01—Abstract
Summary
Summary of the 10-K filed February 22, 2019. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc. (CBOE) reported robust financial performance for the fiscal year ended December 31, 2018, demonstrating significant growth driven by increased trading volumes across its diverse product offerings and geographies.
The acquisition of Bats Global Markets in February 2017 continued to positively impact revenues and operating income, integrating new asset classes like European equities and FX, and expanding the company's global reach. CBOE's strategic focus on innovative products, leading technology, and strong market positions in options, U.S. equities, and European equities has supported its growth trajectory. Despite competitive pressures and evolving regulatory landscapes, CBOE maintained strong market shares in key areas, including being the largest U.S. options exchange and a leading operator in U.S. equities and European equities.
The company's diversified revenue streams, including transaction fees, market data fees, and other services, contributed to a healthy financial position. Investors should note the company's ongoing technology investments, particularly in migrating to the Bats trading platform, and the associated risks, as well as the company's active share repurchase program and dividend payments.
02—Key points
Key Highlights
- Total revenues increased by 24.2% to $2.77 billion in 2018 compared to 2017, primarily driven by a 27.0% increase in transaction fees due to higher market volumes and the full-year impact of the Bats acquisition.
- The acquisition of Bats Global Markets in February 2017 significantly expanded Cboe's product lines, geographic reach, and diversified its business mix, leading to increased revenue and operating income in 2018.
- Operating income grew by 61.2% to $599.4 million in 2018, reflecting strong revenue growth and a 1.0% decrease in operating expenses.
- Diluted earnings per share (EPS) increased by 1.9% to $3.76 in 2018 from $3.69 in 2017.
- The Options segment remains the largest contributor to revenue less cost of revenues, with a 50.2% share in 2018, and saw an 18.4% increase in this metric.
- Cboe maintains strong market positions, with 38.5% market share in U.S. Options, 18.4% in U.S. Equities, and 22.3% in European Equities for 2018.
- The company's cash from operations and available credit facilities are expected to be sufficient to meet its liquidity needs, supporting operations, capital expenditures, debt repayments, dividends, and share repurchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Cboe Global Markets, Inc. kept $0.15.
- Revenue$2.77B100.0%
- Cost of revenue−$1.55B56.0%
- Gross profit$1.22B44.0%
- Operating costs−$617.5M22.3%
- Operating income$599.4M21.6%
- Interest, other & tax−$177.3M6.4%
- Net income$422.1M15.2%
Where FY2018 revenue went
$2.77B- Cost of revenue: $1.55B, 56% of revenue
- Operating costs: $617.5M, 22% of revenue
- Net income: $422.1M, 15% of revenue
- Interest, other & tax: $177.3M, 6.4% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 22, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.77B$2.23B | +24.2% |
| Cost of Revenue | $1.55B$1.23B | +25.8% |
| Gross Profit | $1.22B$995.60M | +22.2% |
| Operating Expenses | $617.50M$623.70M | −1.0% |
| Operating Income | $599.40M$371.90M | +61.2% |
| Interest Expense | $40.50M$42.60M | −4.9% |
| Net Income | $422.10M$396.70M | +6.4% |
| EPS (Basic) | $3.78$3.70 | +2.2% |
| EPS (Diluted) | $3.76$3.69 | +1.9% |
| Shares Outstanding (Basic) | 111.80M107.20M | +4.3% |
| Shares Outstanding (Diluted) | 112.20M107.50M | +4.4% |
05—Questions
Frequently Asked Questions
What were Cboe's main revenue drivers in 2018?
Cboe's primary revenue driver in 2018 was transaction fees, which accounted for approximately 68.6% of net revenues. Other significant revenue sources included market data fees, regulatory fees, access fees, and exchange services and other fees.
How did the Bats acquisition impact Cboe's financial performance?
The acquisition of Bats Global Markets in February 2017 significantly boosted Cboe's financial performance. For 2018, it contributed to a 24.2% increase in total revenues and provided an additional two months of activity compared to 2017, driving growth across multiple segments including U.S. Equities, European Equities, and Global FX.
What are the key risks facing Cboe, according to the 10-K filing?
Key risks identified include the potential loss of exclusive licenses for certain index options and futures, which generate a substantial portion of transaction fees. Other risks include intense price competition, general economic conditions, regulatory and legal changes, cybersecurity threats, reliance on third-party service providers, and the successful migration of technology systems.
06—Continue