Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q2 2021 Earnings Presentation
37 slides from Cboe Global Markets's earnings presentation, Jul 30, 2021
Slide 1: Second Quarter 2021 Earnings Presentation
Second Quarter 2021 Earnings Presentation July 30, 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 and Chief Operating Officer John De
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: 2Q21: Achieved Strong Results Through Balanced Growth
2Q21: Achieved Strong Results Through Balanced Growth Net revenues grew 18% YoY, reflecting robust transaction and non-transaction growth • 21% increase in recurring non-transaction revenue – Continued investment in transaction businesses driving increased access and capacity units – Comprehensive s
Slide 6: 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 7: 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 8: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer 8
Slide 9: 2Q21 Financial Summary
2Q21 Financial Summary Net Revenue (in millions) $366 $351 $351MM $297 $292 $307 Net Revenue +18% Y/Y 2Q20 3Q20 4Q20 1Q21 2Q21 Adjusted EBITDA¹ (in millions) $234MM 71.1% 68.5% Margin % 65.9% 66.9% 66.6% Adjusted EBITDA¹ +11% Y/Y $211 $192 $206 $250 $234 (Adjusted EBITDA margin of 66.6%) 2Q20 3Q20 4
Slide 10: 2Q21 Net Revenue by Segment and Key Drivers
2Q21 Net Revenue by Segment and Key Drivers Net Revenue (in millions) Segment 2Q21 Key Drivers $350.6 • Net revenue up 19% Options • Higher options trading volume and RPC CBOE - C2 - BZX - EDGX • Strong organic growth in recurring non-transaction revenue $296.9 • Net revenue down 2% $178.6 N.A. Equi
Slide 11: 2Q21 Adjusted Operating Expenses Up 34%, Primarily Driven by Acquisitions
2Q21 Adjusted Operating Expenses Up 34%, Primarily Driven by Acquisitions • 2Q21 expense increase primarily driven by addition of BIDS Trading, EuroCCP and MATCHNow, which were acquired in 2020: – $13 million increase in compensation-related expenses – $10 million increase in professional fees and o
Slide 12: Grew Recurring Non-Transaction Revenue 21% YoY; Raised Targeted Growth Rate
Grew Recurring Non-Transaction Revenue 21% YoY; Raised Targeted Growth Rate Raised targeted organic annual growth rate for recurring non-transaction revenue to 12-13%, up 2 ppts • 2Q21 recurring non-transaction revenue of $98.0 million¹ Recurring Non-Transaction Revenue¹ up 21%; organic growth of 19
Slide 13: Adjusted Operating Expense Bridge 2020 to 2021
Adjusted Operating Expense Bridge 2020 to 2021 ($ in millions) Investment $513 Core $13 $531- $490 $539 Normalize 2020 $14-$16 $518- $526 $9-$10 $464 $4-5 $8-$12 $495- $500 $12 $483 $55 $416 M&A Run 2020 Comp, Facilities European 2021 20201 Adjusted Non-recurring Strategic Growth Chi-X Rate Normaliz
Slide 14: 2021 Full-Year Guidance Updated; Incorporates Acquisition of Chi-X
2021 Full-Year Guidance Updated; Incorporates Acquisition of Chi-X and Higher Growth Rate in Non-Transaction Revenue 2021 Guidance 2021 Guidance 2021 Full-Year Guidance 1, 2 as of as of 2020 Actual3 ($ in millions) July 30, 2021 Apr. 30, 2021 Recurring non-transaction revenue4 growth targets: Report
Slide 15: 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 – Consistent dividend payments and growth – Opportunistic share repurchases – In
Slide 16: 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 plan to make in 2021 should contribute to long-term sustainable growth in 2022 and beyond ❖ Will continue to deploy efficient allocatio
Slide 17: Cboe’s Commitment to ESG Initiatives
Cboe’s Commitment to ESG Initiatives Environmental Social Governance • Carbon credits: Offset our Scope 1 • Cboe Empowers: Community • Independent Board: 13 of the 14 and 2 emissions from 2020 and our engagement program that provides Directors are independent and Scope 3 emissions from our 2020 ment
Slide 18: Questions and Answers
Cboe Questions and Answers
Slide 19: Appendix
Cboe Appendix
Slide 20: Options 2Q21 Net Revenue Up 19%, Reflecting Y/Y Increase in ADV
Options 2Q21 Net Revenue Up 19%, 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 22% or $7.6MM, with $0.5MM of increase inorg
Slide 21: North American Equities 2Q21 Net Revenue Down 2%
North American (N.A.) Equities 2Q21 Net Revenue Down 2%, Driven by Lower Trading Volumes and Capture • 2Q21 results include BIDS Trading and MATCHNow, which contributed $10.0 million of net revenue • U.S. equities net capture decrease primarily reflects a mix shift in shares traded, resulting in hig
Slide 22: Futures 2Q21 Net Revenue Up 31%, Reflecting Y/Y Increase in VIX Futures ADV
Futures 2Q21 Net Revenue Up 31%, Reflecting Y/Y Increase in VIX Futures ADV • Revenue increase driven by net transaction fees resulting from higher trading volumes, particularly in VIX futures • RPC decrease primarily reflects the addition of Mini VIX futures in August 2020, one-tenth the size of st
Slide 23: Europe Net Revenue Up 74% for 2Q21, Local Currency Basis
Europe Net Revenue Up 74% for 2Q21, Local Currency Basis, Primarily Reflecting Addition of EuroCCP • Net revenue increase reflects $11.7 million contribution from EuroCCP and favorable currency exchange rates • Increase in net transaction fees, on a local currency basis, driven by increases in tradi
Slide 24: Global FX Net 2Q21 Revenue Up 1%
Global FX Net 2Q21 Revenue Up 1% • Revenue increase driven by higher transaction revenue, reflecting the YoY increase in trading volumes • Market share down 20 bps FX Selected Revenue Data 2Q20 2Q21 Chg ($ in millions) Net Revenue $13.7 $13.8 1% Net transaction and clearing fees 11.4 11.5 1% Non-tra
Slide 25: Second Quarter Financial Overview
Second Quarter Financial Overview Adjusted Financial Results¹ 2Q20 2Q21 % Chg ($ in millions, except per share) Net Revenue² $296.9 $350.6 18% Adjusted Operating Expenses¹ 95.8 128.3 34% Adjusted Operating Income¹ 201.1 222.3 11% Adjusted Operating Margin¹ 67.7% 63.4% -430 bps Adjusted Net Income Al
Slide 26: Net Revenue Detail
Net Revenue Detail • 2Q21 net transaction and clearing fees up 20% • Recurring non-transaction revenue up 21% Net Revenue 2Q20 2Q21 % Chg (in millions) Net transaction and clearing fees¹ $185.0 $220.4 19% Access and capacity fees 55.7 67.1 20% Market data fees 58.7 62.8 7% Regulatory fees 9.7 8.1 -1
Slide 27: Supplemental Segment Information – 2Q20 & 2Q21
Supplemental Segment Information – 2Q20 & 2Q21 2Q20 Supplemental Net Revenue by Segment N.A. Options Futures Europe Global FX Total¹ (in millions) Equities Net transaction fees² $113.8 $33.0 $15.8 $11.0 $11.4 $185.0 Proprietary net transaction fees included above $87.1 $15.8 $164.9 Access and capaci
Slide 28: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2019 to 2020 ($ 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 29: 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 30: Non-GAAP Information
Cboe Non-GAAP Information
Slide 31: 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 32: 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 33: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21 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 Acquisition-related expenses (1
Slide 34: 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 35: Non-GAAP Information
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 3Q20 4Q20 1Q21 2Q21 LTM Net income allocated to common stockholders $ 109.6 $ 87.1 $ 136.8 $ 105.2 $ 438.7 Interest expense, net 9.5 13.5 12.3 12.3 47.6 Income tax provision 53.5 35.6 55.7 73.7 218.5 Depreciation an
Slide 36: Non-GAAP Information
Non-GAAP Information Reconciliation of Revenue Less Cost of Revenue to Organic Net Revenue Net Revenue (in millions) 2Q20 2Q21 % Chg Revenue less cost of revenue (net revenue) $296.9 $350.6 18% Acquisition revenue less cost of revenue - (22.2) Organic net revenue $296.9 $328.4 11% Reconciliation of
Slide 37: Cboe Global Markets
Cboe Global Markets Cboe.com 37