Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — CBOE Holdings — UBS Global Financial Services Conference 2012
39 slides from Cboe Global Markets's conference presentation, May 9, 2012
Slide 1: UBS Global Financial Services Conference
Edward T. Tilly, President and COO CBOE Holdings, Inc. UBS Global Financial Services Conference May 9, 2012 CBOE Holdings, Inc.
Slide 2: Forward Looking Statements
Forward Looking Statements ► This presentation may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations assumptions or projections about the future and involve a n
Slide 3: At a Glance
At a Glance ► Leading Brand and Market Position • Leading L di U U.S.S options ti exchange h • CBOE and VIX are industry’s leading brands • Well positioned to benefit from secular growth ► Leading Product Innovator • Exclusive index franchise differentiates CBOE • Volatility suite provides strong gr
Slide 4: Strong Financial Performance
Strong Financial Performance Adjusted Operating Revenues¹ First Quarter 2012 Highlights: ►Operating Revenues • $121.4 million, down 2% • Slight decline related to industry-wide decline in trading volume YOY ► Adjusted Operating Margin • 47.5%, up 80 bps ► Adjusted Net Income Allocated to Common Stoc
Slide 5: Mission and Strategy
Mission and Strategy Develop New Products Create value for stockholders by offering a diversified Optimize portfolio of risk management Revenue and Market Share in products and services which Commoditized Products generate industry g y leading g profit margins and growth Broaden rates while maintain
Slide 6: Leader in Product Innovation
Leader in Product Innovation Focus on developing exclusive products that generate premium fees ► S&P 500 complex • Flagship SPX contract • SPX Weeklys • SPXpm ► VIX product line • Sector ETFs and single-stock single stock VIX products ► New futures products on CFE CBOE Holdings, Inc. p. 6
Slide 7: SPX Drives Strong Index Volume
SPX Drives Strong Index Volume ► SPX most actively traded cash index • 13% increase in 2011 versus 2010 • 2% YOY increase through April 2012 ► SPX Weeklys important component of SPX complex • 283% increase in 2011 versus 2010 • 29% increase YOY through April 2012 ¹YTD through April 30, 2012 p. 7 CBO
Slide 8: SPXpm Gaining Traction
SPXpm Gaining Traction ► Working closely with early adopters ► Expanded comprehensive marketing and educational program ► Customer feedback continues to be positive ► Open interest topped 100,000 contracts in March and April SPXpm Provides Greater Efficiency, More Control and Lower Costs p. 8 CBOE H
Slide 9: Strong Growth in Volatility Trading
Strong Growth in Volatility Trading ► Strong future growth potential • VIX options up 9% through April 2012 YOY; up 36% in 1Q12 vs 4Q11 • p 67% through VIX futures up g April 2012 YOY; up 74% in 1Q12 vs 4Q11 ► Growth fueled in part by ETPs tied to VIX index • AUM up 82% to $5.1 billion from $2.8 bil
Slide 10: CBOE Volatility Benchmark Indexes
CBOE Volatility Benchmark Indexes CBOE Equity Index Volatility Indexes CBOE VIX Indexes on Individual Equities • CBOE Volatility V l tilit IIndex d (VIX) • Apple (VXAPL) • CBOE DJIA Volatility Index (VXD) • Amazon (VXAZN) • CBOE Nasdaq-100 Volatility Index (VXN) • Goldman Sachs (VXGS) • CBOE S&P 100
Slide 11: Optimizing Revenue and Market Share In Commoditized Products
Optimizing Revenue and Market Share In Commoditized Products Achieved significant market share gains: ► Positive customer response to VIP • Pays credits to firms for certain types and levels of business at CBOE 28.0% ► Market share in multiply-listed options up 3.5 percentage points to 22.6% for Apr
Slide 12: Expanding User Base
Expanding User Base ► Focus on customer segments with FLEX Index Options ADV greatest potential • Users of OTC market • Institutional investors • Volatility traders ► OTC-type trades migrating to CBOE • 28% increase YOY in FLEX index products through April 2012 • 21% growth in FLEX index products i
Slide 13: Providing Enhanced CFLEX Technology
Providing Enhanced CFLEX Technology ► Introducing new CFLEX 2.0, customized trading technology • Enables convenient access to FLEX options • Features Automated Improvement Mechanism (AIM) • Began gradual roll out; expect to be fully functional by end of June ► Expected to attract additional trading
Slide 14: Rollout of CBOE Command
Rollout of CBOE Command™ ► Rollout of new trade engine technology • CFLEX 2.0 • New API • Servers move to New Jersey 4Q12 CBOE Command™ ► Systems y development p embedded in value proposition ► Systems designed in-house • Provide flexibility, scalability • Cost effective p. 14 CBOE Holdings, Inc.
Slide 15: Undisputed Leader in Options Innovation
Undisputed Leader in Options Innovation 1983 2003 Introduced Began operating Index Options Hybrid trading 2011 model Launched 1985 SPXpm 1973 Options 2006 CBOE became Institute 1993 Began trading VIX options first marketplace established Devised methodology for trading options for the VIX Index, the
Slide 16: Ongoing Value Proposition
Ongoing Value Proposition Develop D l NNew Products Optimize Revenue and Market Share in Commoditized Reinvest Products Maintain the Capitalize capital to Continue to drive growth highest on operating drive and return standards of leverage margins and excess cash market inherent in Broaden cash flow
Slide 17: Questions & Answers
Questions & Answers p. 17 CBOE Holdings, Inc.
Slide 18: Appendix Materials
Appendix Materials p. 18 CBOE Holdings, Inc.
Slide 19: Large and Growing U.S. Market
Large and Growing U.S. Market (ADV in thousands) Source: Options Clearing Corporation and CBOE ¹YTD through April 30, 2012 p. 19 CBOE Holdings, Inc.
Slide 20: 1Q12 Financial Overview
1Q12 Financial Overview Adjusted Basis1 (in millions, except EPS and RPC) 1Q12 1Q11 $ Chg. g % Chg. g Operating Revenues $121.4 $124.0 $ (2.6) -2% Adjusted Operating Expenses 63.8 66.1 2.3 -3% Adjusted Operating Income $ 57.6 57 6 $ 57.9 57 9 $ (0 (0.3) 3) -1% 1% Adjusted Operating Margin % 47.5% 46
Slide 21: 1Q12 Reported 7th Consecutive Quarter of Year-Over-Year Margin Improvement
1Q12 Reported 7th Consecutive Quarter of Year-Over-Year Margin Improvement Quarterly Adjusted Operating Income and Margin¹ ($ in millions) $80.0 55.0% $70.0 50.0% $60.0 $50.0 45.0% $40.0 40.0% $30.0 $20.0 35 0% 35.0% $10.0 $0.0 30.0% 1Q09 Q 2Q09 Q 3Q09 Q 4Q09 Q 1Q10 Q 2Q10 Q 3Q10 Q 4Q10 Q 1Q11 Q 2Q1
Slide 22: Highlights of 2012 Fee Changes
Highlights of 2012 Fee Changes CBOE Achieved Significant Gains in Market Share¹► Implemented a new volume Millions incentive program (VIP) ► Revised liquidity provider sliding scale to exclude proprietary and exclusive products ► Increased fees for certain exchange services ► Modified access fees ►
Slide 23: Transaction Fees Driven by Volume and Rate Per Contract
Transaction Fees Driven by Volume and Rate Per Contract Overall Transaction Fee per Contract (RPC) 4Q11 RPC up versus 4Q10 due to higher mix of index RPC decline reflects net impact of VIP, options and futures and lower volume discounts volume discounts and other fee changes Thousands RPC p. 23 CBOE
Slide 24: Options ADV Up 13% 1Q12 Compared with 4Q11
Options ADV Up 13% 1Q12 Compared with 4Q11 CBOE Holdings Quarterly Options ADV (contracts in millions) p. 24 CBOE Holdings, Inc.
Slide 25: Mix of Products Traded and Transaction Fees
Mix of Products Traded and Transaction Fees Mix of Products Traded Mix of Transaction Fees p. 25 CBOE Holdings, Inc.
Slide 26: Leading Across Markets – 2012 YTD
Leading Across Markets – 2012 YTD Total Industry Volume Excl. Dividend Trades CBOE C2 PHLX ISE 28.2% 29.7% NYSE/Amex NYSE/Arca NOM BOX BATS E it Options¹ Equity O ti ¹ ETF Options¹ Index Options¹ Source: Options Clearing Corporation and CBOE ¹YTD through April 30, 2012, Excludes Dividend Trades May
Slide 27: Quarterly Core Operating Expenses
Quarterly Core Operating Expenses¹ ($ in thousands) 1Q 2012 % rev 4Q 2011 % rev 3Q 2011 % rev 2Q 2011 % rev 1Q 2011 % rev Total Operating Expenses $63,977 53% $67,529 56% $68,638 48% $63,838 53% $66,507 54% L Less: Depreciation and Amortization 8,320 7% 7,506 6% 8,897 6% 8,996 8% 8,696 7% Accelerate
Slide 28: Annual Core Operating Expenses
Annual Core Operating Expenses¹ Annual Core Operating Expenses ($ in thousands) 2011 % rev 2010 % rev 2009 % rev 2008 % rev Total Operating Expenses $266,512 $266 512 52% $269,763 $269 763 62% $248,497 $248 497 62% $229,473 $229 473 55% Less: Depreciation and Amortization 34,094 7% 29,891 7% $27,512
Slide 29: Strong Debt-Free Balance Sheet
Strong Debt-Free Balance Sheet Our Business Model Generates Significant Cash Cash Flow Highlights $ in millions 1Q11 2Q11 3Q11 4Q11 1Q12 Net Cash Flow from Operating $ 78.2 $ 14.3 $ 71.1 $ 38.3 $ 63.3 Acti ities Activities Capital Expenditures (7.1) (11.2) (5.1) (5.7) (7.9) Dividend Payments (9.2) (
Slide 30: 2012 Full-Year Guidance
2012 Full-Year Guidance ($ in millions) 2011 Actual 2012 Guidance Exchange services and other fees $18.2 $24 to $26 Access fees $68.7 $64 to $67 Core operating expenses¹ $166.2 $173 to $178² Tax rate 41.9% 41.2% to 41.7% Depreciation and amortization $34.1 $33 to $35 Capital expenditures $29 1 $29.1
Slide 31: CBOE Holdings Rolling 3-Month RPC
CBOE Holdings Rolling 3-Month RPC 2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.151 $0.128 $0.110 Indexes 0.640 0.651 0.658 Exchange-traded funds 0.206 0.188 0.171 Total options average 0.297 0.275 0.261 Futures 1.474 1.610 1.697 Total average transaction fee per contract $0.308 $
Slide 32: Calculation of Weighted Average Shares
Calculation of Weighted Average Shares 1Q 2012 Year 2011 Days Total Days Total Shares Outstanding Days Weighted Avg Shares Outstanding Days Weighted Avg Unrestricted common stock 88,768,885 91 91 88,768,885 90,084,711 365 365 90,084,711 Vesting of participating securities (restricted stock) on 5/17/
Slide 33: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation CBOE Holdings, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share amounts) Three months ended March 31, 2012 Items Impacting Results Accelerated stock- After Considering Reported (GAAP) based compensation¹ Items
Slide 34: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation CBOE Holdings, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share amounts) Three months ended December 31, 2011 Twelve months ended December 31, 2011 Items Impacting Results Items Impacting Results After After C
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation CBOE Holdings, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, ex cept per share amounts) Three months ended Septebmber 30, 2011 Nine months ended September 30, 2011 Items Impacting Items Impacting Results Results After After
Slide 36: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation CBOE Holdings, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, ex cept per share amounts) Three months ended March 31, 2011 Three months ended June 30, 2011 Items Impacting Items Impacting Results Results After After Accelera
Slide 37: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation CBOE Holdings, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, ex cept per share amounts) Three months ended September 30, 2010 Three months ended December 31, 2010 Items Impacting Results Items Impacting Results After After
Slide 38: 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 provided in this presentation include core operating expenses expenses, adjusted operating revenue revenu
Slide 39: CBOE Holdings, Inc.
CBOE Holdings, Inc. 400 South LaSalle Street Chicago, IL 60605 Debbie Koopman Vice President, Investor Relations koopman@cboe com [email protected] 312-786-7136 p. 39 CBOE Holdings, Inc.
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