Cboe Global Markets Reports Results for Second Quarter 2022

Second Quarter Highlights*

  • Diluted EPS for the Quarter of $(1.74), Down 278 percent, primarily due to the impairment of goodwill recognized in the Digital reporting unit

  • Adjusted Diluted EPS1 for the Quarter of $1.67, Up 21 percent

  • Net Revenue for the Quarter of $424 million, Up 21 percent

  • Increases Organic Total Net Revenue Growth2 Target for 2022 to 9 to 11 percent, from 5 to 7 percent; Increases Data and Access Solutions Organic Net Revenue Growth2 Target to 10 to 13 percent, from 8 to 11 percent

  • Increases 2022 Adjusted Operating Expense Guidance2 to $659 to $667 million, from $617 to $625 million.

CHICAGO, July 29, 2022 /PRNewswire/ — Cboe Global Markets, Inc. (Cboe: CBOE) today reported financial results for the second quarter of 2022.

(PRNewsfoto/Cboe Global Markets, Inc.)

“Cboe delivered strong second quarter results to close out an exceptional first half of 2022. Activity across our ecosystem—cash, data and derivatives—was robust,” said Edward T. Tilly, Cboe Global Markets Chairman and Chief Executive Officer. “Many of our newer initiatives, like the extension of trading hours for SPX and VIX Options to nearly 24 hours-a-day, five days-a-week and the addition of Tuesday and Thursday expirations for SPX Weekly options, have outperformed our early expectations in 2022, further accelerating the strong growth across our core businesses. With the closing of the ErisX and NEO acquisitions in the second quarter, the entire Cboe team remains focused on extracting even greater value from the ecosystem we have created. The digital asset market environment has changed dramatically since we closed the ErisX transaction on May 2nd, which resulted in an accounting adjustment. We believe that the $220 million book carrying value reflects the reality of the market today, but in no way changes our enthusiasm for the digital asset space. We are intently focused on integrating our platforms and positioning Cboe for its next wave of growth in the quarters ahead.”

“In the second quarter, Cboe produced record-setting revenue results as overall net revenues grew 21% year-over-year,” said Brian N. Schell, Cboe Global Markets Executive Vice President, Chief Financial Officer and Treasurer. “The benefits of the Cboe flywheel were apparent given the strong year-over-year growth from each category during the quarter, with net revenues from derivatives markets1 growing 30%, data and access solutions1 up 20%, and cash and spot markets1 growing 7%. Moving forward, we are increasing our 2022 total organic net revenue growth2 expectations, targeting 9% to 11% growth, up from our prior guidance range of 5% to 7%. In addition, our 2022 organic net revenue growth2 expectations for our Data and Access Solutions business are increasing to 10% to 13%, up from our prior guidance range of 8% to 11%. The upgraded guidance is a testament to not only the strength of the first half results, but the durability we expect to see in the revenue base moving forward. We look forward to building on the first half momentum with continued investment and integration across the Cboe platform.”

*All comparisons are second quarter 2022 compared to the same period in 2021.

 (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.

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, 2022 and 2021.

Table 1

Consolidated Second Quarter Results

2Q22

2Q21

($ in millions except per share)

2Q22

2Q21

Change

Adjusted1

Adjusted1

Change

Total Revenues Less Cost of Revenues

$

424.1

$

350.6

21

%

$

424.1

$

350.6

21

%

Total Operating Expenses

$

661.5

$

160.6

312

%

$

157.0

$

128.3

22

%

Operating (Loss) Income

$

(237.4)

$

190.0

(225)

%

$

267.1

$

222.3

20

%

Operating Margin % 

(56.0)

%

54.2

%

(110.2)

pp

63.0

%

63.4

%

(0.4)

pp

Net (Loss) Income Allocated to Common Stockholders

$

(184.5)

$

105.2

(275)

%

$

177.3

$

147.4

20

%

Diluted EPS

$

(1.74)

$

0.98

(278)

%

$

1.67

$

1.38

21

%

EBITDA1

$

(202.0)

$

231.8

(187)

%

$

274.2

$

233.6

17

%

EBITDA Margin % 1

(47.6)

%

66.1

%

(113.7)

pp

64.7

%

66.6

%

(1.9)

pp

  • Total revenues less cost of revenues (referred to as “net revenue”) of $424.1 million increased 21 percent, compared to $350.6 million in the prior-year period, reflecting increases in net transaction and clearing fees1 and access and capacity fees. Inorganic net revenue1 in the second quarter of 2022 was $9.9 million.

  • Total operating expenses were $661.5 million versus $160.6 million in the second quarter of 2021, an increase of $500.9 million, primarily due to the impairment of goodwill recognized in the Digital reporting unit, driven by negative events and trends in the broader digital asset environment. Adjusted operating expenses1 of $157.0 million increased 22 percent compared to $128.3 million in the second quarter of 2021, primarily due to the acquisitions of Cboe Asia Pacific, ErisX, and NEO, as well as an increase in salaries, wages, and bonuses resulting in higher compensation and benefits.

  • The effective tax rate for the second quarter of 2022 was 28.2 percent compared with 41.1 percent in the second quarter of 2021. The decrease is primarily due to the remeasurement of UK deferred tax liabilities following the UK tax rate increase from 19 percent to 25 percent enacted during the second quarter of 2021 and effective April 1, 2023. The effective tax rate on adjusted earnings1 was 28.4 percent compared with 30.1 percent in last year’s second quarter. The lower effective tax rate in the second quarter of 2022 was primarily due to changes in income tax reserves in the second quarter of 2021.

  • Diluted EPS for the second quarter of 2022 decreased 278 percent to $(1.74). Adjusted diluted EPS1 of $1.67 increased 21 percent compared to 2021’s second quarter results.

Business Segment Information:

Table 2

Total Revenues Less Cost of Revenues by

Business Segment

(in millions)

2Q22

2Q21

Change

Options

$

235.3

$

178.6

32

%

North American Equities

92.7

89.2

4

%

Europe and Asia Pacific

49.9

41.6

20

%

Futures

29.6

27.4

8

%

Global FX

16.6

13.8

20

%

Digital

*

Corporate

%

Total

$

424.1

$

350.6

21

%

(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.

*Not meaningful, due to the establishment of the Digital segment during the second quarter of 2022 as a result of the ErisX acquisition on May 2, 2022.

Discussion of Results by Business Segment1:

Options:

  • Options net revenue of $235.3 million was up $56.7 million, or 32 percent, from the second quarter of 2021, due to double-digit increases in net transaction and clearing fees2, access and capacity fees, and market data. Net transaction and clearing fees increased primarily as a result of a 46 percent increase in Index options trading volumes versus the second quarter of 2021, along with a 7 percent increase in Index options revenue per contract (“RPC”) for the quarter. Access and capacity fees and market data fees were each 29 percent higher than second quarter 2021.

  • Net transaction and clearing fees2 increased $54.6 million, or 41 percent, reflecting an 18 percent increase in total options average daily volume (“ADV”) and a 21 percent increase in total options RPC compared to the second quarter 2021. 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 Index options increased 7 percent as higher-priced SPX options accounted for a higher percentage of Index options volume.

  • Cboe’s Options business had total market share of 33.2 percent for the second quarter of 2022 compared to 30.4 percent in the second quarter of 2021, primarily reflecting an increase in Cboe’s multi-listed options market share for the quarter of 28.3 percent compared to 26.8 percent in the second quarter of 2021.

North American (N.A.) Equities:

  • N.A. Equities net revenue of $92.7 million was up $3.5 million, or 4 percent, primarily due to higher access and capacity fees and transaction and clearing fees. Year-over-year declines in industry market data offset some of the growth in the segment. Transaction and clearing fees were impacted by higher N.A. equities industry volumes as compared to the second quarter of 2021. Net capture was flat in the second quarter of 2022, when comparing year over year.

  • Cboe U.S. Equities exchanges had market share of 13.6 percent for the second quarter of 2022 compared to 14.3 percent in the second quarter of 2021, negatively impacted by pricing changes that drove a higher net capture.

Europe and Asia Pacific (APAC):

  • Europe and APAC net revenue of $49.9 million increased by 20 percent, reflecting growth in European equities and clearing, and the addition of Cboe Asia Pacific in July 2021, which contributed $8.2 million in net revenue. European Equities average daily notional value (“ADNV”) for the overall market was up 12 percent during the quarter and ADNV traded on Cboe European Equities was €10.9 billion, up 49 percent from last year’s second quarter. Net capture decreased 11 percent for the quarter, reflecting a mix shift with the strongest gains coming in Lit market share, outpacing the growth in higher-capture Cboe BIDS Europe and Periodic Auction services, as well as from the impact of volume pricing tiers with higher volumes and higher market share.

  • For the second quarter of 2022, Cboe European Equities had 23.2 percent market share, up from 17.4 percent in the second quarter of 2021, as a result of positive momentum across all orderbooks, with a particular strength in Lit markets and record Cboe BIDS Europe market share.

Futures:

  • Futures net revenue of $29.6 million increased $2.2 million, or 8 percent, due to increases in net transaction and clearing fees2, access and capacity fees, and market data.

  • Net transaction and clearing fees2 increased $0.8 million, or 4 percent, reflecting slight upticks in both ADV and RPC.

Global FX:

  • Global FX net revenue of $16.6 million increased 20 percent, primarily as a result of higher net transaction and clearing fees2. ADNV traded on the Cboe FX platform was $39.6 billion for the quarter, up 22 percent compared to last year’s second quarter and net capture per one million dollars traded was $2.71 for the quarter, flat compared to $2.71 in the second quarter of 2021.

  • Cboe FX market share was 17.0 percent for the quarter compared to 16.3 percent in last year’s second quarter.

(1) The Digital segment is not further discussed as results were not material given its establishment during the second quarter of 2022 as a result of the ErisX acquisition on May 2, 2022, outside of the goodwill impairment charge recorded in the second quarter of 2022.

(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.

2022 Fiscal Year Financial Guidance

Cboe provided guidance for the 2022 fiscal year as noted below.

  • Organic net revenue growth1 is expected to be in the range of 9 to 11 percentage points in 2022, up from previous guidance of 5 to 7 percentage points.

  • Reaffirmed revenue from acquisitions held less than a year1 is expected to contribute total net revenue growth in a range of 2 to 3 percentage points in 2022.

  • Organic net revenue1 from Data and Access Solutions is now expected to increase by approximately 10 to 13 percent in 2022, from a base of $419 million in 2021, up from previous guidance of 8 to 11 percent.

  • Adjusted operating expenses1 in 2022 are now expected to be in the range of $659 to $667 million, from a base of $531 million in 2021, up from previous guidance of $617 to $625 million. The updated 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, recent acquisitions of NEO and ErisX and increases in core expenses. The guidance excludes the expected amortization of acquired intangible assets of $125 million; the company plans to reflect the exclusion of this amount in its non-GAAP reconciliation.1

  • Reaffirmed 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.

  • Reaffirmed 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.

  • Reaffirmed capital expenditures for 2022 are expected to be in the range of $47 to $52 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 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.

Capital Management

At June 30, 2022, the company had adjusted cash1 of $349.1 million. Total debt as of June 30, 2022 was $1,959.2 million.

The company paid cash dividends of $51.2 million, or $0.48 per share, during the second quarter of 2022 and utilized $15.6 million to repurchase 147 thousand shares of its common stock under its share repurchase program at an average price of $106.12 per share. As of June 30, 2022, the company had approximately $233.3 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, July 29, 2022, 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, July 29, 2022, through 11:00 p.m. CT, August 6, 2022, by calling (877) 344–7529 from the U.S., (855) 669–9658 from Canada or (412) 317–0088 for international callers, using replay code 10160639.

(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 (Cboe: CBOE), a leading provider of market infrastructure and tradable products, delivers cutting-edge trading, clearing and investment solutions to market participants around the world. The Company is committed to operating a trusted, inclusive global marketplace, and to providing leading products, technology and data solutions that enable participants to define a sustainable financial future. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives, FX, and digital assets, across North America, Europe, and Asia Pacific. To learn more, 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 risks, cybersecurity risks, insider threats and unauthorized disclosure of confidential information; 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; fluctuations to currency exchange rates; factors that impact the quality and integrity of our indices; the impact of the novel coronavirus (“COVID-19”) pandemic; 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 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; our ability to manage our growth and strategic acquisitions or alliances effectively; 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 accuracy of our estimates and expectations; litigation risks and other liabilities; and operating a digital asset business, and clearinghouse, including the expected benefits of our ErisX acquisition, cybercrime, changes in digital asset regulation, losses due to digital asset custody, 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, 2021 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.

Cboe Media Contacts:

Analyst Contact:

Angela Tu

Tim Cave

Kenneth Hill, CFA

(646) 856–8734

+44 (0) 7593 506 719

(312) 786–7559

atu@cboe.com

tcave@cboe.com

khill@cboe.com

CBOE-F

Trademarks:
Cboe®, Cboe Global Markets®, Cboe Volatility Index®, Bats®, BIDS Trading®, BZX®, BYX®, Chi-X®, EDGX®, EDGA®, ErisX®, EuroCCP®, 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

2Q 2022

1Q 2022

4Q 2021

3Q 2021

2Q 2021

Options

Total industry ADV (in thousands)

39,377

42,464

40,794

37,548

36,442

Total company Options ADV (in thousands)

13,054

13,392

12,694

11,764

11,092

Multi-listed options

10,378

10,978

10,527

9,794

9,254

Index options

2,677

2,414

2,167

1,970

1,838

Total Options market share

33.2

%

31.5

%

31.1

%

31.3

%

30.4

%

Multi-listed options

28.3

%

27.4

%

27.3

%

27.6

%

26.8

%

Total Options RPC:

$

0.233

$

0.210

$

0.199

$

0.200

$

0.192

Multi-listed options

$

0.066

$

0.067

$

0.066

$

0.069

$

0.067

Index options

$

0.883

$

0.857

$

0.845

$

0.850

$

0.823

North American Equities

U.S. Equities – Exchange:

Total industry ADV (shares in billions)

12.6

12.9

10.8

9.8

10.5

Market share % 

13.6

%

14.3

%

13.3

%

14.0

%

14.3

%

Net capture (per 100 touched shares)

$

0.020

$

0.017

$

0.025

$

0.020

$

0.020

U.S. Equities – Off-Exchange:

ADV (touched shares, in millions)

92.7

108.5

84.2

73.0

75.8

Off-Exchange ATS Block Market Share % (reported on a two-month lag)

24.5

%

24.4

%

22.5

%

22.9

%

21.8

%

Net capture (per 100 touched shares)

$

0.108

$

0.117

$

0.115

$

0.122

$

0.123

Canadian Equities:

ADV (matched shares, in millions)

36.0

41.1

41.3

37.8

47.4

Total market share %

3.1

%

3.2

%

3.3

%

3.4

%

3.4

%

Market share % – TSX listed volume

4.1

%

4.3

%

4.7

%

4.7

%

4.9

%

Net capture (per 10,000 shares, in Canadian Dollars)

$

9.328

$

9.103

$

8.475

$

8.342

$

7.782

Europe and Asia Pacific

European Equities:

Total industry ADNV (Euros – in billions)

46.9

58.7

44.0

39.6

42.0

Market share % 

23.2

%

21.8

%

19.8

%

18.2

%

17.4

%

Net capture (bps)

0.238

0.233

0.256

0.264

0.267

EuroCCP:

Trades cleared (in thousands)

356,351.1

454,437.8

345,074.8

306,085.2

294,801.9

Fee per trade cleared

0.009

0.009

0.011

0.010

0.011

Net settlement volume (shares in thousands)

2,501.6

2,802.1

2,664.9

2,484.1

2,367.3

Net fee per settlement

0.808