Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — CBOE Holdings — Barclays 2012 Global Financial Services Conference
38 slides from Cboe Global Markets's conference presentation, Sep 11, 2012
Slide 1: Barclays 2012 Global Financial Services Conference
Barclays 2012 Global Financial Services Conference September 11, 2012 Edward T. Tilly, President and Chief Operating Officer
Slide 2: 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 3: At a Glance
At a Glance Leading Brand and Market Position Leading U.S. options exchange CBOE and VIX are industry’s leading brands Well positioned to benefit from secular growth Leading Product Innovator Exclusive index franchise differentiates CBOE Volatility suite provides strong growth potential High Perform
Slide 4: Translating Our Mission into Value
Translating Our Mission into Value Develop New Products Create value for stockholders by offering a diversified Optimize portfolio of risk management Revenue and Market Share in products and services which Commoditized Products generate industry leading profit margins and growth Broaden rates while
Slide 5: Large and Growing U.S. Options Market
Large and Growing U.S. Options Market (ADV in thousands) Source: OCC and CBOE ¹YTD through August 2012 CBOE HOLDINGS 5
Slide 6: CBOE Maintains Disciplined Cost Management & Focus on Growth
CBOE Maintains Disciplined Cost Management & Focus on Growth Industry-wide options volume down 14% through August CBOE’s diverse product line helps to mitigate effects of broader industry decline Consolidated options ADV down just 8% through August Constantly monitor allocation of resources Aug. 201
Slide 7: Optimizing Revenue and Market Share In Commoditized Products
Optimizing Revenue and Market Share In Commoditized Products Achieved significant market share gains Positive customer response to VIP Pays credit to firms for certain types 28.7% and levels of business at CBOE Market share in multiply-listed options was 22.9% for August, up 22.9% 380 bps versus Dec
Slide 8: Demand for Options Use Increasing
Demand for Options Use Increasing Studies and research point to increasing demand for options across a variety of customer segments June 2012, Tabb Group Study Evolutionary Called continued growth in options trading a “foregone conclusion” Predicted buy-side trading would lead Buy-side the growth in
Slide 9: Shaping the Industry's Long-Term Growth
Shaping the Industry’s Long-Term Growth Focus on developing exclusive products that generate premium fees VX - CBOE S&P 500 Volatility Index (VIX) Futures CBOE HOLDINGS 9
Slide 10: SPX Complex Drives Strong Index Volume
SPX Complex Drives Strong Index Volume CBOE dominates index options trading with 95% market share SPX is premier U.S. index option for institutions trading large, complex orders SPXpm provides cost-effective alternative to SPY options SPX Weeklys, also pm settled, important component of SPX complex
Slide 11: Strong Growth in Volatility Trading
Strong Growth in Volatility Trading Strong growth potential VIX options ADV down 1% YTD 2012 VIX futures ADV up 58% YTD 2012 Growth fueled in part by ETPs tied to VIX index AUM increased to $4.9 billion at August 31, 2012 from $2.8 billion in December 2011 Shares outstanding at an all-time high ¹YTD
Slide 12: Fueling Growth Through Education
Fueling Growth Through Education CBOE is world’s go-to source for options education CBOE HOLDINGS 12
Slide 13: Institutional Buy-Side Opportunity
Institutional Buy-Side Opportunity Number of funds using CBOE index options strategies increasing CBOE S&P 500 BuyWrite Index (BXM) Introduced 10 years ago First major benchmark index for options investment performance Russell Investments introduced its first U.S. fund to use CBOE-inspired options-b
Slide 14: OTC Opportunity
OTC Opportunity OTC participants poised to drive increased options and volatility trading Traditional OTC participants seeking exchange-traded alternatives Introduced new CFLEX 2.0, customized trading technology Enables more convenient access to FLEX options, using same CBOE interface Introduced new
Slide 15: International Opportunity
International Opportunity Expect continued demand for U.S. options from European institutional investors Tabb study estimates 10% of U.S. listed options volume from Europe CBOE estimates 15-20% of its volume comes from outside U.S. SPX enables overseas investors to take a position in or to hedge the
Slide 16: International Opportunity
International Opportunity Intensifying our international marketing focus Held first CBOE Risk Management Conference outside U.S. Strong focus on SPX and VIX options and futures Announced plans to establish a CFE London hub and to expand VIX futures trading to virtually 24 hours a day, five days a we
Slide 17: CBOE Ramping Up to Meet the Demand of Options Customers
CBOE Ramping Up to Meet the Demand of Options Customers Tabb study: “Firms are investing in options trading infrastructures and expanding their options trading capabilities to include new products, new markets and more complex strategies.” Rollout of new trade engine technology – CBOE Command™ Next
Slide 18: Strong Financial Performance
Strong Financial Performance Second quarter 2012 marked eighth Adjusted Operating Revenues¹ consecutive quarter of YOY adjusted EPS growth YTD operating revenues up 4% YTD adjusted operating margin of 48.7%, up 190 bps versus prior year YTD adjusted diluted EPS of $0.81, up 13% Adjusted Diluted EPS¹
Slide 19: Creating Value for Stockholders
Creating Value for Stockholders Strong cash flow generation and return of capital Returned nearly $600 million to stockholders since IPO Authorized another $100 million in share repurchases on July 31, 2012 Increased dividend by 25% to $0.15 per share, effective with 3Q12 dividend ¹YTD through June
Slide 20: Well Positioned to Benefit from Growth of Options and Volatility Space
Well Positioned to Benefit from Growth of Options and Volatility Space Leverage Proprietary Successfully Products Prudently Compete in Manage Commoditized Expenses Products Reward Stockholders and Invest in Growth CBOE HOLDINGS 20
Slide 21: Q&A
Q&A
Slide 22: Appendix Materials
Appendix Materials
Slide 23: YTD Financial Overview
YTD Financial Overview Adjusted Basis1 6 mos ‘12 6 mos ‘11 $ Chg. % Chg. (in millions, except EPS and RPC) Operating Revenues $253.9 $244.3 $ 9.6 4% Adjusted Operating Expenses 130.2 129.9 -0.3 - Adjusted Operating Income $123.7 $114.4 $ 9.3 8% Adjusted Operating Margin % 48.7% 46.8% 190 bps Adjuste
Slide 24: 2012 Full-Year Guidance
2012 Full-Year Guidance¹ Updated August 2, 2012 ($ in millions) 2011 Actual 2012 Guidance Exchange services and other fees $18.2 $27 to $29 Access fees $68.7 $64 to $67 Core operating expenses2 $166.2 $173 to $1783 Tax rate 41.9% 41.2% to 41.7% Depreciation and amortization $34.1 $33 to $35 Capital
Slide 25: 2Q12 Reported 8th Consecutive Quarter of YOY Margin Improvement
2Q12 Reported 8th Consecutive Quarter of YOY Margin Improvement Quarterly Adjusted Operating Income and Margin¹ ($ in millions) $80.0 55.0% $70.0 50.0% $60.0 $50.0 45.0% $40.0 40.0% $30.0 $20.0 35.0% $10.0 $0.0 30.0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Operating Inc
Slide 26: Highlights of 2012 Fee Changes
Highlights of 2012 Fee Changes CBOE achieved significant gains in market share due to VIP¹ Fee changes included: Millions Implemented a new volume incentive program (VIP) Revised liquidity provider sliding scale to exclude proprietary and exclusive products Increased fees for certain exchange servic
Slide 27: Transaction Fees Driven by Volume and Rate Per Contract
Transaction Fees Driven by Volume and Rate Per Contract Overall Transaction Fee per Contract (RPC) RPC decline reflects net impact of VIP, 2Q12 RPC up versus 2Q11 and 1Q12 primarily due volume discounts and other fee changes to higher mix of index options and futures contracts RPC Thousands CBOE HOL
Slide 28: Mix of Products Traded and Transaction Fees
Mix of Products Traded and Transaction Fees Mix of Products Traded Mix of Transaction Fees CBOE HOLDINGS 28
Slide 29: Quarterly Options ADV
Quarterly Options ADV CBOE Holdings Quarterly Options ADV (contracts in millions) CBOE HOLDINGS 29
Slide 30: CBOE Holdings Rolling 3-Month RPC
CBOE Holdings Rolling 3-Month RPC 2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.151 $0.128 $0.110 $0.112 $0.117 $0.123 $0.124 Indexes 0.640 0.651 0.658 0.667 0.673 0.677 0.680 Exchange-traded funds 0.206 0.188 0.171 0.172 0.176 0.180 0.177 Total options average 0.297 0.275 0.261 0
Slide 31: Leading Across Markets – 2012 YTD
Leading Across Markets – 2012 YTD¹ Total Industry Volume Excl. Dividend Trades¹ CBOE C2 PHLX ISE 28.6% 29.8% NYSE/Amex NYSE/Arca NOM BOX BATS Equity Options¹ ETF Options¹ Index Options¹ Source: Options Clearing Corporation and CBOE ¹YTD through August 2012, Excludes Dividend Trades May not add to 10
Slide 32: Quarterly Core Operating Expenses
Quarterly Core Operating Expenses¹ ($ in thousands) 2Q 2012 % rev 1Q 2012 % rev 4Q 2011 % rev 3Q 2011 % rev 2Q 2011 % rev Total Operating Expenses $66,480 50% $63,977 53% $67,529 56% $68,638 48% $63,838 53% Less: Depreciation and Amortization 8,320 6% 8,320 7% 7,506 6% 8,897 6% 8,996 7% Accelerated
Slide 33: Annual Core Operating Expenses
Annual Core Operating Expenses¹ ($ in thousands) 2011 % rev 2010 % rev 2009 % rev 2008 % rev Total Operating Expenses $266,512 52% $269,763 62% $248,497 62% $229,473 55% Less: Depreciation and Amortization 34,094 7% 29,891 7% 27,512 7% 25,633 6% Accelerated stock-based compensation 453 0% 12,968 3%
Slide 34: Strong Debt-Free Balance Sheet
Strong Debt-Free Balance Sheet Business model generates strong cash flow $ in millions $ in millions 1 At quarter end CBOE HOLDINGS 34
Slide 35: Weighted Average Shares Calculation
Weighted Average Shares Calculation 2Q 2012 YTD 2012 Days Total Days Total Shares Outstanding Days Weighted Avg Shares Outstanding Days Weighted Avg Unrestricted common stock 88,768,885 91 91 88,768,885 88,768,885 182 182 88,768,885 Vesting of participating securities (restricted stock) on 6/14/12 1
Slide 36: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 FY 2009 FY2010 FY2011 Reconciliation of GAAP Net Income Allocated to Common Stockholder to NON-GAAP GAAP net Income allocated to common stockholders $ 20,020 $
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: 400 South LaSalle Street Chicago, Illinois 60605
400 South LaSalle Street Chicago, Illinois 60605 www.cboe.com
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