10-QPeriod: Q1 FY2016

Cboe Global Markets, Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 3, 2016For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported a strong first quarter for 2016, with total operating revenues increasing by 13.6% to $162.3 million compared to the same period in 2015. This growth was primarily driven by a significant 19.5% surge in transaction fees, largely attributed to a favorable shift in the product mix towards higher-revenue-generating index options and futures, coupled with reduced volume discounts. Net income allocated to common stockholders rose by 16.9% to $49.2 million, translating to a 20% increase in diluted earnings per share to $0.60. The company also made strategic acquisitions during the period, notably a majority stake in Vest Financial Group Inc., which contributed to a substantial increase in goodwill on the balance sheet. While operating expenses rose by 13.0%, they were outpaced by revenue growth, leading to an improvement in operating income and margins. Cboe continued its commitment to returning capital to shareholders through dividends and a robust share repurchase program, underscoring a positive financial performance and continued focus on shareholder value.

Financial Highlights

52 data points
Beta

Revenue

$170.50M

83.9% Gross Margin

Net Income

$49.20M

28.9% Net Margin

EPS (Diluted)

$0.60

Total Assets

$394.83M

Cash & Equivalents

$107.50M

Free Cash Flow

$88.50M

Financial Statements
Beta
Revenue$170.50M
Cost of Revenue$27.40M
Gross Profit$143.10M
Operating Expenses$63.60M
Operating Income$79.50M
Interest Expense$0
Net Income$49.20M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)81.80M
Shares Outstanding (Diluted)81.80M

Key Highlights

  • 1Total operating revenues grew 13.6% year-over-year to $162.3 million, driven by a strong performance in transaction fees.
  • 2Transaction fees saw a significant 19.5% increase, largely due to a favorable shift in trading volume towards higher-margin index options and futures, and reduced volume discounts.
  • 3Net income allocated to common stockholders increased 16.9% to $49.2 million, with diluted EPS rising to $0.60 from $0.50 in the prior year.
  • 4Operating income grew by 14.4% to $79.5 million, indicating strong operational leverage.
  • 5The company completed the acquisition of a majority stake in Vest Financial Group Inc. in January 2016, adding $18.8 million in goodwill.
  • 6Cash flows from operating activities increased by 24.1% to $97.4 million, demonstrating robust cash generation.
  • 7Cboe repurchased $42.4 million of its common stock during the quarter, continuing its capital return strategy.

Frequently Asked Questions

The primary driver of CBOE's revenue growth in the first quarter of 2016 was a significant increase in transaction fees. This was largely due to a favorable shift in the mix of products traded towards higher-revenue-generating index options and futures, combined with a reduction in volume discounts and incentives offered to clients.

In January 2016, CBOE acquired a majority stake in Vest Financial Group Inc. This acquisition resulted in the recognition of $18.8 million in goodwill and $8.0 million in intangible assets. The financial statements reflect the consolidation of Vest's operations, though the company stated that the acquisition was not material to its overall consolidated financial statements at that time.

CBOE demonstrated a continued commitment to shareholder returns. The company paid dividends and actively repurchased shares of its common stock, spending $42.4 million on repurchases during the quarter. Cboe expects its cash on hand and funds generated from operations to be sufficient to meet its cash requirements, including future capital expenditures and potential strategic transactions, while continuing its dividend and repurchase programs.

Total operating expenses increased by 13.0% to $82.8 million in Q1 2016 compared to Q1 2015. The main drivers for this increase were higher compensation and benefits (up 6.6%), depreciation and amortization (up 13.9%), professional fees and outside services (up 14.1%), and royalty fees (up 35.1%). These increases were primarily attributed to higher staffing, increased capital spending, acquisition-related costs, and higher trading volumes in licensed products.