CBOE Holdings Q3 results

October 28, 2016 • Reprints

CBOE Holdings, Inc. reported a profit of $40.3 million, or 50 cents per diluted share, down from $67.2 million, or 81 cents per diluted share, a year earlier. Excluding a legal settlement and other items, per-share profit fell to $47.2 million, or 58 cents a share from $63 million, or 76 cents a share.

"I'm pleased to report on a solid third quarter 2016 at CBOE Holdings with adjusted earning per share of 58 cents on revenue of $156 million against the backdrop of choppy volatility and very challenging year-over-year quarterly comparisons," Edward T. Tilly, CBOE Holdings' Chief Executive Officer said in an earnings call with the media Friday morning. 

Operating revenue for the quarter decreased 16% to $156.2 million from $187 million in last year's third quarter financial results. This year's results include $8.6 million of acquisition-related expenses.

"Although trading volume was down this quarter compared to last year's record third-quarter volume, CBOE posted solid financial results, while continuing our efforts to efficiently manage our resources and expenses," Alan J. Dean, CBOE Holdings' Executive Vice President and Chief Financial Officer said in a press release. 

"In the third quarter last year CBOE had record-high financial results as well as record highs in SPX and VIX options and futures trading; and Brexit-driven spikes in volatility drove increased trading in the second quarter on this year. Against those comparisons overall trading at CBOE for the third quarter declined year-over-year and from the previous quarter. However, year-to-date trading in our index suite is up 5% led by an increase of 14% in VIX futures trading and continues to outpace multiply listed volume traded industry-wide, which is down 4%," Tilly said in an earnings call with the media Friday morning.

Analysts projected 56 cents in per-share profit and $158.26 million in revenue, according to Thomson Reuters. 

CBOE turned the playbook upside down in September, announcing its own acquisition of Bats Global Markets Inc.—second-largest U.S. stock exchange by shares traded—for $3.2 billion in a large deal that would create global exchange to rival New York Stock Exchange owner Intercontinental Exchange Inc., Nasdaq Inc. and CME Group Inc.

In regards to the company's planned acquisition of Bats, which was announced earlier this year, Tilly said the acquisition has the potential to significantly expand and diversify their product line, broaden the company's reach in Europe and increase its non-transactional revenue stream. 

"CBOE Holdings is prepared and ready for an earlier integration of the Bates acquisition than the anticipated timeline of the first half of 2017, provided the regulatory approvals go smoothly," John Deters, Chief Strategy Officer and Head of Corporate Initiatives said in an earnings call with the media Friday morning. 

Regarding the retail space, Edward Provost, President and Chief Operating Officer said the products CBOE provides contribute to the bottom line of many trading firms and brokerages and that in turn contributes to the success of CBOE, and with the acquisition of Bates, CBOE looks to bring more opportunities for its customers. 

"Our focus on creating long-term value for our shareholders remains unchanged. The recently announced planned acquisition of Bats is an example of how we are allocating resources in a way that we believe will generate the best returns for our shareholders," Dean said. 

Third-Quarter 2016 Financial Highlights

● GAAP Operating Revenue of $156.2 Million Compared With $187.0 Million, Down 16%

● GAAP Net Income Allocated to Common Stockholders of $40.3 Million Compared With $67.2 Million; Diluted EPS of $0.50 Versus $0.81, Down 38% From 2015's Record High

● Adjusted Net Income Allocated to Common Stockholders of $47.2 Million Compared With $63.0 Million; Adjusted Diluted EPS of $0.58 Versus $0.76

Year-To-Date 2016 Financial Highlights

● GAAP Operating Revenue of $481.9 Million Compared With $478.6 Million, Up 1%

● GAAP Net Income Allocated to Common Stockholders of $140.0 Million Compared With $153.9 Million; Diluted EPS of $1.72 Versus $1.85, Down 7%

● Adjusted Net Income Allocated to Common Stockholders of $145.6 Million Compared With $149.9 Million; Adjusted Diluted EPS of $1.79 Versus $1.80, Down 1%

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