10-QPeriod: Q2 FY2011

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 29, 2011

Filed August 9, 2011For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported a strong increase in revenue and net income for the six months ended June 30, 2011, compared to the same period in 2010. Total operating revenues grew by 14.3% to $244.3 million, driven primarily by a significant surge in access fees due to a new fee structure implemented in July 2010, and a notable increase in regulatory fees. This revenue growth, coupled with a reduction in total operating expenses by 2.1% (largely due to decreases in outside services and trading volume incentives), led to a substantial 41.4% increase in operating income. Net income allocated to common stockholders rose by 36.2% to $64.7 million for the six-month period. Diluted earnings per share also saw a healthy increase to $0.72 from $0.52 in the prior year. The company's balance sheet strengthened, with total assets increasing to $319.4 million, supported by a significant rise in cash and cash equivalents to $106.5 million. CBOE also demonstrated a commitment to shareholder returns by initiating quarterly cash dividends and announcing a new share repurchase program.

Financial Highlights

41 data points
Beta

Revenue

$120.29M

Net Income

$33.40M

27.8% Net Margin

EPS (Diluted)

$0.36

Total Assets

$319.42M

Cash & Equivalents

$106.55M

Free Cash Flow

$14.34M

Financial Statements
Beta
Revenue$120.29M
Operating Expenses$63.84M
Operating Income$56.45M
Net Income$33.40M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)90.16M
Shares Outstanding (Diluted)90.16M

Key Highlights

  • 1Total operating revenues increased by 14.3% to $244.3 million for the six months ended June 30, 2011, compared to $213.7 million in the prior year.
  • 2Net income allocated to common stockholders grew significantly by 36.2% to $64.7 million for the six months ended June 30, 2011, compared to $47.5 million in the prior year.
  • 3Diluted earnings per share increased to $0.72 for the six months ended June 30, 2011, up from $0.52 in the prior year.
  • 4Access fees saw a dramatic increase, growing 668.9% to $34.6 million for the six months ended June 30, 2011, due to a new fee structure implemented in July 2010.
  • 5Operating expenses decreased by 2.1% to $130.3 million for the six months ended June 30, 2011, primarily due to lower outside services and trading volume incentives.
  • 6Cash and cash equivalents increased by $52.8 million to $106.5 million as of June 30, 2011, reflecting strong operational cash flow.
  • 7The company announced a new share repurchase program authorizing up to $100 million in stock repurchases, and continued to pay quarterly cash dividends.

Frequently Asked Questions

The primary driver of the revenue increase was a substantial rise in access fees, which more than sextupled to $34.6 million for the six months ended June 30, 2011. This was a result of a new trading access fee program implemented on July 1, 2010, which assesses fees to all Trading Permit Holders, a broader base than previously charged. Regulatory fees also saw a significant increase of 21.3%.

Total operating expenses decreased by 2.1% to $130.3 million for the six months ended June 30, 2011. Key contributors to this decrease include lower spending on outside services (down 24.2%), trading volume incentives (down 24.5%), and travel and promotional expenses (down 23.1%). These reductions were partially offset by increased employee costs and depreciation and amortization.

CBOE's cash and cash equivalents increased significantly by $52.8 million to $106.5 million as of June 30, 2011. This increase is attributed to positive cash flow generated from operations and the prepayment of liquidity provider transaction fees. The company stated it expects to use cash on hand and funds generated from operations to meet its cash requirements and does not anticipate needing to draw from its $150 million revolving credit facility.

CBOE is committed to returning capital to shareholders. They have been paying quarterly cash dividends, with the dividend amount increasing slightly for the upcoming payment in September 2011. Additionally, on August 2, 2011, the company announced a new share repurchase program, authorizing the purchase of up to $100 million of its unrestricted common stock, indicating confidence in its financial position and future prospects.