First Quarter 2013 Earnings Presentation May 3, 2013
Agenda Strategic Review William Brodsky Chairman and CEO Financial Review Alan Dean Executive Vice President, CFO and Treasurer Questions and Answers William Brodsky Alan Dean Edward Tilly President and Chief Operating Officer Edward Provost Executive Vice President and Chief Business Development Officer CBOE HOLDINGS 2
Forward-Looking Statements This presentation may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our right to exclusively list certain index option products; increasing price competition in our industry; compliance with legal and regulatory obligations; our ability to operate our business, monitor and maintain our systems or program them so that they operate correctly, including in response to increases in trading volume and order transaction traffic; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; economic, political and market conditions; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to maintain access fee revenues; our ability to protect our systems and communication networks from security risks, including cyber-attacks; our ability to attract and retain skilled management and other personnel; our ability to maintain our growth effectively; our dependence on third party service providers; and the ability of our compliance and risk management methods to effectively monitor and manage our risks. More detailed information about factors that may affect our performance may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2012 and other filings made from time to time with the SEC. CBOE HOLDINGS 3
Strategic Review William Brodsky Chairman and CEO
Record First Quarter Earnings Strong financial performance despite lower industry-wide trading volume Financial results driven by strong growth of proprietary products Generate highest revenue per contract Adjusted diluted EPS increased 35% to $0.50 per share Operating revenue increased by 18% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” CBOE HOLDINGS 5
Regaining Market Share in Multiply-Listed Options Focused on being among the leaders in options market share Made enhancements to VIP in February and March CBOE multiply-listed market share increased to 17.6% in April from 24.7% 24.5% 15.3% in January, up 230 bps CBOE April market share of U.S. options of 24.5%, up 170 bps from January ¹Market share stats exclude dividend trades CBOE HOLDINGS 6
CBOE Extends Exclusive Licensing Rights Agreement to Span 20 Years CBOE Holdings and S&P Dow Jones Indices (S&P) Extend 30- Year Collaborative Relationship Extends exclusive rights to create and trade options on the S&P 500, the S&P 100 and other derivative indexes published by S&P Exclusive rights on the S&P 500 extend through 2032, non- exclusive through 2033 Extended long-standing partnership with Russell Indexes Semi-exclusive agreement for options on Russell 2000 Index (RUT) CBOE HOLDINGS 7
Strong Contribution from S&P 500 Index Product Line S&P 500 Index product line: SPX, SPXpm & SPX Weeklys S&P 500 Index ADV up 22% in 1Q13 versus 1Q12 SPX ADV up 21% in April Strong growth in SPX Weeklys *includes SPX Weeklys ADV more than tripled in 1Q13 ADV up 235% in April ¹YTD through April 30, 2013 CBOE HOLDINGS 8
Record Growth in Volatility Trading Strong Growth Amid Low Volatility Record trading in VIX options and futures for 1Q13 VIX options ADV up 48% in 1Q13; up 45% through April VIX futures ADV up 131% in 1Q13; up 128% through April 1Q13 fifth consecutive record for quarterly volume April fourth consecutive record for total monthly trading volume Growth increasingly driven by a broader user base ¹YTD through April 30, 2013 CBOE HOLDINGS 9
Growing Interest in VIX Trading New users driving recent surge in volume and open interest New money flowed into VIX-linked ETPs New VIX-linked products created New traders using VIX futures and options Most recent surge in VIX futures volume driven by new users Hedge funds and proprietary trading firms Increases in VIX options volume continues to be driven by VIX futures trading Greatest source of growth for VIX options coming from increased participation from retail customers CBOE HOLDINGS 10
Broadening Global Customer Reach Committed to extending trading hours for VIX futures Delaying timetable for implementation Allows European investors to access a longer trading session in their local time zone Provides additional trading sessions for VIX futures Risk Management Conferences continue to showcase VIX and SPX trading strategies CBOE HOLDINGS 11
Making Changes to S&P 500 Variance Futures S&P 500 Variance futures designed as an exchange traded version of OTC variance swaps Plan to change how we convert volatility points to futures prices so that the quoted price of our variance futures contract will be more directly comparable to prices in the OTC swap market Designed to provide same quoting conventions and economic performace of OTC variance swaps Providing the advantages of exchange-traded contracts – Transparency – Price discovery – Counterparty clearing guarantees CBOE HOLDINGS 12
CBOE Celebrates 40/30/20 40 th anniversary of CBOE 30 th anniversary of CBOE’s creation of index options 20 th anniversary of the CBOE VIX Volatility Index CBOE launches options CBOE creates S&P 100 Options CBOE introduces VIX Index industry - April 26, 1973 Exchange Index (OEX) in 1983 Options in 1993. Trading begins in 2006. CBOE HOLDINGS 13
Strong Leadership – Strong Growth Opportunities Continued Growth Opportunities Migration of many forms of OTC trading to exchange markets Volatility trading Innovative new products Global expansion Ed Tilly Ed Provost Incoming Chief Executive Officer Incoming President and COO CBOE HOLDINGS 14
Financial Review Alan Dean EVP, CFO and Treasurer
1Q13 Financial Overview Adjusted Basis¹ (in millions, except EPS and RPC) 1Q13 1Q12 $ Change % Change Operating Revenues $142.7 $121.4 $ 21.3 18% Adjusted Operating Expenses 70.1 63.8 6.3 10% Adjusted Operating Income $ 72.6 $ 57.6 $ 15.0 26% Adjusted Operating Margin % 50.9% 47.5% 340 bps Adjusted Net Income Allocated to Common Stockholders $ 43.9 $ 33.0 $ 10.9 33% Adjusted Diluted EPS $ 0.50 $ 0.37 $ 0.13 35% Total ADV 4.37 4.88 -11% Revenue per Contract $0.378 $0.280 $0.098 35% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” CBOE HOLDINGS 16
Overview of Operating Revenues Key Drivers Operating Revenues 1Q13 1Q12 % Chg Transaction fees (in millions) Transaction fees $ 99.1 $84.8 17% 35% increase in RPC Access fees 15.7 16.0 -2% 13% decline in trading volume Exchange services and other fees 9.1 7.4 23% Shift in product mix Market data fees 5.5 6.4 -14% Regulatory Fees Regulatory fees 9.7 4.7 106% Increase in CBOE ORF rate and Other revenue 3.6 2.1 71% implementation of ORF for C2 Total Operating Revenues $142.7 $121.4 18% Exchange services and other fees Positive response to new network access option CBOE HOLDINGS 17
Trading Volume Mix and RPC 1Q13 vs 1Q12 RPC Increase Reflects Shift in Mix of Trading Volume CBOE HOLDINGS 18
Proprietary Products Account for Growing Percentage of Transaction Fee Revenue Index options and futures contracts accounted for 76% of transaction fees in 1Q13, up from nearly 65% in 1Q12 CBOE HOLDINGS 19
Other Revenue Drivers Regulatory fees up $5.0MM (in millions) 1Q13 1Q12 % Chg Increase in CBOE ORF rate and implementation of ORF for C2 Regulatory fees $ 9.7 $ 4.7 106% Fee increase to cover higher costs Exchange services and other fees $ 9.1 $ 7.4 23% related to regulatory services Exchange services up $1.7MM Market data $ 5.5 $ 6.4 -14% Driven by positive response to new network access option Market data down $0.9MM Lower market share CBOE HOLDINGS 20
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