The paragraph is an introduction to the Cboe Global Markets Fourth Quarter Earnings Call. The operator welcomes attendees and outlines the call's format, including the speakers and the presentation of slides. Ken Hill, the Head of Investor Relations and Treasurer, introduces the agenda for the call, which includes discussions by the CEO, Fred Tomczyk, and Global President, Dave Howson, on the company's performance and strategic initiatives, followed by the CFO, Jill Griebenow, presenting the financial results and 2025 financial outlook. A Q&A session will follow, with participation from the COO, Chris Isaacson. The presentation will include forward-looking statements subject to assumptions, risks, and uncertainties, and attendees are referred to SEC filings for more information on these risks.

In this morning's call, Fred Tomczyk reported strong financial performance for Cboe Global Markets in both the fourth quarter and the full year of 2024. The company achieved a 5% year-over-year increase in net revenue for the quarter, reaching $524.5 million, and a 2% rise in adjusted diluted earnings per share to $2.10. For the full year, net revenue grew 8% to a record $2.1 billion, with adjusted earnings per share up 10% to $8.61. This growth was driven by solid performance across derivatives, cash and spot markets, and the Data Vantage business, alongside disciplined expense management. Particularly noteworthy was the strong option volume, with 3.8 billion contracts traded across Cboe's exchanges, marking a fifth consecutive year of record-breaking growth. Overall, every major segment contributed to the net revenue increase for the year.

In 2024, Cboe experienced record trading volumes in SPX and VIX options, with average daily volumes reaching 3.1 million and 830,000 contracts traded, respectively. Their Data Vantage business saw a 7% increase in organic net revenue due to technology investments aimed at optimizing data and insights. The company's cash and spot markets also performed well, achieving a 10% organic net revenue increase, driven by robust trading volumes. Overall, the year was marked by significant transaction and non-transaction growth. As Cboe enters 2025, it is strategically focused and well-positioned to leverage trends such as increased options trading, the rise of retail investors, market globalization, and advancements in technology, including AI. The company's derivatives business is thriving, supported by a growing customer base and strong demand for U.S. market access and options trading.

The paragraph highlights the company's position to support market participants amid uncertainty due to geopolitical factors, deregulation, tax cuts, and tariffs from the new U.S. administration. It emphasizes the opportunity for growth through SPX and VIX products, attracting foreign investment, and enhancing risk management. The company aims to expand retail access to index options through partnerships with platforms like Robinhood and focuses on education and technological innovation to meet rising retail demand. Investments have been made in updating their exchange technology platform to support these initiatives.

The paragraph discusses Cboe's recent rebranding to Cboe Titanium, reflecting its commitment to advancing trading technology globally. The new platform supports innovation across markets and products, improving market share with each new market entry. As 2025 approaches, Cboe is well-positioned strategically and financially to pursue growth opportunities. Dave Howson highlights the strong performance of the Derivatives business, with net revenues up 8% and record-high options volumes in 2024. SPX options volumes increased post-U.S. election as investors adjusted portfolios, while VIX options volumes rose due to a risk-on rally and hedging demand.

The paragraph discusses the growth and significance of 0-day-to-expiration (0DTE) options in the SPX and RUT markets, noting a substantial increase in trading volumes. SPX 0DTE options now constitute over half of all SPX Options ADV, while RUT options have seen a year-over-year trading volume increase. The article highlights the importance of options for investors facing volatile market conditions and changing policies. It also mentions efforts to broaden access, especially through partnerships like the launch on the Robinhood platform, and the potential for international expansion of derivatives products. Additionally, it emphasizes investor education and the advantages of index options such as cash settlement and tax treatment benefits.

The paragraph outlines Cboe's strategic efforts to enhance its global presence and capabilities. The company is investing in sales and education to boost imports to the U.S., with a focus on expanding in key Asia-Pacific markets by building local salesforces and educational resources. Two new brokers have begun offering Cboe products in these priority markets, and Malaysian investors now have access to listed options. The CEDX platform is expanding its offerings with over 320 options from 14 countries. Cboe's product development team introduced new ways to trade S&P Index Volatility, and education will be crucial in 2025 for growth. The company is strengthening its team, welcoming Meaghan Dugan as Head of U.S. Options, and making several new hires and promotions. Cboe expects 2025 to be transformational, focusing on customer access, education, and innovation.

The fourth quarter yielded strong results, with net revenues rising 14% year-over-year, concluding a year of 10% overall growth driven by solid regional contributions and market innovations in 2024. North America saw a 28% increase in net transaction and clearing fees, boosting segment revenues by 10%, while industry volumes grew significantly. The U.S. on-exchange equities capture improved by 42%, striking a balance between market share and revenue optimization. Canada is set to complete its market migration to Cboe Technology by March 3, building on 2024 trends. Europe and Asia-Pacific reported a 17% increase in fourth-quarter net revenue and 16% for the year, driven by higher transaction and clearing fees. Cboe emerged as the largest European stock exchange with a 33% share of continuous trading volume, aided by periodic auctions, which accounted for a record 9.6% of continuous trading.

In the Asia-Pacific region, Cboe achieved strong net revenue growth in Australia and Japan due to increased market share and industry volumes. The Data Vantage segment saw an 8% increase in net revenue for the fourth quarter and 7% for the full year, driven by growth in market data, analytics, and indices. The company attributes record full-year results to new product development and global sales capabilities, with a notable U.S. product launch in 2024 that was successfully expanded to Europe and Australia in 2025. The company plans to focus on developing new products using its infrastructure, with net new annual contract value increasing by 33% in 2024. International sales were strong, with 40% coming from outside the U.S., and Cboe plans to invest in expanding its global sales and educational resources. The fourth quarter highlighted the strength of Cboe's entire ecosystem, including derivatives and cash and spot markets.

The paragraph discusses Cboe's financial performance and strategic focus for 2025. It highlights a strong start to the year, with index options at record levels, and a successful fourth quarter in 2024. Key financial results include a 2% increase in adjusted diluted earnings per share to $2.10, a 5% rise in net revenue to $524.5 million, and 3% growth in adjusted EBITDA to $332 million. Revenue growth was driven by the cash and spot markets and Data Vantage categories, with notable contributions from derivatives. Expenses increased by 7% due to higher travel, promotional, and technology support costs. The segment-specific drivers and metrics are detailed in the company's press release and slide deck appendix.

The options segment achieved record net revenue with a 3% year-over-year growth, driven by increased multi-listed options transaction fees and an 8% rise in volume. However, revenue per contract fell by 5%. North American equities saw a 10% increase in net revenue with transaction and clearing fees up by 28%. Non-transaction access and capacity fees grew by 14%. The Europe and APAC segment posted a 17% revenue increase due to stronger transaction and non-transaction revenues. Futures net revenue decreased by 7% owing to a decline in ADV. The FX segment recorded a 3% revenue growth through higher transaction and clearing fees. Meanwhile, Cboe’s Data Vantage business grew by 8% organically, with international sales contributing significantly. It anticipates further growth in 2025 as it reallocates technology resources to enhance data capabilities and expand its global market access via Cboe Global Cloud.

In the quarter, total adjusted operating expenses rose by 7%, reaching approximately $205 million, due to increased travel, promotional, and technology support service costs. The fourth quarter typically sees high travel and promotional expenses because of the annual risk management conference. Additional marketing expenses were incurred with the launch of index options on Robinhood's platform, though these expenses are expected to decrease sequentially. For 2025, the company anticipates Data Vantage organic net revenue growth in the mid to high-single digits and total organic net revenue growth in the mid-single digits, consistent with previous guidance. They are introducing a 2025 adjusted expense guidance range of $837 million to $852 million, reflecting growth of 4.8% to 6.7%. The guidance includes moderate growth in core expenses and investments to drive revenue, such as sales staff hires in APAC, enhancing their securities financing transaction offering in Europe, and ongoing marketing initiatives.

In 2024, Cboe achieved an 8% increase in net revenue and a 6% rise in adjusted expenses, leading to a 30 basis point expansion in the adjusted EBITDA margin. For 2025, Cboe aims to balance investment for growth with expense management, projecting $75 to $85 million in CapEx and $55 to $59 million in depreciation and amortization, with part of the investment earmarked for a Kansas City office move. The effective tax rate is expected to be 28.5% to 30.5%, while net interest expense is projected at $5 to $6 million for Q1 2025. Additionally, interest income exceeded expectations due to higher cash balances and new interest-earning accounts. Cboe also addresses other financial elements such as earnings on investments and other income for 2025.

The paragraph highlights Cboe's strategic and financial progress, noting that as they enter 2025, they are in a strong financial position with $880 million in adjusted cash and favorable debt terms. They've returned $454 million to shareholders through dividends and share repurchases in 2024, representing 50% of adjusted earnings. The company is focused on strategic capital allocation for long-term returns. Fred Tomczyk, who became CEO in September 2023, emphasizes his priorities of stabilizing the organization after the unexpected CEO departure, sharpening strategic focus, and improving capital allocation and leadership development.

The management team has remained stable and unified, with a strong focus on executing a refined strategy by leveraging their equity derivatives franchise. Over the past 18 months, the company has shifted its capital allocation strategy away from M&A to prioritize organic growth. Following two technology migrations, resources are now fully dedicated to business strategy, supporting organic growth and improved financial strategies. Moving into 2025, the company is financially well-positioned with a focus on leadership development and succession planning, bolstered by recent management changes. Leadership development, aided by a search firm, remains a key priority.

The paragraph discusses the CEO's succession planning process at Cboe. The CEO plans to continue serving until a successor is appointed and will assist with the transition, while also remaining on the Board as a Director. They are committed to ongoing strategic initiatives and long-term goals. The Q&A session starts with Ken Hill allowing one question per person to ensure everyone has a chance to participate. Patrick Moley of Piper Sandler asks the first question about a revenue guide adjustment in the Data Vantage (formerly D&A) sector, noting the projected mid to high-single digit growth is lower than the previous year's 7% to 10% guidance. Jill Griebenow acknowledges his question and indicates a response will follow.

The paragraph discusses a discussion between a participant and Dave Howson about the rollout of Index Options on the Robinhood platform. Dave mentions that the rollout has exceeded expectations in terms of speed and uptake, with Robinhood launching index options on both its mobile app and Legend platform faster than anticipated. The volumes generated from these offerings are considered largely additive. The strategy for engaging the retail space involves focusing on access, education, and product offerings.

The paragraph discusses the progress and future plans of an organization's educational and marketing strategies related to financial products, particularly index options like SPX, VIX, and XSP options. It highlights an increase in the use of complex strategies among customers, indicating proper use of the volatility toolkit. The products have gained traction among active traders, particularly through platforms like Robinhood. Going forward, the organization plans to enhance joint marketing and educational efforts with key retail brokers, focusing on both domestic and international growth by expanding their salesforce. With a significant number of funded accounts and room for increased options penetration, the outlook for 2025 is seen as favorable.

In the paragraph, Jeff Schmitt asks about AI initiatives that could help customers generate more revenue. Chris Isaacson responds, explaining that although there are no immediate revenue opportunities to announce, the company has established an AI center of excellence to enhance productivity and develop new products. They are actively using AI internally and working with sales and product teams to gain insights from customer interactions and their unified data platform. The company hopes these investments will eventually lead to new product introductions. Following this, Alex Kramm inquires about the company's capital allocation strategy, noting the absence of stock buybacks in the recent quarter and Fred's shifted perspective on mergers and acquisitions (M&A) since taking over. Jill Griebenow begins to explain the strategy around share repurchases, affirming it as a key aspect of their capital allocation approach.

The paragraph discusses the company's financial strategies and future plans, focusing on capital allocation, M&A activities, and changes in trading operations. Jill mentions a strong balance sheet and the company's decision to hold off on share repurchases due to succession planning, though it remains a future strategy. Fred Tomczyk emphasizes that their M&A activities must make strategic, financial sense, and align with trends for growth. Michael Cyprys from Morgan Stanley asks about the company's new initiative to extend U.S. equities trading to 24/5, inquiring about expected opportunities, potential volume impacts, and implementation challenges. Dave Howson acknowledges the question but doesn't elaborate within the provided text.

The paragraph discusses Cboe's ongoing operations and plans for expanding their trading hours for U.S. equities to meet global demand, particularly from the Asia-Pacific region. Currently, they operate 24/5 through their proprietary index complex and see significant early morning market share on the EDGX platform, which offers unique features for retail investors. The primary challenge in extending these hours is obtaining regulatory approval from the SEC and implementing necessary infrastructure changes related to the consolidated tape for trade publishing. They anticipate readiness by the end of the year or early next year. Additionally, there is growing international demand for U.S. equities data, supporting their global strategy. Chris Isaacson agrees with the points made.

The paragraph discusses the demand for extended trading hours in global markets, driven by customer requests for 24x5 trading availability. This demand is especially strong for US equities data outside the U.S. Currently, the focus is on achieving 24/5 trading, with plans to eventually extend to nearly 24-hour daily operations on the EDGX exchange, which already has extended hours. The transition to 24/7 trading requires significant infrastructure changes, such as establishing consolidated tapes and clearing facilities for weekends. The company is responsive to customer demand and has experience with extended trading hours in other markets, particularly during high-activity periods like geopolitical events. The paragraph concludes with a segue to the next question from Ashish Sabadra of RBC Capital Markets.

The paragraph discusses the pricing strategies and trends in the options market, focusing on multi-list and proprietary index options. Multi-list options pricing adjusts frequently to adapt to market conditions and optimize revenue, while index options pricing changes are less frequent and more targeted. Retail adoption of options, especially 0DTE trading in the SPX complex, has grown significantly and remains a key strategic focus, with an emphasis on education and global distribution to enhance retail access and participation.

The paragraph discusses Cboe's efforts to expand its team and expertise in the Asia Pacific region, particularly in the options market, to enhance its service to clients seeking interaction with major equity and liquidity pools like the SPX. The conversation shifts to a Q&A where Chris Isaacson explains Cboe's decision to rebrand its technology platform as Titanium. The rebranding aims to highlight the platform's strength, but there are no current plans to commercialize or sell the technology as a service to third parties, unlike some peers. Cboe intends to continue investing in the platform to support its various business lines globally.

Fred Tomczyk explains the reasoning behind the timing of a CEO succession plan. He highlights that his initial objectives upon taking the CEO role were to stabilize the organization, sharpen strategic focus, and work on leadership development and succession. Having achieved these goals, with a strong management team now focused on executing their strategy and a stable balance sheet, he and the Board feel it is the right time to proceed with the leadership transition. While not disclosing specific characteristics of the desired new CEO, Tomczyk notes the Board is clear on what they seek. He emphasizes that the decision is part of a plan to ensure long-term stability and that he has completed his objectives, marking a natural point to step back into a board role.

In the investor call excerpt, Anthony Corbin from Goldman Sachs, filling in for Alex Blostein, inquires about customer trends and growth potential for the SPX franchise, particularly regarding the contribution from Robinhood. Dave Howson responds by noting that Robinhood's rollout exceeded expectations and the volume is seen as largely additive to their business, highlighting the untapped potential among Robinhood's nearly 25 million funded accounts, where only around 4% currently trade options. He also emphasizes the strong start to the year for the SPX complex, driven by increased demand for hedging amid market volatility and uncertainties surrounding Fed expectations, inflation, fiscal policies, and tariff changes. January marked the second-highest month on record for SPX options, alongside a record for global training analysts in SPX.

The paragraph discusses an optimistic outlook for trading options and volatility management. It highlights increased customer engagement in managing risk with options trading available 24/5 and the use of a comprehensive volatility toolkit, including VIX and fixed options. January saw a notable 12% increase in average daily contracts compared to a record in 2024. Additionally, there is a nearly 11% growth in 0DTE trading in SPX between January 2024 and January 2025. The paragraph also mentions excitement about international flows, retail participation, and the expansion of access to options through options-based funds and ETFs. This comprehensive approach and growth in the market are expected to continue positively into 2025.

In the paragraph, Jill Griebenow clarifies that the guidance for the new segment, Data Vantage, remains consistent with previous projections for 2024, within the 7% to 10% growth range. She addresses below-the-line financial items, mentioning that more detailed information will be available in the upcoming Form 10-K in February. These items include minority investments and dividend income from these investments, with a noted decrease in income from minority investments, particularly from Trading Technologies via the 7RIDGE fund, as these investments mature. However, dividend income from other investments is increasing.

The paragraph is a conclusion to a call, where it is mentioned that more detailed information will be provided in February through a 10-K report. The call is then handed back to management for closing remarks, during which Ken Hill thanks the participants and wishes everyone a great 2025, noting that they will reconvene in April. The operator closes the call, inviting everyone to disconnect and have a great day.

This summary was generated with AI and may contain some inaccuracies.