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Cboe Global (CBOE) Q1 Earnings and Revenues Beat Estimates

Cboe Global Markets, Inc.’s CBOE first-quarter 2021 adjusted earnings of $1.53 per share beat the Zacks Consensus Estimate of $1.39. However, the bottom line declined 7.3% year over year.

The quarter witnessed increase in net revenues and trading activity for each business segment, which was offset by higher expenses.

Cboe Global Markets, Inc. Price, Consensus and EPS Surprise

Operational Details    

Total revenues came in at $366 million and beat the Zacks Consensus Estimate by 4.3%. The top line increased 2.2% year over year, reflecting higher access and capacity fees and market data fees and a decrease in royalty fees, offset somewhat by lower net transaction and clearing fees.

Options revenues decreased 4% year over year to $181.7 million attributable to decrease in net transaction and clearing fees, as a result of lower trading volume in index options. Average daily volume for Options surged 19% year over year while revenue per contract or RPC slipped 24% in the quarter.

Revenues of North American Equities increased 11% year over year to $96.1 million driven  by additions of BIDS Trading and MATCHNow.

Futures revenues of $30.6 million were down 24% year over year due to a decline in net transaction and clearing fees.

European Equities revenues surged 61% year over year to $42.1MILLION, reflecting the addition of EuroCCP.

Global FX revenues decreased 13% to $14.7 million attributable to lower net transaction and clearing fees.

Total adjusted operating expenses increased 26% year over year to $124.6 million attributable to acquisitions closed in 2020, resulting in higher compensation and benefits and technology support services.

Adjusted operating income decreased 7% year over year to $240.9 million attributable to higher expenses.

Adjusted operating margin in the quarter under review contracted 660 basis points (bps) to 65.9%.

Adjusted EBITDA margin of 68.5% contracted 570 bps.

Financial Update

As of Mar 31, 2021, CBOE Global had cash and cash equivalents of $263.3 million, up 7.3% from the figure at 2020 end. Total assets were $7 billion, up 6.8% from the level at 2020 end.

At the end of the quarter, long-term debt of the company was $1.1 billion, up 0.3% year over year.

Total shareholders’ equity was $3.4 billion at the end of the reported quarter, up 1.7% from the value on Dec 31, 2020.

Share Repurchase and Dividend Update

The company paid out cash dividends worth $45.3 million and bought back shares worth $47.6 million in the reported quarter. The company had $352.2 million remaining under its existing share repurchase authorization as on Mar 31.

2021 Guidance

Cboe Global estimates organic growth for recurring non-transaction revenues, defined as access and capacity fees plus proprietary market data, between 10% and 11%, up from 6-7% guided earlier.

Recurring non-transactional revenues, are expected to increase 11% to 12%, from a base of $342 million in 2020, with organic growth targeted in the range of 7% to 8%.

The company continues to expect acquisitions closed in 2020 to contribute net revenue growth in the range of 4 to 6 percentage points.

Adjusted operating expenses are still expected to be in the range of $531 to $539 million.

Capital expenditures are still expected in the range of $60 to $65 million. Reaffirmed that depreciation and amortization expense, which is included in adjusted operating expenses, is expected to be in the range of $38 to $42 million.

The effective tax rate on adjusted earnings is expected between 27.5% and 29.5%.

Zacks Rank

Cboe Global currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Securities and Exchanges

First-quarter earnings of Nasdaq NDAQ and CME Group CME beat the Zacks Consensus Estimate while that of MarketAxess Holdings MKTX missed the same.

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