Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q3 2022 Earnings Presentation
41 slides from Cboe Global Markets's earnings presentation, Nov 4, 2022
Slide 1: Third Quarter 2022 Earnings Presentation
Third Quarter 2022 Earnings Presentation November 4, 2022
Slide 2: Agenda
Agenda Strategic Review Edward Tilly Chairman and Chief Executive Officer Financial Review Brian Schell Executive Vice President, Chief Financial Officer and Treasurer Questions & Answers Edward Tilly Brian Schell Chris Isaacson Executive Vice President, Chief Operating Officer Dave Howson Executive
Slide 3: Cautionary Statements Regarding Forward-Looking Information
Cautionary Statements Regarding Forward-Looking Information This presentation 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 su
Slide 4: Strategic Review and Outlook
Strategic Review and Outlook Edward Tilly Chairman and CEO
Slide 5: 3Q22: Record Levels of Net Revenue and Adjusted Earnings Generation Continue
3Q22: Record Levels of Net Revenue and Adjusted Earnings Generation Continue* Net revenues grew 20% YoY, a product of strong transaction and non-transaction growth 5% increase in Cash and Spot Markets net revenue, 3% organic net revenue growth¹ U.S. equities ADV up 6% YoY 15% increase in Data and
Slide 6: Top Strategic Growth Priorities
Top Strategic Growth Priorities Sizing the Key Trends Market Opportunity Cboe Progress Growth Potential ◆ Globalization ◆ Targeting >150mn retail ◆ Derivatives initiatives ◆ 24x5 trading extension on pace to more ◆ Access to multi-asset accounts for Nanos² expected to than double SPX global trading
Slide 7: Global Derivatives: Extending the Market Potential
Global Derivatives: Extending the Market Potential Increasing access for market participants and leveraging our core products Any Time Any Day Prop products available 24 hours a day, 5 days a week SPX Weeklys Drive 0DTE Trading Strategies • Returns remained positive: Since Global Trading Hours (GTH)
Slide 8: Data and Access Solutions: Driving Durable Growth
Data and Access Solutions: Driving Durable Growth Data & Access Solutions Gross Revenue (in millions) DnA growth has been strong: ◆ Averaged 18% year-over-year quarterly growth in total $124 $126 $114 $119 $110 $103 DnA gross revenues since 1Q21 $87 $92 $96 $101 41 43 $85 36 40 33 ◆ Continued to see
Slide 9: Building an Unrivaled Global Derivatives and Securities Network
Building an Unrivaled Global Derivatives and Securities Network Europe ◆ Grew European equities market share by over 6 percentage points in 3Q22 ◆ In 3Q22, Cboe was Europe's largest stock exchange and Cboe BIDS Europe was Cboe's European block trading platform1 ◆ Steady gains in clearing North Ameri
Slide 10: Focus on Integration: Strategic M&A is a Core Competency of Cboe
Focus on Integration: Strategic M&A is a Core Competency of Cboe More Less Transaction Strategic Rational Highlights Integration Progress Integration & Planned Organic Growth Focus1 FT Options - Enhanced Proprietary Products - Hanweck enhanced ticker plant infrastructure supporting distribution of d
Slide 11: Harvesting Investments Across Seasons to Drive Consistent Growth
Harvesting Investments Across Seasons to Drive Consistent Growth 24x5 More Data Tuesday / Thursday Expiry Near-Term BIDS Canada Contributors Data and Access Cboe Global Cloud Solutions European Derivatives Cash & Medium-Term Spot Contributors Indices / ESG Markets BIDS Asia1 Long-Term Derivatives Ma
Slide 12: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer
Slide 13: 3Q22 Financial Summary
3Q22 Financial Summary Net Revenue (in millions) $442mn $370 $391 $418 $424 $442 Net Revenue +20% Y/Y 3Q21 4Q21 1Q22 2Q22 3Q22 Adjusted EBITDA¹ (in millions) $287mn $240 $264 $281 $274 $287 Adjusted EBITDA¹ 67.3% +20% Y/Y 64.8% 67.5% 64.7% 64.9% (Adjusted EBITDA margin of 64.9%) 3Q21 4Q21 1Q22 2Q22
Slide 14: 3Q22 Net Revenue by Segment and Key Drivers
3Q22 Net Revenue by Segment and Key Drivers1 Net Revenue Segment 3Q22 Key Drivers (in millions) $442.4 ◆ Net revenue up 33% Options ◆ Higher options trading volume, market share and RPC $369.5 CBOE - C2 - BZX - EDGX ◆ Strong organic growth in access and capacity and market data fees ◆ Net revenue up
Slide 15: Grew Data and Access Solutions Net Revenue 15% YoY, Organic Growth of 12%
Grew Data and Access Solutions Net Revenue 15% YoY, Organic Growth of 12%1 Reaffirmed targeted 2022 organic growth rate for Data and Access Solutions business of 10-13%, ahead of our medium-term guidance2 3Q22 Data and Access Solutions net revenue of $123.9 million up 15%; organic growth of 12% Yo
Slide 16: 3Q22 Adjusted Operating Expenses Up 23%, Driven by Acquisitions and Compensation and Benefits
3Q22 Adjusted Operating Expenses Up 23%, Driven by Acquisitions and Compensation and Benefits 3Q22 expense increase driven by addition of ErisX and NEO, as well as higher compensation and benefits $28 million increase in compensation-related expenses $4 million increase in travel and promotion
Slide 17: Adjusted Operating Expense Guidance for 2022
Adjusted Operating Expense Guidance for 20221 ($ in millions) $23-25 $10 $651-659 $23-26 $628-634 $42-45 $22 $5531 $5311 2022 2021 Adj 2021 Core Expense 2022 Normalized 2021 Revenue Infrastructure ErisX and NEO2 Adj Operating Operating Acquisitions Growth + Adj Operating run rate Investments Investm
Slide 18: Updated 2022 Guidance
Updated 2022 Guidance 2022 Guidance 2022 Guidance 2022 Guidance 2022 Guidance 2022 Full-Year Guidance 1, 2 as of as of as of as of 2021 Actual3 ($ in millions) November 4, 2022 July 29, 2022 Apr. 29, 2022 Feb. 4, 2022 Data and Access Solutions4 organic revenue growth rate 10 to 13% 10 to 13% 8 to 11
Slide 19: Efficient Allocation of Capital to Create Long-Term Shareholder Value
Efficient Allocation of Capital to Create Long-Term Shareholder Value Preserving balance sheet flexibility remains a priority Capital allocation priorities include: ◆ Investing in the growth of our business ◆ Inorganic opportunities to facilitate growth strategy ◆ Consistent dividend payments and
Slide 20: Positioned to Innovate, Integrate and Grow to Create Value
Positioned to Innovate, Integrate and Grow to Create Value Innovate to capture growing demand Integrate across ecosystem to Grow by accessing untapped for trading products and data services, increase efficiency and better serve addressable markets globally customers ◆ Increase access to data product
Slide 21: Q&A
Choe Q&A
Slide 22: Appendix
Cboe Appendix
Slide 23: Options 3Q22 Net Revenue Up 33%, Reflecting Y/Y Increase in ADV
Options 3Q22 Net Revenue Up 33%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue ◆ Higher transaction fees from index and multi-listed options given stronger volumes, market share and RPC ◆ Access and capacity fees plus proprietary market data were up a combined 28% Options Sele
Slide 24: North American Equities 3Q22 Net Revenue Up 13%, Driven by Solid Industry Volumes
North American (N.A.) Equities 3Q22 Net Revenue Up 13%, Driven by Solid Industry Volumes ◆ Net revenue increase reflects $5.4 million contribution from NEO ◆ U.S. equities transaction and clearing fees were helped by higher year-over-year industry volumes ◆ Access and capacity fee growth remained st
Slide 25: Europe and APAC Net Revenue down 8% for 3Q22, Driven by Currency Headwinds
Europe and APAC Net Revenue down 8% for 3Q22, Driven by Currency Headwinds ◆ Net revenue decrease reflects $7.1 million impact from stronger USD in 3Q22 vs. 3Q211 ◆ Cboe Europe’s overall equities market share was 24.6% in 3Q22 versus 18.2% in 3Q21 ◆ In 3Q22, Cboe was Europe's largest stock exchange
Slide 26: Futures 3Q22 Net Revenue Down 2%, Reflecting Volume Declines
Futures 3Q22 Net Revenue Down 2%, Reflecting Volume Declines ◆ Revenue decrease driven by lower transaction revenues as compared to 3Q21 ◆ Access and capacity and market data saw modest year-over-year improvement during the quarter Futures Selected Revenue Data 3Q22 3Q21 Chg ($ in millions) Net Reve
Slide 27: Global FX Net 3Q22 Revenue Up 21%
Global FX Net 3Q22 Revenue Up 21% ◆ Revenue increase driven by higher volumes and continued market share gains ◆ Market share hit a record at 17.8% for the quarter FX Selected Revenue Data 3Q22 3Q21 Chg ($ in millions) Net Revenue $17.3 $14.3 21% Net transaction and clearing fees¹ 14.6 11.8 24% Non-
Slide 28: Third Quarter Financial Overview
Third Quarter Financial Overview Adjusted Financial Results¹ 3Q22 3Q21 % Chg ($ in millions, except per share) Net Revenue² $442.4 $369.5 20% Adjusted Operating Expenses¹ $172.8 $140.3 23% Adjusted Operating Income¹ $269.6 $229.2 18% Adjusted Operating Margin ¹ 60.9% 62.0% -1.1pts Adjusted Net Incom
Slide 29: Net Revenue Detail
Net Revenue Detail ◆ Derivatives Markets driven by strong transaction and clearing fees ◆ Data and Access Solutions benefited from strong new subscription / unit growth Net Revenue1 3Q22 3Q21 % Chg (in millions) Cash and Spot Markets $98.1 $93.1 5% Data and Access Solutions 123.9 108.2 15% Derivativ
Slide 30: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2020 to 2021 Prioritizing investments to: ($ in millions) 2020 adjusted operating expenses¹ $ 416 • Broaden geographic footprint (Cboe APAC, Euro derivs) Acquisitions 49 • Leverage core capabilities (24x5, BIDS and Nanos) and Non-recurrin
Slide 31: Focused on Growing the Proprietary Index Suite
Focused on Growing the Proprietary Index Suite Index customers at Cboe typically use SPX and VIX options and futures interchangeably or in tandem, depending on market conditions ◆ Plan to further penetrate existing markets with an emphasis on education, targeting key market segments and geographies
Slide 32: Cboe's Commitment to ESG Initiatives
Cboe’s Commitment to ESG Initiatives Environmental Social Governance ◆ Committing to Net Zero: Cboe is ◆ Cboe Empowers: Community engagement ◆ Independent Board: 12 of the 13 Directors committing to reaching net zero emissions program that provides mentorship, are independent across our operations a
Slide 33: Non-GAAP Information
Cboe Non-GAAP Information
Slide 34: Non-GAAP Information
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-GA
Slide 35: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Transaction and Clearing Fees by Segment For the Three Months Ended Options N.A. Equities Europe and Asia Pacific Futures Global FX Total December 31 (in millions) 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Transaction and clearing fees $ 3
Slide 36: Non-GAAP Information
Non-GAAP Information Reconciliation of GAAP Net Revenues to Net Revenues in Constant Currency - Three Months Ended September 30, 2022 Three Months Ended, Net Revenue (in millions) September 30, 2022 Europe and Asia Pacific net revenues $44.5 Constant currency adjustment 7.1 Europe and Asia Pacific n
Slide 37: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Revenue by Revenue Caption – Cash and Data and Derivatives For the Three Months Ended Spot Markets Access Solutions Markets Total Sept. 30 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 Transaction and clearing fees $ 315.5 $ 301.2 $ - $ - $ 400.0 $
Slide 38: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q21 2Q21 3Q21 4Q21 2021 1Q22 2Q22 3Q22 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 136.8 $ 105.2 $ 120.0 $ 165.3 $ 527.3 $ 109.2 $ (184.5) $ 149.6 Acquisition-rel
Slide 39: Non-GAAP Information
Non-GAAP Information 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)
Slide 40: Non-GAAP Information
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 4Q21 1Q22 2Q22 3Q22 LTM Net income allocated to common stockholders $ 165.3 $ 109.2 $ (184.5) $ 149.6 $ 239.6 Interest expense, net 11.1 10.8 14.6 15.3 51.8 Income tax provision 44.3 115.3 (72.3) 78.8 166.1 Deprecia
Slide 41: Cboe.com
Cboe Cboe.com