10-QPeriod: Q3 FY2011

Cboe Global Markets, Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported strong financial results for the nine months ended September 30, 2011, with total operating revenues increasing by 21.3% to $387.9 million compared to the prior year period. This growth was primarily driven by a significant rise in transaction fees, which benefited from a 11.2% increase in trading volume and higher average transaction fees per contract. Net income allocated to common stockholders surged by 56.2% to $105.3 million, demonstrating improved profitability. The company's financial position strengthened, with cash and cash equivalents increasing substantially and a robust operating cash flow generation. Operationally, CBOE experienced record trading volumes in the third quarter of 2011, attributed to market volatility driven by political and economic uncertainties. While transaction fees were the main revenue driver, there was also notable growth in access fees and regulatory fees. Operating expenses saw a slight decrease, largely due to lower employee costs, particularly stock-based compensation, and reduced trading volume incentives. The company also initiated a $100 million share repurchase program and continued to pay quarterly dividends, signaling confidence and commitment to returning value to shareholders.

Financial Highlights

40 data points
Beta

Revenue

$143.60M

Net Income

$41.33M

28.8% Net Margin

EPS (Diluted)

$0.45

Total Assets

$344.64M

Cash & Equivalents

$147.22M

Free Cash Flow

$71.73M

Financial Statements
Beta
Revenue$143.60M
Operating Expenses$68.64M
Operating Income$74.97M
Net Income$41.33M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)90.33M
Shares Outstanding (Diluted)90.33M

Key Highlights

  • 1Total operating revenues for the nine months ended September 30, 2011, increased by 21.3% to $387.9 million, driven by a 14.2% increase in transaction fees.
  • 2Net income allocated to common stockholders grew significantly by 56.2% to $105.3 million for the nine months ended September 30, 2011.
  • 3Operating income surged by 63.5% to $188.9 million for the nine months ended September 30, 2011, indicating strong operational leverage.
  • 4Cash and cash equivalents saw a substantial increase of $93.4 million, reaching $147.2 million as of September 30, 2011, reflecting strong cash flow generation from operations.
  • 5The company announced and began executing a $100 million share repurchase program, demonstrating a commitment to shareholder returns.
  • 6The third quarter of 2011 saw record trading volumes, contributing to a 35.5% increase in total operating revenues for the quarter.
  • 7Employee costs decreased by 5.2% for the nine-month period, primarily due to lower stock-based compensation expenses.

Frequently Asked Questions

The primary driver of revenue growth was a significant increase in transaction fees, fueled by higher trading volumes and an improved average transaction fee per contract. This was particularly strong in index options and exchange-traded funds, as well as futures.

Cboe successfully reduced its total operating expenses by 2.5% for the nine months ended September 30, 2011, primarily due to a decrease in employee costs (notably stock-based compensation) and lower trading volume incentives. This expense management, combined with revenue growth, led to a substantial increase in operating income.

Cboe Global Markets is returning capital through both regular quarterly cash dividends and a newly announced $100 million share repurchase program. This indicates management's confidence in the company's financial performance and its commitment to enhancing shareholder value.

The company cited market volatility and downward movements in financial markets due to domestic and international uncertainties, such as political events and economic unrest in Europe, as key drivers of record trading volumes in the third quarter.