Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — CBOE Holdings — Q2 2013 Earnings Presentation
38 slides from Cboe Global Markets's earnings presentation, Aug 2, 2013
Slide 1: Second Quarter 2013 Earnings Presentation
Second Quarter 2013 Earnings Presentation August 2, 2013
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 CBOE HOLDINGS 2
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: Best-Ever Quarterly Earnings in 2Q13
Best-Ever Quarterly Earnings in 2Q13 Another strong quarter New records set for operating revenue and EPS Driven by continued growth of higher- margin proprietary products Operating revenue increased 14% to $150.8 million Adjusted diluted EPS increased 23% to $0.54 per share Returning value to stock
Slide 6: Total Options ADV Grew 1% YOY in 2Q13: Increased 13% QOQ
Total Options ADV Grew 1% YOY in 2Q13: Increased 13% QOQ Strong growth in proprietary products Options ADV 2Q13 vs 2Q12: Index products increased 23% ETNs and ETFs were up 13% Equity options declined 20% CBOE HOLDINGS 6
Slide 7: Regaining Market Share in Multiply-Listed Options
Regaining Market Share in Multiply-Listed Options Focused on being among the leaders in options market share Made enhancements to VIP in February and March 27.8% CBOE multiply-listed market share increased to 19.7% in June from 22.8% 15.3% in January Increased to 21.1% in July ¹Market share stats ex
Slide 8: C2 Gaining Market Share
C2 Gaining Market Share¹ ETF options trading leads the volume gains at C2 C2’s market share in multiply-listed classes increased to 2.1% in June from 1.6% in January C2’s market share in ETFs rose to 3.8% in June from 2.6% in January Implemented new spread-based pricing model in February to attract
Slide 9: Strong Contribution from S&P Index Product Line
Strong Contribution from S&P 500 Index Product Line Volume gains in S&P 500 Index options driven primarily by growth in SPX Weeklys S&P 500 Index ADV up 21% in 2Q13 versus 2Q12 SPX ADV up 21% through July 2013 Strong growth in SPX Weeklys *includes SPX Weeklys ADV more than doubled in 2Q13 ADV up 14
Slide 10: Record Growth in Volatility Trading
Record Growth in Volatility Trading Strong Growth Amid Low Volatility Record trading in VIX options and futures for 2Q13 VIX options ADV up 28% in 2Q13; up 36% through July VIX futures ADV up 92% in 2Q13; up 99% through July 2Q13 sixth consecutive record for quarterly volume ¹YTD through July 31, 20
Slide 11: Broadening Interest in VIX Trading
Broadening Interest in VIX Trading Growing list of new users embracing VIX futures and options as alternative to fixed income market Hedge funds, proprietary trading firms and calendar spread traders Increasing mainstream adoption of VIX trading BlackRock, “VIX Your Portfolio,” recommends a short vo
Slide 12: Broadening Global Customer Reach
Broadening Global Customer Reach Extending trading hours for VIX futures First phase in late September adds a 45-minute trading session after current close Meets demand from U.S. customers for a post-settlement trading period Phase two, shortly thereafter Allows European-based customers to trade dur
Slide 13: Expanding Volatility-Related Products and Benchmarks
Expanding Volatility-Related Products and Benchmarks CBOE/CBOT 10-Year U.S. Treasury Note Volatility Index In May, CBOE launched an interest rate volatility index based on CME Group’s 10-year Treasury Note contract, as part of an agreement with CME Group Interest rate derivatives represent the large
Slide 14: Bullish About Prospects for Continued Growth
Bullish About Prospects for Continued Growth Develop New Products Extend Global Return Value to Customer Reach Invest in Strategic Stockholders Growth Initiatives Maintain Prudent Fiscal Provide Highest Management Standards in Market Regulation and Compliance CBOE HOLDINGS 14
Slide 15: Financial Review
Financial Review Alan Dean EVP, CFO and Treasurer
Slide 16: 2Q13 Financial Overview
2Q13 Financial Overview Adjusted Basis¹ 2Q13 2Q12 $ Change % Change (in millions, except EPS and RPC) Operating Revenues $150.8 $132.6 $ 18.2 14% Adjusted Operating Expenses 73.6 66.5 7.1 11% Adjusted Operating Income $ 77.2 $ 66.1 $11.1 17% Adjusted Operating Margin % 51.2% 49.8% 140 bps Adjusted N
Slide 17: Overview of Operating Revenues
Overview of Operating Revenues Key Drivers Operating Revenues 2Q13 2Q12 % Chg Transaction fees (in millions) 5% increase in trading volume and Transaction fees $ 106.1 $94.9 12% 6% increase in RPC Access fees 15.0 16.1 -7% Shift in product mix Exchange services and other fees 9.3 7.9 18% Regulatory
Slide 18: Trading Volume Mix and RPC 2Q12 vs 2Q13
Trading Volume Mix and RPC 2Q12 vs 2Q13 RPC Increase Reflects Shift in Mix of Trading Volume CBOE HOLDINGS 18
Slide 19: 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 80% of transaction fees in 2Q13, up from 66% in 2Q12 CBOE HOLDINGS 19
Slide 20: Other Revenue Drivers
Other Revenue Drivers Regulatory fees up $6.4MM (in millions) 2Q13 2Q12 % Chg Higher volume and increase in ORF rate Regulatory fees $10.5 $ 4.1 156% Exchange services Exchange services up $1.4MM and other fees $ 9.3 $ 7.9 18% Driven by positive response to a new network access option Access fees $1
Slide 21: Ongoing Focus on Controlling Expenses
Ongoing Focus on Controlling Expenses Adjusted Operating Key Drivers: Expenses¹ 2Q13 2Q12 % Chg (in millions) Employee costs Employee costs $30.4 $25.3 20% Reflects increases in stock-based Depreciation and compensation, incentive amortization 8.6 8.3 4% compensation and salaries Data processing 4.6
Slide 22: 2Q13 Core Operating Expenses
2Q13 Core Operating Expenses (in millions) 2Q13 2Q12 % Chg Total Operating Expenses $ 75.4 $ 66.5 13% Less: Depreciation and amortization 8.6 8.3 4% Accelerated stock-based compensation 0.8 -- NM Additional expense related to SEC investigation 1.0 -- NM Volume-based expenses: Royalty fees 14.5 12.0
Slide 23: Enhancing Stockholder Value
Enhancing Stockholder Value Strong cash flow generation $207.8MM in cash at quarter end Generated $117MM in cash from operations through June YTD Capital Outlays Dividends $ 27 million Capital expenditures 13 million Stock purchases¹ 6 million Total $ 46 million Increased quarterly dividend by 20% t
Slide 24: Reaffirming 2013 Full-Year Guidance
Reaffirming 2013 Full-Year Guidance As of August 2, 2013 ($ in millions) 2013 Guidance Core operating expenses $189 to $194 Continuing stock-based compensation¹ $18 Core operating expenses excluding stock- based compensation $171 to $176 Adjusted effective tax rate 39.5% to 40.0% Depreciation and am
Slide 25: Well Positioned for Long-Term Growth
Well Positioned for Long-Term Growth ¹Adjusted to reflect the impact of certain items. See appendix for “Non-GAAP Information.” CBOE HOLDINGS 25
Slide 26: Questions & Answers
Questions & Answers
Slide 27: Appendix Materials
Appendix Materials
Slide 28: Well Positioned to Gain Additional Leverage
Well Positioned to Gain Additional Leverage Quarterly Adjusted Operating Income and Margin¹ ($ in millions) $80 55% $70 50% $60 $50 45% $40 40% $30 $20 35% $10 $0 30% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Operating Income Margin ¹Adjusted to reflect the impact of cert
Slide 29: Quarterly Options ADV
Quarterly Options ADV CBOE Holdings Quarterly Options ADV (contracts in millions) CBOE HOLDINGS 29
Slide 30: Trading Volume Mix and RPC 2Q12 vs 2Q13
Trading Volume Mix and RPC 2Q12 vs 2Q13 RPC Increase Reflects Shift in Mix of Trading Volume CBOE HOLDINGS 30
Slide 31: CBOE Holdings Rolling 3-Month RPC
CBOE Holdings Rolling 3-Month RPC 2013 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.149 $0.153 $0.140 $0.114 $0.094 $0.090 Indexes 0.665 0.670 0.671 0.679 0.674 0.675 Exchange-traded products 0.194 0.181 0.155 0.127 0.119 0.119 Total options RPC 0.340 0.341 0.333 0.308 0.295 0.289 Fut
Slide 32: Quarterly Core Operating Expenses
Quarterly Core Operating Expenses¹ ($ in thousands) 2Q 2013 % rev 1Q 2013 % rev 4Q 2012 % rev 3Q 2012 % rev 2Q 2012 % rev Total Operating Expenses $75,414 50% $73,275 51% $70,325 54% $67,458 53% $66,480 50% Less: Depreciation and amortization 8,622 6% 8,282 6% 6,210 5% 8,634 7% 8,320 6% Accelerated
Slide 33: Annual Core Operating Expenses
Annual Core Operating Expenses¹ ($ in thousands) 2012 % rev 2011 % rev 2010 % rev 2009 % rev 2008 % rev Total Operating Expenses $268,241 52% $266,512 52% $269,763 62% $248,497 62% $229,473 55% Less: Depreciation and Amortization 31,485 6% 34,094 7% 29,891 7% 27,512 7% 25,633 6% Accelerated stock-ba
Slide 34: Estimated 2013 Stock-Based Compensation by Quarter
Estimated 2013 Stock-Based Compensation by Quarter Quarterly breakout of estimated stock-based compensation and actual accelerated stock-based compensation 1Q13 2Q13 3Q13 4Q13 Total Estimated continuing stock- based compensation¹ $3.7 $5.5 $4.4 $4.4 $18.0 Accelerated stock-based compensation¹,² $3.2
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation For Years 2009, 2010 and 2011 GAAP to Non-GAAP Reconciliation (in thousands, except per share am ounts) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 FY 2009 FY2010 FY2011 Reconciliation of GAAP Net Income Allocated to Common Stockholder to Non-GAAP GAAP net income allocated to commo
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 am ounts) 1Q12 2Q12 3Q12 4Q12 FY2012 1Q13 2Q13 Reconciliation of GAAP Net Income Allocated to Common Stockholder to NON-GAAP GAAP net income allocated to common stockholders $ 32,863 $ 3
Slide 37: 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. The non-GAAP measures provided in this presentation include core operating expenses, adjusted operating revenue, adjusted operati
Slide 38: CBOE, 400 South LaSalle Street, Chicago
CBOE 400 South LaSalle Street Chicago, Illinois 60605 www.cboe.com