01—Abstract
Summary
Summary of the 10-Q filed November 4, 2022. Cited figures are marked; the original filing is the authoritative source.
Cboe Global Markets, Inc. (CBOE) reported solid revenue growth for the nine months ended September 30, 2022, with total revenues increasing by 12% to $2.95 billiona compared to the prior year.
This growth was driven by increases in transaction and clearing fees across its Options and European Equities exchanges, along with higher data and access solutions revenue. The company also benefited from an increased Section 31 fee rate. However, profitability was significantly impacted by a goodwill impairment charge of $460.9 millionb related to the Cboe Digital segment, leading to a substantial decrease in net income for the nine-month period.
Despite this, the company maintained a strong liquidity position and continues to execute its strategic initiatives, including recent acquisitions of Cboe Digital and NEO. Looking ahead, Cboe is focused on integrating its recent acquisitions and managing market volatility.
While the digital asset segment experienced a significant impairment, the core businesses in Options and Equities demonstrated resilience and growth. Investors should monitor the company's ability to navigate the evolving digital asset landscape and the impact of macroeconomic factors on trading volumes.
02—Key points
Key Highlights
- Total revenues increased by 12% to $2.95 billion for the nine months ended September 30, 2022, driven by higher trading volumes and increased data and access solutions revenue.
- Significant goodwill impairment of $460.9 million was recorded for the Digital segment, substantially impacting net income for the nine-month period.
- The Options segment showed strong performance with a 33% increase in revenue less cost of revenues for the three months ended September 30, 2022, driven by a 49% rise in index options ADV.
- North American Equities segment revenue less cost of revenues grew by 13% for the three months ended September 30, 2022, supported by increased equity volumes and acquisition of NEO.
- Europe and Asia Pacific segment revenue less cost of revenues saw a 15% increase for the nine months ended September 30, 2022, despite adverse foreign currency impacts.
- Cboe maintained a strong liquidity position with $1.39 billion in cash, cash equivalents, and restricted cash as of September 30, 2022.
- The company repurchased approximately $1.3 billion of common stock since inception of its program through September 30, 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2022, Cboe Global Markets, Inc. kept $0.15.
- Revenue$993.5M100.0%
- Cost of revenue−$551.1M55.5%
- Gross profit$442.4M44.5%
- Operating costs−$205.6M20.7%
- Operating income$236.8M23.8%
- Interest, other & tax−$86.6M8.7%
- Net income$150.2M15.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed November 4, 2022Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $993.50M$816.80M | +21.6% |
| Cost of Revenue | $551.10M$447.30M | +23.2% |
| Gross Profit | $442.40M$369.50M | +19.7% |
| Operating Expenses | $205.60M$178.80M | +15.0% |
| Operating Income | $236.80M$190.70M | +24.2% |
| Interest Expense | $16.10M$11.70M | +37.6% |
| Net Income | $150.20M$120.40M | +24.8% |
| EPS (Basic) | $1.41$1.12 | +25.9% |
| EPS (Diluted) | $1.41$1.12 | +25.9% |
| Shares Outstanding (Basic) | 106.20M106.80M | −0.6% |
| Shares Outstanding (Diluted) | 106.40M107.00M | −0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the third quarter of 2022?
Revenue growth in the third quarter of 2022 was primarily driven by increased trading volumes on Cboe's Options and U.S. Equities exchanges, an increase in the Section 31 fee rate, and higher data and access solutions revenue, particularly from access and capacity fees.
What caused the significant decrease in net income for the nine months ended September 30, 2022?
The substantial decrease in net income for the nine months ended September 30, 2022, was primarily due to a goodwill impairment charge of $460.9 million recognized in the Digital segment, stemming from negative trends in the broader digital asset environment and challenges in syndicating minority ownership interests.
How did recent acquisitions impact the company's financial performance?
The acquisitions of Cboe Digital (formerly ErisX) and NEO are expected to contribute to future growth. While Cboe Digital's performance led to a significant goodwill impairment, the company continues to integrate these businesses. The acquisitions contributed to increased revenue in segments like North American Equities and Digital.
What is the company's outlook on dividends and share repurchases?
Cboe expects to continue paying dividends, with the decision remaining at the Board of Directors' discretion. The company had $233.3 million remaining under its share repurchase authorization as of September 30, 2022, and has repurchased a significant amount of its stock since the program's inception.
06—Continue