Second Quarter Highlights*
- Diluted EPS for the Quarter of $1.33, Down 15 percent, primarily due to the impairment of intangible assets recognized in the Digital reporting unit
- Adjusted Diluted EPS¹ for the Quarter of $2.15, Up 21 percent, which ties the quarterly record from the first quarter of 2024
- Record Net Revenue for the Quarter of $513.8 million, Up 10 percent
- Increases Organic Total Net Revenue Growth2 Range for 2024 to 6 to 8 percent, from 5 to 7 percent; Anticipates Lower End of Data and Access Solutions Organic Net Revenue Growth Target2 of 7 to 10 percent
- Reaffirms 2024 Adjusted Operating Expense Guidance2 of $795 to $805 million
Cboe Global Markets, Inc. (Cboe: CBOE) today reported financial results for the second quarter of 2024.
"Cboe reported another strong quarter with record net revenue of $514 million, diluted EPS of $1.33, and adjusted diluted EPS1 of $2.15, up a robust 21% from the second quarter of 2023," said Fredric Tomczyk, Cboe Global Markets Chief Executive Officer. "The second quarter results illustrate the durability of the Cboe business model with year-to-date net revenue increasing by a strong 8% and adjusted diluted EPS1 coming in 17% higher as compared to first half 2023 levels. I am incredibly pleased with the progress we continue to make as we work through our strategic review, the early output of which is evidenced by our solid expense management trends, improved year-over-year EBITDA margins, and additive capital allocation actions with $90 million of share repurchases during the second quarter and a total of $180 million for the first half of the year. Each component of our exchange ecosystem performed well during the second quarter, and we are well positioned for the second half of the year."
"Cboe reported strong 10% year-over-year net revenue growth in the second quarter as each category of our business posted solid year-over-year trends," said Jill Griebenow, Cboe Global Markets Executive Vice President, Chief Financial Officer. "Cash and Spot Markets performance was robust with net revenues growing 15% during the second quarter of 2024. Derivative trends were also solid, up 11% year-over-year, and Data and Access Solutions delivered 5% year-over-year net revenue growth. Notably, adjusted EBITDA margins1 reached 67% through the first half of 2024, up more than two percentage points as compared to the first half of 2023, and we returned nearly $300 million in capital to shareholders in the form of share repurchases and dividends. Moving forward, we anticipate organic total net revenue growth2 to finish in the 6-8% range, up from our prior guidance of the higher end of 5-7%. We are reaffirming our Data and Access Solutions organic net revenue growth2 range of 7-10%, but anticipate finishing at the lower end of the guidance range. Additionally, we are reaffirming our full year adjusted operating expense guidance2 range of $795 to $805 million. We have produced strong results for the first half of 2024 and look forward to delivering durable returns for shareholders in the quarters ahead."
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*All comparisons are second quarter 2024 compared to the same period in 2023. |
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(1)A full reconciliation of our non-GAAP results to our GAAP ("Generally Accepted Accounting Principles") results is included in the attached tables. See "Non-GAAP Information" in the accompanying financial tables. |
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(2)Specific quantifications of the amounts that would be required to reconcile the company's organic net revenue growth guidance and adjusted operating expenses guidance are not available. The company believes that there is uncertainty and unpredictability with respect to certain of its GAAP measures, primarily related to acquisition-related revenues and costs that would be required to reconcile to GAAP revenues less cost of revenues, GAAP operating expenses and GAAP effective tax rate, which preclude the company from providing accurate guidance on certain forward-looking GAAP to non-GAAP reconciliations. The company believes that providing estimates of the amounts that would be required to reconcile the range of the company's organic net revenue growth guidance and adjusted operating expenses would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above. |
Consolidated Second Quarter Results -Table 1
Table 1 below presents summary selected unaudited condensed consolidated financial information for the company as reported and on an adjusted basis for the three months ended June 30, 2024 and 2023.
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Table 1 |
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Consolidated Second Quarter Results |
2Q24 |
2Q23 |
|||||||||||||||||||
|
($ in millions except per share) |
2Q24 |
2Q23 |
Change |
Adjusted1 |
Adjusted1 |
Change |
|||||||||||||||
|
Total Revenues Less Cost of Revenues |
$ |
513.8 |
$ |
467.1 |
10 |
% |
$ |
513.8 |
$ |
467.1 |
10 |
% |
|||||||||
|
Total Operating Expenses |
$ |
303.7 |
$ |
222.3 |
37 |
% |
$ |
197.1 |
$ |
192.3 |
2 |
% |
|||||||||
|
Operating Income |
$ |
210.1 |
$ |
244.8 |
(14) |
% |
$ |
316.7 |
$ |
274.8 |
15 |
% |
|||||||||
|
Operating Margin % |
40.9 |
% |
52.4 |
% |
(11.5) |
pp |
61.6 |
% |
58.8 |
% |
2.8 |
pp |
|||||||||
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Net Income Allocated to Common Stockholders |
$ |
139.7 |
$ |
167.0 |
(16) |
% |
$ |
226.2 |
$ |
188.7 |
20 |
% |
|||||||||
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Diluted Earnings Per Share |
$ |
1.33 |
$ |
1.57 |
(15) |
% |
$ |
2.15 |
$ |
1.78 |
21 |
% |
|||||||||
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EBITDA1 |
$ |
242.3 |
$ |
294.7 |
(18) |
% |
$ |
340.7 |
$ |
293.3 |
16 |
% |
|||||||||
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EBITDA Margin %1 |
47.2 |
% |
63.1 |
% |
(15.9) |
pp |
66.3 |
% |
62.8 |
% |
3.5 |
pp |
|||||||||
- Total revenues less cost of revenues (referred to as "net revenue2") of $513.8 million increased 10 percent, compared to $467.1 million in the prior-year period, a result of increases in cash and spot markets, derivatives markets, and data and access solutions net revenue.
- Total operating expenses were $303.7 million versus $222.3 million in the second quarter of 2023, an increase of $81.4 million, primarily related to the impairment of intangible assets recognized in the Digital reporting unit. Adjusted operating expenses1 of $197.1 million increased 2 percent compared to $192.3 million in the second quarter of 2023. This increase was primarily due to higher compensation and benefits and professional fees and outside services, partially offset by a decline in travel and promotional expenses.
- The effective tax rate for the second quarter of 2024 was 30.8 percent as compared with 30.6 percent in the second quarter of 2023. The higher effective tax rate in 2024 is primarily due to the valuation allowance associated with the impairment of the Globacap investment. The effective tax rate on adjusted earnings1 was 29.5 percent, down 0.2 basis points when compared with 29.7 percent in last year's second quarter.
- Diluted EPS for the second quarter of 2024 decreased 15 percent to $1.33 compared to the second quarter of 2023. Adjusted diluted EPS1 of $2.15 increased 21 percent compared to 2023 second quarter results.
Business Segment Information:
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Table 2 |
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Total Revenues Less Cost of Revenues by |
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Business Segment |
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(in millions) |
2Q24 |
2Q23 |
Change |
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Options |
$ |
306.7 |
$ |
283.2 |
8 |
% |
||||
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North American Equities |
98.3 |
90.8 |
8 |
% |
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Europe and Asia Pacific |
54.3 |
47.3 |
15 |
% |
||||||
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Futures |
34.8 |
29.2 |
19 |
% |
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Global FX |
19.8 |
17.8 |
11 |
% |
||||||
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Digital |
(0.1) |
(1.2) |
* |
% |
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Total |
$ |
513.8 |
$ |
467.1 |
10 |
% |
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(1)A full reconciliation of our non-GAAP results to our GAAP results is included in the attached tables. See "Non-GAAP Information" in the accompanying financial tables. |
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(2)See the attached tables on page 10 for "Net Revenue by Revenue Caption." |
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*Not meaningful |
Discussion of Results by Business Segment:
Options:
- Options net revenue of $306.7 million was up $23.5 million, or 8 percent, from the second quarter of 2023. Net transaction and clearing fees1 increased primarily as a result of a 9 percent increase in index options trading volumes versus the second quarter of 2023. Access and capacity fees and market data fees were 3 percent higher than the second quarter 2023.
- Net transaction and clearing fees1 increased $27.3 million, or 11 percent, reflecting a 1 percent increase in total options average daily volume ("ADV") and a 9 percent increase in total options RPC compared to the second quarter 2023. The increase in total options RPC was due to a mix shift, with index options representing a higher percentage of total options volume.
- Cboe's Options exchanges had total market share of 31.2 percent for the second quarter of 2024 compared to 33.3 percent in the second quarter of 2023, a result of lower multi-list market share as compared to the second quarter of 2023.
North American (N.A.) Equities:
- N.A. Equities record net revenue of $98.3 million increased $7.5 million, or 8 percent versus the second quarter of 2023, reflecting higher net transaction and clearing fees1, proprietary market data fees, and access and capacity fees.
- Net transaction and clearing fees1 increased by $7.0 million, or 25 percent, compared to the second quarter of 2023. The increase was driven by stronger U.S. exchange and off-exchange net capture rates, as well as stronger volumes and market share in Canadian Equities as compared to the second quarter of 2023.
- Cboe's U.S. Equities exchanges had market share of 11.4 percent for the second quarter of 2024 compared to 12.7 percent in the second quarter of 2023 given higher off-exchange and closing auction share. Cboe's U.S. Equities off-exchange market share was 17.8 percent, down from 19.9 percent in the second quarter of 2023 as overall industry alternative trading systems ("ATS") market share declined as a percentage of off-exchange share. Canadian Equities market share rose to 15.0 percent as compared to 14.5 percent in the second quarter of 2023.
Europe and Asia Pacific (APAC):
- Europe and APAC net revenue of $54.3 million increased by 15 percent compared to the second quarter of 2023, reflecting growth in transaction and non-transaction revenues. On a constant currency basis2, net revenues were $55.2 million, up 17 percent on a year-over-year basis. European Equities average daily notional value ("ADNV") traded on Cboe European Equities was €9.6 billion, up 4 percent compared to the second quarter of 2023 given a 10 percent increase in industry market volumes, partially offset by lower market share. Japanese Equities ADNV was 71 percent higher and Australian Equities ADNV was 12 percent higher than the second quarter of 2023.
- For the second quarter of 2024, Cboe European Equities had 22.5 percent market share, down from 23.8 percent in the second quarter of 2023. Total market share was negatively impacted by elevated closing auction activity on listing venues and lower lit book market share. Cboe European Equities net capture rate increased 9 percent given a mix shift to higher capture products. Cboe Australia had 20.8 percent market share for the second quarter of 2024, up from 18.2 percent in the second quarter of 2023. Cboe Japan grew market share to 5.5 percent in the second quarter of 2024 from 4.1 percent in the second quarter of 2023.
Futures:
- Futures net revenue of $34.8 million increased $5.6 million compared to the second quarter of 2023 due to an increase in net transaction and clearing fees1.
- Net transaction and clearing fees1 increased $5.7 million, reflecting a 28 percent increase in ADV during the quarter.
Global FX:
- Global FX record net revenue of $19.8 million increased 11 percent, primarily due to higher net transaction and clearing fees1. ADNV traded on the Cboe FX platform was $47.7 billion for the quarter, up 12 percent compared to last year's second quarter, and net capture rate per one million dollars traded was $2.69 for the quarter, up 1 percent compared to $2.66 in the second quarter of 2023.
- Cboe FX market share was 20.2 percent for the quarter compared to 19.5 percent in last year's second quarter.
Digital:
- Cboe announced the realignment of the Cboe Digital asset business on April 25, 2024. Cboe plans to transition digital asset derivatives trading and clearing into existing derivatives and clearing business lines, pending regulatory review, and has wound down trading on the Cboe Digital spot digital asset trading market. The Digital segment recorded an impairment of intangible assets of $81.0 million related to the Cboe Digital spot market wind down in the second quarter of 2024.
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(1)See the attached tables on page 10 for "Net Transaction and Clearing Fees by Business Segment." |
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(2)A full reconciliation of our non-GAAP results to our GAAP results is included in the attached tables. See "Non-GAAP Information" in the accompanying financial tables. |
2024 Fiscal Year Financial Guidance
Cboe provided guidance for the 2024 fiscal year as noted below.
- Organic total net revenue growth1 is expected to be in the range of 6 to 8 percentage points, up from previous guidance calling for the higher end of 5 to 7 percentage points in 2024.
- Anticipates lower end of organic net revenue1 growth range from Data and Access Solutions of 7 to 10 percentage points in 2024.
- Reaffirms adjusted operating expenses1 in 2024 are expected to be in the range of $795 to $805 million. The guidance excludes the expected amortization of acquired intangible assets of $92 million; the company reflects the exclusion of this amount in its non-GAAP reconciliation.
- Reaffirms depreciation and amortization expense for 2024 is expected to be in the range of $43 to $47 million, excluding the expected amortization of acquired intangible assets.
- Reaffirms minority investments are expected to contribute a $37 to $43 million benefit in 2024 to non-operating (expenses) income. Anticipates that $33 to $37 million of the benefit will come in the earnings on investments line and $4 to $6 million through the other (expense) income, net line.
- Reaffirms the effective tax rate on adjusted earnings1 for the full year 2024 is expected to be in the range of 28.5 to 30.5 percent. Significant changes in trading volume, expenses, tax laws or rates and other items could materially impact this expectation.
- Reaffirms capital expenditures for 2024 are expected to be in the range of $51 to $57 million.
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(1)Specific quantifications of the amounts that would be required to reconcile the company's organic and inorganic growth guidance, adjusted operating expenses guidance, annualized adjusted operating expenses guidance, and the effective tax rate on adjusted earnings guidance are not available. Acquisitions are considered organic after 12 months of closing. The company believes that there is uncertainty and unpredictability with respect to certain of its GAAP measures, primarily related to acquisition-related revenues and costs that would be required to reconcile to GAAP revenues less cost of revenues, GAAP operating expenses and GAAP effective tax rate, which preclude the company from providing accurate guidance on certain forward-looking GAAP to non-GAAP reconciliations. The company believes that providing estimates of the amounts that would be required to reconcile the range of the company's organic growth, adjusted operating expenses, annualized adjusted operating expenses, and the effective tax rate on adjusted earnings would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above. |
Capital Management
At June 30, 2024, the company had cash and cash equivalents of $614.6 million and adjusted cash2 of $594.5 million. Total debt as of June 30, 2024 was $1,440.1 million.
The company paid cash dividends of $58.2 million, or $0.55 per share, during the second quarter of 2024 and utilized $90.4 million to repurchase approximately 514 thousand shares of its common stock under its share repurchase program at an average price of $175.76 per share. As of June 30, 2024, the company had approximately $204.4 million of availability remaining under its existing share repurchase authorizations.
Earnings Conference Call
Executives of Cboe Global Markets will host a conference call to review its second-quarter financial results today, August 2, 2024, at 8:30 a.m. ET/7:30 a.m. CT. The conference call and any accompanying slides will be publicly available via live webcast from the Investor Relations section of the company's website at www.cboe.com under Events & Presentations. Participants may also listen via telephone by dialing (800) 715-9871 (toll-free) or (646) 307-1963 (toll) and using the Conference ID 2619514. Telephone participants should place calls 10 minutes prior to the start of the call. The webcast will be archived on the company's website for replay.
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(2)A full reconciliation of our non-GAAP results to our GAAP results is included in the attached tables. See "Non-GAAP Information" in the accompanying financial tables. |
