Cboe Global Markets, Inc. (CBOE) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong growth in Data Vantage revenues, strategic realignment savings, and expansion in prediction markets, boosting investor confidence. While management was unclear on some future opportunities, the overall outlook remains optimistic with plans for share repurchases and dividend increases. This suggests a positive stock price movement.
Key Financial Performance
Net Revenue $729 million, a 29% increase year-over-year. The growth was driven by record net revenue in every major category and double-digit growth in 4 of 5 company segments.
Adjusted Diluted EPS $3.70, a 48% increase year-over-year. This was attributed to strong performance across core businesses and disciplined expense management.
Derivatives Business Net Revenue 32% increase year-over-year. Growth was driven by a 35% increase in index options net transaction and clearing fees revenue, with SPX options average daily volume increasing 34% year-over-year.
Cash and Spot Markets Net Revenue 34% increase year-over-year. Growth was driven by strong industry volumes, record results in Europe and Asia Pacific, North American equities, and global FX.
Global FX Net Revenue 38% increase year-over-year. Growth was driven by a 36% increase in average daily notional value and a 4% increase in net capture.
Data Vantage Net Revenue 19% increase year-over-year. Growth was driven by new units and new sales, with 85% of growth attributed to these factors.
Adjusted Operating Expenses $201 million, a 4% increase year-over-year. The increase was largely driven by higher compensation and benefits expenses due to strong revenue trends.
Adjusted Operating EBITDA $541 million, a 41% increase year-over-year. The margin expanded by 6.1 percentage points to 74.2%, driven by exceptional revenue results and disciplined expense management.
Options Segment Net Revenue 33% increase year-over-year. Growth was driven by a 34% increase in net transaction and clearing fees, with total options ADV up 10%.
North American Equities Net Revenue 18% increase year-over-year. Growth was driven by a 40% increase in net transaction and clearing fees, with additional contributions from market data fees and access and capacity fees.
Europe and APAC Net Revenue 32% increase year-over-year. Growth was driven by a 43% increase in net transaction and clearing fees and a 21% increase in non-transaction revenues.
Futures Net Revenue 9% increase year-over-year. Growth was driven by a 14% uptick in total ADV due to stronger VIX activity.
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Operating Highlights
Event Contracts: Cboe plans to launch securities-based event contracts, subject to regulatory approval. These contracts are based on the Mini SPX contract and are designed to mirror the risk/reward profile of a vertical call spread. The product aims to provide a simple yes/no outcome with defined downside risk and capped payout range. This launch is the first step in a broader event contract strategy, with plans to expand into economic and financial indicators.
Data Vantage: Net revenue increased by 19% year-over-year, driven by new product sales and demand for market access. Approximately 85% of growth came from new units and sales, with the remainder from pricing changes.
Global Trading Hours: Global trading hours volumes rose by 32% to a record high, driven by growth during Asian hours and onboarding of local brokers.
Cash and Spot Markets: Net revenue increased by 34%, with record results in Europe, Asia Pacific, North American equities, and global FX. European transaction business grew 32%, and global FX net revenue increased by 38%.
Strategic Realignment: Cboe announced a workforce reduction of approximately 20% and a transition back to in-person work to enhance collaboration and decision-making. These changes are expected to yield annualized expense savings of $100-$120 million.
Expense Management: Adjusted operating expenses increased by 4% year-over-year to $201 million, while adjusted operating EBITDA grew 41%, with a margin expansion to 74.2%.
Business Exits and Sales: Cboe is exiting or winding down non-core businesses, including Canada, Australia, corporate listings, European derivatives, and Japanese equities. These actions are expected to reduce annualized net revenue by 3% but save $100-$120 million in expenses.
Focus on Core Businesses: Cboe is reallocating resources to strengthen core areas such as derivatives, index businesses, and clearing capabilities, while exploring new growth areas like prediction markets and tokenization.
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Risk or Challenges
Strategic Realignment: The company announced a 20% workforce reduction and a transition back to in-person work to improve agility, collaboration, and decision-making. This could lead to operational disruptions and employee morale issues during the transition.
Business Exits and Sales: The company is exiting or winding down several businesses, including corporate listings, European derivatives, Japanese equities, and selling its Canada and Australia businesses. These actions may result in a 3% annualized reduction in net revenue and potential challenges in maintaining customer relationships during the transition.
Regulatory Approvals: The planned sales of Cboe Canada and Cboe Australia are subject to regulatory approvals, which could delay or complicate the transactions, impacting financial projections and strategic plans.
Market Conditions: The company’s derivatives business is influenced by macroeconomic factors such as inflation and growth risks, which could impact trading volumes and revenue.
Operational Complexity: The rapid growth and integration of acquisitions since 2020 have created mismatches in strategy and operations, necessitating realignment actions that could disrupt ongoing operations.
Event Contracts Launch: The launch of securities-based event contracts is subject to regulatory approval, and there is a risk of delays or challenges in gaining market acceptance for these new products.
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Guidance & Outlook
Event Contracts Launch: Subject to regulatory approval, the company plans to bring securities-based event contracts to market. This launch is the first step in a broader event contract strategy, with plans to expand beyond index-based outcomes to include contracts around economic and financial indicators.
Strategic Realignment Savings: The company expects its strategic realignment actions to deliver a 12%-14% annualized reduction in adjusted operating expenses compared to 2025, translating to savings of $100 million to $120 million. Approximately $20 million to $25 million of these savings are anticipated to be realized in 2026.
2026 Financial Guidance: The company anticipates low-double-digit organic net revenue growth for its Data Vantage business and total organic net revenue growth in the low-double-digit to mid-teens range. Adjusted operating expenses are expected to range between $838 million and $853 million, with no increase at the low end compared to 2025.
Capital Allocation: The company resumed opportunistic share repurchases, buying back $45 million in shares in Q1 2026. It also returned $76 million to shareholders via dividends, with total capital returned to shareholders in Q1 amounting to $121 million.
Expansion in Financial and Economic Event Markets: The company plans to make greater investments in financial and economic event markets, tokenizing products, and expanding clearing services in Europe and the U.S.
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Shareholder Return Plan
Dividend Payment: Last quarter, the company returned $76 million to shareholders in the form of a $0.72 per share dividend.
Share Repurchase: The company resumed opportunistic share repurchases, buying back a total of $45 million in Cboe shares through the first quarter.
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Key Q&A
Q:How sustainable is the growth in Data Vantage revenues, especially given the reinvestment in the sales force and the updated guidance for the full year?
A:The growth in Data Vantage revenues is strong, with a 19% increase this quarter. About half of the growth was driven by higher access-related revenue due to client demand for increased connectivity to options exchanges. 40% came from increased market data sales, with strong demand in Europe, the U.S., and Asia. Some sales are unevenly spread throughout the year, and new product launches contributed to one-time revenue. Guidance has been updated to low-double digits for the year, but this is not considered a new baseline.
Q:What is Cboe's long-term strategy for prediction markets, including the potential for company-specific financial KPI contracts?
A:Cboe sees prediction markets as a significant new market segment with long-term growth potential. They are focused on contracts related to financial instruments and economic indicators, including company-specific KPI contracts. These contracts may be regulated by the SEC and could be structured as securities or futures. Cboe aims to leverage its expertise in market integrity, contract design, and distribution to lead in this space. They are also exploring opportunities in CFTC-regulated futures or swaps.
Q:What capabilities does Cboe bring to the SPX complex that other options exchanges cannot replicate?
A:Cboe's SPX complex is built on a foundational product with a long-standing partnership with S&P. SPX averaged nearly 5 million contracts per day in Q1, with a 300% increase over five years. The ecosystem includes balanced flow, risk, and participation across brokers, market makers, and customers. The trading floor has 11 broker groups and 20 market-making groups, while the electronic side has 34 retail broker platforms. The ecosystem's design and growth make it difficult to replicate.
Q:What are the details of the $100 million to $120 million expense savings from Cboe's strategic realignment actions?
A:The savings are expected to be $100 million to $120 million annually once fully implemented. $40 million to $50 million will come from the Canada and Australia transactions, which are not yet reflected in the 2026 guidance. An additional $40 million to $50 million will come from other strategic realignment actions, with $20 million to $25 million expected by 2026 and the remainder by 2027. $20 million of previously actioned savings is already included in the 2026 guidance.
Q:How is Cboe prioritizing the use of cash, including proceeds from the Australian and Canadian properties?
A:Cboe is focused on organic investments in areas like financial and economic event markets, tokenized products, and clearing services. They are also considering share repurchases and dividend increases. The strong balance sheet and free cash flow position them well to capitalize on emerging opportunities.
Q:How does the launch of binary options on S&P 500 by prediction markets affect Cboe's competitive dynamics, and how is Cboe approaching pricing for event contracts?
A:Cboe is aware of competing products and is in discussions with regulators to ensure clarity on securities-based products. They are working with retail broker platforms to finalize competitive pricing for event contracts, considering clearing fees, exchange fees, and regulatory fees. Existing contracts like XSP will have pricing in line with current structures, while new KPI-based event contracts will have tailored pricing.
Q:What are Cboe's plans for enhancing clearing capabilities and the opportunities in a tokenized landscape?
A:Cboe is expanding its European clearing house to include securities finance transactions and sees opportunities in tokenization and blockchain applications. They aim to address limitations in traditional market infrastructure, particularly in post-trade areas, and are exploring growth in cryptocurrency and DeFi markets. The economics of clearing and settlement in a tokenized landscape are still being developed.
Q:What is the potential size of the prediction market opportunity for Cboe, and how does it relate to their traditional futures and options franchise?
A:Cboe views prediction markets as a dual opportunity for growth and as a funnel to traditional options trading. The market could be significant, with potential for decomposing equity securities into event contracts tied to earnings, KPIs, and other metrics. While exact sizing is unclear, the opportunity is seen as a large new market segment with long-term growth potential.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the economics of clearing and settlement in a tokenized landscape, stating that it is too early to comment on pricing and economics. Additionally, they did not provide a clear market sizing for the prediction market opportunity, describing it conceptually rather than with concrete figures.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Australia business
CNBC
Canada Australia
FX segment
Indices
Johnston
Market
Markets
Options
Vantage
analytics business
approval
basis contribution
business action
business listing
capture
change today
collaboration
contract option
contribution product
discipline
event contract
fee revenue
firm
increase end
nontransaction
partner
payout
realignment action
realignment change
realignment reduction
role
sale Canada
saving realignment
security future
spot
team
today realignment
trading floor
work
workforce
CBOE Transcript
Cboe Global Markets, Inc. (CBOE) Q1 2026 Earnings Call Transcript
Positive5-1
The earnings call highlights strong growth in Data Vantage revenues, strategic realignment savings, and expansion in prediction markets, boosting investor confidence. While management was unclear on some future opportunities, the overall outlook remains optimistic with plans for share repurchases and dividend increases. This suggests a positive stock price movement.
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The earnings call highlights strong financial performance, with increased revenue growth guidance and reduced expenses, indicating financial health. New product launches and strategic realignment further bolster growth prospects. The Q&A section reassures analysts on growth strategies and market expansion, with positive sentiment towards retail and international market engagement. Although some specifics were avoided, the overall tone remains optimistic, especially with the dividend increase and share repurchase plans. The market is likely to react positively, with a stock price increase expected in the 2% to 8% range.
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