Derivatives and securities exchange operator Cboe Global Markets (CBOE 0.61%) reported fourth-quarter and full-year 2024 earnings on Friday, Feb. 7, that fell just short of consensus estimates. Its adjusted EPS of $2.10 came in below analyst expectations of $2.13. Net revenue in Q4 stood at $524.5 million, just shy of the predicted $525 million, and showed a 5.1% increase year over year.
Despite these slight misses, Cboe recorded a solid annual performance with notable revenue growth spread across its segments. However, growth in operating income was tempered by rising expenses, highlighting the delicate balance of expansion and cost management.
| Metric | Q4 2024 | Analysts' Estimate | Q4 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $2.10 | $2.13 | $2.06 | 2% |
| Net revenue | $524.5 million | $525 million | $499 million | 5.1% |
| Operating income | $298.5 million | — | $294 million | 1.5% |
| Adj. operating margin | 61% | — | 61.6% | (0.6 pps) |
Source: Cboe Global Markets. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. pps = Percentage points.
Business Overview
Cboe Global Markets operates as one of the world's premier derivatives and securities exchange networks. It offers a broad range of trading solutions like equities, derivatives, FX (foreign exchange), and digital assets. Known for its innovation, Cboe is pivotal in providing high-speed, efficient trading services globally.
Recently, the company has focused on diversifying its products to cater to evolving market demands, notably expanding into digital assets. Key success factors include its advanced trading platform technology, robust global presence, and regulatory compliance, all of which enable sustainable growth across various markets.
NYSEMKT: CBOE
Key Data Points
Quarterly Highlights
Cboe's Q4 2024 derivatives market segment saw revenue increase 8% year over year, primarily driven by its options business. Additionally, new product offerings, such as a Mini Bitcoin U.S. ETF Index, have started gaining traction among investors.
The company completed the integration of its operations in Australia and Japan onto the Cboe technology platform. This enhances operational efficiency but also contributed to a 10% hike in total operating expenses. These increased expenses, spurred by technology support and professional fees, reveal areas that could strain financial performance if not controlled.
Despite the modest revenue miss, the company observed strong growth in international markets. Europe and Asia Pacific net revenue rose by 17% year over year, helping counterbalance competitive pressures in North American and options markets. Cboe's expansion into the cryptocurrency derivatives space, although late relative to some competitors, signifies its ongoing commitment to innovation.
From a financial standpoint, the company's adjusted operating expenses rose by 7%, highlighting the navigation challenges within competitive markets and stringent cost management structures. The company's effective tax rate also increased, impacting net earnings, due to adjustments in deferred tax benefits.
Future Outlook
Looking forward, Cboe is guiding for mid-single-digit organic total net revenue growth for 2025. Its guidance for adjusted operating expenses falls between $837 million and $852 million. Emphasis on expanding the Data Vantage segment and committing to product innovation will be crucial in meeting these projections.
Investors should watch how Cboe manages its expenses amidst its expansion efforts, especially in new markets like crypto derivatives. The company's ability to balance innovation and efficiency will steer its future performance amidst shifting market conditions and regulatory landscapes.
