01—Abstract
Summary
Summary of the 10-Q filed August 6, 2015. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc. (CBOE) reported modest revenue growth for the three months ended June 30, 2015, with total operating revenues increasing by 3.3% to $148.7 milliona, driven primarily by higher transaction fees and other revenue.
This growth was achieved despite a 9.4% decrease in overall trading volume, indicating a significant increase in average revenue per contract. For the six months ended June 30, 2015, total operating revenues declined by 3.4% to $291.5 millionb, largely due to lower transaction fees and access fees, coupled with a 12.5% decrease in trading volume. The company saw a decrease in operating expenses for the six-month period, primarily driven by lower compensation and benefits, partly due to the transition of regulatory services to FINRA.
Net income allocated to common stockholders saw an increase of 4.8% to $44.6 millionc for the three-month period, resulting in a diluted EPS of $0.54. However, for the six-month period, net income allocated to common stockholders decreased by 4.8% to $86.7 million, with diluted EPS at $1.04.
The company continued its share repurchase program, spending $78.6 milliond in the first six months of 2015, and had $111.0 million remaining under its authorizations as of June 30, 2015. Cash and cash equivalents decreased to $89.6 million from $147.9 million at the end of 2014, primarily due to investing and financing activities, including a $30 million advance to OCC.
02—Key points
Key Highlights
- For the three months ended June 30, 2015, total operating revenues increased by 3.3% to $148.7 million, driven by a 3.8% increase in transaction fees, despite a 9.4% decrease in trading volume. This indicates a 14.5% rise in average revenue per contract.
- For the six months ended June 30, 2015, total operating revenues decreased by 3.4% to $291.5 million, with transaction fees down 4.9% and total trading volume down 12.5%. However, average revenue per contract increased by 8.6%.
- Operating expenses decreased by 1.0% to $148.6 million for the six-month period, primarily due to a significant 22.2% reduction in compensation and benefits, largely attributable to lower stock-based compensation and the transition of regulatory services.
- Net income allocated to common stockholders increased by 4.8% to $44.6 million for the three months ended June 30, 2015, translating to a diluted EPS of $0.54, up from $0.50 in the prior year.
- For the six months ended June 30, 2015, net income allocated to common stockholders decreased by 4.8% to $86.7 million, with diluted EPS at $1.04, down from $1.06 in the prior year.
- The company actively repurchased shares, spending $78.6 million in the first six months of 2015, and had $111.0 million in remaining repurchase authorization as of June 30, 2015.
- Cash and cash equivalents decreased to $89.6 million as of June 30, 2015, compared to $147.9 million at December 31, 2014, reflecting significant outflows for investing activities, including a $30 million advance to OCC, and financing activities.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed August 6, 2015Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $148.72M$143.94M | +3.3% |
| Operating Expenses | $75.36M$74.23M | +1.5% |
| Operating Income | $73.37M$69.72M | +5.2% |
| Net Income | $44.84M$42.98M | +4.3% |
| EPS (Basic) | $0.54$0.50 | +8.0% |
| EPS (Diluted) | $0.54$0.50 | +8.0% |
| Shares Outstanding (Basic) | 83.29M85.83M | −3.0% |
| Shares Outstanding (Diluted) | 83.29M85.83M | −3.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the three-month period?
Revenue growth in the three months ended June 30, 2015, was primarily driven by an increase in transaction fees and other revenue. Despite a decrease in total trading volume, transaction fees rose due to a higher average revenue per contract, influenced by a shift in product mix towards higher-revenue generating products like index options and futures, fee changes implemented in 2015, and reduced volume discounts.
Why did operating expenses decrease in the six-month period?
Operating expenses decreased in the six months ended June 30, 2015, primarily due to a significant reduction in compensation and benefits. This was a result of lower stock-based compensation expenses, a planned reduction in salaries following the transition of certain regulatory functions to FINRA in late 2014, and lower annual incentive compensation.
How has the company's cash position changed, and what are the key uses of cash?
The company's cash and cash equivalents decreased from $147.9 million at the end of 2014 to $89.6 million as of June 30, 2015. Key uses of cash included capital expenditures for trading platform enhancements, significant share repurchases under its authorized program, dividend payments, and a $30 million advance to the Options Clearing Corporation (OCC) as part of its capital plan. Management believes current cash on hand and operational cash flow are sufficient to meet its 2015 requirements.
What is the significance of the $30 million advance to OCC?
The $30 million advance to OCC represents CBOE's pro-rata contribution to strengthen OCC's capital base, in accordance with a capital plan announced in December 2014. This plan aims to comply with regulatory requirements for Systemically Important Financial Market Utilities. While SEC approval was initially granted, it was stayed pending review, and OCC has filed a motion to lift the stay. If the plan does not proceed, OCC is expected to return the capital contribution.
06—Continue