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Cboe Holdings Reports Record Results For Third Quarter -Quarter Financial Highlights

The following excerpt is from the company's SEC filing.

-- Trading Volume Increases

6 Percent

, With Record Trading Volume in Index Options and Futures

-- Operating Revenue Increases

26 Percent

$187.0 Million

-- GAAP Net Income Allocated to Common Stockholders Increases

40 Percent

$67.2 Million

; Diluted EPS of

42 Percent

-- Adjusted Net Income Allocated to Common Stockholders Rose

31 Percent

$63.0 Million

; Adjusted Diluted EPS of

33 Percent

-- GAAP Operating Margin of

54.1 Percent

Compared With

50.4 Percent

370 Basis Po ints


October 30, 2015

- CBOE Holdings, Inc. (NASDAQ: CBOE) today reported net income allocated to common stockholders of

$67.2 million

per diluted share, for the

quarter of

, compared with

$48.1 million

per diluted share, in the

. On an adjusted basis, net income allocated to common stockholders was

$63.0 million

per share, up 31 percent and 33 percent, respectively, over the third quarter of last year. Operating revenue for the quarter was

$187.0 million

26 percent

$148.9 million

Financial results presented on an adjusted basis for the third quarter of 2015 exclude the recognition of a tax benefit, which is detailed in the reconciliation of non-GAAP results.

"The record financial results we delivered this quarter highlight the utility of our proprietary products, S&P 500

Index (SPX) options, Russell 2000

Index (RUT) options and CBOE Volatility Index (VIX) futures and options. Throughout the third quarter, we also advanced key growth initiatives in developing new products, increasing access to our marketplace, and growing our customer base in order to pave the way for continued success this year and beyond,” said Edward T. Tilly, CBOE Holdings' Chief Executive Officer. “As a result, we remain optimistic about our ability to deliver sustainable long-term value to our customers and our shareholders."

"We are very pleased with our results for the third quarter as we achieved new highs across a number of financial measures, including operating revenue, operating margin and earnings per share. Our operating margin hit a new high of

54.1 percent

, underscoring the operating leverage inherent in our business model and the potential for further gains as we invest in our strategic growth initiatives while prudently managing expenses,” said Alan J. Dean, CBOE Holdings' Executive Vice President and Chief Financial Officer.

(1) A full reconciliation of our non-GAAP results to our GAAP results for the 2015 and

reporting periods is included in the attached tables. See "Non-GAAP Information” in the accompanying financial tables.

-- more --

/11 CBOE Holdings, Inc. Reports Third Quarter 2015 Financial Results

Key Statistics and Financial Highlights

The table below highlights CBOE Holdings' operating results on a GAAP basis and an adjusted basis for the comparative quarters and

-month periods ended

September 30, 2015

. Financial results presented on an adjusted basis provide supplemental information to facilitate period-over-period comparisons by adjusting for certain items that management believes are not indicative of the company's core operating performance.

(in millions, except per share, revenue per contract and trading days)

3Q 2015

3Q 2014

Y/Y Change

YTD 2015

YTD 2014

Key Statistics:

Total Trading Days

Average Daily Volume (options and futures)

Total Trading Volume (options and futures)

Average Revenue Per Contract

GAAP Financial Highlights:

Total Operating Revenues

Total Operating Expenses

Operating Income

Operating Margin %

Weighted Average Shares Outstanding

Adjusted Financial Highlights (1)

Operating revenue was

$38.1 million

, from

. This was largely driven by a

$40.5 million

increase in transaction fees, partially offset by a

$1.6 million

decrease in access fees.

Transaction fees rose

39 percent

in the quarter due to a

increase in the average revenue per contract (RPC) and a

in trading volume compared with the

. Total trading volume in the

million contracts, or

million contracts per day, compared with volume of

million contracts per day, in last year's

quarter. Trading volume in the third quarter included record volume for index options and futures. The RPC was



The higher RPC primarily reflects a favorable shift in the mix of products traded with a higher proportion of volume coming from index options and futures contracts, which generate the highest RPC. These product categories accounted for

44.6 percent

of trading volume in the

33.8 percent

. Additionally, the RPC increased across each product category due to fee adjustments and lower volume discounts and incentives.

The average revenue per contract represents total transaction fee revenue

divided by total reported trading volume for Chicago Board Options Exchange


), C2 Options Exchange

) and CBOE Futures Exchange

Total operating expenses were

$85.9 million

$12.1 million

16 percent

$73.8 million

for the same period in

, primarily due to higher costs for professional fees and outside services, royalty fees and depreciation and amortization.

The company's core operating expenses, which include total operating expenses less volume-based expenses, depreciation and amortization, accelerated stock-based compensation expense and unusual or one-time expenses, were

$51.1 million

$4.8 million

10 percent

, compared with last year's

quarter. The increase in core operating expenses primarily reflects increases of

$4.4 million

in professional fees and outside services and

$0.9 million

in compensation and benefits. The increase in professional fees and outside services is primarily attributed to the company's outsourcing of certain regulatory services to FINRA, which occurred in December 2014. The increase in compensation and benefits was largely due to higher expenses for stock-based compensation and incentive compensation, driven by the company's stronger financial performance.

Volume-based expenses, which include royalty fees and order-routing fees, were

$22.4 million

, an increase of

$5.2 million

30 percent

, compared with the same period last year. This

includes higher royalty fees of

$5.6 million

, partially offset by lower order-routing fees of

$0.4 million

. The increase in royalty fees was driven by higher trading volume in licensed index products, which rose

40.7 percent

over last year's third quarter.

The company's operating margin reached a record high of

370 basis points

50.4 percent

. The margin increase reflects the positive operating leverage generated from the company's higher revenue base.

Effective Tax Rate

On a GAAP basis, the company reported an effective tax rate of

33.4 percent

for the current quarter compared with

35.4 percent

quarter. The effective tax rate for the third quarter of this year included the benefit of the release of uncertain tax positions. Excluding a non-GAAP adjustment of

$4.3 million

, the effective tax rate for the current quarter was

37.7 percent

Year to date, the company's adjusted effective tax rate of

38.5 percent

is in line with its guidance range for the full-year 2015 of

39.5 percent

Operational Highlights and Recent Developments

On October 20, CBOE started trading options on three FTSE Russell indexes: the Russell 1000

Index, the Russell 1000 Value Index and the Russell 1000 Growth Index.

On October 16, the company announced a minority investment in CurveGlobal, a new interest...