Weighted average shares
used in computing income per share:
|
|
|
|
|
|
|
Basic
|
|
|
110.4
|
|
|
111.5
|
Diluted
|
|
|
110.6
|
|
|
111.7
|
Cboe Global
Markets, Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets (Unaudited)
March 31, 2020 and
December 31, 2019
|
|
|
|
March 31,
|
|
December 31,
|
(in
millions)
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
165.2
|
|
$
|
229.3
|
Financial
investments
|
|
|
43.6
|
|
|
71.0
|
Accounts receivable,
net
|
|
|
396.5
|
|
|
234.7
|
Income taxes
receivable
|
|
|
11.5
|
|
|
56.8
|
Other current
assets
|
|
|
15.3
|
|
|
15.8
|
Total Current
Assets
|
|
|
632.1
|
|
|
607.6
|
|
|
|
|
|
|
|
Investments
|
|
|
62.3
|
|
|
61.2
|
Property and
equipment, net
|
|
|
70.7
|
|
|
47.0
|
Property held for
sale
|
|
|
21.1
|
|
|
21.1
|
Operating lease right
of use assets
|
|
|
114.0
|
|
|
53.4
|
Goodwill
|
|
|
2,725.4
|
|
|
2,682.1
|
Intangible assets,
net
|
|
|
1,555.5
|
|
|
1,589.9
|
Other assets,
net
|
|
|
56.4
|
|
|
51.6
|
Total
Assets
|
|
$
|
5,237.5
|
|
$
|
5,113.9
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
208.1
|
|
$
|
171.9
|
Section 31 fees
payable
|
|
|
129.1
|
|
|
99.0
|
Deferred
revenue
|
|
|
17.2
|
|
|
4.5
|
Income taxes
payable
|
|
|
2.9
|
|
|
4.0
|
Current portion of
contingent consideration liability
|
|
|
0.8
|
|
|
2.2
|
Total Current
Liabilities
|
|
|
358.1
|
|
|
281.6
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
868.1
|
|
|
867.6
|
Unrecognized tax
benefits
|
|
|
142.1
|
|
|
135.9
|
Deferred income
taxes
|
|
|
392.2
|
|
|
399.7
|
Non-current operating
lease liabilities
|
|
|
128.3
|
|
|
46.7
|
Contingent
consideration liabilities
|
|
|
16.7
|
|
|
—
|
Other non-current
liabilities
|
|
|
21.9
|
|
|
26.8
|
Total
Liabilities
|
|
|
1,927.4
|
|
|
1,758.3
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common
stock
|
|
|
1.2
|
|
|
1.2
|
Treasury stock at
cost
|
|
|
(1,020.5)
|
|
|
(887.1)
|
Additional paid-in
capital
|
|
|
2,699.7
|
|
|
2,691.3
|
Retained
earnings
|
|
|
1,629.6
|
|
|
1,512.6
|
Accumulated other
comprehensive income, net
|
|
|
0.1
|
|
|
37.6
|
Total
Stockholders' Equity
|
|
|
3,310.1
|
|
|
3,355.6
|
|
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
5,237.5
|
|
$
|
5,113.9
|
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, effective tax rate on adjusted earnings, adjusted cash,
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.
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
|
|
Table
4
|
|
March 31,
|
|
(in millions, except
per share amounts)
|
|
2020
|
|
2019
|
|
Reconciliation of
Net Income Allocated to Common Stockholders to Non-GAAP (As shown
on Table 1)
|
|
|
|
|
|
|
|
Net income allocated
to common stockholders
|
|
$
|
157.0
|
|
$
|
94.6
|
|
Non-GAAP
adjustments
|
|
|
|
|
|
|
|
Acquisition-related
expenses (1)
|
|
|
0.8
|
|
|
2.3
|
|
Amortization of
acquired intangible assets (2)
|
|
|
32.5
|
|
|
37.6
|
|
Change in redemption
value of noncontrolling interest
|
|
|
—
|
|
|
0.2
|
|
Total Non-GAAP
adjustments
|
|
|
33.3
|
|
|
40.1
|
|
Income tax expense
related to the items above
|
|
|
(7.6)
|
|
|
(10.0)
|
|
Net income allocated
to participating securities - effect on reconciling
items
|
|
|
(0.4)
|
|
|
(0.2)
|
|
Adjusted net
income allocated to common stockholders
|
|
$
|
182.3
|
|
$
|
124.5
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Diluted EPS to Non-GAAP
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
|
$
|
1.42
|
|
$
|
0.85
|
|
Per share impact of
non-GAAP adjustments noted above
|
|
|
0.23
|
|
|
0.26
|
|
Adjusted diluted
earnings per common share
|
|
$
|
1.65
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Operating Margin to Non-GAAP
|
|
|
|
|
|
|
|
Revenue less cost of
revenue
|
|
$
|
358.3
|
|
$
|
280.5
|
|
Non-GAAP adjustments
noted above
|
|
|
—
|
|
|
—
|
|
Adjusted revenue
less cost of revenue
|
|
$
|
358.3
|
|
$
|
280.5
|
|
Operating expenses
(3)
|
|
$
|
131.9
|
|
$
|
134.0
|
|
Non-GAAP adjustments
noted above
|
|
|
33.3
|
|
|
39.9
|
|
Adjusted operating
expenses
|
|
$
|
98.6
|
|
$
|
94.1
|
|
Operating
income
|
|
$
|
226.4
|
|
$
|
146.5
|
|
Non-GAAP adjustments
noted above
|
|
|
33.3
|
|
|
39.9
|
|
Adjusted operating
income
|
|
$
|
259.7
|
|
$
|
186.4
|
|
Adjusted operating
margin (4)
|
|
|
72.5
|
%
|
|
66.5
|
%
|
|
|
|
|
|
|
|
|
Reconciliation of
Income Tax Rate to Non-GAAP
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
|
217.5
|
|
|
127.8
|
|
Non-GAAP adjustments
noted above
|
|
|
33.3
|
|
|
40.1
|
|
Adjusted income
before income taxes
|
|
$
|
250.8
|
|
$
|
167.9
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
60.1
|
|
|
32.6
|
|
Non-GAAP adjustments
noted above
|
|
|
7.6
|
|
|
10.0
|
|
Adjusted income
tax expense
|
|
$
|
67.7
|
|
$
|
42.6
|
|
Adjusted income
tax rate
|
|
|
27.0
|
%
|
|
25.4
|
%
|
|
(1) This amount
includes professional fees and outside services, severance,
facilities expenses, impairment charges and other costs related to
the company's acquisitions.
|
(2) This amount
represents the amortization of acquired intangible assets related
to the company's acquisitions.
|
(3) The company
sponsors deferred compensation plans held in a rabbi trust. The
expenses or income related to the deferred compensation plans are
included in "Compensation and benefits" (a contra-expense of $2.1
million in the three months ended March 31, 2020), and are directly
offset by deferred compensation income, expenses and dividends
included within "Other income (expense)" ($2.1 million in income,
expense and dividends in the three months ended March 31, 2020), on
the consolidated statements of income. The deferred compensation
plans' expenses are not adjusted out of "adjusted operating
expenses" and do not have an impact on "Income before income
taxes."
|
(4) 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) and Adjusted EBITDA are widely used non-GAAP
financial measures 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. Adjusted EBITDA is calculated by
adding back to EBITDA acquisition-related expenses. EBITDA
and Adjusted 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 and Adjusted EBITDA may not
be calculated identically by all companies, the presentation here
may not be comparable to other similarly titled measures of other
companies. Adjusted EBITDA margin represents Adjusted
EBITDA divided by net revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
5
|
|
Three Months Ended
|
|
(in
millions)
|
|
March 31,
|
|
Reconciliation of
Net Income Allocated to Common Stockholders to EBITDA and Adjusted
EBITDA (Per Table 1)
|
|
2020
|
|
2019
|
|
Net income
allocated to common stockholders
|
|
$
|
157.0
|
|
$
|
94.6
|
|
Interest expense,
net
|
|
|
7.3
|
|
|
9.9
|
|
Income tax
provision
|
|
|
60.1
|
|
|
32.6
|
|
Depreciation and
amortization
|
|
|
40.5
|
|
|
47.2
|
|
EBITDA
|
|
$
|
264.9
|
|
$
|
184.3
|
|
EBITDA
Margin
|
|
|
73.9
|
%
|
|
65.7
|
%
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments not included in above line items
|
|
|
|
|
|
|
|
Acquisition-related
expenses
|
|
|
0.8
|
|
|
2.3
|
|
Adjusted
EBITDA
|
|
$
|
265.7
|
|
$
|
186.6
|
|
Adjusted EBITDA
Margin
|
|
|
74.2
|
%
|
|
66.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
6
|
|
|
|
|
|
|
|
(in
millions)
|
|
March 31,
|
|
|
December 31,
|
|
Reconciliation of
Cash and cash equivalents to Adjusted Cash
|
|
2020
|
|
2019
|
|
Cash and cash
equivalents
|
|
$
|
165.2
|
|
$
|
229.3
|
|
Financial
investments
|
|
|
43.6
|
|
|
71.0
|
|
Less deferred
compensation plan assets
|
|
|
(18.4)
|
|
|
(23.4)
|
|
Less cash collected
for Section 31 Fees
|
|
|
(53.1)
|
|
|
(69.0)
|
|
Adjusted
Cash
|
|
$
|
137.3
|
|
$
|
207.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Transaction Fees –Three Months Ended March 31, 2020 and
2019
|
|
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
|
|
March 31,
|
|
March 31,
|
|
March 31,
|
|
March 31,
|
|
March 31,
|
|
March 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Transaction
fees
|
$
|
661.5
|
|
$
|
430.4
|
|
$
|
284.2
|
|
$
|
173.8
|
|
$
|
304.0
|
|
$
|
198.9
|
|
$
|
35.9
|
|
$
|
24.6
|
|
$
|
22.3
|
|
$
|
21.1
|
|
$
|
15.1
|
|
$
|
12.0
|
Liquidity
payments
|
|
(392.4)
|
|
|
(243.7)
|
|
|
(124.3)
|
|
|
(65.5)
|
|
|
(261.4)
|
|
|
(170.7)
|
|
|
—
|
|
|
—
|
|
|
(6.7)
|
|
|
(7.5)
|
|
|
—
|
|
|
—
|
Routing and
clearing
|
|
(16.0)
|
|
|
(9.2)
|
|
|
(4.5)
|
|
|
(3.5)
|
|
|
(11.5)
|
|
|
(5.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Net transaction
fees
|
$
|
253.1
|
|
$
|
177.5
|
|
$
|
155.4
|
|
$
|
104.8
|
|
$
|
31.1
|
|
$
|
22.5
|
|
$
|
35.9
|
|
$
|
24.6
|
|
$
|
15.6
|
|
$
|
13.6
|
|
$
|
15.1
|
|
$
|
12.0
|
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SOURCE Cboe Global Markets, Inc.