Image source: CBOE Holdings.
CBOE Holdings (CBOE +0.59%) saw its second-quarter profits rise 15%, as the holding company for the Chicago Board Options Exchange benefited from increased trading in its proprietary products brought about by investors' fears surrounding the Brexit vote.
CBOE Holdings results: The raw numbers
|
Q2 2016 |
Q2 2015 |
Growth (YOY) | |
|---|---|---|---|
|
Operating Revenue |
$163.3 million |
$148.7 million |
10% |
|
Operating Income |
$78.0 million |
$73.4 million |
6% |
|
Earnings per share |
$0.62 |
$0.54 |
15% |
Source: CBOE Holdings Q2 2016 earnings press release.
What happened with CBOE Holdings this quarter?
Operating revenue rose 10% to $163 million, driven by a 16% increase in transaction fees to $118 million.
Average revenue per contract (RPC) increased 10% year over year to $0.405 while total trading volume rose 6% to 291 million contracts (4.55 million per trading day). A shift in the mix of products traded toward higher RPC index options and futures contracts was the primary reason for the increase in RPC during the quarter.
"Our strong financial results were largely fueled by robust trading in options on the S&P 500 Index (SPX) and futures and options on the CBOE Volatility Index (VIX), said CEO Edward Tilly. "Investors worldwide turned to CBOE's marketplace in the face of increased market uncertainty leading up to and in the aftermath of the Brexit referendum."
Total operating expenses increased 13% to $85.3 million. Core operating expenses -- which exclude volume-based expenses, depreciation and amortization, accelerated stock-based compensation expense, and unusual or one-time expenses -- were $52.7 million, up 13% compared with the prior year quarter, mostly due to higher service fees and compensation costs. And volume-based expenses, which include royalty fees and order-routing fees, rose 11% to $19.2 million, due to higher trading volume in licensed index and futures products.
All told, operating income grew 6% $78 million. Net income to common stockholders (which benefited from higher investment income compared to Q2 2015) grew 14% to $50.7 million. And earnings per share, boosted by share buybacks, rose 15% to $0.62.
Capital Returns
During the second quarter, CBOE repurchased 280,900 shares of its stock at an average price of $64.39 per share, for a total cost of $18.1 million.
The company also recently announced a 9% increase to its quarterly dividend.
"Our financial strength and capital position have allowed us to continue to invest in our business while returning capital to shareholders, which includes growing our quarterly dividend rate," said CFO Alan Dean. "We announced that our Board increased our quarterly cash dividend for the sixth consecutive year, raising the third-quarter dividend to $0.25 per share from $0.23 per share, a 9 percent increase. This action reflects our commitment to consistently deliver value to our shareholders."
Looking forward
CBOE reiterated its forecast for full-year 2016 core operating expenses of $211 million to $215 million and capital expenditures of $47 million to $49 million.
"We look forward to further advancing our strategic growth initiatives as our team continues to execute on our four-point strategy: to develop unique products, expand our customer base, form strategic alliances that leverage our core business, and define and lead the options and volatility space globally," added Tilly.
