10-QPeriod: Q3 FY2010

Cboe Global Markets, Inc. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 12, 2010For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported its third quarter 2010 financial results, highlighting significant changes related to its recent demutualization and initial public offering (IPO) completed in June 2010. The company transitioned from a member-owned exchange to a publicly traded stock corporation. For the three months ended September 30, 2010, CBOE reported total operating revenues of $106.0 million, an increase of 7.9% year-over-year, driven primarily by a substantial rise in access fees due to the new trading permit holder program. However, net income saw a modest increase of 6.8% to $20.5 million, or $0.20 per diluted share, compared to the prior year. The nine-month period showed a decrease in net income to $68.0 million from $71.5 million in 2009, reflecting increased operating expenses, particularly in employee costs due to stock-based compensation following the IPO. The company maintained a strong liquidity position with $322.9 million in cash and cash equivalents.

Financial Highlights

21 data points
Beta

Revenue

$106.02M

Net Income

$20.45M

19.3% Net Margin

EPS (Diluted)

$0.20

Cash & Equivalents

$322.94M

Free Cash Flow

$13.53M

Financial Statements
Beta
Revenue$106.02M
Operating Expenses$71.08M
Operating Income$34.93M
Net Income$20.45M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Diluted)102.10M

Key Highlights

  • 1Successful completion of demutualization and IPO in June 2010, transforming CBOE into a publicly traded entity.
  • 2Total operating revenues increased by 7.9% to $106.0 million for Q3 2010 compared to Q3 2009, largely due to a significant increase in access fees from the new trading permit program.
  • 3Net income for Q3 2010 grew 6.8% to $20.5 million ($0.20/share), though net income for the nine-month period decreased to $68.0 million from $71.5 million in the prior year.
  • 4Significant increase in employee costs, driven by stock-based compensation expenses related to the IPO and restricted stock awards.
  • 5Access fees revenue saw a substantial increase due to the new monthly fee structure for trading permit holders implemented on July 1, 2010.
  • 6The company maintained a strong balance sheet with $530.6 million in total assets and $449.1 million in total stockholders' equity as of September 30, 2010.
  • 7Initiated a tender offer in October 2010 to allow Class A-1 and A-2 stockholders liquidity, using proceeds from the IPO.

Frequently Asked Questions

The demutualization and IPO significantly restructured CBOE's balance sheet and equity accounts. The company converted from a non-stock, member-owned entity to a stock corporation. The IPO generated $301.2 million in net proceeds, which were used to pay a special dividend, settle certain obligations, and are being used for share repurchases. The equity structure now includes common stock, additional paid-in capital, and retained earnings, replacing the previous member equity.

Effective July 1, 2010, CBOE implemented a new trading access program charging monthly fees to all trading permit holders. This change led to a significant increase in access fees revenue, which grew by 270% to $18.5 million in Q3 2010 compared to $5.0 million in Q3 2009, contributing positively to the overall revenue growth.

Operating expenses increased primarily due to a substantial rise in employee costs. This was largely driven by stock-based compensation expenses related to the company's Long Term Incentive Plan (LTIP) and restricted stock awards granted in connection with the IPO. For the nine months ended September 30, 2010, stock-based compensation was $15.6 million, significantly impacting overall expenses.

CBOE maintained a strong liquidity position. As of September 30, 2010, cash and cash equivalents stood at $322.9 million. While this was a decrease from the prior year, it reflects significant outflows related to the IPO, including a special dividend payment and settlement obligations. The company also has a $150 million revolving credit facility available, though no borrowings were outstanding.