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It has been about a month since the last earnings report for CBOE Holdings (CBOE). Shares have added about 3.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CBOE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cboe Global's Q3 Earnings and Revenues Beat Estimates
Cboe Global Markets’ third-quarter 2019 adjusted earnings of $1.29 per share beat the Zacks Consensus Estimate by 11.2%. Moreover, the bottom line increased 22% year over year on higher trading volumes.
Operational Details
Total revenues came in at $294 million, beating the Zacks Consensus Estimate by 1.4%. Moreover, the top line increased 9% driven by higher trading volume in proprietary products, including SPX options, VIX options and futures, as well as growth in market data revenues.
Options revenues increased 10% driven by higher revenues from net transaction fees. Total options average daily volume (ADV) increased 15% while revenue per contract (RPC) declined 3%.
Revenues of U.S. Equities increased 6% on higher market data revenues from the industry tape plan, which included audit recoveries of $4.3 million. Futures revenues increased 28% driven by higher net transaction fees.
However, European Equities revenues declined 7%, reflecting a decline in net transaction fees, partially offset by a slight increase in non-transaction revenues.
Global FX revenues declined 4% due to lower net transaction fees.
Total adjusted operating expenses decreased 3% year over year to $96.5 million. The decline was attributable to a decrease in compensation and benefits as a result of lower incentive-based compensation.
Adjusted operating margin in the quarter under review was 67.2%, up 380 basis points (bps), reflecting higher net revenues and lower expenses.
Adjusted EBITDA margin of 70.9% expanded 380 bps.
Financial Update
As of Sep 30, 2019, CBOE Global had cash and cash equivalents of $150 million, down 45.5% from the figure at 2018 end. Total assets were $5.1 billion in the third quarter, down 5.7% from the level at 2018 end.
At the end of the third quarter, long-term debt was $867.1 million, down 5.3% year over year. The company deployed $50 million to pay a term loan, lowering the leverage ratio to 1.1 as of Sep 30 from 1.2 as of Jun 30, 2019.
Total shareholders’ equity was $3.3 billion at the end of the reported quarter, up 2.7% from the value on Dec 31, 2018.