10-QPeriod: Q3 FY2022

Cboe Global Markets, Inc. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 4, 2022For Securities:CBOE

Summary

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 billion 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 million 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.

Financial Highlights

55 data points
Beta

Revenue

$993.50M

44.5% Gross Margin

Net Income

$150.20M

15.1% Net Margin

EPS (Diluted)

$1.41

Total Assets

$7.30B

Cash & Equivalents

$353.30M

Free Cash Flow

$159.10M

Financial Statements
Beta
Revenue$993.50M
Cost of Revenue$551.10M
Gross Profit$442.40M
Operating Expenses$205.60M
Operating Income$236.80M
Interest Expense$16.10M
Net Income$150.20M
EPS (Basic)$1.41
EPS (Diluted)$1.41
Shares Outstanding (Basic)106.20M
Shares Outstanding (Diluted)106.40M

Key Highlights

  • 1Total 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.
  • 2Significant goodwill impairment of $460.9 million was recorded for the Digital segment, substantially impacting net income for the nine-month period.
  • 3The 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.
  • 4North 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.
  • 5Europe 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.
  • 6Cboe maintained a strong liquidity position with $1.39 billion in cash, cash equivalents, and restricted cash as of September 30, 2022.
  • 7The company repurchased approximately $1.3 billion of common stock since inception of its program through September 30, 2022.

Frequently Asked Questions

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.

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.

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.

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.