CBOE-Investor Presentation_Raymond_James_2011_final_3_4_11

8/7/2019 CBOE-Investor Presentation_Raymond_James_2011_final_3_4_11

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aymon ames32nd Annual Institutional Investors Conference

CBOE Holdings, Inc.p. 1

,

March 7, 2011


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Overview

Business Overview and Growth Initiatives

Edward T. Tilly, Executive Vice Chairman

Financial Review

Alan J. Dean, Executive Vice President, CFO and Treasurer



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Corporate Overview

Leading Brand, Reputation and Market Position

. .

CBOE and VIX are industrys leading brand names

Well positioned to benefit from secular growth trends

Leading Product Innovator

Exclusive index franchise differentiates CBOE Volatility suite provides strong growth potential

High Performance Trading Technology

- - - - maintained in-house

Powers CBOE, C2, CFE and CBSX



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Large and Growing U.S. Market

18,787

11,406

14,160 14,336

,

5,969

8,079

2,884 3,150 3,0973,603

4,691

3,7634,717 4,503 4,441 5,150

2,6881,858

,1,127,,

,

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

YTD(Thousands of Contracts)


. .

Source: Options Clearing Corporation and CBOE

YTD through 2/28/11


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CBOE Consistent Market Share Leader

Total Market Share Excluding Dividend Trades 7 points ahead of nextcompetitor in the month of February

All Classes

27%30%

35%

CBOE

20%

18%20%

25%ARCA

PHLX

14%

11%10%

15%BOX

NOM

0%

5%C2


Jan

Feb

Ma Ap

May

Jun

Ju Aug

Sep

Oc Nov

Dec

Jan

Feb

Source: CBOE


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CBOE 2011 YTD Market Share Data

3%

2%

Total Industry Volume Excl. Dividend Trades

3%2%

CBOE

C2

PHLX

13%

11% 27%

1%

31%

14%13%

11% 28%

1%

ISE

NYSE/Amex

NYSE/Arca

22%17%

19%18% BOX

BATS

qu y p ons ETF Options n ex pt ons

24%

6%4% 2%

5%2%

2%

20%

1%3% 1%

94%

20%14%

11%1%

21%14%

14% 1%

95%

CBOE Holdings, Inc.p. 7p. 7p. 7

Source: Options Clearing Corporation and CBOE

Excludes Dividend TradesYTD through 2/28/11


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Differentiated Product Set

CBOE Trades

Equity IndexOptions on CFE Futures

09-10 ADVCh

-9.7% - 0.4% 21.2% 281%

p ons

10-11 ADVChg YTD

19.6% 13.6% -0.5% 283%

Percent of2010 tradingvolume

51% 25% 24% < 1%

3-month av 0.170 0.224 0.592 1.657

RPC 1/31/11


1 YTD through February 28


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Licensed and Proprietary Products

CBOE proprietary indexesand index methodologiesattract volume and provide

ProprietaryGVZ

CBOE GOLDlicensing revenues VOLATILITY INDEX

Exclusive licensingagreements to list indexoptions based on S&P 500,S&P 100 and DJIA Exclusive through 2018 Exclusive through 2012

Ri ht to extend throu h 2017

ExclusivelyLicensedProducts

Strong long-term relationships

x en s roug

Other

and non-exclusive licensingagreements with other indexproviders

LicensingAgreements


ropr e ary an xc us ve ro uc s ccoun or ore anOne Million Contracts Per Day


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CBOE is the Home of Volatility Products

VIX Futures & Options Annual ADV (000's of contracts)450 45

384

40

350 35

248200

250

ion

sADV

20

25

re

sADV

132

17

100

150Opt

10

15 Fut

2393

1

5542

0

50

0

5


2005 2006 2007 2008 2009 2010 2011 YTD

VIX Options VIX FuturesYTD through 2/28/11


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Leveraging Expertise in Volatility Products

Launching CBOE Gold Volatility Index (GVZ) options and futures

, ,

approval CBOE to introduce GVZ options shortly thereafter

Calculating volatility values on individual equities

Allows investors to track individual stock volatility

a cu a ng ew n ex

Provides another tool to investors to track perceived risks of extrememarket moves in the S&P 500

CBOE Holdings, Inc.p. 11p. 11


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Successful Rollout of C2

Launched in October 2010, C2 has 360 options classes listed,representing 81% of U.S. options volume

C2 is designed to: Attract volume from maker/taker exchanges

Minimize geographical latency from primary underlying markets

Provide platform for all electronic versions of S&P 500 index options ando er pro uc s



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C2 is an Active and Growing Market

C2 YTD 2011 ADV is 152,500 Contracts

C2 ADV

250,000

150,000

,

50,000

100,000

0

1/02/10

1/21/10

2/10/10

2/29/10

1/17/11

2/05/11

2/24/11


1 1 1 1


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SPXpm to Broaden Customer Reach

Identical in structure to traditional SPX index option, except itwill have a .m. settlement

Provides a settlement convention found in the OTC marketwhile offering benefits and safeguards of exchange trading

Expect SPX and SPXpm to provide customers two deep poolsof liquidity

SPXpm those seeking point-and-click exposure

SPX institutions conducting large complex trades via open outcry

Rule filing pending SEC approval



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Regulatory Update

Continue to work with regulators on behalf of options customersand the industry

View the SEC proposed rules that could potentially affect optionsindustry as:

ropose ee caps

Step up trading prohibition

Dodd-Frank soundly endorsed exchange trading and centralclearing

Enhances OTC opportunities



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2011 Initiatives

With CBOEs unique product mix, we are well-positioned to takeadvantage of long-term secular growth trends in the industry

Extend the VIX product line Pursue additional licensing opportunities

Bring new products and benchmarks to market

Build on the success of C2 aunc pm on 2

Fine tune pricing schedule and market model to maximize the competitiveoffering of all products on C2

Enhance our outreach programs to educate investors



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Financial Review

Alan J. Dean

Executive Vice President, CFO and Treasurer



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2010 Financial Overview

Adjusted Basis 2010 2009 $ Change % Change

,

Total Operating Revenues $432.7 $402.0 $30.7 8%

Total Operating Expenses 256.8 246.4 $10.4 4%

Operating Income $ 175.9 $155.6 $20.3 13%

Operating Margin 40.7% 38.7% N/A 2.0 pts

. . .

Income Before Income Taxes $174.8 $155.2 $19.6 11%

Net Income $105.5 $ 93.2 $12.3 13%

Diluted EPS for All Stockholders $ 1.10 $ 1.03 $0.07 7%

Total Contracts Per Day 4.46 4.51 N/A (1)%


Rate Per Contract (RPC) $0.294 $0.277 $0.017 6%

Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information.


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Volume Overview by Product

EquityOptions

IndexOptions

Options onETFs

CFE FuturesExchange

09-10 ADV

Chg

-9.7% -0.4% 21.2% 281%

10-11 ADVChg YTD

19.6% 13.6% -0.5% 283%

2010 RPC: $0.176 $0.227 $0.591 $1.72

Total Contracts Traded for CBOE, C2 and CFE (ADV 000s)

22%22% 20% 24%

23%

23%

28% 24% 25%

5,150

4,4584,5084,722

3,767

2,690

55%

58% 53%50% 56% 51%

23%

2006 2007 2008 2009 2010 2011 YT D


1 YTD through February 28

Equity Index ETF


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Transaction Fees Driven by Volume

and Rate Per ContractHigher volume resulted

in lower RPC and

Overall Transaction Fee per Contract (RPC)Overall Transaction Fee per Contract (RPC)

Higher mix of indexoptions drove RPC

RPC up 5 % Y-O-YSequential decline due

5,000

6,000

$0.300

$0.320

stronger revenue growth grow RPCoptions in 4Q vs 3Q

3 000

4,000

$0.260

$0.280

2,000 $0.240

0

,

$0.200

.

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10


, , , , , , , , , , , ,

RPC ($) 0.292 0.279 0.289 0.291 0.292 0.273 0.266 0.278 0.300 0.281 0.306 0.293

p. 20


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Options Trading Volume Mix

2010 2009

51% 56%

25% 24%

Equity Index ETF



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Financial Review Sources of Revenue

Market Data

$21

Regulatory

$15

2010 Revenue Components ($ in millions) 2010 Transaction Fees ($ in millions)

FuturesOther

$8

2%

5%

Exchange

Services

$17

4%

$8

2%

Access Fees

$41

9%

ETFs

$63

19%

Equities

$100

30%

TransactionIndexes

$33077%

$15949%


Total Transaction Fees = $330mmTotal Adjusted Operating Revenues = $433mm



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Focus on Maximizing Revenue Potential

Following demutualization, CBOE began charging a monthly accessfee to all tradin ermit holders

Modified fees for 2011 to include sliding scale for market maker tradingpermits (excludes appointments for proprietary options classes)

Firm must commit to certain number of permits for the year

In 2011 im lemented a number of fee chan es aimed at

Driving incremental volume

Generating additional revenue

C2 provides source for incremental transaction fees and access fees



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Core Operating andVolume-Based Expenses

($ in millions)($ in millions)

$208

$229$248

$270

$62

$63

$28$25 $26

$27$30

$213

$34$26

$138 $148$153 $157 $164

2006 2007 2008 2009 2010

Core operating D&A Non-Operating Items Volume-based


=Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information.


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Strong Debt-Free Balance Sheet

($ in thousands)

As ofDec. 31, 2009

As ofSept. 30, 2010

As ofDec. 31, 2010

a ance ee a a

Cash $383,730 $322,936 $53,789

Total Assets 571,948 530,624 254,112

Total Liabilities 383,814 81,482 78,238

Total Stockholders/MembersEquity 188,134 449,142 175,874

Working Capital $74,328 $332,378 $61,118

Capital Expenditures $ 37,997 $15,049 $ 23,556

No existing debt


1. Reduction from Sept 30, 2010 to Dec 31, 2010 reflects tender offers. Reduction in 2009 reflects recognition of $300 million liability for payment of settlement agreement.

2. Current assets minus current liabilities.3. Does not include new investments in affiliates or the disposition of interests in affiliates .


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Return of Capital to Stockholders

Generated nearly $135 million in operating cash flow in 2010

Purchased more than 12 million shares of Class A-1 and Class A-2restricted common stock

Reduced shares outstanding by 12 percent

Paid $19.7 million in regular dividends in third and fourth quarters

. per s are eac quar er

Board declared dividend of $0.10 per share for first quarter 2011

Above 20 to 30 percent targeted



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Well Positioned to Deliver Higher Margins

$60.0 50.0%

Quarterly Adjusted Operating Income and Margin($ in millions)

$50.046.0%

48.0%

$40.0

42.0%

44.0%

$20.0

.

36.0%

38.0%

.

$10.0

32.0%

34.0%


$0.0

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

30.0%

Operating Income Margin



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Appendix Materials



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Annual Financial Highlights

Options ADV (mm) Transaction Fees ($mm)RPC

4.7Exchange-traded funds

$0.309 $344

1.9

2.7

3.8

.

24%20%22%

24%

25%24%28%

23%

19%

.

Equities $0.282$0.288 $0.288

$0.277$0.294

$145

$190

$273

$315

51%56%51%53%58%

59%

25%16%

2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010

Adjusted Operating Revenues ($mm) Adjusted Pre-Tax Earnings ($mm)Adjusted Operating Expenses ($mm)

$344

$417$402

$433

$208$229

$246$257

$136

$187

$155

$175

$201

$253

$180

21

$68


2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010

Adjusted to reflect the impact of certain items. See Non-GAAP Information.


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Historical Transaction Fee Drivers

For the Year Ended December 31,

2006 2007 2008 2009 2010

Equities 1,556 1,996 2,387 2,519 2,273

Indexes 628 918 1,026 884 1,071

ETFs 504 849 1,304 1,100 1,097

Total Options 2,688 3,763 4,717 4,503 4,441

Futures 2 4 5 5 17

Total 2,690 3,767 4,722 4,508 4,458

Rate Per Contract

Equities $ 0.182 $ 0.180 $ 0.177 $ 0.181 $ 0.176

Indexes 0.500 0.544 0.576 0.567 0.591

ETFs 0.312 0.257 0.259 0.255 0.227

Total Options $ 0.280 $ 0.286 $ 0.286 $ 0.275 $ 0.288

Futures $ 1.974 $ 2.130 $ 1.860 $ 1.990 $ 1.723

Total $ 0.282 $ 0.288 $ 0.288 $ 0.277 $ 0.294


Total Transaction Fees (in thousands) $190,224 $ 272,716 $ 343,779 $ 314,506 $ 330,264


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Calculation of Weighted Average Shares

Days Total Days Total Weighted3 Months Ending Dec 31, 2010 12 Months Ending Dec 31, 2010

ares

Shares Issued to Members 74,400,000 92 92 74,400,000 365 365 74,400,000

Shares Issued to Exercise Right Settlement Class 16,333,380 92 92 16,333,380 365 365 16,333,380

IPO Shares (excluding selling shareholders shares) 9,614,226 92 92 9,614,226 196 365 5,162,708IPO Shares (over allotment) 1,755,000 92 92 1,755,000 196 365 942,411

Tender Offer (11,967,426) 33 92 (4,292,664) 33 365 (1,081,986)

Tender Offer adjustments (50,469) 15 92 (8,229) 15 365 (2,074)

Total weighted average shares basic 97,801,713 95,754,439

Restricted Stock pursuant to LTIP (less forfeitures of 16,430) 2,201,481 92 92 2,201,481 199 365 1,200,260

Anti-dilutive grants based on treasury stock method (2,201,481) 92 92 (2,201,481) 199 365 (1,200,260)

Total weighted average shares - diluted 97,801,713 95,754,439

Total shares including participating securities 100,003,195 96,954,698

Percentage of participating securities 2.20% 1.24%

-In the statements of income of CBOE Holdings, Inc. for the three and twelve months ended December 31, 2010 and 2009, net income per common share is calculated by dividing historical net

income for each of the periods presented by the weighted average number of common shares as if the restructuring transaction was consummated on January 1 of each respective period.

(1) The restricted stock is considered a participating security and is accounted for under the two-class method. The two-class method is an earnings allocation formula that determines earnings

per common share for each participating security according to dividends paid or declared and participation rights in undistributed earnings.



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CBOE Rolling 3-Month RPC

CBOE Rolling Three-Month Average Transaction Fee Per Contract (RPC)

2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Equities $0.177 $0.180 $0.184 $0.172 $0.163 $0.162 $0.170 $0.180 $0.182 $0.180 $0.179 $0.177

Indexes 0.576 0.590 0.597 0.584 0.578 0.580 0.590 0.597 0.598 0.592 0.592 0.590

Exchange-traded funds 0.234 0 .237 0 .236 0 .225 0 .215 0 .217 0.222 0 .233 0 .236 0 .228 0 .228 0 .224

Total options average 0.282 0.290 0.297 0.282 0.274 0.277 0.288 0.296 0.300 0.296 0.292 0.284Futures 2.092 2.004 1.952 1.879 1.832 1.717 1.694 1.600 1.661 1.669 1.674 1.679

Total average transaction fee per contract $0.286 $0.294 $0.300 $0.286 $0.279 $0.281 $0.293 $0.301 $0.306 $0.302 $0.300 $0.293


Equities $0.179 $0.188 $0.195 $0.188 $0.183 $0.188 $0.187 $0.181 $0.171 $0.168 $0.172 $0.172

Indexes 0.583 0.573 0.569 0.563 0.565 0.565 0.570 0.567 0.574 0.578 0.574 0.563

Exchange-traded funds 0.259 0 .267 0 .285 0 .285 0 .272 0 .263 0.247 0 .245 0 .237 0 .235 0 .234 0 .233. . . . . . . . . . . .

Futures 1.728 1.696 1.689 1.657 1.670 1.738 1.819 1.927 1.938 2.077 2.106 2.186



. . . . . . . . . . . .

Indexes 0.550 0.567 0.581 0.582 0.580 0.575 0.573 0.571 0.577 0.579 0.585 0.582Exchange-traded funds 0.244 0 .254 0 .258 0 .271 0 .268 0 .260 0.259 0 .263 0 .267 0 .260 0 .257 0 .244

Total options average 0.277 0.284 0.290 0.292 0.285 0.277 0.275 0.280 0.287 0.298 0.297 0.290

Futures 1.937 2.085 1.835 1.842 1.926 1.919 1.874 1.851 1.898 1.904 1.855 1.763




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Quarterly Financial Highlights

Options ADV (mm) Transaction Fees ($mm)RPC

5.3

Equities Indexes Exchange-traded funds

$83

$94

3.7

4.2

25%

24%24%

22%19%

18%20% 22%

25%

27%

23%25%24%23%

26% 25%

4.54.7

4.54.3

4.5 $0.292$0.273

$0.266$0.278

.

$0.281

.$0.293 $76 $77

$73

50%49%53%53%57%

59%54% 53%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

Adjusted Operating Revenue ($mm) Adjusted Pre-Tax Earnings ($mm)Adjusted Operating Expenses ($mm)

$98

$109$98 $101

$113$106

$113

$97$58

$61$65

$62

$71

$60$64$62

$40

$47

38$42

$46$49

$33$35


1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

Adjusted to reflect the impact of certain items. See Non-GAAP Information.


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Quarterly Core Operating Expenses

($ in thousands)

2Q 2010 1Q 2010 4Q 20094Q 2010 % rev 3Q 2010 % rev % rev % rev % rev

, , , , ,

Less:Depreciation and Amortization 8,190 8% 7,099 7% $7,301 6% $7,301 7% $6,859 6%

Accelerated stock-based compensation 2,004 2% 10,965 10%Volume-based Expense:Royalty Fees 9,710 9% 9,226 9% $11,519 10% $10,898 11% $9,286 8%Trading Volume Incentives 5,665 5% 4,594 4% 7,339 7% 3,696 4% 7,148 6%

-

Exercise Right Appeal Settlement - - - - - - - $2,086 2%

Core Operating Expenses (non-GAAP): $39,968 38% $39,198 37% $44,633 40% $40,457 40% $40,859 34%

Less: Continuing stock-based compensation (3,233) -3% (3,963) -4% (636) -1%Core Operating Expenses excluding continuing

stock-based compensation (non-GAAP): $36,735 35% $35,235 33% $43,997 39% $40,457 40% $40,859 34%

Expense Detail:Employee Costs $20,586 19% $19,715 19% $22,640 20% $23,137 23% $21,222 18%Data Processing 4,960 5% 4,304 4% 5,155 5% 5,082 5% 4,497 4%Outside Services 6,788 6% 6,293 6% 10,041 9% 8,123 8% 7,724 6%Travel and Promotion Expenses 1,672 2% 2,702 3% 3,209 3% 1,986 2% 2,454 2%Facilities Costs 1,662 2% 1,440 1% 1,315 1% 1,384 1% 1,459 1%Other Expenses 1,067 1% 780 1% 2,273 2% 745 1% 1,417 1%

Number of Full Time Employees 581 591 593 597 597

Please see our disclaimer regarding Non-GAAP financial measures.



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Non-GAAP Information

In addition to disclosing results determined in accordance with GAAP,CBOE Holdings has disclosed certain non-GAAP measures of operatingperformance. The non-GAAP measures provided in this press release

, ,operating expenses, adjusted operating income, adjusted operating margin,

adjusted income before income taxes, adjusted income tax provision,adjusted net income, adjusted diluted net income per common share, andad usted diluted EPS for all stockholders.

Management believes that the non-GAAP financial measures presented inthis press release, including adjusted net income and core operating

expenses, provide useful and comparative information to assess trends in- - .Non-GAAP financial measures disclosed by management are provided asadditional information to investors in order to provide them with analternative method for assessing our financial condition and operatingresults. These measures are not in accordance with, or a substitute for,

, an may e eren rom or ncons s en w non- nanc ameasures used by other companies.

Core operating expenses is the companys operating expenses afterexcludin i volume-based ex enses, ii de reciation and amortization


expense, (iii) accelerated stock-based compensation expense and (iv) otherunusual or one-time expenses.


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CBOE Holdings, Inc.

Chicago, IL 60605

Debbie KoopmanDirector, Investor Relations

.

312-786-7136


CBOE-Investor Presentation_Raymond_James_2011_final_3_4_11

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