02.04.2022

Cboe Reports Record Annual Net Revenue

02.04.2022
Cboe Reports Record Annual Net Revenue

– Diluted EPS for the Quarter of $1.54, Up 91 percent; Diluted EPS for the Full Year of $4.92, Up 15 percent

– Adjusted Diluted EPS¹ for the Quarter of $1.70, Up 41 percent; Record Adjusted Diluted EPS for Full Year of $6.05, Up 15 percent

– Net Revenue for the Quarter of $391 million, Up 27 percent; Record Net Revenue for Full Year of nearly $1.5 billion, Up 18 percent

– For 2022, confirming Cboe expects to deliver 5 to 7 percentage points of organic total net revenue growth² and 7 to 10 percentage points of organic net revenue growth² in Data and Access Solutions, consistent with messaging at Cboe’s 2021 Investor Day

– Establishing 2022 adjusted operating expense guidance² of $617 to $625 million, reflecting continuing investment to drive long term revenue and earnings growth

Cboe Global Markets, Inc. reported financial results for the 2021 fourth quarter and full year.

“2021 was a remarkable year for Cboe as we made significant progress advancing our strategic initiatives while delivering record full year results. As we begin 2022, we are focused on the transformational opportunities ahead in Data and Access Solutions, Derivatives and Cboe Digital, opportunities that span our ecosystem,” said Edward T. Tilly, Cboe Global Markets Chairman, President and Chief Executive Officer. “We have demonstrated our ability to diversify and strengthen our revenue profile as a global market operator, something we believe will accelerate in 2022 as we continue to broaden our geographic reach and extend access to our unique set of products and services around the globe. Continued efforts to build on our core capabilities through organic and inorganic investment will allow Cboe to remain a leader in capital markets innovation. I am incredibly proud of the entire Cboe team for the record results delivered in 2021, and I am even more excited about the opportunities in 2022 and beyond.”

“Cboe delivered outstanding fourth quarter and full year results. Over the course of the year, we consistently improved upon our initial expectations, leveraging strong trends in our core businesses as well as contributions from new initiatives. Notably, our fourth quarter transaction revenue grew 42% complemented by 21% growth across our recurring non-transaction businesses,” said Brian N. Schell, Cboe Global Markets Executive Vice President, Chief Financial Officer and Treasurer. “Consistent with what we outlined at our recent Investor Day, we are confident in our ability to deliver on our 5-7% organic total net revenue growth2 target and 7-10% organic net revenue growth2 expectation across Data and Access Solutions in the year ahead. Our full year adjusted operating expense guidance2 of $617 to $625 million reflects the numerous and attractive opportunities we can invest in across our ecosystem, investments we expect to fuel future revenue and earnings growth at Cboe. And while we anticipate investing diligently across our businesses, returning capital to shareholders and maintaining a flexible balance sheet remain critical components of delivering long-term shareholder value. Overall, 2021 was an incredibly strong year for Cboe, and we look forward to building on that momentum in the year ahead.”

*All comparisons are the fourth quarter or the year ended December 31,  2021, compared to the same period in 2020.
 (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) Specific quantifications of the amounts that would be required to reconcile the company’s organic growth guidance, adjusted operating expenses guidance and the effective tax rate on adjusted earnings 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 expenses that would be required to reconcile to GAAP revenues less costs 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 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.

Discussion of Results by Business Segment:

Options:

  • Options net revenue of $202.5 million was up $40.0 million, or 25 percent, from the fourth quarter of 2020, primarily due to a double-digit increase in net transaction and clearing fees1, as a result of higher trading volumes in index and multi-listed options and higher index options revenue per contract (“RPC”), as well as a double-digit increases in access and capacity fees and market data fees.
  • Net transaction and clearing fees1 increased $41.5 million, or 34 percent, reflecting a 23 percent increase in total options average daily volume (“ADV”) and a 9 percent increase in total options RPC compared to the fourth quarter 2020. The increase in total options RPC was due to a mix shift, with index options representing a higher percentage of total options volume. The RPC for multi-listed options decreased 3 percent. The RPC for index options increased 5 percent as SPX options accounted for a higher percentage of index volume.
  • Cboe’s Options business had total market share of 31.1 percent for the fourth quarter of 2021 compared to 32.0 percent in the fourth quarter of 2020, primarily reflecting a decrease in Cboe’s multi-listed options market share for the quarter of 27.3 percent compared to 28.5 percent in the fourth quarter of 2020.

North American (N.A.) Equities:

  • N.A. Equities net revenue of $91.6 million was up $18.0 million, or 24 percent, primarily due to higher transaction and clearing fees and growth in access and capacity fees. Transaction and clearing fees benefited from higher volumes and improved net capture as a result of year-over-year pricing changes. The 2020 acquisition of BIDS Trading contributed $8.5 million in net revenue for the quarter.
  • Cboe U.S. Equities exchanges had market share of 13.3 percent for the fourth quarter of 2021 compared to 15.1 percent in the fourth quarter of 2020.

Europe and Asia Pacific:

  • Europe and Asia Pacific net revenue of $51.7 million increased by 46 percent, primarily reflecting the addition of Chi-X Asia Pacific in July 2021, which contributed $8.5 million in net revenue, and growth in European equities and clearing. European Equities average daily notional value (“ADNV”) for the overall market was up 17 percent during the quarter and ADNV traded on Cboe European Equities was €8.7 billion, up 32 percent from last year’s fourth quarter. Net capture decreased 1 percent for the quarter, reflecting the strongest gains coming in Lit market share during the quarter, outpacing solid activity in higher-margin Cboe LIS block trading and Periodic Auction services.
  • For the fourth quarter of 2021, Cboe European Equities had 19.8 percent market share, up from 17.5 percent in the fourth quarter of 2020, as a result of positive momentum across all orderbooks, with a particular strength in Cboe LIS, as well as successfully re-introducing Swiss securities on Cboe UK order books in February 2021.

Futures:

  • Futures net revenue of $29.9 million increased $8.4 million, or 39 percent, primarily due to an increase in net transaction and clearing fees1.
  • Net transaction and clearing fees¹ increased $8.2 million, or 51 percent, reflecting a 44 percent increase in ADV, further aided by a 5 percent increase in RPC. The RPC increase was primarily due to a lower mix of low-priced Mini-VIX futures, which are one-tenth the size of the standard VIX futures and have a lower fee per contract.

Global FX:

  • Global FX net revenue of $14.8 million increased 6 percent, primarily as a result of higher net transaction and clearing fees¹. ADNV traded on the Cboe FX platform was $33.7 billion for the quarter, which was relatively flat compared to last year’s fourth quarter and net capture per one million dollars traded was $2.77 for the quarter, up 4 percent compared to $2.67 in the fourth quarter of 2020. Cboe SEF recorded its sixth consecutive record ADV quarter at 725 million contracts vs. 135 million in fourth quarter 2020.
  • Cboe FX market share was 16.8 percent for the quarter compared to 16.7 percent in last year’s fourth quarter.

 (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.

2022 Fiscal Year Financial Guidance

Cboe provided guidance for the 2022 fiscal year as noted below. Unless explicitly noted below, this guidance does not take into account the company’s planned acquisitions of ErisX and NEO, which are subject to regulatory review and other customary closing conditions. The company plans to further update its guidance for 2022 after the acquisitions close, which is expected in the first half of this year.

  • Total organic net revenue growth1 is expected to be in the range of 5 to 7 percentage points in 2022.
  • Revenue from acquisitions held less than a year1 is expected to contribute total net revenue growth in a range of 1 to 3 percentage points in 2022.
  • Organic net revenue from Data and Access Solutions (defined as Access and Capacity Fees, Proprietary Market Data and revenue generated from licensing and indices related revenue reported in “Other Revenue”) is expected to increase by approximately 7 to 10 percent in 2022, from a base of $419 million in 2021.
  • Adjusted operating expenses1 in 2022 are expected to be in the range of $617 to $625 million, from a base of $531 million in 2021. The 2022 guidance considers incremental investment spend in technology and headcount to support Cboe’s numerous growth initiatives, deals closed during 2021 but not fully reflected in the 2021 cost base, and increases in core expenses. The guidance excludes the expected amortization of acquired intangible assets of $116 million; the company plans to reflect the exclusion of this amount in its non-GAAP reconciliation.1
  • While not included in our formal 2022 expense guidance range of $617 to $625 million, we believe the pending acquisitions of ErisX and NEO have the potential to add an incremental $36 to $42 million of expenses in 2022, contingent on the timing of closings which are subject to regulatory reviews and other customary closing conditions. We anticipate a potential revenue offset for more than half of the expenses in year one, with an expectation that the additions are EBITDA positive on a combined basis in year two. The company plans to further update its guidance for 2022 after the acquisitions close, which is expected in the first half of this year.
  • Depreciation and amortization expense for 2022, which is included in adjusted operating expenses above, is expected to be in the range of $40 to $44 million, excluding the expected amortization of acquired intangible assets.
  • The effective tax rate1 on adjusted earnings for the full year 2022 is expected to be in the range of 27.5 to 29.5 percent. Significant changes in trading volume, expenses, tax laws or rates and other items could materially impact this expectation.
  • Capital expenditures for 2022 are expected to be in the range of $47 to $52 million.

Capital Management

At December 31, 2021, the company had adjusted cash2 of $325.1 million.  Total debt as of December 31, 2021 was $1,299.3 million.

The company paid cash dividends of $51.5 million, or $0.48 per share, during the fourth quarter of 2021. As of December 31, 2021, the company had approximately $318.9 million of availability remaining under its existing share repurchase authorizations.

Source: Cboe

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