01—Abstract
Summary
Summary of the 10-Q filed May 1, 2020. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc. (CBOE) reported strong financial results for the first quarter ended March 31, 2020, demonstrating significant revenue and earnings growth compared to the prior year.
Total revenues surged by 52.9% to $921.5 milliona, driven by a substantial increase in transaction fees, reflecting higher trading volumes across its key segments, particularly in Options and U.S. Equities. This robust revenue growth, combined with well-managed operating expenses which saw a slight decrease, led to a significant increase in operating income and net income. The company's financial performance was bolstered by increased market volatility and trading activity during the quarter.
Despite the emerging concerns around the COVID-19 pandemic, Cboe successfully navigated the period, with no significant disruptions to its business or control processes, including the temporary suspension of open outcry trading. The strong operational performance translated into substantial year-over-year improvements in earnings per share, indicating healthy profitability for shareholders. Cboe also continued its capital return initiatives through share repurchases and dividend payments, underscoring a commitment to shareholder value.
02—Key points
Key Highlights
- Total revenues increased by 52.9% to $921.5 million for Q1 2020 compared to Q1 2019.
- Net income grew by 65.3% to $157.4 million, with diluted EPS increasing to $1.42 from $0.85.
- Transaction fees increased by 53.7% to $661.5 million, driven by higher trading volumes in Options, U.S. Equities, and Futures.
- Operating income saw a significant increase of 54.5% to $226.4 million.
- The company maintained strong operational control despite the onset of the COVID-19 pandemic, temporarily suspending open outcry trading without significant disruption.
- Cboe continued its capital allocation strategy, repurchasing $119.5 million in common stock during the quarter.
- Strategic acquisitions, including Hanweck and FT Options, contributed to market data revenue growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Cboe Global Markets, Inc. kept $0.17.
- Revenue$921.5M100.0%
- Cost of revenue−$563.2M61.1%
- Gross profit$358.3M38.9%
- Operating costs−$131.9M14.3%
- Operating income$226.4M24.6%
- Interest, other & tax−$69.0M7.5%
- Net income$157.4M17.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 1, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $921.50M$602.60M | +52.9% |
| Cost of Revenue | $563.20M$322.10M | +74.9% |
| Gross Profit | $358.30M$279.40M | +28.2% |
| Operating Expenses | $131.90M$134.00M | −1.6% |
| Operating Income | $226.40M$145.40M | +55.7% |
| Interest Expense | $8.00M$10.40M | −23.1% |
| Net Income | $157.40M$93.50M | +68.3% |
| EPS (Basic) | $1.42$0.84 | +69.0% |
| EPS (Diluted) | $1.42$0.84 | +69.0% |
| Shares Outstanding (Basic) | 110.40M111.50M | −1.0% |
| Shares Outstanding (Diluted) | 110.60M111.70M | −1.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cboe's revenue growth in Q1 2020?
The primary driver of Cboe's revenue growth was a significant increase in transaction fees, which rose by 53.7% to $661.5 million. This surge was attributed to higher trading volumes across its key segments, including Options, U.S. Equities, and Futures, likely influenced by increased market volatility during the quarter.
How did the COVID-19 pandemic impact Cboe's operations and financial results during Q1 2020?
Cboe reported that it was able to manage the onset of the COVID-19 pandemic without significant disruptions to its business or control processes. While open outcry trading was temporarily suspended, the company's electronic trading platforms continued to operate smoothly. The financial results for the quarter reflected strong growth, indicating that the pandemic's material adverse impact had not yet fully materialized or been offset by increased trading volumes during this period.
What is Cboe's approach to capital allocation, including share repurchases and dividends?
Cboe demonstrated a commitment to returning capital to shareholders. During the first quarter of 2020, the company repurchased $119.5 million of its common stock and declared and paid cash dividends totaling $40.0 million. The company expects to continue paying dividends and has remaining availability under its share repurchase program.
How did Cboe's different business segments perform in Q1 2020?
All segments showed growth, with the Options and U.S. Equities segments being the largest contributors to revenue. The Options segment saw a 53.6% increase in revenue, driven by higher ADV. U.S. Equities revenue increased by 60.1%, also fueled by higher volumes. The Futures, European Equities, and Global FX segments also experienced revenue growth.
06—Continue