10-QPeriod: Q2 FY2012

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 7, 2012For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported a solid increase in financial performance for the three and six months ended June 30, 2012, compared to the same periods in 2011. Total operating revenues grew by 10.2% and 3.9% respectively, driven primarily by strong growth in transaction fees and significant increases in exchange services and market data fees. This revenue expansion, coupled with effective expense management that saw operating expenses grow at a slower pace than revenues, led to a notable rise in operating income and net income. Net income allocated to common stockholders increased by 16.3% for the three-month period and 9.4% for the six-month period. Diluted earnings per share also showed substantial improvement, rising to $0.44 from $0.36 for the quarter and $0.81 from $0.72 for the six months. The company also successfully increased its market share in exchange-traded options contracts. CBOE continued its commitment to returning capital to shareholders through dividend payments and a significant share repurchase program. The company's financial health remains robust, supported by strong operating cash flows. Despite strategic investments in capital expenditures, particularly related to technology and infrastructure, the company maintained a healthy liquidity position. CBOE's strategic initiatives, including fee structure adjustments, appear to be positively impacting its market share and revenue generation, positioning it well for continued growth.

Financial Highlights

41 data points
Beta

Revenue

$132.55M

Net Income

$38.50M

29.0% Net Margin

EPS (Diluted)

$0.44

Total Assets

$343.81M

Cash & Equivalents

$127.14M

Free Cash Flow

$23.39M

Financial Statements
Beta
Revenue$132.55M
Operating Expenses$66.48M
Operating Income$66.07M
Net Income$38.50M
EPS (Basic)$0.44
EPS (Diluted)$0.44
Shares Outstanding (Basic)87.15M
Shares Outstanding (Diluted)87.15M

Key Highlights

  • 1Total operating revenues increased by 10.2% to $132.6 million for the three months ended June 30, 2012, and by 3.9% to $253.9 million for the six months ended June 30, 2012, compared to the prior year periods.
  • 2Net income allocated to common stockholders rose by 16.3% to $37.9 million for the three months and by 9.4% to $70.8 million for the six months, demonstrating improved profitability.
  • 3Diluted earnings per share increased to $0.44 for the three months (vs. $0.36 in 2011) and $0.81 for the six months (vs. $0.72 in 2011), indicating enhanced shareholder value.
  • 4Transaction fees, the largest revenue driver, increased by 10.0% for the quarter and 2.0% for the six months, supported by growth in trading volume and average revenue per contract, particularly in index and futures products.
  • 5Market share of total exchange-traded options contracts increased to 29.0% for the three months and 28.6% for the six months, up from 26.0% and 26.6% respectively in the prior year, suggesting successful market strategies.
  • 6The company actively returned capital to shareholders, with $21.3 million in dividend payments and $49.7 million in share repurchases under its $100 million program during the six months ended June 30, 2012.
  • 7Operating expenses grew at a slower pace than revenues, with total operating expenses increasing by only 4.2% for the quarter and remaining flat for the six-month period, leading to improved operating income margins.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in transaction fees, which benefited from higher trading volumes and a slight increase in average revenue per contract, particularly in index options and futures. Additionally, significant growth was seen in exchange services and other fees, as well as market data fees.

Cboe demonstrated effective expense management, with total operating expenses growing at a slower rate than revenues. For the three-month period, operating expenses increased by 4.2%, and for the six-month period, they remained relatively flat. This controlled expense growth, combined with revenue increases, led to a significant rise in operating income and net income, expanding operating income percentage to 49.8% for the quarter and 48.6% for the six months.

Cboe continues to return capital to shareholders through a combination of regular quarterly dividend payments and a share repurchase program. During the six months ended June 30, 2012, the company paid $21.3 million in dividends and repurchased $49.7 million worth of its common stock under its authorized $100 million program. The board also authorized an additional $100 million repurchase program subsequent to the period end.

Yes, Cboe experienced an increase in its market share of total exchange-traded options contracts, rising to 29.0% for the three months and 28.6% for the six months ended June 30, 2012, up from 26.0% and 26.6% in the prior year. Management attributes this market share gain primarily to fee structure adjustments implemented at the beginning of 2012, which made its products more competitive.