CBOE Holdings Q3 Profit Down 10%, But Beats View

(RTTNews) - CBOE Holdings, Inc. (CBOE), the largest U.S. options exchange operator, on Friday reported a 10 percent decline in profit for the third quarter as higher revenues were more than offset by a tax benefit in the prior-year period. However, adjusted earnings per share beat analysts expectations, while revenues came in slightly below expectations.

Edward Tilly, CEO of CBOE Holdings said, "CBOE Holdings delivered a strong third quarter, primarily driven by trading volume increases in our SPX options complex and VIX Index options and futures. CBOE's average daily options volume for the quarter rose five percent over a year ago despite flat trading volume for the U.S. options industry as a whole."

The Chicago, Illinois-based company, the parent of the Chicago Board Options Exchange, said its net income allocated to common shareholders for the third quarter was $41 million or $0.47 per share, down from $45.2 million or $0.52 per share in the prior-year quarter. The prior-year quarter's results include the recognition of a tax benefit relating to prior years of $7.57 million or $0.09 per share.

On an adjusted basis, net income allocated to common stockholders for the latest quarter was $41 million or $0.47 per share, compared to $37.7 million or $0.43 per share in the same period last year.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.45 per share for the quarter. Analysts' estimates typically exclude special items.

Operating revenue for the quarter grew 7 percent to $136.74 million from $128.32 million in the same quarter last year. Analysts had a consensus revenue estimate of $136.80 million for the quarter.

The increase represents higher revenue of $6.4 million in transaction fees, $3.2 million in regulatory fees, and $1.4 million in exchange services and other fees, offset somewhat by a decrease of $2.2 million in other revenue.

Operating margin for the quarter increased 260 basis points to 50.0 percent.

Transaction fees for the quarter increased 7 percent to $92.95 million on higher trading volume, partially offset by a decline in the average revenue per contract.

Total trading volume for the quarter rose 8 percent to 295.4 million contracts and average daily volume increased 6 percent to 4.62 million contracts.

However, average revenue per contract or RPC declined 1 percent from the prior-year period to $0.315. The decrease in RPC primarily resulted from higher volume-based incentives for certain multiply-listed options, under the company's VIP program.

Looking ahead to fiscal 2013, CBOE forecasts core operating expenses in a range of $189 million to $194 million. The company expects continuing stock-based compensation expense included in core expenses to be about $18.0 million for the full year.

Further, the company projects annual capital expenditures in a range of $33 million to $36 million for the year, down from the previous guidance range of $35 million to $40 million.

CBOE closed Thursday's regular trading session at $48.43, down $0.96 on a volume of 0.76 million shares. In Friday's pre-market, the stock is adding $0.12 or 0.25 percent to $48.55.