Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — CBOE Holdings — Q1 2013 Earnings Presentation
38 slides from Cboe Global Markets's earnings presentation, May 3, 2013
Slide 1: First Quarter 2013 Earnings Presentation
First Quarter 2013 Earnings Presentation May 3, 2013
Slide 2: Agenda
Agenda Strategic Review William Brodsky Chairman and CEO Financial Review Alan Dean Executive Vice President, CFO and Treasurer Questions and Answers William Brodsky Alan Dean Edward Tilly President and Chief Operating Officer Edward Provost Executive Vice President and Chief Business Development Of
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a nu
Slide 4: Strategic Review
Strategic Review William Brodsky Chairman and CEO
Slide 5: Record First Quarter Earnings
Record First Quarter Earnings Strong financial performance despite lower industry-wide trading volume Financial results driven by strong growth of proprietary products Generate highest revenue per contract Adjusted diluted EPS increased 35% to $0.50 per share Operating revenue increased by 18% ¹Adju
Slide 6: Regaining Market Share in Multiply-Listed Options
Regaining Market Share in Multiply-Listed Options Focused on being among the leaders in options market share Made enhancements to VIP in February and March CBOE multiply-listed market share increased to 17.6% in April from 24.7% 24.5% 15.3% in January, up 230 bps CBOE April market share of U.S. opti
Slide 7: CBOE Extends Exclusive Licensing Rights Agreement to Span 20 Years
CBOE Extends Exclusive Licensing Rights Agreement to Span 20 Years CBOE Holdings and S&P Dow Jones Indices (S&P) Extend 30- Year Collaborative Relationship Extends exclusive rights to create and trade options on the S&P 500, the S&P 100 and other derivative indexes published by S&P Exclusive rights
Slide 8: Strong Contribution from S&P 500 Index Product Line
Strong Contribution from S&P 500 Index Product Line S&P 500 Index product line: SPX, SPXpm & SPX Weeklys S&P 500 Index ADV up 22% in 1Q13 versus 1Q12 SPX ADV up 21% in April Strong growth in SPX Weeklys *includes SPX Weeklys ADV more than tripled in 1Q13 ADV up 235% in April ¹YTD through April 30, 2
Slide 9: Record Growth in Volatility Trading
Record Growth in Volatility Trading Strong Growth Amid Low Volatility Record trading in VIX options and futures for 1Q13 VIX options ADV up 48% in 1Q13; up 45% through April VIX futures ADV up 131% in 1Q13; up 128% through April 1Q13 fifth consecutive record for quarterly volume April fourth consecu
Slide 10: Growing Interest in VIX Trading
Growing Interest in VIX Trading New users driving recent surge in volume and open interest New money flowed into VIX-linked ETPs New VIX-linked products created New traders using VIX futures and options Most recent surge in VIX futures volume driven by new users Hedge funds and proprietary trading f
Slide 11: Broadening Global Customer Reach
Broadening Global Customer Reach Committed to extending trading hours for VIX futures Delaying timetable for implementation Allows European investors to access a longer trading session in their local time zone Provides additional trading sessions for VIX futures Risk Management Conferences continue
Slide 12: Making Changes to S&P 500 Variance Futures
Making Changes to S&P 500 Variance Futures S&P 500 Variance futures designed as an exchange traded version of OTC variance swaps Plan to change how we convert volatility points to futures prices so that the quoted price of our variance futures contract will be more directly comparable to prices in t
Slide 13: CBOE Celebrates 40/30/20
CBOE Celebrates 40/30/20 40th anniversary of CBOE 30th anniversary of CBOE’s creation of index options 20th anniversary of the CBOE VIX Volatility Index CBOE launches options CBOE creates S&P 100 Options CBOE introduces VIX Index industry - April 26, 1973 Exchange Index (OEX) in 1983 Options in 1993
Slide 14: Strong Leadership – Strong Growth Opportunities
Strong Leadership – Strong Growth Opportunities Continued Growth Opportunities Migration of many forms of OTC trading to exchange markets Volatility trading Innovative new products Global expansion Ed Tilly Ed Provost Incoming Chief Executive Officer Incoming President and COO CBOE HOLDINGS 14
Slide 15: Financial Review
Financial Review Alan Dean EVP, CFO and Treasurer
Slide 16: 1Q13 Financial Overview
1Q13 Financial Overview Adjusted Basis¹ (in millions, except EPS and RPC) 1Q13 1Q12 $ Change % Change Operating Revenues $142.7 $121.4 $ 21.3 18% Adjusted Operating Expenses 70.1 63.8 6.3 10% Adjusted Operating Income $ 72.6 $ 57.6 $ 15.0 26% Adjusted Operating Margin % 50.9% 47.5% 340 bps Adjusted
Slide 17: Overview of Operating Revenues
Overview of Operating Revenues Key Drivers Operating Revenues 1Q13 1Q12 % Chg (in millions) Transaction fees Transaction fees $ 99.1 $84.8 17% 35% increase in RPC Access fees 15.7 16.0 -2% 13% decline in trading volume Exchange services and other fees 9.1 7.4 23% Shift in product mix Market data fee
Slide 18: Trading Volume Mix and RPC 1Q13 vs 1Q12
Trading Volume Mix and RPC 1Q13 vs 1Q12 RPC Increase Reflects Shift in Mix of Trading Volume CBOE HOLDINGS 18
Slide 19: Proprietary Products Account for Growing Percentage of Transaction Fee Revenue
Proprietary Products Account for Growing Percentage of Transaction Fee Revenue Index options and futures contracts accounted for 76% of transaction fees in 1Q13, up from nearly 65% in 1Q12 CBOE HOLDINGS 19
Slide 20: Other Revenue Drivers
Other Revenue Drivers Regulatory fees up $5.0MM (in millions) 1Q13 1Q12 % Chg Increase in CBOE ORF rate and implementation of ORF for C2 Regulatory fees $ 9.7 $ 4.7 106% Fee increase to cover higher costs Exchange services related to regulatory services and other fees $ 9.1 $ 7.4 23% Exchange servic
Slide 21: Ongoing Focus on Controlling Expenses
Ongoing Focus on Controlling Expenses Adjusted Operating Key Drivers: Expenses¹ 1Q 1Q % Chg 2013 2012 (in millions) Outside services Employee costs $27.6 $25.1 10% Higher legal expense related to Depreciation and litigation activity amortization 8.3 8.3 -- Data processing 4.5 4.9 -8% Employee costs
Slide 22: 1Q13 Core Operating Expenses
1Q13 Core Operating Expenses (in millions) 1Q13 1Q12 % Chg Total Operating Expenses $ 73.3 $ 64.0 15% Less: Depreciation and amortization 8.3 8.3 -- Accelerated stock-based compensation 3.2 0.2 NM Volume-based expenses: Royalty fees 13.2 11.2 18% Trading volume incentives 1.0 2.6 -62% Core Operating
Slide 23: Enhancing Stockholder Value
Enhancing Stockholder Value Strong cash flow generation $210.5MM in cash at quarter end Generated $95MM in cash from operations 1Q13 Capital Outlays Dividends $ 13 million Capital expenditures 6 million Total $ 19 million Strong capital position and debt- free balance sheet CBOE HOLDINGS 23
Slide 24: Reaffirming 2013 Full-Year Guidance
Reaffirming 2013 Full-Year Guidance As of May 3, 2013 ($ in millions) 2013 Guidance Core operating expenses $189 to $194 Continuing stock-based compensation¹ $18 Core operating expenses excluding stock- based compensation $171 to $176 Adjusted tax rate 39.5% to 40.0% Depreciation and amortization $3
Slide 25: Looking Ahead
Looking Ahead Expect to see full impact on RPC from changes to VIP and other fee modifications Second quarter will be first full quarter of higher S&P royalty rates Reduction in access fees due to new access credit programs introduced May 1 Several positive developments that bode well for our growth
Slide 26: CBOE Celebrates 40 Years of Innovation
CBOE Celebrates 40 Years of Innovation Options Contracts Traded 1.1 million in 1973 >1.1 billion in 2012 CBOE HOLDINGS 26
Slide 27: Questions & Answers
Questions & Answers
Slide 28: Appendix Materials
Appendix Materials
Slide 29: Well Positioned to Gain Additional Leverage
Well Positioned to Gain Additional Leverage Quarterly Adjusted Operating Income and Margin¹ ($ in millions) $80 55% $70 50% $60 $50 45% $40 40% $30 $20 35% $10 $0 30% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Operating Income Margin ¹Adjusted to reflect the
Slide 30: Quarterly Options ADV
Quarterly Options ADV CBOE Holdings Quarterly Options ADV (contracts in millions) CBOE HOLDINGS 30
Slide 31: CBOE Holdings Rolling 3-Month RPC
CBOE Holdings Rolling 3-Month RPC 2013 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.149 $0.153 $0.140 Indexes 0.665 0.670 0.671 Exchange-traded products 0.194 0.181 0.155 Total options RPC 0.340 0.341 0.333 Futures 1.484 1.560 1.618 Total RPC $0.376 $0.382 $0.378 2012 Jan Feb Mar Apr
Slide 32: Quarterly Core Operating Expenses
Quarterly Core Operating Expenses¹ ($ in thousands) 1Q 2013 % rev 4Q 2012 % rev 3Q 2012 % rev 2Q 2012 % rev 1Q 2012 % rev Total Operating Expenses $73,275 51% $70,325 54% $67,458 53% $66,480 50% $63,977 53% Less: Depreciation and amortization 8,282 6% 6,210 5% 8,634 7% 8,320 6% 8,320 7% Accelerated
Slide 33: Annual Core Operating Expenses
Annual Core Operating Expenses¹ ($ in thousands) 2012 % rev 2011 % rev 2010 % rev 2009 % rev 2008 % rev Total Operating Expenses $268,241 52% $266,512 52% $269,763 62% $248,497 62% $229,473 55% Less: Depreciation and Amortization 31,485 6% 34,094 7% 29,891 7% 27,512 7% 25,633 6% Accelerated stock-ba
Slide 34: Estimated 2013 Stock-Based Compensation by Quarter
Estimated 2013 Stock-Based Compensation by Quarter Quarterly breakout of estimated stock-based compensation for 2013 1Q13 2Q13 3Q13 4Q13 Total Continuing stock-based compensation¹ $3.7 $5.5 $4.4 $4.4 $18.0 Accelerated stock-based compensation¹,² $3.2 $ 3.2 ¹All stock-based compensation is reported i
Slide 35: GAAP to Non-GAAP Reconciliation For Years 2009, 2010 and 2011
GAAP to Non-GAAP Reconciliation For Years 2009, 2010 and 2011 GAAP to Non-GAAP Reconciliation (in thousands, except per share am ounts) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 FY 2009 FY2010 FY2011 Reconciliation of GAAP Net Income Allocated to Common Stockholder to Non-GAAP GAAP net income allocated to commo
Slide 36: GAAP to Non-GAAP Reconciliation For 2012 and 2013
GAAP to Non-GAAP Reconciliation For 2012 and 2013 GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) 1Q12 2Q12 3Q12 4Q12 FY2012 1Q13 Reconciliation of GAAP Net Income Allocated to Common Stockholder to NON-GAAP GAAP net income allocated to common stockholders $ 32,863 $ 37,903
Slide 37: Non-GAAP Information
Non-GAAP Information In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-GAAP measures of operating performance. The non-GAAP measures provided in this presentation include core operating expenses, adjusted operating revenue, adjusted operati
Slide 38: CBOE, 400 South LaSalle Street, Chicago
CBOE 400 South LaSalle Street Chicago, Illinois 60605 www.cboe.com