Cboe Q4 2018 results beat expectations as did its full-year results

Cboe Global Markets

Cboe Global Markets, Inc. (Cboe:CBOE) released its results for Q4 2018 as well as for the full year on Friday last week, both of which beat analysts’ estimates.

The company grew its net revenues, total operating income as well as its operating margins. The higher operating income helped offset the slight increase in operating expenses, which was expected.

Highlights include:

  • Net Revenue for the Q4 of $334.4 Million, up 26%; Full Year a 22% rise
  • New Annual ADV Highs for Trading in Options, Index Options, SPX Options, VIX Futures and FX
  • Operating Margin for the Q4 of 53% and Adjusted Operating Margin of 67%
  • Operating Margin for the Year of 50% and Adjusted Operating Margin of 65%
Edward T. Tilly

Edward T. Tilly

Our record results were fueled by growth across all of our business segments and, most notably, in our suite of proprietary products,” commented Edward T. Tilly, Cboe Global Markets Chairman, President and Chief Executive Officer. “Additionally, we continued to make steady progress towards achieving our synergy targets while remaining focused on executing our strategic initiatives and defining markets to serve investors globally, as demonstrated by our announced rollout of Cboe Select Sector Index Options on 11 industry sectors that comprise the S&P 500 index. We are well-positioned to continue to deliver value to our customers and shareholders. A tremendous team effort made 2018’s record results possible and we are very excited about all that we can accomplish in 2019, including the final phase of our multi-year technology migration, which we plan to complete in October,” Mr. Tilly added.

Brian Schell

Brian Schell

Our record financial results for the fourth quarter and the year underscore the operating leverage inherent in our business model when top-line growth is coupled with consistent expense discipline. Our net revenue grew by 26 percent and 22 percent for the fourth quarter and the year, respectively, accompanied by an adjusted operating margin of 66.6 percent for the fourth quarter and 64.9 percent for the year, reflecting growth of six percentage points and nearly four percentage points, respectively,” said Brian Schell, Cboe Global Markets Executive Vice President, Chief Financial Officer and Treasurer. “Additionally, our strong operating results allowed us to strengthen our balance sheet while still returning $271.2 million to shareholders through dividends and share repurchases in 2018,” Mr. Schell added.

LeapRate reminds that Cboe Global Markets has recently made some Management changes, adding three new executives to its Markets division, as well as Chris Isaacson and Eric Crampton to its Management team.

The complete results of each of the company’s business segments were as follows:


Net revenues generated grew by $44.5 million to come in at $174.5 million, which was a 34% increase as compared to Q4 2017. The increase was largely attributed to higher transaction fees generated from increased revenue per contract for the different options and an increase in trading volumes.

The average daily volumes of options traded grew by 23%, while revenues generated grew by 17%, which fueled the $46.1 million increase in net transaction fees, or a percentage increase of 44%.

The company saw its options business ceded some market share to fall from 40.5% in Q4 2017 to 38.4% in Q4 2018.

U.S. Stocks

The company’s revenues from U.S. stocks grew by $12.5 million, or 18% to come in at $81.5 million largely due to an increase in net transaction fees driven by a 33% jump in average daily trading volumes.

Despite the growth in revenues, Cboe’s U.S. equities department still lost 0.7% market share in Q4 to control just 17.8% of the markets as compared to 18.5% in Q4 2017.

European stocks

Cboe’s European stocks business grew its revenues by 29% to a net of $24.3 million largely due to an increase in net non-transactional and transactional revenues. These revenues were boosted by a 19% YoY growth in the average daily notional value (ADNV) executed in Q4 2018 to €10.6 billion. The net capture also grew by 13% due to an increase in the volumes of periodic auctions and the company’s Large in Scale (LIS) trading.

The company maintained its leading position among Pan-European stock exchanges in terms of its size and grew its market share to 22.7% from 20.3% in Q4 2017.

Global Forex revenues

The company’s net revenues from Forex trades grew by $1.7 million to $13.7 million translating into a 14% increase driven by growing net transactional fees as compared to Q4 2017. The daily volumes traded (ADNV) on the company’s Forex platform grew by 8% to $35.1 billion as compared to Q4 2017.

Cboe also grew its share of the Forex market by 14.9% as compared to last year’s figures to a high of 15.3%.

Financial guidance for fiscal year 2019

The company forecast a slight increase to a 2% decrease in its operating expenses, which are predicted to be between $420 million and $428 million as compared to last year’s operating expenses that came in at $426.8 million after minor adjustments.

These figures do not include the amortization to be charged on $138 million of intangible assets acquired last year.

The operating expenses above include depreciation and amortization expenses of between $35 and $40 million, excluding the amount for the intangible assets quoted above.

The company also projects that its effective tax rate shall range between 27 and 29 percent.

The company has also budgeted for capital expenses starting at $50 million to a maximum of $55 million.

Capital management

Cboe issued a dividend of $0.31 per share for a total of $34.7 million in dividend payouts during Q4 2018. The company paid a total of $130.3 million in cash as dividends during the full year 2018, while it also repurchased 1.3 million shares at $140.9 million. The company had an obligation to purchase $206.1 million of its common stocks at the end of 2018 under its current share repurchase program.

The company also carried $1.2 billion in debt and had $257.7 million in financial investments and cash on its books as at the end of 2018.

Read Also: