01—Abstract
Summary
Summary of the 10-Q filed November 5, 2013. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc. (CBOE) reported a solid financial performance for the nine months ended September 30, 2013, with total operating revenues increasing by 12.5% year-over-year to $430.2 milliona, driven primarily by a 12.0% rise in transaction fees.
This revenue growth, coupled with a 9.6% increase in operating expenses, led to a substantial 15.6% growth in operating income to $213.2 millionb. Net income allocated to common stockholders saw a 10.6% increase, reaching $128.2 million, or $1.47 per diluted share. The company's liquidity position strengthened, with cash and cash equivalents rising to $226.4 million from $135.6 million at the end of 2012, supported by robust cash flow from operations.
CBOE continues to return capital to shareholders through dividends and a share repurchase program, though the pace of buybacks slowed in the first nine months of 2013 compared to the prior year. Investors should note the company's ongoing efforts to manage costs, as evidenced by a slight decrease in the operating expense ratio as a percentage of revenue, and its strategic focus on higher-margin products like index options and futures.
02—Key points
Key Highlights
- Total operating revenues grew 12.5% to $430.2 million for the nine months ended September 30, 2013, driven by a 12.0% increase in transaction fees.
- Operating income increased 15.6% to $213.2 million for the nine months ended September 30, 2013.
- Net income allocated to common stockholders rose 10.6% to $128.2 million, with diluted EPS at $1.47 for the nine months ended September 30, 2013.
- Cash and cash equivalents increased significantly to $226.4 million as of September 30, 2013, indicating improved liquidity.
- Share repurchase activity slowed in the first nine months of 2013 ($14.0 million) compared to the same period in 2012 ($49.7 million), although the company continued to pay dividends.
- The company experienced a shift in trading volume mix towards higher-revenue per contract products like index options and futures.
- Despite revenue growth, operating expenses also increased by 9.6% primarily due to higher employee costs and royalty fees.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2013filed November 5, 2013Financial Statements
Q3 FY2013 against Q3 FY2012
| Line item | Q3 FY2013Q3 FY2012 | Change |
|---|---|---|
| Revenue | $136.74M$128.32M | +6.6% |
| Operating Expenses | $68.32M$67.46M | +1.3% |
| Operating Income | $68.43M$60.86M | +12.4% |
| Net Income | $41.36M$45.76M | −9.6% |
| EPS (Basic) | $0.47$0.52 | −9.6% |
| EPS (Diluted) | $0.47$0.52 | −9.6% |
| Shares Outstanding (Basic) | 87.65M87.27M | +0.4% |
| Shares Outstanding (Diluted) | 87.65M87.27M | +0.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of Cboe's revenue growth in the first nine months of 2013?
Cboe's revenue growth was primarily driven by a significant increase in transaction fees, which rose 12.0% to $298.2 million for the nine months ended September 30, 2013. This was largely attributable to a shift in the volume mix towards higher average revenue per contract products such as index options and futures, along with increased trading volume in these segments, partially offset by higher volume-based incentives and a decline in equity options volume.
How did Cboe manage its operating expenses during this period?
Total operating expenses increased by 9.6% to $217.0 million for the nine months ended September 30, 2013. Key drivers of this increase were higher employee costs ($12.2 million), largely due to stock-based compensation and salaries, and increased royalty fees ($7.0 million) driven by higher trading volume in licensed index products and amended royalty rates. The company also saw an increase in outside services. Despite these increases, operating expenses as a percentage of total operating revenues slightly decreased from 51.8% to 50.4%, indicating some cost management efficiencies.
What is the company's current liquidity position and how is it managing capital?
Cboe's liquidity position strengthened significantly, with cash and cash equivalents increasing to $226.4 million as of September 30, 2013, up from $135.6 million at the end of 2012. This was supported by strong net cash flows from operating activities, which increased to $172.4 million for the nine months ended September 30, 2013. The company continues to return capital to shareholders through regular dividend payments and a share repurchase program, although the amount spent on share repurchases decreased substantially in the first nine months of 2013 compared to the prior year.
Are there any significant legal or regulatory matters impacting the company?
Cboe entered into a Consent Order with the SEC on June 11, 2013, which included a censure, a cease and desist order, and a $6.0 million fine. The company recorded $1.0 million of this penalty in other expenses for the nine months ended September 30, 2013, with $5.0 million having been recognized in the fourth quarter of 2012. Management believes that the ultimate liability from other pending legal proceedings will not materially affect the company's financial position, liquidity, or capital resources.
06—Continue