Second Quarter 2012 Earnings Presentation August 2, 2012
Agenda Strategic Review William Brodsky Chairman and CEO Financial Review Alan Dean Executive Vice President, CFO and Treasurer William Brodsky Questions and Answers 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 exclusive licenses to list certain index options; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes affecting the options markets; increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; increasing price competition; our ability to maintain access fee revenues; 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 accommodate increases in trading volume and order transaction traffic without failure or degradation of performance of our systems; 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, 2011 and other filings made from time to time with the SEC. CBOE HOLDINGS 3
Strategic Review William Brodsky Chairman and CEO
Continued Strong Financial Performance in 2Q12 Operating Revenues Delivered eighth consecutive quarter of $ in millions YOY adjusted EPS growth, significant + 10% gains in market share YOY Strong performance in multi-listed options products Adjusted Operating Margin¹ Prudent approach to cost management + 280 bps Solid financial results despite lower industry-wide trading volume Announced 25% increase in dividend Adjusted Diluted EPS¹ Authorized an additional $100 million in share repurchase program + 22% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” CBOE HOLDINGS 5
Translating Our Mission into Value Develop New Products Create value for stockholders by offering a diversified Optimize portfolio of risk management Revenue and Market Share in products and services which Commoditized Products generate industry leading profit margins and growth Broaden rates while maintaining the Customer Base highest standards of market regulation Leverage Customized Trading Technology CBOE HOLDINGS 6
Leader in Product Innovation Focus on developing exclusive products that generate premium fees S&P 500 complex Flagship SPX contract SPX Weeklys SPXpm Volatility product line Sector ETFs and single-stock volatility index products New futures products on CFE CBOE HOLDINGS 7
SPX Complex Drives Strong Index Volume SPX most actively traded cash index option Up 12% in 2Q12 versus 1Q12 Up 10% in 2Q12 versus 2Q11 SPXpm gaining traction Increased 17% in 2Q12 compared with 1Q12 SPX Weeklys important component of SPX complex Up 54% in 2Q12 versus1Q12 Up 65% in 2Q12 versus 2Q11 Continue to design new SPX products Launched SPX Variance Strips or “V-Strips” ¹YTD through June 30, 2012 CBOE HOLDINGS 8
Strong Growth in Volatility Trading Strong growth potential VIX options up 22% in 2Q12 vs 2Q11 VIX futures up 40% in 2Q12 vs 1Q12; up 91% vs 2Q11 and up 75% YTD Growth fueled in part by ETPs tied to VIX index AUM increased to $5.7 billion at June 1 from $2.8 billion in Dec. 2011 Adding new Volatility benchmarks and tradable products Introduced CBOE Interest Rate Volatility Index (SRVX) ¹YTD through June 2012 CBOE HOLDINGS 9
Optimizing Revenue and Market Share In Commoditized Products Achieved significant market share gains¹ Positive customer response to VIP 2Q12 market share in multiply- 29.0% listed options of 22.6%, down 60 bps versus 1Q12; up 210 bps over 2Q11 22.9% YTD market share in multiply-listed options of 22.9%, up 150 bps versus first six months of 2011 2Q12 total market share of U. S. options of 29.8% (CBOE and C2), up 290 bps versus 2Q11 ¹Market share stats exclude dividend trades CBOE HOLDINGS 10
Expanding User Base Building Relationships with Customers through Educational Programs CBOE HOLDINGS 11
Expanding User Base Building Relationships with Customers through Educational Programs Expansion of the Options Institute Conducts over 400 educational events annually Launching “Options Lab” aimed at college curricula Began new partnerships to further expand reach Options Institute staff includes Former traders – Academics and noted authors – Bloggers and experts in options and volatility – trading CBOE HOLDINGS 12
Leveraging Customized Trading Technology Rollout of new trade engine technology – CBOE Command Next generation of trade engine technology Servers move to New Jersey 4Q12 Completed rollout of CFLEX 2.0 CBOE Command ™ Launched “BasketWeaver” system New functionalities enable us to expand trading in proprietary product lines Systems development embedded in value proposition CBOE HOLDINGS 13
Strong Growth Potential Tabb Group study “US Options Trading 2012: Standing Out from the Crowd” calls future growth in U.S. options trading “a foregone conclusion,” predicting buy-side trading will lead volume growth Well positioned to: Continue to grow our business Capitalize on growth opportunities Return value to stockholders CBOE HOLDINGS 14
Financial Review Alan Dean, Executive VP CFO and Treasurer
2Q12 Financial Overview Adjusted Basis 1 2Q12 2Q11 $ Chg. % Chg. (in millions, except EPS and RPC) $132.6 $120.3 $ 12.3 10% Operating Revenues 66.5 63.7 -2.8 -4% Adjusted Operating Expenses $ 66.1 $ 56.6 $ 9.5 17% Adjusted Operating Income 280 bps 49.8% 47.0% Adjusted Operating Margin % Adjusted Net Income Allocated to $ 37.9 $ 32.7 $ 5.2 16% Common Stockholders $ 0.44 $ 0.36 $ 0.08 22% Adjusted Diluted EPS 4.80 4.45 8% Total Contracts per Day $0.314 $0.308 $0.006 2% Rate per Contract 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 (in millions) 2Q12 2Q11 $ CHG % CHG Transaction Fees 8% increase in trading volume Transaction fees $ 94.9 $ 86.3 $ 8.6 10% 2% increase in RPC Access fees 16.1 17.0 (0.9) -5% Access Fees Reflects fee modifications Exchange services and other fees 7.9 4.3 3.6 84% Exchange Services and Other Fees Market data fees 6.4 4.8 1.6 33% Driven by fee changes Regulatory fees 4.1 4.8 (0.7) -15% Market Data 3.2 3.1 0.1 Other revenue 3% OPRA fees up due to market share gains Total Operating Revenues $ 132.6 $ 120.3 $ 12.3 10% Higher fees from CBOE market data services CBOE HOLDINGS 17
Transaction Fees Driven by Volume and Rate Per Contract Overall Transaction Fee per Contract (RPC) Overall Transaction Fee per Contract (RPC) RPC decline reflects net impact of VIP, 2Q12 RPC up versus 2Q11 and 1Q12 primarily due volume discounts and other fee changes to higher mix of index options and futures contracts RPC Thousands CBOE HOLDINGS 18
Trading Volume Mix 2Q12 vs 2Q11 RPC Increase Primarily Reflects Shift in Mix of Trading Volume CBOE HOLDINGS 19
Fee Change Drives Market Share and Other Benefits CBOE Achieved Significant Gains in Market Share Due to VIP¹ Millions Market share gains accrue other benefits: Growth of market data fees Support for access fees and exchange services revenue Reduction in trading volume incentive expenses ¹Market share excludes dividend trades CBOE HOLDINGS 20
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