Cboe Global Markets Reports Record Net Revenue in Q1 2024

PRESS RELEASE

Cboe Global Markets, Inc. (Cboe: CBOE) today reported financial results for the first quarter of 2024.”During the first quarter, Cboe delivered record quarterly net revenue and strong adjusted earnings, led by the strength of our Derivatives and Data and Access Solutions categories,” said Fredric Tomczyk, Cboe Global Markets Chief Executive Officer.

“These results build on our strong 2023 trends, as overall net revenues grew 7% year-over-year and adjusted EPS increased by 13% as compared to the same period in 2023. Importantly, the adjusted EBITDA margin for the quarter increased by 1.4% year-over-year to 67.2% during the quarter, marking clear progress in our efforts to drive greater margin efficiencies across our businesses. Last week, we announced plans to refocus our digital asset business to leverage our core strengths in derivatives, technology and product innovation while realizing operating efficiencies for both Cboe and our clients.

The second quarter is off to a strong start, and I look forward to building on that momentum going forward.””Following a record 2023, I am incredibly pleased to report record net revenues and strong adjusted earnings in the first quarter of 2024,” said Jill Griebenow, Cboe Global Markets Executive Vice President, Chief Financial Officer. “Derivative trends were robust during the first quarter of 2024 with net revenues growing 8%. Data and Access Solutions delivered equally strong growth with net revenue up 8%, while Cash and Spot Markets net revenues were stable on a year-over-year basis.

Moving forward, we anticipate organic total net revenue growth to finish at the higher end of our 5-7% expected guidance range. We are reaffirming our Data and Access Solutions organic net revenue growth range of 7-10%, in line with our medium-term expectations. Additionally, we are lowering our full year adjusted operating expense guidance range to $795 to $805 million from $798 to $808 million. 2024 is off to a strong start, and we look forward to delivering durable returns for shareholders in the quarters ahead.”

Consolidated First 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 March 31, 2024 and 2023.

IMAGE: Cboe Global Markets, Inc. consolidated first quarter results. Source: PR Newswire

Total revenues less cost of revenues (referred to as “net revenue”) of $502.1 million increased 7 percent, compared to $471.4 million in the prior-year period, a result of increases in derivatives markets and data and access solutions net revenue, as well as stable cash and spot markets net revenue.
Total operating expenses were $219.7 million versus $223.5 million in the first quarter of 2023, a decrease of $3.8 million. Adjusted operating expenses¹ of $192.9 million increased 4 percent compared to $186.2 million in the first quarter of 2023. This increase was primarily due to higher compensation and benefits and technology support services, partially offset by a decline in professional fees and outside services.
The effective tax rate for the first quarter of 2024 was 28.3 percent as compared with 30.1 percent in the first quarter of 2023. The lower effective tax rate in 2024 is primarily due to excess tax benefits from the vesting of equity awards during the quarter. The effective tax rate on adjusted earnings¹ was 28.1 percent, a decrease of 0.9 percent when compared with 29.0 percent in last year’s first quarter.
Diluted EPS for the first quarter of 2024 increased 20 percent to $1.96 compared to the first quarter of 2023. Adjusted diluted EPS¹of $2.15 increased 13 percent compared to 2023 first quarter results.

Business Segment Information:

IMAGE: Total revenues less cost of revenues by business segment (in millions). Source: PR Newswire

Discussion of Results by Business Segment

Options:

Options net revenue of $307.4 million was up $26.7 million, or 10 percent, from the first quarter of 2023. Net transaction and clearing fees increased primarily as a result of a 14 percent increase in index options trading volumes versus the first quarter of 2023. Access and capacity fees were 7 percent higher than first quarter 2023.
Net transaction and clearing fees increased $28.4 million, or 12 percent, reflecting a 1 percent increase in total options average daily volume (“ADV”) and a 12 percent increase in total options RPC compared to the first quarter 2023. The increase in total options RPC was due to a mix shift, with index options representing a higher percentage of total options volume.
Cboe’s Options exchanges had total market share of 31.3 percent for the first quarter of 2024 compared to 31.8 percent in the first quarter of 2023, a result of lower multi-list market share as compared to the first quarter of 2023.

North American (N.A.) Equities:

N.A. Equities net revenue of $92.6 million decreased $0.5 million, or 1 percent versus the first quarter of 2023, reflecting lower net transaction and clearing fees and industry market data.
Net transaction and clearing fees decreased by $0.3 million, or 1 percent, compared to the first quarter of 2023. The decrease was driven by lower Canadian Equities market volumes and net capture as compared to the first quarter of 2023. The decrease was partially offset by a stronger U.S. off-exchange net capture rate, up 24 percent as compared to the first quarter of 2023 given client mix shift and less fee incentives given lower volumes.
Cboe’s U.S. Equities exchanges had market share of 12.8 percent for the first quarter of 2024 compared to 12.7 percent in the first quarter of 2023. Cboe’s U.S. Equities off-exchange market share was 18.4 percent versus 20.4 percent in the first quarter of 2023. Canadian Equities market share rose to 15.3 percent as compared to 14.3 percent in the first quarter of 2023 due to continued client adoption and growth.

Europe and Asia Pacific (APAC):

Europe and APAC net revenue of $54.1 million increased by 10 percent compared to the first quarter of 2023, reflecting double-digit non-transaction revenue growth across market data fees, access and capacity fees, and other revenue. On a constant currency basis, net revenues were $53.4 million, up 8 percent on a year-over-year basis. European Equities average daily notional value (“ADNV”) traded on Cboe European Equities was €9.9 billion, down 13 percent compared to the first quarter of 2023 given a 9 percent decline in industry market volumes and lower market share.
For the first quarter of 2024, Cboe European Equities had 23.7 percent market share, down from 24.9 percent in the first quarter of 2023. Market share was negatively impacted by elevated closing auction activity on listing venues. Cboe Australia had 20.4 percent market share for the first quarter of 2024, up from 18.5 percent in the first quarter of 2023. Cboe Japan grew market share to 5.0 percent in the first quarter of 2024 from 4.8 percent in the first quarter of 2023. Cboe European Equities net capture rate increased 16 percent given mix shift to higher capture products, and Cboe Australia net capture decreased 3 percent when compared to the first quarter of 2023.

Futures:

Futures net revenue of $30.5 million decreased $0.6 million compared to the first quarter of 2023 due to a decline in net transaction and clearing fees, partially offset by higher access and capacity fees and market data fees.
Net transaction and clearing fees decreased $1.3 million, reflecting a 5 percent decrease in ADV during the quarter.

Global FX:

Global FX net revenue of $18.4 million decreased 1 percent, primarily due to lower net transaction and clearing fees. ADNV traded on the Cboe FX platform was $45.3 billion for the quarter, up 1 percent compared to last year’s first quarter, and net capture rate per one million dollars traded was $2.62 for the quarter, down 1 percent compared to $2.64 in the first quarter of 2023.
Cboe FX market share was 20.3 percent for the quarter compared to 19.0 percent in last year’s first quarter.

Digital:

Announced the realignment of Cboe Digital asset business on April 25, 2024. Cboe plans to transition and fully integrate the digital asset derivatives and clearing businesses and wind down operations of the Cboe Digital Spot Market, pending regulatory review and certain corporate approvals.
The wind down of the Cboe Digital Spot Market operations is expected to have an immaterial impact on Cboe’s net revenue in 2024. Expense savings are estimated to be in the range of $2 million to $4 million in 2024, with savings expected to be in the $11 million to $15 million range on annualized adjusted operating expenses.