Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — CBOE Holdings — Q1 2016 Earnings Presentation
40 slides from Cboe Global Markets's earnings presentation, Apr 29, 2016
Slide 1: First Quarter 2016 Earnings Presentation
First Quarter 2016 Earnings Presentation April 29, 2016
Slide 2: Agenda
Agenda Strategic Review Edward Tilly Chief Executive Officer Financial Review Alan Dean Executive Vice President, CFO and Treasurer Questions and Answers Edward Tilly Alan Dean Edward Provost President and Chief Operating Officer John Deters Chief Strategy Officer and Head of Corporate Initiatives C
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 Edward Tilly CEO
Slide 5: Record First-Quarter Results for 1Q16
Record First-Quarter Results for 1Q16 Results fueled by strong trading in proprietary index products Third consecutive quarter proprietary Total ADV for CBOE Index Complex: index products exceeded 40% of total Index Options and VIX Futures (in millions) volume 2.34 2.03 1Q16 ADV for index complex, 1
Slide 6: Translating Our Mission and Strategic Initiatives Into Value
Translating Our Mission and Strategic Initiatives Into Value Our mission is to be the market leader in providing innovative products that facilitate and enhance trading in a global marketplace Strategic Initiatives • Develop unique products • Expand our customer base globally • Form alliances that l
Slide 7: Further Developing Current Products to Grow Index Product Line
Further Developing Current Products to Grow Index Product Line S&P 500 Index (SPX) options, the most SPX ADV* (in thousands) actively traded U.S. index option 1,144 SPX ADV for 1Q16 up 15% vs 1Q15 and 889 896 1,026 821 4Q15 Driven in part by strong Weeklys trading Introduced SPX Weeklys with 1Q15 2Q
Slide 8: CBOE Introduced First in Series of Indexes Designed to Target Investment Outcomes
CBOE Introduced First in Series of Indexes Designed to Target Investment Outcomes CBOE S&P 500 Buffer Protect Indexes are designed to target the outcomes of specific investment strategies Buffer Protect Indexes leverage options as risk management tool Began providing daily values for indexes April 1
Slide 9: Leveraging VIX Methodology to Create New Products and Grow Index Product Line
Leveraging VIX Methodology to Create New Products and Grow Index Product Line CBOE Volatility Index (VIX Index) is VIX Options ADV Chart Title considered the world’s barometer of (in thousands) 797 equity market volatility 657 517 546 425 VIX options ADV up 55% 1Q16 vs 1Q15 and 20% vs 4Q15 VIX futur
Slide 10: Leveraging Partnerships With Index Providers to Grow Index Product Line
Leveraging Partnerships With Index Providers to Grow Index Product Line Sole U.S. provider of major FTSE Russell products and MSCI index products RUT Options ADV Industrywide¹ RUT ADV up 5% in 1Q16 vs 1Q15 and (in thousands) up 18% vs 4Q15 97 81 85 On March 29, launched FTSE 100 79 72 and FTSE China
Slide 11: Expanding Our Global Customer Base
Expanding Our Global Customer Base Expanding outreach and investor education around the world Planning joint marketing and educational efforts with our index provider partners The fifth annual CBOE Risk Management Conference Europe will take place Sept. 26 through 28 in County Wicklow, Ireland Broad
Slide 12: Strong Trading in Our Proprietary Products Continue to Fuel Growth
Strong Trading in Our Proprietary Products Continue to Fuel Growth ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” CBOE HOLDINGS 12
Slide 13: Financial Review
Financial Review Alan Dean EVP, CFO and Treasurer
Slide 14: 1Q16 Financial Overview
1Q16 Financial Overview Adjusted Basis¹ 1Q16 1Q15 $ Change % Change (in millions, except EPS and RPC) Operating Revenues $162.3 $142.8 $ 19.5 14% Adjusted Operating Expenses 81.7 73.3 8.4 11% Adjusted Operating Income $ 80.6 $ 69.5 $ 11.1 16% Adjusted Operating Margin % 49.7% 48.7% 100 bps Adjusted
Slide 15: Operating Revenues Up 14%
Operating Revenues Up 14% Transaction fees key driver of revenue growth Operating Revenues Transaction fees up $19.3MM (in millions) 1Q16 1Q15 % Chg 19% increase in RPC Transaction fees $118.0 $ 98.7 20% – Favorable shift in product mix Access fees 13.2 13.7 -3% Exchange services – Lower volume-rela
Slide 16: Increase in RPC Primarily Reflects Shift in Mix of Trading Volume
Increase in RPC Primarily Reflects Shift in Mix of Trading Volume Trading volume mix and RPC 1Q16 versus 1Q15 Futures Futures 3.9% 4.5% Index 29.4% Index 37.9% Equities Equities 30.4% 1Q15 37.9% 1Q16 ETPs 28.8% ETPs 27.2% CBOE HOLDINGS 16
Slide 17: 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 85.8% of transaction fees in 1Q16 versus 81.3% in 1Q15 CBOE HOLDINGS 17
Slide 18: Other Operating Revenue Drivers
Other Operating Revenue Drivers Operating Revenues Exchange services and other (in millions) 1Q16 1Q15 % Chg fees up $1.7MM Transaction fees $ 118.0 $ 98.7 20% Primarily resulting from the addition Access fees 13.2 13.7 -3% of CBOE Livevol Exchange services and other fees 11.4 9.7 17% Other revenue
Slide 19: Ongoing Focus on Prudent Expense Management
Ongoing Focus on Prudent Expense Management Adjusted Operating Key drivers: Expenses¹ 1Q16 1Q15 % Chg (in millions) Royalty fees up $4.9MM Compensation and benefits $26.9 $25.4 6% Compensation and benefits up Depreciation and amortization 11.6 10.4 12% $1.5MM Technology support services 5.4 5.3 2% P
Slide 20: Core Operating Expenses Up 6%
Core Operating Expenses Up 6% Key drivers: Compensation and benefits up Core Operating Expenses¹ $1.5MM (in millions) 1Q16 1Q15 % Chg Compensation and Primarily due to higher costs for benefits $26.9 $25.4 6% stock-based compensation and Technology support annual incentive compensation services 5.4
Slide 21: 2016 Full-Year Guidance
2016 Full-Year Guidance 2016 Full-Year As of April 29, 2016 ($ in millions) Guidance Core operating expenses $211 to $215 Continuing stock-based compensation¹ $13.5 Accelerated stock-based compensation² $1.0 Depreciation and amortization $46 to $48 Capital expenditures $47 to $49 Effective tax rate
Slide 22: Volume-Based Expenses
Volume-Based Expenses Royalty fees up $4.9MM Volume-Based Higher trading volume in licensed Expenses 1Q16 1Q15 % Chg products in 1Q16 versus 1Q15 (in millions) Royalty fees $ 19.1 $ 14.2 35% – Index complex volume up 28% Order routing 0.1 0.8 -87% • Index options volume up 29% Total $ 19.2 $ 15.0 28
Slide 23: Enhancing Shareholder Value
Enhancing Shareholder Value Strong cash flow generation and disciplined approach to managing cash Cash of $107 million at March 31, 2016 Generated $97 million in operating cash flow in 1Q16 Capital outlays for 1Q16 include: $19 million to pay dividends $47 million to repurchase shares¹ $9 million in
Slide 24: Committed to Returning Capital to Shareholders
Committed to Returning Capital to Shareholders Capital allocation philosophy unchanged Reinvest in our business to fund growth Sustainable dividends and steady growth Opportunistic share repurchases ¹Excludes special dividends ²Starting in 2016, dividend declarations may not align with quarterly ear
Slide 25: Questions & Answers
Questions & Answers
Slide 26: Appendix Materials
Appendix Materials
Slide 27: Optimistic About Long-Term Growth Prospects
Optimistic About Long-Term Growth Prospects Adjusted Operating Revenue and Adjusted Diluted EPS¹ ($ in millions, except EPS) $0.80 $180 $0.75 $160 $0.70 $140 $0.65 $0.60 $120 $0.55 $100 $0.50 $80 $0.45 $60 $0.40 $0.35 $40 $0.30 $20 $0.25 $0 $0.20 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q1
Slide 28: Well Positioned to Gain Additional Leverage
Well Positioned to Gain Additional Leverage Adjusted Operating Income and Margin¹ ($ in millions) $110 55% $100 $90 53% $80 $70 51% $60 $50 49% $40 $30 $20 47% $10 $0 45% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Ad juste d O per ating In co me Adjusted Ope
Slide 29: 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 account for 85.8% of transaction fees in 1Q16, up from 50.6% in 2010 ¹Through March 31, 2016 CBOE HOLDINGS 29
Slide 30: Increase in RPC Primarily Reflects Favorable Shift in Mix of Products Traded
Increase in RPC Primarily Reflects Favorable Shift in Mix of Products Traded CBOE HOLDINGS 30
Slide 31: Quarterly Options ADV
Quarterly Options ADV CBOE and C2 Quarterly Options ADV (in millions) CBOE HOLDINGS 31
Slide 32: CBOE Holdings Rolling 3-Month RPC
CBOE Holdings Rolling 3-Month RPC 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.095 $0.092 $0.085 Indexes 0.738 0.733 0.720 Exchange-traded products 0.138 0.131 0.117 Total options RPC 0.351 0.351 0.346 Futures 1.636 1.623 1.643 Total RPC $0.412 $0.413 $0.405 2015 Jan Feb Mar Apr
Slide 33: Quarterly Core Operating Expenses
Quarterly Core Operating Expenses¹ ($ in thousands) 1Q 2016 % rev 4Q 2015 % rev 3Q 2015 % rev 2Q 2015 % rev 1Q 2015 % rev Total Operating Expenses $82,849 51% $80,052 52% $85,925 43% $75,355 51% $73,286 51% Less: Depreciation and amortization 11,851 7% 12,202 8% 12,394 7% 11,275 8% 10,402 7% Acquisi
Slide 34: Annual Core Operating Expenses
Annual Core Operating Expenses¹ ($ in thousands) 2015 % rev 2014 % rev 2013 % rev 2012 % rev 2011 % rev Total Operating Expenses $314,617 50% $303,424 51% $286,236 50% $268,241 52% $266,512 52% Less: Depreciation and amortization 46,274 7% 39,913 7% 34,488 6% 31,485 6% 34,094 7% Accelerated stock-ba
Slide 35: GAAP to Non-GAAP Reconciliation For 2010 and 2011
GAAP to Non-GAAP Reconciliation For 2010 and 2011 GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 FY2010 FY2011 Reconciliation of GAAP Net Income Allocated to Common Stockholder to Non-GAAP GAAP net income allocated to common stockholders $ 20,0
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 2Q13 3Q13 4Q13 FY2013 Reconciliation of GAAP Net Income Allocated to Common Stockholder to Non-GAAP GAAP net income allocated to common stockhold
Slide 37: GAAP to Non-GAAP Reconciliation For 2014 and 2015
GAAP to Non-GAAP Reconciliation For 2014 and 2015 GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) 1Q14 2Q14 3Q14 4Q14 FY2014 1Q15 2Q15 3Q15 4Q15 FY2015 Reconciliation of GAAP Net Income Allocated to Common Stockholder to Non-GAAP GAAP net income allocated to common stockhold
Slide 38: GAAP to Non-GAAP Reconciliation For 2016
GAAP to Non-GAAP Reconciliation For 2016 GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) 1Q16 2Q16 3Q16 4Q16 FY2016 Reconciliation of GAAP Net Income Allocated to Common Stockholder to Non-GAAP GAAP net income allocated to common stockholders $ 49,198 Add: Accelerated stock-
Slide 39: 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. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP fin
Slide 40: CBOE, 400 South LaSalle Street, Chicago, Illinois
CBOE 400 South LaSalle Street Chicago, Illinois 60605 www.cboe.com