Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Q1 2020 Earnings Presentation
41 slides from Cboe Global Markets's earnings presentation, May 1, 2020
Slide 1: First Quarter 2020 Earnings Presentation
First Quarter 2020 Earnings Presentation May 1, 2020 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 and Answers Edward Tilly Brian Schell Chris Isaacson Executive Vice President and Chief Operating Officer John Deters Executive Vic
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
Strategic Review Edward Tilly Chairman, President and CEO 4
Slide 5: Spread of COVID-19 Fueled Market Uncertainty and Business Changes
Spread of COVID-19 Fueled Market Uncertainty and Business Changes First priority was to mitigate risk of exposure to our associates and trading floor community Began transitioning to work from home ahead of government mandates March 16th temporarily closed trading floor and transitioned C1 to all-el
Slide 6: Cboe's Proprietary Products Utilized to Navigate Market Turbulence
Cboe’s Proprietary Products Utilized to Navigate Market Turbulence Record quarterly financial results driven by higher revenue across business segments Record quarterly adjusted diluted EPS¹ of $1.65 on net revenue of $358 million Index options ADV up 43% and VIX futures ADV up 44% year-over-year Hi
Slide 7: First Quarter 2020 Marked by Record Levels of Market Volatility
First Quarter 2020 Marked by Record Levels of Market Volatility Expect to see new permutations of volatility as this crisis evolves S&P Max VIX During times of extreme market stress, Date Event % Chg Days Index Close investors normally de-risk until the Greek Default Mid 2012 Concerns -9.9% 60 26.66
Slide 8: Delivering Products and Solutions Tailored to New Environment
Delivering Products and Solutions Tailored to New Environment Enhancing all-electronic trading environment with technology solutions Actively redefining how we approach investor education • Virtual forums • Webinars Utilized Cboe Silexx order and execution management system (OEMS) to facilitate acce
Slide 9: Offer Comprehensive Suite of Data Solutions, Analytics and Indices
Offer Comprehensive Suite of Data Solutions, Analytics and Indices Provide market participants tools for better understanding risk and accessing Cboe markets Recent acquisitions of Hanweck and Cboe Information Solutions – a broad suite of FT Options have been timely data solutions, analytics and ind
Slide 10: Supporting Market Participants Through Innovative Offerings
Supporting Market Participants Through Innovative Offerings Seeing positive response to Cboe Retail Priority U.S. Equities Retail Priority Strong momentum in response to retail Monthly ADV (in millions) priority to date Launched Cboe Market Close on March 6 48.6 • We look to provide added opportunit
Slide 11: Pending Acquisition of EuroCCP on Track
Pending Acquisition of EuroCCP1 on Track See opportunity in European derivatives market to grow addressable market and win market share Look to provide an alternative market model, enhancing the overall trading ecosystem*: • Introduce efficiencies enjoyed by the U.S. market – Vibrant lit-book tradin
Slide 12: Executing on Our Initiatives for 2020 and Maintaining Orderly Markets
Executing on Our Initiatives for 2020 and Maintaining Orderly Markets Our goal is to define markets by being the global leader in innovative tradable products and services Strengthen our proprietary products and services Pursue leverageable derivatives methodologies Engage customers via information
Slide 13: Financial Overview and Guidance
Financial Overview and Guidance Brian Schell EVP, CFO and Treasurer 13
Slide 14: Business Highlights – Key Performance Drivers
Business Highlights – Key Performance Drivers Higher trading volumes across all business segments, particularly in our proprietary products Net transaction fees¹ up 43%; non-transaction net revenue up 7% Adjusted operating expenses¹ up 5% Operating scale and expense discipline with EBITDA¹ margin of
Slide 15: Grew Recurring Non-Transaction Revenue Streams
Grew Recurring Non-Transaction Revenue Streams Recurring proprietary non-transaction net revenue up 8% YoY; organic growth of 7% Organic growth excludes $2.4MM of Proprietary Market Data and market data revenue from acquisitions Access and Capacity Fees closed on Feb. 3, 2020 (in millions) $81.9 Abo
Slide 16: Options 1Q20 Net Revenue Up 36%
Options 1Q20 Net Revenue Up 36% 1Q20 revenue increase primarily driven by higher trading volumes RPC increase in index options due to shift in volume mix and SPX options fee increase; decrease in multi-listed options reflects shift in mix by order type and higher rebates Options Selected Revenue Dat
Slide 17: Futures 1Q20 Net Revenue Up 36%
Futures 1Q20 Net Revenue Up 36% Revenue increase driven by higher trading volume RPC increase primarily reflects a mix shift Futures Selected Revenue Data 1Q20 1Q19 Chg ($ in millions) Net Revenue $40.1 $29.5 36% Net transaction fees¹ $35.9 $24.6 46% Access and capacity $4.0 $3.7 8% Market data $1.6
Slide 18: U.S. Equities 1Q20 Net Revenue Up 14%
U.S. Equities 1Q20 Net Revenue Up 14% Revenue increase primarily due to higher net transaction fees Trading volumes lifted by market volatility, with higher percentage of volume traded on-exchange U.S. Equities Selected Revenue Data 1Q20 1Q19 Chg ($ in millions) Net Revenue $86.6 $75.8 14% Net trans
Slide 19: European Equities 1Q20 Net Revenue Up 17% on Local Currency Basis
European Equities 1Q20 Net Revenue Up 17% on Local Currency Basis On a local currency basis, both net transaction fees and non-transaction revenue increased 17% Increase in net transaction fees driven by higher overall industry volume and net capture, offset somewhat by lower market share European E
Slide 20: Global FX 1Q20 Net Revenue Up 22%
Global FX 1Q20 Net Revenue Up 22% Revenue increase reflects higher market volume and net capture Record quarterly revenue Higher net capture due to mix shift in volume by customer type 1Q20 1Q19 Chg FX Net Revenue (in millions) $16.9 $13.9 22% FX Key Operating Stats Market share¹ 15.7% 15.8% -0.1 pt
Slide 21: 1Q20 Adjusted Operating Expenses Up 5%
1Q20 Adjusted Operating Expenses Up 5% Increase driven by 11% increase in compensation and benefits, reflecting: • $5 million increase in incentive-based compensation, including higher bonus accrual and variance due to forfeitures of unvested equity awards in 1Q19 • $2 million increase due to lower
Slide 22: Reduced Guidance for 2020 Adjusted Operating Expenses by $16 Million
Reduced Guidance for 2020 Adjusted Operating Expenses by $16 Million Primarily reflects near-term cost reductions due to the COVID-19 pandemic Adjusted Operating Expenses Bridge from 2019 to 2020 2020 Guidance Reduced by $16 million to $419 to $427 million¹ ($ in millions) Guidance Range 2019 Adjust
Slide 23: 2020 Full-Year Guidance
2020 Full-Year Guidance 2020 Full-Year Guidance 1, 2 2020 Guidance as of 2020 Guidance as of ($ in millions) May 1, 2020 Feb. 7, 2020 Adjusted operating expenses 3 $419 to $427 $435 to $443 Depreciation and amortization (excluding $34 to $38 $34 to $38 amortization of acquired intangible assets) Eff
Slide 24: 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 is a priority Returned capital of $160 million through dividends and share repurchases Leverage ratio declined to 1.0x from 1.2x at December 31, 2019 Used cash on hand to fund acquis
Slide 25: Delivering on Sources of Operating Leverage and Key Strategic Initiatives
Delivering on Sources of Operating Leverage and Key Strategic Initiatives While Defining Markets Globally Growth Footnotes of Core applied here • Record financial results, driven largely by growth of core Proprietary Products proprietary products Strengthen Recurring • Growth in recurring revenue of
Slide 26: Questions & Answers
Cboe’ Global Markets 26
Slide 27: Appendix Materials
Appendix Materials 27
Slide 28: Realized Versus Run-Rate Synergies
Realized Versus Run-Rate Synergies 2019 realized synergies lower due to timing of C1 migration in October 2019 Timing of Incremental Run-Rate Timing of Realized Synergies* (in millions) Synergies* (in millions) $90.0 $35 100% $3.0 $80.0 $33.0 90% $30 75% 80% $18.3 $70.0 $25 64% 70% $2.0 $24.0 $60.0
Slide 29: Targeted Run-Rate Synergies Realization
Targeted Run-Rate Synergies Realization % of Incremental Increase in Run-Rate Actual/Targeted Carryover Total Synergies Cumulative Targeted Run- Run- Rate Each Synergies Realized from Prior Realized/Targeted Synergies (in millions) Rate Synergies Year Realized/Targeted Synergies Year Run-Rate by Yea
Slide 30: First Quarter Financial Overview
First Quarter Financial Overview Adjusted Financial Results¹ 1Q20 1Q19 % Chg ($ in millions, except per share) Net Revenue² $358.3 $280.5 28% Adjusted Operating Expenses¹ 98.6 94.1 5% Adjusted Operating Income¹ 259.7 $186.4 39% Adjusted Operating Margin¹ 72.5% 66.5% 600 bps Adjusted Net Income Alloc
Slide 31: Net Revenue for 2019 Impacted by Decline in Trading Volumes
Net Revenue for 2019 Impacted by Decline in Trading Volumes; Non-Transaction Revenue 1Q20 net transaction fees up 43%; non-transaction revenue up 7% Adjusted Combined Net Revenue¹ 1Q20 1Q19 % Chg (in millions) Net transaction fees $253.1 $177.5 43% Access and capacity fees 57.7 54.4 6% Market data f
Slide 32: Supplemental Segment Information
Supplemental Segment Information 1Q20 Supplemental Net Revenue U.S. European Global Options Futures Total¹ by Segment (in millions) Equities 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
Slide 33: Maintaining Synergy Targets
Maintaining Synergy Targets Maintaining 2019 run-rate synergy target of $80 million and 2020 target of $85 million Remaining synergies of $5 million in 2020 will be reflected in a reduction in cost of revenues versus expenses Targeted Run-Rate Synergies as of February 7, 2020 (in millions) $85 $80 $
Slide 34: Pending Acquisition of EuroCCP and Buildout of Pan-European Derivatives Trading and Clearing
Pending Acquisition of EuroCCP and Buildout of Pan-European Derivatives Trading and Clearing Investing in long-term growth U.S. and EU Projected EPS 2020¹ 2021 U.S. GDP versus EU 2019 Notional Values ($ in trillions) of Options Traded EuroCCP ($0.04) to ($0.05) neutral to positive ($ in trillions) B
Slide 35: Non-GAAP Information
Non-GAAP Information 35
Slide 36: 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-GAA
Slide 37: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Transaction Fees by Segment For the Three Months Ended Options U.S. Equities Futures European Equities Global FX Total March 31 (in millions) 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Transaction fees $ 284.2 $ 173.8 $ 304.0 $ 198.9 $ 35.9
Slide 38: Non-GAAP Information
Non-GAAP Information (in millions, except per share amounts) 1Q19 2Q19 3Q19 4Q19 2019 1Q20 Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 94.6 $ 87.6 $ 105.5 $ 86.1 $ 372.7 $ 157.0 Acquisition-related expenses (1) 2.3 20.8 16.7
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) 2Q19 3Q19 4Q19 1Q20 LTM Net income allocated to common stockholders $ 87.6 $ 105.5 $ 86.1 $ 157.0 $ 436.2 Interest expense, net 10.0 8.2 7.8 7.3 33.3 Income tax provision 35.1 35.0 27.9 60.1 158.1 Depreciation and a
Slide 41: Cboe Global Markets 400 South LaSalle Street Chicago, IL 60605
Cboe Global Markets 400 South LaSalle Street Chicago, IL 60605 www.cboe.com 41