Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q2 2022 Earnings Presentation
41 slides from Cboe Global Markets's earnings presentation, Jul 29, 2022
Slide 1: Second Quarter 2022 Earnings Presentation
Second Quarter 2022 Earnings Presentation July 29, 2022
Slide 2: Agenda
Agenda Strategic Review Edward Tilly Chairman and Chief Executive Officer Financial Review Brian Schell Executive Vice President, Chief Financial Officer and Treasurer Questions & Answers Edward Tilly Brian Schell Chris Isaacson Executive Vice President, Chief Operating Officer Dave Howson Executive
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 and CEO
Slide 5: 2Q22: Strong Revenue and Earnings Generation Continues
2Q22: Strong Revenue and Earnings Generation Continues Net revenues grew 21% YoY, a product of strong transaction and non-transaction growth 7% increase in Cash and Spot Markets net revenue, 3% organic net revenue growth¹ ADNV traded on Cboe European Equities up 49% 30% increase in Derivatives Mar
Slide 6: Top Strategic Growth Priorities
Top Strategic Growth Priorities Sizing the Key Trends Market Opportunity Cboe Progress Growth Potential ◆ Globalization ◆ > $33bn annual spend on ◆ Targeting organic net ◆ Delivered 14% organic net revenue ◆ Access to multi-asset financial market data¹ revenue growth of 7-10% growth5 in 2Q22 Data an
Slide 7: Global Derivatives: Extending the Market Potential
Global Derivatives: Extending the Market Potential Increasing access for market participants and leveraging our core products 24x5 Tuesday / Thursday Expiry Providing Attractive Return on Investment Leveraging Cboe’s Core Strength • Returns remain positive: Since Global Trading Hours • Tuesday expir
Slide 8: Data and Access Solutions: Driving Durable Growth
Data and Access Solutions: Driving Durable Growth DnA Gross Revenue (in $mn) DnA Growth has been strong: $114 $119 $124 $110 $101 $103 ◆ Averaged 19% year-over-year quarterly growth in total $92 $96 41 $87 $85 40 DnA revenues since 1Q21 30 31 33 36 27 28 24 ◆ Continued to see strong growth trends ac
Slide 9: Building an Unrivaled Global Derivatives and Securities Network
Building an Unrivaled Global Derivatives and Securities Network Europe ◆ Grew European equities market share by nearly 6% in 2Q22 ◆ Launched four additional Cboe Europe single country index benchmark derivative contracts ◆ Steady gains in clearing North America ◆ Record monthly SPX volumes in June A
Slide 10: Focus on Integration: Strategic M&A is a Core Competency of Cboe
Focus on Integration: Strategic M&A is a Core Competency of Cboe More Less Transaction Strategic Rational Highlights Integration Progress Integration & Planned Organic Growth Focus1 FT Options - Enhanced Proprietary Products - Hanweck enhanced ticker plant infrastructure supporting distribution of d
Slide 11: Harvesting Investments Across Seasons to Drive Consistent Growth
Harvesting Investments Across Seasons to Drive Consistent Growth 24x5 More Data Tuesday / Thursday Expiry Near-Term BIDS Canada Contributors Data and Access Cboe Global Cloud Solutions European Derivatives Cash & Medium-Term Spot Contributors Indices / ESG Markets BIDS Asia1 Long-Term Derivatives Ma
Slide 12: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer
Slide 13: 2Q22 Financial Summary
2Q22 Financial Summary Net Revenue (in millions) $424MM $418 $424 $391 $370 $351 Net Revenue +21% Y/Y 2Q21 3Q21 4Q21 1Q22 2Q22 Adjusted EBITDA¹ (in millions) $274MM $234 $240 $264 $281 $274 Adjusted EBITDA¹ 67.5% 67.3% +17% Y/Y 66.6% 64.8% 64.7% (Adjusted EBITDA margin of 64.7%) 2Q21 3Q21 4Q21 1Q22
Slide 14: 2021-2022 Digital Asset Ecosystem Timeline
2021-2022 Digital Asset Ecosystem Timeline 1 1 1 Digital Proxy Avg. Index self-calculated, comprised of an equal weighting of public companies directly affected by the digital asset environment: Tickers: COIN, GLXY-TSE, HOOD, BKKT, MARA, RIOT, SDIG, SI, VOYG-TSE 14
Slide 15: 2Q22 Net Revenue by Segment and Key Drivers
2Q22 Net Revenue by Segment and Key Drivers1 Net Revenue Segment 2Q22 Key Drivers (in millions) $424.1 ◆ Net revenue up 32% Options ◆ Higher options trading volume, market share and RPC $350.6 CBOE - C2 - BZX - EDGX ◆ Strong organic growth in access and capacity and market data fees ◆ Net revenue up
Slide 16: Grew Data and Access Solutions Net Revenue 20% YoY, Organic Growth of 14%
Grew Data and Access Solutions Net Revenue 20% YoY, Organic Growth of 14%1, Exceeded Targeted Growth Rate Increased targeted 2022 organic growth rate for Data and Access Solutions business to 10-13% from 8-11%, ahead of our medium-term guidance2 2Q22 Data and Access Solutions net revenue of $121.6
Slide 17: 2Q22 Adjusted Operating Expenses Up 22%, Primarily Driven by Acquisitions
2Q22 Adjusted Operating Expenses Up 22%, Primarily Driven by Acquisitions 2Q22 expense increase primarily driven by addition of Cboe Asia Pacific, ErisX and NEO $19 million increase in compensation-related expenses $4 million increase in travel and promotional fees Excluding acquisitions, ad
Slide 18: Adjusted Operating Expense Guidance for 2022
Adjusted Operating Expense Guidance for 20221 ($ in millions) $12 $659 to 667 $30 to 35 $647 to 660 -$5 $617 to 625 2022 Adj Operating ErisX and NEO 2022 Adj Operating Reducing Top of Incremental Current 2022 Expense Guide at Expense Guide w/ Core Expense Range 2022 Incentive Adj Operating April 29,
Slide 19: Updated 2022 Guidance
Updated 2022 Guidance 2022 Guidance 2022 Guidance 2022 Guidance 2022 Full-Year Guidance 1, 2 as of as of as of 2021 Actual3 ($ in millions) July 29, 2022 Apr. 29, 2022 Feb. 4, 2022 Data and Access Solutions4 organic revenue growth rate 10 to 13% 8 to 11% 7 to 10% 15% Net revenue growth from acquisit
Slide 20: Efficient Allocation of Capital to Create Long-Term Shareholder Value
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 ◆ Inorganic opportunities to facilitate growth strategy ◆ Consistent dividend payments and
Slide 21: Positioned to Innovate, Integrate and Grow to Create Value
Positioned to Innovate, Integrate and Grow to Create Value Innovate to capture growing demand Integrate across ecosystem to Grow by accessing untapped for trading products and data services, increase efficiency and better serve addressable markets globally customers ◆ Increase access to data product
Slide 22: Q&A
Choe Q&A
Slide 23: Appendix
Cboe Appendix
Slide 24: Options 2Q22 Net Revenue Up 32%, Reflecting Y/Y Increase in ADV
Options 2Q22 Net Revenue Up 32%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue ◆ Higher transaction fees from index and multi-listed options given stronger volumes, market share and RPC ◆ Access and capacity fees plus proprietary market data were up a combined 34% Options Sele
Slide 25: North American Equities 2Q22 Net Revenue Up 4%, Driven by Solid Industry Volumes
North American (N.A.) Equities 2Q22 Net Revenue Up 4%, Driven by Solid Industry Volumes ◆ Net revenue increase reflects $1.7 million contribution from NEO ◆ U.S. equities transaction and clearing fees were helped by higher year-over-year industry volumes ◆ Access and capacity fee growth remained str
Slide 26: Europe and APAC Net Revenue Up 20% for 2Q22
Europe and APAC Net Revenue Up 20% for 2Q22, Helped by Higher Volumes and Inclusion of Cboe Asia Pacific ◆ Net revenue increase reflects $8.2 million contribution from Cboe Asia Pacific and higher activity levels ◆ Increase in net transaction fees, driven by strong increases in European equities tra
Slide 27: Futures 2Q22 Net Revenue Up 8%, Reflecting Volume and RPC Gains
Futures 2Q22 Net Revenue Up 8%, Reflecting Volume and RPC Gains ◆ Revenue increase driven by contributions from both transaction and non-transaction revenues ◆ Activity levels and RPC each saw modest improvements relative to 2Q21 levels Futures Selected Revenue Data 2Q22 2Q21 Chg ($ in millions) Net
Slide 28: Global FX Net 2Q22 Revenue Up 20%
Global FX Net 2Q22 Revenue Up 20% ◆ Revenue increase driven by higher volumes and continued market share gains ◆ Market share trends remained solid at 17.0% FX Selected Revenue Data 2Q22 2Q21 Chg ($ in millions) Net Revenue $16.6 $13.8 20% Net transaction and clearing fees¹ 13.9 11.5 21% Non-transac
Slide 29: Second Quarter Financial Overview
Second Quarter Financial Overview Adjusted Financial Results¹ 2Q22 2Q21 % Chg ($ in millions, except per share) Net Revenue² $424.1 $350.6 21% Adjusted Operating Expenses¹ $157.0 $128.3 22% Adjusted Operating Income¹ $267.1 $222.3 20% Adjusted Operating Margin ¹ 63.0% 63.4% -0.4pts Adjusted Net Inco
Slide 30: Net Revenue Detail
Net Revenue Detail ◆ Derivatives Markets driven by strong transaction and clearing fees ◆ Data and Access Solutions benefited from strong new subscription / unit growth Net Revenue 2Q22 2Q21 % Chg (in millions) Cash and Spot Markets $101.2 $94.8 7% Data and Access Solutions 121.6 101.0 20% Derivativ
Slide 31: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2020 to 2021 Prioritizing investments to: ($ in millions) 2020 adjusted operating expenses¹ $ 416 • Broaden geographic footprint (Cboe APAC, Euro derivs) Acquisitions 49 • Leverage core capabilities (24x5, BIDS and Nanos) and Non-recurrin
Slide 32: 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 33: Cboe's Commitment to ESG Initiatives
Cboe’s Commitment to ESG Initiatives Environmental Social Governance ◆ Committing to Net Zero: Cboe is ◆ Cboe Empowers: Community engagement ◆ Independent Board: 12 of the 13 Directors committing to reaching net zero emissions program that provides mentorship, are independent across our operations a
Slide 34: Non-GAAP Information
Cboe Non-GAAP Information
Slide 35: 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 36: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Transaction and Clearing Fees by Segment For the Three Months Ended Options N.A. Equities Europe and Asia Pacific Futures Global FX Total September 30 (in millions) 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Transaction and clearing fees $
Slide 37: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Revenue by Revenue Caption – Cash and Data and Derivatives Spot Markets For the Three Months Ended Access Solutions Markets Total June 30 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 Transaction and clearing fees $ 359.2 $ 312.7 $ - $ - $ 376.1 $ 3
Slide 38: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q21 2Q21 3Q21 4Q21 2021 1Q22 2Q22 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net i ncome allocated to common stockholders $ 136.8 $ 105.2 $ 120.0 $ 165.3 $ 527.3 $ 109.2 $ (184.5) Acquisition-related expense
Slide 39: 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 40: Non-GAAP Information
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 3Q21 4Q21 1Q22 2Q22 LTM Net income allocated to common stockholders $ 120.0 $ 165.3 $ 109.2 $ (184.5) $ 210.0 Interest expense, net 11.7 11.1 10.8 14.6 48.2 Income tax provision 53.4 44.3 115.3 (72.3) 140.7 Deprecia
Slide 41: Cboe.com
Cboe Cboe.com