01—Abstract
Summary
Summary of the 10-Q filed April 29, 2022. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc. reported first-quarter 2022 results showing a slight decrease in total revenue to $974.5 milliona from $1,010.8 million in the prior year, primarily driven by lower cash and spot markets revenue due to reduced Section 31 fees and equity volumes.
However, the company saw growth in derivatives and data/access solutions, leading to an increase in "revenues less cost of revenues" to $418.1 millionb from $365.5 million. Operating income rose to $239.7 million from $204.6 million, and net income was $109.6 million, down from $137.2 million, largely impacted by a higher effective tax rate due to unfavorable U.S. Tax Court decisions related to Section 199 tax benefits.
The company continues to strategically expand its global reach and product offerings, with planned acquisitions of ErisX (digital assets) and NEO (Canadian exchange) expected to close in the near future. Cboe also demonstrated strong operational execution, highlighted by increased trading volumes in key segments like Options and European Equities, and maintained a robust liquidity position with significant cash reserves and available credit facilities, supporting its ongoing share repurchase program and dividend payments.
02—Key points
Key Highlights
- Total revenue for Q1 2022 was $974.5 million, a 4% decrease from Q1 2021, primarily due to lower cash and spot market revenues.
- Revenues less cost of revenues increased by 14% to $418.1 million, driven by strong performance in derivatives markets and data/access solutions.
- Operating income grew 17% to $239.7 million, reflecting improved operational efficiency and revenue growth in key segments.
- Net income decreased by 20% to $109.6 million, impacted by a significantly higher effective tax rate (51.3% vs. 28.9%) due to unfavorable tax litigation outcomes.
- The company successfully raised $300 million in Senior Notes to fund anticipated acquisitions, demonstrating proactive capital management.
- Strategic growth initiatives are underway with planned acquisitions of ErisX (digital assets) and NEO (Canadian exchange) expected to close in 2022.
- Cboe maintained a strong liquidity position with cash and cash equivalents of $659.4 million and significant availability under its revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2022, Cboe Global Markets, Inc. kept $0.11.
- Revenue$974.5M100.0%
- Cost of revenue−$556.4M57.1%
- Gross profit$418.1M42.9%
- Operating costs−$178.4M18.3%
- Operating income$239.7M24.6%
- Interest, other & tax−$130.1M13.4%
- Net income$109.6M11.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2022filed April 29, 2022Financial Statements
Q1 FY2022 against Q1 FY2021
| Line item | Q1 FY2022Q1 FY2021 | Change |
|---|---|---|
| Revenue | $974.50M$1.01B | −3.6% |
| Cost of Revenue | $556.40M$645.30M | −13.8% |
| Gross Profit | $418.10M$365.50M | +14.4% |
| Operating Expenses | $178.40M$160.90M | +10.9% |
| Operating Income | $239.70M$204.60M | +17.2% |
| Interest Expense | $11.70M$12.40M | −5.6% |
| Net Income | $109.60M$137.20M | −20.1% |
| EPS (Basic) | $1.02$1.27 | −19.7% |
| EPS (Diluted) | $1.02$1.27 | −19.7% |
| Shares Outstanding (Basic) | 106.60M107.30M | −0.7% |
| Shares Outstanding (Diluted) | 106.80M107.40M | −0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue decline in the first quarter of 2022?
The primary driver of the revenue decline was a decrease in cash and spot markets revenue, which fell by 16% to $461.9 million. This was mainly due to a significant reduction in the Section 31 fee rate and lower trading volumes in U.S. Equities.
How did the company's tax situation change, and what was its impact?
The effective tax rate significantly increased to 51.3% from 28.9% in the prior year. This was primarily due to unfavorable decisions in Section 199 tax litigation, leading to the recognition of additional tax reserves of $48.5 million, which negatively impacted net income.
What are the key strategic initiatives Cboe is pursuing for future growth?
Cboe is pursuing growth through strategic acquisitions, notably the planned acquisitions of ErisX to enter the digital asset marketplace and NEO to enhance its Canadian equities offering. These are expected to close in the second or third quarter of 2022.
How is Cboe managing its capital and liquidity?
Cboe has a strong liquidity position with $659.4 million in cash and cash equivalents as of March 31, 2022, and substantial availability under its revolving credit facility. The company also successfully issued $300 million in Senior Notes to fund strategic acquisitions and continues its share repurchase program and dividend payments, demonstrating a balanced approach to capital allocation.
06—Continue