10-QPeriod: Q1 FY2014

Cboe Global Markets, Inc. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 6, 2014For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported a solid first quarter for 2014, with total operating revenues increasing by 10.6% to $157.9 million compared to the same period in 2013. This growth was primarily driven by a significant 13.8% increase in transaction fees, fueled by a 31.0% rise in trading volume, particularly in proprietary products like SPX options and VIX futures. Market data fees also showed strong growth of 29.3%. Despite higher operating expenses, largely due to increased employee and royalty costs, operating income rose by a robust 18.2% to $82.0 million. Net income allocated to common stockholders increased by 16.1% to $48.5 million, resulting in a diluted EPS of $0.56, up from $0.48 in the prior year. Financially, CBOE demonstrated strong operational cash flow, although cash and cash equivalents decreased due to significant financing activities, including a special dividend payment and substantial share repurchases totaling $37.1 million in the quarter. The company maintained a healthy market share in the U.S. options industry, increasing to 30.4% from 25.4% in the prior year, indicating successful competitive strategies. Investors should note the continued focus on returning capital to shareholders through dividends and buybacks, alongside strategic investments in its technology platform.

Financial Highlights

42 data points
Beta

Revenue

$157.88M

Net Income

$49.02M

31.1% Net Margin

EPS (Diluted)

$0.56

Total Assets

$412.84M

Cash & Equivalents

$199.06M

Free Cash Flow

$88.32M

Financial Statements
Beta
Revenue$157.88M
Operating Expenses$75.85M
Operating Income$82.04M
Net Income$49.02M
EPS (Basic)$0.56
EPS (Diluted)$0.56
Shares Outstanding (Basic)86.45M
Shares Outstanding (Diluted)86.45M

Key Highlights

  • 1Total operating revenues grew 10.6% year-over-year to $157.9 million, driven by higher trading volumes and market data revenue.
  • 2Transaction fees increased by 13.8% to $112.8 million, primarily due to a 31.0% increase in total trading volume across all product categories.
  • 3Market data fees surged by 29.3% to $7.1 million, reflecting growth in OPRA allocations and proprietary data services.
  • 4Operating income saw a significant increase of 18.2% to $82.0 million, indicating improved operational efficiency.
  • 5Net income allocated to common stockholders rose by 16.1% to $48.5 million, translating to diluted EPS of $0.56, up from $0.48 in Q1 2013.
  • 6CBOE's market share in total exchange-traded options contracts grew to 30.4% from 25.4% in the prior year, highlighting competitive strength.
  • 7The company returned substantial capital to shareholders through $43.8 million in special dividends and $37.1 million in share repurchases during the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by a 13.8% increase in transaction fees, stemming from a 31.0% rise in trading volume. This surge in volume was seen across all product categories, with notable growth in proprietary products like SPX options and VIX futures. Additionally, market data fees saw a significant increase of 29.3%.

Total operating expenses increased by 3.5% to $75.9 million. This was mainly due to higher employee costs (up 8.2%) and royalty fees (up 20.8%), partially offset by a decrease in outside services. Despite the rise in expenses, the strong revenue growth led to an 18.2% increase in operating income to $82.0 million, demonstrating improved profitability.

CBOE actively returned capital to shareholders. They paid a special dividend of $43.8 million and repurchased $37.1 million of their common stock under their announced share repurchase program. This reflects a commitment to enhancing shareholder value alongside reinvestment in the business.

CBOE's market share in U.S. exchange-traded options increased to 30.4% in Q1 2014 from 25.4% in Q1 2013, indicating a strengthening competitive position, partly attributed to fee changes implemented in March 2013. The company expects its cash on hand and operating cash flow to be sufficient for its 2014 needs, including operations, capital expenditures, dividends, and stock repurchases.