10-QPeriod: Q1 FY2012

Cboe Global Markets, Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 8, 2012For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported stable financial performance for the first quarter of 2012, with net income of $33.4 million, a slight increase from $32.9 million in the prior year period. Total operating revenues saw a modest 2.1% decline to $121.4 million, primarily due to lower transaction and access fees, though this was partially offset by strong growth in exchange services and market data fees. Operating expenses also decreased by 3.8% to $64.0 million, driven by reductions in employee costs and trading volume incentives. The company's market share in total exchange-traded options contracts increased to 28.1% from 27.2%, indicating strong competitive positioning. Key financial highlights include a healthy operating income of $57.4 million and diluted earnings per share of $0.37, consistent with the previous year. CBOE continues to execute its share repurchase program, having bought back $30.6 million of stock in the quarter, demonstrating a commitment to returning capital to shareholders. The company's liquidity remains strong, with cash and cash equivalents increasing to $148.6 million, providing ample resources for operations and strategic initiatives. Investors should note the strategic fee adjustments implemented in January 2012 aimed at promoting trading in various products, which are expected to influence future revenue streams.

Financial Highlights

40 data points
Beta

Revenue

$121.39M

Net Income

$33.42M

27.5% Net Margin

EPS (Diluted)

$0.37

Total Assets

$353.44M

Cash & Equivalents

$148.63M

Free Cash Flow

$63.34M

Financial Statements
Beta
Revenue$121.39M
Operating Expenses$63.98M
Operating Income$57.41M
Net Income$33.42M
EPS (Basic)$0.37
EPS (Diluted)$0.37
Shares Outstanding (Basic)88.15M
Shares Outstanding (Diluted)88.15M

Key Highlights

  • 1Net income for Q1 2012 was $33.4 million, a slight increase from $32.9 million in Q1 2011.
  • 2Total operating revenues decreased by 2.1% to $121.4 million, primarily due to lower transaction and access fees.
  • 3Market share of total exchange-traded options contracts increased to 28.1% from 27.2% year-over-year.
  • 4Operating expenses decreased by 3.8% to $64.0 million, driven by lower employee costs and trading volume incentives.
  • 5Diluted earnings per share remained stable at $0.37 for Q1 2012.
  • 6The company repurchased $30.6 million of its common stock under its $100 million repurchase program during the quarter.
  • 7Cash and cash equivalents increased to $148.6 million as of March 31, 2012.

Frequently Asked Questions

The primary drivers of the revenue decline were lower transaction fees (-5.7%) and access fees (-9.1%). This was largely attributed to a decrease in total trading volume and average transaction fees per contract, as well as adjustments to market-maker trading permits. However, these decreases were partially offset by significant increases in exchange services and other fees (+57.4%) and market data fees (+25.5%).

CBOE successfully reduced its total operating expenses by 3.8% to $64.0 million in the first quarter of 2012 compared to the prior year. Key reductions were seen in employee costs and trading volume incentives. This expense management contributed to stable operating income ($57.4 million) and a slight increase in net income to $33.4 million, demonstrating effective cost control in the face of revenue pressures.

CBOE is actively returning capital to shareholders through its share repurchase program. In the first quarter of 2012, the company purchased approximately $30.6 million of its common stock under its $100 million authorization. The company also continues to pay quarterly dividends, indicating a commitment to a balanced approach of capital return to investors.

Transaction fees remain the largest revenue contributor (nearly 70%), though they declined year-over-year. Significant growth was observed in 'Exchange services and other fees' and 'Market data fees'. The company noted a shift in transaction fees by product, with a decrease in equity and ETF options, an increase in index options, and substantial growth in futures, particularly on the VIX Index, indicating a strategic evolution in its product mix.