Cboe Global Markets Reports Results for Third Quarter 2024
Third Quarter Highlights*
Diluted EPS for the Quarter of $2.07, Up 6 percent
Record Adjusted Diluted EPS¹ for the Quarter of $2.22, Up 8 percent
Record Net Revenue for the Quarter of $532.0 million, Up 11 percent
Increases Organic Total Net Revenue Growth2 Range for 2024 to 7 to 9 percent, from 6 to 8 percent; Reaffirms Lower End of Data and Access Solutions Organic Net Revenue Growth Target2 of 7 to 10 percent
Increases 2024 Adjusted Operating Expense Guidance2 to $798 to $808 million, from $795 to $805 million
CHICAGO, Nov. 1, 2024 /PRNewswire/ -- Cboe Global Markets, Inc. (Cboe: CBOE) today reported financial results for the third quarter of 2024.
"In the third quarter, Cboe reported strong diluted EPS of $2.07, record net revenue of $532.0 million and record adjusted diluted EPS1 of $2.22, highlighting the solid progress we continued to make in sharpening our strategic focus," said Fredric Tomczyk, Cboe Global Markets Chief Executive Officer. "Through the first three quarters of the year, Cboe has grown net revenue by 9%, diluted EPS by 4%, and adjusted diluted EPS1 by 14%. The broad-based contribution speaks to the complementary nature of Cboe's ecosystem with Derivatives net revenue up 11%, Cash and Spot Markets up 9% and Data and Access Solutions up 6% on a year-to-date basis. I am excited as we move forward as an organization with a refined strategic framework that will help ensure we are well-aligned with secular market trends to drive growth and opportunity in the years ahead."
"Cboe reported strong 11% year-over-year net revenue growth to drive solid diluted EPS and record quarterly adjusted diluted EPS1 results in the third quarter," said Jill Griebenow, Cboe Global Markets Executive Vice President, Chief Financial Officer. "Derivatives net revenue was up a strong 13% year-over-year in the third quarter as Cboe produced record volumes across our derivatives platform. Cash and Spot Markets performance was also strong, producing 12% net revenue gains as compared to the third quarter of 2023, and Data and Access Solutions delivered 6% year-over- year net revenue growth for the quarter. Given the year-to-date trends and our expectations for the fourth quarter, we are raising our organic total net revenue growth2 range for 2024 to 7-9%, up from our prior guidance of 6-8%. In conjunction with our increased revenue guidance, we are increasing our full year adjusted operating expense guidance2 range to $798 to $808 million, up from our prior guidance range of $795 to $805 million. Moving forward, we are well positioned to allocate capital across our organization to the highest-return initiatives, helping deliver long-term shareholder value."
*All comparisons are third quarter 2024 compared to the same period in 2023.
(1)
A full reconciliation of our non-GAAP results to our GAAP ("Generally Accepted Accounting Principles") results is included in the attached tables. See "Non-GAAP Information" in the accompanying financial tables.
(2)
Specific quantifications of the amounts that would be required to reconcile the company's organic net revenue growth guidance and adjusted operating expenses guidance are not available. The company believes that there is uncertainty and unpredictability with respect to certain of its GAAP measures, primarily related to acquisition-related revenues and costs that would be required to reconcile to GAAP revenues less cost of revenues, GAAP operating expenses and GAAP effective tax rate, which preclude the company from providing accurate guidance on certain forward-looking GAAP to non-GAAP reconciliations. The company believes that providing estimates of the amounts that would be required to reconcile the range of the company's organic net revenue growth guidance and adjusted operating expenses would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.
Consolidated Third Quarter Results -Table 1Table 1 below presents summary selected unaudited condensed consolidated financial information for the company as reported and on an adjusted basis for the three months ended September 30, 2024 and 2023.
Table 1
Consolidated Third Quarter Results ($ in millions except per share)
3Q24
3Q23
Change
3Q24Adjusted1
3Q23Adjusted1
Change
Total Revenues Less Cost of Revenues
$ 532.0
$ 480.5
11 %
$ 532.0
$ 480.5
11 %
Total Operating Expenses
$ 224.6
$ 209.3
7 %
$ 204.0
$ 180.3
13 %
Operating Income
$ 307.4
$ 271.2
13 %
$ 328.0
$ 300.2
9 %
Operating Margin %
57.8 %
56.4 %
1.4 pp
61.7 %
62.5 %
(0.8)pp
Net Income Allocated to Common Stockholders
$ 217.4
$ 207.1
5 %
$ 232.9
$ 218.9
6 %
Diluted Earnings Per Share
$ 2.07
$ 1.95
6 %
$ 2.22
$ 2.06
8 %
EBITDA1
$ 341.1
$ 319.7
7 %
$ 342.0
$ 320.5
7 %
EBITDA Margin %1
64.1 %
66.5 %
(2.4)pp
64.3 %
66.7 %
(2.4)pp
Total revenues less cost of revenues (referred to as "net revenue"2) of $532.0 million increased 11 percent, compared to $480.5 million in the prior-year period, a result of increases in derivatives markets, cash and spot markets, and data and access solutions net revenue2.
Total operating expenses were $224.6 million versus $209.3 million in the third quarter of 2023, an increase of $15.3 million. This increase was primarily due to higher compensation and benefits and travel and promotional expenses, partially offset by a decline in professional fees and outside services. Adjusted operating expenses1 of $204.0 million increased 13 percent compared to $180.3 million in the third quarter of 2023. This increase was primarily due to higher compensation and benefits and travel and promotional expenses, partially offset by a decline in professional fees and outside services.
The effective tax rate for the third quarter of 2024 was 29.3 percent as compared with 22.9 percent in the third quarter of 2023. The higher effective tax rate in 2024 is primarily due to releases of penalties and interest associated with Section 199 positions in 2023. The effective tax rate on adjusted earnings1 was 29.2 percent, up 2.8 basis points when compared with 26.4 percent in last year's third quarter. The change was primarily due to lower non-deductible compensation in 2023 resulting from executive changes.
Diluted EPS for the third quarter of 2024 increased 6 percent to $2.07 compared to the third quarter of 2023. Adjusted diluted EPS1 of $2.22 increased 8 percent compared to 2023 third quarter results.
Business Segment Information:
Table 2
Total Revenues Less Cost of Revenues by Business Segment(in millions)
3Q24
3Q23
Change
Options
$ 320.9
$ 290.8
10 %
North American Equities
98.0
95.1
3 %
Europe and Asia Pacific
55.6
45.6
22 %
Futures
38.0
32.4
17 %
Global FX
20.0
18.3
9 %
Digital
(0.5)
(1.7)
* %
Total
$ 532.0
$ 480.5
11 %
(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.
(2)
See the attached tables on page 10 for "Net Revenue by Revenue Caption."
*Not meaningful
Discussion of Results by Business Segment1:
Options:
Options record net revenue of $320.9 million was up $30.1 million, or 10 percent, from the third quarter of 2023. Net transaction and clearing fees2 increased primarily as a result of a 13 percent increase in index options trading volumes versus the third quarter of 2023. Access and capacity fees were 5 percent higher than the third quarter of 2023.
Net transaction and clearing fees2 increased $35.9 million, or 14 percent, reflecting a 2 percent increase in total options average daily volume ("ADV") and a 10 percent increase in total options revenue per contract ("RPC") compared to the third quarter of 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 30.5 percent for the third quarter of 2024 compared to 33.6 percent in the third quarter of 2023, a result of lower multi-list market share as compared to the third quarter of 2023.
North American (N.A.) Equities:
N.A. Equities net revenue of $98.0 million increased $2.9 million, or 3 percent, from the third quarter of 2023, reflecting higher net transaction and clearing fees2 and access and capacity fees, partially offset by a decline in industry market data fees.
Net transaction and clearing fees2 increased by $2.9 million, or 10 percent, compared to the third quarter of 2023. The increase was driven by stronger industry volumes and improved net capture rates, partially offset by lower market share as compared to the third quarter of 2023.
Cboe's U.S. Equities exchanges had market share of 10.9 percent for the third quarter of 2024 compared to 12.7 percent in the third quarter of 2023 given higher industry off-exchange and closing auction share. Cboe's U.S. Equities off-exchange market share was 17.7 percent, down from 19.9 percent in the third quarter of 2023. Canadian Equities market share declined to 14.6 percent as compared to 15.2 percent in the third quarter of 2023.
Europe and Asia Pacific (APAC):
Europe and APAC net revenue of $55.6 million increased by 22 percent compared to the third quarter of 2023, reflecting growth in net transaction and clearing fees2 and non-transaction revenues. On a constant currency basis3, net revenues were $54.9 million, up 20 percent on a year-over-year basis. European Equities average daily notional value ("ADNV") traded on Cboe European Equities was €9.3 billion, up 16 percent compared to the third quarter of 2023 given a 13 percent increase in industry market volumes. Japanese Equities ADNV was 117 percent higher and Australian Equities ADNV was 28 percent higher than the third quarter of 2023.
For the third quarter of 2024, Cboe European Equities had 23.8 percent market share, up from 23.2 percent in the third quarter of 2023. Cboe European Equities net capture rate increased 11 percent given a mix shift to higher capture products. Cboe Australia had 20.8 percent market share for the third quarter of 2024, up from 17.9 percent in the third quarter of 2023. Cboe Japan grew market share to 5.4 percent in the third quarter of 2024 from 3.3 percent in the third quarter of 2023.
Futures:
Futures net revenue of $38.0 million increased $5.6 million, or 17 percent, from the third quarter of 2023 due to an increase in net transaction and clearing fees2.
Net transaction and clearing fees2 increased $5.6 million, reflecting a 19 percent increase in ADV during the quarter.
Global FX:
Global FX record net revenue of $20.0 million increased 9 percent, primarily due to higher net transaction and clearing fees2. ADNV traded on the Cboe FX platform was $48.3 billion for the quarter, up 9 percent compared to last year's third quarter, and net capture rate per one million dollars traded was $2.66 for the quarter, up 1 percent compared to $2.64 in the third quarter of 2023.
Cboe FX market share was 19.1 percent for the quarter compared to 20.2 percent in last year's third quarter.
(1)
The Digital and Corporate segments are not further discussed as results were not material during the third quarter of 2024.
(2)
See the attached tables on page 10 for "Net Transaction and Clearing Fees by Business Segment."
(3)
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 7 to 9 percentage points, up from previous guidance calling for 6 to 8 percentage points in 2024.
Reaffirms lower end of organic net revenue1 growth range from Data and Access Solutions of 7 to 10 percentage points in 2024.
Adjusted operating expenses1 in 2024 are expected to be in the range of $798 to $808 million, up from previous guidance of $795 to $805 million. The guidance excludes the expected amortization of acquired intangible assets of $89 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.
Minority investments are expected to contribute a $40 to $46 million benefit in 2024 to non-operating (expenses) income, up from previous guidance of $37 to $43 million. Reaffirms that $33 to $37 million of the benefit will come in the earnings on investments line and anticipates $7 to $9 million to come through the other income (expense), net line, up from previous guidance of $4 to $6 million.
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.
Capital expenditures for 2024 are expected to be in the range of $57 to $63 million, up from previous guidance of $51 to $57 million.
(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 September 30, 2024, the company had cash and cash equivalents of $763.2 million and adjusted cash2 of $763.7 million. Total debt as of September 30, 2024 was $1,440.6 million.
The company paid cash dividends of $66.3 million, or $0.63 per share, during the third quarter of 2024 and utilized $24.6 million to repurchase approximately 144 thousand shares of its common stock under its share repurchase program at an average price of $170.45 per share. As of September 30, 2024, the company had approximately $679.8 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 third-quarter financial results today, November 1, 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 6762730. 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.
(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.
About Cboe Global Markets
Cboe Global Markets (Cboe: CBOE), the world's leading derivatives and securities exchange network, delivers cutting-edge trading, clearing and investment solutions to people around the world. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives, and FX, across North America, Europe, and Asia Pacific. Above all, Cboe is committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future. To learn more about the Exchange for the World Stage, visit www.cboe.com.
Cautionary Statements Regarding Forward-Looking Information
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. You can identify these statements by forward-looking words such as "may," "might," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," and the negative of these terms and other comparable terminology. All statements that reflect our expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements.
We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Some factors that could cause actual results to differ include: the loss of our right to exclusively list and trade certain index options and futures products; economic, political and market conditions; compliance with legal and regulatory obligations; price competition and consolidation in our industry; decreases in trading or clearing volumes, market data fees or a shift in the mix of products traded on our exchanges; legislative or regulatory changes or changes in tax regimes; our ability to protect our systems and communication networks from security vulnerabilities and breaches; our ability to attract and retain skilled management and other personnel, increasing competition by foreign and domestic entities; our dependence on and exposure to risk from third parties; global expansion of operations; factors that impact the quality and integrity of our and other applicable indices; our ability to manage our growth and strategic acquisitions or alliances effectively; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to minimize the risks, including our credit, counterparty investment, and default risks, associated with operating a European clearinghouse; our ability to accommodate trading and clearing volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems; misconduct by those who use our markets or our products or for whom we clear transactions; challenges to our use of open source software code; our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status; our ability to maintain BIDS Trading as an independently managed and operated trading venue, separate from and not integrated with our registered national securities exchanges; damage to our reputation; the ability of our compliance and risk management methods to effectively monitor and manage our risks; restrictions imposed by our debt obligations and our ability to make payments on or refinance our debt obligations; our ability to maintain an investment grade credit rating; impairment of our goodwill, long-lived assets, investments or intangible assets; the impacts of pandemics; the accuracy of our estimates and expectations; litigation risks and other liabilities; risks relating to digital assets, including winding down the Cboe Digital spot market and transitioning digital asset futures contracts to CFE, operating a digital assets futures clearinghouse, cybercrime, changes in digital asset regulation, and fluctuations in digital asset prices. More detailed information about factors that may affect our actual results to differ may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings made from time to time with the SEC.
We do not undertake, and we expressly disclaim, any duty to update any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
The condensed consolidated statements of income and balance sheets are unaudited and subject to revision.
Cboe Media Contacts:
Analyst Contact:
Angela Tu
Tim Cave
Kenneth Hill, CFA
(646) 856-8734
+44 (0) 7593 506 719
(312) 786-7559
CBOE-F
Trademarks:
Cboe®, Cboe Global Markets®, Cboe Volatility Index®, Cboe Clear®, Cboe Datashop®, BIDS Trading®, BZX®, BYX®, Cboe Clear®, EDGX®, EDGA®, MATCHNow®, and VIX® are registered trademarks of Cboe Global Markets, Inc. and its subsidiaries. All other trademarks and service marks are the property of their respective owners.
Cboe Global Markets, Inc.
Key Performance Statistics by Business Segment
3Q 2024
2Q 2024
1Q 2024
4Q 2023
3Q 2023
Options
Total industry ADV (in thousands)
48,733
46,129
47,452
44,410
43,411
Total Company Options ADV (in thousands)
14,882
14,384
14,833
14,896
14,592
Multi-listed options
10,655
10,367
10,744
10,725
10,848
Index options
4,227
4,017
4,089
4,172
3,743
Total Options market share
30.5 %
31.2 %
31.3 %
33.5 %
33.6 %
Multi-listed options
24.0 %
24.6 %
24.8 %
26.7 %
27.4 %
Total Options RPC:
$ 0.298
$ 0.295
$ 0.299
$ 0.297
$ 0.270
Multi-listed options
$ 0.063
$ 0.062
$ 0.064
$ 0.060
$ 0.055
Index options
$ 0.892
$ 0.898
$ 0.915
$ 0.908
$ 0.894
North American Equities
U.S. Equities - Exchange:
Total industry ADV (shares in billions)
11.5
11.8
11.8
11.2
10.4
Market share %
10.9 %
11.4 %
12.8 %
13.0 %
12.7 %
Net capture (per 100 touched shares)
$ 0.024
$ 0.027
$ 0.019
$ 0.013
$ 0.022
U.S. Equities - Off-Exchange:
ADV (touched shares, in millions)
79.3
74.7
82.0
76.1
73.8
Off-Exchange ATS Block Market Share % (reported on a one-month lag)
17.7 %
17.8 %
17.6 %
18.4 %
19.9 %
Net capture (per 100 touched shares)
$ 0.135
$ 0.136
$ 0.132
$ 0.137
$ 0.125
Canadian Equities:
ADV (matched shares, in millions)
135.9
150.6
146.3
141.8
127.5
Total market share %
14.6 %
15.0 %
15.3 %
15.3 %
15.2 %
Net capture (per 10,000 shares, in Canadian Dollars)
$ 4.240
$ 4.046
$ 3.997
$ 3.905
$ 3.976
Europe and Asia Pacific
European Equities:
Total industry ADNV (Euros - in billions)
€ 38.9
€ 42.6
€ 41.8
€ 37.7
€ 34.3
Market share %
23.8 %
22.5 %
23.7 %
