10-QPeriod: Q2 FY2014

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 6, 2014For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported its financial results for the second quarter and first half of 2014. For the three months ended June 30, 2014, the company saw a decrease in total operating revenues to $143.9 million from $150.8 million in the prior year, largely driven by lower transaction fees due to a shift in product mix and lower average revenue per contract, despite an increase in market data fees. For the six months ended June 30, 2014, CBOE reported an increase in total operating revenues to $301.8 million from $293.5 million in the prior year, primarily due to higher transaction fees and market data fees. Diluted earnings per share for the three months ended June 30, 2014 were $0.50, down from $0.52 in the prior year, while for the six months, it increased to $1.06 from $1.00. The company continued its share repurchase program and paid dividends, reflecting a commitment to returning capital to shareholders.

Financial Highlights

43 data points
Beta

Revenue

$143.94M

Net Income

$42.98M

29.9% Net Margin

EPS (Diluted)

$0.50

Total Assets

$385.78M

Cash & Equivalents

$145.11M

Free Cash Flow

$32.92M

Financial Statements
Beta
Revenue$143.94M
Operating Expenses$74.23M
Operating Income$69.72M
Net Income$42.98M
EPS (Basic)$0.50
EPS (Diluted)$0.50
Shares Outstanding (Basic)85.83M
Shares Outstanding (Diluted)85.83M

Key Highlights

  • 1Total operating revenues for Q2 2014 decreased by 4.5% to $143.9 million, primarily due to a 7.7% decline in transaction fees.
  • 2For the six months ended June 30, 2014, total operating revenues increased by 2.8% to $301.8 million, driven by growth in transaction fees and market data fees.
  • 3Diluted earnings per share for common stockholders decreased to $0.50 in Q2 2014 from $0.52 in Q2 2013, but increased to $1.06 for the first six months of 2014 from $1.00 in the prior year.
  • 4Market data fees showed significant growth, increasing by 36.4% for Q2 2014 and 32.9% for the first six months of 2014.
  • 5Total operating expenses decreased slightly in Q2 2014 to $74.2 million from $75.4 million, mainly due to lower employee costs and outside services.
  • 6The company repurchased $88.3 million of its common stock in the first six months of 2014 under its share repurchase program.
  • 7CBOE experienced a decrease in average revenue per contract, particularly in equity and ETP options, largely due to a shift in product mix towards lower-revenue products and increased volume-based incentives.

Frequently Asked Questions

The decrease in transaction fees during the second quarter of 2014 was primarily attributed to a 4.1% decline in total trading volume and a 3.8% decrease in average revenue per contract. This reduction in average revenue per contract was mainly due to a shift in the mix of trading volume towards products with lower average revenue per contract and increased volume-based incentives, particularly driven by higher volume in equities.

Cboe's market share of total U.S. options industry volume increased to 30.3% for the three months ended June 30, 2014, from 27.4% in the prior year period. For the six months ended June 30, 2014, the company's market share of total exchange-traded options contracts was 30.0%, up from 26.4% in the same period of 2013.

Cboe Global Markets, Inc. is committed to returning capital to shareholders through both dividends and share repurchases. The company continued to pay quarterly dividends and actively repurchased shares under its announced program. In the first six months of 2014, CBOE repurchased $88.3 million of its common stock, and on July 30, 2014, the board authorized an additional $100 million for share repurchases.

While the company is subject to various legal proceedings, including patent litigation and class action lawsuits related to market data and trading practices, management stated in the filing that, as of June 30, 2014, they do not believe there is a reasonable possibility of a material loss exceeding amounts already recognized. The ultimate outcome of these matters is not expected to have a material effect on the company's financial position, liquidity, or capital resources.