Cboe Global Markets (CBOE) Q4 2006 earnings summary

Executive summary

• Record FY2006 trading volume of 674.7 million contracts, up 44% YoY, drove record net income; market share rose to 33%, leading U.S. options exchanges.

• The for-profit transition, new business initiatives and multi-asset platform expansion positioned the exchange for growth amid regulatory and competitive change.

Financial highlights

• Revenue reached $257.986 million vs. $203.055 million in 2005, up 27%; transaction fees were $186.285 million vs. $143.254 million.

• Record net income was $42.108 million vs. $10.895 million in 2005; income before taxes was $72.027 million vs. $19.893 million.

• Expenses increased $2.8 million YoY, mainly from employee costs, outside services and royalty fees; employee costs included $3.4 million higher severance expense.

• Other expenses included a $7.1 million refund, with accrued interest, from the revised 2000 class-action settlement.

Outlook and guidance

• Management expected Reg NMS to create opportunities for new market centers and expanded portfolio margining to improve capital allocation and modernize the marketplace.

• The proposed demutualization would make the exchange a subsidiary of CBOE Holdings; it remained subject to regulatory approval and a membership vote.

• CBSX began trading March 5, 2007, with a planned rollout of 2,800 actively traded NYSE, Nasdaq and AMEX-listed securities.