Cboe Global Markets, Inc.

Good morning, everyone, and welcome to the CBO Global Markets Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your telephone keypad. Please note, this event is being recorded. And now I would like to turn the conference over to Ken Hill, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us for our Second Quarter Earnings Conference Call. On the call today, Ed Tilley, our Chairman and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then, Brian Scheller, Executive Vice President, CFO, and Treasurer, will provide an overview of financial results for the quarter, as well as an update on our 2022 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Iveson, our Chief Operating Officer, Dave Housen, our President, and our Chief Strategy Officer, John Dieters. I'd like to point out that this presentation will include the use of slides. We'll 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. During our remarks, we'll make some forward-looking statements which represent 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 a forward-looking statement. 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. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings material. Now, I'd like to turn the call over to Ed.

Thanks, Ken. Good morning and thanks for joining us today. Before I begin, I'm pleased to officially welcome Dave Housen to the U.S. He relocated to Chicago last week from London and is overseeing Cibo's business lines globally in his new role as president. We're excited to have him here today. I'm pleased to report on another strong quarter at Cibo Global Markets. During the quarter, we achieved record-setting revenue results, growing net revenue 21% year-over-year to a record $425 million, and adjusted diluted EPS grew 21% to $1.67. Our solid second quarter results were driven by the continued diversification of our business as we continue to integrate recent acquisitions with strong volume in our proprietary index products, increased trading activity in our cash equities businesses, and continued growth across data and access solutions business. Our derivatives business had another excellent quarter driven by strong performance in our index options franchise, specifically SVX options, as well as a solid increase in our multi-listed options business. Record monthly activity in the SVX complex helped drive a 66% increase in average daily volume for the quarter, while VIX futures were up 7% and VIX options remained flat. Multi-listed options trading ADV increased 12% year over year. Our cash and spot markets business performed remarkably well during the second quarter, with net revenue increasing 7%, including 3% organic net revenue growth year over year. These results were driven by exceptionally strong performance in our European equities segment, where average daily notional value traded was up 49% year over year. Additionally, SIBO European equities market share increased nearly 6% points year-over-year to 23.2%. Similar trends we saw last quarter, these results reflect not just a favorable market backdrop, but the implementation of an analytics-driven campaign by our sales team to help clients achieve better results on SIBO Europe than is achievable on other venues. Our data and access solutions business remains strong, with the integration of our recent acquisitions continuing to fuel the durability of this business. Year-over-year net revenue increased 20%, with 14% organic net revenue growth. We continue to remain focused on executing on the significant opportunities we see in three core areas of our business. Data and access solutions, derivatives, and SIBO digital. During the quarter, we made solid progress advancing each of these priorities, including closing the acquisition of ARISX on May 2nd. While the digital asset market environment has changed dramatically since we closed ARISX transaction, which resulted in the accounting adjustment that Brian will discuss in more detail, our strategy has not changed. We remain excited by the compelling strategic opportunity for SIBO in the digital asset space. We believe the long-term opportunity within the digital asset space will continue to evolve. Now, more than ever, market participants want a trusted, transparent, regulated market for digital assets, which is foundational to our strategy for this asset class. We are continuing to work closely with our partner group and expect to announce equity partners soon as we shape and define the future of SIBO Digital and the broader industry. Turning now to derivatives. where our SBX franchise continued to flourish as we expanded across to customers to meet increased demand, both on and off the trading floor. With market uncertainty and heightened volatility continuing across the globe, market participants turned to SIBO's derivatives and volatility products to help manage risk. Many of our newer initiatives, like the extension of trading hours for SBX and VIX options to nearly 24 hours a day, five days a week, and the addition of Tuesday and Thursday expirations for SBX weekly options have outperformed our early expectations in 2022, further accelerating the strong growth across our core business. Since adding Tuesday and Thursday expirations for SBX weekly options this spring, our initial estimates indicate we've added an average of over 200,000 incremental SBX contracts per day, reinforcing the trend we have seen of customers embracing shorter duration trading strategies. The expansion of our SBX weeklies complex to include expiries every trading day has helped meet this customer demand. ADV and SBX contracts with zero days to expiration increased 120% since the start of 2021, with retail brokerage platforms accounting for over 80% of the volumes. Additionally, during global trading hours, Average daily volume in SPX options increased 189% year over year. VIX options increased 49%, and VIX futures volumes increased 19%. Global customers want access to tools to manage risk, and we continue to focus on expanding upon our core strength and finding new ways to deliver access to meet their needs. We continue to believe strongly in the durability of our data and access solutions business, going forward as we continue to integrate our recently acquired businesses and strive to further unlock value and revenue opportunities. Brian will expand on this later in the call, but we are updating our 2022 organic net revenue growth expectations for this business to a range of 10% to 13%, up from our prior guidance range of 8% to 11%. The record results during the quarter were driven by continued demand for access to our global exchange network, SIBO's front-end platforms, and proprietary market data. Since the first quarter of 2021, we have averaged 19% year-over-year growth, and as we continue to integrate and innovate, we believe there is more total addressable market to capture across trading, data, and products, and we are well-positioned to capitalize on these opportunities through our data and access solutions group. Three important areas of expansion we're excited about include distribution as a service, which leverages SIBO's expansive network to provide data streaming services for vendors and partners, bundle data, which allows us to package high-quality data from across markets to deliver consistent and cost-effective data solutions to customers, and SIBO's cloud strategy, which further extends CETO's data to new users and geographies, an important step towards broadening investor access to our proprietary content and market data globally. The last several years have been very exciting as we've evolved our business, broadened our geographic reach, and extended access to our unique set of products and services around the globe. Today, we are the only truly global market infrastructure provider operating markets, and delivering services around the world and around the clock every day of the week. Around the globe, we've continued to see strong performance in all geographies and asset classes. Starting with our global FX business, we saw strong buy-ins with average daily notional volume topping $39.6 billion during the second quarter, with market share of 17%. We also saw our full amount offering, which provides clients with a solution for a larger order risk transference with low market impact, reach a new record of $11.8 billion ADV in the second quarter. We were also very encouraged by our product diversification strategy. In particular, our higher margin NDF offering, where we saw a 200% year-over-year increase to $785 million ADV. With continued rising inflation interest rates, we continue to be bullish on the opportunities that exist for our FX business. Turning now to Europe, in addition to the strong results I noted earlier for our European equities business, SIBO Bids Europe became the number one block trading platform with a record 33% market share of the European block trading market. Additionally, EuroCCP, our European clearing business, saw steady growth this quarter. We also continue to make progress on our European derivatives initiative. And while early volume trends have been softer than we expected due to geopolitical events in Europe delaying customer onboarding timetables, we still believe strongly in the long-term strategy and the vision for this business. Moving to Asia Pacific, Shibu Japan market share increased to 3.5%, up from 2.5% one year ago, as the new liquidity provider program introduced earlier this year continued to attract volume. In Australia, market share grew to 17% from 16% year-over-year, and we are on track to migrate SIBO Australia to our proprietary technology in February 2023. Finally, in North America, we completed the acquisition of NEO last month, bolstering our market share in Canada and expanding our listings business globally. Our overall market share in Canada now tops 12.1%, including both NEO and MatchNow, and we are working on integration plans that will help enable us to maximize the opportunities we see for our global equities and listing businesses. Our geographic and asset class diversification, coupled with our unique product set, enables us to meet the needs of an increasingly diverse set of customers around the world. Our global scale gives us the unmatched ability to efficiently scale and expand our business in new ways. With the closing of the acquisitions of Arasax and Neo in the second quarter, the entire Civo team remains focused on extracting even greater value from the ecosystem we have created, integrating our platforms and positioning Civo for its next wave of growth in the quarters ahead. We've acquired nine companies in the last two years. and we remain laser-focused on the various stages of integration for each of these companies. Each of these companies has brought a unique offering to SIBO and helped us achieve a greater global breadth of services and products, as well as new distribution channels. As we stated before, we approach the integration of technology and teams holistically, avoiding silos while maximizing synergies, both revenue and cost. This approach creates workflow efficiencies for customers, harmonizing technology and access points, creating a better experience for them. As we continue to architect our business for the future, our strategy remains focused on delivering products and services that create short, medium, and long-term opportunities, helping to enable a cadence of consistent growth. We are excited to have announced acquisitions closed and integration efforts well underway, bringing strong momentum for our flywheel as we head into the second half of the year. With that, I'll turn it over to Brian.