Cboe Global Markets Reports Strong Growth in Q3

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Cboe Global Markets Reports Strong Growth in Q3

Cboe Global Markets, Inc. (CBOE), a leading provider of global market infrastructure and traded products, reported record net revenue of $532 million for the third quarter, marking an 11% increase year-over-year. The company’s adjusted diluted earnings per share rose 8% to $2.22. This financial success was primarily driven by a 13% organic net revenue growth in the Derivatives market and a 12% increase in Cash and Spot Markets revenues. The company raised its full-year organic net revenue growth guidance to 7%-9% and updated its adjusted expense guidance to $798 million-$808 million.

Key Points:

  • Record net revenue of $532 million, an 11% year-over-year increase.
  • Adjusted diluted earnings per share increased by 8% to $2.22.
  • Organic net revenue growth in the Derivatives market rose by 13%.
  • Cash and Spot Markets revenues grew by 12%.
  • Full-year organic net revenue growth guidance increased to 7%-9%.
  • Adjusted expense guidance set at $798 million-$808 million.

Company Outlook: Cboe expects continued strength in the Data and Access Solutions segment during the fourth quarter. The company forecasts a positive outlook for volatility product sets in both U.S. and international markets. The raised full-year organic net revenue growth guidance and adjusted expense guidance reflect improved revenue expectations and increased marketing investments.

Downside Highlights: For the third quarter of 2024, total adjusted operating expenses rose approximately 13% year-over-year to about $204 million, largely due to higher wages and travel expenses. The company acknowledged increased competition in multi-listed options, leading to market share loss.

Upside Highlights: Strong performance in custom index options and futures, with significant growth in VIX options (33% ADV increase). A notable 7% increase in average daily volume for SPX contracts. International segments saw a 22% revenue increase, with Europe and Asia-Pacific leading growth. A strategic partnership with Robinhood to offer index options, aiming to enhance retail investor access.

Shortcomings: Despite overall growth, the company experienced market share loss in multi-listed options due to increased competition.

Q&A Highlights: There is currently no need to add more expirations for SPX options, with a focus remaining on flexibility and risk management. Projected expense growth between 6% and 8% for 2024 aims to stabilize margins. Confirmation of increased competition in multi-listed options and a strategy to optimize revenue. Future investments will focus on derivatives, data access, and technology, with international expansion and product innovation being key areas. The transition to Cboe's technology platform in Canada is set to be completed by March 2024.

In conclusion, Cboe Global Markets delivered a strong third-quarter report, reporting record revenues and increases in earnings per share. The company is focused on organic growth, strategic partnerships, and international expansion to maintain momentum in global markets. Cboe management remains optimistic about the future, aided by strategic investments in technology, product innovation, and market access.

InvestingPro Insights: Cboe Global Markets’ robust third-quarter performance is further illuminated by recent data from InvestingPro. The company’s 3.84% revenue growth over the past twelve months, and a more impressive 16.16% quarterly revenue growth, support the strong financial results reported in the article. This is consistent with the company's raised full-year organic net revenue growth guidance of 7%-9%.

InvestingPro tips highlight that Cboe has increased its dividend for ten consecutive years, demonstrating a commitment to shareholder returns that complements its growth strategy. This is particularly noteworthy given the company’s strong financial performance and the reported increase in earnings per share for the third quarter.

The company's profitability is underscored by a healthy gross profit margin of 51.75% and an operating income margin of 29.36% over the last twelve months, as indicated by InvestingPro data. These metrics support the upside highlights in the article, especially the strong performance in custom index options and futures.

However, as pointed out by an InvestingPro tip, it is important to note that Cboe is trading at a high P/E ratio of 26.7 based on near-term earnings growth. This valuation metric could be a point of consideration for investors, especially in the context of the market share challenges outlined in the downside highlights related to multi-listed options.

For readers looking to delve deeper into Cboe's financial health and market position, InvestingPro offers eight additional tips, providing a comprehensive analysis of the company’s outlook and potential risks.