Cboe Global Markets, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fourth Quarter Results: Cboe delivered record net revenue ($671 million) and adjusted earnings for the quarter and year. Derivatives, cash and spot markets, and DataVantage all saw growth.
• Strategic Realignment: Commenced sales process for Cboe Australia and Canada, ceased operations on corporate listings businesses, closed Cboe Europe derivatives exchange (FedEx) in January 2026.
• Product Innovations: Launched Monday and Wednesday expirations for select multi-list names, saw growth in VIX products, and added Russell 2000 index options to global trading hour session.
• Leadership Changes: Welcomed Heidi Fisher to head cash and spot markets businesses and Scott Johnston as new COO; Christopher Isaacson to serve as adviser through 2026.

Segment Performance

• Derivatives: Fourth quarter net revenue increased 38% year over year to a record. Multi-list options net transaction and clearing fees revenue up 41% due to higher industry volumes and positive pricing trends. Index options net transaction and clearing fees revenue up 40% with SPX zero DTE ADV up 66% year over year. Derivatives category delivered record fourth quarter with net revenue increasing 38% year over year.
• Cash and Spot Markets: Net revenue up 27%. Europe and Asia Pacific segment had 24% year over year net revenue growth, driven by 33% growth in net transaction and clearing fees. North American Equities net transaction and clearing fees revenues up 18% due to strong equity volumes. Global FX net revenue up 22% year over year.
• DataVantage: Net revenue increased by 9% year over year in the fourth quarter, with roughly 90% of growth driven by new unit and new sales.

Guidance

• 2026: Anticipates DataVantage organic net revenue growth in mid to high single-digit range and total organic net revenue growth in mid-single-digit range. Adjusted operating expense guidance range $864 million to $879 million. CapEx guidance range $73 million to $83 million. Effective tax rate on adjusted earnings expected 27.5% to 29.5%. Interest income, net of interest expense, expected $3 million to $4 million positive contributor for 2026.

Risks

• Market Uncertainties: Geopolitical tensions and economic uncertainty may impact product demand and trading volumes.
• Regulatory Risks: Compliance with new regulations could affect product launches and operations.
• Competition: Intense competition in derivatives and cash markets may affect market share and revenue capture.

Q: Patrick Moley asked about DataVantage guidance, specifically why mid to high single-digit growth target.

A: Kenneth Hill and Craig Donohue responded that when setting annual guidance, they look at full-year basis, see durability in DataVantage business, with good momentum from new usage and overseas sales.

Q: Daniel Thomas Fannon inquired about single name zero DTE cannibalizing index business.

A: Robert Hocking explained that single name zero DTE and SPX options are not cannibalistic, as they have different product designs, risk profiles, and usage patterns, and are additive to the market.

Q: Elias Abboud asked about new brokers' contribution to SPX volumes and pipeline for further broker adds.

A: Robert Hocking stated that new brokers like Robinhood have contributed to growth, with strong demand from APAC brokers for SPX and VIX options, expecting more broker adds in 2026.

Q: Benjamin Budish asked about prediction market launch.

A: Robert Hocking said targeting second-quarter launch for event contracts, with regulatory approval and partner readiness key, and sees alignment with existing SPX product set.

Q: Brian Bedell asked about capital deployment and expense guidance related to strategic realignment.

A: Jill Griebenow explained focus on organic investments in securities financing and event prediction markets, with adjusted operating expense guidance including known impacts from strategic realignment actions like FedEx wind down and business closures.