First Quarter Earnings Conference Call May 1, 2012
Agenda Strategic Review William Brodsky Chairman and CEO Financial Review Alan Dean Executive Vice President CFO and Treasurer Questions and Answers William Brodsky Alan Dean Edward Tilly President and Chief Operating Officer Edward Provost Executive Vice President Chief Business Development Officer p. 2
Forward Looking Statements This presentation may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our exclusive licenses to list certain index options; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes affecting the options markets; increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; increasing price competition; our ability to maintain access fee revenues; economic, political and market conditions; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to accommodate increases in trading volume and order transaction traffic without failure or degradation of performance of our systems; our ability to protect our systems and communication networks from security risks, including cyber attacks; our ability to attract and retain skilled management and other personnel; our ability to maintain our growth effectively; our dependence on third party service providers; and the ability of our compliance and risk management methods to effectively monitor and manage our risks. More detailed information about factors that may affect our performance may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2011 and other filings made from time to time with the SEC. p. 3
Strategic Review William Brodsky Chairman and CEO p. 4
Solid Financial Results Slight decline in operating revenues to $121.4 million related to industry-wide decline in trading volume YOY Solid expense control enhanced operating margin Adjusted diluted EPS up 3% to $0.37 7th consecutive quarter of adjusted EPS growth YOY Strong gains in market share p. 5
Mission and Strategy Create value for stockholders by offering a diversified portfolio of risk management products and services which generate industry leading profit margins and growth rates while maintaining the highest standards of market regulation Develop New Products Optimize Revenue and Market Share in Commoditized Products Broaden Customer Base p. 6
SPXpm Gaining Traction Working closely with early adopters Expanded comprehensive marketing and educational program Customer feedback continues to be positive Open interest topped 100,000 contracts in March and April p. 7
Strong Growth in Volatility Trading Strong future growth potential VIX options up 4% 1Q12 YOY; up 36% in 1Q12 vs 4Q11 VIX futures up 57% 1Q12 YOY; up 74% in 1Q12 vs 4Q11 Growth fueled in part by ETPs tied to VIX index AUM up 82% to $5.1 billion from $2.8 billion in Dec. 2011 Adding new VIX benchmarks and tradable products ¹YTD through March 31, 2012 p. 8
CBOE Volatility Benchmark Indexes CBOE Equity Index Volatility Indexes CBOE Volatility Index (VIX) CBOE DJIA Volatility Index (VXD) CBOE Nasdaq-100 Volatility Index (VXN) CBOE S&P 100 Volatility Index (VXO) CBOE ETF VIX Indexes CBOE Gold ETF Volatility Index (GVZ)¹ CBOE Emerging Markets ETF Volatility Index (VXEEM)² CBOE Brazil ETF Volatility Index (VXEWZ)³ CBOE Crude Oil ETF Volatility Index (OVX) 4 CBOE Silver ETF Volatility Index (VXSLV) CBOE China ETF Volatility Index (VXFXI) CBOE Gold Miners ETF Volatility Index (VXGDX) CBOE Energy Sector ETF Volatility Index (VXXLE) CBOE EuroCurrency ETF Volatility Index (EVZ) CBOE VIX Indexes on Individual Equities Apple (VXAPL) Amazon (VXAZN) Goldman Sachs (VXGS) Google (VXGOG) IBM (VXIBM) Other CBOE Volatility-Related Indexes CBOE VIX of VIX Index (VVIX) CBOE Tail Hedge Strategy Index (VXTH) CBOE S&P 500 SKEW Index (SKEW) CBOE VIX Premium Strategy Index (VPD) CBOE Capped VIX Premium Strategy Index (VPN) CBOE S&P 500 Implied Correlation Indexes (KCJ, ICJ, JCJ) ¹Futures and options began trading in 2011 ²Futures and options began trading in January 2012 ³Futures began trading in February 2012; options launched in March 2012 4 Futures began trading March 26; options to begin trading April 10, 2012 p. 9
Optimizing Revenue and Market Share In Commoditized Products Achieved significant market share gains: Positive customer response to VIP Pays credits to firms for certain types and levels of business at CBOE Market share in multiply-listed options up 3.9 percentage points to 23.0% for March 2012 versus 19.1% in December 2011 Ensure optimal returns in proprietary products Revised liquidity provider sliding scale to exclude proprietary products 28.5% 23.0% Strong Initial Response to VIP p. 10
Expanding User Base Focus on customer segments with FLEX Index Options ADV greatest potential Users of OTC market Institutional investors Volatility traders OTC-type trades migrating to CBOE 24% increase in FLEX index products 1Q12 vs 1Q11 21% growth in FLEX index products in 2011 vs 2010 ¹YTD through March 31, 2012 p. 11
Providing Enhanced CFLEX Technology Introducing new CFLEX 2.0, customized trading technology Enables convenient access to FLEX options Features Automated Improvement Mechanism (AIM) Began gradual roll out; expect to be fully functional by end of June Expected to attract additional trading to the CBOE marketplace p. 12
Rollout of CBOE Command Rollout of new trade engine technology CFLEX 2.0 New API Servers move to New Jersey 4Q12 Systems development embedded in value proposition Systems designed in-house Provide flexibility, scalability Cost effective CBOE Command p. 13
Undisputed Leader in Options Innovation 1973 CBOE became first marketplace for trading options 1983 Introduced Index Options 1985 Options Institute established 1993 Devised methodology for the VIX Index, the market-leading measure of volatility 2003 Began operating Hybrid trading model 2006 Began trading VIX options 2007 Introduced CFLEX execution system 2011 Launched SPXpm 1997 1973 Selected by Dow Jones 2010 2012 1990 Introduced LEAPS options contracts, giving investors the ability to establish long-term positions, to U.S. market to introduce the first 2004 option on the DJIA Opened CBOE Futures Exchange (CFE) and launched VIX futures Launched C2, all electronic exchange Created Pulse, a multi-asset universal access electronic order system Launched CFLEX 2.0, execution system Launching CBOE Command, new trade engine technology Product & Technology Investment Focuses on Customer Needs & Product Synergies p. 14
Financial Review Alan Dean Executive Vice President CFO and Treasurer p. 15
1Q12 Financial Overview Adjusted Basis 1 (in millions, except EPS and RPC) 1Q12 1Q11 $ Chg. % Chg. Operating Revenues $121.4 $124.0 $ (2.6) -2% Adjusted Operating Expenses 63.8 66.1 2.3-3% Adjusted Operating Income $ 57.6 $ 57.9 $(0 (0.3) -1% Adjusted Operating Margin % 47.5% 46.7% 80 bps Adjusted Net Income Allocated to Common Stockholders $ 33.0 $ 32.5 $ 0.5 2% Adjusted Diluted EPS $ 0.37 $ 0.36 $ 0.01 3% Total Contracts per Day 4.88 5.08-4% Rate per Contract $0.280 $0.285 $0.005-2% ¹Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information. p. 16
Overview of Operating Revenues Operating Revenues (in millions) 1Q12 1Q11 $ CHG % CHG Transaction fees $ 84.8 $ 89.9 $ (5.1) -6% Key Drivers: Transaction Fees Access fees 16.0 17.6 (1.6) -9% Access Fees Exchange services and other fees 7.4 4.7 2.7 57% Market data fees 6.4 5.1 1.3 25% Regulatory fees 4.7 5.0 (0.3) -6% Other revenue 2.1 1.7 0.4 24% Total Operating Revenues $ 121.4 $ 124.0 $ (2.6) -2% 4% decrease in trading volume 2% decrease in RPC Reflects fee modifications Exchange Services and Other Fees Di Driven by fee changes Market Data OPRA fees up due to market share gains Higher fees from CBOE market data services p. 17
Highlights of Fee Changes CBOE Achieved Significant Gains in Market Share¹ Millions Implemented a new volume incentive program (VIP) Revised liquidity provider sliding scale to exclude proprietary and exclusive products Increased fees for certain exchange services Modified access fees Increased fees at CFE ¹Market share excludes dividend trades Made additional adjustments to fine tune and optimize revenues and expenses Drive incremental volume, leverage proprietary products, ensure competitive pricing p. 18
Transaction Fees Driven by Volume and Rate Per Contract Overall Transaction Fee per Contract (RPC) Thousands 4Q11 RPC up versus 4Q10 due to higher mix of index options and futures and lower volume discounts RPC decline reflects net impact of VIP, volume discounts and other fee changes RPC p. 19
Trading Volume Mix 1Q12 vs 1Q11 RPC Changes Primarily Reflect Impact of Fee Modifications p. 20
Strong Growth in Exchange Services and Market Data Revenue (in millions) 1Q12 1Q11 $ CHG % CHG Access fees $ 16.0 $ 17.6 $ (1.6) -9% Exchange services and other fees $ 7.4 $ 4.7 $ 2.7 57% Market data fees $ 6.4 $ 5.1 $ 1.3 25% Key Drivers: Access fees decline Reflects fee modifications Trading permits held steady More permit holders taking advantage of sliding scale pricing Full-year commitments Exchange services up 57% Driven by fee changes Market data fees up 25% OPRA fees up due to market share gains Higher fees from CBOE market data services p. 21
Adjusted Operating Expenses¹ Adjusted Operating Expenses (in millions) 1Q12 1Q11 $ CHG % CHG Employee Costs $ 25.1 $ 25.4 $ (0.3) -1% Depreciation and Amortization 8.3 8.7 (0.4) -5% Data Processing 4.9 4.4 0.5 11% Outside Services 7.2 6.6 0.6 9% Royalty Fees 11.2 11.1 0.1 1% Trading Volume Incentives 2.6 5.7 (3.1) -54% Travel and Promotional Expenses 2.2 1.7 0.5 29% Facilities Costs 1.3 1.5 (0.2) -13% Other Expenses 1.0 1.0 - - Total Adjusted Operating Expenses $ 63.8 $ 66.1 $ (2.3) -3% Key Drivers: Outside Services Higher expenses for contract programmers Travel and Promotional Expenses Advertising campaign for VIX products and SPXpm Data Processing Reflects migration of trading operations to Secaucus, NJ Trading Volume Incentives Down due to changes in program criteria ¹Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information. p. 22
1Q12 Core Operating Expenses up 3% (in thousands) 1Q12 1Q11 $ CHG % CHG Total Operating Expenses $ 63,977 $ 66,507 $ (2,530) -4% Less: Depreciation and amortization 8,320 8,696 (376) -4% Accelerated stock-based compensation expense 194 340 (146) NM Volume-based expenses: Royalty fees 11,191 11,146 45 - Trading volume incentives 2,649 5,759 (3,110) -54% Core Operating Expenses (non-gaap): $ 41,623 $ 40,566 $ 1,057 3% Detail of Core Operating Expenses (non-gaap) Employee costs $25,096 $25,396 -$300-1% Data processing 4899 4,899 4428 4,428 471 11% Outside services 7,170 6,579 591 9% Travel and promotional expenses 2,167 1,685 482 29% Facilities costs 1,303 1,492 (189) -13% Other expenses 988 986 2 - Total $ 41,623 $ 40,566 $ 1,057 3% NM = not meaningful p. 23
Volume-based Expenses Volume-based expenses: (in thousands) 1Q12 1Q11 $ CHG % CHG Royalty fees $ 11,191191 $ 11,146146 $ 45 0% Trading volume incentives 2,649 5,759 (3,110) -54% Total $ 13,840 $ 16,905 $ (3,065) -18% Royalty fees primarily determined by trading volume in licensed index products Trading volume incentives decline primarily due to changes in program criteria to qualify for quantity-based fee waivers p. 24
Seventh Consecutive Quarter of Year-Over-Year Margin Improvement $80.0 Quarterly Adjusted Operating Income and Margin¹ ($ in millions) 55.0% $70.0 $60.0 50.0% $50.0 45.0% $40.0 $30.0 40.0% $20.0 $10.0 35.0% $0.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 30.0% Operating Income Margin ¹Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information. p. 25
Strong Debt-Free Balance Sheet Our Business Model Generates Significant Cash Cash Flow Highlights $ in millions 1Q11 2Q11 3Q11 4Q11 1Q12 Net Cash Flow from Operating Activitiesities $ 78.2 $ 14.3 $ 71.1 $ 38.3 $ 63.3 Capital Expenditures (7.1) (11.2) (5.1) (5.7) (7.9) Dividend Payments (9.2) (9.2) (11.0) (10.9) (10.7) Purchase of Unrestricted Stock (3.1) (14.8) (33.4) (30.6) Net Increase (Decrease) in Cash and Cash Equivalents $ 61.9 $(9.1) $40.7 $(12.3) $ 13.7 Cash and Cash Equivalents at Quarter end $115.7 $106.5 $147.2 $134.9 $148.6 p. 26
2012 Full-Year Guidance ($ in millions) 2011 Actual 2012 Guidance Exchange services and other fees $18.2 $24 to $26 Access fees $68.7 $64 to $67 Core operating expenses¹ $166.2 $173 to $178² Tax rate 41.9% 41.2% to 41.7% Depreciation and amortization $34.1 $33 to $35 Capital expenditures $29.1 $30 to $35 (1) The company expects core expenses to be at the low end of the guidance range if volume in 2012 is flat to up 4 percent and at the high end of the range if volume growth is 5 percent or higher. (2) Continuing stock-based compensation expense, included in core expenses, is expected to be in the range of $12.2 to $12.7 million, included d in employee costs; 2011 core expenses included d continuing i stock based compensation of $12.2 2 million. p. 27
Ongoing Value Proposition Maintain the highest standards of market regulation Continue to drive margins and cash flow Capitalize on operating leverage inherent in the business Reinvest capital to drive growth and return excess cash to stockholders p. 28
Questions & Answers p. 29
Appendix Materials p. 30
Options ADV Up 13% 1Q12 Compared with 4Q11 CBOE Holdings Quarterly Options ADV (contracts in millions) p. 31
Quarterly Core Operating Expenses¹ ($ in thousands) 1Q 2012 % rev 4Q 2011 % rev 3Q 2011 % rev 2Q 2011 % rev 1Q 2011 % rev Total Operating Expenses $63,977 53% $67,529 56% $68,638 48% $63,838 53% $66,507 54% Less: Depreciation and Amortization 8,320 7% 7,506 6% 8,897 6% 8,996 8% 8,696 7% Accelerated stock-based compensation 194 - - - - - 113-340 - Severance expense pursuant to executive employment agreement - 3,709 3% - - - - - - Volume-based Expense: Royalty Fees 11,191 9% 12,346 10% 13,956 10% 10,373 9% 11,146 9% Trading Volume Incentives 2,649 2% 2,440 2% 3,525 2% 2,515 2% 5,759 5% Core Operating Expenses (non-gaap)¹: $41,623 35% $41,528 35% $42,260 29% $41,841 35% $40,566 33% Less: Continuing stock-based compensation (2,745) -2% (3,010) -3% (2,976) -2% (3,106) -3% (3,073) -3% Core Operating Expenses excluding continuing stockbased compensation (non-gaap)¹: $38,878 32% $38,518 32% $39,284 27% $38,735 32% $37,493 30% Expense Detail: Employee Costs $25,096 21% $24,560 20% $25,945 18% $24,391 20% $25,396 20% Data Processing 4,899 4% 4,263 4% 4,337 3% 4,905 4% 4,428 4% Outside Services 7,170 6% 6,657 6% 6,881 5% 7,190 6% 6,579 5% Travel and Promotion Expenses 2,167 2% 3,345 3% 2,416 2% 2,368 2% 1,685 1% Facilities Costs 1,303 1% 1,426 1% 1,081 1% 1,400 1% 1,492 1% Other Expenses 988 1% 1,277 1% 1,600 1% 1,587 1% 986 1% $41,623 $41,528 $42,260 260 $41,841 $40,566 Number of Full Time Employees 601 596 591 588 582 ¹Please see our disclaimer regarding Non-GAAP financial measures. p. 32
Calculation of Weighted Average Shares Shares Days Outstanding 1Q 2012 Year 2011 Total Days Total Days Weighted Avg Shares Outstanding Days Weighted Avg Unrestricted common stock 88,768,885 91 91 88,768,885 90,084,711 365 365 90,084,711 Vesting of participating securities (restricted stock) on 5/17/11 22,641 228 365 14,143 Vesting of participating securities (restricted stock) on 6/15/11 413,175 199 365 225,265 Vesting of participating securities (various dates) 84,358 various 365 7,405 Vesting of participating securitites (various dates) 72 66 91 52 Treasury share purchases (various dates) (1,149,000) various (623,110) (1,836,000) various (337,527) Total weighted average shares - basic and diluted 88,145,827 89,993,997 Participating securities for the period 1,474,323 1,474,323 1,860,371 1,860,371 Weighted average shares including participating securities 89,620,150 91,854,368 Percentage of net income allocated to participating securities 1.65% 2.03% Net income allocated to common stockholders equals net income less the percentage of net income allocated to participating securities. GAAPEPSi is calculated l dby diidi dividing net tincome allocated dto common stockholders by the total t weighted average shares outstanding t during the period dfor basic and ddiluted. d p. 33
CBOE Holdings Rolling 3-Month RPC 2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.151 $0.128 $0.110 Indexes 0.640 0.651 0.658 Exchange-traded funds 0.206 0.188 0.171 Total options average 0.297 0.275 0.261 Futures 1.474 1.610 1.697 Total average transaction fee per contract $0.308 $0.289 $0.280 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.170 $0.164 $0.160 $0.163 $0.168 $0.169 $0.171 $0.159 $0.159 $0.155 $0.163 $0.167 Indexes 0592 0.592 0601 0.601 0604 0.604 0615 0.615 0618 0.618 0627 0.627 0624 0.624 0606 0.606 0605 0.605 0605 0.605 0621 0.621 0631 0.631 Exchange-traded funds 0.223 0.215 0.207 0.207 0.208 0.202 0.197 0.187 0.192 0.194 0.205 0.212 Total options average 0.276 0.272 0.275 0.282 0.289 0.295 0.303 0.300 0.301 0.300 0.308 0.312 Futures 1.657 1.591 1.507 1.493 1.514 1.477 1.437 1.376 1.371 1.348 1.328 1.329 Total average transaction fee per contract $0.286 $0.282 $0.285 $0.293 $0.301 $0.308 $0.316 $0.313 $0.313 $0.311 $0.317 $0.321 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 0.284 Futures 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 2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 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 Total options average 0.287 0.287 0.292 0.282 0.273 0.272 0.272 0.270 0.264 0.266 0.273 0.274 Futures 1728 1.728 1696 1.696 1689 1.689 1657 1.657 1670 1.670 1738 1.738 1819 1.819 1927 1.927 1938 1.938 2077 2.077 2106 2.106 2186 2.186 Total average transaction fee per contract $0.288 $0.288 $0.292 $0.283 $0.274 $0.273 $0.273 $0.272 $0.266 $0.268 $0.277 $0.278 p. 34
GAAP to Non-GAAP Reconciliation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share amounts) Three months ended March 31, 2012 Items Impacting Results Reported (GAAP) Accelerated stockbased compensation¹ After Considering Items (non-gaap) Total Operating Revenues $ 121,392 $ 121,392 Total Operating Expenses 63,977 (194) 63,783 Operating Income 57,415 194 57,609 Operating Margin 47.3 % 47.5 % Total Other Income /(Expense) (453) (453) Income Before Income Taxes 56,962 194 57,156 Income Tax Provision 23,545 80 23,625 Effective Income tax rate 41.3 % 41.3 % Net Income $ 33,417 $ 114 $ 33,531 Net Income Allocated to Participating Securities (554) (2) (556) Net Income Allocated to Common Stockholders $ 32,863 $ 112 $ 32,975 Diluted Net Income per Share Allocated to Common Stockholders $ 0.37 $ 0.00 $ 0.37 NOTE: May not foot due to rounding p. 35
GAAP to Non-GAAP Reconciliation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share amounts) Three months ended December 31, 2011 Twelve months ended December 31, 2011 Items Impacting Results Items Impacting Results Reported (GAAP) Other Expense Income Tax Expense After Considering Items (non- GAAP) Reported (GAAP) Operating expenses Income tax expense Other expense After Considering Items (non- GAAP) Total Operating Revenues $ 120,208 $ 120,208 $ 508,144 $ 508,144 Total Operating Expenses 67,529 (3,709) 63,820 266,512 (4,162) 262,350 Operating Income 52,679 3,709 56,388 241,632 4,162 245,794 Operating Margin 43.8 % 46.9 % 47.6 % 48.4 % Total Other Income /(Expense) (343) (343) (1,548) 460 (1,088) Income Before Income Taxes 52,336 3,709 56,045 240,084 4,162 460 244,706 Income Tax Provision 20,529 1,478 322 22,329 100,678 1,677 (3,901) 185 98,639 Effective Income tax rate 39.2 % 0.6% 39.8 % 41.9 % (1.6)% 40.3 % Net Income $ 31,807 $ 2,231 $ (322) $ 33,716 $ 139,406 $ 2,485 $ 3,901 $ 275 $ 146,067 Net Income Allocated to Participating Securities (520) (37) 5 (552) (2,263) (40) (63) (6) (2,372) Net Income Allocated to Common Stockholders $ 31,287 $ 2,194 $ (317) $ 33,164 $ 137,143 $ 2,445 $ 3,838 $ 269 $ 143,695 Diluted Net Income per Share Allocated to Common Stockholders $ 0.35 $ 0.02 $ - $ 0.37 $ 1.52 $ 0.03 $ 0.04 $ - $ 1.60 NOTE: May not foot due to rounding p. 36
GAAP to Non-GAAP Reconciliation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, ex cept per share amounts) Three months ended Septebmber 30, 2011 Nine months ended September 30, 2011 Items Impacting Results Items Impacting Results Reported (GAAP) Income tax reserve adjustment After Considering Items (non- GAAP) Reported (GAAP) Income tax reserve adjustment Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Total Operating Revenues $143,604 $ 143,604 $387,935 $387,935 Total Operating Expenses 68,638 68,638 198,984 (453) 198,531 Operating Income 74,966 74,966 188,951 453 189,404 Operating Margin 52.2% 52.2% 48.7% 48.8% Total Other Income /(Expense) (401) (401) (1,204) 460 (744) Income Before Income Taxes 74,565 74,565 187,747 453 460 188,660 Income Tax Provision 33,238 (4,223) 29,015 80,148 (4,223) 188 191 76,304 Effective Income Tax Rate 44.6% 38.9% 42.7% 40.4% Net Income $41,327 $4,223 $ 45,550 $107,599 $4,223 $265 $269 $112,356 Net Income Allocated to Participating Securities (730) (75) (805) (2,294) (90) (6) (6) (2,396) Net Income Allocated to Common Stockholders $40,597 $4,148 $ 44,745 $105,305 $4,133 $259 $263 $109,960 Diluted Net Income per Share Allocated to Common Stockholders $0.45 $0.05 $ 0.50 $1.17 $0.05 $0.00 $0.00 $1.22 NOTE: May not foot due to rounding p. 37
GAAP to Non-GAAP Reconciliation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, ex cept per share amounts) Three months ended March 31, 2011 Three months ended June 30, 2011 Items Impacting Results Items Impacting Results Reported (GAAP) Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Reported (GAAP) Accelerated stock-based compensation After Considering Items (non- GAAP) Total Operating Revenues $ 124,042 $ 124,042 $ 120,290 $ 120,290 Total Operating Expenses 66,507 (340) 66,167 63,838 (113) 63,725 Operating Income 57,535 340 57,875 56,452 113 56,565 Operating Margin 46.4% 46.7% 46.9% 47.0% Total Other Income /(Expense) (643) 459 (184) (162) (162) Income Before Income Taxes 56,892 340 459 57,691 56,290 113 56,403 Income Tax Provision 24,021 143 194 24,358 22,889 46 22,935 Net Income $ 32,871 $ 197 $ 265 $ 33,333 $ 33,401 $ 67 $ 33,468 Net Income Allocated to Participating Securities (782) (5) (6) (793) (792) (2) (794) Net Income Allocated to Common Stockholders $ 32,089 $ 192 $ 259 $ 32,540 $ 32,609 $ 65 $ 32,674 Diluted Net Income per Share Allocated to Common Stockholders $ 036 0.36 $ 000 0.00 $ 000 0.00 $ 036 0.36 $ 036 0.36 $ 000 0.00 $ 036 0.36 NOTE: May not foot due to rounding p. 38
GAAP to Non-GAAP Reconciliation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share amounts) Three months ended September 30, 2010 Three months ended December 31, 2010 Items Impacting Results Items Impacting Results Reported (GAAP) Accelerated stock-based compensation After Considering Items (non- GAAP) Reported (GAAP) Recognition of prior-period revenue Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Total Operating Revenues $ 106,015 $ - $ 106,015 $ 117,391 $ (4,406) $ 112,985 Total Operating Expenses 71,082 (10,965) 60,117 65,537 (2,004) 63,533 Operating Income 34,933 10,965 45,898 51,854 (4,406) 2,004 49,452 Operating Margin 33.0% 43.3% 44.2% 43.8% Total Other Income /(Expense) (235) (235) (1,898) 1,620 (278) Income Before Income Taxes 34,698 10,965 45,663 49,956 (4,406) 2,004 1,620 49,174 Income Tax Provision 14,244 4,461 18,705 18,579 (1,638) 745 602 18,288 Net Income $ 20,454 $ 6,504 $ 26,958 $ 31,377 $ (2,768) $ 1,259 $ 1,018 $ 30,886 Net income allocated to Participating Securities $ (434) $ (144) $ (578) $ (690) $ 61 $ (28) $ (22) $ (679) Net Income Allocated to Common Stockholders $ 20,020 $ 6,360 $ 26,380 $ 30,687 $ (2,707) $ 1,231 $ 995 $ 30,206 Diluted Net Income Per Share Allocated to Common Stockholders $ 0.20 $ 0.06 $ 0.26 $ 0.31 $ (0.03) $ 0.01 $ 0.01 $ 0.31 Diluted Net Income Per Share for all Stockholders $ 0.20 $ 0.06 $ 0.26 $ 0.32 $ (0.03) $ 0.01 $ 0.01 $ 0.32 (in thousands, ex cept per share amounts) Year ended December 31, 2010 Year ended December 31, 2009 Items Impacting Results Items Impacting Results Reported (GAAP) Recognition of prior-period revenue Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Reported (GAAP) Recognition of deferred access fee revenue Exercise right appeal settlement After Considering Items (non- GAAP) Total Operating Revenues $ 437,104 $ (4,406) $ 432,698 $ 426,082 $ (24,086) $ 401,996 Total Operating Expenses 269,763 (12,968) 256,795 248,498 (2,086) 246,412 Operating Income 167,341 (4,406) 12,968 175,903 177,584 (24,086) 2,086 155,584 Operating Margin 38.3% 40.7% 41.7% 38.7% Total Other Income /(Expense) (2,718) 1,620 (1,098) (355) (355) Income Before Income Taxes 164,623 (4,406) 12,968 1,620 174,805 177,229 (24,086) 2,086 155,229 Income Tax Provision 65,227 (1,746) 5,138 642 69,261 70,778 (9,619) 833 61,992 Net Income $ 99,396 $ (2,660) $ 7,830 $ 978 $ 105,544 $ 106,451 $ (14,467) $ 1,253 $ 93,237 Net income allocated to Participating Securities $ (1,229) $ 33 $ (97) $ (12) $ (1,305) $ - $ - $ - $ - Net Income Allocated to Common Stockholders $ 98,167 $ (2,627) $ 7,733 $ 966 $ 104,239 $ 106,451 $ (14,467) $ 1,253 $ 93,237 Diluted Net Income Per Share Allocated to Common Stockholders $ 1.03 $ (0.03) $ 0.08 $ 0.01 $ 1.09 $ 1.17 ($0.16) $0.01 $ 1.03 Diluted Net Income Per Share for all Stockholders $ 1.04 $ (0.03) $ 0.08 $ 0.01 $ 1.10 $ 1.17 ($0.16) $0.01 $ 1.03 NOTE: May not foot due to rounding p. 39
Non-GAAP Information In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-gaap measures of operating performance. The non-gaap measures provided in this presentation include core operating expenses, adjusted operating revenue, adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted effective tax rate, adjusted net income, adjusted net income allocated to common stockholders and adjusted diluted earnings per share. Management believes that t the non-gaap financial i measures presented in this presentation, including adjusted net income and core operating expenses, provide useful and comparative information to assess trends in our core operations and a means to evaluate period-to-period comparisons. Non-GAAP financial measures disclosed by management, including adjusted diluted EPS, are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non- GAAP financial i measures used by other companies. Core operating expenses is the company s operating expenses after excluding (i) volume-based expenses, (ii) depreciation and amortization expense, (iii) accelerated stock-based compensation expense and (iv) other unusual or one-time expenses. p. 40
400 South LaSalle Street Chicago, IL 60605 Debbie Koopman Vice President, Investor Relations koopman@cboe com koopman@cboe.com 312-786-7136 p. 41