Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Sandler O'Neill Global Exchange and Brokerage Conference 2018
41 slides from Cboe Global Markets's conference presentation, Jun 7, 2018
Slide 1: Sandler O'Neill Global Exchange and Brokerage Conference
Sandler O’Neill Global Exchange and Brokerage Conference Investor Meetings June 7, 2018
Slide 2: 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 3: At Cboe – We Empower Potential to Stay Ahead of an Evolving Market
At Cboe – We Empower Potential to Stay Ahead of an Evolving Market What we do: Cboe offers trading across a diverse range of products in multiple asset classes and geographies Four U.S. Options Four U.S. Equities Futures European Global FX Exchanges Exchanges Exchange Equities How we do it: Relentle
Slide 4: Strengthening our Position as a Leading Global Exchange Operator
Strengthening our Position as a Leading Global Exchange Operator • #1 U.S. options market¹- home to SPX and VIX Index options Options • 40.6% combined market share in 1Q18 Diversified Product Offering • #2 U.S. equities market share¹ U.S. Equities • #1 in retail volume • CFE home to VIX futures trad
Slide 5: Remain Focused on Executing Our Strategic Initiatives
Remain Focused on Executing Our Strategic Initiatives Our mission: “to power your potential to stay ahead of an evolving market,” is brought to life through three commitments: • Relentless product innovation • Leading-edge technology • Seamless solutions 5
Slide 6: Strengthening our Position as a Leading Global Exchange Operator
Strengthening our Position as a Leading Global Exchange Operator Able to shape every aspect of the product development and trading cycle Product Product Design Listing Product Education Trading Market Market Data Data Packaging Generation 6
Slide 7: Product Innovation: Plan to Launch Corporate Bond Index Futures
Product Innovation: Plan to Launch Corporate Bond Index Futures Entered into collaboration with IHS Markit and BlackRock to develop the first-ever broad-based corporate bond index futures¹ New collaboration combines Cboe’s product development expertise with IHS Markit’s and BlackRock’s leadership in
Slide 8: Product Innovation: Launched XBT Futures on December 10, 2017
Product Innovation: Launched XBT Futures on December 10, 2017 XBT futures, the first of their kind, provide a risk management tool for market participants seeking to hedge their underlying bitcoin holdings XBT futures create: Cboe Bitcoin Futures Daily Volume and Open Interest • An exchange-listed,
Slide 9: Product Innovation - Celebrating 25 Years of VIX
Product Innovation - Celebrating 25 Years of VIX April 2018 marked the 25th anniversary of the introduction of the Cboe Volatility Index® Began disseminating the new Cboe One-Year Volatility Index (ticker: VIX1Y) in April 2018 • Designed to monitor the market’s expectations for longer-term volatilit
Slide 10: Leading-edge Technology
Leading-edge Technology Migrating Cboe exchanges onto Bats technology to create a common world-class trading platform across our options, futures and equities markets Oct. 7, 2019 • Planned Cboe Options May 14, 2018 technology migration¹ Apr. 30, 2018 • C2 migration to Bats technology Feb. 25, 2018
Slide 11: Seamless Trading Solutions: Customer Education and Collaboration
Seamless Trading Solutions: Customer Education and Collaboration Cboe Risk Management Conferences offer a premier educational forum for institutional users of equity derivatives, options and volatility products Held 34th annual RMC U.S. on March 7-9, 2018 RMC Europe planned for September 12-14, 2018
Slide 12: 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 products interchangeably or in tandem, depending on their trading objective and market conditions Surge in volatility in 1Q18 resulted in new quarterly and monthly volume records in SPX option
Slide 13: Options – Focused on Growing Highest-Margin Index Options
Options – Focused on Growing Highest-Margin Index Options While Optimizing Overall Revenue Capture ADV traded in our proprietary index options up 25% YoY through May Total options ADV up 19% YoY through May Quarterly Options ADV* (in millions) Look to optimize revenue capture across our 9.09 6.85 7.
Slide 14: U.S. Equities - Highly Scalable Business Model Across Four Exchanges
U.S. Equities - Highly Scalable Business Model Across Four Exchanges Offer competitive market-leading pricing U.S. Equities Net Revenue Chart -Title Percent Transaction Strong recurring subscription-based versus Non-Transaction Fees and Market Share revenue stream ($ in millions) • About 70% of net
Slide 15: U.S. Equities: Grew ETF Market Listings
U.S. Equities: Grew ETF Market Listings Grew ETF listings market share, which enhances benefits for issuing firms and provides deeper liquidity to market participants Number of Cboe U.S. ETPs 2018 TD¹ Highlights: • Increased ETP listings by 7% 250 268 • Captured 26% of new listings 137 • Executed 22
Slide 16: Futures – Home of VIX Futures Trading
Futures – Home of VIX Futures Trading VIX futures trade nearly 24X5 VIX Futures ADVVIX Options (in thousands) 313 VIX futures ADV up 14% YTD vs same period 294 last year¹ 201 200 239 159 Trading in non-U.S. hours accounts for nearly 10% of trading 2018 to date¹ Highest-margin proprietary product 201
Slide 17: Continued to Grow CFE User Accounts
Continued to Grow CFE User Accounts Unique CFE User Accounts 7,000 6,500 6,350 11% Growth 6,000 5,706 27% Growth 5,500 5,000 4,495 4,500 4,000 3,500 3,000 Q4 2015 Q4 2017 1Q18 Source: Cboe 17
Slide 18: European Equities – Operate Largest Pan-European Stock Exchange
European Equities – Operate Largest Pan-European Stock Exchange Diversifying our European business model post MiFID II Rapid adoption of our Periodic Auctions European Equities NetChart Revenue Title - Percent of book Transaction versus Non-Transaction Fees and Market Share ($ in millions) • Record
Slide 19: European Equities – Leveraging Opportunities Presented by MiFID II
European Equities – Leveraging Opportunities Presented by MiFID II Positive uptake in 2018 on value-added products and services offered to help customers adapt to changing regulatory environment, through April: • Cboe Periodic Auctions book reported record month in April • Cboe Large in Scale (LIS)
Slide 20: Global FX – Cboe FX, first ECN for the Institutional FX Market
Global FX – Cboe FX, first ECN for the Institutional FX Market Developed new products and services, leveraging industry structural changes 1Q18 marked a high point for both Global FX Net RevenueChart - Percent Title Transaction versus market share and ADNV traded Non-Transaction Fees and Market Shar
Slide 21: 1Q18 Business Highlights – Key Growth Drivers
1Q18 Business Highlights – Key Growth Drivers Continued strength of proprietary index products Strong growth from both transaction and non-transaction fees Expense discipline and expense synergies Demonstrated strong operating leverage and earnings growth Combined Net Revenue¹ up 24% Organic Net Rev
Slide 22: Increased Run-Rate Expense Synergy Target to $85MM
Increased Run-Rate Expense Synergy Target to $85MM; Expect to Reach in 2020, A Year Ahead of Plan* Raised run-rate expense synergy target to $85 million from $65 million Expect to reach run-rate expense synergies in 2020, one year ahead of initial projections Targeted Run-Rate Expense Synergies as o
Slide 23: 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 is a priority Invest in the growth of our business Return capital through dividends and share repurchases • Returned ~$31 million in dividends and ~$44 million in share repurchases i
Slide 24: Delivering on Sources of Operating Leverage and Key Strategic Initiatives
Delivering on Sources of Operating Leverage and Key Strategic Initiatives Growth Footnotes of Core applied here • Focused on growing proprietary products Proprietary Products • Generated strong organic revenue growth Diversification and Stabilization of Revenue • Strong growth in diverse set of reve
Slide 25: Appendix Materials
Appendix Materials 25
Slide 26: 2018 Full-Year Guidance
2018 Full-Year Guidance* 2018 Full-Year Guidance Guidance as of ($ in millions) May 4, 2018¹ Previous Guidance Adjusted combined operating expenses² $420 to $428 $420 to $428 Depreciation and amortization (excluding $53 to $58 $53 to $58 amortization of acquired intangible assets) Capital expenditur
Slide 27: 1Q18 Financial Overview
1Q18 Financial Overview Adjusted Combined Financial Results¹ 1Q18 1Q17 % Chg ($ in millions, except per share) Net Revenue¹,² $328.5 $265.3 24% Adjusted Operating Expenses¹ 109.9 106.3 3% Adjusted Operating Income¹ $218.6 $159.0 37% Adjusted Operating Margin¹ 66.5% 59.9% 660 bps Adjusted Net Income
Slide 28: Revenue Growth
Revenue Growth Proprietary Products - Key Driver of Revenue Growth Mix of Proprietary Products as Mix of Proprietary Products as Percentage of Total Net Transaction Fees Percentage of Total Transaction Fees 51.9% 47.6% 50.4% 47.0% 63.6% 69.8% 62.5% 68.4% 14.9% 15.5% 16.5% 19.4% 37.5% 30.2% 37.5% 31.
Slide 29: Growth in Proprietary Products in Various Volatility Environments
Growth in Proprietary Products in Various Volatility Environments Quarterly Average Daily Volume Versus Average VIX Index 1,800,000 23.0 1,700,000 1,600,000 21.0 1,500,000 1,400,000 19.0 Average Daily Volume 1,300,000 1,200,000 17.0 Average VIX Index 1,100,000 1,000,000 15.0 900,000 800,000 13.0 700
Slide 30: Non-GAAP Information
Non-GAAP Information 30
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: Combined Reconciliations
Non-GAAP Information Combined Reconciliations The non-GAAP unaudited combined financial measures have been prepared by recording combined adjustments to the historical consolidated financial statements of Cboe Global Markets. The combined financial measures for the three months ended March 31, 2017
Slide 33: Reconciliation of Segment Net Revenues
Non-GAAP Information Reconciliation of Segment Net Revenues (in millions) 1Q17 2Q17 3Q17 4Q17 2017 1Q18 Options $ 128.9 $ 126.7 $ 130.7 $ 130.0 $ 516.3 $ 167.1 U.S. Equities 25.5 74.4 70.2 69.0 239.1 79.7 Futures 28.8 36.2 38.9 35.6 139.5 42.3 European Equities 6.1 18.5 18.4 18.8 61.8 24.6 Global FX
Slide 34: Reconciliation of Net Transaction Fees by Segment
Non-GAAP Information Reconciliation of Net Transaction Fees by Segment For the Three Months Ended March 31, 2018 U.S. European (in millions) Options Equities Futures Equities Global FX Total Reconciliation of Net Transaction Fees by Segment Transaction fees $ 235.8 $ 233.8 $ 38.8 $ 25.7 $ 13.0 $ 547
Slide 35: Reconciliation of Net Transaction Fees
Non-GAAP Information Reconciliation of Net Transaction Fees (in millions) Consolidated Options Segment 1Q18 1Q17 1Q18 1Q17 Transaction fees $ 547.1 $ 256.4 $ 235.8 $ 140.2 Liquidity payments (302.9) (105.3) (87.6) (35.8) Routing and clearing (10.3) (6.3) (3.5) (3.5) Net transaction fees $ 233.9 $ 14
Slide 36: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q17 2Q17 3Q17 4Q17 2017 1Q18 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 15.1 $ 67.3 $ 59.7 $ 254.6 $ 396.7 $ 117.3 Compensation and benefits (1) 9.1 — — — 9.1 —
Slide 37: EBITDA Reconciliations
Non-GAAP Information EBITDA Reconciliations EBITDA (earnings before interest, income taxes, depreciation and amortization) is a widely used non-GAAP financial measure of operating performance. EBITDA margin represents EBITDA divided by revenues less cost of revenues (net revenue). It is presented as
Slide 38: Non-GAAP Information
Non-GAAP Information (see slide 39 for footnotes) Three Months Ended (in millions, except per share amounts) March 31, 2017 Reconciliation of Non-transaction Revenue (1): Access fees $ 17.8 Exchange services and other fees 15.4 Market data fees 22.5 Regulatory fees 8.3 Other revenue 5.8 Non-GAAP adj
Slide 39: Non-GAAP Information - Footnotes
Non-GAAP Information - Footnotes for table on slide 38 (1)Total non-transaction revenue represents the sum of access fees, exchange services and other fees, market data fees, regulatory fees (net of Section 31 fees) and other revenue. (2) Reflects adjustment to include the activity of Bats for Janua
Slide 40: Adjusted Combined Debt to EBITDA - Trailing Twelve Months
Non-GAAP Information Adjusted Combined Debt to EBITDA - Trailing Twelve Months ¹ (in millions) 2Q17 3Q17 4Q17 1Q18 LTM Combined net income allocated to common stockholders $ 67.3 $ 59.7 $ 254.6 $ 117.3 $ 498.9 Interest 12.5 10.5 10.4 9.6 43.0 Income tax provision 38.1 45.6 (153.0) 41.3 (28.0) Deprec
Slide 41: Cboe Global Markets
Cboe Global Markets 400 South LaSalle Street Chicago, IL 60605 www.cboe.com 41
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