Cboe Global Markets, Inc. · CBOE:CBOE

Cboe Global Markets — Q2 2023 Earnings Presentation

44 slides from Cboe Global Markets's earnings presentation, Aug 4, 2023

1. Slide 1: Second Quarter 2023 Earnings Presentation

   SECOND QUARTER 2023 EARNINGS PRESENTATION August 4, 2023

2. Slide 2: Agenda

   Agenda Strategic Review Edward Tilly Chairman and Chief Executive Officer Jill Griebenow Financial Review Executive Vice President, Chief Financial Officer, Treasurer and Chief Accounting Officer Questions & Answers Edward Tilly Jill Griebenow Chris Isaacson Executive Vice President, Chief Operating

3. 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

4. Slide 4: Strategic Review and Outlook

   STRATEGIC REVIEW AND OUTLOOK Edward Tilly, Chairman and CEO 4

5. Slide 5: 2Q23: Strong Net Revenue and Adjusted Earnings

   2Q23: Strong Net Revenue and Adjusted Earnings* Net revenues grew 10% Y/Y, a product of strong transaction and non-transaction growth 21% increase in Derivatives Markets organic net revenue¹ ADV up 38% in index options and 2% in multi-listed options 9% increase in Data and Access Solutions net reven

6. Slide 6: Cboe's Commitment to ESG Initiatives

   Cboe’s Commitment to ESG Initiatives Environmental Social Governance ◆ Scope 3 Emissions: Calculated and disclosed ◆ Cboe Empowers: Community engagement ◆ Independent Board: 11 of the 12 Directors are Scope 3 emissions in several categories for 2022, program that provides mentorship, scholarships an

7. Slide 7: Top Strategic Growth Priorities

   Top Strategic Growth Priorities Sizing the Key Trends Market Opportunity Cboe Progress Growth Potential ◆ Globalization ◆ Targeting >150mn retail ◆ Derivatives initiatives ◆ Derivatives delivered 21% y/y organic net ◆ Access to multi-asset accounts with smaller & more expected to contribute 2- reven

8. Slide 8: Expanding the Toolkit Any Day Any Time

   Expanding the Toolkit Solutions for every use case, from the smallest retail client to the most complicated financial institution Any Day Any Time Every Customer Daily expirations for maximum precision Prop products available 24 hours a Retail to institutional, the global in risk management: day, 5

9. Slide 9: Derivatives Product Innovation Builds on Strong Foundation

   Derivatives Product Innovation Builds on Strong Foundation 1-Day VIX • Cboe 1-Day Volatility Index (VIX1D) seeks to measure the expected volatility of the S&P 500 Index over the current trading day • The non-tradable 1-day volatility index is designed to provide real-time information about the expec

10. Slide 10: Data and Access Solutions: Driving Durable Growth

    Data and Access Solutions: Driving Durable Growth Data & Access Solutions Gross Revenue DnA growth trends have been strong: (in millions) ◆ Averaged 16% year-over-year quarterly growth in total DnA $135 $124 $126 $128 $129 gross revenues since 2Q21 $110 $114 $119 $103 48 43 45 45 ◆ Anticipate new op

11. Slide 11: Building an Unrivaled Global Derivatives and Securities Network

    Building an Unrivaled Global Derivatives and Securities Network Europe ◆ Grew year-over-year European equities market share by nearly one percentage point to 23.8% in 2Q23 ◆ In 2Q23, Cboe BIDS Europe was the largest European block trading platform1 North America ◆ Cboe Clear Europe market share2 gre

12. Slide 12: Harvesting Investments Across Seasons to Drive Consistent Growth

    Harvesting Investments Across Seasons to Drive Consistent Growth More Data  24x5 / Global Trading Hours  0DTE / Daily Expiries Near-Term  BIDS Canada Contributors Data & Access  Cboe Global Cloud Solutions Medium-  European Derivatives Term Cash & Contributors  Indices / ESG Spot  BIDS Asia1

13. Slide 13: Financial Overview and Guidance

    FINANCIAL OVERVIEW AND GUIDANCE Jill Griebenow, EVP, CFO, CAO and Treasurer 13

14. Slide 14: 2Q23 Financial Summary

    2Q23 Financial Summary Net Revenue (in millions) $467mn $457 $471 $467 $424 $442 Net Revenue +10% Y/Y 2Q22 3Q22 4Q22 1Q23 2Q23 Adjusted EBITDA¹ (in millions) $293mn $274 $287 $292 $310 $293 Adjusted EBITDA¹ +7% Y/Y 64.7% 64.9% 63.9% 65.8% 62.8% (Adjusted EBITDA margin¹ of 62.8%) 2Q22 3Q22 4Q22 1Q23

15. Slide 15: 2Q23 Net Revenue by Segment and Key Drivers

    2Q23 Net Revenue by Segment1 and Key Drivers Net Revenue $467.1 Segment 2Q23 Key Drivers (in millions) Net Rev. Growth Key Drivers $424.1 Options ◆ Higher index options trading volume and RPC +20% CBOE - C2 - BZX - ◆ Strong organic growth in access and capacity and EDGX proprietary market data fees

16. Slide 16: Grew Data and Access Solutions Net Revenue 9% YoY

    Grew Data and Access Solutions Net Revenue 9% YoY, Organic Growth of 7%1 Reaffirmed targeted 2023 organic net revenue growth rate1 for Data and Access Solutions business of 7-10%, in line with our medium-term guidance2  2Q23 Data and Access Solutions net revenue of $133 million up 9%; organic growt

17. Slide 17: 2Q23 Adjusted Operating Expenses Up 22%

    2Q23 Adjusted Operating Expenses1 Up 22%, Driven by Acquisitions and Compensation and Benefits  2Q23 expense increase driven by addition of Cboe Digital and NEO acquisition, as well as higher compensation and benefits  $20 million increase in compensation-related expenses  $10 million increase in

18. Slide 18: Adjusted Operating Expense Guidance for 2023

    Adjusted Operating Expense Guidance for 20231 ($ in millions) $59-64 $766-774 ~6% Core Growth ~9 percentage points of growth ~4% CAT build $25-27 $30-31 $6521 2022 Adj Core 2023 2022 Growth Operating Expense Adj Operating Acquisitions Investments Expenses Growth Expenses Growth Rate Growth Core Tota

19. Slide 19: Updated 2023 Guidance

    Updated 2023 Guidance 2023 Guidance 2023 Guidance 2023 Guidance 2023 Full-Year Guidance 1, 2 2022 Actual3 as of as of as of ($ in millions) August 4, 2023 May 5, 2023 Feb. 3, 2023 Data and Access Solutions4 organic net revenue growth rate 7 to 10% 7 to 10% 7 to 10% 12% Net revenue growth from acquis

20. Slide 20: 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

21. Slide 21: Positioned to Innovate, Integrate and Grow to Create Value

    Positioned to Innovate, Integrate and Grow to Create Value Innovate to capture growing Integrate across ecosystem Grow by accessing demand for trading products to increase efficiency and untapped addressable and data services, globally better serve customers markets ◆ Increase access to data product

22. Slide 22: Q&A

    Q&A 22

23. Slide 23: Appendix

    Appendix © 2023 Cboe Exchange, Inc. All rights reserved. 23

24. Slide 24: Options 2Q23 Net Revenue Up 20%

    Options 2Q23 Net Revenue Up 20%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue Options Selected Revenue Data ($ in millions) 2Q23 2Q22 Chg ◆ Higher transaction fees from index options Net Revenue $283.2 $235.3 20% given stronger volumes and RPC Net transaction and clearing fee

25. Slide 25: North American Equities 2Q23 Net Revenue Down 2%

    North American (N.A.) Equities 2Q23 Net Revenue down 2%, Contribution from NEO Offset by N.A. Equities Industry Volumes and Market Share N.A. Equities Selected Revenue Data 2Q23 2Q22 Chg ◆ Net revenue reflects $3.6 million inorganic ($ in millions) Net Revenue $90.8 $92.7 -2% contribution from NEO N

26. Slide 26: Europe and APAC Net Revenue Down 5% for 2Q23

    Europe and APAC Net Revenue down 5% for 2Q23, Driven by Lower Industry Volumes Europe and APAC Selected Revenue Data ($ in millions) 2Q23 2Q22 Chg ◆ Cboe Europe’s overall equities market share was Net Revenue Net transaction and clearing fees¹ $47.3 $49.9 -5% 23.8% in 2Q23 versus 23.2% in 2Q22 $23.1

27. Slide 27: Futures 2Q23 Net Revenue Down 1%

    Futures 2Q23 Net Revenue down 1%, Volume Declines offset by RPC and Access and Capacity Fees Futures Selected Revenue Data 2Q23 2Q22 Chg ◆ Lower volumes drove a decline in net transaction ($ in millions) Net Revenue $29.2 $29.6 -1% and clearing fees, partially offset by better RPC Net transaction an

28. Slide 28: Global FX Net 2Q23 Revenue Up 7%

    Global FX Net 2Q23 Revenue Up 7% FX Selected Revenue Data 2Q23 2Q22 Chg ◆ Revenue increase driven by higher volumes and ($ in millions) Net Revenue $17.8 $16.6 7% continued market share gains Net transaction and clearing fees¹ 14.7 13.9 6% ◆ Market share hit a record at 19.5% for the quarter Non-tra

29. Slide 29: Second Quarter 2023 Financial Overview

    Second Quarter 2023 Financial Overview Adjusted Financial Results¹ 2Q23 2Q22 % Chg ($ in millions, except per share) Net Revenue² $467.1 $424.1 10% Adjusted Operating Expenses¹ $192.3 $157.0 22% Adjusted Operating Income¹ $274.8 $267.1 3% Adjusted Operating Margin ¹ 58.8% 63.0% -4.2pts Adjusted Net

30. Slide 30: 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 1 Net Revenue 2Q23 2Q22 % Chg (in millions) Cash and Spot Markets $90.3 $101.2 -11% Data and Access Solutions 133.0 121.6 9% Deriva

31. Slide 31: Expense Bridge Summary

    Expense Bridge Summary Prioritizing investments to: Adjusted Operating Expenses Bridge for 2021 to 2022 ($ in millions) ◆ Broaden geographic footprint (Cboe APAC, Euro Derivs) Contribution ◆ Leverage core capabilities (Derivatives toolkit) and 2021 Adjusted Operating Expenses¹ $ 531 Actual to y/y gr

32. Slide 32: Focused on Growing the Proprietary Index Suite

    Focused on Growing the Proprietary Index Suite Index customers at Cboe typically use the toolkit of Cboe proprietary products interchangeably or in tandem, depending on market conditions ◆ Plan to further penetrate existing markets with an emphasis on education, targeting key market segments and geo

33. Slide 33: 0DTE Adding Stability to SPX Volumes

    0DTE Adding Stability to SPX Volumes SPX Volume by Expiration 2.9 2.9 2.9 2.8 2.7 2.7 2.7 2.7 2.6 2.6 2.6 2.3 2.2 2.2 2.1 43% 44% 43% 42% 1.8 44% 43% 44% 42% 45% 45% 46% 1.7 1.8 1.7 32% 37% 42% 44% 22% 26% 24% 22% Thursday expiration introduced May 11 Tuesday expiration introduced Apr 18 >0DTE 0DTE

34. Slide 34: M&A Integration Translating to Long-Term Growth Opportunities

    M&A Integration Translating to Long-Term Growth Opportunities Transaction Strategic Rationale Integration Progress Integration & Planned Organic Growth Focus1 FT Options - Enhanced Proprietary Products - Hanweck enhanced ticker plant infrastructure supporting - Foundation for risk distribution of da

35. Slide 35: Non-GAAP Information

    Non-GAAP Information © 2023 Cboe Exchange, Inc. All rights reserved. 35

36. Slide 36: 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

37. Slide 37: Reconciliation of Net Transaction and Clearing Fees by Segment

    Non-GAAP Information Reconciliation of Net Transaction and Clearing Fees by Segment For the Three Months Europe and Asia Ended Options N.A. Equities Pacific Futures Global FX Digital Total Sept 30 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Transaction and cle

38. Slide 38: Reconciliation of Net Revenues to Constant Currency

    Non-GAAP Information Reconciliation of GAAP Net Revenues to Net Revenues in Constant Currency Three Months Six Months Net Revenue (in millions) Ended, Ended, June 30, 2023 June 30, 2023 Europe and Asia Pacific net revenues $47.3 $96.6 Constant currency adjustment 0.5 3.9 Europe and Asia Pacific net

39. Slide 39: Reconciliation of Net Revenue by Revenue Caption

    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 June 30 (in millions) 2023 2022 2023 2022 2023 2022 2023 2022 Transaction and clearing fees $ 279.0 $ 359.2 $ - $ - $ 406.7 $ 376

40. Slide 40: Reconciliation of Net Income to Non-GAAP

    Non-GAAP Information (in millions, except per share amounts) 1Q22 2Q22 3Q22 4Q22 2022 1Q23 2Q23 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 109.2 $ (184.5) $ 149.6 $ 159.0 $ 234.2 $ 172.6 $ 167.0 Acquisition-related expenses

41. Slide 41: EBITDA Reconciliations

    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)

42. Slide 42: Adjusted Debt to EBITDA - Trailing Twelve Months

    Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 3Q22 4Q22 1Q23 2Q23 LTM Net income allocated to common stockholders $ 149.6 $ 159.0 $ 172.6 $ 167.0 $ 648.2 Interest expense, net 15.3 15.7 15.1 13.9 60.0 Income tax provision 78.8 76.1 74.8 74.0 303.7 Depreciation

43. Slide 43: Disclaimer

    Disclaimer The iBoxx iShares $ High Yield Corporate Bond Index and the iBoxx iShares $ Investment Grade Corporate Bond Index (“iBoxx iShares $ Corporate Bond Indices”) are products of S&P Dow Jones Indices LLC or its affiliates or licensors (“S&P DJI”) and have been licensed for use by Cboe Exchange

44. Slide 44: Thank You

    THANK YOU 44

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