10-QPeriod: Q2 FY2010

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 12, 2010For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) filed its Form 10-Q for the quarterly period ended June 30, 2010, reporting on a period of significant corporate transformation. The company completed a major restructuring on June 18, 2010, converting from a member-owned non-stock corporation to a stock corporation, CBOE Holdings, Inc., with its common stock listed on NASDAQ. This transition involved the issuance of shares to former members and a special dividend payment. Subsequently, CBOE Holdings completed an initial public offering (IPO) in June 2010, raising approximately $301.4 million in net proceeds. These events mark a fundamental shift in the company's structure and ownership. Financially, for the three months ended June 30, 2010, CBOE reported total operating revenues of $112.6 million, a slight increase of 3.3% year-over-year, primarily driven by a 16.0% increase in transaction fees. However, operating income declined by 12.2% to $41.8 million, and net income decreased by 11.4% to $24.9 million, impacted by higher operating expenses, particularly in employee costs, outside services, and royalty fees. The company ended the quarter with a strong cash position of $324.1 million, though this was impacted by significant payments related to the restructuring and dividend. For the six-month period, total operating revenues increased by 3.2% to $213.7 million, driven by transaction and market data fees. Operating income and net income saw declines of 8.3% and 9.2%, respectively, to $80.6 million and $47.6 million, also due to increased operating expenses. Investors should note the significant one-time events and their financial impact, as well as the potential future revenue streams from new trading permit holder access fees.

Financial Highlights

20 data points
Beta

Revenue

$112.62M

Net Income

$24.89M

22.1% Net Margin

EPS (Diluted)

$0.27

Cash & Equivalents

$324.07M

Free Cash Flow

$71.28M

Financial Statements
Beta
Revenue$112.62M
Operating Expenses$70.79M
Operating Income$41.83M
Net Income$24.89M
EPS (Basic)$0.27
EPS (Diluted)$0.27
Shares Outstanding (Diluted)92.23M

Key Highlights

  • 1Completed a significant corporate restructuring on June 18, 2010, transforming from a member-owned entity to a stock corporation (CBOE Holdings, Inc.) listed on NASDAQ.
  • 2Successfully completed an Initial Public Offering (IPO) on June 18, 2010, raising approximately $301.4 million in net proceeds.
  • 3Reported total operating revenues of $112.6 million for the three months ended June 30, 2010, an increase of 3.3% year-over-year, driven by higher transaction fees.
  • 4Net income for the three months ended June 30, 2010, decreased by 11.4% to $24.9 million, reflecting increased operating expenses.
  • 5For the six months ended June 30, 2010, total operating revenues increased by 3.2% to $213.7 million, while net income decreased by 9.2% to $47.6 million.
  • 6Ended the quarter with a strong cash and cash equivalents balance of $324.1 million.
  • 7Anticipates significant incremental operating revenues from new access fees for trading permit holders starting July 1, 2010.

Frequently Asked Questions

The most significant events were the corporate restructuring completed on June 18, 2010, which converted CBOE into a stock corporation (CBOE Holdings, Inc.) and its subsequent Initial Public Offering (IPO) on the same date. These events involved significant cash outlays for settlement obligations and dividend payments, but also generated substantial proceeds from the IPO.

Total operating revenues saw a modest increase. For the three months ended June 30, 2010, revenues increased 3.3% to $112.6 million, primarily driven by a 16.0% rise in transaction fees. For the six-month period, revenues grew 3.2% to $213.7 million, also boosted by transaction fees and market data fees. However, access fees and exchange services and other fees declined year-over-year.

Operating income and net income declined despite revenue growth due to a significant increase in operating expenses. For the three-month period, operating expenses rose 15.3% due to higher employee costs (including stock-based compensation), outside services, and royalty fees. Similar trends were observed for the six-month period, with overall operating expenses increasing by 11.7%.

CBOE expects significant incremental operating revenues from access fees charged to trading permit holders, which began on July 1, 2010. The company anticipates an average permit rate in the range of $6,000 to $6,400 per month for 2010.