Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q1 2021 Earnings Presentation
36 slides from Cboe Global Markets's earnings presentation, Apr 30, 2021
Slide 1: First Quarter 2021 Earnings Presentation
First Quarter 2021 Earnings Presentation April 30, 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: 1Q21: Achieved Strong Results While Continuing to Build the Foundation for Future Growth
1Q21: Achieved Strong Results While Continuing to Build the Foundation for Future Growth Solid Results Against Difficult Prior-Year Comparisons • Sequential growth across business segments • Re-engagement of institutional clients trading index options and volatility products • Continued growth in re
Slide 6: Strategic Momentum – Investing in Long-Term Growth
Strategic Momentum – Investing in Long-Term Growth 1Q21 Highlights 1Q21 Key Highlights ❖ Strong growth in recurring non-transaction revenue; increasing 2021 growth target Expand product ❖ Created new Market Data and Access Build upon core Solutions division lines across asset proprietary classes pro
Slide 7: Cboe Agrees to Acquire Chi-X Asia Pacific
Cboe Agrees to Acquire Chi-X Asia Pacific¹ Building One of the World’s Largest Global Derivatives and Securities Networks Global Derivatives and Securities North America & Asia Pacific Network Europe Region • #1 U.S. Options Exchange • Access to fast growing markets and • Accelerates growth across p
Slide 8: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer 8
Slide 9: 1Q21 Financial Summary
1Q21 Financial Summary Net Revenue (in millions) $358 $366 $366MM $297 $292 $307 Net Revenue +2% Y/Y; +19% Q/Q 1Q20 2Q20 3Q20 4Q20 1Q21 Adjusted EBITDA¹ (in millions) $250MM 74.2% 71.1% 68.5% Margin % 65.9% 66.9% Adjusted EBITDA¹ $266 $211 $206 $250 $192 (Adjusted EBITDA margin of 68.5%) 1Q20 2Q20 3
Slide 10: 1Q21 Net Revenue by Segment and Key Drivers
1Q21 Net Revenue by Segment and Key Drivers Net Revenue (in millions) $365.5¹ Segment 1Q21 Key Drivers $358.3 • Net revenue down 4% Options • Lower index options trading, offset somewhat by record CBOE - C2 - BZX - EDGX trading in multi-listed options • Strong organic growth in recurring non-transac
Slide 11: 1Q21 Adjusted Operating Expenses Up 26%, Primarily Driven by Acquisitions
1Q21 Adjusted Operating Expenses Up 26%, Primarily Driven by Acquisitions • 1Q21 expense increase primarily driven by addition of BIDS Trading, EuroCCP and MATCHNow, which were acquired in 2020: – $19 million increase in compensation-related expenses – $5 million increase in technology support servi
Slide 12: Grew Recurring Non-Transaction Revenue; Raised Targeted Growth Rate Guidance
Grew Recurring Non-Transaction Revenue; Raised Targeted Growth Rate Guidance Raised organic annual growth rate target for recurring non-transaction revenue to 10-11%, up 4 ppts • 1Q21 recurring non-transaction revenue of $96.1 million¹ Recurring Non-Transaction Revenue¹ up 17%; organic growth of 14%
Slide 13: Adjusted Operating Expense Bridge 2020 to 2021
Adjusted Operating Expense Bridge 2020 to 2021 ($ in millions) Investment $15 - $531 - Core $16 $539 $9- $10 $7-$8 $508 - Normalize 2020 $14 - $513 $18 $16 $487 $55 $416 2020¹ Adjusted M&A run Non-recurring 2020 Comp, general Facilities European Strategic 2021 Operating rate savings, including Norma
Slide 14: 2021 Full-Year Guidance Summary; Recurring Revenue Growth Target Updated
2021 Full-Year Guidance Summary; Recurring Revenue Growth Target Updated 2021 Guidance 2021 Guidance 2021 Full-Year Guidance 1, 2 as of as of 2020 Actual3 ($ in millions) Apr. 30, 2021 Feb. 5, 2021 Recurring non-transaction revenue4 growth targets: Reported growth 11 to 12% 7 to 8% 12% Organic growt
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: Questions and Answers
Cboe Questions and Answers
Slide 18: Appendix
Appendix Appendix 18
Slide 19: Options 1Q21 Net Revenue Down 4%, Reflecting Y/Y Decline in Index Options ADV
Options 1Q21 Net Revenue Down 4%, Reflecting Y/Y Decline in Index Options ADV • Lower transaction fees from index options, offset somewhat by higher transaction fees from multi-listed options • Growth in recurring non-transaction fees, access and capacity fees and proprietary market data, of $5.6MM,
Slide 20: North American Equities 1Q21 Net Revenue Up 11%, Driven by Acquisitions
North American (N.A.) Equities 1Q21 Net Revenue Up 11%, Driven by Acquisitions • 1Q21 results include BIDS Trading and MATCHNow, which contributed $12.4 million of net revenue • U.S. equities net capture decline primarily reflects a mix shift in shares traded • Growth in recurring non-transaction re
Slide 21: Futures 1Q21 Net Revenue Down 24%, Reflecting Y/Y Decline in VIX Futures ADV
Futures 1Q21 Net Revenue Down 24%, Reflecting Y/Y Decline in VIX Futures ADV • Revenue decrease driven by net transaction fees resulting from lower trading volume and RPC against difficult prior year comparisons • RPC decrease primarily reflects the addition of Mini VIX futures in August 2020, one-t
Slide 22: Europe Net Revenue Up 49% for 1Q21, Local Currency Basis
Europe Net Revenue Up 49% for 1Q21, Local Currency Basis, Reflecting Addition of EuroCCP • Net revenue increase reflects $12.1 million contribution from EuroCCP and favorable exchange rate variance • Decrease in net transaction fees, on a local currency basis, driven by lower trading volumes, offset
Slide 23: Global FX Net 1Q21 Revenue Down 13%, Reflecting Lower Volumes
Global FX Net 1Q21 Revenue Down 13%, Reflecting Lower Volumes • Revenue decrease driven by lower transaction revenue, reflecting the year-over-year decline in trading volumes • Market share up 80 basis point FX Selected Revenue Data 1Q20 1Q21 Chg ($ in millions) Net Revenue $16.9 $14.7 -13% Net tran
Slide 24: First Quarter Financial Overview
First Quarter Financial Overview Adjusted Financial Results¹ 1Q20 1Q21 % Chg ($ in millions, except per share) Net Revenue² $358.3 365.5 2% Adjusted Operating Expenses¹ 98.6 124.6 26% Adjusted Operating Income¹ 259.7 240.9 -7% Adjusted Operating Margin¹ 72.5% 65.9% -660 bps Adjusted Net Income Alloc
Slide 25: Net Revenue Detail
Net Revenue Detail • 1Q21 net transaction and clearing fees down 7% • Recurring non-transaction revenue up 17% Net Revenue 1Q20 1Q21 % Chg (in millions) Net transaction and clearing fees¹ $253.1 234.3 -7% Access and capacity fees 57.7 66.4 15% Market data fees 56.2 63.8 14% Regulatory fees 9.4 9.6 2
Slide 26: Supplemental Segment Information – 1Q21
Supplemental Segment Information – 1Q21 1Q20 Supplemental Net Revenue by N.A. Global Options Futures Europe Total¹ Segment (in millions) Equities FX Net transaction fees² $155.4 $31.1 $35.9 $15.6 $15.1 $253.1 Proprietary net transaction fees included above $129.0 $35.9 $164.9 Access and capacity fee
Slide 27: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2019 to 2020 ($ 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 28: 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 29: Non-GAAP Information
Cboe Non-GAAP Information
Slide 30: 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 31: 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 32: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q20 2Q20 3Q20 4Q20 2020 1Q21 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 Acquisition-related expenses (1) 0.8 9.46.2
Slide 33: 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 34: Non-GAAP Information
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 2Q20 3Q20 4Q20 1Q21 LTM Net income allocated to common stockholders $ 113.3 $ 109.6 $ 87.1 $ 136.8 $ 446.8 Interest expense, net 7.3 9.5 13.5 12.3 42.6 Income tax provision 43.0 53.5 35.6 55.7 187.8 Depreciation and
Slide 35: Non-GAAP Information
Non-GAAP Information Reconciliation of Revenue Less Cost of Revenue to Organic Net Revenue Net Revenue (in millions) 1Q20 1Q21 % Chg Revenue less cost of revenue (net revenue) $358.3 $365.5 2% Acquisition revenue less cost of revenue - (26.8) Organic net revenue $358.3 $338.7 -5% Reconciliation of O
Slide 36: Cboe Global Markets
Cboe Global Markets Cboe.com 36