Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — CBOE Holdings — Q3 2010 Earnings Presentation
29 slides from Cboe Global Markets's earnings presentation, Nov 4, 2010
Slide 1: Third Quarter Earnings Conference Call
CBOE Holdings, Inc. Third Quarter Earnings Conference Call N November b 4, 4 2010 p. 1 CBOE Holdings, Inc.
Slide 2: Forward Looking Statements
Forward Looking Statements ► This presentation contains statements which may be considered forward-looking statements within the meaning of the Securities Exchange Act of 1934, including, without limitation, statements regarding operating strategies, future plans and financial results. Forward-looki
Slide 3: Strategic Review
Strategic Review William J. Brodsky Chairman and CEO p. 3 CBOE Holdings, Inc.
Slide 4: 2010 Options Volume Trends
2010 Options Volume Trends Total Monthly Options Average Daily Volume for 2010 (in thousands) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 J Jan F b Feb M Mar A Apr M May J Jun J l Jul A Aug S Sep O t Oct Source: Company Data p. 4 CBOE Holdings, Inc.
Slide 5: Strong Year-over-Year Volume Growth in Proprietary Index Products
Strong Year-over-Year Volume Growth in Proprietary p y Index Products 42% 81% 6% p. 5 CBOE Holdings, Inc.
Slide 6: CBOE Third Quarter Market Share Data
CBOE Third Quarter Market Share Data Total Industry Volume Excl. Dividend Trades CBOE 5% 1% 5% 1% ISE 3% 3% NASDAQ/PHLX 12% 28% 29% 31% NYSE/ARCA 12% 14% NYSE/AMEX 12% 12% BOX 18% 22% 18% 19% 19% NASDAQ/NOM BATS Equity Options ETF Options Index Options 5% 1% 5% 1% 1% 1% 3% 2% 4% 25% 20% 13% 13% 12%
Slide 7: C2: New All-Electronic Exchange
C2: New All-Electronic Exchange ► Successfully launched on October 29, 2010 ► O Opportunities t iti include: i l d • Extend customer reach • Maximize value of order flow attracted to our marketplace • Repatriate order flow currently routed away through linkage • Gain incremental volume p. 7 CBOE Hol
Slide 8: C2 Aims to Capture Additional Volume
C2 Aims to Capture Additional Volume ► Employs a maker/taker pricing model with modified price/time matching algorithm on multiply-listed classes ► Competitive take fee and maker subsidy ► Transaction fees for all multiply-listed penny pilot equity and ETF option classes, per contract: Maker Taker C
Slide 9: PULSE Trader Platform
PULSE Trader Platform ► PULSE terminal enables users to send orders to CBOE, CBSX, C2, CFE and other U.S. U S exchanges ► Provides enhanced customization and functionality at competitive price ► Currently granting licenses to CBOE and CBSX Trading Permit Holders and allowing firms to make workstatio
Slide 10: Regulatory Developments
Regulatory Developments ► Dodd-Frank bill soundly endorses exchange trading and central clearing ► SEC proposed rulemaking that could potentially affect options industry, includes: • “Step up” trading • Fee caps ► CBOE is in dialogue with regulators and advocating in the interests of options custome
Slide 11: Financial Review
Financial Review Alan J. Dean Executive Vice President, CFO and Treasurer p. 11 CBOE Holdings, Inc.
Slide 12: Third Quarter 2010 Financial Overview
Third Quarter 2010 Financial Overview ¹Adjusted Basis (unaudited) Q3 2010 Q3 2009 $ Change % Change (in millions, millions except RPC and EPS) Total Operating Revenues $106.0 $98.2 $ 7.8 8% Total Operating Expenses¹ 60.1 65.2 (5.1) (8)% Operating Income¹ $ 45.9 $33.0 $12.9 39% Operating Margin¹ 43.3
Slide 13: 3Q 2010 Operating Revenues
3Q 2010 Operating Revenues Operating Revenues (in millions) 3Q 2010 3Q 2009 % CHG Key Variance Drivers: Transaction fees: ► Transaction fees $ 72.9 $ 76.3 -4% • 17% decrease in trading volume A fees Access f 18 5 18.5 50 5.0 270% • 15% iincrease iin RPC tto $0 $0.306 306 Access fees: ► Exchange serv
Slide 14: Transaction Fees Driven by Volume and Rate Per Contract
Transaction Fees Driven by Volume and Rate Per Contract Overall Transaction Fee per Contract (RPC) Higher mix of index options p drove Thousands Higher Hi h volume l resulted lt d RPC RPC growth 6,000 in lower RPC and $0.320 stronger revenue growth 5,000 $0.300 4,000 $0.280 3,000 $0.260 $ 2,000 $0.2
Slide 15: 3Q 2010 Options Trading Volume Mix
3Q 2010 Options Trading Volume Mix Q3 2010 Q3 2009 25% 24% 50% 57% 19% 25% Equity Index ETF CBOE Holdings, Inc. Options Options Options p. 15
Slide 16: 3Q 2010 Adjusted Operating Expenses
3Q 2010 Adjusted Operating Expenses Adjusted Operating Expenses (in Key Variance Drivers: millions) 3Q 2010 3Q 2009 % CHG Employee Costs: ► Employee Costs $ 23.7 $ 22.1 7% • $4.0 million increase from continuing stock-based compensation expense Depreciation and Amortization 7.1 6.9 3% • $2.6 million
Slide 17: Balance Sheet Overview
Balance Sheet Overview As of As of As of ($ in thousands) Sept. 30, 2009 Dec. 31, 2009 Sept. 30, 2010 B l Balance Sh Sheett Data D t Cash $348,938 $383,730 $322,936 Total Assets 564,378 571,948 530,624 Total Liabilities 111,065 383,814 81,482 Total Stockholders’/Members' Equity¹ 453,313 188,134 449,
Slide 18: Fourth Quarter Guidance Summary
Fourth Quarter Guidance Summary ► Continuing stock-based compensation expense $3.1 - $3.3 million ► Accelerated stock-based stock based compensation expense of approximately $2.0 million (excluded from adjusted earnings) ► Incremental depreciation and amortization expense of $8.3 - $8.6 million tied
Slide 19: Questions & Answers
Questions & Answers p. 19 CBOE Holdings, Inc.
Slide 20: Appendix Materials
Appendix Materials p. 20 CBOE Holdings, Inc.
Slide 21: Annual Financial Highlights
Annual Financial Highlights (Please see our disclaimer regarding Non-GAAP financial measures on slide X for information about our use of non-GAAP measures in this table) Options ADV (mm) RPC Transaction Fees ($mm) Exchange-traded funds 4.7 $0.309 $344 Indexes 4.5 4.5 $0 294 $0.294 $315 $0.282 $0.288
Slide 22: Historical Transaction Fee Drivers
Historical Transaction Fee Drivers For the Year Ended December 31, 9 Mos 9 Mos ‘05-’09 Ended Ended CAGR/ Sept. 30, Sept. 30, 2005 2006 2007 2008 2009 Avg. 2010 2009 Average Daily Volume (in thousands) Equities 1,094 1,556 1,996 2,387 2,519 23% 2,277 2,594 Indexes 459 628 918 1 026 1,026 884 18 1 101
Slide 23: Calculation of Weighted Average Shares
Calculation of Weighted Average Shares 3 Months Ending Sept 30, 2010 9 Months Ending Sept 30, 2010 Days Total Days Total Weighted Shares Outstanding Days Weighted Avg Outstanding Days Avg Shares Issued to Members 74,400,000 74 400 000 92 92 74,400,000 74 400 000 273 273 74,400,000 74 400 000 Shares
Slide 24: CBOE Rolling 3-Month RPC
CBOE Rolling 3-Month RPC CBOE Rolling Three-Month Average Transaction Fee Per Contract (RPC) 2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.177 $0.180 $0.184 $0.172 $0.163 $0.162 $0.170 $0.180 $0.182 Indexes 0 576 0.590 0.576 0 590 0.597 0 597 0.584 0 584 0.578 0 578 0.580 0 580 0.
Slide 25: Quarterly Financial Highlights
Quarterly Financial Highlights (Please see our disclaimer regarding Non-GAAP financial measures on slide X for information about our use of non-GAAP measures in this table) Options ADV (mm) RPC Transaction Fees ($mm) Equities Indexes Exchange-traded funds $94 53 5.3 $0 306 $0.306 $81 $83 $ $0 300 $0
Slide 26: Quarterly Core Operating Expenses
Quarterly Core Operating Expenses ($ in thousands) 3Q 2010 % rev 2Q 2010 % rev 1Q 2010 % rev 4Q 2009 % rev 3Q 2009 % rev Total Operating Expenses $71,082 67% $70,792 63% $62,352 62% $64,152 53% $65,197 66% Less: Depreciation and Amortization 7,099 7% $7,301 6% $7,301 7% $6,859 6% $6,884 7% Accelerat
Slide 27: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation CBOE Holdings, Incorporated and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures For the Three Months Ended September 30, 2010 (in thousands, except per share amounts) Three months ended Sept 30, 2010 Adjustment for accelerated Reported p stock-based
Slide 28: Non-GAAP Information
Non-GAAP Information ► In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-GAAP measures of operating performance. The non-GAAP measures p p provided in this p press release include core operating expenses, adjusted operating expenses, adjust
Slide 29: CBOE Holdings, Inc.
CBOE Holdings, Inc. 400 South LaSalle Street Chicago, IL 60605 Debbie Koopman Director, Investor Relations koopman@cboe com [email protected] 312-786-7136 p. 29 CBOE Holdings, Inc.