Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q4 2020 Earnings Presentation
39 slides from Cboe Global Markets's earnings presentation, Feb 5, 2021
Slide 1: Fourth Quarter 2020 Earnings Presentation
Fourth Quarter 2020 Earnings Presentation February 5, 2021 1
Slide 2: Agenda
Agenda Strategic Review Edward Tilly Chairman, President and Chief Executive Officer Financial Review Brian Schell Executive Vice President, CFO and Treasurer Questions & Answers Edward Tilly Brian Schell Chris Isaacson Executive Vice President and Chief Operating Officer John Deters Executive Vice
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: 2020: Record Results and Strategic Progress Against Challenging Backdrop
2020: Record Results and Strategic Progress Against Challenging Backdrop Achieved record results while building the foundation for future growth • Experienced solid growth in multi-listed options and cash equities • Continued growth in recurring non-transactional revenue • Record results despite mac
Slide 6: 2021 and Beyond: Continued Growth and Investment
2021 and Beyond: Continued Growth and Investment ❖ Targeting mid-term organic net revenue growth of 4 to 6 percentage points ❖ Investing in organic growth initiatives in 2021 ❖ Beginning to see institutional investors re-engage in trading our index options and volatility products ❖ Continuing to exe
Slide 7: Strategic Momentum
Strategic Momentum Expectations for 2020 Highlights 2021 and Beyond ❖ Increased trading in index ❖ Achieved 12% growth in Expand product options and futures recurring non- Build upon core lines across asset proprietary transactional revenue; products classes ❖ Continued recurring 9% organic growth¹
Slide 8: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer 8
Slide 9: 4Q20 Financial Summary
4Q20 Financial Summary Net Revenue (in millions) $358 $307MM $280 $297 $292 $307 Net Revenue +10% Y/Y 4Q19 1Q20 2Q20 3Q20 4Q20 Adjusted EBITDA¹ (in millions) $206MM 70.2% 74.2% 71.1% Margin % 65.9% 66.9% Adjusted EBITDA¹ $266 $211 $206 $197 $192 (Adjusted EBITDA margin of 66.9%) 4Q19 1Q20 2Q20 3Q20
Slide 10: 4Q20 Net Revenue by Segment and Key Drivers
4Q20 Net Revenue by Segment and Key Drivers Net Revenue¹ (in millions) Segment 4Q20 Key Drivers $307.1 • Net revenue up 17% Options • Higher trading in multi-listed options and growth of $280.3 CBOE - C2 - BZX - EDGX proprietary market data • Net revenue down 3% $162.5 U.S. Equities • Decrease in SI
Slide 11: 4Q20 Adjusted Operating Expenses Up 17%, Primarily Driven by Acquisitions
4Q20 Adjusted Operating Expenses Up 17%, Primarily Driven by Acquisitions • 4Q expense increase primarily driven by addition of EuroCCP and other acquisitions: – $9 million increase in compensation-related expenses – $3 million increase in technology support services – $2 million increase in profess
Slide 12: 2021 Revenue Guidance
2021 Revenue Guidance +4-6% +6-7% Net Revenue Contribution Recurring Non-Transactional From Recent Acquisitions Organic Revenue Growth • For 2021, expecting net revenue contribution from recent acquisitions in a range of 4 to 6 percentage points – Leverage the deals closed in 2020 to accelerate orga
Slide 13: Adjusted Operating Expense Bridge 2020 to 2021
Adjusted Operating Expense Bridge 2020 to 2021 ($ in millions) Investment $15 - $531 - Core $16 $539 $9- $10 $7-$8 $508 - Normalize 2020 $14 - $513 $18 $16 $487 $55 $416 2020¹ Adjusted M&A run Non-recurring 2020 Comp, general Facilities European Strategic 2021 Operating rate savings, including Norma
Slide 14: 2021 Full-Year Guidance Summary
2021 Full-Year Guidance Summary 2021 Full-Year Guidance 1, 2 2021 Guidance as of 2020 Actual3 ($ in millions) February 5, 2021 Recurring non-transactional revenue4 growth targets: Reported growth 7 to 8% 12% Organic growth 6 to 7% 9% Adjusted operating expenses5 $531 to $539 $416 Depreciation and am
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 • Re
Slide 16: Well Positioned to Continue Growth in 2021
Well Positioned to Continue Growth in 2021 ❖ 2020 was a year in which we achieved record results and made strategic progress despite a challenging backdrop ❖ Expect to grow revenue while continuing to execute against our strategic growth initiatives ❖ Investments we plan to make in 2021 should contr
Slide 17: Questions and Answers
Cboe Questions and Answers
Slide 18: Appendix
Appendix Appendix 18
Slide 19: Grew Recurring Non-Transactional Revenue
Grew Recurring Non-Transactional Revenue 4Q20 recurring non-transactional revenue² up 16%; organic growth of 9% YoY Recurring Non-Transactional Revenue (in millions) • 4Q20 organic growth excludes $5.1MM of revenue $90.9 contributed from acquisitions and other items¹ $78.5 $81.9 $81.2 $87.7 $76.6 $7
Slide 20: Options 4Q20 Net Revenue Up 17%; Year Up 15%
Options 4Q20 Net Revenue Up 17%; Year Up 15% Revenue increase primarily driven by: • Higher transaction fees from multi-listed options • Growth in proprietary market data revenue, with $4.7MM from acquisitions in 4Q20 and $15.2MM for the year Options Selected Revenue Data 4Q19 4Q20 Chg 2019 2020 Chg
Slide 21: Futures 4Q20 Net Revenue Down 30%; Year Down 19%
Futures 4Q20 Net Revenue Down 30%; Year Down 19% • Revenue decrease driven by net transaction fees resulting from lower trading volume and RPC • RPC decrease primarily reflects the addition of Mini VIX futures in 2020, one-tenth the size of standard VIX futures, and higher volume from corporate bond
Slide 22: North American Equities 4Q20 Net Revenue Down 2%; Year Up 9%
North American (N.A.) Equities 4Q20 Net Revenue Down 2%; Year Up 9% • Increase in net transaction fees offset by lower SIP market data revenue, reflecting decrease in market share and SIP audit recoveries • Net transaction fees reflect higher U.S. equities trading volume offset somewhat by lower net
Slide 23: European Equities Net Revenue Up 60% for 4Q20 and 30% for Year
European Equities Net Revenue Up 60% for 4Q20 and 30% for Year, Local Currency Basis, Reflecting Addition of EuroCCP • Net revenue increase reflects contribution from EuroCCP • Increase in net transaction fees driven by higher net capture, offset somewhat by lower market share European Equities Sele
Slide 24: Global FX Net Revenue Up 9% for 4Q20 and Full Year
Global FX Net Revenue Up 9% for 4Q20 and Full Year • Revenue increase driven by higher transaction and non-transaction revenue • FX made solid progress in 2020, expanding its footprint and diversifying its revenue streams by introducing new order types and products, including: – Launch of Cboe Swiss
Slide 25: Fourth Quarter and Year Financial Overview
Fourth Quarter and Year Financial Overview Adjusted Financial Results¹ 4Q19 4Q20 % Chg 2019 2020 % Chg ($ in millions, except per share) Net Revenue² $280.3 $307.1 10% $1,136.9 $1,254.3 10% Adjusted Operating Expenses¹ 95.6 112.2 17% 389.3 415.5 7% Adjusted Operating Income¹ 184.7 194.9 6% $747.6 $8
Slide 26: Net Revenue Detail
Net Revenue Detail • 2020 net transaction fees up 11%; non-transaction net revenue up 7% Net Revenue 4Q19 4Q20 % Chg 2019 2020 % Chg (in millions) Net transaction and clearing 8% 11% $170.6 $184.2 $715.7 $793.5 fees¹ Access and capacity fees 57.3 62.7 9% 221.9 236.7 7% Market data fees 53.8 57.6 7%
Slide 27: Supplemental Segment Information - Quarter
Supplemental Segment Information - Quarter 4Q19 Supplemental Net Revenue U.S. European Global Options Futures Total¹ by Segment (in millions) Equities Equities FX Net transaction fees² $105.0 $17.2 $26.1 $11.3 $11.0 $170.6 Proprietary net transaction fees included above $85.6 $26.1 $111.7 Access and
Slide 28: Supplemental Segment Information - Year
Supplemental Segment Information - Year 2019 Supplemental Net Revenue by U.S. European Global Options Futures Total¹ Segment (in millions) Equities Equities FX Net transaction fees² $434.5 $75.8 $110.2 $49.8 $45.4 $715.7 Proprietary net transaction fees included above $353.9 $110.2 $464.1 Access and
Slide 29: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2019 to 2020 ($ 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 30: 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 31: Non-GAAP Information
Cboe Non-GAAP Information
Slide 32: 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 33: Non-GAAP Information: Net Transaction and Clearing Fees by Segment
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) 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 Transaction fees $ 172.7 $ 284.2 $ 198.9 $
Slide 34: Non-GAAP Information: Net Income Reconciliation
Non-GAAP Information (in millions, except per share amounts) 1Q19 2Q19 3Q19 4Q19 2019 1Q20 2Q20 3Q20 4Q20 2020 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 94.6 $ 87.6 $ 105.5 $ 86.1 $ 372.7 $ 157.0 $ 113.3 $ 109.6 $ 87.1 $ 4
Slide 35: Non-GAAP Information: 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)
Slide 36: Non-GAAP Information: Adjusted Debt to EBITDA
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 1Q20 2Q20 3Q20 4Q20 LTM Net income allocated to common stockholders $ 157.0 $ 113.3 $ 109.6 $ 87.1 $ 467.0 Interest expense, net 7.3 7.3 9.5 13.5 37.6 Income tax provision 60.1 43.0 53.5 35.6 192.2 Depreciation and
Slide 37: Non-GAAP Information: Organic Net Revenue Reconciliation
Non-GAAP Information Reconciliation of Revenue Less Cost of Revenue to Organic Net Revenue Net Revenue (in millions) 4Q19 4Q20 % Chg 2019 2020 % Chg Revenue less cost of revenue (net revenue) $280.3 $307.1 10% $1,136.9 $1,254.3 10% Acquisition revenue less cost of revenue - (18.1) - (41.4) Organic n
Slide 38: Additional Trademark Info
Additional Trademark Info The iBoxx® iShares® $ High Yield Corporate Bond Index and the iBoxx® iShares® $ Investment Grade Corporate Bond Index (the “Indexes”) referenced herein are the property of Markit Indices Limited (“Index Sponsor”) and have been licensed for use in connection with Cboe® iBoxx
Slide 39: Cboe Global Markets
Cboe Global Markets Cboe.com 39