Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q4 2022 Earnings Presentation
41 slides from Cboe Global Markets's earnings presentation, Feb 3, 2023
Slide 1: Fourth Quarter 2022 Earnings Presentation
Fourth Quarter 2022 Earnings Presentation February 3, 2023
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: 4Q22: Record Levels of Net Revenue and Adjusted Earnings in Fourth Quarter
4Q22: Record Levels of Net Revenue and Adjusted Earnings in Fourth Quarter Cap a Record Year* Net revenues grew 17% YoY, a product of strong transaction and non-transaction growth 5% decrease in Cash and Spot Markets net revenue, 7% organic net revenue decrease¹ U.S. equities ADV up 2% YoY 13% inc
Slide 6: Top Strategic Growth Priorities
Top Strategic Growth Priorities Sizing the Key Trends Market Opportunity Cboe Progress Growth Potential ◆ Globalization ◆ Targeting >150mn retail accounts ◆ Derivatives initiatives ◆ 24x5 trading extension tripled SPX global trading ◆ Access to multi-asset with smaller & more flexible expected to co
Slide 7: Global Derivatives: Extending the Market Potential
Global Derivatives: Extending the Market Potential Increasing access for market participants and leveraging our core products Any Time Any Day Prop products available 24 hours a day, 5 days a week SPX Weeklys Drive Same-Day Trading Strategies • Returns remained positive: Since Global Trading Hours (
Slide 8: Data and Access Solutions: Driving Durable Growth
Data and Access Solutions: Driving Durable Growth Data & Access Solutions Gross Revenue DnA growth has been strong: (in millions) ◆ Averaged 17% year-over-year quarterly growth in total $124 $126 $128 $114 $119 $110 DnA gross revenues since 1Q21 $101 $103 41 43 45 36 40 ◆ Continued to see strong gro
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 over 5 percentage points to 24.9% in 4Q22 ◆ In 4Q22, Cboe was Europe's largest stock exchange and Cboe BIDS Europe was the largest European block trading platform1 ◆ Cboe Clear Europe mark
Slide 10: M&A Integration Leading to Long-Term Growth Opportunities
M&A Integration Leading to Long-Term Growth Opportunities Transaction Strategic Rationale Integration Progress Integration & Planned Organic Growth Focus1 FT Options - Enhanced Proprietary Products - Hanweck enhanced ticker plant infrastructure supporting - Foundation for risk management distributio
Slide 11: Harvesting Investments Across Seasons to Drive Consistent Growth
Harvesting Investments Across Seasons to Drive Consistent Growth 24x5 / GTH 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 Derivati
Slide 12: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer
Slide 13: 4Q22 Financial Summary
4Q22 Financial Summary Net Revenue (in millions) $457mn $391 $418 $424 $442 $457 Net Revenue +17% Y/Y 4Q21 1Q22 2Q22 3Q22 4Q22 Adjusted EBITDA¹ (in millions) $292mn $264 $281 $274 $287 $292 Adjusted EBITDA¹ 67.3% +11% Y/Y 67.5% 64.7% 64.9% 63.9% (Adjusted EBITDA margin¹of 63.9%) 4Q21 1Q22 2Q22 3Q22
Slide 14: 4Q22 Net Revenue by Segment and Key Drivers
4Q22 Net Revenue by Segment and Key Drivers1 Net Revenue Segment 4Q22 Key Drivers (in millions) $457.1 Net Rev. Growth Key Drivers $390.5 Options ◆ Higher index options trading volume and RPC CBOE - C2 - BZX - EDGX +35% ◆ Strong organic growth in access and capacity and market data fees ◆ Higher U.S
Slide 15: Grew Data and Access Solutions Net Revenue 13% YoY, Organic Growth of 10%
Grew Data and Access Solutions Net Revenue 13% YoY, Organic Growth of 10%1 Targeted 2023 organic net revenue growth rate for Data and Access Solutions business of 7-10%, in line with our medium-term guidance2 4Q22 Data and Access Solutions net revenue of $126 million up 13%; organic growth of 10%
Slide 16: 4Q22 Adjusted Operating Expenses Up 28%
4Q22 Adjusted Operating Expenses Up 28%, Driven by Acquisitions and Compensation and Benefits 4Q22 expense increase driven by addition of Cboe Digital and NEO, as well as higher compensation and benefits $19 million increase in compensation-related expenses $5 million increase in travel and pr
Slide 17: Adjusted Operating Expense Guidance for 2023
Adjusted Operating Expense Guidance for 20231 $53-59 ($ in millions) $769-779 Core Growth ~6% 8-9 percentage points of growth ~2% CAT build $28-30 $688-6901 $36-38 $6521 2022 Adj 2022 Normalized 2022 Growth Core Expense 2023 Operating Acquisitions run rate Investments Growth Adj Operating Expenses E
Slide 18: Updated 2023 Guidance
Updated 2023 Guidance 2023 Guidance 2023 Full-Year Guidance 1, 2 as of 2022 Actual3 ($ in millions) Feb. 3, 2023 Data and Access Solutions4 organic net revenue growth rate 7 to 10% 12% Net revenue growth from acquisitions held <12 months 0.5% 2% Total organic net revenue growth rate 7 to 9% 16% Adju
Slide 19: 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 20: 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 21: Q&A
Choe Q&A
Slide 22: Appendix
Cboe Appendix
Slide 23: Options 4Q22 Net Revenue Up 35%
Options 4Q22 Net Revenue Up 35%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue ◆ Higher transaction fees from index options given stronger volumes and RPC ◆ Access and capacity fees plus proprietary market data were up a combined 24% Options Selected Revenue Data 4Q22 4Q21 Chg
Slide 24: North American Equities 4Q22 Net Revenue Up 5%
North American (N.A.) Equities 4Q22 Net Revenue Up 5%, Driven by NEO Contribution and Solid U.S. Equities Industry Volumes ◆ Net revenue increase reflects $5.5 million contribution from NEO ◆ U.S. equities transaction and clearing fees were helped by higher year-over-year industry volumes ◆ Access a
Slide 25: Europe and APAC Net Revenue down 15% for 4Q22
Europe and APAC Net Revenue down 15% for 4Q22, Driven by Currency Headwinds ◆ Net revenue decrease reflects $5.6 million impact from stronger USD in 4Q22 vs. 4Q211 ◆ Cboe Europe’s overall equities market share was 24.9% in 4Q22 versus 19.8% in 4Q21 ◆ In 4Q22, Cboe was Europe's largest stock exchange
Slide 26: Futures 4Q22 Net Revenue Down 10%
Futures 4Q22 Net Revenue Down 10%, Reflecting Volume Declines ◆ Revenue decrease driven by lower transaction revenues as compared to 4Q21 ◆ Market data and Access and capacity saw modest year-over-year improvement during the quarter Futures Selected Revenue Data 4Q22 4Q21 Chg 2022 2021 Chg ($ in mil
Slide 27: Global FX Net 4Q22 Revenue Up 14%
Global FX Net 4Q22 Revenue Up 14% ◆ Revenue increase driven by higher volumes and continued market share gains ◆ Market share hit a record at 18.4% for the quarter FX Selected Revenue Data 4Q22 4Q21 Chg 2022 2021 Chg ($ in millions) Net Revenue $16.9 $14.8 14% $67.9 $57.6 18% Net transaction and cle
Slide 28: Fourth Quarter Financial Overview
Fourth Quarter Financial Overview Adjusted Financial Results¹ 4Q22 4Q21 % Chg 2022 2021 % Chg ($ in millions, except per share) Net Revenue² $457.1 $390.5 17% $1,741.7 $1,476.1 18% Adjusted Operating Expenses¹ $176.6 $137.5 28% 652.2 530.7 23% Adjusted Operating Income¹ $280.5 $253.0 11% $1,089.5 $9
Slide 29: 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 Revenue1 4Q22 4Q21 % Chg 2022 2021 % Chg (in millions) Cash and Spot Markets $97.1 $102.7 -5% $406.7 $395.9 3% Data and Access
Slide 30: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2021 to 2022 Prioritizing investments to: ($ in millions) • Broaden geographic footprint (Cboe APAC, Euro derivs) Contribution to • Leverage core capabilities (24x5, BIDS and Nanos) and 2021 Adjusted Operating Expenses¹ $ 531 Actual y/y g
Slide 31: Focused on Growing the Proprietary Index Suite
Focused on Growing the 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 geographies
Slide 32: Cboe's Commitment to ESG Initiatives
Cboe’s Commitment to ESG Initiatives Environmental Social Governance ◆ Committing to Net Zero: Cboe is committing to ◆ Cboe Empowers: Community engagement ◆ Independent Board: 12 of the 13 Directors reaching net zero emissions across our operations program that provides mentorship, scholarships are
Slide 33: Non-GAAP Information
Cboe Non-GAAP Information
Slide 34: 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 35: Reconciliation of 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 Europe and Asia Pacific Futures Global FX Total March 31 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Transaction and clearing fees $ 348.
Slide 36: Reconciliation of Net Revenues to Constant Currency
Non-GAAP Information Reconciliation of GAAP Net Revenues to Net Revenues in Constant Currency - December 31, 2022 Three Months Ended, Twelve Months Ended, Net Revenue (in millions) December 31, 2022 December 31, 2022 Europe and Asia Pacific net revenues $44.2 $196.1 Constant currency adjustment 5.6
Slide 37: Reconciliation of Net Revenue by Revenue Caption
Non-GAAP Information Reconciliation of Net Revenue by Revenue Caption – Reconciliation of Net Revenue by Revenue Caption – Cash and Data and Derivatives Cash and Data and Derivatives For the Three Months Ended Spot Markets Access Solutions Markets Total For the Twelve Months Ended Access Solutions M
Slide 38: Reconciliation of Net Income to Non-GAAP Net Income
(in millions, except per share amounts) 1Q21 2Q21 3Q21 4Q21 2021 1Q22 2Q22 3Q22 4Q22 2022 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 136.8 $ 105.2 $ 120.0 $ 165.3 $ 527.3 $ 109.2 $ (184.5) $ 149.6 $ 159.0 $ 234.2 Acquisitio
Slide 39: 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 40: Adjusted Debt to EBITDA - Trailing Twelve Months
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 1Q22 2Q22 3Q22 4Q22 LTM Net income allocated to common stockholders $ 109.2 $ (184.5) $ 149.6 $ 159.0 $ 234.1 Interest expense, net 10.8 14.6 15.3 15.7 56.4 Income tax provision 115.3 (72.3) 78.8 76.1 197.9 Deprecia
Slide 41: Cboe.com
Cboe Cboe.com