Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q3 2021 Earnings Presentation
39 slides from Cboe Global Markets's earnings presentation, Oct 29, 2021
Slide 1: Third Quarter 2021 Earnings Presentation
Third Quarter 2021 Earnings Presentation October 29, 2021 1
Slide 2: Agenda
Agenda Strategic Review Edward Tilly Chairman, President 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 John Deter
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, President and CEO 4
Slide 5: 3Q21: Solid Financial Results, With Revenue Growth Across All Business Segments
3Q21: Solid Financial Results, With Revenue Growth Across All Business Segments Net revenues grew 27% YoY, reflecting healthy transaction and non-transaction growth • 39% increase in net transaction fees¹ – ADV up 37% in index options and 20% in multi-listed options – Continued engagement of institu
Slide 6: Cboe to Enter Digital Asset Space Through Planned Acquisition of ErisX
Cboe to Enter Digital Asset Space Through Planned Acquisition of ErisX¹ Answering customer demand for a trusted, transparent and regulated digital asset marketplace. Innovative solution to meet an inflection point in retail demand, institutional interest, market growth and the mainstreaming of digit
Slide 7: Strategic Momentum – Investing in Long-Term Growth
Strategic Momentum – Investing in Long-Term Growth Building One of the World’s Largest Global Derivatives and Securities Networks 1Q21 Highlights 2Q21 Key Highlights Grow recurring non-transaction revenue • Exceeded growth target in recurring non-transaction revenue; increasing 2021 organic growth t
Slide 8: Plan to Launch our First Nanos on the S&P Index in 1Q22
Plan to Launch our First Nanos on the S&P 500 Index in 1Q22; Designed for Growing Base of Retail Traders 1 Multiplier (significantly lower price point for customers) Cash Settled Fewer Strikes Short Expiration Cycles (≤ 7days) to make trading options simpler, Educational Resources easier and more af
Slide 9: Expanding Cboe’s Ecosystem of Market Infrastructure and Tradable Products
Expanding Cboe’s Ecosystem of Market Infrastructure and Tradable Products • Comprehensive solutions in 21 • Operate cash and spot markets markets across the globe across U.S., Canada, Europe, • More than 350 derivatives-based Australia, and Japan indices • Foundation for investment in • Drives recur
Slide 10: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer 10
Slide 11: 3Q21 Financial Summary
3Q21 Financial Summary Net Revenue (in millions) $370 $370MM $366 $351 $292 $307 Net Revenue +27% Y/Y 3Q20 4Q20 1Q21 2Q21 3Q21 Adjusted EBITDA¹ (in millions) $240MM 66.9% 68.5% Margin % 65.9% 66.6% 64.8% Adjusted EBITDA¹ +25% Y/Y $192 $206 $250 $234 $240 (Adjusted EBITDA margin of 64.8%) 3Q20 4Q20 1
Slide 12: 3Q21 Net Revenue by Segment and Key Drivers
3Q21 Net Revenue by Segment and Key Drivers Net Revenue Segment 3Q21 Key Drivers (in millions) $369.5 • Net revenue up 30% Options • Higher options trading volume and RPC CBOE - C2 - BZX - EDGX • Strong organic growth in recurring non-transaction revenue $292.0 • Net revenue up 13% N.A. Equities • L
Slide 13: Grew Recurring Non-Transaction Revenue 21% YoY; Organic Growth of 14%
Grew Recurring Non-Transaction Revenue 21% YoY; Organic Growth of 14%2, Exceeded Targeted Growth Rate Raised targeted organic annual growth rate for recurring non-transaction revenue to ≈14%, up 2 ppts • 3Q21 recurring non-transaction revenue of $106.2 million¹ Recurring Non-Transaction Revenue¹ up
Slide 14: 3Q21 Adjusted Operating Expenses Up 29%, Primarily Driven by Acquisitions
3Q21 Adjusted Operating Expenses Up 29%, Primarily Driven by Acquisitions • 3Q21 expense increase primarily driven by addition of BIDS Trading and Chi-X Asia Pacific: – $15 million increase in compensation-related expenses – $8 million increase in professional fees and outside services primarily due
Slide 15: Adjusted Operating Expense Bridge 2020 to 2021
Adjusted Operating Expense Bridge 2020 to 2021 ($ in millions) Investment $513 Core $13 $536- $490 $541 Normalize 2020 $14-$16 $523- $528 $9-$10 $464 $4-$5 $13-$14 $500- $502 $12 $483 $55 $416 M&A Run 2020 Comp, Facilities European 2021 20201 Adjusted Non-recurring Strategic Growth Chi-X APAC Rate N
Slide 16: Updated Guidance Reflects Higher Growth Rate in Non-Transaction Revenue and Projected Performance-based Compensation
Updated Guidance Reflects Higher Growth Rate in Non-Transaction Revenue and Projected Performance-based Compensation 2021 Guidance 2021 Guidance 2021 Full-Year Guidance 1, 2 as of as of 2020 Actual3 ($ in millions) Oct. 29, 2021 July 30, 2021 Recurring non-transaction revenue4 growth targets: Report
Slide 17: Focused on Efficient Allocation of Capital to Create Long-Term Shareholder Value
Focused on 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 pa
Slide 18: Well Positioned to Continue Growth in 2021 and Beyond
Well Positioned to Continue Growth in 2021 and Beyond Expect to grow revenue while continuing to execute against our strategic growth initiatives Investments we made in 2021 should contribute to long-term sustainable growth in 2022 and beyond Will continue to deploy efficient allocation of cap
Slide 19: Cboe’s Commitment to ESG Initiatives
Cboe’s Commitment to ESG Initiatives Environmental Social Governance • Carbon credits: Offset our Scope 1 and 2 emissions from 2020 and our Scope 3 emissions from our 2020 • Cboe Empowers: Community • Independent Board: 13 of the 14 business air travel through the engagement program that provides Di
Slide 20: Questions and Answers
Cboe Questions and Answers
Slide 21: Appendix
Cboe Appendix
Slide 22: Options 3Q21 Net Revenue Up 30%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction
Options 3Q21 Net Revenue Up 30%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue • Higher transaction fees from index and multi-listed options • Recurring non-transaction fees, access and capacity fees plus proprietary market data, up 12% or $4.8MM organic Options Selected Reven
Slide 23: North American Equities 3Q21 Net Revenue Up 13%, Driven Primarily by Addition of BIDS Trading
North American (N.A.) Equities 3Q21 Net Revenue Up 13%, Driven Primarily by Addition of BIDS Trading • 3Q21 results include BIDS Trading, which contributed $8.0 million of net revenue; MATCHNow acquisition anniversaried on Aug. 4 , 2021, inorganic contribution of $0.5 million • U.S. equities net cap
Slide 24: Futures 3Q21 Net Revenue Up 24%, Reflecting Y/Y Increase in VIX Futures ADV and Capture
Futures 3Q21 Net Revenue Up 24%, Reflecting Y/Y Increase in VIX Futures ADV and Capture • Revenue increase driven by net transaction fees resulting from higher trading volumes, particularly in VIX futures • RPC increase primarily reflects a mix shift, with Mini VIX futures accounting for a lower per
Slide 25: Europe and APAC Net Revenue Up 53% for 3Q21, Includes Addition of Chi-X Asia Pacific
Europe and APAC Net Revenue Up 53% for 3Q21, Includes Addition of Chi-X Asia Pacific in July • Net revenue increase reflects $8.2 million contribution from Chi-X Asia Pacific and favorable currency exchange rates; YoY change in exchange rates accounted for approximately $3.5 million of increase • In
Slide 26: Global FX Net 3Q21 Revenue Up 8%
Global FX Net 3Q21 Revenue Up 8% • Revenue increase driven by higher transaction revenue, reflecting the YoY increase in trading volumes and net capture • Market share up 110 bps, reflecting a new all-time quarterly high FX Selected Revenue Data 3Q20 3Q21 Chg ($ in millions) Net Revenue $13.2 $14.3
Slide 27: Third Quarter Financial Overview
Third Quarter Financial Overview Adjusted Financial Results¹ 3Q20 3Q21 % Chg ($ in millions, except per share) Net Revenue² $292.0 $369.5 27% Adjusted Operating Expenses¹ 108.9 140.3 29% Adjusted Operating Income¹ $183.1 229.2 25% Adjusted Operating Margin¹ 62.7% 62.0% -70 bps Adjusted Net Income Al
Slide 28: Net Revenue Detail
Net Revenue Detail • 3Q21 net transaction and clearing fees up 39% • Recurring non-transaction revenue up 21% Net Revenue 3Q20 3Q21 % Chg (in millions) Net transaction and clearing fees¹ $171.2 $238.6 39% Access and capacity fees 60.6 72.8 20% Market data fees 59.5 62.0 4% Regulatory fees 8.4 6.7 -2
Slide 29: Supplemental Segment Information – 3Q20 & 3Q21
Supplemental Segment Information – 3Q20 & 3Q21 3Q20 Supplemental Net Revenue by Segment (in N.A. Europe and Options Futures Global FX Total¹ millions) Equities Asia Pacific Net transaction fees² $106.1 $18.2 $16.8 $19.2 $10.9 $171.2 Proprietary net transaction fees included above $77.2 $16.8 $94.0 A
Slide 30: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2019 to 2020 ($ in millions) 2019 adjusted operating expenses¹ $ 389 Realized expense synergies (18) Non-recurring savings (16) One-time benefit 6 Acquisitions 34 Core (5% increase) 21 2020 adjusted operating expenses¹ $ 416 Adjusted Oper
Slide 31: Focused on Growing Highest-Margin Proprietary Index Suite
Focused on Growing Highest-Margin 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 g
Slide 32: Non-GAAP Information
Cboe Non-GAAP Information
Slide 33: 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 34: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Transaction and Clearing Fees by Segment For the Three Months Ended Options N.A. Equities Futures European Equities Global FX Total March 31 (in millions) 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 Transaction fees $ 284.2 $ 308.7 $ 304.0 $
Slide 35: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21 3Q21 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 157.0 $ 113.3 $ 109.6 $ 87.1 $ 467.0 $ 136.8 $ 105.2 $ 120.0 Acquisition-relate
Slide 36: 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 37: Non-GAAP Information
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 4Q20 1Q21 2Q21 3Q21 LTM Net income allocated to common stockholders $ 87.1 $ 136.8 $ 105.2 $ 120.0 $ 449.1 Interest expense, net 13.5 12.3 12.3 11.7 49.8 Income tax provision 35.6 55.7 73.7 53.4 218.4 Depreciation a
Slide 38: Non-GAAP Information
Non-GAAP Information Reconciliation of Revenue Less Cost of Revenue to Organic Net Revenue 9 mos 9 mos Net Revenue (in millions) 3Q20 3Q21 % Chg % Chg 2020 2021 Revenue less cost of revenue (net revenue) $292.0 $369.5 27% $947.2 $1,085.6 15% Acquisition revenue less cost of revenue - (16.7) - (65.7)
Slide 39: Cboe Global Markets
Cboe Global Markets Cboe.com 39