Cboe Global Markets (CBOE) Q4 2005 earnings summary

Executive summary

• FY2005 set records for trading volume and market share, with net income of $10.9 million; the strong year supported the planned shift to a for-profit model.

• Conversion from a membership organization to a for-profit model was approved in September 2005 and initiated January 1, 2006, with streamlined infrastructure and a reduced operating budget planned.

Financial highlights

• Revenue was $203.1 million and net income was $10.9 million in FY2005, versus $88.9 million and $1.2 million, respectively, in the six months ended Dec. 31, 2004; periods are not equivalent.

• Revenue was $25.2 million, or 14%, higher than the prior period on an annualized basis; 32% trading-volume growth was cited as the main driver.

• Expenses were $10.2 million higher than the prior period on an annualized basis, mainly from employee costs (+$8.4 million) and royalty fees (+$4.0 million).

• Fee reductions and caps saved members and customers $31.6 million in 2005, versus $12.0 million in the prior period on an annualized basis.

Outlook and guidance

• FY2006 was expected to be pivotal as the for-profit conversion provided strategic flexibility; priorities included refining the Hybrid system, developing products and technology, and improving efficiency.

• Trading set new records in early 2006: March volume reached 55 million contracts, up 46% YoY, and a single-day record of 5.64 million contracts was set on March 16.