Cboe(US:CBOE)2020-10-31 00:45Financial Data and Key Metrics Changes - The company reported a 1% decrease in net revenue year-over-year, with net transaction fees down 8% and non-transaction revenue up 1% [41] - Adjusted EBITDA was $192 million, down 8%, and adjusted diluted earnings per share decreased 14% to $1.11 due to a higher effective tax rate [41][62] - Quarterly recurring revenue from proprietary market data and access capacity fees grew by 14% compared to Q3 2019, exceeding prior guidance [41] Business Line Data and Key Metrics Changes - In the options segment, net revenue increased by 1% or $2 million, driven by strong trading volumes in multi-listed options and growth in market data revenue [45] - Multi-listed options saw a 42% increase in average daily volume, while index options experienced a 22% decline in average daily volume [46] - The futures segment experienced a 39% decrease in net revenue, primarily due to a 38% decline in average daily volume [48] Market Data and Key Metrics Changes - U.S. equities volumes increased by 25%, benefiting from retail trading activity, although net capture decreased by 15% [50] - European equities net revenue increased by 53% on a U.S. dollar basis, primarily due to revenue from EuroCCP [54] - Global FX net revenue increased by 1%, driven by higher non-transaction revenue despite weaker industry volumes [57] Company Strategy and Development Direction - The company aims to strengthen its U.S. Equities business through new markets and trading mechanisms, with a focus on retail participation [9] - Recent acquisitions, including MATCHNow and plans for BIDS Trading, are expected to enhance the company's presence in off-exchange U.S. equities and expand its product ecosystem [11][13] - The company is also focused on expanding its FX offerings and enhancing its information solutions to meet growing demand [33][28] Management's Comments on Operating Environment and Future Outlook - Management noted that market uncertainty due to COVID-19 and the upcoming U.S. elections has dampened institutional trading, keeping the VIX index elevated [20] - The company is optimistic about its strategic growth initiatives and believes it is well-positioned to benefit from future trading conditions [38] - Management expects to see continued growth in recurring revenue streams and is adjusting its expense management strategies accordingly [60] Other Important Information - The company plans to launch Cboe European derivatives in the first half of next year and has made significant progress in its build-out [31] - The effective tax rate for the quarter was 30.8%, which impacted earnings per share significantly [62] - The company returned $46 million to shareholders through dividends and $42 million through share repurchases during the quarter [66] Q&A Session Summary Question: Can you talk about the lower RPC in the third quarter and its relation to MEMEX? - Management explained that the lower RPC was a strategic decision to grow market share and compete with off-exchange trading, with expectations for a rebound in RPC in October [72][74] Question: What is driving the growth expectation for access and capacity fees? - Management attributed the growth to increased demand for market data and the success of recent acquisitions, indicating a continuing trend of growth in this category [76][78] Question: Can you discuss retail distribution for Cboe futures and proprietary options? - Management emphasized the importance of investor education for both retail and institutional clients, highlighting recent webinars aimed at financial professionals [80][82] Question: What are the thoughts on 2021 expenses given the current environment? - Management indicated it is too early for specific guidance but expects expenses to grow due to acquisitions while maintaining a focus on long-term shareholder value [85][87] Question: What improvements can be expected from the BIDS acquisition? - Management highlighted the potential to access a significant portion of the U.S. equities market trading off-exchange and the opportunity to expand into other geographies [91][93]