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CBOE Holdings, Inc.’s (CBOE - Free Report) first-quarter 2017 adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate of 68 cents by 14.7%. Also, the bottom line jumped 27.9% year over year.
Results were driven by higher revenues, partially offset by increased expenses. The company recorded increased trading volume in the quarter.
Adjusted net income allocated to common stockholders surged 44.7% year over year to $72.2 million.
On a GAAP basis, net income allocated to common stockholders was $15.1 million or 16 cents per share compared with $49.2 million or 60 cents per share in the prior-year quarter.
Notably, CBOE Holdings completed the acquisition of Bats Global Markets, Inc. on Feb 28, 2017. The company remains focused on utilizing opportunities to boost financial strength, accelerate strategic growth initiatives and access new areas of growth to deliver greater value to shareholders.
Edward T. Tilly, CBOE Holdings' Chief Executive Officer, stated, "While the Bats integration is a top priority, we also remain laser focused on growing our proprietary products. Despite record low realized volatility in the first quarter, trading on VIX futures rose 18 percent while trading in our index options increased 7 percent compared with first-quarter 2016, led by record trading in SPX options and significantly outpacing the options industry, which posted a 4 percent decline in average daily volume.”
Operational Details
In the first quarter, total revenue came in at $356.2 million. The top line outpaced the Zacks Consensus Estimate of $202 million by 76.3% and also skyrocketed 108.9% year over year. On an adjusted basis, revenues soared 35.2%. Net revenue contribution of $39.2 million from Bats Global Markets for March as well as increase in transaction fees and other revenues drove the upside.
Total trading volume of CBOE Holdings rose 9% year over year to 7.1 million contracts. Total revenue per contract (RPC) for Options declined 8.7% year over year to 24.2 cents. Total RPC for U.S. Futures increased 10.4% year over year to $1.814.
Total operating expenses increased 163.1% year over year to $167.3 million, primarily due to higher professional fees and outside services, compensation and benefits, depreciation and amortization, technology support services and incremental operating expenses related to the buyout of Bats Global Markets in March. On an adjusted basis, expenses increased 25.4% from the prior-year quarter.
Adjusted operating margin expanded 10 basis points year over year to 59.9%.
CBOE Holdings, Inc. Price, Consensus and EPS Surprise
As of Mar 31, 2017, CBOE Holdings had cash and cash equivalents of $153.3 million, down 57.6% from $97.3 million at the end of 2016. Total assets were $5.3 billion at the end of the first quarter as against $476.7 million at year-end 2016.
Total shareholders’ equity was $2.7 billion at the end of the reported quarter as against $317.9 million as of Dec 31, 2016.
Net operating cash flow came in at ($9.6) million in the first quarter, which compared unfavorably with $97.4 million in the year-ago quarter.
Dividend Update
In the first quarter, the board of directors declared a dividend of 25 cents per share, which amounted to $28 million.
2017 Outlook
The guidance for full-year 2017 takes into account the company’s acquisition of Bats Global Markets.
Adjusted operating expenses are expected in the range of $415–$423 million (down 1% to up 1% year over year) compared with $417 million in 2016.
Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $52–$54 million, excluding the amortization of acquired intangibles of $169 million. Capital expenditures are estimated in the range of $55–$60 million based on the company's ongoing investments in systems hardware and software, including CBOE Holdings' systems migration to Bats Global Markets’ technology.
Acquisition-related expenses are likely to be about $65.2 million, which represents expenses recognized through Mar 31, 2017. Accelerated stock-based compensation expenses are projected to be about $9.1 million in the year. The effective tax rate will likely be within 35–37%.
Among the other securities and exchanges that have reported their first-quarter earnings so far, the bottom line at Nasdaq, Inc. (NDAQ - Free Report) , CME Group Inc. (CME - Free Report) and Intercontinental Exchange, Inc. (ICE - Free Report) beat their respective Zacks Consensus Estimate.
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CBOE Holdings (CBOE) Q1 Earnings Beat Estimates, Grow Y/Y
CBOE Holdings, Inc.’s (CBOE - Free Report) first-quarter 2017 adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate of 68 cents by 14.7%. Also, the bottom line jumped 27.9% year over year.
Results were driven by higher revenues, partially offset by increased expenses. The company recorded increased trading volume in the quarter.
Adjusted net income allocated to common stockholders surged 44.7% year over year to $72.2 million.
On a GAAP basis, net income allocated to common stockholders was $15.1 million or 16 cents per share compared with $49.2 million or 60 cents per share in the prior-year quarter.
Notably, CBOE Holdings completed the acquisition of Bats Global Markets, Inc. on Feb 28, 2017. The company remains focused on utilizing opportunities to boost financial strength, accelerate strategic growth initiatives and access new areas of growth to deliver greater value to shareholders.
Edward T. Tilly, CBOE Holdings' Chief Executive Officer, stated, "While the Bats integration is a top priority, we also remain laser focused on growing our proprietary products. Despite record low realized volatility in the first quarter, trading on VIX futures rose 18 percent while trading in our index options increased 7 percent compared with first-quarter 2016, led by record trading in SPX options and significantly outpacing the options industry, which posted a 4 percent decline in average daily volume.”
Operational Details
In the first quarter, total revenue came in at $356.2 million. The top line outpaced the Zacks Consensus Estimate of $202 million by 76.3% and also skyrocketed 108.9% year over year. On an adjusted basis, revenues soared 35.2%. Net revenue contribution of $39.2 million from Bats Global Markets for March as well as increase in transaction fees and other revenues drove the upside.
Total trading volume of CBOE Holdings rose 9% year over year to 7.1 million contracts. Total revenue per contract (RPC) for Options declined 8.7% year over year to 24.2 cents. Total RPC for U.S. Futures increased 10.4% year over year to $1.814.
Total operating expenses increased 163.1% year over year to $167.3 million, primarily due to higher professional fees and outside services, compensation and benefits, depreciation and amortization, technology support services and incremental operating expenses related to the buyout of Bats Global Markets in March. On an adjusted basis, expenses increased 25.4% from the prior-year quarter.
Adjusted operating margin expanded 10 basis points year over year to 59.9%.
CBOE Holdings, Inc. Price, Consensus and EPS Surprise
CBOE Holdings, Inc. Price, Consensus and EPS Surprise | CBOE Holdings, Inc. Quote
Financial Update
As of Mar 31, 2017, CBOE Holdings had cash and cash equivalents of $153.3 million, down 57.6% from $97.3 million at the end of 2016. Total assets were $5.3 billion at the end of the first quarter as against $476.7 million at year-end 2016.
Total shareholders’ equity was $2.7 billion at the end of the reported quarter as against $317.9 million as of Dec 31, 2016.
Net operating cash flow came in at ($9.6) million in the first quarter, which compared unfavorably with $97.4 million in the year-ago quarter.
Dividend Update
In the first quarter, the board of directors declared a dividend of 25 cents per share, which amounted to $28 million.
2017 Outlook
The guidance for full-year 2017 takes into account the company’s acquisition of Bats Global Markets.
Adjusted operating expenses are expected in the range of $415–$423 million (down 1% to up 1% year over year) compared with $417 million in 2016.
Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $52–$54 million, excluding the amortization of acquired intangibles of $169 million. Capital expenditures are estimated in the range of $55–$60 million based on the company's ongoing investments in systems hardware and software, including CBOE Holdings' systems migration to Bats Global Markets’ technology.
Acquisition-related expenses are likely to be about $65.2 million, which represents expenses recognized through Mar 31, 2017. Accelerated stock-based compensation expenses are projected to be about $9.1 million in the year. The effective tax rate will likely be within 35–37%.
Zacks Rank
CBOE Holdings 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
Among the other securities and exchanges that have reported their first-quarter earnings so far, the bottom line at Nasdaq, Inc. (NDAQ - Free Report) , CME Group Inc. (CME - Free Report) and Intercontinental Exchange, Inc. (ICE - Free Report) beat their respective Zacks Consensus Estimate.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
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