01—Abstract
Summary
Summary of the 10-Q filed July 31, 2020. Cited figures are marked; the original filing is the authoritative source.
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%a 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%b 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%c 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.
02—Key points
Key Highlights
- Total 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.
- Transaction 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.
- Operating expenses decreased by 14.4% in Q2 and 8.5% for the first half, primarily due to reduced acquisition-related costs and professional fees.
- Operating income saw substantial growth of 29.2% for Q2 and 43.4% for the first half, reflecting strong revenue growth and controlled expenses.
- Net income rose by 34.4% for Q2 and 51.7% for the first half, indicating improved profitability.
- The company completed strategic acquisitions including Hanweck, FT Options, and Trade Alert, contributing to market data fee growth.
- Cboe 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Cboe Global Markets, Inc. kept $0.13.
- Revenue$868.7M100.0%
- Cost of revenue−$571.8M65.8%
- Gross profit$296.9M34.2%
- Operating costs−$135.2M15.6%
- Operating income$161.7M18.6%
- Interest, other & tax−$48.1M5.5%
- Net income$113.6M13.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed July 31, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $868.70M$620.60M | +40.0% |
| Cost of Revenue | $571.80M$337.40M | +69.5% |
| Gross Profit | $296.90M$283.20M | +4.8% |
| Operating Expenses | $135.20M$158.00M | −14.4% |
| Operating Income | $161.70M$125.20M | +29.2% |
| Interest Expense | $7.40M$10.50M | −29.5% |
| Net Income | $113.60M$87.60M | +29.7% |
| EPS (Basic) | $1.04$0.79 | +31.6% |
| EPS (Diluted) | $1.03$0.78 | +32.1% |
| Shares Outstanding (Basic) | 109.50M111.50M | −1.8% |
| Shares Outstanding (Diluted) | 109.60M111.60M | −1.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth for Cboe in the second quarter of 2020?
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.
How did Cboe manage its expenses during this period?
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.
What impact did the COVID-19 pandemic have on Cboe's operations and financial results?
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.
What is the company's outlook on capital allocation, including dividends and share repurchases?
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.
06—Continue