10-QPeriod: Q1 FY2015

Cboe Global Markets, Inc. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 6, 2015For Securities:CBOE

Summary

Cboe Global Markets, Inc. reported a decrease in total operating revenues for the first quarter of 2015 compared to the same period in 2014, primarily driven by lower transaction fees due to reduced trading volume. This decline was partially offset by increased market data fees and other revenue. Despite the revenue dip, operating expenses also saw a reduction, largely attributed to lower compensation and benefits and royalty fees. However, an increase in depreciation and amortization, along with professional fees and outside services, tempered the overall expense decrease. Consequently, operating income and net income for the quarter were lower than the prior year. The company continues to manage its liquidity through operating cash flows and has a consistent dividend policy, alongside an active share repurchase program. An advance to The Options Clearing Corporation (OCC) represents a significant investment activity during the quarter.

Financial Highlights

43 data points
Beta

Revenue

$142.84M

Net Income

$42.26M

29.6% Net Margin

EPS (Diluted)

$0.50

Total Assets

$375.80M

Cash & Equivalents

$137.56M

Free Cash Flow

$78.45M

Financial Statements
Beta
Revenue$142.84M
Operating Expenses$73.29M
Operating Income$69.55M
Net Income$42.26M
EPS (Basic)$0.50
EPS (Diluted)$0.50
Shares Outstanding (Basic)83.96M
Shares Outstanding (Diluted)83.96M

Key Highlights

  • 1Total operating revenues decreased by 9.5% to $142.8 million in Q1 2015 compared to Q1 2014, mainly due to a 12.5% drop in transaction fees driven by lower trading volumes.
  • 2Despite lower revenues, total operating expenses decreased by 3.4% to $73.3 million, primarily due to reduced compensation and benefits and royalty fees.
  • 3Net income allocated to common stockholders declined by 13.3% to $42.1 million, resulting in diluted earnings per share of $0.50, down from $0.56 in the prior year period.
  • 4The company advanced $30 million to The Options Clearing Corporation (OCC) as part of a capital plan, significantly increasing investing activities year-over-year.
  • 5Cash flows from operating activities decreased to $78.5 million from $88.3 million, largely influenced by lower net income.
  • 6Cboe repurchased approximately $31.4 million worth of its common stock under its share repurchase program during the quarter.
  • 7Market data fees saw a notable increase of 11.9% to $8.0 million, indicating growth in this revenue stream.

Frequently Asked Questions

The primary driver for the decrease in total operating revenues was a 12.5% decline in transaction fees, which fell to $98.7 million. This reduction was attributed to a 15.2% decrease in total trading volume, partially offset by an increase in average revenue per contract due to fee changes implemented in 2015 and a shift in product mix. Access fees and regulatory fees also contributed to the overall revenue decline.

Cboe successfully reduced its total operating expenses by 3.4% to $73.3 million. This was largely due to a significant decrease in compensation and benefits ($8.0 million lower, or 23.8%), which was influenced by lower stock-based compensation and a reduction in salaries following the transition of regulatory functions. Royalty fees also decreased.

Cboe advanced $30 million to OCC as part of a capital plan designed to strengthen OCC's capital base and meet regulatory requirements. This significant investment activity was a major factor in the increase of cash flows used in investing activities during the quarter. The company is awaiting further regulatory developments regarding this plan.

As of March 31, 2015, Cboe reported $137.6 million in cash and cash equivalents. The company expects that its current cash on hand and funds generated from operations will be sufficient to meet its 2015 cash requirements. Cboe also indicated that it continues to consider strategic transactions, which could impact liquidity in the short term.