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Moderator
Moderator
Ladies and gentlemen, thank you for standing by. Welcome everyone to the SIBO Global Markets first quarter earnings call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the one once again. Thank you. I would now like to hand the call over to Mr. Ken Hill, Vice President of Investor Relations and Treasurer. You may begin your conference.
Ken Hill
Vice President of Investor Relations and Treasurer
Good morning, and thank you for joining us for our first quarter earnings conference call. On the call today, Fred Thompson, our CEO, and Dave House, our global president, will discuss our performance for the quarter and provide an update on the strategic initiatives. Then, Jill Greveno, our chief financial officer, will provide an overview of our financial results for the quarter, as well as discuss our 2024 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our chief operating officer. I would like to point out that this presentation will include the use of slides. We will 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 will 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 performances and results may differ materially from what is expressed or implied in any forward-looking statements. 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 call. During this call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Fred.
Fred Thompson
CEO
Thanks, Ken, and good morning, everyone, and thanks for joining us today. I'm pleased to report on strong first quarter results for CBOE Global Markets. During the quarter, we grew net revenue 7% year over year to a record $502 million and adjusted diluted earnings per share by 13% to $2.15. These solid results were driven by strong volumes across our derivatives franchise, specifically our proprietary index option products, continued expansion of our data and access solutions business, and disciplined expense management. Our derivatives business delivered another strong quarter as organic net revenue increased 8% year over year. We saw strong volumes across our suite of S&P 500 index option products with first quarter ADV and the SPX contract increasing 17% year-over-year to 3.2 million contracts. We have also seen solid performance in our volatility product suite during the first quarter, with VIX futures and options volumes further accelerating in April. Given the secular and cyclical tailwinds in place, we are well positioned as investors continue to utilize options in their portfolio and trading strategies. Our data and access solutions business continued to perform well during the quarter, with organic net revenue increasing 8% year over year. We continued to see durability in this business as we leveraged our global network and ecosystem of data and access solutions to drive growth. Net revenue in our cash and spot markets business was stable during the quarter, as volume across global equity markets remained muted. Overall, it was a strong quarter for both transaction and non-transaction revenue growth to start the year. I continue to remain focused on three priorities that I believe will further strengthen CBOE and support our longer-term growth strategy. First, sharpening our strategic focus on areas where we see strategic growth opportunities for CBOE. the effective allocation of our capital, and third, developing talent and management succession. As part of our strategic review process, coupled with the lack of regulatory clarity in the digital space, last week we announced plans to refocus our digital asset business to leverage our core strengths in derivatives, technology, and product innovation while realizing operating efficiencies for both SIBO and our clients. We plan to transition and fully integrate our digital assets derivatives currently offered by Siebel Digital into our existing global derivatives, harnessing the power of our global derivatives franchise and global technology platform to help support and fuel growth of the exchange traded crypto derivatives market. We plan to migrate our cash settled Bitcoin and Ether futures contracts trading on CBOE's digital exchange to the CBOE futures exchange in the first half of 2025 pending regulatory review and certain corporate approvals. Additionally, we plan to wind down operations of the CBOE digital spot market, our digital asset trading platform, in the third quarter of 2024 subject to regulatory review. The lack of clarity on the US regulatory front for the cash spot business, combined with the lack of any timeline to provide that clarity, among other considerations, has given us cause to change our strategic direction in the digital business to focus on where we have regulatory clarity and leverage our core strengths of derivatives, technology, and product innovation. With these changes, we are reallocating resources to focus on where we see as the greatest opportunity for growth and profitability, which is the continued expansion of our global derivatives franchise. On the clearing side, we plan to align and unify our clearing operations globally and intend to maintain CBOE Clear Digital, which will continue to clear our Bitcoin and Ether futures. We believe these changes provide an opportunity to leverage our global derivatives platform enhance efficiencies, and sharpen our focus. Optimizing our business operations and product development across borders and asset classes enables us to better serve our diverse client base and sharpen our strategic focus. We continue to develop leadership in all functions across the company and optimize our organizational structure to support our global strategy. This realignment of our digital business into our derivatives and clearing business lines creates continued opportunities for development and growth within our senior leadership team. Finally, we continue to execute on a disciplined capital allocation strategy. The steps we are taking in our digital business illustrate our intent to allocate our resources and capital to the areas where we see the best returns for our firm. Also, as demonstrated during the first quarter, and through April, share repurchases remain an important component of our capital allocation framework, one we plan to continue to use opportunistically in the market. Overall, we remain committed to maintaining a flexible balance sheet while investing in organic growth initiatives, our technology capabilities, and operating efficiencies, thereby driving durable revenue expansion, optimized margins, and earnings growth for our stakeholders. We'll now turn the call over to Dave Housen to talk through how we are driving results within our strategy.
Dave House
Global President
Thanks, Fred. Starting with the strong results in the global derivatives category, despite the cyclical headwind of low volatility in Q1, with the VIX index averaging just 13.7, the lowest in over five years, SPX options volume remains strong. Average daily volume was up a robust 17% year-over-year to 3.2 million contracts, finishing just shy of the all-time high set in Q4 last year. In fact, January and February ranked as the second and third highest SPX volume months on record through the first quarter. We believe investors took advantage of the low levels of volatility to more cheaply hedge their portfolio, with SPX puts making up a higher share of the total volume. Hedging demand was particularly strong in our VIX options suite, with VIX core volume ADV up 4% quarter over quarter to over 500,000 contracts, as investors took advantage of the low levels of VIX to add cheap tail protection. The resilience of our index options volume in the face of cyclical headwinds speaks to the strength of the secular drivers of our business, which we outlined in detail on the last earnings call. We continue to lean into these and see further room for growth. For example, in January, we launched Tuesday-Thursday expirers for our Russell 2000 index options, completing the set of daily expirers for small cap stocks. While still in early days, Russell 2000 index options volumes hit a five-year high ADV of 79,000 contracts in February. and the share of zero DTE volume grew from 8.7% in Q4 to now 12%. Within our more established SBX product, volumes increased 17% year-over-year, and zero DTE options increased a robust 32% year-over-year and grew 3% from Q4 level to a new record of 1.54 million contracts. Zero DTE options has made up 48% of overall SPX activity in Q1, up two percentage points from last quarter. The rise of retail options trading is another secular trend we're excited to build on, with more platforms coming online for index options trading later this year, giving retail investors expanded access to our products. To that end, we're thrilled to see our margin relief plan approved by the SEC recently, which we believe will make it easier for investors to overwrite index options on ETFs that track the same index. This is expected to benefit not just our SPX-XSP options complex, but also our Russell 2000 and MSCI suite of index options as well. Overwriting funds have grown tremendously in popularity in recent years, with total AUM jumping more than sixfold since the pandemic to now over $130 billion. Anecdotally, we're also seeing more interest from the retail and RIA community in using these options to enhance their portfolio. We see this margin relief approval as an additional catalyst for wider adoption of options by the retail community. Even without a turn in the macro environment, we believe we're well positioned for the rest of the year as we continue to execute on our strategic initiatives. However, if we do get a shift in investor sentiment, As was the case in April, we expect to benefit as traders harness the full versatility of our S&P 500 volatility toolkit. For example, with the market sell-off in April, VIX options volumes surged to a six-year high, with daily volumes exceeding 2.6 million contracts on April 12th, on the back of escalating Middle East tensions. That's higher volume than we saw during the 2020 COVID crisis. despite the VIX index hitting a high of just 19 last month versus 82 in March of 2020. VIX options through April are on pace to report its second highest quarter on record at current levels. While Q1 was characterized by a consistent market rally amidst low volatility, Q2 is looking a lot more precarious amidst heightened geopolitical tensions and greater macro uncertainty. As investors grapple with resurgent inflation, rising rates, not to mention the U.S. election later this year, we believe the need to use options to dynamically manage positions, hedge exposures, and generate income only increases. And while trading metrics in North America remain strong during U.S. hours, volumes traded in U.S. products during non-U.S. hours continue to increase. During the first quarter, SPX global trading hours activity increased 41% as compared to the first quarter of 2023. And in April, we saw SPX GTH activity increased 73% versus Q2 2023 levels, and VIX GTH increased 69% over the same period. With GTH activity accounted for just 3% of April's SPX activity and less than 1% of VIX auctions activity, we continue to see an attractive path forward for non-US customers to increase access to the US markets. Looking at the business more globally, we hit some notable milestones on our European derivatives platform, SEDEX. Total index derivative volumes again hit record levels in March, besting the prior record by 26%. Positioning us for future growth, we broadened the list of single stock options traded on SEDEX to more than 300 companies across 14 European countries at the end of March. And on April 1st, we initiated and revamped our liquidity provider programs in the region. Client feedback has been promising, and we look forward to providing greater customer efficiencies through our pan-European approach to trading and clearing. DNA net revenues grew 8% compared to the first quarter of 2023, driven primarily by client expansion and additional unit sales of our expanding portfolio of access and data products. Speaking to the breadth of the DNA business, during the quarter, each region and every business line outside of digital saw net revenues increase. In fact, 43% of data growth in the first quarter came from outside of the Americas. We saw outside contributions from Australia, where DNA net revenue grew 19%, and Europe, where net revenue increased a strong 10% on a constant currency basis. We believe future growth will be fueled by strengthening our distribution capabilities through areas like cloud, further expanding our index capabilities, and providing greater access to our markets around the world. Taking a look at cash and spot businesses around the globe, first quarter results were solid. It's worth noting, though, our ability to expand our cash and spot reach benefits more than just our transaction revenues. The continued progress we make in these markets has the potential to add additional revenue streams in tangential areas around the globe. In North America, we saw U.S. on-exchange net capture rates rebound from December lows to finish in line with first quarter 2023 levels. Furthermore, Canadian market share improved by a full percentage point to 15.3% during the first quarter. And we remain on track with our final technology integration, the migration of our Canadian market to SIBO technology in early 2025, subject to regulatory review. Moving over to Europe during the first quarter, SIBO Europe was the region's largest exchange by value traded, a testament the strong breadth of our product offering in the region. As we look to expand our capabilities into related areas with untapped addressable markets, we remain on track for a third quarter launch of our securities financing transactions clearing services subject to regulatory review. SIBO's SFT business will clear stock lending activities for market participants. With the introduction of stricter capital requirements, we believe now is the right time to leverage our clearing capabilities to bring a solution to the market with the potential to meaningfully reduce risk-weighted assets for customers. We've secured the backing of nine key industry participants, spanning banks, clearing firms, asset managers, and custodians, and look forward to bringing this service to market in the months ahead. And finally, turning to Asia Pacific, we saw strong momentum in Australia and Japan. In Australia, SIBO continued its market share gains with total market share for the quarter finishing at 20.4%, up nearly two percentage points from the first quarter of 2023. In Japan, not only did market share reach 5% in the first quarter, a full percentage point higher than the 2023 average, but volumes grew a robust 72% as compared to year-ago levels. Those trends have continued in the second quarter, with SIBO Japan market share hitting a single-day high of 6.5% on the 23rd of April. With our APAC integrations behind us, we look forward to competing more aggressively in the market to expand our transaction and non-transaction revenues. Overall, SIBO remains incredibly well positioned to consistently grow revenue across the firm. This means not only leaning in on more established product areas like our index business, but allowing newer areas to leverage a robust infrastructure already in place. Earlier, Fred spoke to some of the key strategic impacts of our recently announced digital reorganization. I want to provide some additional context on how the move leverages our global derivatives and clearing capabilities. On the derivative side, the reorganization reinforces the integrated global view we take with not only our derivatives franchise, but all of our businesses at SIBO. By consolidating SIBO's futures products onto one market, SIBO's futures exchange, also known as CFE, pending a regulatory review and certain corporate approvals, we can leverage the totality of our derivatives capabilities to grow our businesses while creating efficiencies for market participants. Specifically, that means reducing complexity for clients by allowing them to connect to one global platform for all their U.S. futures trading needs. As part of CFE, newer products like digital asset futures can leverage tried and true CFE capabilities to accelerate the go-to-market timeline for products like auctions on futures and complex orders for digital products, expanding the toolkit of solutions available to clients. In addition, these products will be able to tap into a seasoned and global sales force, a resilient technology infrastructure, and a unified management team under the leadership of Cathy Clay, our Executive Vice President of Global Derivatives. On the clearing side, we are equally excited about the opportunities presented by unifying our clearing operations on a global basis. Vikesh Patel, currently President of CBOE Clear Europe, will also oversee U.S. clearing. SIBO Clear Europe will continue to operate as a pan-European central clearing counterparty for European equities and derivatives. Adding SIBO Clear Digital under the global clearing umbrella provides a cohesive clearing approach that spans equities and derivatives in Europe to Bitcoin and Ether futures in the US. The result is SIBO having greater control of its product development destiny from ideation through to clearing considerations. Across the firm, we continue to leverage our core strengths and find pockets of growth in our cash, data, and derivatives categories. The first quarter of 2024 was very strong, and we look forward to driving further growth in the quarters ahead. With that, I will turn the call over to Jill.
Jill Greveno
Chief Financial Officer
Thanks, Dave. As Fred and Dave highlighted, SIBO posted a strong first quarter with adjusted diluted earnings per share of 13% on a year-over-year basis, to a record $2.15. I will provide some high-level takeaways from the quarter before delving into an assessment of the segment results. Our first quarter net revenue increased 7% to finish at a record $502 million. The growth was again driven by the strength in our derivatives markets and data and access solutions businesses, with steady results from our cash and spot markets categories. Specifically, derivatives markets produced 8% year-over-year organic net revenue growth in the first quarter, as we saw sustained growth in our proprietary product franchise during the quarter. Data and access solutions net revenues also increased 8% on an organic basis during the quarter. We are pleased with the revenue trends and are confident in our ability to deliver on our 7 to 10% targeted net revenue growth in 2024. Cash and spot markets net revenues were roughly flat to a year ago levels on an organic basis, given stable results across our business segments. Adjusted operating expenses increased 4% to $193 million, with the year-over-year growth driven by higher compensation related expenses and technology support services during the quarter. An adjusted EBITDA of $337 million grew a solid 9% versus the first quarter of 2023. Importantly, given our strong revenue generation and diligent expense management, we made material progress in stabilizing our adjusted EBITDA margins during the first quarter. Our first quarter adjusted EBITDA margin expanded by 1.4% on a year-over-year basis and by nearly three percentage points sequentially to an attractive 67.2%. Turning to the key drivers by segment, Our press release and the appendix of our slide deck include information detailing the key metrics for our business segments, so I'll provide some highlights for each. The options segment delivered another robust quarter as net revenues grew 10%, led by higher index option transaction fees and growth in recurring non-transaction revenue. Total options ADV was up 1%, driven by a 14% increase in index options volume. Revenue per contract moved 12% higher, with index options representing a higher percentage of total options volume. And access and capacity fees were up 7%, while proprietary market data fees increased 15% versus first quarter of 23. North American equities net revenue decreased 1% on a year-over-year basis in the first quarter, reflecting lower industry market data and steady net transaction and clearing fees. In net transaction and clearing fees, a decrease in Canadian equities market volumes in net capture was partially offset by stronger U.S. off-exchange net capture rate of 24% versus first quarter 23, given positive mixed shifts seen during the quarter. On the non-transaction side, access and capacity fees increased 5% as compared to the first quarter of 23. The Europe and APAC segment reported a 10% year-over-year increase in net revenue, driven by 20% non-transaction revenue growth across market data fees, access and capacity fees, and other revenue. Transaction revenue in Australia and Japan benefited from another quarter of market share gains. The future segment net revenue decreased 2% in the quarter, primarily due to lower volumes. On the non-transaction side, access and capacity fees continued to perform well, of 8% versus the first quarter of last year, and market data revenues increased by 10%. And finally, net revenue in the FX segment decreased 1%, driven by a slightly lower net capture rate. Market share was 20.3% for the quarter, as compared to 19% in the first quarter of 23. Turning now to SIBO's data and access solutions business, net revenues were up a solid 8% on an organic basis in the first quarter. Net revenue growth continued to be driven by solid new subscription and unit growth, accounting for 57% of market data and access solutions revenue growth. We are pleased with the strong start to the year and believe the momentum across the suite of SIBO's businesses position us well to fuel our full year and medium term DNA revenue growth guidance of 7% to 10%. More specifically, we expect to see continued strength from demand for access across our global markets, particularly as we increase our presence in new geographies, proprietary data sales and options analytics, benefiting from the sustained growth across our derivatives complex. And finally, we anticipate a continued focus on our distribution capabilities, from market data to indices, adding to the enhanced distribution capabilities of CBOE Global Cloud. Turning to expenses, total adjusted operating expenses were approximately $193 million for the quarter, up 4% compared to last year. The increase was a product of higher compensation and benefits and technology support services, and partially offset by a decline in professional fees and outside services. As we look ahead on slide 16 to our 2024 guidance, we are lowering our full year 2024 adjusted operating expense guidance range to $795 to $805 million, from $798 to $808 million. The updated guidance reflects our first quarter results, some reduced cost expectations as a result of the digital realignment, as well as a slightly higher bonus accrual moving forward given our expectation to be at the higher end of our total organic net revenue guidance range for the full year. On digital specifically, I want to walk through a few of the expected one-time and annualized impacts of the announced realignment and revised digital strategy. CBOE expects a one-time estimated pre-tax charge of $39 million to $82 million, primarily related to the non-cash impairment of long-lived intangible assets, which is expected to be recorded in the second quarter of 2024. These charges are expected to be considered one-time and excluded from adjusted earnings. We do anticipate roughly $2 to $4 million of adjusted operating expense savings this year as we carefully wind down the spot digital asset trading platform in the third quarter of 2024, subject to regulatory review. Moving forward, we anticipate the closure will generate annualized savings of $11 to $15 million on an annualized adjusted operating expense basis. Overall, we believe the current expense guidance range gives us flexibility to invest in high return areas of our business. Looking at our full year guidance more broadly, we are anticipating organic total net revenue growth to finish at the higher end of our 5% to 7% expected range for 2024. We are also reaffirming our DNA organic net revenue growth range of 7% to 10% for 2024 in line with our medium term expectations. This quarter, we are breaking out our other income line into earnings and investments and other income. Importantly, though, the aggregate benefit we expect to realize for non-operating income is unchanged at $37 to $43 million in 2024. We anticipate $33 to $37 million from positive marks on our investments to help our earnings and investments line and $4 to $6 million in largely dividend income to flow through our other income line. Our full year guidance range for CapEx remains at $51 to $57 million for 2024 and depreciation and amortization is expected to be in the range of $43 to $47 million for the year. We continue to expect the effective tax rate on adjusted earnings under the current tax laws to come in at 28.5% to 30.5% for 2024. And finally, outside of our annual guidance, we expect net expense to be in the range of $9 to $10 million for the second quarter of 2024. On the capital front, we continue to maintain a flexible and attractive capital return policy for shareholders. In the first quarter, we returned a total of 58.5 million to shareholders in the form of a 55 cent per share quarterly dividend. In addition, we repurchased 89 million in shares during the first quarter. We have continued our repurchase activity in the month of April, adding an incremental 27 million in repurchases during the month. Moving forward, we will look to opportunistically repurchase shares given our continued healthy free cash flow generation. Turning to our balance sheet, first quarter leverage ratio declined to 1.1 times from 1.2 times in the prior quarter as a result of solid EBITDA generation. Overall, we remain comfortable with our debt profile in the balance sheet flexibility it affords, having locked in low, medium to longer term fixed rates, averaging below 3% on our outstanding debt. As always, we aspire to allocate capital and resources in the most value-enhancing ways, striking the right balance between investing in future revenue growth and optimizing our margins. We look forward to building on the solid year-to-date trends and delivering durable shareholder returns in 2024. Now I'd like to turn the call back over to Fred for some closing comments before we open it up to Q&A.
Fred Thompson
CEO
In closing, I would like to thank our team for the continued progress made throughout the first quarter. 2024 is also a strong start, and we believe we are well positioned for another strong year.
Ken Hill
Vice President of Investor Relations and Treasurer
At this point, we'd be happy to take questions. We ask you please limit your question to one per person to allow time to get to everyone. Feel free to get back in the queue, and if time permits, we'll take a second question.
Moderator
Moderator
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star followed by the one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Patrick Moley from Piper Standler. Please go ahead with your question.
Patrick Moley
Analyst at Piper Sandler
Yes, good morning. Thanks for taking the question. So you now expect organic total net revenue growth to be at the higher end of that 5% to 7% range. Revenues were up 6.5% in the first quarter. So it seems like the guide would imply there's an expectation that revenue growth is going to be as good or better than what we saw in the first quarter. But index option volumes did slow down. They've come back here a little bit in April. And you're facing some pretty tough comps for the rest of the year. So just can you speak to what gave you the confidence to point us? toward the higher end of that range? And then just adding on to that, if you could, what are you baking into that guidance in terms of index option volume growth for the remainder of the year? Thanks.
Jill Greveno
Chief Financial Officer
Sure, you bet. Thank you for the question, Patrick. So if you saw, obviously, first quarter, very strong net revenue results coming in 7% higher than first quarter 2023, really fueled by the derivatives market business, as well as DNA, very strong contribution there. So that, coupled with, again, the very strong April we saw, just, again, gave us confidence in guiding to the higher end of that 5% to 7% range. We'll obviously keep an eye on this and get another quarter of results under our belt and come back to the group in early August with refined projections, but feel good at the moment with that 5% to 7%, that higher end there.
Dave House
Global President
Just, Patrick, a little bit more. I'm sure we'll talk a bit more about it. and the complex continues to perform well through both of those. And then as we take that forward look through into the rest of the year, you can see a number of potential drivers, whether that be the geopolitical tensions, inflation, interest rates, and of course the U.S. election. So plenty of activity really in front of us there when we think about
Moderator
Moderator
All right, thanks. Thank you. Our next question comes online of Alex Cram from UBS. Please go ahead.
Alex Cram
Analyst at UBS
Yes, hello. Just a quick follow-up here, actually, on the outlook on the DNA side. I know you did 8% in the first quarter, but when I look forward, I think, if I look at last year, the comms are getting much tougher in the second quarter. I don't fully remember what happened there, but I think there was definitely a step-up. So, Just wondering in terms of your confidence level, given that that 7% to 10% is eerily just your medium-term guide. So given the visibility you should have in that business, just wondering how you feel about where you may check out in the 7% to 10% given the tough comps here starting in the second quarter.
Dave House
Global President
Yeah, Alex, thanks for the question. We remain confident in this 7% to 10% guide. In particular, as we had in the call notes there, the growth year-over-year in all asset classes in all regions that we saw throughout the quarter. Solid growth from 57% from new subscriptions and new units. And then also, encouragingly, 43% of their growth for the market data and access services was from outside of the Americas. That's a record growth percentage for us outside of the Americas. Continued strong engagement there with 79% of customers for the cloud from outside of the Americas as well. And so as we think through the rest of the year, and as you say, Q2 last year was elevated versus Q1 in terms of growth somewhat, but then continued throughout the year of last year. But when we think about this year, more data on net. We've got SIBO Australia with the re-platformed growth from SIBO Australia's DNA there. We've got more products to package and bundle from those 27 markets in different ways and be able to deliver them to our customers where they're at over the cloud. And then finally, it's an exciting year for SIBO as we've been able to turn attention towards technology enhancements in the core platform. And the access layer improvements that we're bringing to market this year and into next we think will represent incremental value that customers are willing to pay for and should also enhance our competitive position within those venues themselves, in particular in the U.S. options and equities landscape. So overall, confident with the 7% to 10% guide where we stand today, and of course we'll update you next quarter as well.
Alex Cram
Analyst at UBS
Sounds good. Thank you.
Moderator
Moderator
Thank you. Our next question comes from the line of Craig Seganzala of Bank of America. Please go ahead.
Craig Seganzala
Analyst at Bank of America
Hey, good morning, everyone. Hope you're doing well. My question is on zero DTS. Volumes are up a lot over the last year, but it looks like the mix is sort of stabilized in the 50% zone. So we wanted to get your updated thoughts on where the zero DTA DT mix may be heading over the next 12 months. Also, if the Robin Hood launch could move it significantly higher and what other factors you think are most sensitive to adoption.
Dave House
Global President
Great, thanks very much for the question there. You're right, 48% of SPX was zero DTE in Q1, and April was 50%. We see those variations as we go through the months, depending on what's actually happening in the environment there. When we think about the breakdown that we normally give you with retail to non-retail, where non-retail does include professional retail, we saw continued increase year over year, whereas now just under a third is retail and just over two-thirds is non-retail. That's versus around about 59% of non-retail in Q1 of last year. So what we see there is more funds, more strategies, more PMs coming to the marketplace, and more systematic strategies coming towards that shorter end of the curve. And as we think about it now, we're eclipsing second anniversary of of adding the Tuesday and Thursday expirations. And there's a tremendous amount of data now. And that data is used by institutional and systematic funds in order to be able to train models. And we're seeing some of the outcome of that in the complex as we go forward. And the interesting point as we grew 3% of zero DT versus Q4 it grew in a lower volatility environment in Q1. So as we look forward, we continue to see those shorter-term risk management strategies people are deploying are less sensitive to the broader macro trends.
Moderator
Moderator
Thank you. Thank you. Our next question comes from the line of Ben Budish of Barclays. Please go ahead.
Ben Budish
Analyst at Barclays
Hi. Good morning, and thanks for taking the question. I wanted to follow up on the outlook. You mentioned that there are some kind of volatility-related events coming up later in the year that could be drivers for the SPX complex. I also recall not too long ago you were talking about zero DTE as being a more recurring revenue stream, at least versus things like equities, which are sort of you trade once and can kind of sit in it because it's got a shorter time to expiration. You tend to enter into a new contract. So I guess what are your thoughts on sort of the recurring nature of the zero DTE complex? You know, how much growth are you sort of seeing from that sort of user or users that are becoming more regular users versus how much do you perhaps expect will come from a pickup in volatility or a normalization in VIX levels later in the year? Thank you.
Dave House
Global President
position or exposure or view that you've expressed in the market needs to be refreshed at the expiry of that option. And indeed, also, if you put on a spread in the market, you may need to manage that position as the regime or pricing or your view changes over time. So those two factors really do result in a much higher engagement rate from customers as they utilize options to manage risk, to generate income, to take views, And as I mentioned just now, we've seen a lot of funds and bank QISs deploying strategies that have a much shorter dated view, coming forward in the curve from, say, a two to six week strategy to a zero to a five or six day strategy that they can deploy and redeploy. So you can see there that timing of the frequency of deploying those strategies really creating a more durable engagement in the platforms. And then as you see volatility coming through, we've seen higher volume days, interestingly, on volume up days in recent months. And so we don't just require volatility with market sell-offs to get activity in the platform. And we've seen diverse views being expressed in this year as we've gone from Q1 throughout into Q2.
Fred Thompson
CEO
Just to add something to Dave's comments, I think the comment we made before that we do see option trading revenue much more recurring than equity trading revenue. And the reason is, as Dave said, because they expire, you have to re-put your position on. So to me, that applies to the whole option revenue stream, not just to zero BP.
Ben Budish
Analyst at Barclays
Appreciate that. Thank you very much.
Moderator
Moderator
Thank you. Our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.
Brian Bedell
Analyst at Deutsche Bank
Oh, great. Thanks. Good morning. Thanks for taking my question. Maybe just speaking of recurring revenue and back onto the data and access, just looking at slides 8 and 14 and the comments on a couple of the drivers for the 7% to 10%, and I think this would be for medium term also. But can you comment on one of the first ones there, the global access? What portion of your, say, data and access revenue or at least your customer base is asking for global access or really tying everything that you do globally together. I know, Dave, you talked about the portion that was coming from outside the U.S., but I know global access is a big initiative of yours. So can you talk about what portion of people are using that now and what you see as the opportunity going forward for that?
Dave House
Global President
Yeah, absolutely. The 43% growth rate from outside the area of America is certainly a good lead indicator as we see that grow quarter over quarter. The cloud is an example for us where we have customers around the world taking one data set, being drawn in by, for example, the access to the U.S. equity market data as, let's say, a CFD provider out in Australia or But once you're in, you've got the common platform, you've got the API access, you can then find a myriad of other data points that you can find useful to yourself and your user base. And we do see users taking one data item from the cloud and then expanding laterally across interest across those 27 markets. And then we think about access to the derivatives complex. We've seen some really good onboarding. this year from retail brokers out in the Asia Pacific region. So really encouraging there. In order to onboard for the platform, you need access to the data. And then when you get access to the platform, what we're seeing there is a really good beachhead for activity in the Southeast Asia Pacific region, bringing activity back into the U.S. core complex. So in summary there, we do see people taking data units from us on the cloud and then expanding laterally in that. And the benefits of having that for our customers as they don't have to deploy technology resources for multiple APIs and multiple datasets. They can easily take new datasets that interest them with a very low to no incremental technology effort to do that.
Brian Bedell
Analyst at Deutsche Bank
Got it. So it's a land and expand strategy whereby you get the customer and then you cross-sell multiple other datasets and analytics.
Dave House
Global President
Absolutely. And we certainly take a one-firm approach to our sales here at SIBO where we're training customers all of our salespeople globally on all of the data and assets that we have within SIBO. So if you're in Australia, you know to talk about the risk market and analytics options capability that we've got, that we can bring to the market, our index.
Chris Isaacson
Chief Operating Officer
We land and expand and get them raw equity data, and then we get them derivatives data, and they start trading in GTH on slide seven. You can see that we're having a really good pull through with the expanded access with GTH increased 41% year over year and 73% quarter to date. So really excited about that growth that starts with data that moves to transactions.
Brian Bedell
Analyst at Deutsche Bank
Great. Thank you so much.
Moderator
Moderator
Thank you. Our next question comes from the line of Owen Lau from Oppenheimer. Please go ahead.
Owen Lau
Analyst at Oppenheimer
Hi. Good morning, and thank you for taking my question. I actually have a broader question about SIBO. So over the past two years, SIBO has benefited from high growth of CODTE, and now we have identified many smaller incremental revenue and expense opportunities. You talk about land and expense strategy and doing more buybacks. It just felt like the profile has changed. So if you can help me out over the next two years, what should investors focus on to gauge the investment merit for SIBO? Thanks a lot.
Fred Thompson
CEO
Well, I think you're going to look at the same things that you've always looked at, which is our revenue growth. And we're clearly sending the message about our view on our derivatives franchise and the globalization of that. We continue to see lots of opportunities on the DNA side. And so those are the two growth platforms for Siebel. The equities markets, we continue to like that business. It has good margins, kicks off lots of free cash flow, but it's harder to grow than the other two franchises. So we're focused on growing all three, but mainly the top two. now more focused on delivering organic growth initiatives than on integrating acquisitions that we've been doing the last couple of years. And then, of course, not only the resources internally, but then it frees up capital. Our balance sheet is in very good shape now. We're kicking off lots of free cash flow so we can do return capital to our shareholders through dividends and buybacks. So while we had a nice lift from zero DTE, growth as we built this global footprint. I think we got a lot of, I want to call it land and expand. We got lots of opportunities to sell what we got in different markets around the world. We're doing quite well in the markets that we entered. Our market share, if you look at Japan, Australia, Canada, once they get on our technology, our market share seems to expand. We're feeling good about that. We have lots of things that we're looking forward to. Do we have another zero DTE up our sleeve? I'd like to think we do, but I'm not sure we do. But that franchise and the SPX complex, the way we look at it is it has high demand around the world, not just in the U.S. Capital liquidity continues to flow to the U.S., but a lot of times people that want to invest and trade in the U.S. are looking to the SPX complex.
Moderator
Moderator
Got it. Thanks a lot. Thank you. Our next question comes from the line of Michael Sipris from Morgan Stanley. Please go ahead.
Michael Sipris
Analyst at Morgan Stanley
Hey, good morning. Thanks for taking the question. Just wanted to circle back on the DNA revenue growth target, 7% to 10% as you look out over the next couple of years. Just curious where you see the biggest opportunity within there to drive growth ahead. Which product specifically do you think could be the biggest driver, contributor there? And is this new portion would be coming from new products versus from... products that you're going to drive greater penetration of the existing customer set versus new customers. Thank you.
Dave House
Global President
Certainly for us, the growth in the short term and the medium term continues to be, as Fred said, sell what we've got. We see a great runway for selling the data products that we have internationally in particular. And then the second and third sleeve of the DNA business outside of the data and access is the index business. It's a smaller portion of the overall, but it's throwing in a very good rate with our specialization in derivative strategy benchmarks and bringing those to the marketplace. We've got what we think in the risk market analytics sleeve, the world-class global options analytics capabilities, which we find greater adoption internationally for those there as well. And then when we think back to the core and the basics, the access to our market continues to be high in demand to push out new data there. And then when we think about new data products, it's really about packaging and bundling what we have. The great example from the zero DTE inception was the uptake of the open and closed data sets which shows positions opening and closing throughout the day in the SPX options contract. That was a particularly insightful pivot on the data which we were able to provide to customers from the existing activity in the franchise. And as the into its own. Of course, we'll be thinking about new technologies that we can deploy to help us generate those insights on a go-forward basis.
Chris Isaacson
Chief Operating Officer
Chris, I just might add here, as Dave mentioned, we're just very, very focused on increasing access and distribution of all of our data. The SIBO global cloud growth has been great, especially driven outside of the U.S., and we will be pushing to Now we can unlock this global network because all the platform migrations are done except for Canada, which is coming in March of next year. We'll be rolling out those access improvements first in the U.S. and then around the world. These are material upgrades in our technology platform, which speaks to the power of a global network and a global platform. We can build something once and then roll it out all over the world to the benefit of our customers.
Carl Voigt
Analyst at KBW
Great. Thank you.
Moderator
Moderator
Thank you. Our next question comes from the line of Alex Bloestein of Goldman Sachs. Please go ahead.
Alex Bloestein
Analyst at Goldman Sachs
Hey, good morning. Thank you for the question. Fred, one for you. I just want to get your mark to market on where we are in this sort of strategic review journey you guys have been on. After the decision on Ceiba Digital, are there other areas where you think you guys are looking to sort of pivot away from? And if so, what could that look like? And just one follow-up for Jill, the $11 to $15 million in annualized savings that you highlighted, is there a revenue offsetting impact as well, or are you really speaking to the operating income effect from these changes? Thanks.
Fred Thompson
CEO
Want to check the second one first?
Jill Greveno
Chief Financial Officer
You bet. So the $11 to $15 million in contemplated savings on an annualized basis is really the expense portion. So not expecting anything. Material from a revenue impact perspective in 2024, very consistent with what we messaged last week.
Fred Thompson
CEO
Okay. And then back to your first question, Alex. So I'd say in terms of the strategic review, we're in the heart of the process now. We've done all of our analysis of the trends we see in the markets around the world. and where we have strengths on a relative basis. And so we're now starting to really get down focus. Okay, so now that we know all that, we've taken an outside-in view of SIBO and the market. Okay, so what do we do now? So we're getting right into the heart of the discussion in the management team. But we still have to debate that out and conclude on areas where we want to focus our time and attention. And then we have to review it with the board, obviously. in October because there'll be some questions. And as I said in the last time, we'll probably be in a position to talk about it further later this year. I just want to remind everybody that this strategy review is all about finding which areas that we want to focus our resources on to drive revenue and earnings growth, which over the longer term drives shareholder value. That combined with a disciplined capital allocation strategy should deliver good value for our shareholders. As I said, in an exchange like ours, you have high margins, it's a capital-like business model, and it's all about how you allocate your resources, particularly technology, and capital to drive value for the shareholders over the longer term.
Moderator
Moderator
Great, thank you. Thank you. Our next question comes from the line of Carl Voigt of KBW. Please go ahead.
Carl Voigt
Analyst at KBW
Hi, good morning. Maybe I could just ask a question on CDEX. Sounds like you've realized record activity levels there in March, which is good to see. I guess, can you just elaborate whether you still have incentives in place there for trading? And I'm assuming it may still be a bit of a drag on group profitability while the business ramps and you try to gain further momentum there. I guess any color on when we should start to see revenues and profitability ramp for CDAP.
Dave House
Global President
Thanks very much, Kyle. You rightly point out the record month in March for index derivatives and Q1 being up 30% year over year. We did revamp the liquidity provider program starting in Q2 to really refine those and focus on the type of liquidity, the concentration that we are looking for. That, along with the extension of the number of single stock options coverage in Q1, we now cover over 90% of OIs. So what that gives is a full unit of offering now with single stock options and futures and options on our index products. We've got more market makers coming on board as we go through the rest of the year and we're eagerly anticipating the launch of a major global retail brokerage platform in the coming months. All that will then begin to form the core liquidity ecosystem that we'll be able to produce more sales and marketing efforts in conjunction with our customers, and talk to those retail brokers that are looking to expand internationally, as well as those funds that are looking to deploy capital into Europe. And so what we'll do throughout the rest of the year is monitor that as those volumes and that activity in the platform progresses. And as you speak to profitability and revenues and such, it's worth reflecting on pan-European equities exchange, which is profitable, the largest cash equity clearinghouse as well. So we've got scale. So the incremental investment here for us is relatively small and affords us the opportunity to be patient and continue to work with our customers to onboard to what is a brand new exchange, product set, and clearinghouse, which does take time. So it will be a journey. So we'll be continuing to review that as we go throughout this year and
Carl Voigt
Analyst at KBW
Great, thank you.
Moderator
Moderator
Thank you. Our next question comes from the line Patrick Moley of Piper Sandler. Please go ahead.
Patrick Moley
Analyst at Piper Sandler
Thanks for taking the follow-up. Just a modeling question on the buyback. I appreciate that it's, you know, you're being opportunistic, but it was rather large in the first quarter relative to what you've done recently. And it seems like it was pretty strong in April. So can you help us just kind of frame and understand the size and pace of that buyback from here? Anything you can give us would be great. Thanks.
Jill Greveno
Chief Financial Officer
You bet. So really in a very comfortable position from a balance sheet perspective, paid off the last of our floating rate debt in the fourth quarter of 2023, leverage ratio down to 1.1 times here at the end of the first quarter. So the first quarter, as we've historically mentioned, has typically been heavier in share repurchases. So again, the first quarter this year was heavy, and then also tacked on with that were some opportunistic share repurchases. So we generate a lot of free cash flow. We deploy the capital via various valves. So had a history of paying a quarterly dividend. In the past, we've increased that in the third quarter. We'll take a look at that again this year. And then Again, any time we sense perceived weakness in the share price, we'll get behind it and back it from a repurchase perspective, especially given the comfortable balance sheet perspective we're in right now. So that's why you're seeing an elevated level. We stand behind the stock. We have the free cash flow there to back it. We're also mindful of organic growth initiatives. We want to keep a bit of dry powder to invest in the business to drive that long-term growth. So it's really a balance between those areas.
Moderator
Moderator
Great. Thanks, Jill. Thank you. We have a follow-up question from Owen Lau of Oppenheimer. Please go ahead.
Owen Lau
Analyst at Oppenheimer
Yeah, thank you for taking my follow-up. On the digital side, could you please remind us on why you think CBO can be competitive on Bitcoin and Ether futures trading without the spot offering? And then what does this realignment mean to CBO's broader strategy on how to tackle the digital asset ecosystem longer term? Thanks a lot.
Dave House
Global President
I'm sorry, could you repeat The line broke a little.
Owen Lau
Analyst at Oppenheimer
Oh, sorry about that. So I was just asking, how does this realignment, the digital assets realignment, mean to C-Volt's broader strategy on how to tackle the whole digital assets ecosystem longer term?
Dave House
Global President
Great. Thanks for the clarification there. So what we looked at when we looked at the overall landscape here, We look to lean on our scaled infrastructure and existing global resources. What we think makes this move attractive for us is that we get to bring those crypto digital futures onto a single venue, a single venue with an existing broad distribution and customer base. It gets brought onto a single technology stack, which runs all of our global equities, futures, and options market, a familiar set of functionality which leapfrogs the functionality customers want. We also get to have a clearinghouse that clears these products and potential other new product innovations in the crypto derivative space, which then allows us to define our own destiny. It allows us to have autonomy around that product curation and that timeline to market. And then there's the global derivatives team, that scale and expertise around the world for derivatives, but also that scale and expertise around the world for clearing brought to bear in unison onto the digital asset space. So we think derivatives is where it's at for us. We think we're good at that. We've got the technology and the people to be able to give us an edge.
Fred Thompson
CEO
We also realized that we do not have regulatory clarity in the spot and cash spot market. And we do not see when we're going to have regulatory clarity. And so we went into all this, we wanted to build a trusted, liquid, efficient market. Everybody wants that. But if you don't have regulatory clarity, it's very hard to do that because you can't bring all the various participants into the market. So as Dave said, we've gone to where our strengths are, and we've gone to where we have regulatory clarity, and basically we see that as the best opportunity for us looking forward.
Moderator
Moderator
Thanks a lot. Thank you. Our final follow-up question comes from Michael Cypress of Morgan Stanley. Please go ahead.
Michael Sipris
Analyst at Morgan Stanley
Great. Thanks for taking the follow-up. Just wanted to ask about credit index products. I understand you have a few that you're launching. I hope you could update us on that. And more broadly, if you could speak to the opportunity set within credit index products and new partnership opportunities that can make sense over time. Just how are you thinking about that, particularly as credit markets continue to electronify with new investor types entering the marketplace? What's your vision for SIBO and credit?
Dave House
Global President
So for us today, we have two IBOX futures contracts, and we have options on those futures contracts as well available to customers. For us, having a futures product is particularly useful for those fixed income funds who can't trade securities, and so the ETFs are locked off to them. So having the ability to manage and hedge exposure is particularly useful there, but also for international customers to get that access to an aligned future which aligns deeply, which tracks very closely to the two key benchmarks here, the LQD and HYG ETS of the underlying to allow access and exposure there to manage those exposures is particularly useful. The international aspect also comes into play as a future to be able to access that from international participants as well. So for us it's the first toe into credit as we go through, but that alignment core underlying exposure is the key differentiator for SIBO's credit offering because it does align to the HYG and LQD products very, very closely and allows tighter exposure there.
Moderator
Moderator
Great. Thank you. Thank you. There are no further questions at this time. I will now turn the call back over to the SIBO Global Markets team for closing remarks.
Fred Thompson
CEO
Okay, well, thanks, everyone. Thanks for your questions today, and thanks for calling in. We're off to a great start to 2024, and we look to continue the momentum for the rest of the year.
Moderator
Moderator
Thank you. This concludes today's conference call. We thank you for participating, and you may now disconnect.
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