cboe holdings, inc. third quarter earnings conference call...

CBOE Holdings, Inc.p. 1p. 1

CBOE Holdings, Inc. Third Quarter Earnings Conference CallNovember 3, 2011


Agenda

Strategic Review William BrodskyChairman and CEO

Financial Review Alan DeanExecutive Vice PresidentCFO and Treasurer

Questions and Answers William Brodsky

Alan Dean

Edward TillyPresident and Chief Operating Officer


► 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: legislative or regulatory changes; changes in law or government policy; increasing competition; loss of our exclusive licenses; decrease in trading volumes; an inability to introduce competitive new products and services; competitive pressures on our existing products, services and trading access fees; changes in price levels and volatility in the derivatives and equity markets; economic, political and market conditions; increases in our fixed costs and expenses; loss of existing customers; difficulty developing strategic relationships and attracting new customers; increased costs related to, or the loss of, intellectual property; rapid technological developments; increases in trading volume and order transaction traffic that we cannot accommodate; our ability to maintain our growth effectively; damage to our reputation and brand name; loss of market data revenue; detrimental changes to our fee structure; failure to effectively monitor and manage our risks; customer consolidation; and changes to the tax treatment for options trading.

► 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, 2010 and other filings made from time to time with the SEC.

Forward Looking Statements


Strategic Review

William Brodsky

Chairman and CEO

CBOE Holdings, Inc.p. 5

► Operating Revenues

• $143.6 million, up 35%

► Adjusted Operating Margin

• 52.2%, up 890 bps

• Highest ever

► Adjusted Net Income Allocated to Common Stockholders

• $44.7 Million, up 69%

► Adjusted Diluted EPS

• $0.50, up 92%

p. 5¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.”

Record Financial Results for 3Q11


CBOE Holdings Quarterly Options ADV (in millions)

5.42

3.71

4.55

5.29

4.23

5.04

4.40

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Options ADV Up 46% in 3Q11 vs 3Q10

Includes May 6 “Flash Crash”

CBOE Holdings, Inc.

Total Monthly Options Average Daily Volume

p. 7

Options Volume Trending Up YOY

(in millions)

Source: Company Data

May 6“Flash Crash”

CBOE Holdings, Inc.

Leading Across Markets – 3Q11

Total Industry Volume

Equity Options¹ ETF Options¹ Index Options

Excl. Dividend Trades CBOE

C2

PHLX

ISE

NYSE/Amex

NYSE/Arca

NOM

BOX

BATS

Source: Options Clearing Corporation and CBOE¹Excludes Dividend Trades

27.5%27.0%

p. 8

CBOE Holdings, Inc.

Consistently Leading the Market

27%

20%

12%13%

19%

p. 9

Source: Options Clearing Corporation and CBOE

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► VIX options increased 127% in 3Q11 versus 3Q10

► VIX futures increased 320% in 3Q11 versus 3Q10

VIX Trading Continues to Set New Highs

¹YTD through 10/31/11

¹

CBOE Holdings, Inc.

SPX Drives Strong Index Volume

SPX Most Actively Traded Cash Index OptionSPX 2011 Monthly ADV (in thousands)

SPX Trading Averaging 794,000 Contracts Per Day YTD

p. 12

CBOE Holdings, Inc.

SPXpm Successfully Launched Oct. 4

► Market makers on C2 doubled since launch of SPXpm

► Steady volume growth

► Activated paired orders and complex orders in mid-Oct.

► Increased participation guarantees for SPXpm orders

p. 13

CBOE Holdings, Inc.

Actively Raising Awareness

Ads present differences between SPXpm and other S&P 500 contracts

p.14

CBOE Holdings, Inc.

Expect SPXpm to be embraced by a diverse group of c ustomers

► Liquidity providers currently trading SPX

► Active retail investors and traders seeking larger notional value contract

► OTC users seeking exchange-traded alternative

A Product Already in Demand

p. 15

CBOE Holdings, Inc.

Complements the Trading of SPX

SPX on CBOE and SPXpm on C2 = Two Deep Pools of Liquidity

p.16

CBOE Holdings, Inc.

C2 Achieving Steady Growth

► Averaged 255,000 contracts per day in 3Q11, up 34 percent from 2Q11

► Adjusted market model on Nov. 1 to maximize market depth and liquidity

• Implemented new maker-taker fee Nov.1 – highest maker credit

• Modified the matching algorithm to pro-rata, with not priority or entitlements

p. 17

CBOE Holdings, Inc.

Regulatory Environment Update

► SEC remains focused on writing rules for Dodd-Frank

► Expect U.S. regulatory reform will eventually result in most OTC-types of trades being traded on exchanges and/or centrally cleared

► Well positioned to benefit from OTC-type opportunities

p.18


2011 Initiatives

► CBOE’s unique focus on options and volatility products leaves us well-positioned to take advantage of long-term secular growth trends

► Key Priorities:

• Drive investor awareness of the benefits of SPXpm

• Expand product offerings, including VIX product line

• Build on success of C2 platform

• Position CBOE to benefit from regulatory reform

► Strong operating cash flow and debt-free balance sheet provide us financial flexibility

• Invest in innovation• Reward stockholders

p. 19


Financial Review

Alan Dean

Executive Vice President CFO and Treasurer

CBOE Holdings, Inc.p. 21p. 21p. 21

Record Third Quarter Financial Results¹

3Q11 3Q10 $ Change % Change

(in millions, except RPC and EPS)

Total Operating Revenues $ 143.6 $ 106.0 $ 37.6 35%

Total Adjusted Operating Expenses 68.6 60.1 8.5 14%

Adjusted Operating Income 75.0 45.9 29.1 63%

Adjusted Operating Margin Percentage 52.2% 43.3% N/A 890 bps

Adjusted Income Before Income Taxes 74.6 45.7 28.9 63%

Adjusted Net Income 45.6 27.0 18.6 69%

Adjusted Net Income Allocated to Common Stockholder s 44.7 26.4 18.3 69%

Adjusted Diluted EPS $0.50 $0.26 $0.24 92%

Total Contracts Per Day 5.48 3.73 N/A 47%

Rate Per Contract (RPC) $0.313 $0.306 $0.007 2%¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.”


Key Drivers:

► Transaction Fees

• 47% increase in trading volume

• 2% increase in RPC to $0.313

► Access Fees

• Reflects implementation of sliding fee scale for market maker trading permits

► Regulatory Fees

• Higher trading volume and rate increases versus last year

Operating Revenues up 35 percent

Operating Revenues (in millions) 3Q11 3Q10 $ CHG % CHG

Transaction fees $ 109.8 $ 72.9 $ 36.9 51%

Access fees 16.9 18.5 (1.6) -9%

Exchange services and other fees 4.5 3.9 0.6 15%

Market data fees 4.9 4.9 - 0%

Regulatory fees 5.3 3.4 1.9 56%

Other Revenue 2.2 2.4 (0.2) -8%

Total Operating Revenues $ 143.6 $ 106.0 $ 37.6 35%


0

1,000

2,000

3,000

4,000

5,000

6,000

$0.200

$0.220

$0.240

$0.260

$0.280

$0.300

$0.320

ADV (000s) 4,479 4,715 4,488 4,350 4,555 5,310 3,725 4,262 5,081 4,447 5,481

RPC ($) $0.292 $0.273 $0.266 $0.278 $0.300 $0.281 $0.306 $0.293 $0.285 $0.308 $0.313

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

p. 23

Overall Transaction Fee per Contract (RPC)Overall Transaction Fee per Contract (RPC)

Transaction Fees Driven by Volumeand Rate Per Contract

RPC up due to higher mix of index options and futures

Thousands RPC

RPC up due to higher mix of index options and futures and lower volume discounts


Options Trading Volume Mix

RPC Increased due to Mix Shift to Higher-Margin Index Options and Futures

CBOE Holdings, Inc.

► Implemented sliding fee scale for market maker trading permits on Jan. 1, 2011

► Trading permits holding steady

► Market makers continue to take advantage of sliding fee scale

p. 25p. 25

Trading Permits Holding Steady


Key Drivers:

► Royalty Fees

• Higher volume in licensed index options

►Employee Costs

• Increase in accrual for incentive awards due to higher earnings

► Depreciation and Amortization

• Reflects startup of C2

►Trading Volume Incentives

• Down due to changes in program criteria

Adjusted Operating Expenses (in millions) 3Q11 3Q10 $ CHG % CHG

Employee Costs $ 25.9 $ 23.7 $ 2.2 9%

Depreciation and Amortization 8.9 7.1 1.8 25%

Data Processing 4.3 4.3 - 0%

Outside Services 6.9 6.3 0.6 10%

Royalty Fees 14.0 9.2 4.8 52%

Trading Volume Incentives 3.5 4.6 (1.1) -24%

Travel and Promotional Expenses 2.4 2.7 (0.3) -11%

Facilities Costs 1.1 1.4 (0.3) -21%

Other Expenses 1.6 0.8 0.8 100%

Total Adjusted Operating Expenses $ 68.6 $ 60.1 $ 8.5 14%

Operating Expenses¹

¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.”


(in thousands) 3Q11 3Q10 $ CHG % CHG

Total Operating Expenses $ 68,638 $ 71,082 $ (2,444) -3%

Less:

Depreciation and amortization 8,897 7,099 1,798 25%

Accelerated stock-based compensation expense - 10,965 (10,965) NM

Volume-based expenses: -

Royalty fees 13,956 9,226 4,730 51%

Trading volume incentives 3,525 4,594 (1,069) -23%Core Operating Expenses (non-GAAP): $ 42,260 $ 39,198 $ 3,062 8%

Detail of Core Operating Expenses Excluding Continu ing Stock-Based Compensation (non-GAAP) Employee costs (excluding stock-based compensation expense) $ 25,945 $ 23,678 $ 2,267 10% Data processing 4,337 4,304 33 1% Outside services 6,881 6,293 588 9% Travel and promotional expenses 2,416 2,702 (286) -11% Facilities costs 1,081 1,440 (359) -25% Other expenses 1,600 781 819 105% Total $ 42,260 $ 39,198 $ 3,062 8%

3Q11 Core Operating Expenses

NM = not meaningful


(in millions) 3Q11 3Q10 $ CHG % CHG -

Royalty fees $14.0 $9.2 $4.8 52% Trading volume incentives 3.5 4.6 -1.1 -24% Total $17.5 $13.8 $3.7 27%

Volume-based expenses:

► Royalty fees increased due to higher trading volume in licensed index products

► Trading volume incentives decreased due to changes in incentive program, offsetting higher trading volume

• Equity options up 5% in 3Q11 versus 3Q10• ETF options up 105% in 3Q11 versus 3Q10

Volume-based Expenses

CBOE Holdings, Inc.

Quarterly Adjusted Operating Income and Margin¹($ in millions)

¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.”

Record Third Quarter Margin of 52.2%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Operating Income Margin

p. 29

CBOE Holdings, Inc.

3Q11 3Q10 Change YTD11 YTD10 Change

GAAP 44.6% 41.1% +350 bps 42.7% 40.7% +200 bps

Adjusted 38.9% 41.0% -210 bps 40.4% 40.7% -30 bps

► Increase in Illinois tax rate on 1/1/2011

► Additional tax liabilities of $4.2 million due to NY State advisory opinion extending taxing power over certain electronic transactions on out-of-state exchanges going back to 2007

► We are vigorously challenging NY’s interpretation

► Positive impact of reserve adjustments following the close of prior year audits

Revised 2011 GAAP Tax Rate Guidance to 42.2 to 42.8 percent

p. 30


Guidance Summary for Full Year 2011

► Access fees in a range of $65 to $68 million

• Excludes access fees for SPXpm on C2

► Core annual expenses in a range of $170 to $173 million

• Includes continuing stock-based compensation expense in a range of $12.2 to $12.7 million

► Accelerated stock-based compensation expense of $453,000 (excluded from adjusted earnings)

► Depreciation and amortization expense of $35 to $37 million

► Capital expenditures of $30 to $35 million

► Revised GAAP effective tax rate to a range of 42.2% to 42.8%


Strong Debt-Free Balance Sheet

1. Current assets minus current liabilities.2. Does not include new investments in affiliates or the disposition of interests in affiliates.

► No existing debt

($ in millions) Mar. 31, 2011 June 30, 2011 Sept. 30, 2011

Balance Sheet Data

Cash and cash equivalents $115.7 $106.5 $147.2

Total Assets $320.8 $319.4 $344.6

Total Liabilities $117.8 $ 92.1 $ 98.9

Total Stockholders’ Equity $203.0 $227.3 $245.7

Other Data

Working Capital¹ $ 93.5 $116.6 $142.2

Capital Expenditures² $ 7.1 $ 18.3 $ 23.5

CBOE Holdings, Inc.

Focused on Driving Increased Stockholder Value

Strong Cash Flow Generation

► YTD generated operating cash flow of $164.3 million

• Exceeds full-year 2010 operating cash flow of $134.9 million

• 3Q11 cash flow of $71.7 million versus $13.5 million for 3Q10

► Purchased 599,900 shares

• Average price of $24.82, total of $15 million

• $100 million share repurchase program authorized on August 2, 2011

► Paid out over $481 million since IPO

p. 33


Questions & Answers


Appendix Materials


Quarterly Core Operating Expenses¹

3Q 2011 % rev 2Q 2011 % rev 1Q 2011 % rev 4Q 2010 % rev 3Q 2010 % revTotal Operating Expenses $68,638 48% $63,838 53% $66,507 54% $65,537 62% $71,082 67%Less: Depreciation and Amortization 8,897 6% 8,996 8% 8,696 7% 8,190 8% 7,099 7% Accelerated stock-based compensation 0 - 113 - 340 - 2,004 2% 10,965 10% Volume-based Expense: Royalty Fees 13,956 10% 10,373 9% 11,146 9% 9,710 9% 9,226 9% Trading Volume Incentives 3,525 2% 2,515 2% 5,759 5% 5,665 5% 4,594 4% Non-Operating Items: Exercise Right Appeal Settlement - - - - - -Core Operating Expenses (non-GAAP)¹: $42,260 29% $41,841 35% $40,566 33% $39,968 38% $39,198 37%Less: Continuing stock-based compensation (2,976) -2% (3,106) -3% (3,073) -3% (3,233) -3% (3,963) -4%Core Operating Expenses excluding continuing stock-based compensation (non-GAAP)¹: $39,284 27% $38,735 32% $37,493 30% $36,735 35% $35,235 33%

Expense Detail: Employee Costs $22,969 16% $21,285 18% $22,323 18% $20,586 19% $19,715 19% Data Processing 4,337 3% 4,905 4% 4,428 4% 4,960 5% 4,304 4% Outside Services 6,881 5% 7,190 6% 6,579 5% 6,788 6% 6,293 6% Travel and Promotion Expenses 2,416 2% 2,368 2% 1,685 1% 1,672 2% 2,702 3% Facilities Costs 1,081 1% 1,400 1% 1,492 1% 1,662 2% 1,440 1% Other Expenses 1,600 1% 1,587 1% 986 1% 1,067 1% 781 1%

Number of Full Time Employees 591 588 582 581 591

¹Please see our disclaimer regarding Non-GAAP financial measures.

($ in thousands)


2011 Calculation of Weighted Average Shares

Shares Days

Outstanding Total Days Weighted Avg Shares

Days Outstanding

Total Days Weighted Avg

Unrestricted common stock 51,786,717 90 90 51,786,717 51,786,717 91 91 51,786,717 Class A-2 common stock (converts to unresticted 6/13/11) 38,297,994 90 90 38,297,994 38,297,994 91 91 38,297,994 Vesting of participating securities (restricted stock) on 5/17/11 22,641 44 91 10,947 Vesting of participating securities (restricted stock) on 6/15/11 413,175 15 91 68,106

Total weighted average shares - basic and diluted 90,084,711 90,084,711 90,520,527 90,163,764

Participating securities as of quarter end 2,195,621 90 90 2,195,621 2,193,521 91 91 2,193,521 Vesting of participating securities on 5/17/11 (22,641) 44 91 (10,947) Vesting of participating securities on 6/15/11 (542,550) 15 91 (89,431)

Weighted average shares including participating securities 92,280,332 92,148,857 92,256,906 Percentage of net income allocated to participating securities 2.379% 2.269%

Shares Days

Outstanding Total Days Weighted Avg Shares

Days Outstanding

Total Days Weighted Avg

Unrestricted common stock 90,084,711 92 92 90,084,711 90,084,711 273 273 90,084,711 Vesting of participating securities (restricted stock) on 5/17/11 22,641 92 92 22,641 22,641 136 273 11,279 Vesting of participating securities (restricted stock) on 6/15/11 413,175 92 92 413,175 413,175 107 273 161,940 Treasury share purchases (various dates in Aug and Sept.) (599,900) various 92 (186,452) (599,900) various 273 (62,833)

Total weighted average shares - basic and diluted 89,920,627 90,334,075 89,920,627 90,195,097

Participating securities as of 9/30/11 2,188,727 92 92 2,188,727 2,188,727 273 273 2,188,727 Vesting of participating securities (restricted stock) on 5/17/11 (22,641) 92 92 (22,641) (22,641) 136 273 (11,279) Vesting of participating securities (restricted stock) on 6/15/11 (542,550) 92 92 (542,550) (542,550) 107 273 (212,648) Anti-dilutive grants based on two-class method (1,623,536) 92 92 (1,623,536) (1,623,536) 273 273 (1,623,536)

Weighted average shares including participating securities 91,957,611 92,159,898 Percentage of net income allocated to participating securities 1.766% 2.132%

Net income allocated to common stockholders equals net income less the percentage of net income allocated to participating securities.

3Q 2011

2Q 2011 (vested qtr)1Q 2011 (pre-vesting)

9 mos ended September 30, 2011


CBOE Rolling 3-Month RPC

CBOE Rolling Three-Month Average Transaction Fee Pe r Contract2011 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 $0.159Indexes 0.592 0.601 0.604 0.615 0.618 0.627 0.624 0.606 0.605Exchange-traded funds 0.223 0.215 0.207 0.207 0.208 0.202 0.197 0.187 0.192 Total options average 0.276 0.272 0.275 0.282 0.289 0.295 0.303 0.300 0.301Futures 1.657 1.591 1.507 1.493 1.514 1.477 1.437 1.376 1.371 Total average transaction fee per contract $0.286 $0.282 $0.285 $0.293 $0.301 $0.308 $0.316 $0.313 $0.313

2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecEquities $0.177 $0.180 $0.184 $0.172 $0.163 $0.162 $0.170 $0.180 $0.182 $0.180 $0.179 $0.177Indexes 0.576 0.590 0.597 0.584 0.578 0.580 0.590 0.597 0.598 0.592 0.592 0.590Exchange-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 0.284Futures 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



CBOE Holdings, Inc.

CBOE Holdings, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures

For the Three and Nine Months Ended September 30, 2011

(in thousands, ex cept per share amounts)

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

Three months ended Septebmber 30, 2011 Nine months ended September 30, 2011

Items Impacting Results

GAAP to Non-GAAP Reconciliation

NOTE: May not foot due to rounding

p. 39






For the Three Months Ended March 31 and June 30, 2011

(in thousands, except per share amounts)

Items

Impacting

Results

Reported

(GAAP)

Accelerated

stock-based

compensation

Impairment

charge

After

Considering

I tems (non-

GAAP)

Reported

(GAAP)

Accelerated

stock-based

compensation

After

Considering

I tems (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


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 0.36$ 0.00$ 0.00$ 0.36$ 0.36$ 0.00$ 0.36$

Three months ended June 30, 2011Three months ended March 31, 2011






For the Three Months and Year Ended December 31, 2010 and 2009

(in thousands, ex cept per share amounts)

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


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, 2009


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


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) $0.01 1.03$


Three months ended September 30, 2010

Year ended December 31, 2010

Three months ended December 31, 2010



► 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 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 the non-GAAP financial 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 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.

Non-GAAP Information


CBOE Holdings, Inc.400 South LaSalle StreetChicago, IL 60605

Debbie KoopmanDirector, Investor [email protected]

cboe holdings, inc. third quarter earnings conference call...

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