Cboe Global Markets Inc (CBOE) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...

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Sat, May 4, 2024, 1:03 AM 4 min read

Net Revenue: Increased 7% year-over-year to $502 million.
Adjusted Diluted EPS: Grew 13% to $2.15.
Derivatives Business Revenue: Organic net revenue up 8% year-over-year.
Data and Access Solutions Revenue: Organic net revenue rose 8% year-over-year.
Cash and Spot Markets Revenue: Remained stable during the quarter.
Adjusted EBITDA: $337 million, up 9% from the first quarter of 2023.
Adjusted EBITDA Margin: Expanded by 1.4% year-over-year to 67.2%.
Share Repurchases: Continued as a key component of capital allocation.

Warning! GuruFocus has detected 6 Warning Signs with OEC.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cboe Global Markets Inc (CBOE) reported a strong first quarter with net revenues increasing by 7% year-over-year to a record $502 million.
Adjusted diluted earnings per share rose by 13% to $2.15, driven by strong volumes across the Derivatives franchise and disciplined expense management.
The Derivatives business saw an 8% year-over-year increase in organic net revenue, with significant volume growth in S&P 500 index option products.
Data and Access Solutions business continued to perform well, with an 8% increase in organic net revenue, leveraging global network and ecosystem.
Cboe Global Markets Inc (CBOE) is focusing on strategic growth opportunities, effective capital allocation, and talent development to strengthen the company and support long-term growth.

Negative Points

Net revenue in the Cash and Spot Markets business remained stable as volume across global equity markets was muted, indicating no significant growth in this segment.
Cboe Global Markets Inc (CBOE) announced plans to refocus its digital asset business due to lack of regulatory clarity, leading to the winding down of the Cboe Digital Spot Market.
The company faces challenges in the digital assets space, particularly with the U.S. regulatory environment, which has impacted strategic directions and operations.
Despite overall growth, the Futures segment experienced a 2% decrease in net revenue due to lower volume, highlighting some areas of weaker performance.
The FX segment also saw a decrease in net revenue by 1%, driven by a slightly lower net capture rate, indicating challenges in this market segment.

Q & A Highlights

Q: Can you speak to what gave you the confidence to point us toward the higher end of the 5% to 7% range for organic total net revenue growth? A: (Jill M. Griebenow - Executive VP & CFO, Cboe Global Markets, Inc.) The strong net revenue results in the first quarter, which were 7% higher than the first quarter of 2023, fueled by the derivatives markets business and DnA, along with a very strong April, gave us confidence in guiding towards the higher end of that range.

Q: Regarding the outlook on the DnA side, given that the comps are getting tougher in the second quarter, how confident are you about achieving the 7% to 10% growth? A: (David Howson - Executive VP & Global President, Cboe Global Markets, Inc.) We remain confident in the 7% to 10% guide. The growth year-over-year in all asset classes and regions, solid growth from new subscriptions and units, and 43% of the growth in market data and access services from outside of the Americas contribute to this confidence.

: What are your updated thoughts on where the 0DTE mix may be heading over the next 12 months, and what factors are most sensitive to adoption? A: (David Howson - Executive VP & Global President, Cboe Global Markets, Inc.) The mix of 0DTE in SPX was 48% in Q1 and 50% in April. We see variations depending on market conditions. More funds and systematic strategies are moving towards the shorter end of the curve, and we expect this trend to continue.

Q: Could you please remind us why you think Cboe can be competitive in Bitcoin futures trading without the spot offering? What does this realignment mean for Cboe's broader strategy on tackling the digital asset ecosystem longer term? A: (David Howson - Executive VP & Global President, Cboe Global Markets, Inc.) We are focusing on areas where we have regulatory clarity and leveraging our strengths in derivatives and technology. This strategic move allows us to provide a single venue with broad distribution and familiar functionality, which we believe gives us a competitive edge in crypto derivatives.

Q: On the digital side, could you elaborate on the expected impact of the realignment on Cboe's broader strategy in the digital asset ecosystem? A: (Frederic J. Tomczyk - CEO & Director, Cboe Global Markets, Inc.) The realignment reflects our focus on derivatives where we have regulatory clarity. We are moving away from areas lacking regulatory clarity, like the spot market, to focus on derivatives and clearing operations where we can leverage our strengths and have greater control over product development.

Q: What is the anticipated financial impact of the digital assets realignment, specifically regarding savings and potential revenue impacts? A: (Jill M. Griebenow - Executive VP & CFO, Cboe Global Markets, Inc.) The realignment is expected to result in $11 million to $15 million in annualized savings on an adjusted operating expense basis, with minimal impact on revenue for 2024. This adjustment reflects our strategic shift and focus on more profitable and regulatory clear areas.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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