CBOE GLOBAL MARKETS CHICAGO, July 29, 2016 /PRNewswire/ -- CBOE Holdings, Inc. (NASDAQ: CBOE) today reported net income allocated to common stockholders of $50.7 million, or $0.62 per diluted share, for the second quarter of 2016, compared with $44.6 million, or $0.54 per diluted share, up 14 percent and 15 percent, respectively, over the second quarter of 2015. Adjusted net income allocated to common stockholders was $48.7 million, or $0.60 per share, up 9 percent and 11 percent, respectively, over the second quarter of 2015. Operating revenue for the quarter was $163.3 million, up 10 percent compared with $148.7 million in the second quarter of 2015.
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Financial results presented on an adjusted basis for the second quarter of 2016 exclude certain items that management believes are not indicative of the company's core operating performance, which are detailed in the reconciliation of non-GAAP results.
"Our strong financial results were largely fueled by robust trading in options on the S&P 500 Index (SPX) and futures and options on the CBOE Volatility Index (VIX). The VIX Index and SPX are widely viewed as proxies for worldwide volatility and the global stock market, respectively. Investors worldwide turned to CBOE's marketplace in the face of increased market uncertainty leading up to and in the aftermath of the Brexit referendum. We look forward to further advancing our strategic growth initiatives as our team continues to execute on our four-point strategy: to develop unique products, expand our customer base, form strategic alliances that leverage our core business, and define and lead the options and volatility space globally," said Edward T. Tilly, CBOE Holdings' Chief Executive Officer.
"We are pleased to report another strong quarter," said Alan J. Dean, CBOE Holdings' Executive Vice President and Chief Financial Officer. "Our financial strength and capital position have allowed us to continue to invest in our business while returning capital to shareholders, which includes growing our quarterly dividend rate. Yesterday, we announced that our Board increased our quarterly cash dividend for the sixth consecutive year, raising the third-quarter dividend to $0.25 per share from $0.23 per share, a 9 percent increase. This action reflects our commitment to consistently deliver value to our shareholders."
((1)) A full reconciliation of our non-GAAP results to our GAAP results for the 2016 and 2015 reporting periods is included in the attached tables. See "Non-GAAP Information" in the accompanying financial tables.
Key Statistics and Financial Highlights
The table below highlights CBOE Holdings' operating results on a GAAP basis and an adjusted basis for the three- and six-month periods ended June 30, 2016 and 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
amounts, revenue
per contract and
trading days) 2Q 2016 2Q 2015 Y/Y YTD YTD Y/Y
Change 2016 2015 Change
--- ------ ---- ---- ------
Key Statistics:
---------------
Total Trading Days 64 63 125 124
------------------ --- --- --- ---
Average Daily
Volume (options
and futures) 4.55 4.38 4% 4.66 4.57 2%
---------------- ---- ---- --- ---- ---- ---
Total Trading
Volume (options
and futures) 291.2 275.9 6% 582.5 566.6 3%
---------------- ----- ----- --- ----- ----- ---
Average Revenue
Per Contract $0.405 $0.368 10% $0.405 $0.354 14%
--------------- ------ ------ --- ------ ------ ---
GAAP Financial
Highlights:
--------------
Total Operating
Revenues $163.3 $148.7 10% $325.7 $291.5 12%
--------------- ------ ------ --- ------ ------ ---
Total Operating
Expenses 85.3 75.3 13% 168.2 148.6 13%
--------------- ---- ---- --- ----- ----- ---
Operating Income 78.0 73.4 6% 157.5 142.9 10%
---------------- ---- ---- --- ----- ----- ---
Operating Margin % 47.7% 49.3% (160) bps 48.4% 49.0% (60) bps
----------------- ---- ---- --------- ---- ---- --------
Net Income $50.9 $44.8 14% $100.1 $87.1 15%
---------- ----- ----- --- ------ ----- ---
Net Income
Allocated to
Common
Stockholders $50.7 $44.6 14% $99.7 $86.7 15%
------------- ----- ----- --- ----- ----- ---
Diluted EPS $0.62 $0.54 15% $1.22 $1.04 17%
----------- ----- ----- --- ----- ----- ---
Weighted Average
Shares
Outstanding 81.3 83.3 (2%) 81.6 83.6 (2%)
---------------- ---- ---- --- ---- ---- ---
Adjusted Financial
Highlights (1):
------------------
Total Operating
Expenses $83.8 $75.3 11% $165.6 $148.6 11%
--------------- ----- ----- --- ------ ------ ---
Operating Income 79.5 73.4 8% 160.1 142.9 12%
---------------- ---- ---- --- ----- ----- ---
Operating Margin % 48.7% 49.3% (60) bps 49.2% 49.0% 20 bps
----------------- ---- ---- -------- ---- ---- ------
Net Income
Allocated to
Common
Stockholders $48.7 $44.6 9% $98.6 $86.9 13%
------------- ----- ----- --- ----- ----- ---
Diluted EPS $0.60 $0.54 11% $1.21 $1.04 16%
----------- ----- ----- --- ----- ----- ---
(1) A full reconciliation of our non-
GAAP results to our GAAP results
for the 2016 and 2015 reporting
periods is included in the
attached tables. See "Non-GAAP
Information" in the accompanying
financial tables.
Operating Revenue
The company reported operating revenue of $163.3 million in the second quarter of 2016, an increase of $14.6 million, or 10 percent, from $148.7 million in the second quarter of 2015, primarily driven by increases of $16.3 million in transaction fees and $1.6 million in exchange services and other fees, offset somewhat by a $4.2 million decrease in other revenue.
Transaction fees rose 16 percent in the quarter, the result of a 10 percent increase in average revenue per contract (RPC) and a 6 percent increase in total trading volume versus the second quarter of 2015. Total trading volume in the second quarter was 291.2 million contracts, or 4.55 million contracts per day, compared with volume of 275.9 million contracts, or 4.38 million contracts per day, in last year's second quarter. Trading volume in the company's higher-margin index options and futures contracts rose 22 percent in the quarter while lower-margin, multiply-listed options declined 4 percent versus the second quarter of 2015. The RPC in the second quarter of 2016 was $0.405 compared with $0.368 in the second quarter of 2015.
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 42.9 percent of trading volume in the second quarter of 2016, compared with 37.2 percent in the second quarter of 2015.
The average RPC represents total transaction fee revenue divided by total reported trading volume for Chicago Board Options Exchange(®) (CBOE(®)), C2 Options Exchange(SM) (C2(SM)) and CBOE Futures Exchange(SM) (CFE(®)).
Operating Expenses
Total operating expenses were $85.3 million for the second quarter of 2016, up $10.0 million or 13 percent, compared with $75.3 million for the same period in 2015, primarily due to increases in compensation and benefits, royalty fees, professional fees and outside services and depreciation and amortization. Total adjusted operating expenses, which exclude accelerated stock-based compensation, acquisition-related expenses and other unusual items were $83.8 million, up $8.5 million or 11 percent, compared with $75.3 million for the second quarter of 2015.
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 $52.7 million for the second quarter of 2016, up $6.0 million or 13 percent, compared with last year's second quarter. The increase in core operating expenses primarily reflects increases of $3.5 million in compensation and benefits and $1.8 million in professional fees and outside services. The increase in compensation and benefits was largely driven by higher expenses for salaries and incentive compensation, which is aligned with the company's financial performance. The increase in professional fees and outside services primarily reflects higher legal and contract services.
Volume-based expenses, which include royalty fees and order routing fees, were $19.2 million in the second quarter of 2016, an increase of $1.8 million or 11 percent, compared with the same period last year. This increase was driven by higher royalty fees of $2.5 million and a favorable variance of $0.7 million in order routing fees. The increase in royalty fees resulted from higher trading volume in licensed index and futures products, which rose 22 percent over last year's second quarter.
Operating Margin
The company's operating margin was 47.7 percent for the second quarter of 2016, down 160 basis points compared with 49.3 percent in last year's second quarter. The adjusted operating margin was 48.7 percent for the quarter, down 60 basis points compared with 49.3 percent for the second quarter of 2015.
Effective Tax Rate
The company reported an effective tax rate of 39.2 percent for the second quarter of 2016 compared with 39.1 percent in last year's second quarter. Year to date, the company's effective tax rate is 39.1 percent, in line with its guidance range for the full-year 2016 of 38.5 percent to 39.5 percent.
Operational Highlights and Recent Developments
-- On July 11, CBOE announced that it plans to list SPX Monday-expiring
Weeklys(SM) options, beginning August 15, 2016, pending regulatory
approval. With the expected introduction of SPX "Monday Weeklys," CBOE
will now offer SPX options with Monday, Wednesday and Friday weekly
expirations.
-- On July 6, CBOE announced that it has created a series of 13 "Enhanced
Growth Indexes," the second in a family of options-based strategy
performance benchmarks designed to target the outcomes of specific
investment strategies. The CBOE S&P 500(® )Enhanced Growth Indexes
measure the performance of a hypothetical portfolio of SPX FLexible
EXchange(®) (FLEX(®)) options designed to provide targeted annual
returns. CBOE began disseminating daily values for the new benchmarks on
June 24, 2016.
-- On July 1, the company opened its first international business
development office in London, enabling CBOE to increase its presence in
the region and allow its business development team to more directly
engage with European-based clients and potential new customers, as well
as the exchange's strategic partners.
-- On June 24, record volume was set in VIX(® )futures traded at CFE in
non-U.S. trading hours with 235,141 contracts changing hands, surpassing
the previous single-day record of 140,811 contracts set during the
overnight session on August 24, 2015. For the month of June, VIX futures
volume in non-U.S. trading hours set a new high with ADV of 41,468
contracts, topping the previous record of 34,234 contracts from January
2016.
-- On June 14, CBOE announced that it has entered into an exclusive
licensing agreement with Social Market Analytics (SMA) to develop a
series of sentiment-based strategy benchmark indexes based on SMA's
social media metrics.
-- On May 23, CBOE Holdings announced that it made a minority equity
investment in Eris Exchange Holdings, LLC, a U.S.-based futures exchange
group offering swap futures as a capital-efficient alternative to
over-the-counter swaps.
-- On April 28, CBOE announced that it launched a new website, CBOE Livevol
Data Shop, which offers clients a full suite of uniquely customizable
market data sets.
-- On April 15, CBOE started overnight dissemination of the VIX Index.
Values for the VIX Index are published approximately every 15 seconds
starting at 2:15 a.m. during CBOE's extended trading hours session for
VIX and SPX options, which runs from 2:00 a.m. to 8:15 a.m. CT.
2016 Fiscal Year Financial Guidance
The company reaffirmed its financial guidance for the 2016 fiscal year as follows:
-- Core operating expenses for the 2016 fiscal year are expected to be in
the range of $211.0 million to $215.0 million.((2))
-- Continuing stock-based compensation expense included in core expenses is
expected to be approximately $13.5 million for the full year.
-- The company expects to recognize accelerated stock-based compensation
expense, on a quarterly basis, totaling approximately $1.0 million for
the full year. This expense is reported in compensation and benefits
and included in the company's non-GAAP reconciliation as an adjusted
financial measure.
-- Capital expenditures are expected to be in the range of $47.0 million to
$49.0 million.
-- Depreciation and amortization expense is expected to be in the range of
$46.0 million to $48.0 million.
-- The effective tax rate for full-year 2016 is expected to be in the range
of 38.5 percent to 39.5 percent. Significant changes in trading volume,
expenses, state and local tax rates and other items, including ongoing
state and federal tax audits and unusual items, could materially impact
this expectation.
((2) )Specific quantifications of the amounts that would be required to reconcile the company's core operating expenses guidance are not available. The company believes that there is a degree of volatility with respect to certain of its GAAP measures, primarily related to volume-based expenses, which include royalty fees and order routing fees, the items that would be required to reconcile to GAAP operating expenses, which preclude the company from providing accurate guidance on certain forward-looking GAAP to non-GAAP reconciliations. The company believes that providing estimates of the amounts that would be required to reconcile the range of the company's core operating expenses would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.
Return of Capital to Stockholders
As announced on July 28, 2016, CBOE Holdings' Board of Directors declared a dividend for the third quarter of 2016, increasing the dividend payment by 9 percent to $0.25 per share from $0.23 per share in the prior quarter. The dividend is payable September 16, 2016, to stockholders of record as of September 2, 2016.
During the second quarter of 2016, the company repurchased 280,900 shares of its common stock under its share repurchase program at an average price of $64.39 per share, for an aggregate purchase price of $18.1 million. Year to date, the company has repurchased 947,786 shares at an average price of $63.83 per share, for an aggregate purchase price of $60.5 million.
Since the inception of its share repurchase program in 2011 through June 30, 2016, the company has repurchased 10,947,401 shares of its common stock at an average price of $45.95 per share, for a total of $503.0 million.
As of June 30, 2016, the company had approximately $97.0 million of availability remaining under its existing share repurchase authorizations.
Earnings Conference Call
Executives of CBOE Holdings will host a conference call to review its second-quarter financial results today, July 29, 2016, at 8:30 a.m. ET/7:30 a.m. CT. The conference call and any accompanying slides will be publicly available via live webcast from the Investor Relations section of the company's website at www.cboe.com under Events & Presentations. Participants may also listen via telephone by dialing (877) 255-4313 from the United States, (866) 450-4696 from Canada or (412) 317-5466 for international callers. Telephone participants should place calls 10 minutes prior to the start of the call. The webcast will be archived on the company's website for replay. A telephone replay of the earnings call also will be available from approximately 11:00 a.m. CT, July 29, 2016, through 11:00 p.m. CT, August 5, 2016, by calling (877) 344-7529 from the U.S., (855) 669-9658 from Canada or (412) 317-0088 for international callers, using replay code 10088000.
About CBOE Holdings
CBOE Holdings, Inc. (NASDAQ: CBOE) is the holding company for Chicago Board Options Exchange (CBOE), CBOE Futures Exchange (CFE) and other subsidiaries. CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options and volatility trading through product innovation, trading technology and investor education. CBOE Holdings offers equity, index and ETP options, including proprietary products, such as options and futures on the CBOE Volatility Index (VIX Index) and S&P 500 options (SPX), the most active U.S. index option. Other products engineered by CBOE include equity options, security index options, Weeklys options, FLEX options, and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE Holdings is home to the world-renowned Options Institute, Livevol options analytics and data tools, and www.cboe.com, the go-to place for options and volatility trading resources.
Forward-Looking Statements
This press release may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. There are important factors that could cause actual results, level of activity, performance or achievements to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our right to exclusively list and trade certain index options and futures products; economic, political and market conditions; compliance with legal and regulatory obligations, including our obligations under agreements with regulatory agencies; increasing price competition in our industry; decreases in trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; our dependence on third party service providers; our index providers' ability to perform under our agreements; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to accommodate trading volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems; our ability to protect our systems and communication networks from security risks, including cyber-attacks; the accuracy of our estimates and expectations; our ability to maintain access fee revenues; our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status; the ability of our compliance and risk management methods to effectively monitor and manage our risks; our ability to attract and retain skilled management and other personnel; and our ability to manage our growth and strategic acquisitions or alliances effectively.
More detailed information about factors that may affect our performance may be found in our filings with the U.S. Securities and Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2015 and other filings made from time to time with the SEC.
The condensed consolidated statements of income, balance sheets and statements of cash flows are unaudited and subject to reclassification.
CBOE Media Contacts: Analyst Contact:
Suzanne Cosgrove Gary Compton Debbie Koopman
(312) 786-7123 (312) 786-7612 (312) 786-7136
cosgrove@cboe.com comptong@cboe.com koopman@cboe.com
----------------- ----------------- ----------------
CBOE-F
Trademarks:
CBOE(®), Chicago Board Options Exchange(®), CBOE Volatility Index(®), CFE(®), Livevol(®), FLEX(®), FLexible EXchange(®), and VIX(®) are registered trademarks and BuyWrite(SM), BXM(SM), CBOE Futures Exchange(SM), The Options Institute(SM), and Weeklys(SM) are service marks of Chicago Board Options Exchange, Incorporated (CBOE). C2(SM) and C2 Options Exchange(SM) are service marks of C2 Options Exchange, Incorporated (C2). Standard & Poor's(®), S&P(®) and S&P 500(® )are registered trademarks of Standard & Poor's Financial Services LLC and have been licensed for use by CBOE, C2 and CFE. All other trademarks and service marks are the property of their respective owners.
CBOE Holdings, Inc.
Selected Quarterly Operating Statistics
Average Daily Volume by Product (in thousands)
2Q 2016 1Q 2016 4Q 2015 3Q 2015 2Q 2015
------- ------- ------- ------- -------
PRODUCT:
--------
Equities 1,363 1,449 1,435 1,476 1,530
-------- ----- ----- ----- ----- -----
Indexes 1,691 1,811 1,547 2,076 1,445
------- ----- ----- ----- ----- -----
Exchange-
traded
products 1,239 1,298 1,075 1,432 1,221
--------- ----- ----- ----- ----- -----
Total
Options
Average
Daily
Volume 4,293 4,558 4,057 4,984 4,196
-------- ----- ----- ----- ----- -----
Futures 258 216 188 261 183
------- --- --- --- --- ---
Total
Average
Daily
Volume 4,551 4,774 4,245 5,245 4,379
-------- ----- ----- ----- ----- -----
Mix of Trading Volume by Product
2Q 2016 1Q 2016 4Q 2015 3Q 2015 2Q 2015
------- ------- ------- ------- -------
PRODUCT:
--------
Equities 29.9% 30.4% 33.8% 28.1% 34.9%
-------- ---- ---- ---- ---- ----
Indexes 37.2% 37.9% 36.5% 39.6% 33.0%
------- ---- ---- ---- ---- ----
Exchange-
traded
products 27.2% 27.2% 25.3% 27.3% 27.9%
--------- ---- ---- ---- ---- ----
Futures 5.7% 4.5% 4.4% 5.0% 4.2%
------- --- --- --- --- ---
Total 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
Average Revenue Per Contract by Product
2Q 2016 1Q 2016 4Q 2015 3Q 2015 2Q 2015
------- ------- ------- ------- -------
Trading Days 64 61 64 64 63
------------ --- --- --- --- ---
PRODUCT:
--------
Equities $0.070 $0.085 $0.097 $0.106 $0.093
-------- ------ ------ ------ ------ ------
Indexes 0.701 0.720 0.726 0.709 0.697
------- ----- ----- ----- ----- -----
Exchange-
traded
products 0.103 0.117 0.143 0.143 0.117
--------- ----- ----- ----- ----- -----
Total Options
Average
Revenue Per
Contract 0.328 0.346 0.349 0.368 0.308
------------- ----- ----- ----- ----- -----
Futures 1.682 1.643 1.686 1.647 1.758
------- ----- ----- ----- ----- -----
Total Average
Revenue Per
Contract $0.405 $0.405 $0.408 $0.431 $0.368
------------- ------ ------ ------ ------ ------
Transaction Fees by Product (in thousands)
2Q 2016 1Q 2016 4Q 2015 3Q 2015 2Q 2015
------- ------- ------- ------- -------
PRODUCT:
--------
Equities $6,146 $7,505 $8,866 $10,036 $8,942
-------- ------ ------ ------ ------- ------
Indexes 75,861 79,551 71,891 94,192 63,441
------- ------ ------ ------ ------ ------
Exchange-traded
products 8,140 9,263 9,839 13,089 8,966
--------------- ----- ----- ----- ------ -----
Total Options
Transaction Fees $90,147 $96,319 $90,596 $117,317 $81,349
----------------- ------- ------- ------- -------- -------
Futures 27,786 21,685 20,257 27,506 20,268
------- ------ ------ ------ ------ ------
Total Transaction
Fees $117,933 $118,004 $110,853 $144,823 $101,617
----------------- -------- -------- -------- -------- --------
CBOE Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three and Six Months Ended June 30, 2016 and 2015
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(in thousands, except per share
amounts) 2016 2015 2016 2015
------------------------------- ---- ---- ---- ----
Operating Revenues:
Transaction fees $117,934 $101,617 $235,937 $200,340
Access fees 13,179 13,371 26,429 27,057
Exchange services and other fees 11,359 9,736 22,750 19,464
Market data fees 8,172 7,557 16,141 15,569
Regulatory fees 9,219 8,746 18,319 17,128
Other revenue 3,466 7,698 6,083 12,006
------------- ----- ----- ----- ------
Total Operating Revenues 163,329 148,725 325,659 291,564
------------------------ ------- ------- ------- -------
Operating Expenses:
Compensation and benefits 28,530 24,136 55,636 49,574
Depreciation and amortization 12,260 11,275 24,111 21,677
Technology support services 5,658 4,813 11,336 10,138
Professional fees and outside
services 14,745 12,594 28,376 24,544
Royalty fees 19,336 16,755 38,450 30,905
Order routing (83) 627 21 1,414
Travel and promotional expenses 2,492 2,526 5,006 5,027
Facilities costs 1,418 1,293 2,946 2,677
Other expenses 1,006 1,336 2,328 2,684
-------------- ----- ----- ----- -----
Total Operating Expenses 85,362 75,355 168,210 148,640
------------------------ ------ ------ ------- -------
Operating Income 77,967 73,370 157,449 142,924
Other Income/(Expense):
Investment and other income 5,657 59 6,364 110
Net income/(loss) from
investments 218 202 524 (125)
Interest and other borrowing
costs (28) - (55) -
Total Other Income/(Expense) 5,847 261 6,833 (15)
---------------------------- ----- --- ----- ---
Income Before Income Taxes 83,814 73,631 164,282 142,909
-------------------------- ------ ------ ------- -------
Income tax provision 32,883 28,786 64,175 55,804
Net Income 50,931 44,845 100,107 87,105
---------- ------ ------ ------- ------
Net loss attributable to
noncontrolling interests 299 - 523 -
--- ---
Net Income Excluding
Noncontrolling Interests 51,230 44,845 100,630 87,105
------------------------- ------ ------ ------- ------
Change in redemption value of
noncontrolling interests (299) - (523) -
Net income allocated to
participating securities (212) (199) (414) (379)
------------------------- ---- ---- ---- ----
Net Income Allocated to Common
Stockholders $50,719 $44,646 $99,693 $86,726
------------------------------ ------- ------- ------- -------
Net Income Per Share Allocated
to Common Stockholders:
Basic $0.62 $0.54 $1.22 $1.04
Diluted 0.62 0.54 1.22 1.04
Weighted average shares used in
computing income per share:
Basic 81,343 83,290 81,580 83,621
Diluted 81,343 83,290 81,580 83,621
CBOE Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
June 30, 2016 and December 31, 2015
(in thousands, except share amounts) June 30, 2016 December 31, 2015
----------------------------------- ------------- -----------------
Assets
Current Assets:
Cash and cash equivalents $52,193 $102,253
Accounts receivable - net of allowances 71,129 62,535
Marketing fee receivable 7,052 5,682
Income taxes receivable 32,489 27,901
Other prepaid expenses 10,577 5,122
Other current assets 432 625
--- ---
Total Current Assets 173,872 204,118
-------------------- ------- -------
Investments 72,698 48,430
Land 4,914 4,914
Property and Equipment:
Total Property and Equipment-Net 61,130 60,360
Goodwill and Intangible Assets-Net 35,990 10,033
Total Other Assets-Net 58,040 56,933
Total $406,644 $384,788
----- -------- --------
Liabilities, Redeemable Noncontrolling
Interests and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $54,721 $60,104
Marketing fee payable 7,532 6,141
Deferred revenue and other liabilities 10,876 4,019
Post-retirement benefit obligation -
current 54 100
Contingent consideration - current 3,434 2,000
Income taxes payable 15 1,633
-------------------- --- -----
Total Current Liabilities 76,632 73,997
------------------------- ------ ------
Total Long-term Liabilities 51,649 51,146
Total Liabilities 128,281 125,143
----------------- ------- -------
Redeemable Noncontrolling Interests 12,600 -
----------------------------------- ------ ---
Stockholders' Equity:
Preferred stock, $0.01 par value:
20,000,000 shares authorized, no shares
issued and outstanding at June 30, 2016
or December 31, 2015 - -
Common stock, $0.01 par value:
325,000,000 shares authorized;
92,950,065 issued and 81,285,307
outstanding at June 30, 2016;
92,738,803 issued and 82,088,549
outstanding at December 31, 2015 929 927
Additional paid-in-capital 131,851 123,577
Retained earnings 666,016 603,597
Treasury stock at cost - 11,664,758
shares at June 30, 2016 and 10,650,254
shares at December 31, 2015 (532,249) (467,632)
Accumulated other comprehensive loss (784) (824)
---- ----
Total Stockholders' Equity 265,763 259,645
-------------------------- ------- -------
Total $406,644 $384,788
----- -------- --------
CBOE Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2016 and 2015
Six Months Ended June 30,
-------------------------
(in thousands) 2016 2015
------------- ---- ----
Cash Flows from
Operating Activities:
Net income $100,107 $87,105
Adjustments to
reconcile net income
to net cash flows
from operating
activities:
Depreciation and
amortization 24,111 21,677
Other amortization 40 36
Provision for deferred
income taxes (369) 536
Stock-based
compensation 7,105 5,801
Loss on disposition of
property 2 392
Equity (gain) in
investment (524) (239)
Impairment of
investment and other
assets - 118
Net change in assets
and liabilities (15,569) (9,601)
-------------------- ------- ------
Net Cash Flows
provided by Operating
Activities 114,903 105,825
---------------------- ------- -------
Cash Flows from
Investing Activities:
Capital and other
assets expenditures (25,430) (17,636)
Acquisition of a
majority interest in
a business, net of
cash received (14,257) -
Interest expense on
contingent
consideration - -
Investments (23,744) (30,935)
Other (398) 246
----- ---- ---
Net Cash Flows used in
Investing Activities (63,829) (48,325)
---------------------- ------- -------
Cash Flows from
Financing Activities:
Payment of quarterly
dividends (37,688) (35,288)
Purchase of common
stock from employees (4,119) (3,119)
Excess tax benefit
from stock-based
compensation 1,171 1,246
Purchase of common
stock under announced
program (60,498) (78,632)
----------------------
Net Cash Flows used in
Financing Activities (101,134) (115,793)
---------------------- -------- --------
Net Decrease in Cash
and Cash Equivalents (50,060) (58,293)
--------------------- ------- -------
Cash and Cash
Equivalents at
Beginning of Period 102,253 147,927
-------------------- ------- -------
Cash and Cash
Equivalents at End of
Period $52,193 $89,634
---------------------- ------- -------
Supplemental
Disclosure of Cash
Flow Information
Cash paid for income
taxes $67,200 $53,860
Non-GAAP Information
In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-GAAP measures of operating performance. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. The non-GAAP measures provided in this press release include core operating expenses, adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income allocated to common stockholders and adjusted diluted earnings per share.
Management believes that the non-GAAP financial measures presented in this press release, including adjusted net income and core operating expenses, provide useful and comparative information to assess trends in our core operations and a means to evaluate period-to-period comparisons. Non-GAAP financial measures disclosed by management, including adjusted diluted EPS, are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results.
The table below shows core operating expenses, which is the company's operating expenses after excluding (i) volume-based expenses, (ii) depreciation and amortization expense, (iii) accelerated stock-based compensation expense and (iv) other unusual or one-time expenses.
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(in thousands) 2016 2015 2016 2015
---- ---- ---- ----
Total Operating Expenses $85,362 $75,355 $168,210 $148,640
Less:
Depreciation and
amortization 12,260 11,275 24,111 21,677
Acquisition-related
expenses 300 - 668 -
Compensation and benefits
(1) 892 - 1,092 -
Assessment of computer-
based lease taxes for
prior period use - - 296 -
Volume-based expenses
Royalty fees 19,336 16,755 38,450 30,905
Order routing (83) 627 21 1,414
--- --- --- -----
Core Operating Expenses
(non-GAAP) $52,657 $46,698 $103,572 $94,644
Less: Continuing stock-
based compensation
expense 3,472 3,147 6,635 5,801
----- ----- ----- -----
Core Operating Expenses
Excluding Continuing
Stock-Based
Compensation (non-GAAP) $49,185 $43,551 $96,937 $88,843
------- ------- ------- -------
Detail of Core Operating
Expenses (non-GAAP)
Compensation and benefits $27,638 $24,136 $54,544 $49,574
Technology support
services 5,658 4,813 11,336 10,138
Professional fees and
outside services 14,445 12,594 27,708 24,544
Travel and promotional
expenses 2,492 2,526 5,006 5,027
Facilities costs 1,418 1,293 2,946 2,677
Other expenses 1,006 1,336 2,032 2,684
----- ----- ----- -----
Total $52,657 $46,698 $103,572 $94,644
------- ------- -------- -------
(1) For the second quarter of 2016,
this amount includes $270 for
accelerated stock-based
compensation expenses and $622 in
additional bonus accrual
resulting from legal settlement
revenue. For the year-to-date
results, this amount includes
$470 for accelerated stock-based
compensation expenses and $622 in
additional bonus accrual
resulting from legal settlement
income.
The information below shows the reconciliation of each financial measure from GAAP to non-GAAP. The non-GAAP financial measures exclude the impact of those items detailed below and are referred to as adjusted financial measures.
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(in thousands, except
per share amounts) 2016 2015 2016 2015
--------------------- ---- ---- ---- ----
Reconciliation of GAAP
Net Income Allocated
to Common Stockholders
to Non-GAAP
-----------------------
GAAP net income
allocated to common
stockholders $50,719 $44,646 99,693 86,726
Add: Compensation and
benefits (1) 892 - 1,092 -
Add: Acquisition-
related expenses 300 - 668 -
Add: Amortization of
intangible assets 340 - 601 -
Add: Change in
redemption value of
noncontrolling
interests 299 - 523 -
Add: Assessment of
computer-based lease
taxes for prior period
use - - 296 -
Less: Legal settlement
(2) (5,500) - (5,500) -
Add: Impairment charge - - - 364
Income tax expense
related to the items
above (3) 1,614 - 1,233 (142)
Net income allocated to
participating
securities -effect on
reconciling items 10 - 6 (2)
--- --- ---
Adjusted net income
allocated to common
stockholders $48,674 $44,646 $98,612 $86,946
------- ------- ------- -------
Reconciliation of GAAP
Diluted EPS to Non-
GAAP
----------------------
GAAP diluted earnings
per common share $0.62 $0.54 1.22 1.04
Per share impact of
non-GAAP adjustments
noted above (0.02) - (0.01) -
Adjusted diluted
earnings per common
share $0.60 $0.54 $1.21 $1.04
----- ----- ----- -----
Reconciliation of GAAP
Operating Margin to
Non-GAAP
----------------------
GAAP operating revenue $163,329 $148,725 325,659 291,564
Non-GAAP adjustments
noted above - - - -
Adjusted operating
revenue $163,329 $148,725 $325,659 $291,564
-------- -------- -------- --------
GAAP operating expenses $85,362 $75,355 168,210 148,640
Non-GAAP adjustments
noted above (1,532) - (2,657) -
------ ---
Adjusted operating
expenses $83,830 $75,355 $165,553 $148,640
------- ------- -------- --------
GAAP operating income $77,967 $73,370 157,449 142,924
Non-GAAP adjustments
noted above 1,532 - 2,657 -
Adjusted operating
income $79,499 $73,370 $160,106 $142,924
------- ------- -------- --------
Adjusted operating
margin 48.7% 49.3% 49.2% 49.0%
(1) For the second quarter of 2016,
this amount includes $270 for
accelerated stock-based
compensation expenses and $622 in
additional bonus accrual
resulting from the legal
settlement revenue. For the year-
to-date results, this amount
includes $470 for accelerated
stock-based compensation
expenses and $622 in additional
bonus accrual resulting from the
legal settlement income.
(2) Settlement received for attorney
fees and expenses relating to a
litigation matter, reported in
investment and other income.
(3) GAAP to Non-GAAP reconciling
items that are associated with
our controlling interest in Vest
Financial Group Inc. are not tax
effected.
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SOURCE CBOE Holdings, Inc.
