Cboe(CBOE) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Cboe Global Markets reported a 5% year-over-year increase in net revenue for Q4 2024, totaling $524.5 million, and a 2% increase in adjusted diluted earnings per share to$ 2.10 [8][41] - For the full year 2024, net revenue grew 8% to a record $2.1 billion, and adjusted diluted earnings per share increased 10% to a record$ 8.61 [8][9] - Adjusted operating expenses rose by 7% to $205 million in Q4 2024, driven by higher travel, promotional expenses, and technology support services [50][41] Business Line Data and Key Metrics Changes - The Derivatives business saw organic net revenue increase by 8% in 2024, with total options volume reaching 3.8 billion contracts traded [10][22] - Cash and spot markets experienced a 14% increase in net revenues year-over-year in Q4 2024, contributing to a 10% growth for the full year [31][42] - Data Vantage business reported an 8% increase in net revenue for Q4 2024, with a full-year growth of 7% [36][48] Market Data and Key Metrics Changes - North American equities net revenue increased by 10% year-over-year, with net transaction and clearing fees growing by 28% in Q4 2024 [45][33] - The Europe and Asia-Pacific segment delivered a 17% year-over-year net revenue growth in Q4 2024, driven by higher transaction and clearing fees [34][35] - The Asia-Pacific region is focused on expanding presence in six priority markets, with new brokers enabling access to Cboe products [28] Company Strategy and Development Direction - Cboe is positioned to benefit from trends such as the rising popularity of options trading, the growth of retail investors, and advancements in technology [13][14] - The company is reallocating resources towards investment in its exchange technology platform, Cboe Titanium, to enhance trading technology [19][20] - A strategic focus on organic growth opportunities and disciplined capital allocation is emphasized, moving away from M&A [60][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. market's strong performance and the potential for new investors due to the S&P 500's returns [16] - The geopolitical environment presents challenges, but Cboe's products are seen as valuable tools for investors to manage risk [15] - The company anticipates 2025 to be a transformational year, focusing on improved access, education, and innovation [31][39] Other Important Information - Cboe returned$ 66 million to shareholders in Q4 2024 through dividends, totaling $249 million for the year [58] - The company has a strong balance sheet with$ 880 million in adjusted cash and a low average leverage ratio of 1.1 times [59] Q&A Session Summary Question: Concerns about Data Vantage revenue guidance - Management clarified that the mid to high-single digit growth range for Data Vantage is consistent with previous guidance and reflects market standards [70][73] Question: Uptake of index options on Robinhood - Management reported strong uptake of index options on Robinhood, with increased use of complex strategies and a focus on education and joint marketing to drive further adoption [75][78] Question: AI initiatives for revenue generation - The company is investing in AI to improve productivity and develop new products, but no immediate revenue opportunities were reported [85][88] Question: Capital allocation and lack of stock buybacks - Management explained that the decision not to repurchase stock was due to succession planning, but share repurchases remain a part of the capital allocation strategy [90][92] Question: 24/5 trading opportunity - Management discussed the demand for 24/5 trading and the readiness to implement it, pending regulatory approvals [97][102] Question: Price increases for options and retail adoption - Management indicated that pricing changes for options are dynamic and focused on balancing market share with revenue capture, with retail adoption expected to continue growing [110][113]