Cboe Global Markets, Inc. · CBOE:CBOE
Cboe Global Markets — Investor Day (November 2021)
71 slides from Cboe Global Markets's investor day presentation, Nov 16, 2021
Slide 1: 2021 Investor Day
2021 Investor Day November 16, 2021
Slide 2: Today's Presenters and Q&A Participants
Today’s Presenters and Q&A Participants Ed Tilly Cathy Clay Ade Cordell Arianne Criqui John Deters Chairman of the Board, Executive Vice President, President, Cboe Netherlands Senior Vice President, Executive Vice President, Chief President and Chief Executive Global Head of Data and Access Head of
Slide 3: Agenda
Agenda 8:30 – 8:35 a.m. CT Introduction 10:00 – 10:25 a.m. Panel: Growing Proprietary Products Ken Hill, Vice President, Investor Relations Arianne Criqui, Senior Vice President, Head of Derivatives and Global Client Services Rob Hocking, Senior Vice President, Head of 8:35 – 8:50 a.m. Strategic Ove
Slide 4: Cautionary Statements Regarding Forward-Looking Information
Cautionary Statements Regarding Forward-Looking Information This presentation 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 su
Slide 5: Strategic Overview
Strategic Overview Ed Tilly Chairman of the Board, President and Chief Executive Officer
Slide 6: Building One of the World's Largest Global Derivatives and Securities Networks
Building One of the World’s Largest Global Derivatives and Securities Networks to Create Value and Drive Growth 1973 16 Founded in Chicago Operational Locations 23 1,000+ Markets/Exchanges Associates Globally ◆ Global derivatives, ◆ Unified platform ◆ Passionately data, securities creates global ser
Slide 7: Positioned to Innovate, Integrate and Grow to Create Value
Positioned to Innovate, Integrate and Grow to Create Value Innovate to capture growing demand Integrate across ecosystem to Grow by accessing untapped for trading products and data services, increase efficiency and better addressable markets globally serve customers ◆ Proven organic investment and M
Slide 8: Key Industry Trends Driving Customer Demand
Key Industry Trends Driving Customer Demand Access to multi-asset Data intensity and class trading sophistication of capabilities trading strategies Rise of the ESG-focused Globalization retail customer investment 8
Slide 9: Customer Relationships are a Core Competitive Strength
Customer Relationships are a Core Competitive Strength Key Trends Cboe Capabilities ◆ Global network connectivity services Global Banks ◆ Building global scale and efficiency ◆ Consolidated multi-exchange market data feeds ◆ Data, multi-asset execution, and clearing services ◆ Global network connect
Slide 10: Cboe is Uniquely Positioned to Climb the Value Ladder
Cboe is Uniquely Positioned to Climb the Value Ladder Customer Led Product & Market Derivatives Markets Innovation ◆ US, Europe, ◆ Capital Efficiencies, combined with Asia Pacific Clearing ◆ Tradeable Products Superior Technology Global Data Solutions Product ◆ Equities ◆ Derivatives Sophistication
Slide 11: Cboe Ecosystem Enables Virtuous Cycle of Innovation and Growth
Cboe Ecosystem Enables Virtuous Cycle of Innovation and Growth More Data ◆ Operate cash and spot markets across U.S., ◆ Comprehensive solutions in 23 markets Canada, Europe, Australia, and Japan across the globe ◆ Foundation for investment in new ◆ More than 350 derivatives-based indices markets and
Slide 12: Portfolio Evolution Has Dramatically Increased Our Addressable Markets
Portfolio Evolution Has Dramatically Increased Our Addressable Markets Robust strategic drivers across equity Amplified market opportunity and derivatives markets across data and analytics Organic Growth M&A Growth Recurring Revenue Growth Targeting >150mn Retail Nearly $75 trillion in New Over $37
Slide 13: Top Strategic Growth Priorities
Top Strategic Growth Priorities Sizing the Key Trends Market Opportunity Cboe Differentiation Growth Potential ◆ Globalization ◆ > $33bn annual spend on ◆ Leverage our global, ◆ Targeting organic net ◆ Access to multi-asset financial market data¹ proprietary data set to revenue growth of 7- Data and
Slide 14: Cboe's Commitment to ESG Initiatives
Cboe’s Commitment to ESG Initiatives Environmental Social Governance ◆ Carbon credits: Offset our Scope 1 and 2 ◆ Cboe Empowers: Community engagement ◆ Independent Board: 13 of the 14 Directors emissions from 2020 and our Scope 3 program that provides mentorship, are independent emissions from our 2
Slide 15: Well Positioned to Create Value and Drive Growth
Well Positioned to Create Value and Drive Growth Innovate to capture growing Integrate across ecosystem to Grow by accessing untapped demand for trading products and increase efficiency and better addressable markets data services, globally serve customers 15
Slide 16: Core Strengths and Competitive Differentiators
Core Strengths and Competitive Differentiators Chris Isaacson Executive Vice President, Chief Operating Officer
Slide 17: Building One of the World's Largest Global Derivatives and Securities Networks
Building One of the World’s Largest Global Derivatives and Securities Networks Cboe is committed to providing best-in-class technology to power our cutting-edge trading and investment solutions $84 B € 7.3 B 11.8 M Average amount traded on Average amount traded on Average number of Cboe’s U.S. Equit
Slide 18: Strength of Unified Platform Fuels the Ecosystem
Strength of Unified Platform Fuels the Ecosystem More Data Unified Platform Provides Greater Access, Efficiency and Scale Innovate customer-driven Data and solutions around tradable Access Solutions products, data and access Innovate Cash & Spot Integrate across a scalable Markets technology platfor
Slide 19: Innovating, Integrating and Growing to Meet Opportunities
Innovating, Integrating and Growing to Meet Opportunities Navigating changes and complexities across asset classes, geographies, and regulation Options Regulation Brexit / Regulatory Electronification Nation Market MiFID II Environment System (NMS) 2003 2005–2007 2016–2020 2022 and Beyond ◆ Market b
Slide 20: Cboe Global Cloud Infrastructure Expands Market Opportunities
Cboe Global Cloud Infrastructure Expands Market Opportunities Increases customers, products, markets, geographic reach, access, and distribution Product Region Product Category Status Equities Launched Aug. 1st (beta) TAM¹ Futures $1 bn Launched Nov. 1st (full prod) North America Indices U.S. Option
Slide 21: Cboe Answering Customer Demand for a Digital Asset Marketplace
Cboe Answering Customer Demand for a Trusted, Transparent and Regulated Digital Asset Marketplace Derivatives Spot Trading Data Solutions Clearing Trading ◆ Cboe to enter digital asset space Key Features through planned acquisition of ErisX¹ Marketplace Data Clearing & Settlement ◆ ErisX operates a
Slide 22: The Future of Crypto
The Future of Crypto More Data Bringing Clarity, Trust and Transparency to the Digital Asset Marketplace ◆ ErisX¹ is expected to provide Cboe the entire crypto Data and ecosystem (including clearing) in one step Access Solutions ◆ Digital Advisory Committee is expected to provide relationships with
Slide 23: Key Takeaways - Core Competencies
Key Takeaways - Core Competencies 1. Leverage global platform; creating operational scale and efficiency ◆ Efficiency at scale both organically and through M&A ◆ Expanding customer access and distribution; building stronger customer relationships by identifying friction points and reducing barriers
Slide 24: Scaling into New Markets
Scaling into New Markets David Howson Executive Vice President, President Europe and Asia Pacific
Slide 25: Building an Unrivaled Global Derivatives and Securities Network
Building an Unrivaled Global Derivatives and Securities Network Europe ◆ #1 Pan-European equities exchange1 and clearing house ◆ #1 block trading venue2 (BIDS) ◆ Proprietary index suite ◆ Launched Pan-European equity derivatives North America Asia Pacific ◆ #1 U.S. Options Exchange, exclusive home o
Slide 26: Complementary M&A and Organic Initiatives Driving Global Growth
Complementary M&A and Organic Initiatives Driving Global Growth ◆ Innovate, Integrate, Grow – ‘M&A is only as good as the organic momentum that surrounds it’ Derivatives Markets ◆ US, Europe, ◆ Capital Efficiencies, Asia Pacific Clearing ◆ Proven blueprint for organic ◆ Tradeable Products growth ◆ E
Slide 27: Strategic Priorities and Broadened Opportunity Set
Strategic Priorities and Broadened Opportunity Set Australia Japan Canada5 ◆ 18.7% Market share¹ ◆ 2.7% Market share³ ◆ 16.5% Market share4 Broaden Geographic ◆ ~23% retail¹ ◆ ~30% retail³ ◆ ~30% retail4 Reach ◆ 10th largest market² ◆ 4th largest market² ◆ 7th largest market² ◆ BIDS Network 2022/202
Slide 28: European Success a Blueprint for Other Regions
European Success a Blueprint for Other Regions Equities Market Share¹ 18 Markets Across Europe Helsinki Oslo 25.9% #1 intraday equities market share1 24.2% Stockholm 22.8% Market data includes 1 in every 2 Dublin 23.7% London Copenhagen 23% equity trades in Europe 27.7% Amsterdam 21.5% #1 Pan-Europe
Slide 29: Utilized Organic Growth and M&A to Become a Market-leader
Utilized Organic Growth and M&A to Become a Market-leader Launched 140 Derivatives Transactional¹ Non-Transactional Acquired Euro CCP ~£119 120 100 £89 Revenue (£ in millions) Launched Extended Cboe NL 43% BIDS 80 Periodic network £71 Trade reporting Auctions £68 Bats and data (Cboe LIS) 44% acquire
Slide 30: Leveraging Our Ecosystem to Build New Markets
Leveraging Our Ecosystem to Build New Markets More Data Data and Access Solutions Through a combination of acquisitions and Cash & organic investment, we have: Spot ◆ Unlocked Pan-European Cash Equities Markets ◆ Used Cboe European market data to build indices ◆ EuroCCP acquisition enabled derivativ
Slide 31: Key Takeaways
Key Takeaways 1. Unique global network ◆ M&A combined with customer-led organic initiatives leads to sustainable value creation opportunities across asset classes 2. Pan-European Blueprint ◆ Success demonstrates how we create a self-sustaining ecosystem across cash, data and derivatives markets 31
Slide 32: Cultivating Recurring Revenue
Cultivating Recurring Revenue Cathy Clay Executive Vice President, Global Head of Data & Access
Slide 33: Global Opportunity for Data and Access Solutions
Global Opportunity for Data and Access Solutions Changing demographics ◆ Transfer of Global Wealth Total Market Size¹ ◆ Tech Savvy Generations Proliferation of data sets ◆ Doubling Every 3 Years Americas EMEA APAC Data: $16.2 bn Data: $10.8 bn Data: $6.2 bn ◆ ESG, Digital Assets Indices: $2.5 bn Ind
Slide 34: Simplifying Global Markets
Simplifying Global Markets Exchange data powers the markets Market Data & Analytics: $33 bn TAM¹ Indices: $4 bn TAM¹ Other Other ◆ Flywheel of creation and consumption Price Reference Fixed Income & Valuation 4% Factor 6% 11% ◆ Growth of transactional and non-transactional revenue Data 17% 12% ESG 3
Slide 35: Integrated For Data-Driven Solutions
Integrated For Data-Driven Solutions Organic capabilities & strategic acquisitions 2025: est. $45 - 50 bn³ TAM using 4-6% CAGR ◆ Cboe Global Indices + Market Data & Access + LiveVol + Silexx + Hanweck + FT Options + TradeAlert Content & delivery ◆ Proprietary market content meets flexible delivery 2
Slide 36: Business Lines Overview
Business Lines Overview Data and Access Solutions Core Technology Access & Connectivity Cboe Global Risk & Market Solutions Indices Analytics ◆ Foundational data architecture ◆ Efficient solutions integration and development Complementary Cboe relationship ◆ Data and Access Solutions offerings benef
Slide 37: Multi-Dimensional Opportunity
Multi-Dimensional Opportunity Integrating new asset classes ◆ Traditional: listed derivatives, equities, fixed income, & OTC derivatives ◆ Emerging: digital assets & ESG Innovating new solutions Derivatives Markets ◆ US, Europe, ◆ Capital Efficiencies, ◆ Simplify the client vendor experience Asia Pa
Slide 38: Complementary Growth Through Data-Driven Solutions
Complementary Growth Through Data-Driven Solutions More Data Data created and consumed ◆ Cboe powered Data and Access Solutions offerings Engaged participants grow markets Data and ◆ Data and Access Solutions clients navigate trading Access complexities with confidence Solutions Index innovation Cas
Slide 39: Key Takeaways – Data and Access Solutions
Key Takeaways – Data and Access Solutions 1. Targeting organic revenue growth of 7-10% annually over the medium term ◆ Large Total Addressable Market of $37B ◆ Expecting areas like risk analytics and indices to grow at above- segment rates 2. Tight alignment with global exchange network ◆ Differenti
Slide 40: Break
Cboe Break
Slide 41: Proprietary Products
Proprietary Products Ade Cordell, President, Cboe Netherlands Arianne Criqui, Senior Vice President, Head of Derivatives and Global Client Services Rob Hocking, Senior Vice President, Head of Derivatives Strategy
Slide 42: Global Derivatives: Expand Access to Derivatives to Drive Organic Growth
Global Derivatives: Expand Access to Derivatives to Drive Organic Growth Derivatives Net Revenue¹ 5-Year CAGR = 8% >150mn Retail $600 $633 Accounts at Top $561 $519 $526 Four Retail $435 Brokers We Estimate 2016 2017 2018 2019 2020 2021* Less Than 1/3 Trade Options Today² Number of US ‘40 Act Funds
Slide 43: Global Derivatives: Innovation Hub
Global Derivatives: Innovation Hub INNOVATION Significant positive change that drives business value and sustainable growth ✓ Nanos¹ ✓ Compression (multilateral) nanos by Cboe SIMPLE - nanos provides a simpler, more accessible *71% Exploring forward… alternative to today’s options. want less choice
Slide 44: Launch of First Pan-European Transparent and Lit Derivatives
Launch of First Pan-European Transparent and Lit Derivatives Replicate Pan-European blueprint Equity + Index Options Market Landscape¹ established by Cboe Europe equities Europe vs U.S. business with derivatives ◆ Clearing through Cboe’s - EuroCCP ◆ Phased introduction of futures and options on Pan-
Slide 45: Derivatives Panel Discussion
Derivatives Panel Discussion 45
Slide 46: Financial Overview
Financial Overview Brian Schell Executive Vice President, Chief Financial Officer and Treasurer
Slide 47: We Have Evolved Cboe to Capture Growth Opportunities
We Have Evolved Cboe to Capture Growth Opportunities Total Net Revenue Data & Access Solutions Net Revenue2 Transaction-based Net Revenue3 21% CAGR 15% CAGR $1.4 bn 26% CAGR $0.8 bn $0.6 bn $0.4 bn $0.4 bn $0.1 bn 2016 20211 2016 20211 2016 20211 Adjusted EBITDA4 Adjusted EPS4 22% CAGR 19% CAGR $1.0
Slide 48: Growth Reflects Increased Diversification
Growth Reflects Increased Diversification Net Revenue1 (in billions) $1.4 100% VIX and SPX Net Transaction Fees5 (% of Net Revenue) $1.3 $1.4 90% $1.2 $1.1 80% Components of Revenue Growth3 $1.2 $1.0 44% 69% 70% 45% $1.0 49% 60% Total Net Revenue (5-yr) 21% 46% $0.8 49% 50% 29% $0.6 $0.6 40% Derivat
Slide 49: Strong Free Cash Flow Reflects Superior Operating Model
Strong Free Cash Flow Reflects Superior Operating Model and Efficiency of Technology Platform Free Cash Flow1 $717 Revenue growth with high margins: $580 $578 ◆ Unified technology platform - efficiency $523 ◆ Global network - synergy $379 ◆ Incentive growth alignment Enables strategic balance sheet
Slide 50: Clear Capital Allocation Approach
Clear Capital Allocation Approach Capital Allocation Philosophy Balanced Capital Usage Since 2016 Organic opportunities Invest in 21% M&A investments 56% ~$4B Priority Total Capital Dividend growth Deployed Return of Capital Share repurchases 23% Leverage ratio* to maintain investment grade status H
Slide 51: Disciplined Investment Approach Delivers Long-Term Profitable Growth
Disciplined Investment Approach Delivers Long-Term Profitable Growth Industry Peer Group ROIC Comparison ROIC 2020 ROIC¹ Threshold 14%¹ Organic 11%² 10%² Acquisitions 8%² Initiatives > 10% ROIC target U.S. Exchange #1 U.S. Exchange #2 U.S. Exchange #3 over 3-5 year time frame P/E on 2022 Consensus*:
Slide 52: Framework for Investing in Superior Growth Opportunities
Framework for Investing in Superior Growth Opportunities Leverage Investment Customer Core Expand and Profit Demand Competencies TAM Potential 52
Slide 53: Recent M&A Activity
Recent M&A Activity Transactions closed in Transactions announced pending regulatory 2020 and 2021 approval and customary closing conditions * * Limited partner investment in acquisition 53
Slide 54: Raising Medium-to-longer Term Organic Revenue Growth Guidance
Raising Medium-to-longer Term Organic Revenue Growth Guidance Annual Net Revenue Growth Average annual organic total net revenue growth rate (2018-2021) of 4%¹ 7% New Organic Revenue Exceeding 2021 Revenue Targets 5% Growth Target Zone¹ ◆ Targeted medium- to long-term organic total net revenue of 4-
Slide 55: Key Takeaways
Key Takeaways 1. Proven track record of success ◆ Operating performance – revenues, earnings, free cash flow ◆ Balance sheet utilization/flexibility ◆ Capital allocation as a value creator 2. Increased guidance on revenue growth targets ◆ High conviction revenue growth opportunities ◆ Strong mix of
Slide 56: Closing Remarks
Closing Remarks Ed Tilly Chairman of the Board, President and Chief Executive Officer
Slide 57: Key Takeaways From the Day
Key Takeaways From the Day More Data ◆ Spoke to our core strengths and technological Data and advantages Access Solutions ◆ Outlined our blueprint for geographic expansion Cash & Spot ◆ Highlighted the durability and sustainability of Markets recurring revenue growth ◆ Provided insights on how we ar
Slide 58: Top Strategic Growth Priorities
Top Strategic Growth Priorities Sizing the Key Trends Market Opportunity Cboe Differentiation Growth Potential ◆ Globalization ◆ > $33bn annual spend on ◆ Leverage our global, ◆ Targeting organic net ◆ Access to multi-asset financial market data¹ proprietary data set to revenue growth of 7- Data and
Slide 59: Q&A
Q&A Cboe
Slide 60: Supplemental Information
Cboe Supplemental Information
Slide 61: Notes and Definitions
Notes and Definitions Definitions: • Net revenues referred to in presentation represents total revenues less cost of revenues • Net transaction and clearing fees represents transaction and clearing fees less liquidity payments and routing and clearing fees • DnA represents Data and Access Solutions
Slide 62: Non-GAAP Information
Cboe Non-GAAP Information
Slide 63: Non-GAAP Information
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-GA
Slide 64: Non-GAAP Information
Non-GAAP Information Reconciliation of Net Transaction and Clearing Fees by Business Segment For the Year Ended December 31, 2016 European (in millions) Options N.A. Equities Futures Equities Global FX Total Transaction fees $ 408.2 $ 101.1 $ 509.3 Liquidity payments (35.8) - (35.8) Routing and clea
Slide 65: Non-GAAP Information – See next slide for footnotes
Non-GAAP Information – See next slide for footnotes Non-GAAP Information (in millions, except per share amounts) 2016 2017* 2018 2019 2020 2021¹ Reconciliation of Net Income Allocated to Common Stockholders to Non-GAAP Net income allocated to common stockholders $ 184.9 $ 396.7 $ 422.1 $ 372.7 $ 467
Slide 66: Non-GAAP Information – Footnotes for Previous Slide
Non-GAAP Information – Footnotes for Previous Slide (*) Includes Bats for the period March 1 through December 31, 2017. (1) Reflects results for the nine months ended September 30, 2021, annualized. (2) This amount includes professional fees and outside services, severance, facilities expenses, impa
Slide 67: Non-GAAP Information
Non-GAAP Information EBITDA Reconciliations EBITDA (earnings before interest, income taxes, depreciation and amortization) and Adjusted EBITDA are widely used non-GAAP financial measures of operating performance. EBITDA margin represents EBITDA divided by revenues less cost of revenues (net revenue)
Slide 68: Non-GAAP Information
Non-GAAP Information Free cash flow is a non-GAAP financial performance measure which is reviewed by management, and which we believe provides useful information to measure the net cash generated from the company’s operations that is available for various sources of capital deployment. Free cash flo
Slide 69: Non-GAAP Information
Non-GAAP Information We define return on invested capital, or ROIC, as adjusted net operating income after tax divided by invested capital. Adjusted operating income after tax reflects adjusted operating income less tax based on our adjusted effective tax rate during the period. Invested capital is
Slide 70: Non-GAAP Information
Non-GAAP Information Reconciliation of Revenue Less Cost of Revenue to Organic Net Revenue (as reported in each respective year) (in millions) 2017 2018 2019 2020 2021* Revenue less cost of revenue (Net Revenue) $ 995.6 $ 1,216.9 $ 1,136.9 $ 1,254.3 $ 1,447.5 Acquisition revenue less cost of revenue
Slide 71: Cboe.com
Cboe Cboe.com