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01/11 03:08
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance with increased revenue guidance and expense reduction. Closure of the Japanese equities business and strategic realignment indicate cost-saving measures, while new product developments and international growth in data sales support optimism. The Q&A reveals a strategic focus on organic growth, AI integration, and market expansion, despite some uncertainties. Overall, the positive guidance and strategic initiatives suggest a likely stock price increase.
Net Revenue Cboe grew net revenue 14% year-over-year to a record $605.5 million. This growth was driven by strong volumes in multi-list and proprietary index option products, new sales growth in the Cboe Data Vantage business, robust industry volumes in Cash and Spot markets, and strong expense discipline.
Adjusted Diluted EPS Adjusted diluted EPS increased 20% year-over-year to a record $2.67. This was attributed to strong business performance and disciplined expense management.
Derivatives Markets Net Revenue Net revenue increased 15% year-over-year. Growth was driven by higher industry volumes and positive market share trends in multi-list options, as well as a 19% increase in net transaction and clearing fees revenue in index options, powered by robust growth in 0DTE options trading.
Cash and Spot Markets Net Revenue Net revenue increased 14% year-over-year. European cash equities business drove this growth, with a 35% increase in net transaction and clearing fees and a 24% increase in net revenue for the Europe and Asia Pacific segment.
Global FX Net Revenue Net revenue grew 13% year-over-year, driven by a 3% increase in average daily notional value and a 9% increase in net capture.
Data Vantage Net Revenue Net revenue increased 12% year-over-year. Nearly 90% of the growth was driven by new unit and new sales, reflecting strong demand for Cboe's Data and Access products.
Adjusted Operating Expenses Adjusted operating expenses were $210 million, up 3% year-over-year. The increase was primarily due to higher compensation and benefits expense resulting from strong revenue trends.
Adjusted Operating EBITDA Adjusted operating EBITDA grew 21% year-over-year to $409 million, with a margin expansion of 3.8 percentage points to 67.5%. This reflects strong business performance and disciplined expense management.
Options Segment Net Revenue Net revenue grew 19% year-over-year, marking the fifth consecutive quarter of record net revenue. This was driven by a 26% increase in total options ADV, including a 15% increase in index options volume and a 31% increase in multi-listed options volume.
Futures Net Revenue Net revenue decreased 22% year-over-year, primarily due to lower volumes.
SPX 0DTE options: SPX 0DTE average daily volume surged 62% year-over-year, while overall SPX ADV increased 26% to a record 3.9 million contracts. 0DTE options made up over 61% of SPX volumes, up from a 48% share a year ago.
Mini-SPX options: 0DTE ADV more than doubled over the past year and drove an impressive 66% increase in total ADV during the quarter. 0DTE options now make up roughly half of Mini-SPX volume, up from 35% a year ago.
MAG 10 index options and futures: New product launch subject to regulatory approval, designed to provide exposure to AI and tech themes with cash-settled European-style options.
European cash equities: Net revenue increased 24% year-over-year, driven by 35% growth in net transaction and clearing fees and solid market share gains.
Global FX: Net revenue grew 13% year-over-year, marking 17 out of the last 18 quarters with year-over-year growth.
Net revenue growth: Cboe grew net revenue 14% year-over-year to a record $605.5 million, with all three revenue categories (Derivatives Markets, Cash and Spot Markets, and Data Vantage) posting double-digit growth.
Expense management: Adjusted operating expenses increased only 3% year-over-year, demonstrating strong expense discipline.
Business realignment: Cboe will initiate a sales process for its Australia and Canada businesses, discontinue U.S. and European Corporate Listings efforts, and reduce costs in several smaller business areas to focus on core strengths.
Focus on core businesses: Cboe is directing greater attention to index and multi-list options, Futures, U.S. and European Equities, and FX, leveraging strong secular growth trends.
Strategic Realignment: The company is discontinuing U.S. and European Corporate Listings efforts, reducing costs in U.S. and European ETP Listings businesses, Cboe Europe Derivatives Exchange, and smaller Risk and Market Analytics businesses. This could lead to transitional challenges and potential disruptions in operations.
Divestiture of Non-Core Businesses: Cboe is initiating a sales process for its Australia and Canada businesses, which, while performing well, are deemed outside the core focus. This could result in transitional risks and potential loss of revenue streams during the divestiture process.
Competitive Pressures in Multi-List Options: The multi-list options space remains highly competitive, which could impact market share and profitability despite current positive trends.
Dependence on SPX and 0DTE Options: A significant portion of growth is driven by SPX and 0DTE options. Any market or regulatory changes affecting these products could adversely impact revenue.
Lower VIX Product Activity: VIX products faced lower activity due to a stable macro backdrop and lower realized volatility, which could affect revenue diversification.
Economic and Market Uncertainty: Trade tensions, potential government shutdowns, and an uncertain economic outlook could impact investor behavior and market activity.
Regulatory Risks: The company is pursuing regulatory reforms in the options space, which could face delays or challenges, impacting strategic initiatives.
Expense Management Challenges: While expenses are currently well-managed, higher compensation and benefits expenses due to strong revenue trends could pressure margins.
2025 Financial Outlook: Cboe is increasing its full-year total organic net revenue growth guidance range to low double digits to mid-teens from high single digits. Data Vantage organic net revenue growth guidance is also raised to high single digits to low double digits from mid- to high single digits. Adjusted operating expense guidance is lowered to $827 million to $842 million from $832 million to $847 million. Capital expenditure guidance is reduced to $73 million to $83 million from $75 million to $85 million. Depreciation and amortization expectations are also lowered to $50 million to $54 million from $53 million to $57 million.
Core Derivatives Business Outlook: Cboe remains positive on the outlook for its core derivatives business, driven by secular trends such as increasing retail participation and international expansion. The company continues to onboard more international brokers as global customers seek exposure to U.S. financial markets.
Strategic Realignment Impact: The strategic realignment, including the sale of Cboe Australia and Cboe Canada businesses and discontinuation of certain listings efforts, is expected to be accretive to earnings. It will result in a 3% reduction in net revenue and an 8%-10% reduction in adjusted operating expenses on an annualized basis, based on 2025 guided ranges.
New Product Launches: Cboe plans to launch new index options and futures, subject to regulatory approval, to provide investors with exposure to AI and tech themes and a more precise way to manage risk.
Retail Expansion and Alternative Investment Products: Cboe is focusing on retail-oriented digital crypto and event contract spaces, with new leadership hires to drive growth in these areas.
Dividend Increase: In the third quarter, the company returned $76 million to shareholders in the form of a $0.72 dividend, representing a 14% year-over-year increase in the quarterly dividend.
The earnings call highlights strong financial performance with increased revenue guidance and expense reduction. Closure of the Japanese equities business and strategic realignment indicate cost-saving measures, while new product developments and international growth in data sales support optimism. The Q&A reveals a strategic focus on organic growth, AI integration, and market expansion, despite some uncertainties. Overall, the positive guidance and strategic initiatives suggest a likely stock price increase.
The earnings call summary indicates a generally positive outlook with strong financial performance, product development, and market strategy. The Q&A section reveals confidence in growth prospects and strategic partnerships, though some responses were vague. Overall, the increased revenue guidance and global expansion plans suggest a positive sentiment, despite some uncertainties. The lack of a market cap prevents precise prediction, but the overall tone and strategic focus suggest a positive stock price movement in the short term.
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