Q4 2024 Earnings Summary
- Strong growth in retail options trading: Cboe's partnership with Robinhood has exceeded expectations in both speed and uptake, leading to increased volumes that are largely additive. The company is focusing on access, education, and product offerings to further tap into the nearly 25 million funded accounts on Robinhood, with only about 4% currently trading options. This early success and ongoing initiatives position Cboe well for continued growth in the retail segment.
- Expansion of trading hours to meet global demand: Due to significant customer demand, particularly from the Asia-Pacific region, Cboe is expanding U.S. equities trading to nearly 24x5 on its EDGX platform. By leveraging its global infrastructure and technology already used for 24x5 trading in its proprietary index complex, Cboe aims to provide international investors access during their local market hours, potentially increasing volumes and revenues.
- Record volumes in SPX and VIX options: Cboe reported a strong start to the year with its S&P 500 Index (SPX) and VIX options. January saw the second-highest month on record for SPX options, with volumes higher than the 2024 average. VIX options also reached an average daily volume of 925,000 contracts in January, which is 12% higher than the 2024 record. This growth reflects increased demand for hedging tools amid market uncertainty, suggesting robust growth prospects for Cboe's volatility products.
- CEO succession uncertainty: The company is undergoing a CEO transition, as current CEO Fred Tomczyk plans to step down and return to the board, potentially introducing leadership uncertainty.
- Softened growth outlook for Data Vantage business: The growth guidance for the Data Vantage segment has been adjusted to mid- to high single-digit revenue growth, compared to the previous 7% to 10% range, indicating a potential slowdown.
- Regulatory hurdles for 24x5 trading initiative: The plan to extend U.S. equities trading hours to 24x5 is contingent upon obtaining regulatory approvals from the SEC, which are yet to be forthcoming, potentially delaying the initiative.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +14% (from $968.7M in Q4 2023 to $1,107.6M in Q4 2024) | Revenue grew significantly driven by robust performance in Derivatives Markets and Cash & Spot Markets. The current period benefited from higher regulatory fee rates and increased trading activity compared to the previous period. |
Operating Income | +1.5% (from $294M in Q4 2023 to $298.5M in Q4 2024) | Operating income improved marginally as higher overall revenues were largely counteracted by a steep 24% rise in Cost of Goods Sold. This suggests that increased income less cost of revenues was absorbed by rising operational expenses. |
Cost of Goods Sold | +24% (from $469.7M in Q4 2023 to $583.1M in Q4 2024) | COGS surged significantly, largely due to higher fee obligations (e.g., steep increases in regulatory fee components such as Section 31 fees and royalty-related costs). These cost increases eroded margins, contrasting with the lower levels observed in the previous period. |
Net Income | -7% (from $212M in Q4 2023 to $196.5M in Q4 2024) | Net income declined despite higher revenue, as the rising cost structure (in particular, the 24% hike in COGS) negatively impacted profitability. The margin pressure from increased costs in Q4 2024 relative to Q4 2023 contributed to a 7% drop in net income. |
Basic EPS | -6% (from $1.99 in Q4 2023 to $1.87 in Q4 2024) | Basic EPS fell in line with net income erosion, reflecting the margin compression driven by increased costs. Even with revenue growth, the higher operating and cost pressures translated into a 6% decline in EPS. |
Business Segments | Mixed – Derivatives: strong ($490.3M); Cash & Spot: strong ($468.6M); Options: -$222.8M decline; North American Equities: -$727.1M decline | Segment performance was mixed. Derivatives and Cash & Spot Markets drove revenue robustly due to higher trading fees and fee rate adjustments, while significant declines in Options and North American Equities suggest a loss in trading volumes and fee pressure compared to the previous period. This divergence highlights structural shifts in Cboe’s trading activity. |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong retail options trading growth and Robinhood partnership | Q1 2024: Emphasized growing retail engagement and potential 0DTE synergy. Q2 2024: Partnership with Robinhood (2nd-largest options platform) to launch index options, targeting 24M funded accounts. | Rollout of index options on Robinhood’s platform exceeded expectations; ~25M funded accounts with only ~4% trading options, indicating a significant growth opportunity. | Recurring, continued bullish sentiment around retail growth. |
Expansion of trading hours (24x5) to meet global demand | Q1 2024: SPX Global Trading Hours activity up 41% year-over-year, focusing on increased non-U.S. customer access. Not mentioned in Q2 2024. | Aimed at 24x5 on EDGX, citing customer demand and pending SEC and consolidated tape approvals, potentially by end of 2025 or early 2026. | Dropped in Q2, then re-emerged in Q4; positive outlook. |
Record volumes in SPX and VIX options | Q1 2024: SPX ADV +17% YoY, near record; VIX options up 4% QoQ. Q2 2024: SPX near all-time highs; VIX ~18% QoQ increase. | SPX average daily volume at 3.1M (+7% YoY), VIX ADV at 830k (+12% YoY); momentum continued into January 2025. | Consistent topic, bullish volumes. |
CEO succession uncertainty | Not mentioned in Q1 2024 or Q2 2024. | Noted that succession planning affected share repurchases; CEO to remain until successor is appointed. | New topic in Q4, cautious tone. |
Softened growth outlook for Data Vantage (Data & Access Solutions) | Q1 2024: Confident in 7%–10% organic net revenue growth. Q2 2024: Slower 5% organic net revenue growth, reaffirmed lower end of guidance. | Guidance framed as mid- to high single-digit, consistent with 7%–10% prior range; clarified that language shift isn’t a fundamental change. | Recurring, concerns noted in Q2, reinforced stable outlook in Q4. |
Regulatory approvals needed for 24x5 trading initiative | Not mentioned in Q1 2024 or Q2 2024. | SEC and consolidated tape approvals required for publishing trades; infrastructure targeted for late 2025. | New mention in Q4, important step for global expansion. |
Expansion into international markets (Europe, APAC) | Q1 2024: Largest in Europe by value traded; rising share in Australia, Japan. Q2 2024: 31% continuous trading share in Europe, APAC expansion with new brokers onboarded. | Europe share rose to 33%; strong APAC growth and new strategic investments. | Consistent, bullish global expansion. |
Growing adoption of Cboe Global Cloud | Q1 2024: 79% of cloud customers outside Americas; broadening data access. Q2 2024: 80% sales from outside the Americas, strategic priority. | Brief reference to leveraging its distribution capability, but no major detail in Q4. | Still present, mention less explicit in Q4. |
Slowed European index options expansion | Not mentioned in Q1 2024. Q2 2024: ADV ~850 contracts/day, stable rollouts, focusing on long-term development. | No mention in Q4 2024. | Mentioned only in Q2, no further updates. |
Return of capital to shareholders (share repurchases, dividends) | Q1 2024: $58.5M dividends, $89M repurchases. Q2 2024: 65% of adjusted earnings returned, $90M repurchased in Q2, dividends $0.55/share. | Dividends of $66M in Q4; no repurchases due to CEO succession uncertainty; total $454M returned in 2024. | Consistent, paused share buybacks in Q4 due to succession. |
Strategic review and digital business realignment | Q1 2024: Detailed realignment, winding down spot crypto market, focusing on derivatives. Q2 2024: Continued realignment, $81M charge for intangible asset impairment. | No direct mention aside from emphasis on reduced M&A and more organic growth. | Mentioned in Q1 & Q2, less explicit in Q4. |
Reliance on 0DTE options | Q1 2024: 48%–50% of SPX volume, strong retail/institutional adoption. Q2 2024: 48% of SPX, used for hedging. | 0DTE accounts for ~50%+ of SPX activities, ~1.6M contracts ADV, growing retail use. | Recurring, remains a key driver of volume. |
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SPX Growth and Robinhood Impact
Q: How will Robinhood boost SPX options growth?
A: The Robinhood rollout surpassed our expectations, being quicker with greater uptake than anticipated. Volumes from Robinhood are largely additive, providing a strong setup for 2025. With nearly 25 million funded accounts and only about 4% trading options, there's a solid runway for growth. The SPX complex had a robust start in January with the second-highest month on record, reflecting strong demand. ** ** -
Capital Allocation and Share Buybacks
Q: Why no stock buybacks, and what's the M&A plan?
A: Share repurchases remain vital to our capital allocation strategy. However, due to the succession planning process, we chose not to repurchase shares this quarter. We maintain a strong balance sheet and will be opportunistic moving forward. Regarding M&A, we seek opportunities that make strategic and financial sense, leveraging our scale and technology to deliver long-term value. -
24x5 U.S. Equities Trading
Q: What’s the impact of moving to 24x5 trading?
A: We're extending U.S. equities trading to 24x5 to meet global customer demand, especially from Asia-Pacific investors wanting access during their daylight hours. Utilizing our EDGX exchange, which already has extended hours and appeals to retail investors, we can implement this once regulatory approvals are in place, likely by early next year. This expansion is expected to drive additional volumes and data revenue. -
Data Vantage Revenue Guidance
Q: Has the Data Vantage growth outlook softened?
A: Our updated guidance aligns with market standards but remains consistent with prior ranges. We're still targeting 7% to 10% growth for Data Vantage, just as we communicated a year ago. There has been no softening in our growth outlook. ** ** -
Options Pricing and Retail Adoption
Q: How will pricing changes and retail adoption affect options?
A: We continuously adjust pricing in our multi-list options to optimize revenue, balancing market share and capture. Retail adoption is a significant focus; over the past five years, we've seen increased retail engagement in options, notably an 11% growth in zero-day-to-expiry trading in SPX options between January '24 and January '25. We’re investing in education and global distribution to further drive this growth. -
CEO Succession Plan
Q: How will the CEO search affect strategy?
A: With organizational stabilization and a sharpened strategic focus, it's the right time for leadership transition. The board has clear criteria for the new CEO, and our strong management team remains focused on executing our strategy. The search won't impact our current plans. -
Guidance and Investment Income
Q: Are guidance and investment income expectations stable?
A: Yes, our Data Vantage guidance remains at 7% to 10% growth, consistent with last year. Income from minority investments is tapering off as those cycles mature, but dividend income from other investments continues to rise. We'll provide more details in our upcoming Form 10-K. -
Technology Platform Rebranding
Q: Does rebranding as Titanium signal tech monetization?
A: We've rebranded our technology platform as Cboe Titanium to highlight our technological strength. While peers have monetized their platforms, we currently have no plans to commercialize Titanium as a service. We're focused on investing in it to support and drive our global businesses.