Cboe(CBOE)2024-05-03 20:13Financial Data and Key Metrics Changes - The company reported a 7% year-over-year increase in net revenues, reaching a record $502 million, and a 13% increase in adjusted diluted earnings per share to $2.15 [45][70] - Adjusted EBITDA grew 9% year-over-year to $337 million, with adjusted EBITDA margins expanding by 1.4% year-over-year to 67.2% [71][72] - Adjusted operating expenses increased by 4% to $193 million, driven by higher compensation-related expenses and technology support services [71][113] Business Line Data and Key Metrics Changes - The Derivatives business saw an 8% year-over-year organic net revenue increase, with S&P 500 Index options volume up 17% year-over-year [46][70] - Data and Access Solutions net revenues also increased by 8% on an organic basis, with significant contributions from outside the Americas, particularly a 19% increase in Australia [64][112] - Cash and Spot Markets net revenues remained stable, reflecting muted volumes across global equity markets [55][70] Market Data and Key Metrics Changes - The company experienced a 41% increase in SPX global trading hours activity compared to Q1 2023, with a 73% increase in April [62] - In Europe, total index derivative volumes hit record levels in March, surpassing previous records by 26% [63] - Market share in Australia increased to 20.4%, while Japan's market share reached 5%, with volumes growing 72% year-over-year [86] Company Strategy and Development Direction - The company is refocusing its digital asset business to leverage core strengths in derivatives, technology, and product innovation due to regulatory uncertainties [47][56] - Plans include integrating digital asset derivatives into the global derivatives platform and winding down the Cboe Digital Spot Market by Q3 2024 [57][68] - The company aims to enhance its competitive position through technology improvements and a disciplined capital allocation strategy [121][79] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for options as investors utilize them for portfolio hedging amid low volatility [81] - The outlook for the remainder of the year includes potential drivers such as geopolitical tensions, inflation, and U.S. elections, which may increase the need for options [83][101] - Confidence in achieving the 7% to 10% revenue growth target for 2024 is supported by strong engagement and growth in all asset classes [112][115] Other Important Information - The company anticipates annualized savings of $11 million to $15 million from winding down the digital asset trading platform [75] - A one-time estimated pre-tax charge of $39 million to $82 million is expected due to the digital strategy realignment [114] - The company returned $58.5 million to shareholders in the form of dividends and repurchased $89 million in shares during Q1 [77] Q&A Session Summary Question: What gives confidence in the higher end of the revenue growth range? - Management expressed confidence due to strong net revenue results in Q1 and positive trends observed in April, despite facing tough comps for the rest of the year [100][101] Question: How does the company view the D&A growth outlook given tough comps? - Management remains confident in the 7% to 10% growth guidance, citing strong engagement and growth from new subscriptions, particularly from outside the Americas [102][105] Question: What are the expectations for index option volume growth? - Management indicated that various factors, including geopolitical tensions and inflation, could drive increased index option volume, contributing to overall growth [101][118]