10-QPeriod: Q2 FY2023

Cboe Global Markets, Inc. Quarterly Report for Q2 Ended Jun 30, 2023

Filed August 4, 2023For Securities:CBOE

Summary

Cboe Global Markets, Inc. reported robust financial results for the second quarter and first half of 2023, demonstrating a significant recovery from the prior year's performance, which was impacted by a substantial goodwill impairment. Total revenues for the quarter were $907.8 million, a decrease of 8% year-over-year, primarily driven by lower cash and spot market revenues. However, derivatives market revenues saw a healthy increase of 7%, indicating strength in their core options and futures businesses. The company achieved operating income of $244.8 million for the quarter, a substantial improvement from the prior year's operating loss, and net income of $167.8 million. For the first six months of 2023, total revenues were $1,896.0 million, down 3% year-over-year. Despite this slight decrease, the company substantially improved its profitability, reporting an operating income of $492.7 million and net income of $341.2 million. This turnaround was significantly influenced by the absence of the large goodwill impairment charge recorded in the prior year. The company's focus on derivatives and data & access solutions continues to drive performance, with these segments showing positive revenue growth. Cboe also highlighted strong liquidity and compliance with debt covenants, providing a stable financial foundation.

Financial Highlights

54 data points
Beta

Revenue

$907.80M

51.5% Gross Margin

Net Income

$167.80M

18.5% Net Margin

EPS (Diluted)

$1.57

Total Assets

$7.20B

Cash & Equivalents

$413.60M

Free Cash Flow

-$510.90M

Financial Statements
Beta
Revenue$907.80M
Cost of Revenue$440.70M
Gross Profit$467.10M
Operating Expenses$222.30M
Operating Income$244.80M
Interest Expense$16.70M
Net Income$167.80M
EPS (Basic)$1.58
EPS (Diluted)$1.57
Shares Outstanding (Basic)105.70M
Shares Outstanding (Diluted)106.10M

Key Highlights

  • 1Total revenues for Q2 2023 were $907.8 million, a decrease of 8% YoY, while H1 2023 revenues were $1,896.0 million, down 3% YoY.
  • 2Derivatives market revenue increased by 7% in Q2 and 11% in H1, driven by higher volumes in options and futures.
  • 3Operating income significantly improved, reaching $244.8 million in Q2 2023 (compared to a $237.4 million loss in Q2 2022) and $492.7 million in H1 2023 (compared to $2.3 million in H1 2022).
  • 4Net income for Q2 2023 was $167.8 million, a significant turnaround from a net loss of $184.5 million in Q2 2022. H1 2023 net income was $341.2 million, compared to a net loss of $74.9 million in H1 2022.
  • 5Operating expenses decreased by 66% in Q2 and 47% in H1, largely due to the absence of the prior year's goodwill impairment charge.
  • 6The company ended the quarter with strong liquidity, reporting $413.6 million in cash and cash equivalents and $1,136.4 million in total cash, cash equivalents, and restricted cash.
  • 7Cboe successfully repaid $140 million of its Term Loan Agreement in H1 2023, and remains in compliance with all debt covenants.

Frequently Asked Questions

The primary driver for the substantial improvement in operating income and net income was the absence of a $460.1 million goodwill impairment charge related to the Cboe Digital acquisition that negatively impacted the prior year's results. This, coupled with strong performance in the derivatives segment and improved operational efficiency, led to the significant year-over-year recovery.

The Options segment showed robust growth, with revenues less cost of revenues increasing by 20% YoY. The North American Equities segment experienced a 2% decline in revenues less cost of revenues, while the Europe and Asia Pacific segment saw a 5% decrease. The Futures and Global FX segments showed modest growth. The Digital segment continued to report a loss, with revenues less cost of revenues decreasing due to contra-revenue recognition.

Cboe expects to continue paying dividends and remains committed to its share repurchase program. As of June 30, 2023, the company had $139.8 million of availability remaining under its existing share repurchase authorizations. The decision to pay dividends remains at the discretion of the Board of Directors and is subject to various factors, including earnings and financial condition.

Cboe Global Markets has a total debt of $1,603.1 million as of June 30, 2023. The company has been actively managing its debt, including repaying $140 million of its Term Loan Agreement in the first half of 2023. The company remains in compliance with all its debt covenants and has a revolving credit facility providing additional liquidity if needed.