Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q4 2021 Earnings Presentation
41 slides from Cboe Global Markets's earnings presentation, Feb 4, 2022
Slide 1: Fourth Quarter 2021 Earnings Presentation
Fourth Quarter 2021 Earnings Presentation February 4, 2022
Slide 2: Agenda
Agenda Strategic Review Edward Tilly Chairman, President 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 John Deter
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
Slide 5: 4Q21: Capping a Record Year with Another Quarter of Revenue Growth Across All Business Segments
4Q21: Capping a Record Year with Another Quarter of Revenue Growth Across All Business Segments Net revenues grew 27% YoY, backed by strong transaction and non-transaction growth 42% increase in net transaction fees¹ ADV up 36% in index options and 21% in multi-listed options ADNV traded on Cboe
Slide 6: 2022 and Beyond: Continued Growth and Investment
2022 and Beyond: Continued Growth and Investment • Targeting medium-term organic net revenue growth of 5 to 7 percentage points annually • Continuing to invest in organic growth initiatives in 2022 • Recent expansions into Asia-Pacific and Canada, as well as planned expansion into Digital Assets enh
Slide 7: 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 21% recurring non- ◆ Access to multi-asset financial market data¹ revenue growth of 7-10% transaction revenue growth i
Slide 8: Global Derivatives: Positioned To Drive Growth
Global Derivatives: Positioned To Drive Growth Increasing access for market participants and leveraging our core products 24x5 and Tuesday / Thursday Expiry nanos by Cboe European Deriviatives Launching March 14 Leveraging Cboe’s Core Strength (Interactive Brokers, TradeStation, Tradier, Webull) Gai
Slide 9: Cboe Answering Customer Demand for a Trusted, Transparent and Regulated Digital Asset Marketplace
Cboe Answering Customer Demand for a Trusted, Transparent and Regulated Digital Asset Marketplace Derivatives Spot Trading Data Solutions Clearing Trading • Cboe to enter digital asset space through planned acquisition of ErisX¹ Key Features • ErisX operates a U.S. based digital Marketplace Data Cle
Slide 10: Cboe Ecosystem Enables Virtuous Cycle of Innovation and Growth
Cboe Ecosystem Enables Virtuous Cycle of Innovation and Growth More Data ◆ Operate cash and spot markets across U.S., ◆ Comprehensive solutions in 23 markets Canada, Europe, Australia, and Japan across the globe ◆ Foundation for investment in new ◆ More than 350 derivatives-based indices markets and
Slide 11: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer
Slide 12: 4Q21 Financial Summary
4Q21 Financial Summary Net Revenue (in millions) $366 $351 $370 $391 $391MM $307 Net Revenue +27% Y/Y 4Q20 1Q21 2Q21 3Q21 4Q21 Adjusted EBITDA¹ (in millions) $264MM 66.9% 68.5% 66.6% 64.8% 67.5% Adjusted EBITDA¹ $264 +28% Y/Y $206 $250 $234 $240 (Adjusted EBITDA margin of 67.5%) 4Q20 1Q21 2Q21 3Q21
Slide 13: 4Q21 Net Revenue by Segment and Key Drivers
4Q21 Net Revenue by Segment and Key Drivers Segment 4Q21 Key Drivers Net Revenue (in millions) $390.5 ◆ Net revenue up 25% Options ◆ Higher options trading volume and RPC CBOE - C2 - BZX - EDGX ◆ Strong organic growth in recurring non-transaction $307.1 revenue ◆ Net revenue up 24% $202.5 N.A. Equit
Slide 14: Grew Recurring Non-Transaction Revenue 21% YoY, Organic Growth of 15%
Grew Recurring Non-Transaction Revenue 21% YoY, Organic Growth of 15%2, Exceeded Targeted Growth Rate Affirmed targeted 2022 organic growth rate for Data and Access Solutions business of 7-10%, in line with our medium-term guidance3 Recurring Non-Transaction Revenue¹ 4Q21 recurring non-transaction
Slide 15: 4Q21 Adjusted Operating Expenses Up 23%, Primarily Driven by Acquisitions
4Q21 Adjusted Operating Expenses Up 23%, Primarily Driven by Acquisitions 4Q21 expense increase primarily driven by addition of BIDS Trading and Chi-X Asia Pacific $17 million increase in compensation-related expenses $4 million increase in professional fees and outside services primarily due
Slide 16: Adjusted Operating Expenses with ErisX and NEO
Adjusted Operating Expenses with ErisX2 and NEO2 ($ in millions) $36-42 $653-667 $10 $617 - 625 $23-26 $31-36 $22 $5531 $5311 2022 2021 Adj 2021 Normalized 2021 Core Expense Revenue Infrastructure 2022 Adj Operating ErisX and NEO2 Operating Acquisitions run rate Growth of ~6% Investments Investments
Slide 17: Updated Guidance Reaffirms Confidence in Medium-Term Targets
Updated Guidance Reaffirms Confidence in Medium-Term Targets 2022 Guidance 2022 Full-Year Guidance 1, 2 as of 2021 Actual3 ($ in millions) Feb. 4, 2022 Data and Access Solutions4 organic revenue growth rate 7 to 10% 15% Net revenue growth from acquisitions held <12 months 1 to 3% 7% Total organic ne
Slide 18: 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 19: 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 20: Q&A
Q&A Appendix 20
Slide 21: Appendix
Cboe Appendix
Slide 22: Options 4Q21 Net Revenue Up 25%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue
Options 4Q21 Net Revenue Up 25%, Reflecting Y/Y Increase in ADV and Recurring Non-transaction Revenue ◆ Higher transaction fees from index and multi-listed options ◆ Recurring non-transaction fees, access and capacity fees plus proprietary market data, up 17% or $6.9mn organic Options Selected Reven
Slide 23: North American Equities 4Q21 Net Revenue Up 24%, Driven by Addition of BIDS
North American (N.A.) Equities 4Q21 Net Revenue Up 24%, Driven by Addition of BIDS Trading and Higher Capture and Industry Volumes ◆ 4Q21 results include BIDS Trading, which contributed $8.5 million of net revenue ◆ U.S. equities benefited from higher industry volumes and higher net capture given ye
Slide 24: Europe and APAC Net Revenue Up 46% for 4Q21
Europe and APAC Net Revenue Up 46% for 4Q21, Helped by Higher Volumes and Inclusion of Chi-X Asia Pacific ◆ Net revenue increase reflects $8.5 million contribution from Chi-X Asia Pacific and higher activity levels ◆ Increase in net transaction fees, driven by healthy increases in trading volumes ◆
Slide 25: Futures 4Q21 Net Revenue Up 39%, Reflecting Y/Y Increase in VIX Futures ADV and Capture
Futures 4Q21 Net Revenue Up 39%, Reflecting Y/Y Increase in VIX Futures ADV and Capture ◆ Revenue increase driven by net transaction fees resulting from higher trading volumes, particularly in VIX futures ◆ RPC increase primarily reflects a mix shift, with Mini VIX futures accounting for a lower per
Slide 26: Global FX Net 4Q21 Revenue Up 6%
Global FX Net 4Q21 Revenue Up 6% ◆ Revenue increase driven by higher net capture and slightly higher volumes within transaction revenue ◆ Market share was steady at 16.8% ◆ Cboe SEF recorded its sixth consecutive record ADV quarter at 725 million contracts vs. 135 million in fourth quarter 2020 FX S
Slide 27: Fourth Quarter and Full Year Financial Overview
Fourth Quarter and Full Year Financial Overview Adjusted Financial Results¹ 4Q21 4Q20 % Chg 2021 2020 % Chg ($ in millions, except per share) Net Revenue² $390.5 $307.1 27% $1,476.1 $1,254.3 18% Adjusted Operating Expenses¹ 137.5 112.2 23% 530.7 415.5 28% Adjusted Operating Income¹ $253.0 $194.9 30%
Slide 28: Net Revenue Detail
Net Revenue Detail ◆ 4Q21 net transaction and clearing fees up 42% ◆ Recurring non-transaction revenue up 21% Net Revenue 4Q21 4Q20 % Chg 2021 2020 % Chg (in millions) Net transaction and clearing fees¹ $261.3 $184.2 42% $954.6 $793.5 20% Access and capacity fees 74.4 62.7 19% 280.7 236.7 19% Market
Slide 29: Supplemental Segment Information – 4Q21 & 4Q20
Supplemental Segment Information – 4Q21 & 4Q20 4Q21 Supplemental Net Revenue by Segment Europe and Asia Options N.A. Equities Futures Global FX Total¹ (in millions) Pacific Net transaction and clearing fees² $161.8 $34.0 $29.0 $24.2 $12.3 $261.3 Proprietary net transaction fees included $117.2 $0.0
Slide 30: Supplemental Segment Information – 2021 & 2020
Supplemental Segment Information – 2021 & 2020 2021 Supplemental Net Revenue by Segment Europe and Asia Options N.A. Equities Futures Global FX Total¹ (in millions) Pacific Net transaction and clearing fees² $583.6 $124.9 $102.9 $95.2 $48.0 $954.6 Proprietary net transaction fees included $412.9 $0.
Slide 31: Expense Bridge Summary
Expense Bridge Summary Adjusted Operating Expenses Bridge for 2020 to 2021 Prioritizing investments to: ($ in millions) 2020 adjusted operating expenses¹ $ 416 • Broaden geographic footprint (Chi-X, Euro derivs) Acquisitions 49 • Leverage core capabilities (24x5, BIDS and Nanos) and Non-recurring sa
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 ◆ Carbon credits: Offset our Scope 1 and 2 ◆ Cboe Empowers: Community engagement ◆ Independent Board: 13 of the 14 Directors emissions from 2020 and our Scope 3 program that provides mentorship, are independent emissions from our 2
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 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 37: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21 3Q21 4Q21 2021 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 $ 105.2 $ 120.0 $ 165.3
Slide 38: 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 39: Non-GAAP Information
Non-GAAP Information Adjusted Debt to EBITDA - Trailing Twelve Months¹ (in millions) 1Q21 2Q21 3Q21 4Q21 LTM Net income allocated to common stockholders $ 136.8 $ 105.2 $ 120.0 $ 165.3 $ 527.3 Interest expense, net 12.3 12.3 11.7 11.1 47.4 Income tax provision 55.7 73.7 53.4 44.3 227.1 Depreciation
Slide 40: Non-GAAP Information
Non-GAAP Information Reconciliation of Revenue Less Cost of Revenue to Organic Net Revenue 12 mos 12 mos Net Revenue (in millions) 4Q21 4Q20 % Chg % Chg 2021 2020 Revenue less cost of revenue (net revenue) $390.5 $307.1 27% $1,476.1 $1,254.3 18% Acquisition revenue less cost of revenue (17.0) - (82.
Slide 41: Cboe.com
Cboe Cboe.com