10-QPeriod: Q2 FY2020

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 31, 2020For Securities:CBOE

Summary

Cboe Global Markets, Inc. (CBOE) reported a strong performance in the second quarter and first half of 2020, driven by significantly increased trading volumes across its U.S. Equities and Options segments. Total revenues surged by 40% and 46.5% for the respective periods, largely fueled by higher transaction and regulatory fees. The company demonstrated robust operational efficiency, with revenues less cost of revenues growing by 4.8% and 16.5% for the three and six months ended June 30, 2020, respectively. Operating expenses saw a notable decrease of 14.4% and 8.5% due to lower acquisition-related costs and professional fees. This resulted in substantial growth in operating income, up 29.2% and 43.4% for the comparable periods. Despite increased investments in acquisitions such as Hanweck and Trade Alert, Cboe maintained a healthy financial position. Net income increased by 34.4% and 51.7% for the quarter and year-to-date periods. The company also highlighted its continued commitment to returning capital to shareholders through dividends and an ongoing share repurchase program.

Financial Highlights

54 data points
Beta

Revenue

$868.70M

34.2% Gross Margin

Net Income

$113.60M

13.1% Net Margin

EPS (Diluted)

$1.03

Total Assets

$5.37B

Cash & Equivalents

$210.10M

Free Cash Flow

$318.40M

Financial Statements
Beta
Revenue$868.70M
Cost of Revenue$571.80M
Gross Profit$296.90M
Operating Expenses$135.20M
Operating Income$161.70M
Interest Expense$7.40M
Net Income$113.60M
EPS (Basic)$1.04
EPS (Diluted)$1.03
Shares Outstanding (Basic)109.50M
Shares Outstanding (Diluted)109.60M

Key Highlights

  • 1Total revenues increased significantly, up 40% for Q2 2020 and 46.5% for the first half of 2020, driven by higher trading volumes in U.S. Equities and Options.
  • 2Transaction fees and regulatory fees were primary revenue drivers, increasing by 44.8% and 61.5% respectively for Q2, and 49.5% and 91.8% for the first half.
  • 3Operating expenses decreased by 14.4% in Q2 and 8.5% for the first half, primarily due to reduced acquisition-related costs and professional fees.
  • 4Operating income saw substantial growth of 29.2% for Q2 and 43.4% for the first half, reflecting strong revenue growth and controlled expenses.
  • 5Net income rose by 34.4% for Q2 and 51.7% for the first half, indicating improved profitability.
  • 6The company completed strategic acquisitions including Hanweck, FT Options, and Trade Alert, contributing to market data fee growth.
  • 7Cboe maintained a strong liquidity position, with $210.1 million in cash and cash equivalents and $176.5 million in financial investments as of June 30, 2020.

Frequently Asked Questions

Revenue growth was primarily driven by a significant increase in trading volumes across the U.S. Equities and Options segments. This led to higher transaction fees. Additionally, regulatory fees also contributed significantly to the revenue increase.

Cboe successfully managed its expenses by reducing acquisition-related costs, professional fees, and depreciation and amortization. This cost control, coupled with revenue growth, led to a substantial increase in operating income.

The company noted that while it experienced increased trading volumes which positively impacted revenues, the full impact of the pandemic is uncertain. Cboe temporarily suspended open outcry trading and implemented work-from-home policies without significant operational disruptions. The company anticipates potential future impacts on trading behavior and demand for its products.

Cboe expects to continue paying dividends and has an ongoing share repurchase program. As of June 30, 2020, the company had $329.9 million in remaining authorization for share repurchases and maintained a strong liquidity position to fund operations, capital expenditures, and potential strategic acquisitions.