Cboe Global Markets, Inc. (Nasdaq: CBOE) has reported record financial results for the first quarter of 2018.
Consolidated results for the first quarter of 2017 include Bats Global Markets (Bats) for the period March 1 through March 31, 2017.
Cboe completed its acquisition of Bats on February 28, 2017.
Edward T. Tilly
Our record results underscore the utility of our products and the strength of our diversified portfolio of exchanges, particularly in times of heightened market uncertainty, which we witnessed during the first quarter. We reported strong growth across each of our business segments and set new volume highs in our proprietary products as well as in multiple asset classes including options, futures and FX,” said Edward T. Tilly, Cboe Global Markets Chairman and Chief Executive Officer. “Additionally, we successfully completed the technology migration for CFE, our Futures exchange, we are on track to complete the C2 Options exchange technology migration in May and announced plans for an October 7, 2019 migration for Cboe Options. We plan to continue to deliver value to our customers and shareholders as we focus on achieving our synergy targets and executing on our strategic initiatives.
Our first-quarter financial results highlight the operating leverage inherent in our business model with strong top- and bottom-line growth driven by record net revenue, prudent expense management and the positive impact of tax reform,” added Brian Schell, Cboe Global Markets Executive Vice President and Chief Financial Officer. “Our business continued to generate considerable operating cash flow which enabled us to invest in our business, return capital to shareholders through dividends and share repurchases, and to reduce our leverage ratio. Taken together, our actions demonstrate our balanced approach to capital deployment and our continued focus on creating long-term value for our shareholders.
Highlights include:
- First Quarter Diluted EPS of $1.04
- Adjusted Diluted EPS of $1.38, up 47 Percent
- Net Revenue of $328.5 Million, up 70 Percent, Reflects the Bats Acquisition
- Net Revenue increased 24 Percent for First Quarter Compared to Adjusted Combined Net Revenue for Prior-Year Period
- Organic Net Revenue Increased 28 Percent for the Quarter 1,2
- Set New Quarterly Highs for Total Options, Futures and FX Volume
- Established New Quarterly Volume Highs in VIX Futures, VIX Options and SPX Options
- Run-rate Expense Synergy Target Increased to $85 Million, up $20 Million; Expect to Reach a Year Ahead of Initial Plan
Consolidated First Quarter Results
- Total revenues less cost of revenues (referred to as “net revenue”), were $328.5 million, up 70 percent from $193.4 million in the prior-year period, driven primarily by a $131.2 million net revenue contribution from legacy Bats for the first quarter of 2018 versus a $39.2 million net revenue contribution from legacy Bats for the first quarter of 2017 and an increase in net transaction fees.
- Net revenue of $328.5 million was up $63.2 million, or 24 percent, compared with adjusted combined net revenue of $265.3 million in the prior-year period. The increase primarily reflects higher revenue from net transaction fees, primarily due to higher trading volume across each business segment.
- Excluding legacy Bats’ net revenue contribution, the company’s organic net revenue was $197.3 million, up $43.1 million or 28 percent, compared to first quarter 2017. The increase was primarily a result of stronger trading volume from Cboe’s VIX® futures and proprietary index options.
- Operating expenses were $160.8 million versus $167.3 million in the prior-year first quarter. The decrease was driven by a $56.4 million decrease in acquisition-related expenses offset somewhat by increased amortization of acquired intangibles.
- Adjusted operating expenses for the first quarter were $109.9 million compared with adjusted combined operating expenses of $106.3 million for the first quarter of 2017. The increase primarily reflects higher compensation and benefits expense, primarily due to an increase in incentive-based compensation, which is aligned with the company’s financial and operational performance.
- The operating margin for the first quarter of 2018 was 51.1 percent. The adjusted operating margin was 66.5 percent, up 660 basis points compared with the adjusted combined margin of 59.9 percent in the first quarter of 2017, mainly attributed to the higher revenue.
- The effective tax rate for the first quarter of 2018 was 25.9 percent. The effective tax rate on adjusted earnings in the first quarter of 2018 was 25.8 percent.
- Diluted EPS for the first quarter of 2018 was $1.04. Adjusted diluted EPS was $1.38, up 47 percent compared to adjusted combined diluted EPS of $0.94 for 2017’s first quarter.
The complete 1Q 2018 report can be seen here.