GuruFocus -
- Net Revenue: Increased 11% year over year to $532 million.
- Adjusted Diluted Earnings Per Share: Rose 8% to $2.22.
- Derivatives Net Revenue: Increased 13% year over year.
- Cash and Spot Markets Revenue: Grew 12% year over year.
- Data and Access Solutions Revenue: Increased 6% year over year.
- Adjusted Operating Expenses: Increased 13% to $204 million.
- Adjusted EBITDA: Grew 7% to $342 million.
- Options Segment Revenue: Increased 10% year over year.
- North American Equities Revenue: Increased 3% year over year.
- Europe and APAC Revenue: Increased 22% year over year.
- Futures Segment Revenue: Increased 17% year over year.
- FX Segment Revenue: Increased 9% year over year.
- Share Repurchases: $25 million in Q3, $204 million year-to-date.
- Dividend: $0.63 per share, a 15% increase year over year.
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 record quarter with net revenue growth of 11% year over year, reaching $532 million.
- The derivatives business saw a 13% increase in organic net revenue, driven by strong volumes in proprietary index options and futures products.
- The data and access solutions business continued to perform well, with organic net revenue increasing 6% year over year.
- Cboe's strategic focus on organic growth has led to a stabilization of margins and moderated expense growth.
- The company announced a partnership with Robinhood (NASDAQ:HOOD) to offer index options, tapping into the growing retail participation in the options market.
- Adjusted operating expenses increased by 13% to $204 million, driven by higher compensation-related expenses and travel costs.
- Despite strong revenue growth, the EBITDA margin slipped slightly, raising concerns about peak margins.
- The multi-listed options market share has faced increased competition, impacting Cboe's market position.
- The launch of new products like VIX options on futures has seen limited volume so far, indicating a need for more market participant engagement.
- The company has increased its full-year adjusted expense guidance, reflecting upward pressure on short-term incentive bonuses and marketing spend.
A: David Howson, Executive Vice President, Global President: The confidence in hitting the 7% to 10% guidance is based on four categories: new sales, pricing changes, technology investments, and new insights from technology enhancements. These factors are expected to drive growth into the new year.
Q: How do you plan to expand the opportunity set with major brokers in the US or elsewhere?
A: David Howson, Executive Vice President, Global President: We are focusing on new customer acquisition, particularly in Asia Pacific, and increasing penetration of existing retail brokerage platforms. We are investing in education and marketing to inform customers about the benefits of options trading.
Q: What has changed in your strategic focus from a year ago regarding inorganic versus organic growth priorities?
A: Fredric Tomczyk, CEO: We have slowed down M&A to focus on organic growth, particularly in derivatives and data and access solutions. Our balance sheet is strong, allowing us to consider inorganic opportunities that align with our strategic goals.
Q: Can you provide an update on the VIX options on futures and the feedback so far?
A: David Howson, Executive Vice President, Global President: Early signs are positive with customer engagement and strategy testing. The product is expected to season over 2025, providing valuable insights for customers during uncertain market conditions.
Q: How should we think about the rate of core expense growth for next year, given the investment needs for growth?
A: Jill Griebenow, CFO: While we won't provide specific 2025 guidance yet, we remain focused on disciplined expense management and stabilizing margins. Our 2024 expense growth is significantly lower than the previous year, reflecting our commitment to margin stability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.