Q4 2019 Earnings Call
Please standby we're about to begin.
Good day and welcome to the see any group fourth quarter and full year 2019 earnings call.
Today's call is being recorded at this time I would like to turn the conference over to Mr. John P. Sure. Please go ahead Sir.
Good morning. Thank you all for joining yesterday stronger Safe Harbor language and I'll turn it over to Jerry and John for brief remarks fall by your question. Other members of our matching that she will also participate in the <unk> session.
Statements made on this call and any other reference documents our website at <unk> historical facts are forward looking statements.
Statements are not guarantees of future performance. They involve risks uncertainties assumptions that are difficult to predict.
Therefore, actual outcomes and results may differ materially for once expressed or implied.
Well detailed information about factors that may affect our performance can be found filings with the FCC, which are on our website.
Lastly on the final page of the earnings release, you will see a reconciliation between GAAP and non-GAAP measures.
I would like to turn the call over to Terry. Thank you. Thank you John Thank you all for joining US. This morning are common smoking rooms, so you're right to your questions. We released our executive summary, this morning, which provide his extensive details on 2019 and fourth quarter fourth Borderfree 83, and that slowly was 16.9 lane.
Hi trucks down from an extremely active few form 20-F 18 period.
We are very pleased with the work we did to integrate the next business during 2019, including back office migrations to support finance and HR systems, and the building up and integrated global sales to importantly, our global technology migration is on track for corporate check and for yes.
During 2019, we had 40 trading days over 25 nine contracts that ends up from 35 days of prior year.
We had annual volume records in interest rates metals and total options.
We continue to position. She every group for the long term by watching innovative new brothers schools and services to support customer needs and to create capital and operational efficiencies from market participants.
We drove significant growth from customers outside the United States during 2019.
During the year non U.S. trading volume grew 10% to almost 5 million contracts per day.
During Q4, non U.S. GDB expanded from 24% the total volume to 27%.
And the proportion increased year over year across all six product lines Geopark few one.
Our business from outside the United States is up double digits in all six asset classes.
We continued to deliver a successful new product rollouts during 2019.
Okay, where might grow even many any be treated approximately 106 million contract since its launch in may.
With diverse participation from across segments and originally constructed.
We gained traction in innovative products, including silver futures and CMB FX link.
What's just said daily trading record in January of this year.
So we're pleased to have wants to see many S&P, yes, Jeep futures as well as our new wanting to auctions products.
So far in Q1, our markets have been fairly active with total volume up more than 10%.
It's worth noting that activity.
Yeah, you're right for contract commodity contracts is particularly strong with metals off more than 50% energy up 20% and agricultural products up more than 10%.
Total open interest has increased from 113 billion at yearend two more than 128 million contracts I look forward to answering any questions you have before I do that I'll turn the call over to John to provide some additional comments John.
Thanks, Terry made a lot of progress during 2019, as we integrate index attracted new customers and created innovative solutions, we delivered $4.9 billion and revenue and manage our expenses very carefully which ultimately drove $6.80 an adjusted EPS.
These strong results led to an annual variable dividend at $2 to 50 cents per share and we recently announced a regular dividend of 85 cents per share at 13% increase from last year.
In the fourth quarter, we faced tough comparables to a very strong Q4 2018. Despite the headwinds we get you need to manage the business very well expenses were virtually flat with the previous quarter, we delivered $1.52 and adjusted yes.
One thing to note for the quarter as you know our business experiences mix shifts in product venue a membership class in December we experienced an unfavorable mix shift with a higher proportion of never trading at a lower proportion of privately negotiated trades in our rates business, which reduced its rolling three month RPC for the month of December Nonetheless.
The rates RBC was up sequentially for the quarter end up year over year.
Moving to 2020, we will continue to execute on our strategy integrate the businesses and migrate customers from the legacy vertex system to go back.
In terms of our guidance for this year I want to provide some background.
We started 2019 with initial adjusted expense guidance of $1.65 billion to $1.66 billion.
For the full year, we were $13 million below the low end of that range at 1.637 billion for 2020. We currently expect for your adjusted operating expenses, excluding license fees to be between 1.64 and $1.65 billion.
For capital expenditures, excluding onetime integration costs net of leasehold improvement allowances, we expect to be in the range of $180 million to $200 million.
By the end of 2019, we targeted $50 million in run rate expense synergies and at the end at yearend, we exceeded that target and achieved $58 million and run rate expense synergies plus another $6 million of subleasing revenue for totaling $64 million. This is not up the additional costs that we're carrying to run infrastructure.
In parallel as we prepare for the migration to claw back for Boca Tech need yet at this time, we expect to be at $110 million of annual run rate expense synergies by the end of 2020.
In terms of our tax rate last year, we got into an effective tax rate of between 24 and a half in 25 in half percent I mentioned in Q3 that the new U.S. tax legislation would have a positive impact going forward. As a result, we expect or 2020 adjusted effective tax rate to be between 23 and 24%.
Please refer to last page of our executive commentary for additional financial highlights in details.
With that short summary, we'd like to open up the coffee your questions based on the number of analysts covering US. Please limit yourself to one question and then feel free to jump back into the queue. Thank you.
Thank you if you would like to ask a question. Please press star followed by the digit one if you are using the speakerphone. Please make sure. Your mute function is turned off to allow you to signal to reach our equipment.
Once again star one and our first question today, we'll hear from rich Repetto with paper salmon.
Yeah. Good good morning, guys.
First I just want to shout out to Brian Dark I know nearly 40 years in the exchange based Oh, sorry to see him go each toward an exchange the job.
Huh.
So.
With that I guess my question is John just around the cost and the synergies and could you tell US we ended up and what you actually realized in 2019, and then I'm just trying to get a feel for what the underlying Brooks weighted.
You know that's the beauty synergies that that but you've got you know it looks like it's going to be.
Slightly up on a net basis, but what.
How does the synergies impact what do you realize so far what we realize next year.
Great. Thanks, Thanks rich.
I appreciate the question. So in terms of on in terms of our realized expense synergies realized about $35 million in 2019 in terms of synergies yeah like I mentioned in the prepared remarks, we exceeded our run rate synergy target and we had originally targeted 50 million Oh, we get $58 million.
Expenses plus an additional 6 million then I'll leasehold are on some of these revenues so about $64 million all in so really pleased with the outperformance in terms of law the integration into its and synergy realization. This is a a total company effort and what you did a an excellent job so in terms of.
In terms of next year, you know the way the way to think about it is you know if you take our our rely our expenses for this year ex you know excluding license fees of about 16 37, you add back in the realized synergies and you grow that expense base between too.
It happened, 3% that's about the.
The upward pressure that we get on our expenses.
Then you back out the run rate synergies that we had which is about 58 million. Then you back out what we think we're going to realized in 2020, and that's about $15 million in realized synergies in 2020 now it's less than what we achieved in 2000 from a realized perspective lesson.
We achieved in two.
2019, and that's because you know as you know, we're gonna be migrating customers onto glow bags in the fourth quarter.
So you know that's that's really kind of the target for US all that gets you basically flat. This year about 16 40 to 16 50. So that's kind of the way to think about it you know we're going to accelerate the synergies.
2020 as much as we can you were very comfortable with our target of 110, but he said we can actually accelerate the synergies we will help with the company is really focused on making sure that we have a good and seamless transition from the legacy broker tech platform to claw backs.
Congrats.
Thanks, I mean this thank you for Makena nice comments about all of our Dear friends Mr. character, who is here.
So I just see him go.
Thank you that helps John Thank you.
That's great.
Well move on well move on to Dan Fannon with Jefferies.
Hi, Thanks, good morning.
Can you talk about the next integration a little bit more and specifically the migration over to go back since Fourq you I think in the prepared statement you talked about some of the decline forms you've been holding maybe what you're hearing from clients right. As we think about that migration, what if any kind of all ticket volume might we might you yet.
[noise] Brian.
Sure. Thank you with respect to the integration I think I've alluded to the last call that we complete our apiay releases, which makes it possible for customers to begin my trading and the test environment.
We are pleased with the outreach to the clients today in terms of there.
Sign up for connectivity and for testing.
We've had a multiple forums, both domestically and internationally with our client base to get them situated and ready for for testing.
I think the rubber will really meet the road in the course of the next quarter in terms of the acceleration and making sure that we've got to clients and actively testing.
In in throughout Q2, we're excited about the capabilities and the functionality attributes I'm moving over to claw backs that feedback that we continue to hear from the client base is very positive in terms of the switchover.
So so that in conjunction with the talks that we're having the clients in cracker EBIAT says Wow.
You know the clients feel like we're doing a very methodical job in terms of our outreach in terms of the preparation in terms of the planning and casting I think I've mentioned that task, we have a fairly elaborate testing program in the context of ensuring that our clients have the ample time.
Two acquaint themselves with the functionality into platform switchover, but many of our clients by the way are very familiar with global.
Great. Thank you.
Thanks, Dan.
Let's move onto Brian the Dallas Deutsche Bank.
Great. Thank you want to drugs.
Right right on and good morning, you can talk about news and potential uses it depends upon RBC to do move up a little bit in 2020 here, maybe if John you can talk about the impact of the of the adverse member mix shift in rates on on fourth quarter and then any.
Plans pricing changes across the futures product suite in 2020.
And also if the market data I know last time I think you had its a price increase on the monthly fees into between 2018. So sometimes you do that every other year. So just seeing if there's anything plant.
For for 2020, and also just squeeze in just the non U.S. and that's been growing nicely any commentary on the potential impact.
And the shift.
Yes.
Yes.
Okay. Brian that was that was it was quite a number of of question. So I'll do my best to hit them. All so first off let let's talk about our RPC. So you know in the month in November we talked a little bit bought and Oh, I'm, sorry, we talk a little bit about in my prepared remarks, and you know.
So you'll basically what happened in a in the month of December Hot Rolling three month average for rates.
For the ARPC was actually down compared to the rolling three month average in November so really I understand why it went down you really need to look at the activity that was occurring in December which rolls into the calculation in September which rolls out of the calculation. So when you isolate those two months of activity in September.
We had a higher amount of a member trading activity plus a higher proportion of.
Privately negotiated trades and that really caused those are higher RPC training.
So that caused the RPC to actually decline a rolling three month November compared to rolling three month December and it's really it's changed change in a in mix.
Between September and December so that was that was what happened on the on the rate side in terms of 2020 and things are are impacting our could impact our our range a couple of things to point out.
Number one can take a look at our trading activity. So far this year I'm very pleased with our volume being up.
11% year to date and you know what's interesting when you look at the mix of trading you know, we see energy up 20%, We see act up 11%, we see a metals up 51% all of them and the commodities area, which have a higher RPC odds and then the financials.
I also see very good strong energy our equity trading has as well also when you take a look at how we're performing overseas Ami is up 25% with all product areas up double digits. So far this year and that I impacts of about 34% So no very.
Strong activity coming from international as you know international odd tends to have a higher RPC then U.S. So when you look at the mix you know of commodity strong commodities performance and strong international performance that should help in terms of the RPC.
Then you had a question around pricing.
You know in general you know we are always looking at our.
At our at our pricing schedules and you know we should we take a look at everything that hits a impacts our RPC. So we'll look at you know the face rate look at the market maker programs and we look at incentive plans and we do it very detailed product by product analysis, we've taken into consideration the market environment.
Total cost trade and other factors.
And with that we do and we do when we look at making any pricing adjustment, we do it with an eye towards not impacting volume. That's that's very critical in 2019, we didn't take any significant pricing actions and 2020, we did make some adjustments.
That impact the Rpcs and assuming similar trading activities in 2019.
The impact would be in the range of path adjustments range about wanting to have to 2% of our futures and options transaction fees and the majority of the changes began at the start of February was that was in response to your question on on the pricing in that market data, we've made some pricing adjustment.
Hi in non display data recently that went into effect and then.
You know I think I think that's kind of the the major major point on our market data. So I think that addressed all your questions.
Yes.
Great just maybe doing what's the impact to the market data price increases.
From a revenue perspective.
We didn't we didnt, we didnt provide a we didn't provide that on the market data.
Fair enough. Thank you so much.
Thanks, Brian.
Next we'll move to my carrier with Bank of America.
Good morning, Thanks for taking the question.
You see dramatic growth Alan.
You guys highlighted to strengthen Eightv and we've seen that you are coming from outside the U.S. and then even the new product I think you guys mentioned that over the past decade, contributing about 10% of 80 today.
So I guess just on the international front it looks like some of the products are contributing 25% today in somewhere in the Fortys, maybe where do you see that opportunity ahead, given either penetration potential or somebody initiatives. They have in place in similar on like the new product launches can you provide either you or some color or some context around maybe that piece of new launches.
Right, even the uptake that you're seeing over the past few years versus the past decade that drove that 10% contribution DDB even today.
Yeah, Mike sorry about the ordering on kind of around a little bit here I think there's a lot of expressing a lot of those to touch on it but I'm going to have Sean and touch a little bit as it relates to some of the launches that I referenced earlier, one being obviously so for is that a brand new launch when it's out there and that's growing so I think that is something that we can sort of conversation about.
And then obviously listed the yesterday futures, which are no.
So it's kind of hard to get.
A trajectory of how they're going to performance or too early stage and Sean I'll turn it to you on some of the new products that we can talk about the international growth.
Absolutely focused on both adjusting their existing products in order to make them more attractive to participants.
Actually relative filter products and the thing new innovative products that address unmet needs in the marketplace. So so far we're very excited about where we are there.
We're currently running over 40000 contracts today.
We have the equivalent of more than 1.2 trillion with open interest.
Obviously, so for a large and important initiative. In addition to the future inside that I just talked about.
We now cleared more than 64 billion worth of so for interest rate swaps across 30, Counterparties on future side, we now have well over 350 different firms.
Trading Trey our silver future. So very excited about those developments, but but if you look at each and every asset class and the financials. What you noted was in our report we said that we had more than 2.1 billion DTV last year from new products launched since 2010, we had $310 million in revenues. This is.
Across every asset class we are continuously innovating. So if you will get equities for example over the last few years.
We launched the VTEC basis trade index closed which is.
Got it very high RPC and enjoying very good growth.
Significantly adds to our revenues. In addition to that we have the total return of features we have dividends futures and then obviously you know very well about the micro you minis, maybe just a brief update on the microarray minis, we're doing 647000 contracts today. So far this year, that's up 37% from last year.
In addition to that we did tell you last year. When we started in terms of the RPC. When we initially launch a product we typically have heavy incentive to make sure that theres very high liquidity on day, one so that everyone always has a good experience from day, one but we also promised you that we would be reducing those impressions over time. So if you.
Q3, RPC for example on those micro Ninnies.
7.8 cents. If you look at in Q4 that was 11.4 cents. So a very significant increase in that RPC. While the proxy is growing very significantly if you look again at the RPC on that Mike Reed many.
There's more than 80000 different vocaltec fifties that are trading that's a huge number of clients. We believe we penetrated.
Tens of thousands of new clients in particular.
Larger retail traders, but.
But but but I want to get to is.
Just enormous growth and then the product growth in the RPC ties less than what they have very high premium relative the ninnies. So if you do that the map.
As you'll recall that micros or 110th the size of any money that means risk equivalent that's a $1.10 a contract relative to you can see we reported in our equity index is 55 cents a contract is our hours our average RPC.
If you look then we mentioned in his prepared remarks, FX like a new record day in January.
In addition to that you know the other thing I would mention in foreign exchange.
Arms of innovations or adjusting the existing products.
Late last year, we adjusted the minimum price increments it sounds technical but actually very important just as a minimum price increments and the quarterly roll dollar Euro dollar yen.
And dollar Sterling in those those December role than were outstanding I think it's fair to say for each of those are three products. So each and every case the role volume was up tremendously.
Percentage of the open interest that was rolls up tremendously and we saw a huge increase in interest from from banks and hedge huh.
We did announce earlier this year that we are.
You know now going to likewise be reducing them, then pricing trends and dollar Canada and all the dollar.
In addition to that.
What is what impacted that have our foreign exchange market foreign exchange market volatility is incredibly low if you look at the January volatility into lowest volatility going back 90, 92 for the G seven currencies.
So incredibly low volatility nonetheless.
Last year, the number of large open interest holders in our foreign exchange business grew by 30%.
January Twentyth, we had it new all time record high and large open interest holders and foreign exchange. So would lead these adjustments are products even in this very low volatility environment, having a very positive impact. So every asset classes seeing innovation, new product launches I keep mentioning them one less than one I'll mention as we just launched in January also options on our server.
I could go on and on but hopefully that gives you enough color Yeah, Mike Let me just talk real quick above.
In Europe, and I'll ask Brian a comment a little bit about the growth throughout Europe has been goes the second part of your question and I'll touch just a quick story about Asia last night.
Really Winkler, who is my Chief commercial officer held off site, which she was scheduled to be with her and her team in Asia, but obviously that was not going to be the case. So they held here from Chicago, we have over 200 salespeople today, we have a significant amount of those in Asia, We I actually participated in her a.
Thanks, Kevin do walk him right. So I didnt participate for an hour and it's quite fascinating to see the enthusiasm amongst the Asian sales folks because.
We are now able to leverage our broker check next to a treasury platform. These are things that sales folks never had before that can hopefully increase the business throughout the region of Asia.
We're having great growth through there so we referenced in the earlier numbers and we're excited about the prospects. So what salesforce can do by creating capital and operational efficiencies within next transaction as they continue to sell those products throughout the region.
And talk about your.
Let's spend a journey.
Walk along with us over the last few years, you've heard what we've done to build up to the ability to say that we have about 5 million of our volume now coming out of international.
You're well aware of the liquidity programs, we've put in place over the years to build up that activity during the regional time zone.
I think that that story is just continuing to to unfold and a very positive way based on the diversity of the products. The asset classes that we represent our global sales force that is very dedicated to into the very specific client segments that do business.
At our institution over the past five years, we've seen over 75% growth than our average daily volume internationally.
And what that breaks down too.
Is about 40 million contracts coming out of.
The EMEA region and a route another million contracts coming out of Asia is in the first year that we were able to on an average daily volume for the year really neat.
And in some instances exceed that million dollar.
<unk> dollar million contract level.
I would mention that you'd seen double digit growth occurring in various asset classes again, it's the beauty of the diversity of our products. So earlier quarters, you were seeing tremendous growth in the international side in Europe on the interest rate product. This last quarter, we saw a little bit up at slide in terms of Vince.
Trust rates in the European side of the equation, but that was offset.
By strong growth in terms of our commodities, particularly our goal futures are platinum futures are foreign currencies did well.
With respect to Asia Pacific, We saw I've heard of a downturn in their energy products, but that was highly offset by performance in our interest rate.
Hi trend in our equities. So again, it's the diversity of the products that we have it's our ability to penetrate these client segments. You've heard me talk about country planning, which is the rather new phenomena that we've introduced across our sale core center international teams over the course, the last two years, we're covering over 70% I think at the time.
And countries that are providing the revenues I'm the international time zone, where we have very very specific deliverables for our sales force and our business line in our international teams and we track those accordingly.
One last point if we.
We maintained its level of volume from a you know from international this will be the largest month in our history. Since 2012 since we started tracking it has to be our largest eightv month.
Look in February.
With that give you a little color Mike.
Yes, Thanks a lot.
Thanks, Mike.
The next we'll move to Alex boasting with Goldman Sachs.
Hi, this is sharing filling in for Onyx or can you talk about the Don just couldn't do so far I'm or something else.
Ladies shoes have you made and how should we think about the implications on volumes on the pricing.
Right.
Sure we've been a member of the alternate reference rate Committee now for several years.
And we would a leader in terms of introducing vests over futures already mentioned earlier that yeah. We have you know about them once you killing was about dangerous.
Would you know 40000 contract today, if you look recently in terms of our server futures, we're running 78% of the global volume until her futures in terms of average daily volume and we're right in 94% of the open interest.
So I'd say very solid growth in terms of those products. We see this at additive to the rest of our products in terms of fed funds futures in your own futures.
As most treasury futures, obviously isn't that a product that we expect to grow side by side with with our existing products. In addition to that I mentioned earlier on each rates fall side. We cleared 54 billion would have been straight swaps you have 30 participants now who cleared in Sri thoughts with us.
And working very closely with the industry on developments I did mentioned also earlier than we did launched so for options on us over futures in January.
Other things going on this year later this year, we will be.
Looking at the industry, we will be changing the discounting on artist straight swaps from fed funds over to so for so I would say that.
There's a continuous increase in the adoption of so for by our clients.
And.
Very good we.
Ecosystem in terms of trading that's over futures as I said earlier is actually thing what 370 participant.
You know have been trading atossa, he's a very healthy.
Very healthy park area, and it's and it's going very nicely.
Oh.
Thank you on anything on the on the pricing side as to how that would impact among them.
On the pricing side, you know I would assume.
In the beginning when we.
When we launched new products, we want to ensure that they are extremely liquid so in the beginning we typically offer incentives in order to ensure that we have the liquidity.
And with so for I've said this on previous calls I think we are the national home for the product.
So you know we offer the most efficient place to trade the French commodity spreads between you know eurodollar futures and this over future as the fed funds futures and sort of features in addition to that from a margin and capital perspective, we offer offsets between sort of futures Eurodollar futures. So features treasury futures. So for features are fed funds futures, so an extremely efficient.
Into place to trade.
In the beginning we do have incentives, we do have incentives today and as I said, Yeah, we had 94% of the global on open interest in the car overtime I would expect us to reduce you know those incentives and I expect the pricing to look similar event.
I'm going to are you at all in futures, but at the moment honestly there there are some incentives.
Okay. Thank you.
And we'll move on to Alex Kramm with CBS.
Hey, good morning, everyone.
Wanted to take some of the pricing questions that you got and it may be take them over to the to the next side can you talk about.
Now how you view pricing in those legacy business a little bit more.
One on the non transaction side, but but also on the transaction side I think there's still a lot on legacy contracts that are fairly fixed. So do you think there are will be opportunities have maybe some of that comes up as you may be moves to blow back. So maybe restructure some of that or you were pretty happy to kind of keep the in keep the volume they are no matter what the.
And maybe not participate in the upside as.
Maybe competition gets a little bit bigger in that space. Thank you.
Hi, Alex. This is this is John I'll start good chunk chime in.
You are correct. When you when you look at pardon the next legacy next businesses.
You know broker tech in particular has a a large number of the spoke agreements and you they tend to vary less with volume than our futures business. When you look at he'd be assets more akin to our futures business in terms of in terms of volume back.
Activity versus revenue realization so.
So that's that's on the market side on the on the optimization businesses.
You know the non transaction optimization businesses is much more of a subscription based or monthly based or see offer those for those services. Obviously on the transaction side of the optimization businesses that varies a bit with the amount of.
Activity that's performed so for example this.
This quarter, we saw a sequential increase in the amount of revenue generated from the transaction business of the optimization companies that we own.
It was actually up about $4 million sequentially that was primarily because there is more activity and try to reduce.
In terms of our in terms are we haven't announced the long term plans around pricing, we're very focused on the transition from a from the legacy next.
Platforms onto globex.
But you know as as we always do you know, we'll we're always looking at our you know what our pricing and we want to make sure that were very Ori got very compelling offerings that we've got very.
Very compelling you know a.
Platform for our customers to use I think you know I.
I think underlying what John said this is Sean.
Our primary focus now is transitioning.
The business is off the globex, so both brokerage check this year and DBS next year on to go back and secondly, making sure that we have the single most attractive platform for anyone to trade.
In terms of our products, so creating new.
I mean, the cash and the futures markets that haven't existed before because we have both as a products. So we're really focusing on the transition on to go back one to making sure. We at the single most attractive parts possible three creating new efficiencies marketplaces never seen before.
And for you know cross selling to the cross selling is the thing that we've already.
He has already heavily into in terms that cross selling maybe just a couple of.
Points.
In particular.
We started out we started tracking what we call cross referrals and cross introduction.
Between cash and features businesses and to date, we are now tracking more than 400.
Cross interactions, where we are having.
Cash markets salespeople entries costs or futures folks as well as our future sales team introducing clients over into the cash markets businesses. The large portion of those are as we had expected as we talked about it when we launched the transaction.
The the highest portion is coming from foreign exchange.
Customers in the cash markets as well as the futures markets.
The cross sell opportunity.
Typically in Europe.
The never two categories in interest rates, so youre really very focused on the client experience.
Very helpful. Thank you.
[laughter] them or move on to Chris Harris with Wells Fargo.
Thanks, guys.
With the us.
With the news out there regarding ice is interest in ebay can you give us an update on your thoughts regarding M&A and specifically, hoping you could address whether you consider somewhat out of the bops transactions.
Well, we won't comment on what was talked about with continental.
As far as our M&A strategy.
Chris as you are saying, we're very deliberate and diligent and how we approach it.
And we tried to be on obviously opportunistic if something horizons that we think is right for the value of the shareholders think and increase the value for their clients. So you know we ever long history I'm not going to go through all the history of what our integration or our transactions of men are focused on the next immigration.
Two years left on that integration process to give the vote brokers that any of you asked on the platform.
Part of what we're trying to accomplish.
So that's our strategy for an hour and.
Obviously, we always look at things, but at the same time were appropriate razor focused as I've said before on completing the integration of this transaction.
Okay got it.
The next lives to childhood with KBW.
Hi, Good morning, maybe couple questions on multi data.
We'll take them next month, a bit of revenues were down $5 million sequentially ending the call off on that Jones the decline multiples that implies she good sequential growth in team is core data revenue just let Joe Bob was up pricing.
And then maybe just an update on the interim data initiative gun sales problem.
Let's now.
Alright I Kyle this is this is John.
When you take a look at our market data line you know.
You know from from a revenue perspective, it was actually up about $500000 sequentially from Q3 to Q4 and really when you when you Peel it back in our market data performed very well in the fourth quarter in Q3, we had $1.1 billion more in audit findings and as you.
No those I find it can vary quarter to quarter, depending on you know at you know as as those audit findings get realized so I'm really if you strip out the audit findings are market. It is actually up a million and a half dollars and that's really a function of 'em up two things. One you know we had a.
Yeah, we had a pricing change that we discussed in our non splay data and also we've seen a on a stabilization on the attrition.
Which is which has been helpful. So the core market data, excluding audits is up about a million and a half and from a next perspective. The market data is relatively flat Q3 to Q4 on Brian you want to talk a little bit about them.
The pricing, but on the the derived side. If we continue to be very pleased with the demand from the client base in terms of.
Having access to our products for them to be able to build structured products based off of our data.
Business continues to to grow involved in the interest and the demand is coming from a variety of different client sectors. What I'm. Most pleased about is our engagement with the consumers of this data whether it be our core customers customers being.
The consumers of the data for trading so you got to think about this outside the box of subscribers the traditional subscribers, but those looking at it from the perspective.
Using data to complement both their trading development of products that they can sell in house.
As well as demand for historical data that they used for a variety of reasons and so we've really been trying to more deeply engage with the client they audits and quite honestly that we started almost a couple if I think a couple of years back and.
Curtis has really allowed us to capture a much deeper insight into how the variety of client segments utilize their data that's brought us much closer to the client base itself and the consumers. The other thing that we looked very closely at is that this distributors of the data so I'm really drawing a much.
Closer alliance and relationships with the with the vendors and how we go about pricing that information for them to be able to redistribute our data. So we're very excited about the.
The foundation and the programs that we put in place over the last couple of years to help us really grow.
Each of these variety of data offering.
When you look at next as you can appreciate.
We had to get into this more deeply this past year in terms of looking at the maybe the esoteric nature of how that data is utilized by EPS as well as broker tax until we have a number of plans on the horizon working closely with shot and his team in terms of how we can.
Better structure and package that information for consumption.
Thanks, and John I apologize the 5 million sequential decline of looking at was actually for the next other revenue.
Could you just don't just provide any clarity on that I'm sorry.
Oh, no worries no worries Kyle yes, so really the primary driver of the $5 million reduction in the other revenue is on as you recall in the third quarter, we announced that we had completed the sale of the Enzo business. So the majority that 5 million dollar decline was related to.
To that sale.
Got it thank you.
Right no problem.
Well move on to go and now with Oppenheimer.
Good morning, and thank you want picking my question.
So I wanted to touch on the commodities and matter was a little bit AG and open interest solved all the commodities.
Adam square up quite nicely yields that you at the end of January.
He's talked about some of its wipers strings here.
So I get taking share small not exchanges internationally, you said continue migration from cash to Derisk with you. So is that mainly driven by.
Like volatility brands like called a virus, how should we think about the contribution of each slide for and be sustainability off the street gone with the recipes you. Thank you.
Thanks, So I'll give that there.
Yes.
Good run its actually there are three different business. Some are operating in conjunction with another summer actually quite you correlated when you look at the impact the Corona virus African swine fever, and the pace on trade you all that you've seen on ratio.
Brian had mentioned, we seeing particular strength in the commodities business as all three of these most especially our metals business out of Europe and Asia I.
I think that's a business that over the last four or five years, not only heavily positioned our comments our co Max gold and silver contracts as a de global batch structure seen that as more vis a shifts out of the bilateral swaps market, primarily about London testicle market. While we are market into our markets were actually progressed, our volumes back 20 years.
And if you go back over 20 years ago, Comex, representing 10% of the total.
Physical and fast cash.
Combined business as a futures and cash fast forward to today and Comex now represents a 50% of larger volumes than what we've seen a MLB I may business. So we're seeing that only on market adoption very much the capital and operational efficiencies I'll call next goal. So we've gone from one of that physical markets and 50% pick up that cash.
So the significant growth in uptake as are largely driven by us and actually Asian and European customers, we see that on the competitive numbers, we see that will fall numbers. The best is referred to so far this year were up 50%.
We've seen that our Asian business and metals is up 56%, it's up to 8% as well in a in a pack. So I expect that that business continues to grow that is both.
Metal and particularly gold as a preferred commodity again I'm certain markets the military operate and make us better positioning the futures market is the best solution and product for delivery that market flipping over to our energy business. I think it was referenced are on the call Terry talked about the strong growth we've seen so far this year in our energy business.
Globally energy investments up 20% and we're seeing that actually up significantly in Europe, as well and what we're seeing maris after a year of basically a $10 trade arrangement oil and natural gas sitting at around two and a half hours.
We've seen significant impacts to concerns of global growth and Q waste and what's the market expressed a view on in terms of local brokers effectively the price of oil so seen that FX downdraft has actually taken place we saw double check up from 16, chewed up 52, and the sped up too much on growth concerns we've seen our business. So far this year apps.
Let me take off so not surprising to see that the preference for global crude trading taking the place in the form of doubling CCI. It's a global crude oil market store that we've been talking about for the last three years and we see that played very much impact and I'd say, even some more strongly and natural gas our business and natural gas.
Is up 40% so far this year and our market share have gone to an all time record, 84% some natural gas futures.
We haven't use so again, when you're saying markets breakout below levels driven by growth raised concerns globally. Oracle just came up 20 minutes ago and global both concerns putting downward pressure on energy prices the markets coming to see a may see units our energy prices to manage that risk lastly on the AG side. This is a business has caused by half a billion.
Our business to the from.
This is a market, where we saw record dairy and livestock volumes last year.
So as you have saw concerns about African slide so in Asia concerns about call. It appears we saw that risk the maddest here at Sealy group, most particularly with the phase one trade agreement now announced we've seen a resumption of our volume when a little bit sideways and grains and oilseeds last year, we're seeing our access us up so far 11% this year and most.
Notably when you're seeing where that growth is taking place we're seeing that that's a so far up 33% in Europe and gosh, 51% in Asia. So again, when the market experience as volatility uncertainty and breakout ranges.
We're seeing the market continue to adopt Siemens <unk> global benchmarks and we're seeing that not just during the last time zone. That's the point, Brian as Meg Internet referenced earlier, an outsized proportional new clients acquisition in Europe and Asia.
That's helpful. Thank you.
Do they sir.
Okay.
And next this Ari Ghosh with credit Suisse.
Hey, good morning, everyone.
But would you just similar you hit on this but just wanted to touch on a couple items that could be incremental too.
Just looking forwards so slow just hoping you could give us an update on conversations you're having with clients around them navigating you Amar in potential cost saves from your FX suite and then.
Just moving on to put going you can can you just see solid volumes on new account cool to round up around deployments wells just curious how the institutional ecosystem has evolved being around bitcoin and your competitive positioning in this emerging asset classes. Most thank you very much.
Thank you Sean yes in terms of the unclear Barton rules that something we've been very focused on now for a number of years and that will continue to be a tailwind for us over the next couple of years with the extension.
The dates by regulators relevance compliant.
So we do expect that September of this year.
Another very large portion of clients will be forced into those on could marginals relative to that we do see an opportunity to offer clients lifted FX options in particular, but also to use our FX futures as alternatives to forwards. We added as you'll recall couple of years go now a monthly features in addition to our quarterly.
Features.
In order to help facilitate that as well as FX like in order to make that transition from the agency market over the futures market listed market.
You know much much easier as you are rightly pointing out you know something that we point out we pointed out four years now.
Right is that if you if you were affected by the unclear at margin will give attendee margin period of risk. If you move Juno Tc product and we do now clear.
Both.
I'm deliverable forwards as well as cash settled for slows the G. Seven currencies. So we are clearing.
You know FX for its cash so that makes forwards any otcs market as well. So unclear 10 day margin period of risk clear to seek a five day Mark security risks actually now cleared about 69 billion worth of NDS, and CSS and RMCF accidents.
Relatively small but increasing.
But the but the most efficient place is in futures and listed options, which is typically the one day margin period of resin. So do you see that to be a continuing tailwind. In addition to that our optimization services are very focused on having a holistic solution that no other marketplace can offer.
You know in terms of optimization of portfolios.
As well so trying to deal more we can see continued benefit there.
And I think at a second question.
A big did claim on you have continued to operate well.
You know, we're doing around 10000 contract today.
And yeah, we did line launch options on decline, which are doing well, but honestly, it's a very small part of our market.
Great. Thank you very much.
And as a reminder, its star one if you would like to ask a question.
And next I'll take a follow up question from Brown, but down with Deutsche Bank.
Great. Thanks, Thanks, very much just went off and see my appreciation for Bryant or guns are helpful. Over the years and a great answers on these earnings calls and I'm just any other questions were asked already but just.
Are there any plans to fills the president a rule for you eliminating.
That that position.
Yeah, Ryan sorry.
I'm going to look at that over a period of time, Brian is committed to being here through May and then that help advising me thereafter, so and he's also joining our board of directors, which will also be a benefit to the not only the shareholders, but to the employee base as well what she has a big part of now so I haven't made a decision about how.
Where I'm going to move forward with that particular roll right now.
I'll work with Brian and others as we continue to resolve.
Brian starts this transition into its next life. So.
Let me instead as equity your comments at the beginning he does give great answers and not only that he works with wonderful and clients and his knowledge will be around for a long time to come so that is greatly appreciate it.
Thanks very much.
Thank you.
And just a reminder, star one if he would like to ask your question.
Next on live till Patrick O'shaughnessy with Raymond James.
Hey, guys, it's actually David Farnham on for Patrick.
I was wondering for the international business I was wondering if we could dig into the.
Drivers of your growth across the various regions. So can you speak to your sales head count ramp over the last few years.
Where are we kind of right now across various regions, where was it say five years ago.
And as we look forward to would you anticipate further headcount growth to can you continue to capitalize on the international opportunity or do you feel like you're.
Correct point right now.
David sorry to be right now our headcount in sales has gone up close to 200.
Of the Sammy workforce today and its spread throughout the world fairly evenly obviously, the big part of a term U.S., but in Europe and Asia as well in other parts isn't if in fact pretty.
Business is growing and I continue to see that benefits, which I have seen by increasing the salesforce over the last several years, yeah I remember about seven to 10 years ago that number was probably about 10 to 15 people in sales and now we're sitting at EUR 200, and you can look at the chart up into the right that the growth.
The business and you can correlate that new account acquisitions that Julie lingered on senior been doing along with the sales folks and as long as we can continue to offer a solution thats more cost benefit to the to participate and we're going to continue that our sales folks to do so.
It's one of those things you don't want to it'd be a company Philip salespeople, but if they are continuing to deliver value I have no problem, increasing the size of that step as long as a business is reflective of what they are producing.
Great very helpful. Thanks.
Thank you.
And that will conclude today's question and answer session I would now like to turn the call back over the management for any additional for closing remarks.
Well, we appreciate it very much and we look forward to speaking with all due next quarter and the nice thing. Thank you.
And that will conclude today's call. We thank you for your participation.
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