CBOE Holdings' CEO Discusses Q4 2011 Results - Earnings Call Transcript
CBOE Holdings (
)
Q4 2011 Earnings Call
February 9, 2012, 8:30 a.m. ET
Executives
Debbie Koopman – VP IR
William Brodsky – Chairman, CEO
Alan J. Dean - CFO, EVP of Finance & Administration and Treasurer
Edward T. Tilly – President, COO
Edward L. Provost – EVP, Chief Business Development Officer
Analysts
Richard H. Repetto - Sandler O'Neill
Michael Carrier - Deutsche Bank AG
Jillian Miller - BMO Capital Markets U.S.
Christopher J. Allen - Evercore Partners Inc.
Kenneth B. Worthington - JP Morgan Chase & Co.
Niamh Alexander - KBW
Patrick O’Shaughnessy– Raymond James
Alex Kramm - UBS Investment Bank
Justin Schack – Rosenblatt Securities
Gaston F. Ceron - Morningstar Inc.
Matthew Heinz – Stifel Nicolaus
Rob Brostrom – CLSA
Dan Fannon – Jefferies & Co.
Christopher Harris - Wells Fargo Securities, LLC.
Presentation
Operator
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Good day everyone and welcome to today's CBOE Holdings Fourth Quarter 2011 Earnings Conference Call. At this time, all participants are on a listen-only mode. Later we’ll conduct a question and answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s call is being recorded. At this time, for opening introductions, I would like to turn the call over to Debbie Koopman, Director of Investor Relations.
Debbie Koopman
Thank you. Good afternoon and thank you for joining us on our fourth quarter conference call. On the call today, Bill Brotsky, our Chairman and CEO, will discuss the quarter and our strategic initiative for 2012, then Alan Dean, our Executive Vice President and CFO will detail our fourth quarter 2011 financial results. Following their comments, we will open the call to Q&A. Also, joining us for Q&A today is our President and Chief Operating Officer, Ed Tilly; and our Executive Vice President of Business Development Officer, Ed Provost.
In addition, I'd like to point out that this presentation will include the use of several slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of our website.
As a preliminary note, you should be aware, that this presentation contains forward-looking statements, which present our current judgment on what the future may hold, and while we believe these judgments are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, after this conference call.
Now, I'd like to turn the call over to Bill Brotsky.
William J. Brodsky
Thank you Debbie and good morning, and thank you for joining us today. 2011 was a banner year for CBOE Holdings, with new records across key financial metrics, including revenues, earnings, and operating margins. We returned nearly $92 million in capital to stockholders in 2011 through our share repurchase program and quarterly dividends, which we increased by 20% during the second half of the year.
We achieved record trading volume as well. Fueled by record trading levels and SPX and volatility options and futures, CBOE Holdings reached an all-time high of 4.8 million contracts per day, an increase of 8% over 2010.
2011 also saw the continued expansion of our volatility product line. The addition of SPXpm to our S&P 500 complex and enhancements to C2. I’m particularly pleased to note the outstanding performance of our trade engine, CBOEdirect, which supports multiple exchanges and hybrid trading with low latency, which was virtually flawless throughout a busy and tumultuous trading year.
Solid fourth quarter results capped an outstanding year. Despite slower than usual trading in November and December, we reached a fourth quarter record high in adjusted revenues and earnings, posting adjusted diluted earnings per-share of $0.37 on revenues of $120.2 million.
Alan will discuss our quarterly results in more detail, so I’ll move ahead now with a look at what’s on the horizon for CBOE Holdings.
Our core mission is to create value for stockholders by generating industry leading profit margins and growth rates to a diversified portfolio mix of risk management products and services. Strategic initiatives in 2012 voted three main categories, developing new products, optimizing revenue and commoditized products, and broadening our customer base, all while maintaining the highest standards in market regulations. I will spend a few moments discussing each strategic initiative.
Product development most clearly distinguishes CBOE from the competition, and is the centerpiece of our mission going forward. We are keenly focused on developing exclusive products that generate premium fees and superior profit margins.
Three main product areas a slated for expansion in 2012, our SPX – our S&P 500 complex, our volatility product line, and new future products on CFE. CBOEs exclusive S&P 500 options complex includes our flagship S&P, SPX contact, SPX weekly, and the newly launched SPXpm on C2. Each offers a unique way to trade options on the S&P 500.
S&P is the premier U.S. Index option – I’m sorry, SPX is the premier U.S. Index option for institutions trading large and complex orders. These customers prefer the tremendous liquidity provided by some 270 SPX market makers and brokers on CBOE trading floor.
SPX reached a record total of nearly 200 million contracts last year, up 13% over 2010. SPX weekly options bring an added dimension to SPX by trading – by allowing traders to more specifically target opportunities tied to market events, such as earnings and government reports.
Early in 2011, we made SPX weekly available electronically through our hybrid system. Volume subsequently jumped to 69,000 contracts a day, up 283% over the previous year when they traded an open outcry.
SPXpm our new electronic S&P 500 option product was launched in October. Customers wanted a cost efficient user friendly alternative to other electronically based S&P 500 option products, mainly spider options. Our pm products is designed to provide them with greater efficiency, more control, and lower cost.
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