10-Q/APeriod: Q2 FY2012

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

Filed May 2, 2013For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported solid financial performance for the six months ended June 30, 2012, with total operating revenues increasing by 3.9% to $253.9 million, driven primarily by growth in transaction fees, exchange services, and market data fees. This revenue growth, coupled with carefully managed operating expenses, led to a significant increase in operating income and net income, demonstrating the company's ability to capitalize on market opportunities. The company also saw an improvement in its market share for exchange-traded options contracts. Financially, CBOE maintained a healthy liquidity position, with cash and cash equivalents of $127.1 million at the end of the period. The company actively managed its capital through a $100 million share repurchase program, demonstrating a commitment to returning value to shareholders. Despite increased investment in capital expenditures and operational enhancements, the company's financial condition remains robust, supported by strong cash flows from operations.

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 3.9% to $253.9 million for the six months ended June 30, 2012, compared to the prior year period.
  • 2Net income allocated to common stockholders grew by 9.4% to $70.8 million for the six months ended June 30, 2012.
  • 3Transaction fees, the primary revenue driver, increased by 2.0% to $179.7 million for the six months ended June 30, 2012.
  • 4The company's market share in total exchange-traded options contracts improved to 28.6% from 26.6% in the same period last year.
  • 5Operating income increased by 8.3% to $123.5 million for the six months ended June 30, 2012, reflecting effective cost management.
  • 6CBOE actively repurchased shares under its $100 million share repurchase program, spending $49.7 million in the first six months of 2012.
  • 7Capital expenditures for systems hardware and software increased to $19.5 million for the six months ended June 30, 2012, indicating investment in technology and infrastructure.

Frequently Asked Questions

CBOE's revenue growth was primarily driven by increases in transaction fees, exchange services and other fees, and market data fees. This was partially offset by lower access fees and regulatory fees. Specifically, transaction fees benefited from a slight increase in trading volume and average revenue per contract, while strategic fee changes implemented in early 2012 contributed to improved market share and revenue from proprietary products.

Total operating expenses remained relatively flat, increasing by only 0.1% to $130.4 million for the six months ended June 30, 2012. While some expenses like outside services, royalty fees, and travel/promotional expenses increased, these were largely offset by decreases in depreciation and amortization and significant reductions in trading volume incentives. This careful expense management helped to improve operating income margins.

CBOE has an active share repurchase program. In the first six months of 2012, the company purchased approximately 1.87 million shares for $49.7 million. As of June 30, 2012, the company had repurchased $96.7 million of its authorized $100 million program. The company also announced on July 31, 2012, that its board authorized an additional $100 million repurchase program.

While CBOE is involved in ongoing legal proceedings, including patent litigation and index options litigation, management believes that the ultimate liability from these matters is not expected to have a material adverse effect on the company's financial position, liquidity, or capital resources. The company does not currently believe that any material loss exceeding amounts already recognized is probable for these proceedings.