01—Abstract
Summary
Summary of the 10-Q filed October 30, 2020. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc.'s third-quarter 2020 report shows robust revenue growth driven by increased trading volumes across its key segments, particularly Options and North American Equities.
Total revenues increased by 17.4% year-over-year for the quarter, reaching $792.7 milliona, and by 36.1% for the nine-month period to $2.58 billion. This growth was supported by higher transaction and clearing fees, along with increased regulatory fees, reflecting a dynamic market environment. Net income saw a modest increase of 3.8% for the quarter to $109.9 million, while the nine-month net income surged by 33.9% to $380.9 million, demonstrating improved profitability over the year.
The company also successfully completed several strategic acquisitions during the period, including Hanweck Associates, FT Providers, Trade Alert, and a controlling stake in EuroCCP. These acquisitions are expected to contribute to future growth and expand Cboe's service offerings in market data analytics and European clearing.
Despite increased operating expenses, largely due to these acquisitions and associated integration costs, Cboe maintained strong operating income, highlighting operational efficiency and strategic execution. The company also continued its capital return programs, including share repurchases and dividend payments, reinforcing its commitment to shareholder value.
02—Key points
Key Highlights
- Total revenues increased by 17.4% to $792.7 million for the three months ended September 30, 2020, and by 36.1% to $2.58 billion for the nine months ended September 30, 2020, driven by strong trading volumes.
- Net income increased by 3.8% to $109.9 million for the three months ended September 30, 2020, and by 33.9% to $380.9 million for the nine months ended September 30, 2020.
- The Options segment showed a 17.5% increase in revenue, with average daily volume (ADV) for total touched contracts up 24.7%.
- North American Equities revenue grew by 22.0%, with U.S. Equities market ADV increasing by 43.5%.
- Completed several key acquisitions including Hanweck Associates, FT Options, Trade Alert, and a majority stake in EuroCCP, expanding market data and European clearing capabilities.
- Operating income increased by 31.2% for the nine-month period, demonstrating improved profitability across segments.
- The company maintained a strong balance sheet with $212.7 million in cash and cash equivalents as of September 30, 2020, and $939.1 million in total debt, while remaining in compliance with debt covenants.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2020, Cboe Global Markets, Inc. kept $0.14.
- Revenue$792.7M100.0%
- Cost of revenue−$500.7M63.2%
- Gross profit$292.0M36.8%
- Operating costs−$152.7M19.3%
- Operating income$139.3M17.6%
- Interest, other & tax−$29.4M3.7%
- Net income$109.9M13.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed October 30, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $792.70M$675.40M | +17.4% |
| Cost of Revenue | $500.70M$381.40M | +31.3% |
| Gross Profit | $292.00M$294.00M | −0.7% |
| Operating Expenses | $152.70M$146.60M | +4.2% |
| Operating Income | $139.30M$147.40M | −5.5% |
| Interest Expense | $9.60M$8.80M | +9.1% |
| Net Income | $109.90M$105.50M | +4.2% |
| EPS (Basic) | $1.01$0.95 | +6.3% |
| EPS (Diluted) | $1.01$0.94 | +7.4% |
| Shares Outstanding (Basic) | 108.70M111.60M | −2.6% |
| Shares Outstanding (Diluted) | 108.80M111.90M | −2.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cboe's revenue growth in Q3 2020?
The primary driver of Cboe's revenue growth in the third quarter of 2020 was the significant increase in trading volumes across its key segments, particularly in the Options and North American Equities markets. This led to higher transaction and clearing fees, as well as increased regulatory fees.
How did the acquisitions impact Cboe's financial performance?
Cboe completed several strategic acquisitions during the period, including Hanweck, FT Options, Trade Alert, and a controlling stake in EuroCCP. These acquisitions are expected to expand the company's offerings in market data analytics and European clearing and contributed to revenue growth, though they also led to an increase in operating expenses due to integration costs.
What is the company's outlook on dividends and share repurchases?
Cboe's board of directors declared a quarterly cash dividend of $0.42 per share. The company expects to continue paying dividends and has ample availability remaining under its share repurchase authorization, indicating a commitment to returning capital to shareholders.
What is the impact of the COVID-19 pandemic on Cboe's operations and liquidity?
While Cboe has implemented measures to address COVID-19, including temporary suspension of open outcry trading, the company has not experienced significant disruptions. Management believes that COVID-19 is unlikely to have a material impact on liquidity or access to capital markets in the near to foreseeable future, though future trading behavior changes could impact results.
06—Continue