Cboe Global's (CBOE) Q3 Earnings Top, Expense View Slashed

Cboe Global Markets, Inc.’s CBOE third-quarter 2020 adjusted earnings of $1.11 per share beat the Zacks Consensus Estimate by 3.7%.

Shares of the company gained 1.2% in the pre-market trading session, reflecting the outperformance.

However, the bottom line decreased 14% year. Sustained robust engagement among retail customers was offset by decreased trading among institutional investors as a result of ongoing uncertainty regarding the global macro-environment.

Cboe Global Markets, Inc. Price, Consensus and EPS Surprise

Cboe Global Markets, Inc. price-consensus-eps-surprise-chart | Cboe Global Markets, Inc. Quote

Operational Details

Total revenues came in at $292 million and beat the Zacks Consensus Estimate by 2.4%. However, the top line decreased 1% year over year on lower net transaction and clearing fees due to dec;line in trading volumes in index options and futures, offset by revenues from acquisitions.

Options revenues increased 1% year over year to $148.1 million driven by higher market data revenues. Average daily volume for Options surged 24% year over year while revenue per contract or RPC slipped 26.7% in the third quarter.

Revenues of North American Equities increased 1% year over year to $75.8 million, driven by higher revenues from access and capacity fees and net transaction fees.

Futures revenues of $23.3 million were down 39% year over year due to a decline in net transaction fees.

European Equities revenues surged 53% year over year to $31.6 million, reflecting the addition of EuroCCP, as well as higher access and capacity fees.

Global FX revenues increased 1% to $13.2 million driven by higher access and capacity fees.

Total adjusted operating expenses increased 13% year over year to $108.9 million attributable to acquisitions, resulting in higher compensation and benefits and technology support services.

Adjusted operating income dropped 7% year over year to $183.1 million. The decline was attributable to lower net revenues and higher operating expenses.

Adjusted operating margin in the quarter under review contracted 450 basis points (bps) to 62.7%.

Adjusted EBITDA margin of 65.9% contracted 500 bps.

Financial Update

As of Sep 30, 2020, CBOE Global had cash and cash equivalents of $212.7 million, down 7.2% from the figure at 2019 end. Total assets were $6.1 billion in the third quarter, up 18.8% from the level at 2019 end.

At the end of the third quarter, long-term debt of the company stands at $869.1 million, up 0.2% year over year.

Total shareholders’ equity was $3.3 billion at the end of the reported quarter, down 0.3% from the value on Dec 31, 2019.

Share Repurchase and Dividend Update

The company paid out cash dividends worth $45.8 million or 42 cents per share and bought back shares worth $41.8 million in the third quarter and another $32.2 million through Oct 29.

As of Oct 29, 2020, the company had $255.9 million remaining under its existing share repurchase authorization.

2020 Guidance Slashed

Adjusted operating expenses are now expected to be in the range of $415 to $420 million, down from the previous guidance of $436 to $444 million, primarily due to lower compensation costs, including incentive-based compensation, professional fees and travel and marketing expenses.

Capital expenditures are expected in the range of $45 to $50 million, down from the prior guidance of $65 to $70 million. Depreciation and amortization expense are estimated in the range of $32 to $36 million, down from the previous guidance of $34 to $38 million.

The effective tax rate on adjusted earnings is expected between 27% and 29%, up from the prior range of 26.5% to 28.5%.

Zacks Rank

Cboe Global currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Securities and Exchanges

Third-quarter earnings of Nasdaq NDAQ and MarketAxess Holdings MKTX beat the respective Zacks Consensus Estimate while CME Group CME missed the same.

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