CHICAGO, Feb. 8, 2019 /PRNewswire/ -- Cboe Global
Markets, Inc. (Cboe: CBOE) today reported financial results
for the 2018 fourth quarter and full year.
Consolidated results for the year ended December 31, 2017 include Bats Global Markets,
Inc. (Bats) for the period March 1
through December 31, 2017. Cboe completed its
acquisition of Bats on February 28,
2017.
"Our record results were fueled by growth across all of our
business segments and, most notably, in our suite of proprietary
products," said Edward T. Tilly,
Cboe Global Markets Chairman, President and Chief Executive
Officer. "Additionally, we continued to make steady progress
towards achieving our synergy targets while remaining focused on
executing our strategic initiatives and defining markets to serve
investors globally, as demonstrated by our announced rollout of
Cboe Select Sector Index Options on 11 industry sectors that
comprise the S&P 500 index. We are well-positioned to
continue to deliver value to our customers and shareholders.
A tremendous team effort made 2018's record results possible and we
are very excited about all that we can accomplish in 2019,
including the final phase of our multi-year technology migration,
which we plan to complete in October," Mr. Tilly added.
"Our record financial results for the fourth quarter and the
year underscore the operating leverage inherent in our business
model when top-line growth is coupled with consistent expense
discipline. Our net revenue grew by 26 percent and 22 percent for
the fourth quarter and the year, respectively, accompanied by an
adjusted operating margin of 66.6 percent for the fourth quarter
and 64.9 percent for the year, reflecting growth of six percentage
points and nearly four percentage points, respectively," said
Brian Schell, Cboe Global Markets
Executive Vice President, Chief Financial Officer and
Treasurer. "Additionally, our strong operating results
allowed us to strengthen our balance sheet while still returning
$271.2 million to shareholders
through dividends and share repurchases in 2018," Mr. Schell
added.
*All comparisons are fourth quarter or the year 2018 compared
to the same period in 2017.
(1)A full reconciliation of our non-GAAP
results to our GAAP results is included in the attached tables. See
"Non-GAAP Information" in the accompanying financial
tables.
Consolidated Fourth Quarter Results -Table 1
Table 1 below presents summary selected unaudited condensed
consolidated financial information for the company as reported and
on an adjusted basis for the three months ended December 31, 2018 and 2017.
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Table
1
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Consolidated Fourth Quarter Results
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4Q18
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4Q17
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($ in millions except per share
data)
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4Q18
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4Q17
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Change
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Adjusted1
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Adjusted1
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Change
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Total Revenues Less
Cost of Revenues
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$
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334.4
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$
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265.6
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26
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%
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$
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334.4
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$
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265.6
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26
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%
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Total Operating
Expenses
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$
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158.0
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$
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156.9
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1
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%
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$
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111.8
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$
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105.0
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6
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%
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Operating
Income
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$
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176.4
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$
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108.7
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62
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%
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$
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222.6
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$
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160.6
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39
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%
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Operating Margin
%
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52.8
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%
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40.9
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%
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1190
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bps
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66.6
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%
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60.5
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%
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610
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bps
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Net Income Allocated to
Common Stockholders
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$
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137.3
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$
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254.6
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(46)
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%
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$
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171.6
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$
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97.7
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76
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%
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Diluted EPS
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$
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1.23
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$
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2.26
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(46)
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%
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$
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1.54
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$
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0.87
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77
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%
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EBITDA
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$
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233.4
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$
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167.9
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39
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%
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$
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240.2
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$
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176.8
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36
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%
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EBITDA Margin
%
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69.8
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%
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63.2
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%
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660
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bps
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71.8
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%
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66.6
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%
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520
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bps
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- Total revenues less cost of revenues (referred to as "net
revenue") were $334.4 million, up 26
percent from $265.6 million in the
prior-year period, reflecting growth in each business segment.
- Total operating expenses were $158.0
million versus $156.9 million
in the fourth quarter of 2017. Adjusted operating expenses¹ were
$111.8 million versus $105.0 million in the fourth quarter of 2017,
primarily reflecting an increase in compensation and benefits as a
result of increased financial performance.
- Operating income grew by 62 percent to $176.4 million and adjusted operating income¹
grew by 39 percent to $222.6
million.
- The operating margin for the fourth quarter was 52.8 percent.
The adjusted operating margin¹ increased to 66.6 percent from 60.5
percent in the fourth quarter of 2017, reflecting increased
operating leverage from a higher revenue base.
- Income tax expense of $37.3
million for the fourth quarter was $190.3 million higher than last year primarily
due to the tax benefits recognized from the enactment of corporate
tax reform in 2017.
- Diluted EPS for the fourth quarter of 2018 was $1.23. Adjusted diluted EPS1 was
$1.54, up 77 percent compared to
2017's fourth quarter.
Business Segment Information:
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Table
2
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Total Revenues
Less Cost of Revenues by
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Business
Segment
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(in
millions)
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4Q18
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4Q17
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Change
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Options
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$
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174.5
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$
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130.0
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34
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%
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U.S.
Equities
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81.5
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69.0
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18
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%
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Futures
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40.4
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35.6
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13
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%
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European
Equities
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24.3
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18.8
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29
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%
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Global FX
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13.7
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12.0
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14
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%
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Corporate
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0.0
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0.2
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(100)
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%
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Total
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$
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334.4
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$
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265.6
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26
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%
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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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Discussion of Results by Business Segment:
Options:
- Options net revenue of $174.5
million was up $44.5 million
or 34 percent from the fourth quarter of 2017, primarily due to
growth in net transaction fees driven by higher trading volume and
revenue per contract (RPC) in both index options and
multiply-listed options, with SPX options setting a new quarterly
trading record.
- Net transaction fees¹ increased $46.1
million or 44 percent, as total options average daily volume
(ADV) grew 23 percent and the RPC increased 17 percent for the
fourth quarter. The RPC increase reflects RPC growth in
multiply-listed options and index options of 48 percent and 10
percent, respectively.
- Cboe's Options business had market share of 38.4 percent for
the fourth quarter of 2018 compared to 40.5 percent in the fourth
quarter of 2017.
U.S. Equities:
- U.S. Equities net revenue of $81.5
million was up $12.5 million
or 18 percent, primarily due to higher net transaction fees, driven
by a 33 percent increase in ADV and a 24 percent increase in net
capture.
- Cboe's U.S. Equities business had market share of 17.8 percent
for the fourth quarter of 2018 compared to 18.5 percent in the
fourth quarter of 2017.
Futures:
- Futures net revenue of $40.4
million increased $4.8 million
or 13 percent, primarily due to higher net transaction fees.
- Net transaction fees¹ increased $4.0
million or 12 percent, due to an 18 percent increase in VIX
futures ADV, offset somewhat by a 6 percent decline in futures RPC,
primarily resulting from a shift in the mix of trading volume.
European Equities:
- Net revenue of $24.3 million for
European Equities increased 29 percent, reflecting growth in both
net transaction fees and non-transaction revenue. Average daily
notional value (ADNV) traded during the quarter was €10.6 billion,
up 19 percent from last year's fourth quarter, with net capture up
13 percent, reflecting a higher mix of periodic auctions volume and
Cboe LIS (Large in Scale) trading.
- For the fourth quarter of 2018, Cboe Europe Equities retained
its position as the largest Pan-European stock exchange with 22.7
percent market share, up from 20.3 percent in the fourth quarter of
2017.
Global FX:
- Global FX net revenue of $13.7
million increased $1.7 million
or 14 percent, primarily due to higher net transaction fees
compared with the fourth quarter of 2017. ADNV traded on the Cboe
FX platform was $35.1 billion for the
quarter, up 8 percent from last year's fourth quarter.
- Cboe FX market share increased to 15.3 percent from 14.9
percent in the fourth quarter of 2017.
(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.
2019 Fiscal Year Financial Guidance
The company provided the following guidance for the 2019 fiscal
year:
- Adjusted operating expenses are expected to be in a range of
$420 to $428
million, representing a projected decline of 2 percent to a
nominal increase compared to 2018's adjusted operating expenses of
$426.8 million. The guidance excludes
the amortization of acquired intangible assets of $138 million, which the company plans to include
in its non-GAAP reconciliation.²
- Depreciation and amortization expense, which is included in
adjusted operating expenses above, is expected to be in the range
of $35 to $40
million, excluding the amortization of acquired intangible
assets of $138 million.
- The effective tax rate² on adjusted earnings for the full year
is expected to be in the range of 27 to 29 percent. Significant
changes in trading volume, expenses, federal, state and local tax
laws or rates and other items could materially impact this
expectation.
- Capital expenditures are expected to be in the range of
$50 to $55
million.
(2)Specific quantifications of the amounts
that would be required to reconcile the company's 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
expenses that would be required to reconcile to 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 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
The company paid cash dividends of $34.7
million, or $0.31 per share,
during the fourth quarter of 2018. For the full year 2018,
the company paid cash dividends of $130.3
million and utilized $140.9
million to repurchase 1.3 million shares of its common stock
under its share repurchase program at an average price of
$104.52 per share. As of
December 31, 2018, the company had
approximately $206.1 million of
availability remaining under its existing share repurchase
authorizations.
At December 31, 2018, the company
had adjusted cash and financial investments¹ of $257.7 million. Total debt as of
December 31, 2018 was $1.2 billion.
Earnings Conference Call
Executives of Cboe Global Markets will host a conference call to
review its fourth-quarter financial results today, February 8, 2019, 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 (877) 255‑4313 from the United States, (866) 450‑4696 from
Canada or (412) 317‑5466 for
international callers. 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. A telephone replay of
the earnings call also will be available from approximately
11:00 a.m. CT, February 8, 2019,
through 11:00 p.m. CT, February 15,
2019, by calling (877) 344‑7529 from the U.S., (855)
669‑9658 from Canada or (412)
317‑0088 for international callers, using replay code 10126940.
(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.
About Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE) is one of the
world's largest exchange holding companies, offering cutting-edge
trading and investment solutions to investors around the world. The
company is committed to relentless innovation, connecting global
markets with world-class technology, and providing seamless
solutions that enhance the customer experience.
Cboe offers trading across a diverse range of products in
multiple asset classes and geographies, including options, futures,
U.S. and European equities, exchange-traded products (ETPs), global
foreign exchange (FX) and multi-asset volatility products based on
the Cboe Volatility Index (VIX Index), the world's barometer for
equity market volatility.
Cboe's trading venues include the largest options exchange in
the U.S. and the largest stock exchange by value traded in
Europe. In addition, the company
is one of the largest stock exchange operators in the U.S. and a
leading market globally for ETP trading.
The company is headquartered in Chicago with offices in Kansas City, New
York, London, San Francisco, Singapore, Hong
Kong and Ecuador. For more
information, 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
volumes, market data fees or a shift in the mix of products traded
on our exchanges; legislative or regulatory changes; increasing
competition by foreign and domestic entities; our dependence on and
exposure to risk from third parties; our index providers' ability
to maintain the quality and integrity of their indexes and to
perform under our agreements; 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 attract and retain skilled management and
other personnel, including those experienced with post-acquisition
integration; our ability to accommodate trading volume and
transaction traffic, including significant increases, without
failure or degradation of performance of our systems; our ability
to protect our systems and communication networks from security
risks, including cyber-attacks and unauthorized disclosure of
confidential information; 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; damage to our
reputation; the ability of our compliance and risk management
methods to effectively monitor and manage our risks; our ability to
manage our growth and strategic acquisitions or alliances
effectively; unanticipated difficulties or expenditures relating to
the acquisition of Bats Global Markets, Inc., including, without
limitation, difficulties that result in the failure to realize
expected synergies, accretion, efficiencies and cost savings from
the acquisition within the expected time period (if at all),
whether in connection with integration, migrating trading
platforms, broadening distribution of product offerings or
otherwise; restrictions imposed by our debt obligations; our
ability to maintain an investment grade credit rating; potential
difficulties in our migration of trading platforms and our ability
to retain employees as a result of the acquisition; and the
accuracy of our estimates and expectations. 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, 2017 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 reclassification.
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Cboe Media
Contacts:
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Analyst
Contact:
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Suzanne
Cosgrove
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Stacie
Fleming
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Debbie
Koopman
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(312)
786‑7123
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44‑20‑7012‑8950
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(312)
786‑7136
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cosgrove@cboe.com
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sfleming@cboe.com
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koopman@cboe.com
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CBOE-F
Trademarks:
Cboe®, Bats®, BZX®, BYX®, EDGX®, EDGA®, Cboe Volatility Index® and
VIX® are registered trademarks and Cboe Global MarketsSM
and SPXSM are service marks 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.
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Key Performance
Statistics by Business Segment
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4Q 2018
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3Q
2018
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2Q
2018
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1Q
2018
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4Q 2017
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Options (ADV
in thousands)
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Total industry
ADV
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22,450
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18,292
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18,807
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22,407
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17,347
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Total company
Options ADV
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8,610
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6,733
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7,095
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9,092
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7,029
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Multiply-listed
options
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6,067
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4,965
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5,264
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6,286
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4,971
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Index
options
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2,543
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1,768
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1,831
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2,806
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2,058
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Total Options
Market Share
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38.4
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%
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36.8
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%
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37.7
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%
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40.6
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%
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40.5
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%
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Total Options
RPC:
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$
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0.280
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$
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0.244
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$
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0.241
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$
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0.261
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$
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0.239
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Multiply-listed
options
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$
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0.083
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$
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0.068
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$
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0.063
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$
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0.061
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$
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0.056
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Index
options
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$
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0.750
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$
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0.737
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$
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0.753
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$
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0.710
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$
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0.682
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U.S.
Equities
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Total industry ADV
(shares in billions)
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8.5
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6.3
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6.9
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7.6
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6.4
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Market share
%
|
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17.8
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%
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|
17.5
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%
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18.9
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%
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19.4
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%
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18.5
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%
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Net capture (per 100
touched shares)
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$
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0.027
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$
|
0.026
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$
|
0.023
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$
|
0.023
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$
|
0.022
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Futures
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ADV (in
thousands)
|
|
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338
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|
|
239
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|
|
258
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|
|
368
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|
|
285
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RPC
|
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$
|
1.686
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$
|
1.704
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$
|
1.633
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$
|
1.727
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|
$
|
1.799
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|
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European
Equities
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|
|
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Total industry ADNV
(Euros - in billions)
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€
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46.7
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€
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41.4
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€
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47.4
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€
|
50.8
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€
|
43.8
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Market share
%
|
|
|
22.7
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%
|
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23.1
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%
|
|
22.2
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%
|
|
21.2
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%
|
|
20.3
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%
|
Net capture
(bps)
|
|
|
0.200
|
|
|
0.195
|
|
|
0.183
|
|
|
0.190
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|
|
0.177
|
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|
|
|
Global
FX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market share
%
|
|
|
15.3
|
%
|
|
14.8
|
%
|
|
14.9
|
%
|
|
15.3
|
%
|
|
14.9
|
%
|
ADNV ($ in
billions)
|
|
$
|
35.1
|
|
$
|
34.6
|
|
$
|
38.4
|
|
$
|
41.6
|
|
$
|
32.4
|
|
Net revenue (per one
million dollars traded)
|
|
$
|
2.63
|
|
$
|
2.63
|
|
$
|
2.56
|
|
$
|
2.45
|
|
$
|
2.57
|
|
|
ADV = average daily
volume; ADNV = average daily notional value.
|
|
RPC, average revenue
per contract, for options and futures represents total net
transaction fees recognized for the period divided by total
contracts traded during the period.
|
|
U.S. Equities, "net
capture per 100 touched shares" refers to transaction fees less
liquidity payments and routing and clearing costs divided by the
product of one-hundredth ADV of touched shares on BZX, BYX, EDGX
and EDGA and the number of trading days.
|
|
European Equities,
"net capture per matched notional value" refers to transaction fees
less liquidity payments in British pounds divided by the product of
matched ADNV in British pounds and the number of
trading days.
|
|
Global FX, "net
capture per one million dollars traded" refers to net transaction
fees divided by the product of one-millionth of ADNV traded on the
Cboe FX market, the number of trading days, and two, which
represents the buyer and seller that are both charged on the
transaction. Market Share represents Cboe FX volume divided by the
total volume of publicly reporting spot FX venues (Cboe FX, EBS,
Refinitiv, and FastMatch).
|
|
Average transaction
fees per contract can be affected by various factors, including
exchange fee rates, volume-based discounts and transaction mix by
contract type and product type.
|
Cboe Global
Markets, Inc. and Subsidiaries
|
Consolidated
Statements of Income (Unaudited)
|
Three Months and
Twelve Months Ended December 31, 2018 and 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31,
|
|
Twelve Months Ended
December 31,
|
(in millions, except
per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
*2017
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
fees
|
|
$
|
563.2
|
|
$
|
431.3
|
|
$
|
1,986.9
|
|
$
|
1,564.9
|
Access fees
|
|
|
33.8
|
|
|
29.2
|
|
|
127.9
|
|
|
106.8
|
Exchange services and
other fees
|
|
|
20.8
|
|
|
19.5
|
|
|
83.1
|
|
|
74.8
|
Market data
fees
|
|
|
49.7
|
|
|
47.2
|
|
|
204.0
|
|
|
164.5
|
Regulatory
fees
|
|
|
73.1
|
|
|
86.4
|
|
|
333.9
|
|
|
291.5
|
Other
revenue
|
|
|
7.1
|
|
|
7.1
|
|
|
33.0
|
|
|
26.6
|
Total
Revenues
|
|
|
747.7
|
|
|
620.7
|
|
|
2,768.8
|
|
|
2,229.1
|
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
payments
|
|
|
309.8
|
|
|
243.6
|
|
|
1,113.0
|
|
|
849.7
|
Routing and
clearing
|
|
|
10.3
|
|
|
9.7
|
|
|
39.1
|
|
|
37.6
|
Section 31
fees
|
|
|
65.7
|
|
|
79.5
|
|
|
302.4
|
|
|
260.0
|
Royalty fees
|
|
|
27.5
|
|
|
22.3
|
|
|
97.4
|
|
|
86.2
|
Total Cost of
Revenue
|
|
|
413.3
|
|
|
355.1
|
|
|
1,551.9
|
|
|
1,233.5
|
Revenues Less Cost
of Revenues
|
|
|
334.4
|
|
|
265.6
|
|
|
1,216.9
|
|
|
995.6
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
60.8
|
|
|
53.2
|
|
|
228.8
|
|
|
201.4
|
Depreciation and
amortization
|
|
|
49.1
|
|
|
55.9
|
|
|
204.0
|
|
|
192.2
|
Technology support
services
|
|
|
13.4
|
|
|
11.2
|
|
|
47.9
|
|
|
42.1
|
Professional fees and
outside services
|
|
|
16.4
|
|
|
17.1
|
|
|
68.3
|
|
|
66.0
|
Travel and promotional
expenses
|
|
|
3.2
|
|
|
5.2
|
|
|
13.0
|
|
|
17.2
|
Facilities
costs
|
|
|
2.9
|
|
|
2.6
|
|
|
11.5
|
|
|
10.3
|
Acquisition-related
costs
|
|
|
6.7
|
|
|
9.0
|
|
|
30.0
|
|
|
84.4
|
Change in contingent
consideration
|
|
|
0.1
|
|
|
(0.1)
|
|
|
0.1
|
|
|
1.0
|
Other
expenses
|
|
|
5.4
|
|
|
2.8
|
|
|
13.9
|
|
|
9.1
|
Total Operating
Expenses
|
|
|
158.0
|
|
|
156.9
|
|
|
617.5
|
|
|
623.7
|
Operating
Income
|
|
|
176.4
|
|
|
108.7
|
|
|
599.4
|
|
|
371.9
|
Other
Income/(Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(9.7)
|
|
|
(10.4)
|
|
|
(38.2)
|
|
|
(41.3)
|
Other (expense)/
income
|
|
|
8.9
|
|
|
5.8
|
|
|
10.0
|
|
|
3.8
|
Total Other
Income
|
|
|
(0.8)
|
|
|
(4.6)
|
|
|
(28.2)
|
|
|
(37.5)
|
Income Before Income
(Benefit) Taxes
|
|
|
175.6
|
|
|
104.1
|
|
|
571.2
|
|
|
334.4
|
Income tax (benefit)
provision
|
|
|
37.3
|
|
|
(153.0)
|
|
|
146.0
|
|
|
(66.2)
|
Net
Income
|
|
|
138.3
|
|
|
257.1
|
|
|
425.2
|
|
|
400.6
|
Net income attributable
to noncontrolling interests
|
|
|
0.4
|
|
|
0.3
|
|
|
1.3
|
|
|
1.1
|
Net Income Excluding
Noncontrolling Interests
|
|
|
138.7
|
|
|
257.4
|
|
|
426.5
|
|
|
401.7
|
Change in redemption
value of noncontrolling interests
|
|
|
(0.4)
|
|
|
(0.3)
|
|
|
(1.3)
|
|
|
(1.1)
|
Net income allocated to
participating securities
|
|
|
(1.0)
|
|
|
(2.5)
|
|
|
(3.1)
|
|
|
(3.9)
|
Net Income Allocated
to Common Stockholders
|
|
$
|
137.3
|
|
$
|
254.6
|
|
$
|
422.1
|
|
$
|
396.7
|
Net Income Per Share
Allocated to Common Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
1.23
|
|
$
|
2.27
|
|
$
|
3.78
|
|
$
|
3.70
|
Diluted earnings per
share
|
|
|
1.23
|
|
|
2.26
|
|
|
3.76
|
|
|
3.69
|
Weighted average shares
used in computing income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
111.3
|
|
|
112.3
|
|
|
111.8
|
|
|
107.2
|
Diluted
|
|
|
111.6
|
|
|
112.6
|
|
|
112.2
|
|
|
107.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Includes Bats for
the period March 1 through December 31, 2017.
|
Cboe Global
Markets, Inc. and Subsidiaries
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
December 31, 2018
and 2017
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
(in
millions)
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
275.1
|
|
$
|
143.5
|
Financial
investments
|
|
|
35.7
|
|
|
47.3
|
Accounts receivable,
net
|
|
|
287.3
|
|
|
217.3
|
Income taxes
receivable
|
|
|
70.4
|
|
|
17.2
|
Other current
assets
|
|
|
15.2
|
|
|
9.4
|
Total Current
Assets
|
|
|
683.7
|
|
|
434.7
|
|
|
|
|
|
|
|
Investments
|
|
|
86.2
|
|
|
82.7
|
Land
|
|
|
4.9
|
|
|
4.9
|
Property and
equipment, net
|
|
|
71.7
|
|
|
73.9
|
Goodwill
|
|
|
2,691.4
|
|
|
2,707.4
|
Intangible assets,
net
|
|
|
1,720.2
|
|
|
1,902.6
|
Other assets,
net
|
|
|
62.9
|
|
|
59.5
|
Total
|
|
$
|
5,321.0
|
|
$
|
5,265.7
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Stockholders'
Equity
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
198.5
|
|
$
|
153.8
|
Section 31 fees
payable
|
|
|
81.1
|
|
|
105.6
|
Current portion of
long-term debt
|
|
|
299.8
|
|
|
—
|
Deferred
revenue
|
|
|
8.5
|
|
|
15.4
|
Income taxes
payable
|
|
|
4.1
|
|
|
2.6
|
Contingent
consideration liability
|
|
|
3.9
|
|
|
56.6
|
Total Current
Liabilities
|
|
|
595.9
|
|
|
334.0
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
915.6
|
|
|
1,237.9
|
Income tax
liability
|
|
|
114.9
|
|
|
78.8
|
Deferred income
taxes
|
|
|
436.8
|
|
|
488.2
|
Other non-current
liabilities
|
|
|
7.4
|
|
|
6.8
|
Total
Liabilities
|
|
|
2,070.6
|
|
|
2,145.7
|
|
|
|
|
|
|
|
Redeemable
Noncontrolling Interests
|
|
|
9.4
|
|
|
9.4
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common
stock
|
|
|
1.2
|
|
|
1.2
|
Treasury stock at
cost
|
|
|
(720.1)
|
|
|
(558.3)
|
Additional
paid-in-capital
|
|
|
2,660.2
|
|
|
2,623.7
|
Retained
earnings
|
|
|
1,288.2
|
|
|
993.3
|
Accumulated other
comprehensive income, net
|
|
|
11.5
|
|
|
50.7
|
Total
Stockholders' Equity
|
|
|
3,241.0
|
|
|
3,110.6
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,321.0
|
|
$
|
5,265.7
|
Non-GAAP Information
In addition to disclosing results determined in accordance with
GAAP, Cboe Global Markets has disclosed certain non-GAAP measures
of operating performance. These measures are not in accordance
with, or a substitute for, GAAP, and may be different from or
inconsistent with non-GAAP financial measures used by other
companies. The non-GAAP measures provided in this press release
include net transaction fees, adjusted operating expenses, adjusted
operating income, adjusted operating margin, adjusted net income
allocated to common stockholders and adjusted diluted earnings per
share, effective tax rate on adjusted earnings, adjusted cash and
financial investments, EBITDA, EBITDA margin, adjusted EBITDA and
adjusted EBITDA margin.
Management believes that the non-GAAP financial measures
presented in this press release, including adjusted operating
income and adjusted operating expenses, provide additional and
comparative information to assess trends in our core operations and
a means to evaluate period-to-period comparisons. Non-GAAP
financial measures disclosed by management are provided as
additional information to investors in order to provide them with
an alternative method for assessing our financial condition and
operating results.
Amortization expense of acquired intangible assets: We
amortize intangible assets acquired in connection with various
acquisitions. Amortization of intangible assets is inconsistent in
amount and frequency and is significantly affected by the timing
and size of our acquisitions. As such, if intangible asset
amortization is included in performance measures, it is more
difficult to assess the day-to-day operating performance of the
businesses, the relative operating performance of the businesses
between periods and the earnings power of the company. Therefore,
we believe performance measures excluding intangible asset
amortization expense provide investors with an additional basis for
comparison across accounting periods.
Acquisition-related expenses: From time to time, we have
pursued small bolt-on acquisitions and in 2017 completed a larger
transformative acquisition, which have resulted in expenses which
would not otherwise have been incurred in the normal course of the
company's business operations. These expenses include integration
costs, as well as legal, due diligence and other third party
transaction costs. The frequency and the amount of such expenses
vary significantly based on the size, timing and complexity of the
transaction. Accordingly, we exclude these costs for purposes of
calculating non-GAAP measures which provide an additional analysis
of Cboe's ongoing operating performance or comparisons in Cboe's
performance between periods.
Other significant items: We have excluded certain other
charges that are the result of other non-comparable events to
measure operating performance. For 2017, other significant items
primarily included interest and other borrowing costs incurred
prior to the close of the Bats transaction and accelerated
stock-based compensation that was incurred due to a change in the
vesting schedule for equity award grants.
The tables below show the reconciliation of each financial
measure from GAAP to non-GAAP. The non-GAAP financial measures
exclude the impact of those items detailed below and are referred
to as adjusted financial measures.
Reconciliation of
GAAP and non-GAAP Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
Table
3
|
|
December 31,
|
|
December 31,
|
|
(in millions, except
per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
*2017
|
|
Reconciliation of
Net Income Allocated to Common Stockholders to Non-GAAP (As shown
on Table 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated
to common stockholders
|
|
$
|
137.3
|
|
$
|
254.6
|
|
$
|
422.1
|
|
$
|
396.7
|
|
Non-GAAP
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
Acquisition-related
expenses (2)
|
|
|
6.7
|
|
|
9.0
|
|
|
30.0
|
|
|
84.4
|
|
Amortization of
acquired intangible assets (3)
|
|
|
39.4
|
|
|
43.0
|
|
|
160.6
|
|
|
142.6
|
|
Change in contingent
consideration
|
|
|
0.1
|
|
|
(0.1)
|
|
|
0.1
|
|
|
1.0
|
|
Debt issuance
costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.2
|
|
Provision for
uncollectable convertible notes receivable
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
Change in redemption
value of noncontrolling interests
|
|
|
0.4
|
|
|
0.3
|
|
|
1.3
|
|
|
1.1
|
|
Total Non-GAAP
adjustments
|
|
|
46.6
|
|
|
52.2
|
|
|
192.0
|
|
|
247.2
|
|
Income tax expense
related to the items above
|
|
|
(11.7)
|
|
|
(19.2)
|
|
|
(49.4)
|
|
|
(92.3)
|
|
Re-measurement of
deferred tax assets and liabilities as a result of corporate rate
increase in Illinois
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.4
|
|
Effect of tax reform
law
|
|
|
—
|
|
|
(191.5)
|
|
|
—
|
|
|
(191.5)
|
|
Tax provision
re-measurements
|
|
|
(0.4)
|
|
|
—
|
|
|
(0.4)
|
|
|
—
|
|
Net income allocated
to participating securities - effect on reconciling
items
|
|
|
(0.2)
|
|
|
1.6
|
|
|
(0.9)
|
|
|
0.5
|
|
Adjusted net
income allocated to common stockholders
|
|
$
|
171.6
|
|
$
|
97.7
|
|
$
|
563.4
|
|
$
|
368.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Diluted EPS to Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
|
$
|
1.23
|
|
$
|
2.26
|
|
$
|
3.76
|
|
$
|
3.69
|
|
Per share impact of
non-GAAP adjustments noted above
|
|
|
0.31
|
|
|
(1.39)
|
|
|
1.26
|
|
|
(0.27)
|
|
Adjusted diluted
earnings per common share
|
|
$
|
1.54
|
|
$
|
0.87
|
|
$
|
5.02
|
|
$
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Operating Margin to Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less cost of
revenue
|
|
$
|
334.4
|
|
$
|
265.6
|
|
$
|
1,216.9
|
|
$
|
995.6
|
|
Non-GAAP adjustments
noted above
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted revenue
less cost of revenue
|
|
$
|
334.4
|
|
$
|
265.6
|
|
$
|
1,216.9
|
|
$
|
995.6
|
|
Operating
expenses
|
|
$
|
158.0
|
|
$
|
156.9
|
|
$
|
617.5
|
|
$
|
623.7
|
|
Non-GAAP adjustments
noted above
|
|
|
46.2
|
|
|
51.9
|
|
|
190.7
|
|
|
237.1
|
|
Adjusted operating
expenses
|
|
$
|
111.8
|
|
$
|
105.0
|
|
$
|
426.8
|
|
$
|
386.6
|
|
Operating
income
|
|
$
|
176.4
|
|
$
|
108.7
|
|
$
|
599.4
|
|
$
|
371.9
|
|
Non-GAAP adjustments
noted above
|
|
|
46.2
|
|
|
51.9
|
|
|
190.7
|
|
|
237.1
|
|
Adjusted operating
income
|
|
$
|
222.6
|
|
$
|
160.6
|
|
$
|
790.1
|
|
$
|
609.0
|
|
Adjusted operating
margin (4)
|
|
|
66.6
|
%
|
|
60.5
|
%
|
|
64.9
|
%
|
|
61.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Income Tax Rate to Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
|
175.6
|
|
|
104.1
|
|
|
571.2
|
|
|
334.4
|
|
Non-GAAP adjustments
noted above
|
|
|
46.6
|
|
|
52.2
|
|
|
192.0
|
|
|
247.2
|
|
Adjusted income
before income taxes
|
|
$
|
222.2
|
|
$
|
156.3
|
|
$
|
763.2
|
|
$
|
581.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
37.3
|
|
|
(153.0)
|
|
|
146.0
|
|
|
(66.2)
|
|
Non-GAAP adjustments
noted above
|
|
|
11.7
|
|
|
210.7
|
|
|
49.4
|
|
|
276.4
|
|
Adjusted income
tax (benefit) expense
|
|
$
|
49.0
|
|
$
|
57.7
|
|
$
|
195.4
|
|
$
|
210.2
|
|
Adjusted income
tax rate
|
|
|
22.1
|
%
|
|
37.0
|
%
|
|
25.6
|
%
|
|
36.3
|
%
|
|
(*) Includes Bats for
the period March 1 through December 31, 2017.
|
(1) For the
twelve months ended December 31, 2017, this amount includes $9.1
million for accelerated stock-based compensation
expense.
|
(2) This amount
includes professional fees and outside services, severance, and
other costs related to the company's acquisition of
Bats.
|
(3) This amount
represents the amortization of acquired intangible assets for
Bats.
|
(4) Adjusted
operating margin represents adjusted operating income divided by
adjusted revenue less cost of revenue.
|
EBITDA Reconciliations
EBITDA (earnings before interest, income taxes, depreciation and
amortization) is a widely used non-GAAP financial measure of
operating performance. EBITDA margin represents EBITDA divided by
revenues less cost of revenues (net revenue). It is presented as
supplemental information that the company believes is useful to
investors to evaluate its results because it excludes certain items
that are not directly related to the company's core operating
performance. EBITDA is calculated by adding back to net income
interest expense, income tax expense, depreciation and
amortization. EBITDA should not be considered as substitutes either
for net income, as an indicator of the company's operating
performance, or for cash flow, as a measure of the company's
liquidity. In addition, because EBITDA may not be calculated
identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies.
EBITDA margin represents EBITDA divided by net revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
(in
millions)
|
|
December 31,
|
|
December 31,
|
|
Reconciliation of
Net Income Allocated to Common Stockholders to EBITDA and Adjusted
EBITDA (Per Table 1)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income
allocated to common stockholders
|
|
$
|
137.3
|
|
$
|
254.6
|
|
$
|
422.1
|
|
$
|
396.7
|
|
Interest,
net
|
|
|
9.7
|
|
|
10.4
|
|
|
38.2
|
|
|
41.3
|
|
Income tax provision
(benefit)
|
|
|
37.3
|
|
|
(153.0)
|
|
|
146.0
|
|
|
(66.2)
|
|
Depreciation and
amortization
|
|
|
49.1
|
|
|
55.9
|
|
|
204.0
|
|
|
192.2
|
|
EBITDA
|
|
$
|
233.4
|
|
$
|
167.9
|
|
$
|
810.3
|
|
$
|
564.0
|
|
EBITDA
Margin¹
|
|
|
69.8
|
%
|
|
63.2
|
%
|
|
66.6
|
%
|
|
56.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments not included in above line items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits (accelerated stock-based compensation)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
Acquisition-related
expenses
|
|
|
6.7
|
|
|
9.0
|
|
|
30.0
|
|
|
84.4
|
|
Provision for
uncollectable convertible notes receivable
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
Other
|
|
|
0.1
|
|
|
(0.1)
|
|
|
0.1
|
|
|
1.0
|
|
Adjusted
EBITDA
|
|
$
|
240.2
|
|
$
|
176.8
|
|
$
|
840.4
|
|
$
|
662.3
|
|
Adjusted EBITDA
Margin¹
|
|
|
71.8
|
%
|
|
66.6
|
%
|
|
69.1
|
%
|
|
66.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
275.1
|
|
$
|
143.5
|
|
|
|
|
|
|
|
Financial
investments
|
|
|
35.7
|
|
|
47.3
|
|
|
|
|
|
|
|
Less cash collected for
Section 31 Fees
|
|
|
(53.1)
|
|
|
(70.5)
|
|
|
|
|
|
|
|
Adjusted
Cash
|
|
$
|
257.7
|
|
$
|
120.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¹EBITDA margin
represents the respective EBITDA divided by the respective net
revenue as shown in the non-GAAP reconciliations
provided.
|
Reconciliation of
Net Transaction Fees –Three Months Ended December 31, 2018 and 2017
- Table 5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Options
Segment
|
|
U.S. Equities
Segment
|
|
Futures
Segment
|
|
European Equities
Segment
|
|
Global FX
Segment
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Transaction
fees
|
$
|
563.2
|
|
$
|
431.3
|
|
$
|
235.5
|
|
$
|
180.1
|
|
$
|
254.0
|
|
$
|
188.9
|
|
$
|
36.6
|
|
$
|
32.4
|
|
$
|
25.1
|
|
$
|
19.2
|
|
$
|
12.0
|
|
$
|
10.7
|
Liquidity
payments
|
|
(309.8)
|
|
|
(243.6)
|
|
|
(80.7)
|
|
|
(71.9)
|
|
|
(219.5)
|
|
|
(164.1)
|
|
|
(0.2)
|
|
|
—
|
|
|
(9.4)
|
|
|
(7.6)
|
|
|
—
|
|
|
—
|
Routing and
clearing
|
|
(10.3)
|
|
|
(9.7)
|
|
|
(2.8)
|
|
|
(2.3)
|
|
|
(7.5)
|
|
|
(7.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Net transaction
fees
|
$
|
243.1
|
|
$
|
178.0
|
|
$
|
152.0
|
|
$
|
105.9
|
|
$
|
27.0
|
|
$
|
17.4
|
|
$
|
36.4
|
|
$
|
32.4
|
|
$
|
15.7
|
|
$
|
11.6
|
|
$
|
12.0
|
|
$
|
10.7
|
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