10-QPeriod: Q2 FY2021

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 30, 2021For Securities:CBOE

Summary

Cboe Global Markets, Inc. reported mixed financial results for the second quarter and first half of 2021. Total revenues saw a slight increase for the first half of the year, driven by growth in transaction and clearing fees, and access and capacity fees. However, a significant decrease in regulatory fees, largely due to a lower Section 31 fee rate, impacted overall revenue performance, particularly in the second quarter. Profitability showed pressure, with net income declining year-over-year for both the quarter and the six-month period. This was influenced by increased operating expenses, including higher compensation and benefits, technology support, and professional services, partly due to recent acquisitions. Despite these challenges, Cboe's liquidity position remained strong, supported by operating cash flows and available credit facilities. The company continues to execute on its strategic initiatives, including the integration of recent acquisitions and investments in technology and product development.

Financial Highlights

54 data points
Beta

Revenue

$800.80M

43.8% Gross Margin

Net Income

$105.50M

13.2% Net Margin

EPS (Diluted)

$0.98

Total Assets

$7.10B

Cash & Equivalents

$450.90M

Free Cash Flow

$111.30M

Financial Statements
Beta
Revenue$800.80M
Cost of Revenue$450.20M
Gross Profit$350.60M
Operating Expenses$160.60M
Operating Income$190.00M
Interest Expense$12.40M
Net Income$105.50M
EPS (Basic)$0.99
EPS (Diluted)$0.98
Shares Outstanding (Basic)106.80M
Shares Outstanding (Diluted)106.90M

Key Highlights

  • 1Total revenues increased by 1.2% to $1.81 billion for the first six months of 2021 compared to the same period in 2020, driven by higher transaction and clearing fees and access and capacity fees, despite a significant drop in regulatory fees.
  • 2Net income decreased by 7.1% to $105.5 million for the second quarter of 2021 and by 10.4% to $242.7 million for the first six months of 2021, year-over-year.
  • 3Operating expenses increased by 18.8% in the second quarter and 20.4% in the first six months of 2021, primarily due to higher compensation and benefits, professional fees, and technology support costs, reflecting investments and recent acquisitions.
  • 4The Options segment showed strong performance, with revenues less cost of revenues up 18.6% in the second quarter, driven by increased ADV in index and multi-listed options.
  • 5The North American Equities segment experienced a 1.5% decrease in revenues less cost of revenues for the second quarter, impacted by lower U.S. Equities exchange volumes, although new acquisitions contributed to overall segment growth.
  • 6Cboe maintained a strong liquidity position, with cash and cash equivalents of $450.9 million and available credit facilities providing ample resources for operations and strategic initiatives.
  • 7The company repurchased $33.7 million of its common stock in the second quarter and $81.3 million in the first six months of 2021, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Cboe Global Markets reported mixed results. While total revenues saw a modest increase for the first half of 2021, driven by higher transaction and clearing fees, net income declined year-over-year for both the second quarter and the first half due to increased operating expenses and a significant drop in regulatory fees. Key segments like Options showed robust growth, while North American Equities faced some headwinds.

Revenues were impacted by a substantial decrease in regulatory fees, largely due to a lower Section 31 fee rate. Higher transaction and clearing fees, access and capacity fees, and market data fees partially offset this. Profitability was affected by increased operating expenses, including higher compensation and benefits, professional fees, and technology support, partly due to recent acquisitions (BIDS Trading, MATCHNow, EuroCCP, Chi-X Asia Pacific). An increase in interest expense also played a role.

The acquisitions of BIDS Trading, MATCHNow, and EuroCCP in 2020, and Chi-X Asia Pacific in 2021, contributed to revenue growth in specific segments like North American Equities and Europe. However, these acquisitions also led to increased operating expenses, particularly in compensation, technology, and professional services, which pressured profitability in the short term. The company is working on integrating these businesses to realize synergies.

Cboe maintained a strong liquidity position, with cash and cash equivalents of $450.9 million as of June 30, 2021. The company also had $250 million available under its revolving credit facility, plus additional borrowing capacity. This, combined with cash generated from operations, is expected to be sufficient for near-term needs, including operations, capital expenditures, debt servicing, and potential strategic acquisitions.